Fitch Affirms Turk P&I's IFS Rating at 'BB-'; Outlook Stable

Thu 02 Apr, 2026 - 11:49 AM ET

Fitch Ratings - London - 02 Apr 2026: Fitch Ratings 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 operating scale, and high investment risks stemming from exposure to the Turkish banking sector. The rating also reflects an improved, but tight, capital position, good earnings record, albeit exposed to investment and FX volatility, and adequate reinsurance protection.

Key Rating Drivers

Standalone Strength Key; Potential Support: Fitch 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 strategic role in supporting the Turkish maritime sector and 50% government ownership support its business profile.

Turk P&I is a relatively small, partially state-owned insurer, specialising in protection and indemnity (P&I) and hull and machinery (H&M) coverage. The company benefits from strong marine insurance expertise, a dominant market share in Turkish P&I, and a top three position in H&M. Turk P&I is reasonably diversified within marine insurance, but its small operating scale is a key rating constraint. The company generated about USD74 million in premiums in 2025, calculated using policy-level exchange rates at inception, and had only USD17 million in equity based on the year-end exchange rate.

No Impact from Conflict: War risks are not included as standard cover, and the company's internal policies automatically exclude areas with high war risk, resulting in negligible exposure, including zero exposure to the Middle East conflict. We do not anticipate any immediate impact on Turk P&I from the conflict, although the long-term effects on global marine transport could influence business volumes and pricing.

Low Capital Base: Capitalisation remains stretched, reflected in a 'Somewhat Weak' Fitch Prism Global score at end-2024 and end-2025, pressured by a low absolute capital base. The regulatory solvency ratio improved significantly, rising from 65% at end-2023 to 118% at end-2024 and 128% at end-2025, supported by both a capital injection and internal capital generation. The absence of financial leverage and likely shareholder support are positive factors. No dividends are planned in the short-to-medium term, supporting capital retention and, in March 2026, the company increased paid-in capital to TRY 600 million from TRY 320 million through the capitalisation of retained earnings.

Domestic Banks, Currency Risks Exposure: Turk P&I follows a conservative investment strategy, with assets allocated to short-term deposits at state-owned and large private banks, and government eurobonds. This creates exposure to Turkish banking and government risks. Three-quarters of investments are in foreign currency (FC), resulting in a significant open long FX position of 1.8x equity at end-2025 (1.1x at end-2024), which leaves fair value exposed to a depreciation of FC against the Turkish lira.

Investments, FX Gains Support Earnings: Financial performance is good, with a return on equity of 33% in 2025 and a five-year average of 44%, although earnings remain volatile due to underwriting results and currency movements. Investment income and FX gains, driven by the company's significant FC holdings, have more than offset negative underwriting results, particularly in the H&M segment, where loss ratios remain high. The Fitch-calculated net loss ratio improved to 90% in 2025 from 121% in 2023, reflecting recovery from high storm-related losses.

Depreciation of the local currency in recent years has inflated lira-denominated loss reserves, adversely affecting overall loss ratios, while almost all premiums and claims are transacted in hard currencies. The US dollar gross loss ratio was notably lower: 67% in 2025, 74% in 2024 and 85% in 2023.

Adequate Reinsurance Practices: Fitch considers Turk P&I's reinsurance coverage for both P&I and H&M risks adequate, supported by highly rated ('A' category) marine reinsurers. The company uses multi-layer, non-proportional treaty structures, providing up to USD500 million for P&I and USD22.5 million per H&M event. Overall reinsurance protection is effective, in our view, as shown during the 2023 Sea of Marmara storms. Catastrophe exposure remains manageable due to Turk P&I's conservative risk appetite, limited exposure to high-severity risks such as oil platforms and a proactive in-house loss prevention team.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

-- A material deterioration in capital without prospects of a timely recovery could lead to a downgrade of the national and international scale ratings

-- 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

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

-- Improvement in the company profile assessment, for example due to sustained profitable growth while maintaining a regulatory solvency ratio comfortably above 100%, could lead to an upgrade of the national and international scale ratings

-- A larger capital base, leading to a Fitch Prism score maintained comfortably above the 'Adequate' threshold, together with improvements in the operating environment and investment risk, for example driven by the Turkish sovereign and banking sector's stronger credit quality, could lead to positive rating action

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. Fitch'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 Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Rating Actions

ENTITY/DEBT	RATING	PRIOR
Turk P ve I Sigorta A.S.	LT IFS BB- Upgrade	LT IFS AA-(tur) Rating Outlook Positive Upgrade