Moody's Ratings (Moody's) has assigned a 'Ba2' Insurance Financial Strength Rating (IFSR) to First Takaful Insurance Company (First Takaful). The outlook is 'Stable'.
Based in Kuwait, First Takaful is a mid-tier property and casualty insurer, underwriting various commercial and personal lines products.
Ratings rationale
Moody’s says that the assignment of a ‘Ba2’ IFSR to First Takaful reflects:
(i) the company's diversified product offering across retail and commercial lines of insurance business;
(ii) adequate asset quality with an adequate quality of reinsurance assets and invested assets, albeit with sizeable exposure to equity investments;
(iii) modest capital buffer above the regulatory requirement post the recent capital infusion of KWD6m ($19.4m) by shareholders; and
(iv) financial flexibility demonstrated by the recent equity raise, its status as one of only a handful of insurers being listed on Boursa Kuwait and no current outstanding borrowings.
Underwriting
These strengths are moderated by First Takaful's recent return to underwriting profitability and uncertainty about its ability to continue improving its underwriting performance given its modest market position, as the 18th largest in the Kuwaiti insurance market in terms of premiums, which constrains its growth and diversification prospects amid intense competition, albeit that it has a better market position in motor insurance, which is its area of focus.
The competitive pricing pressures of the Kuwaiti insurance market, alongside First Takaful's high expense base relative to its premium volume, have resulted in weak underwriting profitability, with the YE2025 five-year average combined ratio (COR) of 105%, albeit having recently improved with a YE2025 standalone COR of 99%.
The weak historical performance has resulted in volatile, often loss-making results with return on capital (ROC) of -9.7% and -4.4% for YE2023 and YE2024, respectively, before the recent underwriting improvement in YE2025 resulting in a ROC of 1.1% for that year. The historic weak performance had pressured capital adequacy, with the company unable to meet minimum regulatory capital requirements during YE2025.
More positively, Moody’s notes that the KWD6m capital injection by First Takaful's shareholders in February 2026, has increased the insurer’s consolidated (policyholders' and shareholders') equity from KWD5.9m at YE2025 to KWD11.7m per financial results reported at 31 March 2026. This has abated the risks related to non-compliance with regulatory solvency requirements; however, the company's post-capital infusion risk framework remains to be enhanced and actioned in terms of allocation of the capital into investments and underwriting risks.
The ‘Ba2’ rating also incorporates First Takaful's environmental, social and governance (ESG) considerations, as per the General Principles for Assessing Environmental, Social and Governance Risks methodology of Moody’s. The assessment by Moody’s that First Takaful's exposure to governance risks is moderate, reflected in a Governance Issuer Profile Score (IPS) of ‘G-3’, is driven by the still-evolving financial strategy and risk management, and the weak performance track record, albeit with recent signs of improvement.
Outlook
The stable outlook reflects expectations on the part of Moody’s that First Takaful will maintain its recent improvements in underwriting profitability whilst maintaining its reinstated capital levels and regulatory compliance.
Moody’s said, "First Takaful's 'Standalone Scorecard-indicated Outcome' of ‘Ba2’ is four notches below the 'Preliminary Standalone Outcome' of ‘Baa1’. This reflects the smaller size and concentration of the Kuwaiti insurance market, which constrains First Takaful's business profile compared to global peers and requires a more holistic assessment of the company's asset quality, profitability, capital adequacy, and financial flexibility, based on the quality of underlying assets, underwriting profitability metrics and regulatory solvency ratios.”