News Middle East22 Oct 2020

Saudi Arabia:Fundamentals and shareholders' support are behind ICIEC's Aa3 IFSR

| 22 Oct 2020

The main shareholders of The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), in particular Islamic Development Bank (IsDB) and Saudi Arabia, are very likely support the company in times of financial distress, given ICIEC's key role as facilitator of trade between many countries, notes Moody's Investors Service.

In addition, as a member of the IsDB Group, ICIEC benefits from various managerial synergies and support from its parent. ICIEC is a member of the IsDB Group, which holds 50.7% of ICIEC's subscribed shares. ICIEC's other shareholders/members include Saudi Arabia and other sovereign members of the Organisation of the Islamic Cooperation (OIC).

ICIEC's subscribed capital has almost doubled in seven years, increasing to ID288m ($400m; ID1 = SDR1) at YE 2018 from ID149m at YE 1432H (25 November 2011) whilst called capital increased to ID144m from ID75m in the same period.

Rating

Moody's has affirmed the Aa3 insurance financial strength rating (IFSR) of ICIEC. The outlook is maintained at stable. Moody's says that the rating affirmation reflects ICIEC's stand-alone fundamentals as well as the support stemming from its shareholders.

The stand-alone credit quality of ICIEC is supported by its role as the leading multilateral export credit and investment insurance corporation in the world that provides Shariah-compliant insurance and reinsurance products, as well as its enhanced regional knowledge based on its experience by operating in the OIC member countries.

Asset quality is strong with a highly liquid invested assets portfolio and high risk assets representing only 12.9% of the company's consolidated (shareholders and policyholders) equity at YE2018. These strengths are partly offset by a significant exposure to geo-political risks.

Profitability

Furthermore profitability has been weak, as evidenced by the five-year average combined ratio of 122.9% as at YE 2018, despite recent improvements (from 130.9% as at YE 2017) driven by steady growth in premiums and expense efficiency.

According to Moody's, ICIEC's main challenges are

  1. to further improve and manage stand-alone capitalisation levels in the context of growth opportunities and the level of geo-political risk in some of its markets,

  2. to enhance business coverage and reduce risk and business/client concentrations,

  3. to continue to optimise and improve the level of efficiency of the corporation and the underwriting process and

  4. to continue to optimise the production of distribution networks.

 

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