Fitch Ratings affirms Tunis Re rating at ‘AA(tun)'; outlook stable
The ratings agency affirmed that Tunis Re maintains its position as the undisputed leader in Tunisia's reinsurance market. This strong domestic presence, combined with a well-diversified business portfolio, forms the cornerstone of the company's financial stability.
The report highlights Tunis Re's capitalization as adequate, according to the Prism Global model (excluding the U.S.), driven by its large capital base and low net exposure to catastrophe risk, which is offset by high asset risk.
In terms of performance, Tunis Re posted a robust net combined ratio of 92.7% in 2023 and a Return on Equity (ROE) of 7.7%, reflecting disciplined underwriting practices, even with the one-off impact from the February 2023 earthquake in Turkey.
Fitch further points to the company's resilience, noting that over half of gross written premiums originate from foreign markets, many of which are more highly rated than Tunisia, bolstering financial strength.
On the risk management front, Tunis Re employs a proactive reinsurance strategy with a solid retrocession program backed by highly rated partners, offering effective protection against large-scale claims.
However, Fitch also flags a key vulnerability: a high concentration of investments in Tunisian dinar-denominated assets, with no currency hedging in place. This could weigh on the company's rating in the event of significant exchange rate volatility.
Looking ahead, Fitch identifies two potential drivers for an upgrade: greater asset diversification outside Tunisia to reduce exposure to the domestic market, and an increased share of high-quality international business to enhance the company's overall risk profile.
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