JEDDAH, 2 June 2008 — The Islamic Corporation for Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IDB) Group, has been gradually expanding its business with its credit and country risk business insured exceeding $1.4 billion for 2007. During the last five years, ICIEC’s insurance commitments grew by an average annual rate of more than 60 percent.
In a new move, it has decided to support exporters in member countries, especially those involved in food exports, due to the ongoing food crisis in some parts of the world. “We want to provide insurance to exporters who are facing the prospects of nonpayment,” Dr. Abdel Rahman Taha, general manager of ICIEC told Arab News in an interview. “
ICIEC’s mission is to encourage exports from member countries and facilitate the flow of foreign direct investments to them by providing and encouraging the use of Shariah compatible export credit and investment insurance as credit and country risk mitigation instruments.
“Export credit insurance as a risk mitigation and credit enhancement tool is rapidly gaining recognition and utility in our member countries,” Taha said. “This is reflected in the high rate of growth of ICIEC’s insurance business, fueled by robust demand form major exporters such as Saudi Basic Industries Corporation and El Sewedy Group of Egypt.
“We have been embarking on an aggressive direct marketing strategy and our new insurance commitments have been surging year after year,” he said and assured the stakeholders and clients of ICIEC of the positive steps it has taken over the years,” said Taha who assumed charge of his current responsibilities at ICIEC in 1994. “Our growth has not come at the expense of sound underwriting and proper risk management. Indeed, the risk portfolio of ICIEC has witnessed marked improvements in terms of balance and quality, with OECD and other investment grade countries making up more than 70 percent of total exposure, and short-term transactions contributing to 76 percent of total exposure. Moreover, ICIEC has substantially increased its cession to the reinsurance market from six percent to 18 percent of its current portfolio,” said Taha, an MBA and PhD from the University of California.
Taha, who lectured at the University of Khartoum and then moved to the World Bank as a senior economist, was associated with trade finance and credit and political risk insurance fieled when he joined the Inter-Arab Investment Guarantee Corp. in 1984. He then moved to the Arab Monetary Fund as director of trade finance.
ICIEC’s activities have not been confined only to its core insurance business, as its developmental mandate dictates that it engages in various endeavors designed to support and help member countries expand their exports and attract more foreign investment flows. Toward this end, ICIEC was assigned the management of the IDB Group Investment Promotion Technical Assistance Program, designed to help member countries improve their capability to attract FDI. “ICIEC has also redoubled its efforts to support export credit agencies in member countries through providing reinsurance and technical assistance services,” Taha said.
ICIEC’s medium term strategy calls for the continuation of the high rate of growth in business turnover coupled with prudent risk management and improved financial results.
This strategic objective, which so far was achievable, is now hampered by an exhausted insurance capacity problem. Thus far, the Corporation has dealt with this problem through various means, including the increase of the gearing ratio of capital to insurance commitments and the expansion of reinsurance.
“An injection of more capital resources is imperative for the corporation to be able to realize its mandate of encouraging member countries’ exports and facilitating the flow of investments into them,” he said.
ICIEC’s success is attributable not only to strong market demand and an aggressive marketing program, but also to a business strategy focused on developing strong business partnerships with prominent players in the international credit and political risk insurance industry.
The launching of the joint Globe Alliance Insurance Policy with COFACE of France and the admission of ICIEC to the Berne Union, the international association of elite of international credit insurers, are significant developments for the organization, he added.
One of the major indicators of ICIEC’s success is the fact that Moody’s recently assigned Aa3 to it. “Moody’s Investors Service is one of the major rating agencies in the world and for the first time it has assigned the insurance financial strength rating to us,” Taha said, adding that the rating outlook is stable. Moody’s notes that ICIEC’s rating reflect both the stand-alone fundamentals as well as potential support from its shareholders/IDB member countries.
Thus, despite the absence of explicit guarantees, in the context of its key role as facilitator of member country’s exports and inward foreign investments, ICIEC’s rating reflects the strong ability and potential willingness of its main shareholders to support the company in times of financial distress.
This rating puts ICIEC at par with major insurers of credit and political risk in the international market and should, therefore, encourage more use of its services by exporters and banks from member countries and investors worldwide.