Increased insurance business in the Middle East and North Africa and an escalation in Takaful, or Islamic insurance, have raised rating questions about new companies coming to market, a ratings agency said.

Standard & Poor's Ratings Services addressed those issues in analyses titled "Takaful: A New Face for Insurance" and "Credit FAQ: Rating Start-Up Insurance And Reinsurance Companies in the Middle East and North Africa."

The firm released the publications in advance of seminars it is holding on Feb. 5 and Feb. 6 in Dubai and Bahrain titled "Ratings at Work in the Capital Markets of the Middle East."

Standard & Poor's credit analyst Kevin Willis in a statement said there has been increasing interest in whether the firm will rate the new insurance companies, or 'start-ups,' in the Middle East and North Africa region.

"It is possible for start-up companies to receive a rating, but we believe that a disciplined and conservative approach in such circumstances is crucial," he noted.

Mr. Willis said S&P has examined "the dynamics of Takaful and include it within the scope of our current insurance rating criteria."

According to the article, "Takaful: A New Face For Insurance," Takaful companies offer protection to contributors, (policyholders) by accumulating contributions (premiums) to a fund for the mutual benefit of the contributors. The fund is the resource out of which payments are made in the event of a claimable loss, the article said.

It continued that key requirements of the business model are to adhere to Islamic principles of:

o Avoiding uncertainty

o Avoiding gambling

o Avoiding interest

S&P said it is able to rate new companies and has already rated some companies in the Middle East and North Africa region, but that its "disciplined and conservative" approach remains unchanged.

"For start-ups, the main challenge is the lack of track record," Mr. Willis said. With many regulators in the region citing a "Standard & Poor's rating as part of their security measures, there is an increasing incentive for companies to embark on the rating process and show they are in the investment-grade range of 'BBB-' or above."

According to S&P, the inclusion of religious observance is the only significant difference in the business model for Takaful insurance," but we expect that by attracting new clients, Takaful products will contribute to a rapid increase in insurance penetration in the region," Mr. Willis said.

Mr. Willis will speak at both seminars in Dubai and Bahrain. Senior analysts from various other analytical groups within Standard & Poor's will also be speaking. For further details, contact Michelle Morin at michelle_morin@standardandpoors.com.

The report is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit research and analysis system, at www.ratingsdirect.com. Anyone who is not a subscriber may purchase a copy by calling 212-438-9823 or sending an e-mail to research_request@standardandpoors.com., S&P said.

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S&P Addresses Takaful Ratings Issues

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