S&P Global Ratings on Feb. 20 lowered MedGulf Cooperative Insurance and Reinsurance Co.'s credit and insurer financial strength ratings to B from BB- and revised the implications of the ratings' CreditWatch placement to developing from negative, where they were originally placed Aug. 15, 2017.
The agency said the ratings action reflects its concern that the Saudi Arabia-based firm's discussions with potential capital providers in recent months have not yet reached a satisfactory conclusion. The company is still negotiating to arrange a rights issue for up to 400 million Saudi Arabian riyals, S&P noted.
Earlier in February, The Saudi Arabian Monetary Authority prohibited the company from writing new business until its solvency position returns to a satisfactory level. The longer the prohibition is in effect, the more that the MedGulf's commercial and other policy holders will be compelled to move their insurance business to other providers, potentially damaging the company's competitive position, the agency said.
Should MedGulf fail to quickly raise solvency to an acceptable level, the regulatory prohibition may become permanent, which could result in the company ceasing to be a viable commercial enterprise, S&P noted.
The agency said the CreditWatch placement reflects its view of the current uncertainty regarding the willingness and ability of the company's principal shareholders to agree and act upon a capital-raising plan.
S&P also lowered the company's Gulf Cooperation Council regional scale issuer credit rating to gcB+ from gcBBB- and changed the implications of the ratings' CreditWatch placement to developing from negative.
As of Feb. 20, US$1 was equivalent to 3.75 Saudi Arabian riyals.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.