Al Sagr under scrutiny as Fitch places insurer on negative watch

Investing.com -- 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 decision was announced on Monday, April 14, 2025, and reflects potential downward revision of Fitch’s assessment of Al Sagr’s corporate governance.

The RWN was triggered following the regulator’s suspension of Al Sagr’s compulsory motor insurance license in February 2025. The suspension was due to non-compliance with supervisory and regulatory instructions, as well as deficiencies in the board of directors’ governance measures. The situation was further complicated by the resignation of an independent board member.

Fitch’s decision also takes into account the risk of additional unresolved governance issues and potential delays in remedial actions for the reinstatement of the compulsory motor insurance license. These factors could negatively impact the insurer’s credit profile. Al Sagr is currently working with the regulator to implement corrective measures, but the potential impact remains uncertain.

The ratings agency plans to resolve the RWN after further analysis within the next six months, factoring in subsequent developments and their implications for Al Sagr’s credit profile.

The insurer’s corporate governance will be under close scrutiny during this period. If the governance deficiencies noted by the Saudi regulator are not resolved within the next six months, Fitch’s assessment of the insurer’s corporate governance could weaken from neutral to less favorable.

The suspension of the insurer’s compulsory motor insurance license, a business line that accounted for 22% and 19% of insurance revenue in 2024 and 2023 respectively, is expected to significantly affect the company’s premium volumes. Nonetheless, the insurer will continue to service in-force compulsory motor policies.

Fitch has also outlined the factors that could lead to negative or positive rating action. A multi-notch downgrade could occur if risks regarding corporate governance practices remain unresolved over the next six months, or if there is a failure to maintain good financial performance, reflected in a combined ratio consistently above 100%, or significant deterioration in capitalization.

On the other hand, the RWN could be removed and the ratings affirmed if the risks regarding Al Sagr’s corporate governance practices are resolved over the next six months.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.