AM Best affirms Tunis Re ratings – but with a negative outlook

The outlook of the credit ratings reflects the current pressures in the country

AM Best affirms Tunis Re ratings – but with a negative outlook


By Abigail Adriatico

Global credit rating agency AM Best has affirmed the credit ratings of Société Tunisienne de Réassurance (Tunis Re), which had a Financial Strength Rating (FSR) of B and a Long-Term Issuer Credit Rating (Long-Term ICR) of “bb” – but with a negative outlook.

AM Best came to the conclusion that Tunis Re’s balance sheet strength was strong and that its operating performance was adequate, its business profile was limited, and its enterprise risk management (ERM) was marginal.

The negative outlook for Tunis Re’s ratings is a reflection of the current risk pressures seen in Tunisia. According to the credit rating agency, such pressures may continue to deteriorate the firm’s balance sheet fundamentals along with its ability to manage the heightened risk environment in which it is operating.

Measured by its Best’s Capital Adequacy Ratio (BCAR), AM Best found that Tunis Re’s balance sheet strength was underpinned by its risk-adjusted capitalisation. The assessment took into account the firm’s investment portfolio by its asset class and concentration in Tunisia. With Tunisia’s heightened economic and political risk driving increases in the required capital for investment risk since 2020, the margin that Tunis Re held in excess was significantly reduced.

From 2019 until 2023, Tunis Re had an average return-on-equity ratio at 7.6%. It earnings largely came from solid investment returns. Within the same period, the firm also had a weighted average net investment yield of 7.7%.

Tunis Re’s non-life portfolio saw a technical profit for five consecutive years by 2023, noting an improvement in its underwriting performance since 2018. Despite this, gains and losses in foreign exchange provided a level of volatility to the firm’s operating performance.

The firm’s business profile assessment served as a reflection of its position in Tunisia as well as its diversification into regional markets. Its operations continue to be of limited scale in the global reinsurance market, it was noted.

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