Fitch Ratings has placed Al Sagr Cooperative Insurance Company's (Al Sagr) 'BBB' Insurer Financial Strength (IFS) and 'A+(sau)' National IFS Rating on 'Rating Watch Negative' (RWN).
The RWN reflects a potential downward revision of Fitch's assessment of Al Sagr's corporate governance from "Neutral" to "Less favourable".
“This follows the regulator's suspension of Al Sagr's compulsory motor insurance licence in February 2025, resulting from non-compliance with supervisory and regulatory instructions and shortcomings in the board of directors' governance measures. The suspension was compounded by the resignation of an independent board member,” said Fitch in a commentary.
The RWN also reflects the risk that additional unresolved governance issues may exist, and any potential delays in remedial action leading to the reinstatement of the compulsory motor insurance license could adversely affect Fitch’s assessment of the insurer's credit profile.
Al Sagr is working with the regulator to implement corrective measures, but substantial uncertainty about the potential impact persists. Fitch intends to resolve the RWN following further analysis within the next six months, taking into account subsequent developments and their implications for Al Sagr's credit profile.
Fitch highlights Al Sagr's key rating drivers to be:
Governance Under Scrutiny: Fitch's assessment of the insurer's corporate governance could weaken from 'Neutral" to "Less favourable" if shortcomings in corporate governance criticised by the Saudi regulator are not resolved within the next six months. The Saudi regulator has suspended the insurer's compulsory motor insurance licence, citing regulatory compliance and governance deficiencies, including concerns about the board's independence and effectiveness.
Fitch expects the insurer's remedial plans to be sufficient to alleviate the regulator's concerns. However, the global credit rating agency continues to closely monitor the situation as it sees downside risk for Al Sagr's ratings if a weak corporate governance structure persists.
Compulsory Motor Licence Suspension: The suspended business line accounted for 22% and 19% of insurance revenue, in 2024 and 2023, respectively. Fitch anticipates that a prolonged suspension will significantly affect the company's premium volumes, although the insurer will continue to service in-force compulsory motor policies.