AM Best affirmed the financial strength rating of B (Fair) and the long-term issuer credit rating of “bb” (Fair) for Arab Reinsurance Company SAL, or Arab Re, with a stable outlook.
According to the agency, the action reflects an assessment of strong balance sheet strength, adequate operating performance, a limited business profile and marginal enterprise risk management.
The agency noted the operating environment in Lebanon poses very high economic, political and financial system risks; Arab Re is domiciled there and holds just under 40% of its invested assets in the country.
The company has increased holdings of good quality foreign investments in recent years, which AM Best said has improved resilience to asset-side stress scenarios, including a full impairment of Lebanon-based assets.
The reinsurer posted profitable operating results in each of the past five years (2020–2024) and reported a return on equity of 4.7% in 2024. Annual underwriting results have been positive since 2021, a trend AM Best linked to portfolio remediation steps such as exiting underperforming risks and revising underwriting guidelines.
Investment income is expected to remain a significant contributor to earnings, supported by relatively low underwriting leverage and the favorable global interest rate environment.
Macro conditions vary across MENA, with inflation ranging from 0.9% in Oman to 71.6% in Türkiye as of mid-year 2024. For reinsurers operating across these markets, asset allocation, currency exposure, and reserving practices factor into capital adequacy and liquidity management, and can affect investment yields and loss-cost trends.
In parts of Arab Re’s core region, premium growth may provide a counterbalance to competitive and macro pressures. The UAE market reported a 21% revenue increase in 2024 and projects up to 20% growth in 2025, with reinsurers absorbing much of the prior-year flood losses, indicating potential expansion in reinsurance demand alongside pricing recalibration.
Arab Re maintains a niche position in its core Middle East and North Africa markets, built on its original role serving Arab insurance markets and longstanding relationships with cedants. AM Best said growth prospects are constrained by intense competition across regional reinsurance markets.
AM Best’s previous research on MENA reinsurers indicates many regional players lack the scale and diversification of larger global groups and often follow on programs, which limits their influence over pricing and terms. This structural context helps explain why competition can constrain growth for reinsurers focused on the region despite periods of firmer pricing.
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