A.M. Best Assigns Credit Ratings to Nomad Life Insurance Company JSC. The outlook assigned to these Credit Ratings (ratings) is stable. Nomad Life is a wholly owned subsidiary of Nomad Insurance Group Limited, a non-operating holding company also domiciled in Kazakhstan.
Nomad Life’s risk-adjusted capitalisation is constrained by its relatively high net underwriting leverage, stemming mainly from its significant reserve provisions, as well as a track record of onerous dividend payments. Furthermore, the company’s asset base is exposed to the high financial system risk in Kazakhstan.
Nomad Life’s operating performance has been positive, albeit volatile in recent years, as demonstrated by its weighted average return on equity of 71.3%, which ranged from 13.4% to 158.1% between 2012 and 2016. The company benefits from good investment income reflective of the high interest and inflation rate environment in Kazakhstan.
Nomad Life’s exposure to the compulsory workers’ compensation segment is a negative rating factor due to the potential for large and long tail losses. This concern is exacerbated following the discontinuation of its treaty reinsurance protection in 2016, which has increased the company’s net exposure to workers’ compensation risks. In the first half of 2017, almost a half of Nomad Life’s portfolio was derived from this segment.
Nomad Life has an established business profile in Kazakhstan, with a 23% share of the local life market, measured by gross written premiums in the first half of 2017. Nonetheless, in A.M. Best’s opinion, Nomad Life’s relatively small size (by international standards) leaves the company susceptible to sudden changes in its operating or regulatory environment, which are typical for the Kazakh insurance market.
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