S&P affirms Takaful International’s rating at BBB

Standard and Poor’s in a statement said that it had affirmed its ‘BBB’ long-term sovereign credit ratings on the Kingdom of Bahrain and removed them from CreditWatch negative with outlook negative.

“Under our ratings criteria, sovereign risk is a key factor influencing the financial strength of insurers and so most insurers are rated no higher than the relevant sovereign. We are therefore removing the ‘BBB’ ratings on Takaful International Co. BSC from CreditWatch negative and affirming them,” it added.
The negative outlook on Takaful International reflects that on the Kingdom of Bahrain. Should the sovereign rating be lowered, the rating on the insurer would also be lowered.

Standard & Poor’s Ratings Services said on Tuesday removed its ratings on Bahrain-based Takaful International Co. BSC from CreditWatch, where they had been placed with negative implications on Feb. 24, 2011. At the same time, we affirmed the ‘BBB’ long-term counterparty credit and insurer financial strength ratings on the company. The outlook is negative.

“Under our ratings criteria, sovereign risk is a key factor influencing the financial strength of insurers. As a result, the vast majority of insurers are rated no higher than the relevant sovereign local currency rating. Consequently, the outlook on Takaful International is negative, reflecting our view of increasing sovereign-related risk.

“Takaful International derives the majority of its premium from Bahrain and most of its invested assets are also held there. Therefore, we believe the quality of the company’s investment portfolio is affected by movements in the sovereign rating. The heightened sovereign risk also adversely affects our view of industry and economic risks in Bahrain.

“The negative outlook on Takaful International reflects that on Bahrain’s sovereign credit ratings. If we were to lower the sovereign credit rating on Bahrain, we would also lower the ratings on Takaful International so that they align with those on the sovereign. We are unlikely to raise the rating over the rating horizon (12-24 months) without an improvement in the sovereign rating,” it added.

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