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 increased social, political and economic uncertainty in Lebanon.
In October 2019, demonstrations spread across Lebanon, rapidly leading to the resignation of the government. Since then, political and economic uncertainty has increased significantly, with a slowdown in capital inflows causing, in some instances, cash flow constraints to the economy.
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 diversification. In 2018, approximately 14% of AIC’s gross written premium were generated in Lebanon, whilst the proportion of the group’s cash and deposits held domestically amounted to only 16% as at year-end. Furthermore, in the first nine months of 2019, in response to increasing political and economic uncertainty in Lebanon, AIC implemented several risk management measures. As a result, AM Best considers AIC to have a limited exposure to Lebanon.
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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