Research Update: UAE-Based SALAMA/Islamic Arab Insurance Co. 'BBB' Ratings Remain On CreditWatch Negative

For the third year in a row, SALAMA/Islamic Arab Insurance Co.'s financial accounts contain several audit qualifications due to insufficient information regarding the valuation and ownership of certain assets--although one qualification was removed in recent quarters. We understand that SALAMA is taking legal action against third parties to recover these amounts but if the assets are significantly or fully impaired SALAMA's capital adequacy could materially deteriorate, as per our model. As a result of the qualified assets, SALAMA's regulatory solvency is also below the required minimum. We therefore kept our 'BBB' ratings on SALAMA on CreditWatch negative, where they were placed on July 26, 2021. We expect to resolve the CreditWatch after assessing the outcome of court cases. We may

...- For the third year in a row, SALAMA/Islamic Arab Insurance Co.'s financial accounts contain several audit qualifications due to insufficient information regarding the valuation and ownership of certain assets--although one qualification was removed in recent quarters. - We understand that SALAMA is taking legal action against third parties to recover these amounts but if the assets are significantly or fully impaired SALAMA's capital adequacy could materially deteriorate, as per our model. - As a result of the qualified assets, SALAMA's regulatory solvency is also below the required minimum. - We therefore kept our '###' ratings on SALAMA on CreditWatch negative, where they were placed on July 26, 2021. - We expect to resolve the CreditWatch after assessing the outcome of court cases. We may affirm the ratings if SALAMA makes progress toward resolving the audit qualifications, failing which, we may lower the ratings by one or more notches....

Research Update