Bahrain-based reinsurer Hannover ReTakaful's (HRT) war-related exposures are either highly reinsured or subject to war exclusions, and should therefore be manageable, even though it is too early to assess the potential impact of the conflict on HRT's business, says S&P Global Ratings (S&P).
Given the increase in geopolitical risk in the region and a more challenging operating environment, S&P has revised HRT’s risk exposure score to moderately high from moderately low. This aligns the score with that on other reinsurers in the region.
Ratings affirmed
S&P has affirmed its 'A+' issuer credit and insurer financial strength ratings on HRT. The outlook is stable.
S&P rates HRT above the sovereign credit rating on its country of domicile, Bahrain (B+/Stable/B). This is because the company has only a minimal asset and risk exposure to the country.
The stable outlook reflects S&P’s view that HRT will continue to expand profitably, maintain capital adequacy in line with the 99.99% confidence level, and remain a strategically important subsidiary of Hannover Re over the next two years.
Balance sheet
S&P forecasts that HRT will maintain capital adequacy at the 99.99% confidence level in 2026-2027, supported by profitable earnings, of which a share will be retained. At year-end 2025, HRT reported strong capital buffers above the 99.99% confidence level as per S&P’s internal risk-based capital model. S&P now considers the company’s capital and earnings assessment as very strong. This was the first year when HRT reported under the IFRS17 accounting standard.
The insurer's overall profitability continues to support its business growth, despite relatively high dividend payouts. S&P’s base-case scenario assumes a dividend payout ratio of about 50% of net profits, although HRT has the flexibility to adjust its dividends in the event capital adequacy declines. Hence, S&P expects that HRT will continue to maintain capital at this level over the next two to three years.
HRT will maintain a relatively conservative and highly liquid investment portfolio, in S&P’s view. Over the years, HRT has maintained a conservative, yet highly liquid investment portfolio with investments across fixed-income securities and deposits. This has further improved in 2025, with the proportion of investment-grade fixed-income securities increasing, supporting HRT's overall liquidity. As a result, S&P has revised its liquidity score on HRT to exceptional from adequate. At year-end 2025, stressed liquid assets covered stress liabilities by about 2.7x. S&P anticipates that liquidity will remain at the current level over the next one to two years.
Underwriting
S&P expects HRT to maintain profitable underwriting performance. Based on IFRS17, the company’s combined ratio improved to 86% in 2025 from 95% in 2024, mainly driven by lower claims and expenses and supported by strong insurance revenue growth, which S&P still expects could show some volatility over the short to medium term considering the overall market landscape.
Investment
The company also benefitted from higher profit rates on its fixed-income and cash-based investment portfolio. In 2025, HRT reported a strong increase in net profit to about BHD11m ($29.3m) from BHD6m in 2024. The strong improvement in earnings was underpinned by both profitable underwriting and investment results.
Parent
S&P assumes HRT will remain strategically important to its parent, Hannover Re. HRT benefits from the Hannover Re brand, including through access to the group's resources, relationships with various industry stakeholders, and technical know-how. S&P adds three notches of uplift to its 'bbb+' assessment of HRT's stand-alone credit profile to reflect HRT's important role in supporting its parent's growth ambitions in emerging markets, notably in takaful in the Middle East and Southeast Asia. HRT also has several operational connections to its parent, including retrocession agreements, support on underwriting, and risk management.