Ilaf Takaful Insurance Company has demonstrated a track record of sound operating performance, reporting a good balance of earnings between its policyholders' and shareholders' funds in recent years, notes AM Best.
Since 2023, the company has continued to report a surplus in its policyholders’ fund. Underwriting performance has been a leading driver of overall profitability, with a four-year (2022-2025) weighted average net-net combined ratio of 88%. Whilst ILAF Takaful has seen some volatility in individual lines of business, the company has demonstrated its underwriting control and selection to quickly remediate loss-making business.
‘Good’ ratings assigned
AM Best has assigned a Financial Strength Rating of ‘B++ ‘(Good) and a Long-Term Issuer Credit Rating of ‘bbb’ (Good) to Ilaf Takaful. The outlook assigned to these credit ratings is ‘Stable’.
The ratings reflect ILAF Takaful’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
AM Best assesses ILAF Takaful’s risk-adjusted capitalisation on a combined basis, including its policyholders’ and shareholders’ fund, due to the requirement that the shareholders’ fund has to support the policyholders’ fund.
ILAF Takaful’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects prospective risk-adjusted capitalisation to remain comfortably at the strongest level. The balance sheet strength is further supported by the company’s conservative investment strategy and strong liquidity levels. An offsetting factor to the balance sheet strength assessment is the company’s small capital base, which increases the risk of volatility.
Business profile
Established in 2005, ILAF Takaful maintains a niche position as a small takaful company operating in Kuwait’s insurance market. Whilst contributions are concentrated geographically, diversification is achieved through the product offering. The company’s business profile benefits from its affiliation with its ultimate parent, Fouad Alghanim & Sons Group of Companies Holding, from which it derives around 50% of its written premium. The Group has interests in engineering, construction, power, oil and gas, automotive, investment, trading, shipping, aviation, telecom, hospitality and real estate.
AM Best views ILAF Takaful’s risk capabilities as appropriate relative to the size and complexity of its operations. The global credit rating agency expects the company to develop its ERM framework over the near to medium term with the help of external consultants.