Fitch Ratings has affirmed Societe Tunisienne de Reassurance’s (Tunis Re) National Insurer Financial Strength (National IFS) Rating at ‘AA (tun)’. The Rating Outlook is Stable, it said in a statement.
Tunis Re’s National IFS is driven by its strong creditworthiness. The recent downgrade of Tunisia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC-‘ from ‘CCC+’ does not alter our view of Tunis Re’s credit risk relative to local market peers’.
Fitch believes Tunis Re’s earnings are strong for the rating, supported by sound and improving technical profitability. It reported a combined ratio of 91.7% in 2022 (2021: 92.5% in 2021, three-year average: 93.7%), despite the adverse impact of inflation and exchange rate effects due to the rise of the US dollar. This led to an improvement in the Fitch-calculated return on equity (ROE) to 8.6% in 2022 from 7.7% in 2021.
“We expect Tunis Re’s solid underwriting expertise, sound risk management and effective retrocession to mitigate potential earnings volatility resulting from foreign-exchange (FX) movements and financial market fluctuations,” said Fitch Ratings.
It added that Tunis Re’s retrocession practices are effective and positive for the rating. It has developed strong business ties with highly rated international reinsurers.
“In 2022 retention rate continued to increase as the company shifted its activity towards less volatile treaty business. Its whole portfolio is subject to an excess of loss policy, while exposure to catastrophe risk remained largely retroceded. However, the company remains vulnerable to higher retrocession cost,” said the ratings agency.
