AM Best has revised the outlooks to stable from negative and affirmed the credit ratings of Lebanon-based Arab Reinsurance Company SAL (Arab Re).
The affirmed Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” (Fair) reflect Arab Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
Additionally, the revised outlooks reflects AM Best’s expectation that Arab Re’s rating fundamentals will remain resilient against the backdrop of the challenging economic and political conditions that persist in Lebanon.
“In AM Best’s view, economic, political and financial system risks in Lebanon are very high. Political uncertainty in the country has remained elevated following the 2022 elections that failed to produce a parliamentary majority, a cabinet or a president. Economic conditions remain challenging, with the country having to contend with hyperinflation and a significantly devalued currency,” explains the rating agency.
Adding: “Arab Re has a material exposure to Lebanon, where the company is headquartered and holds a sizeable component of its investments. Despite these challenges over recent years, Arab Re has grown its offshore asset portfolio, which has helped strengthen the company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), and its liquidity.
“The improvement in Arab Re’s BCAR has made its balance sheet more resilient to asset-side stress tests, which gives AM Best greater confidence over the company’s ability to navigate the ongoing challenging domestic operating environment.”
AM Best also highlighted the niche position Arab Re holds in its core market in the Middle East and North Africa region, which was built upon its original role as a reinsurer for Arab insurance markets and long-standing relationships with cedants.
Despite the company’s geographical reach, the agency warns, its growth potential is limited, as reinsurance markets in the region remain highly competitive.
