Tugu Reasuransi Indonesia’s (Tugure) non-life combined ratio stood at 105.7% by end-2020, higher than the 103.2% by end-2019, notes Fitch Ratings. The increase was due to lower premiums, higher claim payments following floods that hit Jakarta in early 2020 and claim increases in the health business due to the pandemic.
Tugure is adopting a more prudent underwriting practice to manage its financial performance. Fitch expects the company to maintain its selective underwriting practice.
The international credit rating agency has affirmed Tugure’s National Insurer Financial Strength (IFS) Rating at ‘A+(idn)’ with a stable outlook.
‘A’ National IFS Ratings denote a strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country or monetary union, across all industries and obligation types.
The rating affirmation reflects Tugure’s satisfactory capitalisation, ‘Moderate’ business profile and manageable but volatile underwriting performance. It also considers the company’s conservative investment risk profile and satisfactory management of catastrophe risks in the catastrophe-prone Indonesian market.
Tugure had a risk-based capital (RBC) ratio of 226% at end-2020 (end-2019: 242%), above the 120% minimum regulatory requirement. Fitch expects the reinsurer to maintain a good capital position against underwriting and investment risks, particularly during the coronavirus pandemic, by managing volatility in its profitability.
Fitch deems Tugure’s business profile ‘Moderate’ because of its limited business diversification, adequate business franchise and a business risk profile on a par with the Indonesian reinsurance sector. The company has been maintaining its current business mix while tapping new business through its ultimate parent, Asuransi Tugu Pratama. Almost 100% of Tugure’s underwriting business is sourced from Indonesia and around 90% is from the non-life segment.
The company uses mainly excess-of-loss treaties to mitigate its catastrophe exposure and monitors its risk accumulation regularly. The reinsurer also collaborates periodically with external brokers to assess its catastrophe exposure conservatively through various modelling tools.
The reinsurer’s investment portfolio remained liquid with cash, cash equivalents and fixed-income securities accounting for around 75% of its invested assets at end-2020. Fitch expects financial-market volatility to have a limited impact on the company’s portfolio, as its exposure to risky assets, including unaffiliated stocks and below-investment-grade bonds, is manageable compared with its equity.