RIYADH: Saudi insurer Tawuniya’s credit rating has been upgraded from A- to A with a “Stable” outlook by S&P Global, citing an improved capital adequacy ratio. The agency underscored that the key impetus for the change lies in Tawuniya’s efforts to curtail liability risk charges, coupled with a consequential augmentation of total adjusted capital. The discernible strides in capital strength signify a robust financial position, reflecting positively on the insurer’s ability to navigate risks and uncertainties effectively. S&P said in the statement: “The stable outlook reflects our view that Tawuniya will retain its market-leading position in Saudi Arabia, as well as very strong capital and earnings, supported by both its underwriting and investment activities over the next two years.” Looking ahead, the rating firm outlined potential factors that could lead to a negative rating action. That included a significant deterioration in Tawuniya’s capital and earnings, unexpected underwriting or investment losses, higher-than-expected premium growth, or changes in the competitive landscape. Conversely, the likelihood of an upgrade within the two-year outlook period is considered limited, contingent upon insurance firm passing a hypothetical sovereign stress test. The company is expected to maintain robust capital adequacy through 2025, primarily supported by substantial earnings retention. “We expect Tawuniya’s top line to increase by 35 percent in 2023 before moderating to still-significant rates of 15 percent–20 percent in 2024-2025,” S&P Global said. The insurer’s strategic positioning in the Saudi market and its strong reputation are anticipated to fuel its competitive standing, allowing Tawuniya to capitalize on emerging business opportunities. S&P Global Ratings underscored Tawuniya’s relatively limited potential for capital and earnings volatility, citing risk mitigation strategies such as ceding larger property or casualty risks to highly rated international partners and maintaining a highly liquid investment portfolio. While Tawuniya is acknowledged as a government-related entity due to its significance in the Saudi insurance sector, the firm emphasized that the ratings “are based on its stand-alone credit profile assessment and do not benefit from any additional notches due to government support.”