Global Arab Network | In Line With Downgrade Of Parent, Oman Insurance Ratings Lowered

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In Line With Downgrade Of Parent, Oman Insurance Ratings Lowered

Global Arab Network - - Maha Karim

Tuesday, 07 July 2009 17:59

Standard & Poor's Ratings Services said today that it lowered its long-term counterparty credit and insurer financial strength ratings on United Arab Emirates (UAE)-based composite insurer Oman Insurance Co. (PSC) to 'BBB+' from 'A-'. In addition, we removed the ratings on Oman Insurance from CreditWatch with negative implications, where they had been placed on March 18, 2009. The outlook is stable.

"The ratings on Oman Insurance have been lowered in line with the downgrade of its parent, United Arab Emirates-based Mashreqbank (A-/Negative/A-2)," said Standard & Poor's credit analyst Nigel Bond. Standard & Poor's views Oman Insurance as strategically important to Mashreqbank, and previously incorporated one notch into the ratings on the company to reflect the potential for support from its parent. This notch has now been withdrawn. In line with Standard & Poor's group methodology, the ratings on Oman Insurance remain capped at one notch below those on Mashreqbank. "Consequently, the ratings on Oman Insurance now reflect its stand-alone credit profile, with no benefit from group support," said Mr. Bond.

The ratings on Oman Insurance reflect its strong operating performance and strong competitive position. Offsetting factors are its marginal capitalization and investment profile and its weak enterprise risk management (ERM), particularly investment risk management.

The stable outlook reflects the stand-alone credit profile of Oman Insurance. We do not expect any further lowering of the ratings on Mashreqbank to result in any change to those on Oman Insurance; however, any improvement in the ratings on Mashreqbank could lead to a like-for-like improvement in those on Oman Insurance.

Standard & Poor's expects that Oman Insurance will improve its ERM, particularly its investment risk management, which will result in a lower risk profile for the company. This, in turn, will benefit its capital adequacy and reduce both its capital and operating performance volatility. We also assume that the company's underwriting performance will remain very strong, with the net combined ratio continuing to be better than 90%, and that its strong competitive position as a leading insurer in the UAE will be maintained.

Global Arab Network

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