S&P lowers ratings on UAE’s Takaful Re

Standard & Poor’s Ratings Services said that it lowered its long-term counterparty credit and insurer financial strength ratings on United Arab Emirates-based Takaful Re Ltd. (TRL) to ‘BBB-‘ from ‘BBB’. “We subsequently withdrew the ratings on TRL at its request. At the time of the withdrawal, the outlook was stable,” said S&P.

“The downgrade reflects the deterioration of TRL’s business risk profile, mostly due to challenges within the Islamic insurance sector that have been exacerbated by the company’s lack of scale,” S&P said. “This is because TRL is exposed to the highly competitive segment of Takaful business written in the Gulf Cooperation Council region.

“The combination of our fair assessment of TRL’s business risk profile and our upper adequate assessment of its financial risk profile would typically result in an anchor outcome of ‘bbb’. We have set TRL’s anchor one notch lower at ‘bbb-‘ because of TRL’s weakened business risk profile. We believe TRL’s franchise and market position have weakened, based on the company’s decreased market share and poor performance in recent years.

The stable outlook at the time of withdrawal reflected our view that TRL’s risk-based capital would remain at extremely strong levels. This is supported by TRL’s excess level of capital relative to its low level of premium income.

TRL continues to be majority-owned (54 per cent) by Arab Insurance Group (B.S.C.) (Arig, unrated), and we believe shareholders would be fully supportive if needed.