Life insurer Atlanticlux to come to market with US$100 million Sukuk - IFN

Life insurer Atlanticlux to come to market with US$100 million Sukuk

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LUXEMBOURG: Life insurer Atlanticlux (ATL) has come to the market stating that it will issue the first tranche of its US$100 million Sukuk, set at US$20 million, in September this year. It is expected that the securitized portfolio will include more than 100,000 in-force unit-linked life insurance policies written by ATL; a subsidiary of German insurance and Takaful company FWU. The program, which will be issued via Salam III, a limited non-cellular Guernsey-incorporated company, will see Salam III enter into a reinsurance contract with ATL who is also the deal’s obligor, with ATL ceding 90% of the remaining mortality risk and part of the lapse risk to the Guernsey company as part of its new business policies. Proceeds from the program will be used to finance acquisition costs of new business, putting the company in a position to pay for its purchases upfront. The first tranche of the Sukuk has been rated at ‘BBB-EXP’ by Fitch Ratings, a rating that is also carried by the entire program. According to the rating agency, the assigned ratings are based on the Sukuk’s similar credit characteristics to a senior unsecured corporate obligation by ATL. This is partially based on the Sukuk’s recourse nature and a lack of bankruptcy remoteness in the structure. This is the first time ATL will be coming to the market with a Shariah compliant issuance, and it has been stated by the company that each tranche of its Sukuk program will have a tenor of five years. Following the issuance of the total US$100 million-worth program, the ratio of ATL’s financing commitments to its total available capital is expected to increase by three-fold to 2.4 from 0.8. However, Fitch does not expect this relatively high ratio to affect the company’s ratings due to the repayment mode of the program which will be derived from acquisition fees included in insurance premiums as part of its new business policies. ATL’s current agreements with its distribution partners are also seen as sufficient in reducing the insurer’s credit risk against lapses.