Notes

Hello every one, so, we want to have this meeting to present the reserves that were set IN 2022-q1 and Financial condition report at at 2021-Q4.
so, I will go straight to the presentation, Reserves as at march 31, 2022
So, these are the reserves that we are going to look at and compare with previous quarter so, it will basically a 2022-Q1 VS 2021-Q4 comparison.
First is Unearned premium reserves
the numbers in the presentation are used in 1000 AED
UPR is share of written premium received associated with the proportion of policy period that is yet to lapse as at the valuation date.
The gross UPR for the quarter Q1 is 39.6M and it is inline with the last quarter .But further on granular basis, the UPR of Fire has experienced a dip of around AED 6M though it is consistent with quarter on quarter data e.g in 2021-Q1 the Fire UPR was around 21.4M however, The reason why it has decreased is that the there comparatively higher written business of AED 22M in 2021-Q4 in comparison with 7.4M written premium in the current quarter.
Engineering line has experienced an increase this is because the written premium in this quarter has increased by AED 3.2M but still the Q1 engineering written premium and UPR is consistent with the Q1 2021
Marine Hull UPR increased from 0 to 1.2M as there was no written business in last quarter but now it is around 1.5M and as the complete premium is not yet earned we have got UPR this quarter.
Rest of the lines have shown some minor changes and they are consistent with 2021-Q1 or 2019-Q1 (motor) UPR.
These were some gross changes We have calculated UPR on both gross and net of reinsurance basis.
The Net UPR have decreased on total level but have the similar changes as gross when lookin at the granular level. Expcept one thing in engineering though both of gross and net have but decreased but net number of line is significantly lower than gross it is because of less retention ratios of Engineering large policies. After starting Reinsuring engineering in 2019, MSI has low retension in large policies


Notes
General Accident inline with quarter on quarter but increase in last quarter (Increase in business with last year)
Fire inline with quarter on quarter but decrease with last quarter (decrease in business with last year)
Engineering inline with quarter on quarter but increase in last quarter (increase in business by 1/3 with last year)
Motor inline with 2019-Q1, decrease with quarter on quarter but increased with last quarter (Increase in business with last year)



Marine Hull inline with quarter on quarter but increase in last quarter (increase from 0 with last year)

Outstanding loss reserves (OSLR)
OSLR is the amount of claim the insurer has not yet paid and expects to pay. we have used the of OSLR as provided by the Company on both gross of reinsurance and net of reinsurance base
The table show the line of business wise comparison of Outstanding loss reserves for last two quarters.
For both the quarters, the overall OSLR heavily relied on Fire. and Fire has significantly decreased in the this quarter and the main reason for that there was a large Claim of Fire in 2021-Q4 with the claim amount of AED 42.2 M that which is partially paid in 2022-Q1 owing to the decrease of OSLR from AED 53M to AED 34M. Other LOBs have shown slight changes in gross OSLR

For Net OSLR, except Engineering, all the other line have equal oustanding loss reserves for both gross and net, this represents that very small portion of claims is covered in RI even in Fire where, there a large of claim because of high XOL priority. For Engineering like 2021-Q4 net OSLR is lower than gross because of claims cession.

Incurred but not Reported Reserves
IBNR are reserves for claims that are incurred before the valuation date but not reported. These reserves includes IBNYT, IBNER (enough reported includes the claims are reported but the claims amount is expected to change)
The overall gross IBNR has changed with slight increment the change is owing to change in the Fire IBNR due to change in the assumptions.
IBNR was calculated on a gross of reinsurance basis using ELR method there are some changes in the assumption of ELR of Fire. We have changes the ELR from 20% to 25% The reason for the change in assumption is high frequency of large claims in recent quarters. For all lines, IBNR on a net of reinsurance basis was set equal to the IBNR on a gross of reinsurance basis.

Unallocated loss adjustment expense:
ULAE are the reserves for future settlement for those expenses and losses that cannot be assigned to individual Claims
The assumption here is that half the expenses are incurred at time of opening of the claim and half at time of settlement of the claim. Hence, the ULAE ratio is adding 50% to OSLR and 100% to IBNR. and then multiplied to ULAE ratio of 7.5% for all the lines.
The calculation here is for gross of reinsurance basis.
ULAE on net of reinsurance basis is set equal to the ULAE reserve on a gross of reinsurance basis.
Outstanding for a large claim has been excluded for ULAE calculation.

Reserves 2020-Q4 vs 2021-Q4
This slide shows the comparison of all the reserves for the quarter ending of 2020 vs 2021.
The UPR has increased mainly due to increase in the written business of liability and engineering in 2021-Q4. The significant OSLR increment here is because of the large claim of Fire.
Increase in IBNR is due to increment in EP of 2020-Q4 in 2021-Q4. ULAE has increased because it is a function of IBNR and OSLR and both of them have an increase. URR is zero for both the
quarters because the URR was enough to cater the expected outflows.

Fire Gross ultimate loss ratio:
In terms of GWP, Fire is being the largest LOB and due to the nature of this LOB it is prone to large losses. But The loss ratio have done fairly well except in 2021 which was influenced by a high loss ratio of Fire. But overall the Earned premium for all the years are sufficient to absorb the large losses. We have cumulative ultimate loss ratio of 62% for period 2017-2022-Q1. The OS amount for 2021 as at 2021-Q4 was AED 52M which was due to 42M large claim of Fire and in 2022-Q1 it is paid by AED 26.4 reflected here.
Let look at the portfolio size, the earned premium of Fire is consistently increasing over the review period. last year earned premium was AED 49.5M, It reached to 12.5M in Q1 which is slightly higher than what was the earned in 2021-Q1 and inline with the rest of the quarters of last year.

Motor Gross Ultimate Loss Ratios:
The volume in this LOB is very small leading to volatile loss ratios over the review period. The Negative OS in 2018-2021 is due to recoveries salvage subrogation in recent quarters. The overall gross loss ratios have been below 30% over the review period. and from the loss ratio, it is clear the motor line is profitable even though the portfolio share for motor is very limited and with the year it is even more decreasing. The earned premium in 2022-Q1 is 155K with is the lowest of all the quarter for period 2017-2022-Q1

Engineering Gross Ultimate Loss Ratios:
For Engineering from 2018, the loss ratios are less than or equal to 16%. and there is not claim activity and 2019. with the cummulative ultimate loss ratios equal to 75%.which is influenced by incradabily high loss ratio of 2017 it was due to two large losses.
The portfolio is being increasing from year to year over the review period . 2022-Q1 earned premium is consistent with 2021-Q1.

General Accident Gross Ultimate Loss Ratios:
The gross ultimate loss ratios have been at or below 10% for the last five accident years. with cumulative ultimate loss ratio of 4%. The graph shows here that Portfolio size of GA is decreasing from 2018 onwards though the Q1 earned premium is comparatively higher in quarter on quarter analysis so, we might have increased in portfolio in 2022.

Liability Gross Ultimate Loss Ratios:
the ultimate gross loss ratios are at or below 10% for all accident years because of minimal claim activity. except 2018 loss ratio which is driving up by a large claim. There is also a positive growth in earned premium for all the years.

Marine Cargo ultimate loss Ratios:
The cumulative ultimate loss ratio for marine cargo is 28%. AY 2017 have comparatively large loss ratio due to a large claim in 2017.
The earned premium for marine cargo have increased from 2017 to AY 2019 but declined since.

Marine Hull ultimate loss Ratios:
There has been no claim activity for Marine Hull over the review period and is leading to an ultimate loss ratio is 0%.
The earned premium of Marine Hull was increasing in period 2017-2019 and after a dip in 2020 it increased in 2021. we can also expect 2022 to be higher as the first quarter have the highest earned premium when compared to first quarter of of year in review period.




Engineering ---> 0% report loss ratio but some ultimate is there
GA ---> 0% report loss ratio but some ultimate is there
Liability ---> 0% report loss ratio but some ultimate is there

Solvency Requirement:
According to the Central bank of UAE, The Company shall at all times comply with the requirements of the Solvency Margin, which means maintaining Own Funds as per Article (7) above for the largest of the following three capital requirement,
MCR;
The minimum paid up capital of each company should not be less than,
MGF:
The Minimum Guarantee Fund shall be calculated based on a minimum amount of funds required to support each type of business written by the Company. The minimum funds for each type of business is the max of an absolute minimum and a percentage of net earned premium as determined by the Authority.
SCR
The Solvency Capital Requirement shall be calibrated so as to ensure that all quantifiable risks to which each Company is exposed are taken into account. The Solvency Capital Requirement (SCR) mainly cover the these risks from the next slide,

Solvency Position
The table shows the 2021-Q4 solvency position of the company. For MSI, according to the regulations, the applicable capital requirement is MCR as it the highest The solvency ratio w.r.t MCR work outs to be 157% in 2021-Q4
The total solvency margin that is Total basic own funds- MCR is around AED 57.4M reflecting that's MSI has sufficient margin for adverse scenarios
History of Solvency -> Historically the net admissible assets have been above the MCR, which has been the applicable capital requirement. Both SCR and MGF are low.
The graph shows the comparison of Total basic own fund, with all capital requirements. With Regards to definition of Basic own funds these are the admissible assets -liabilities and in Q4 these are decreased by AED 30M it was because the rate of increasing liabilities which was caused by the high loss ratio of Fire line this year was much higher than the admissible assets. The admissible assets increased by AED 21M due to increase insurance receivables and bank deposits.
The SCR is slightly up in Q4 because of increase in credit, investment and underwriting risk and this is reasonable as, the portfolio of this quarter was marginally higher.

Assets, Liability & Admissibility:
Total assets increased in 2017 owing to a capital injection by the Head Office. They stayed consistent in 2018, and then increased onwards owing to an increase in volume of business. Similarly liabilities have the same increase but in fact it nearly doubles in 2021 due to substantial increase in the outstanding loss reserves brought on because of a large Fire claim.
The admissibility ratio is approximately 100% as, all invested assets are in cash & cash equivalents, and spread out amongst multiple banks, hence there is no counterparty exposure adjustment. There has been some inadmissibility arising from aging of insurance and reinsurance receivables, and intangible assets but it is minor that why not visible here.

Cost of Reinsurance:
The CI is a measure of how much reinsurance costs the company by comparing premium ceded against commissions earned & claims recovered.
So, for MSI the cost of RI is entirely depends on RI premium and RI commission as the RI share of the claims is negligiable.
The overall cost of reinsurance has continued to increase over the last three years.
it is nearly doubled in 2021 from AED 5.3M in 2020 to AED 10.1M. This increase is brought on primarily by increase in RI earned premium for Fire and Engineering which is driven by some large policies written in previous years.
Engineering was at its lowest -1.6M in AY 2019 due to the high volume of reinsurance commission written by this line.
Cost of reinsurance is volatile for Marine and Engineering here over the review period because usually commissions are earned in line with earning of the policy but since for MSI the commissions are not deferred, we are using they are fully earned at the time they are written - this is leading to spikes in cost of RI. Overall cost of reinsurance for AY 2021 has increased from 10% to 15% . and this increase is experiance by all the line except Motor which is not reinsured.

Gross Underwriting performance:
If the gross combined ratio is below 100%, a line is considered profitable.
The gross combined ratios had a decreasing trend from 143% in AY 2017 to 48% in AY 2020 reflected in the increase in underwriting surplus. For AY 2021 Fire has incurred a substantial deficit due to a large claim of AED 42M.
As, company is heavily relied on Fire performance so, this leads to an overall gross underwriting deficit.
The gross underwriting surplus have decreased of all the LOBs except enginering in AY 2021.

Net Underwriting performance:
Similar to gross, overall net combined ratio has been decreasing since 2017 to 2020 and increasing in 2021.The decline in Net Combined ratios reflect the growth in total net underwriting surplus.