S&P Announces Rating Actions in Wake of Bahrain Unrest

Standard & Poor’s Ratings Services announced that it has affirmed its long-term counterparty credit and insurer financial strength ratings on Hannover ReTakaful B.S.C., Trust International Insurance & Reinsurance Co. B.S.C. (c) (Trust Re), and Saudi National Insurance Co. (SNIC). The outlooks for all of these ratings are stable.

S&P explained that “on Feb. 24, 2011, we placed on CreditWatch with negative implications the long-term counterparty credit and insurer financial strength ratings on three Bahraini insurers: Bahrain National Insurance Co. BSC (BNI), Bahrain Kuwait Insurance Co. BSC (BKIC), and Takaful International Co. BSC (Takaful International), and the Gulf Cooperation Council (GCC) regional scale ratings on the former two.”

S&P also noted that it took the rating actions following those it had previously announced for the Kingdom of Bahrain (A-/Watch Neg/A-2; see “Kingdom of Bahrain Ratings Lowered By One Notch To ‘A-/A-2’ On Heightened Political Risk; On CreditWatch Negative,” published Feb. 21, 2011), which “reflect our reappraisal of political risks in Bahrain.”

S&P indicated that Hannover ReTakaful, Trust Re, and SNIC “have limited exposure to business derived from or assets held in Bahrain and their choice of the Kingdom as a domicile stems from its role as a financial center.”

S&P also pointed out that it believes these “companies could effectively operate from another domicile with limited or no disruption to business, should the need arise. By contrast, BNI, BKIC, and Takaful International derive the majority of their premiums from Bahrain and most of their invested assets are also held in the Kingdom. Therefore, their business and financial profiles are affected by movements in the sovereign rating.”

However, S&P said its rating actions on BNI, BKIC, and Takaful International “reflect our view of the risk of deterioration in the sovereign’s creditworthiness. In our opinion, the current situation could have a negative impact on these rated insurers because of their operational and asset exposure to Bahrain. Under our ratings criteria, sovereign risk is a key factor influencing the financial strength of insurers. As a result, the rating on nearly all insurers is limited by the relevant sovereign local currency rating.”

S&P added that it intends to “resolve the CreditWatch placements on BNI, BKIC, and Takaful International within the next three months, pending a resolution of the CreditWatch listing on Bahrain.”

Source: Standard & Poor’s