S&P Notes Rise in Islamic Compliant (Takaful) Insurance

February 1, 2006

The London office of Standard & Poor’s Ratings Services has issued two reports on the increasing volume of insurance business in the Middle East and North Africa (MENA), which, for S&P, raises the question “about whether new companies coming to market will be rated.”

Takaful insurance, S&P notes, “has grown in scale and significance,” and the reports -“Credit FAQ: Rating Start-Up Insurance And Reinsurance Companies In The Middle East And North Africa” and “Takaful: A New Face For Insurance,” address both questions.

S&P will follow up the studies with seminars on the subject, “Ratings At Work In The Capital Markets Of The Middle East,” in Dubai and Bahrain on Feb. 5 and Feb. 6, 2006.

“There has been increasing interest in whether we will rate the new insurance companies, or ‘start-ups’, in the MENA region, explained S&P credit analyst Kevin Willis. “It is possible for start-up companies to receive a rating, but we believe that a disciplined and conservative approach in such circumstances is crucial. We have also examined the dynamics of Takaful and include it within the scope of our current insurance rating criteria.”

S&P said the reports address the “the most commonly asked questions about the rating of newly formed companies.” In fact it already rates a number of companies in the region, but it also indicated that it maintains a “disciplined and conservative approach” in doing so.”

“For start-ups, the main challenge is the lack of track record. But with many regulators in the region citing a Standard & Poor’s rating as part of their security measures, there is an increasing incentive for companies to embark on the rating process and show that they are in the investment-grade range of ‘BBB-‘ or above,” Willis explained.

S&P also indicated that “Takaful insurance has greatly increased the accessibility of insurance products in the Middle East. In the second article, the differences between Takaful and other insurance models are examined. Overall, we conclude that the inclusion of religious observance is the only significant difference in the business model, but we expect that by attracting new clients, Takaful products will contribute to a rapid increase in insurance penetration in the region.”

Willis will be speaking at both the seminars in Dubai and Bahrain on the subject of “The Developing Insurance Markets On The Middle East”. Senior analysts from various other analytical groups within Standard & Poor’s will also be speaking. For further details, please contact Michelle Morin at michelle_morin@standardandpoors.com.

The report is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit research and analysis system, at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to research_request@standardandpoors.com. *

Ratings information can also be found on Standard & Poor’s public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. All Standard & Poor’s research information is accessible for 24 hours after publication on the public Web site.

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