I’m thrilled to sit down with Priya Jaiswal, a distinguished expert in banking, business, and finance, whose deep insights into market analysis and international trends have made her a trusted voice in the industry. Today, we’re diving into the recent capital restructuring of Salama Islamic Arab Insurance Company, a leading Takaful provider in the UAE. Our conversation explores the intricacies of their financial strategy, the importance of regulatory compliance, and what this means for the company’s future in the evolving landscape of Islamic finance.
Can you walk us through the key components of Salama’s capital restructuring plan approved on October 16, 2025?
Certainly, Natalie. Salama’s restructuring plan is a multi-step approach to bolster its financial health. It starts with a capital reduction to offset accumulated losses, which is essentially a way to clean up the balance sheet by addressing past deficits. Alongside this, they’ve canceled treasury shares, which helps streamline the company’s equity structure. The next phase involves issuing up to AED 175 million in Mandatory Convertible Sukuk through a special purpose vehicle. These Sukuk will eventually convert into new shares, bringing in fresh capital from strategic investors. It’s a comprehensive strategy aimed at restoring solvency and aligning with regulatory expectations.
Why was reducing capital to offset accumulated losses such a critical move for Salama at this stage?
Accumulated losses can weigh heavily on a company’s balance sheet, signaling financial distress to stakeholders and regulators. For Salama, reducing capital to absorb these losses was a necessary reset. It allows them to present a clearer, healthier financial picture, which is crucial for maintaining trust among shareholders and meeting the stringent capital requirements set by the Central Bank of the UAE. Without this step, the path to recapitalization and long-term stability would have been much harder to navigate.
How does the issuance of Mandatory Convertible Sukuk fit into this restructuring, and what role does the special purpose vehicle play?
The Mandatory Convertible Sukuk, or MCS, is a Shariah-compliant instrument that serves as a bridge to inject new capital into Salama. By issuing up to AED 175 million through a special purpose vehicle, the company creates a structured mechanism to attract strategic investors without immediately diluting existing shareholders. The special purpose vehicle acts as an intermediary, holding the Sukuk until they are mandatorily converted into shares at a later stage. This approach not only ensures fresh funds but also aligns with Takaful principles, maintaining Salama’s commitment to Islamic finance.
In what ways does this restructuring enhance Salama’s solvency and alignment with the Central Bank of the UAE’s regulations?
The restructuring directly addresses solvency by strengthening Salama’s balance sheet through the infusion of new capital via the Sukuk issuance. Solvency, in simple terms, is about having enough capital to cover potential liabilities, and this move ensures Salama can meet its obligations even under stress. Additionally, the Central Bank of the UAE has strict guidelines on capital adequacy for insurance and Takaful firms. By recapitalizing and reducing losses, Salama is positioning itself to fully comply with these rules, which is vital for operational continuity and regulatory trust.
Salama reported a net profit of AED 8.25 million in the first half of 2025. What do you think were the driving forces behind this financial improvement?
That’s a promising result, especially amidst restructuring efforts. I believe Salama’s net profit of AED 8.25 million reflects a combination of disciplined underwriting practices and operational efficiency. Underwriting discipline means they’ve been careful about the risks they take on, ensuring premiums align with potential claims. Additionally, their focus on optimizing expenses likely played a role in boosting profitability. The rise in total equity by 5.2% to AED 351.84 million also suggests effective management of assets and liabilities, contributing to this positive outcome.
With S&P Global Ratings affirming a ‘BBB-‘ rating with a Developing outlook, how do you see this impacting Salama’s reputation in the market?
A ‘BBB-‘ rating from S&P Global Ratings is a solid endorsement of Salama’s financial stability and improving fundamentals. The ‘Developing’ outlook indicates potential for an upgrade if the restructuring succeeds and solvency strengthens further. In the market, this rating signals to investors, partners, and customers that Salama is a credible player in the Takaful space. It enhances confidence, especially among strategic investors who’ve already shown interest in the Sukuk issuance, and positions Salama as a reliable entity for future growth.
Mohamed Ali Bouabane emphasized maintaining strong underwriting discipline. Can you explain what this means for Salama’s operations on a day-to-day basis?
Absolutely. Underwriting discipline is at the heart of any insurance or Takaful provider’s operations. For Salama, it means rigorously assessing risks before accepting policies, ensuring that the premiums they charge are commensurate with the potential payouts. On a day-to-day level, this translates to thorough evaluations of client profiles, claims histories, and market conditions. It’s about avoiding overexposure to high-risk segments and maintaining a balanced portfolio, which ultimately protects the company’s financial health and ensures they can honor claims without strain.
Looking ahead, what is your forecast for Salama’s position in the Takaful industry following this restructuring?
I’m cautiously optimistic about Salama’s future in the Takaful industry. If they successfully complete this restructuring and secure final regulatory approvals, they’ll be well-positioned with a stronger balance sheet and enhanced solvency. Their focus on underwriting discipline and expense optimization suggests a commitment to sustainable growth. Given their established presence in the UAE and beyond, I foresee Salama solidifying its role as a leading Takaful provider, potentially expanding their market share as investor and customer confidence grows. However, maintaining compliance and adapting to evolving regulations will be key to their long-term success.
