LONDON: AM Best has commented that the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of ARABIA Insurance Company s.a.l. (AIC) (Lebanon), both with a negative outlook, remain unchanged despite the weakening social, political and economic conditions in Lebanon.
In October 2019, demonstrations spread across Lebanon, rapidly leading to the resignation of the government. Since then, political uncertainty has increased and economic and financial conditions have deteriorated, compounded by the country’s default in March 2020 on its USD 1.2 billion Eurobond and by the global spread of the COVID-19 pandemic.
Although AIC is domiciled in Lebanon, it is somewhat insulated from the heightened political and economic risk in the country. It operates through a network of branches and subsidiaries across nine countries in the Middle East, providing the group with good geographic diversification. Less than 20% of AIC’s gross written premium are generated in Lebanon, whilst the proportion of the group’s cash and deposits held domestically amounted to just 16% at year-end 2018. Furthermore, throughout 2019, in response to increasing political and economic uncertainty in Lebanon, AIC implemented several risk management measures.
AM Best will continue to monitor how events unfold in Lebanon and any impact the heightened social, political and economic risks have on AIC.
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