IIRA reaffirms fiduciary ratings of Islamic Insurance Company

January 21, 2015 12:16 pm

Islamic International Rating Agency (IIRA) has reaffirmed the Takaful Financial Strength (TFS) rating of The Islamic Insurance Company PLC (TIIC) in Jordan at ‘A’ (Single A). Outlook on the assigned rating is ‘Stable’.

The fiduciary score has been reassessed in the range of ’71-75′, which indicates that protection factors are adequate. The company has an established history of wealth creation for its shareholders, while maintaining a conservative risk profile and supporting business growth through internal capital generation. The fiduciary score is an aggregation of scores assigned to its two sub-sections i.e. Asset Manager Quality and Shari’a Governance.

The assigned rating derives strength from TIIC’s franchise as a Shari’a compliant operator that builds on the reputation of its parent, Jordan Islamic Bank, and which forms part of the Al Baraka Banking Group. Established in 1996, the company has grown at a steady rate and presently commands a market share of about 4 per cent in Jordan’s overall insurance sector.

Profitability position of the firm has improved in recent years on the back of increase in the proportion of life takaful business featuring lower claims ratio, and to some extent improvement in the loss ratio of the motor segment. Performance is also supported by sound expense management. The company has consistently generated surplus in the policyholders’ fund for the past five years. Capitalization and liquidity indicators are strong, while re-takaful coverage of risks underwritten is considered adequate.

However, weak macroeconomic fundamentals against the backdrop of regional instability and regulatory constraints in Motor TPL policies continue to pose challenges for the company and the insurance sector as a whole. The company may also benefit from greater diversification in its business mix, which is currently dominated by motor, medical and life takaful policies.

The overall governance structure at the company is considered adequate keeping in view the small size of the institution, however there is room for improvement in the areas of transparency and self-regulation. Drawing from its parent’s organizational culture, TIIC encourages conformance with Islamic principles and overall operations of the company are deemed Shari’a compliant; however, there is room for improvement with regards to departmentalization of certain functions such as audit and compliance.