Rating Action Commentary
ֳ Affirms Turk P&I's IFS Rating at 'BB-'; Outlook Stable
Thu 10 Apr, 2025 - 5:03 AM ET
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Turk P ve I Sigorta A.S.
ֳ - Madrid - 10 Apr 2025: ֳ has affirmed Turk P ve I Sigorta A.S.'s (Turk P&I) Insurer Financial Strength (IFS) Rating at 'BB-' and National IFS Rating at 'AA-(tur)'. The Outlooks are Stable.
The IFS Rating reflects Turk P&I's small size and scale compared with other Turkish insurers and investment risks skewed towards the Turkish banking sector, which is in line with the rest of the market. The rating also reflects Turk P&I's adequate earnings and scapitalisation pressure.
Key Rating Drivers
Turkish Marine Specialist: ֳ assesses Turk P&I based on the insurer's standalone credit quality, but also considers its ownership structure, which is equally divided between public and private interests. The shareholders have provided capital support on several occasions, and we believe they will continue to do so in case of further capital need. We believe the company's ownership and its strategic role in the Turkish economy are supportive of its credit profile.
Turk P&I, which is Turkiye's first protection and indemnity (P&I) insurance provider, also underwrites hull and machinery (H&M) insurance, which accounted for 64% of net premiums in 2024. ֳ´s assessment of Turk P&I´s company profile takes into accounts its small size, increasing international diversification, in addition to its ownership and strategic role in Turkiye. Its business volumes continued to grow strongly in 2024, supported by the strong development of its international business. However, Turk P&I has taken a more cautious approach to growth in 2024 and 2025, due to softer market conditions in international H&M insurance.
Pressured Capitalisation: The insurer's regulatory solvency ratio improved to 118% at end-2024 from 65% at end-2023, following a capital increase of TRY200 million provided by its shareholders in September 2024 as well as stronger retained earnings. Turk P&I's capital score on ֳ's Prism Global capital model also improved to 'Somewhat Weak' at end-2024 from 'Weak' at end-2023. However, we believe its capitalisation will remain under pressure from continued strong business volumes growth, which may exceed its capacity for internal capital generation.
High Exposure to Banking System: Turk P&I's balance sheet comprises deposits in Turkish banks as well as government bonds. At end-2024, 94% of invested assets were allocated to bank deposits. This indicates a high exposure to the banking sector in Turkiye, in line with the rest of the Turkish insurance market.
Adequate Financial Performance: We view Turk P&I's earnings as adequate. For 2024, Turk P&I reported a net income of TRY121 million (2023: TRY62 million), equivalent to a net income return on equity of 33% (2023: 37%). Its profitability was highly influenced by increased technical profits, as well as higher investment income due to high interest rates and foreign-exchange (FX) gains. Turk P&I receives most of its premium income and pays most of its claims in foreign currencies. The insurer's earnings are subject to claims volatility due to the nature of its business.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
-- A downgrade of Turkiye's sovereign rating could lead to a downgrade of the international scale rating
-- Business risk profile deterioration due, for example, to a sharp deterioration in the maritime trade environment could lead to a downgrade of the national and international scale ratings
--A material deterioration in capital without prospects of a timely recovery could lead to a downgrade of the national and international scale ratings
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
--An upgrade of Turkiye' s sovereign rating could lead to an upgrade of the international scale rating
-- Improvement in the company profile assessment, for example, due to sustained profitable growth while maintaining its regulatory solvency ratio comfortably above 100% could lead to an upgrade of the national and international scale ratings
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ֳ's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ֳ's ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.
Additional information is available on
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
- Prism Global (ex-U.S.) Model, v1.8.1 (1)
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
| Turk P ve I Sigorta A.S. | EU Issued, UK Endorsed |