Fitch Ratings has upgraded Societe Tunisienne de Reassurance’s (Tunis Re) National Insurer Financial Strength (National IFS) Rating to ‘AA(tun)’ from ‘AA-(tun)’. The Outlook is Stable.
Tunis-Re is the leader of the Tunisian reinsurance market, with an estimated market share of 20% in 2020, with a very strong expertise of the national market and pricing power.
Fitch believes that Tunis Re’s corporate risk management framework has shown continuous improvement over the last two years compared to local practices, which is positive for its rating.
The company’s risk-based internal capital model was reviewed by a leading international audit firm in 2020.
This was positively viewed by Fitch as it brings the company’s risk management practices somewhat closer to EU Solvency 2 standards, the ratings agency said.
Fitch believes Tunis-Re’s credit fundamentals will remain robust relative to Tunisian peers’ amid the COVID-19 pandemic.
The ratings agency noted that Tunis Re is highly exposed to systemic risk as most of its assets are domestic. However, investment risks are in line with Tunis Re’s credit profile, and most of its domestic investments are liquid.
Tunis Re is exposed to currency risk, through its business operations which are increasingly skewed towards international markets, high use of international retrocession, and an unhedged currency mismatch between assets and liabilities.
Fitch said it did not expect capitalization to significantly deteriorate as a result of the economic downturn caused by the pandemic. “We expect regulatory capital to remain at a comfortable level, although regulatory oversight in Tunisia is somewhat under-developed,” it indicated.