Fitch Ratings has assigned Societe Tunisienne de Reassurance (Tunis Re) a National Insurer Financial Strength (IFS) Rating of ‘AA-(tun)’ (Very Strong). The Outlook is Stable.
The national scale IFS Rating reflects Tunis Re’s very strong business profile and profitability, and moderate asset risk relative to the domestic market.
The rating of Tunis Re reflects its leading position in the Tunisian reinsurance market and increasing international diversification, as well as its strategic role within the Tunisian economy, underpinned by its strong ties with its cedents, retrocessionaires and the Tunisian state, the international ratings agency said.
The company is highly exposed to systemic risk as most of its assets are domestic. Fitch, however, believes that asset allocation is in line with Tunis Re’s credit profile, and most of the company’s domestic investments are liquid. Tunis Re is exposed to currency risk, with an unhedged currency mismatch between assets and liabilities.
Tunis Re’s scored ‘Strong’ under Fitch’s PRISM factor-based capital model at end-2017, indicating a strong capital base and low risk appetite. However, Fitch views regulatory oversight on solvency in Tunisia as somewhat underdeveloped, as the insurance market is currently regulated under a Solvency I-type framework, which constrains the agency’s assessment of Tunis Re’s capital quality and strength.
Tunis Re plans to have an external review of its reserving practices in the next few years, which would positively impact our assessment of the company’s reserve adequacy, which currently constrains the rating, said Fitch.