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IIRA assigns stable rating for Al Baraka Insurance

Bahrain Business
Wed, 20 Jul 2016

Manama: Islamic International Rating Agency (IIRA) has assigned a Takaful Financial Strength (TFS) rating of ‘BBB’ (Triple B) to Al Baraka Insurance Company (ABIC), Sudan.

Outlook on the assigned rating is ‘Stable’. The fiduciary score has been assessed in the range of ‘61-65’, reflecting adequate fiduciary standards.

ABIC is the second oldest takaful operator in Sudan and derives business synergies from its largest shareholder, Al Baraka Bank Sudan (ABBS), which is a part of the Al Baraka Banking Group. 

Although there is no explicit commitment, business and management support from the parent in case of financial stress is also likely. Association with a recognised international Islamic finance franchise supports the institution’s rating.

ABIC has achieved rapid growth in its business volumes in recent years on account of expansion of branch network, management initiatives and to some extent inflationary pressure which has led to an increase in the value of sum insured. 

This has been accompanied by improving diversification as the company has ventured into new lines of business. 

However, the business base continues to feature concentration with the motor segment representing over half of gross contributions. 

Sudan’s macroeconomic situation also poses challenges for business diversification given low demand for fire and marine policies.

Performance of policyholders’ fund has continued to improve given superior net claims and administrative expense ratios with growth in business volumes. 

Internal capital generation from shareholders’ fund is however limited.

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