Fitch Downgrades Turk P&I's IFS to 'B+'; Outlook Negative

Fitch Ratings - Madrid - 28 Feb 2022:

Fitch Ratings has downgraded Turk P ve I Sigorta A.S.'s (Turk P&I) Insurer Financial Strength (IFS) Rating to 'B+' from 'BB-'. The Outlook is Negative.


Key Rating Drivers

The downgrade follows Fitch's similar rating action on Turkey's Long-Term Local-Currency Issuer Default Rating (IDR) on 11 February 2022 and a subsequent downgrade of Turkish banks' ratings (see "Fitch Downgrades 22 Turkish Banks' Ratings; Outlooks Negative" at ). Today's rating action reflects Turk P&I's exposure to the Turkish operating environment and investments held in deposits held in Turkish banks as well as sovereign and bank bonds.

The rating of Turk P&I reflects a less established business franchise compared with other Turkish insurers', its investment risks that are skewed towards the Turkish banking sector, and exposure to the Turkish economy, in line with the rest of the market. The rating also reflects Turk P&I's strong liquidity profile, very strong but potentially volatile earnings, and adequate capitalisation.

The downgrade of Turkey's sovereign rating reflects Turkey's increased vulnerabilities in terms of high inflation, low external liquidity and weak policy credibility, which affect Fitch's assessment of 'industry profile and operating environment' (IPOE). Fitch ranks Turk P&I's company profile as 'moderate' compared with other Turkish insurers', despite the company's small size, limited history and less established business lines. This is because we believe its ownership structure, equally divided between public and private interests, and its strategic role in Turkey, are positive for its company profile. Turk P&I's increasing international diversification also benefits the company profile.

Investments on Turk P&I's balance sheet comprise deposits in Turkish banks, with some concentration on a single state-owned bank as well as bonds issued by the government and domestic banks. This indicates a high exposure to the banking sector in Turkey, although the company started to diversify its investment portfolio since 2020 towards bonds. Liquidity is strong for the rating.


Turk P&I's earnings remained strong in 2021, with net income of TRY56 million (2020: TRY16 million). We expect the results will remain very strong for the rating, which will continue to support the company's very strong expected growth in 2022.


Turk P&I scored 'Adequate' under Fitch's Prism Factor-Based Capital Model (FBM) and its solvency ratio stood at 109% at end-2021. We believe capitalisation supports the rating, and we expect such capital levels to be maintained in 2022.



Factors that could, individually or collectively, lead to negative rating action/downgrade:

-Material deterioration in the Turkish economy or the company's investment quality, as reflected in a downgrade of Turkey's Long-Term Local-Currency IDR

-Business-risk profile deterioration, due to, for example, sharp deterioration in the maritime trade environment

Factors that could, individually or collectively, lead to positive rating action/upgrade:

-Material improvements in the Turkish economy or the company's investment quality, as reflected in a revision of the Outlook to Stable on Turkey's Long-Term Local-Currency IDR, could lead to an Outlook revision to Stable on Turk P&I's IFS Rating


Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector specific best- and worst-case scenario credit ratings, visit 10111579



The principal sources of information used in the analysis are described in the Applicable Criteria.


ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This 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. For more information on Fitch's ESG Relevance Scores, visit


Rating Actions




Turk P ve I Sigorta A.S.

Ins Fin Str / B+ Negative

Ins Fin Str / BB- Negative