LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has assigned a financial strength rating of B++ (Good) and an issuer credit rating of “bbb+” to Emirates Retakaful Limited (ERL) (United Arab Emirates). The outlook assigned to both ratings is stable. Concurrently, A.M. Best has placed the financial strength rating of B++ (Good) and issuer credit rating of “bbb+” of ERL’s parent, Al Fajer Retakaful Insurance Company K.S.C. (Closed) (AFR) (Kuwait), under review with negative implications.
The ratings of ERL reflect the company's sound prospective risk-adjusted capitalisation together with its robust anticipated profitability and adequate enterprise risk management.
ERL was incorporated in September 2013 in the Dubai International Financial Center (DIFC). Subsequently, it was issued with USD 120 million of paid-up capital and obtained a license from the Dubai Financial Services Authority (DFSA) to operate as an authorised reinsurance carrier. Over the very short term, AFR’s staff and retakaful fund are expected to be transferred to ERL in their entirety.
ERL has ambitious business plans over the medium term and is looking to build upon AFR’s existing revenue base. Management factors risk-based capital requirements into its strategic forecasting, and capital is available over the medium term to support increasing underwriting risks. Immediate execution risks relate to the transfer of AFR’s retakaful fund and successful contract renewals. If successfully executed, this is likely to support robust underwriting and overall profitability in the coming years.
Upward rating movement for ERL is unlikely while the company executes the initial phases of its business plan. Downward rating pressure could arise through a significant reduction in risk-adjusted capitalisation or if profitability does not meet expectations.
AFR’s ratings will remain under review until its retakaful fund has been transferred, at which point the ratings are expected to be affirmed and withdrawn. The negative implications reflect the fact that AFR’s ratings are unlikely to be upgraded before they are withdrawn; its weakened prospective market profile; and the execution risks surrounding the transfer of its reinsurance portfolio.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
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