The sale by Arab Reinsurance Company (Arab Re) of a material land holding in Lebanon will materially reduce the company's asset risk, says AM Best.
In a commentary, AM Best says that the plot of land represented 24% of Arab Re’s total investments at the end of 2025. The sale will significantly benefit the reinsurer’s risk-adjusted capitalisation over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). The sale of this land should also contribute to further insulating Arab Re from the challenging economic and political conditions in Lebanon. The transaction is expected to be completed by December 2028.
Ratings affirmed
AM Best has affirmed Arab Re’s Financial Strength Rating (FSR) of ‘B’ (Fair) and Long-Term Issuer Credit Rating (Long-Term ICR) of ‘bb’ (Fair). The outlook of the FSR is ‘Stable’, and the outlook of the Long-Term ICR is ‘Positive’.
These credit ratings 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 (ERM).
The positive outlook on the Long-Term ICR reflects the positive pressures across Arab Re’s balance sheet strength and ERM assessments following the decision by the company’s management to de-risk its investment portfolio.
Operating results
Arab Re has recorded profitable operating results in each of the last five years (2025-2021), evidenced in 2025 by a return-on-equity ratio of 6.1%. The company reported positive underwriting results in each year since 2021, which reflects portfolio remediation actions taken by Arab Re’s management, including exiting underperforming risks and the revision of underwriting guidelines. Investment income is expected to remain a strong contributor toward overall earnings, resulting from the company’s relatively low underwriting leverage and the favourable global interest rate environment.
Arab Re has a niche position in its core markets in the Middle East and North Africa regions, built upon its original role as a reinsurer for Arab insurance markets and long-standing relationships with cedants. Despite the company’s geographic reach, its growth potential is limited, as reinsurance markets in these regions remain highly competitive.