SALAMA/Islamic Arab Insurance Co. P.S.C.

The CreditWatch placement reflects the uncertainty regarding the valuation of qualified assets and SALAMA's ongoing court cases with third parties. We expect to resolve the CreditWatch after assessing the outcome of the 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. Following a decline of about 6.1% in real GDP in the UAE in 2020, GDP growth will recover to about 3.5%-4% in 2021-2022. Gross written premium (GWP) growth in the overall UAE insurance market will likely remain relatively modest in 2021, due to high competition and the absence of any new mandatory covers. SALAMA is the largest Sharia-compliant (takaful) insurer

...S&P Global Ratings expects SALAMA's '###' capital adequacy to remain a key rating driver. We expect SALAMA will maintain its risk-based capital adequacy at the '###' benchmark as per our model. Audit qualifications pose a risk to SALAMA's capital adequacy, as well as the rating. We expect SALAMA to maintain its operating performance in 2021-2023. SALAMA has consistently improved its operating performance and has a four-year average (2017-2020) net combined ratio (NCR) of about 95%. In 2020, The NCR stood at 93%. We expect Salama to maintain its operating performance, with the combined ratio remaining below 95% in 2021-2023. We expect SALAMA to expand its UAE business, while gradually decreasing its exposure to North African Countries. SALAMA's United Arab Emirates (UAE) business represents about three quarters of its top line, and we expect SALAMA to continue to grow its UAE business while gradually moving away from high-risk markets....

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