Jeddah (UNA-OIC) – Moody’s Investors Service (Moody’s) has affirmed the Aa3 Insurance Financial Strength Rating (IFSR) of the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) with a stable outlook.
The rating affirmation reflects ICIEC’s improvements in the stand-alone fundamentals as well as the continued support stemming from its shareholders, the Islamic Development Bank (IsDB, Aaa stable) and multiple sovereign members of the Organization of the Islamic Cooperation (OIC).
The stand-alone credit quality of ICIEC has strengthened over the past couple of years and is supported by its expanding role as the leading multilateral export credit and investment insurance corporation in the world that provides Shariah-compliant insurance and reinsurance products, as well as its enhanced regional knowledge based on its experience by operating in the OIC Member States.
Asset quality remains strong with a highly liquid invested assets portfolio and high-risk assets representing only 9.1 percent of the corporation’s consolidated (shareholders’ and policyholders’) equity at YE 2020.
Furthermore, despite the growth in business over the past few years, the corporation maintained strong levels of capital adequacy with Net Total Exposure to Shareholders’ Equity of 3.8x. ICIEC also gradually enhanced its risk management.
ICIEC’s profitability was resilient in 2020, with a combined ratio of 43.7 percent and net income of Islamic Dinar 6.2 million in 2020 which, despite the pressures from the coronavirus pandemic, remained relatively similar to 2019’s combined ratio of 39.9 percent and net income of Islamic Dinar 6.6 million (all on a Moody’s basis). Profitability benefitted from enhanced business coverage and reduced risk and business/client concentrations, as well as from efficiency gains.
ICIEC’s rating also benefits from the support from its main shareholders, in particular, IsDB and the Government of Saudi Arabia (A1 negative). Given ICIEC’s key role as a facilitator of trade between many countries, Moody’s expects that the shareholders will very likely support the corporation in times of financial distress. IsDB holds 50.6 percent of ICIEC’s subscribed shares as at H1 2021 whilst ICIEC’s other shareholders/members include Saudi Arabia and other sovereign members of the OIC. In addition, as a member of the IsDB Group, ICIEC benefits from various managerial synergies and support from its parent.
The stable rating outlook reflects Moody’s expectation that ICIEC will continue to enhance its risk management enabling it to maintain its strong levels of capital, asset quality and the recent improvements of profitability. Moody’s expects ICIEC to continue to grow and diversify its business with underwriting discipline.
Upward rating pressure for ICIEC may arise over time in case of (i) a multi-notch upgrade of the long-term ratings of ICIEC’s main shareholders’/member countries, and/or (ii) a significant strengthening in ICIEC’s ownership structure and/or level of support from members and in particular of IsDB.
Conversely, the rating may experience downward pressure in case of (i) a downgrade of some of ICIEC’s main shareholders/member countries, in particular, IsDB as well as Saudi Arabia’s rating moving to below A1 level, and/or (ii) significant reduction in ownership and/or level of support from IsDB, and/or (iii) a material increase in ICIEC’s risk profile due to significant deterioration of current capitalization and/or a material increase in the corporation’s asset risk and insurance risk profile.