Third party firm may carry out ‘run-off’ of existing Arig portfolio
BAHRAIN: The extraordinary general meeting (EGM) of the shareholders of Arab Insurance Group (ARIG) on Thursday (August 13) decided to cease writing further reinsurance business.
The EGM authorised the board to carry out an orderly run-off of the existing portfolio internally or by appointing a third party to carry out the run-off.
Alternatively, the company has decided to explore the possibility of finding a buyer to take over the company. “The board has been given the authority to pursue all possible ways to preserve and enhance shareholder value,” a company statement said.
Runoff insurance protects the third party or the acquiring company from legal claims made against the company being acquired (here Arig) or a company that has merged or ceased operations. A runoff policy applies for a certain period after the policy is active acting as a claims-made policy rather than an occurrence policy.
Board decision on cessation
The board of directors of Arab Insurance Group (Arig) had decided to cease its underwriting activities in its meeting in last May itself.
Founded in 1980, Arig’s shareholders involve the Emirati, Libyan and Kuwaiti governments along with other private investors.
The Bahrain based Arig slipped into the red with a loss $3.62 million for the first half ending June 2020, against $9.54 million profit a year earlier.
The insurance giant reported a steep decline in gross written premiums, which went into negative, at $12.61 million against $171.74 million for first-half 2019, which impacted the bottom line hard. The total assets have fallen from $1.036 billion as of December 2019 to $888.82 million as of June 30, 2020
The board in its meeting held on May 13, resolved to recommend to the shareholders the cessation of the company’s underwriting activities. The Central Bank of Bahrain (CBB) was informed of the board’s decision and an EGM had been scheduled on August 13, to discuss and decide on the board’s recommendation.
GCC reinsurance market
The reinsurance market across the GCC has been showing a state of hardening especially in property and engineering segments in the recent past. This is also in view of the fact that several regional reinsurers have closed their shops in the past more than two years.
The technical performance of the market has shown deterioration in 2019. “Unless some wisdom prevails, we will see further decline in 2020,” Omer Elamin President – Orient Group Orient Insurance was quoted as saying.
