AM Best cites Kuwaiti company's strong capitalisation

AM Best has assigned a financial strength rating (FSR) of A- (Excellent) and an issuer credit rating (ICR) of “a-” to Al Fajer Retakaful Insurance Company (Kuwait). The outlook on both ratings is stable.

The ratings reflect the company’s excellent projected risk-adjusted capitalisation on a combined basis and the well capitalised retakaful fund, in addition to the regionally experienced management team. Partially offsetting factors are the execution risk of the business plan associated with a start-up company and the competition levels in the Middle East and South East Asia.

Al Fajer Re provides Shariah-compliant reinsurance protection, predominantly on a treaty basis, to non-life risks with a projected business income of approximately KWD 10m (US$38m) in March 2009, which is expected to grow to approximately KWD 28m ($104m) by 2011.

AM Best believes that Al Fajer Re’s projected risk-adjusted capitalisation on a combined basis (shareholders and retakaful funds) is likely to be excellent. AM Best also expects the risk-adjusted capital position for the policyholders or retakaful fund to be supportive of Al Fajer Re’s forecast premiums growth over the next three to five years, given the Qard’ Hassan (interest free loan) of KWD 25m ($95m) available to the policyholders’ fund from the shareholders’ fund through a trust deed.

A ratings statement from AM Best said: “Al Fajer Re’s investment strategy is expected to be very conservative with the vast majority of assets being held in cash deposits (murabahas). Al Fajer Re also benefits from a management team well experienced in the Middle East and Far East region, with excellent underwriting expertise and established relationships with companies and brokers internationally, in addition to the strong and reputable regional shareholders.”