Standard & Poor’s Ratings Services removed the long-term counterparty credit and insurer financial strength ratings on Bahrain Kuwait Insurance Company (BKIC) from CreditWatch, where they had been placed with negative implications on Feb. 24, 2011. At the same time, we have affirmed the ‘BBB’ ratings on BKIC. The outlook is negative.
“The rating actions follow those on the Kingdom of Bahrain (BBB/Negative/A-3); see “,” published July 20, 2011. 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 BKIC’s ratings is negative, reflecting our view of increasing sovereign-related risk,” S&P in a statement said.
“BKIC 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,” it added.
“The negative outlook on BKIC’s ratings 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 BKIC 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,” S&P said.