AM Best Upgrades Dunav-Re’s Long-Term Issuer Credit Rating to ‘bbb+’
AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) of Dunav-Re a.d.o. (Dunav-Re), Serbia’s leading reinsurer, to “bbb+” from “bbb,” with both ratings remaining within the “Good” category. At the same time, AM Best affirmed Dunav-Re’s Financial Strength Rating (FSR) at B++ (Good).
The ratings agency has revised the outlook for Dunav-Re’s Long-Term ICR to stable from positive, while maintaining a stable outlook for the company’s FSR. The rating action reflects the reinsurer’s strong balance sheet, consistently strong operating performance, established position within the Serbian reinsurance market and appropriate enterprise risk management practices.
The upgraded Long-Term ICR also recognizes the strategic importance of Dunav-Re to its parent company, Dunav osiguranje a.d.o. (Dunav Insurance), and the expectation that the parent would provide timely and sufficient support to the reinsurer if required.
The latest rating action provides a positive assessment of Dunav-Re’s financial position and its role within the wider Dunav Insurance group, while the stable outlook indicates that AM Best currently expects the company’s financial and operating fundamentals to remain broadly resilient.
Strategic Importance to Dunav Insurance Supports Upgrade
A central factor behind the upgrade is the rating lift applied to Dunav-Re based on its relationship with Dunav Insurance.
AM Best considers Dunav-Re to have significant strategic importance to its parent because the reinsurer has consistently supported the group’s broader business strategy. Dunav-Re provides reinsurance capacity to Dunav Insurance and its subsidiaries, allowing the group to manage insurance risks and maintain greater flexibility in underwriting its business.
The relationship between the two companies is therefore an important component of Dunav-Re’s overall credit profile.
At year-end 2025, Dunav-Re accounted for approximately one-fifth of the Dunav Insurance group’s consolidated gross written premium. This contribution demonstrates the reinsurer’s material role within the group and highlights the importance of its operations to the parent company’s overall insurance activities.
Dunav-Re is also the leading reinsurer in Serbia and has been expanding its international business portfolio. Its growing presence outside its domestic market provides an additional source of diversification and demonstrates the company’s ability to compete for reinsurance business beyond its traditional geographic base.
AM Best also notes that Dunav Insurance’s creditworthiness has improved in recent years. The stronger financial position of the parent company provides additional support to Dunav-Re’s credit profile.
Based on this relationship, AM Best expects Dunav Insurance to provide prompt and adequate support to Dunav-Re if circumstances arise that require additional financial assistance.
Strong Balance Sheet Provides Foundation
Dunav-Re’s balance sheet strength remains one of the key pillars supporting its ratings.
AM Best assesses the company’s balance sheet strength as strong, supported by risk-adjusted capitalization at the strongest level as measured by its Best’s Capital Adequacy Ratio, or BCAR.
BCAR is an important measure used by AM Best to assess whether an insurer has sufficient capital relative to the risks it assumes. Strong risk-adjusted capitalization provides an important buffer against unexpected losses and adverse changes in an insurer’s operating environment.
For Dunav-Re, strong capitalization has been supported by solid internal capital generation over recent years.
The company has demonstrated an ability to generate capital through its operations, helping reinforce its financial position while supporting business growth.
Dunav-Re also benefits from good financial flexibility as a subsidiary of Dunav Insurance. The parent relationship provides another potential source of support if the reinsurer were to encounter significant financial pressure.
Together, strong risk-adjusted capitalization, internal capital generation and financial flexibility provide a solid foundation for Dunav-Re’s financial strength.
Domestic Investment Concentration Remains a Risk
Despite its strong capitalization, Dunav-Re’s balance sheet strength assessment is subject to several offsetting factors.
One of the most important is the company’s high exposure to Serbia’s financial system.
Dunav-Re holds all of its investments domestically, creating a relatively concentrated investment profile. Such concentration can expose the company to risks associated with economic, financial and market conditions in Serbia.
A deterioration in the domestic financial system could potentially affect the value or liquidity of the company’s investment portfolio.
For a reinsurer operating in an increasingly international market, geographic diversification of assets can provide an additional layer of protection against localized financial shocks. Dunav-Re’s domestic concentration means that the company remains more closely linked to developments in its home market.
AM Best therefore considers this exposure when evaluating the company’s overall financial strength.
Small Absolute Capital Base Adds Sensitivity
Another factor partially offsetting Dunav-Re’s strong balance sheet assessment is the relatively small size of its capital base in absolute terms.
Although the company’s risk-adjusted capitalization is assessed at the strongest level, a smaller absolute capital base can make an insurer more sensitive to unexpected shocks.
Large catastrophe losses, adverse reserve developments, investment losses or other significant changes in risk exposure could have a proportionately greater impact on a smaller capital base.
This means that maintaining disciplined underwriting and effective risk management remains particularly important for Dunav-Re as it continues to grow its business.
The company’s strong BCAR position provides an important cushion, but the size of the underlying capital base remains an important consideration in assessing the resilience of its balance sheet.
Reliance on Retrocession
Dunav-Re also relies on retrocession to manage risks associated with its domestically sourced business.
Retrocession is effectively reinsurance purchased by a reinsurer. It allows a reinsurer to transfer a portion of the risks it has assumed to other reinsurance companies.
This can help limit exposure to large individual losses, catastrophic events and accumulation risks.
However, reliance on retrocession also introduces counterparty risk. If a retrocessionaire is unable to meet its obligations when claims arise, the reinsurer that originally assumed the risk may still face financial pressure.
AM Best recognizes this risk in its assessment of Dunav-Re.
However, the associated risks are partly mitigated by the company’s stable retrocession panel and the excellent credit quality of its retrocession partners.
A stable panel of high-quality counterparties can reduce the probability of recoverability problems and provide greater confidence that reinsurance recoverables will be available when required.
Strong and Consistent Operating Performance
Dunav-Re’s operating performance is another major factor supporting its ratings.
The company has demonstrated a strong track record of profitability over the past several years.
Between 2021 and 2025, Dunav-Re recorded a five-year weighted average return on equity of 21.0%.
A return on equity at this level indicates that the company has been effective in generating earnings relative to its capital base.
Consistent profitability is particularly important for reinsurers because strong earnings can support capital generation, provide additional financial flexibility and help absorb unexpected losses.
Dunav-Re’s results demonstrate that the company has been able to maintain profitability while simultaneously expanding its international business.
Underwriting Remains a Key Strength
The reinsurer has also maintained robust underwriting performance despite rapid growth in its international portfolio.
AM Best reported a five-year weighted average combined ratio of 84.7% for the 2021-2025 period.
The combined ratio is one of the most important measures of underwriting profitability in the insurance industry. A ratio below 100% generally indicates that an insurer or reinsurer generated an underwriting profit before considering investment income.
Dunav-Re’s 84.7% five-year weighted average therefore demonstrates a strong level of underwriting profitability.
Maintaining this performance while expanding internationally is particularly notable because rapid growth can sometimes create additional underwriting risks.
New markets may involve unfamiliar claims patterns, different regulatory environments, changing pricing conditions and new catastrophe exposures.
Dunav-Re’s ability to maintain a strong combined ratio suggests that the company has exercised discipline in selecting and pricing the business it assumes.
Selective Underwriting Supports Future Performance
AM Best expects Dunav-Re’s prospective operating performance to remain supported by selective underwriting.
Underwriting discipline will be important as the company continues to expand its international portfolio.
Rapid premium growth can provide opportunities for higher earnings, but uncontrolled expansion can also increase exposure to poorly priced risks.
By maintaining a selective approach to underwriting, Dunav-Re can focus on business that aligns with its risk appetite and pricing requirements.
The company’s established underwriting performance provides a strong starting point for future growth.
AM Best also expects stable investment income to contribute to the reinsurer’s prospective operating performance.
Investment income can play an important role in the overall profitability of insurers and reinsurers, particularly when companies maintain significant investment portfolios against their insurance liabilities.
International Expansion Adds Diversification
Dunav-Re’s international business has grown significantly in recent years.
The expansion provides the company with opportunities to diversify its sources of premium and reduce its reliance on the domestic Serbian market on the underwriting side.
International business can also increase the company’s scale and provide access to new reinsurance opportunities.
However, international expansion also introduces additional risks, including differences in market conditions, regulatory frameworks, claims environments and competitive dynamics.
The company’s continued underwriting discipline will therefore be important as it seeks to balance growth with profitability and risk management.
The fact that Dunav-Re has maintained strong underwriting results despite international expansion is a positive factor in AM Best’s assessment.
Enterprise Risk Management Remains Appropriate
AM Best also considers Dunav-Re’s enterprise risk management to be appropriate.
Effective enterprise risk management is critical for a reinsurer because of the broad range of risks that can arise from underwriting, investments, catastrophe exposures, counterparty relationships and international operations.
Dunav-Re’s risk management framework helps the company identify and manage these exposures while supporting its broader strategic objectives.
The reinsurer’s use of retrocession, strong capitalization and selective underwriting are examples of tools that can help manage the risks associated with its business model.
Maintaining appropriate risk management will become increasingly important as the company expands its international operations and potentially takes on larger or more diverse portfolios.
Parent Company Support Remains Important
The relationship with Dunav Insurance remains a key element of Dunav-Re’s rating profile.
The parent company has an important strategic interest in the reinsurer because Dunav-Re provides reinsurance support to Dunav Insurance and its subsidiaries.
The reinsurer’s contribution of approximately one-fifth of the group’s consolidated gross written premium further illustrates the significance of its operations.
AM Best’s expectation that Dunav Insurance would provide prompt and sufficient support to Dunav-Re, if needed, provides an additional layer of confidence in the company’s credit profile.
The improved creditworthiness of Dunav Insurance in recent years also strengthens this relationship.
AM Best’s decision to revise the outlook for Dunav-Re’s Long-Term ICR to stable from positive indicates that the rating agency currently expects the company’s credit fundamentals to remain relatively stable.
The stable outlook for the Financial Strength Rating has also been maintained.
The change from a positive outlook does not represent a deterioration in Dunav-Re’s underlying financial strength. Rather, the upgrade to “bbb+” incorporates the benefits of the company’s strategic relationship with Dunav Insurance and reflects AM Best’s current assessment of the company’s overall credit profile.
Going forward, maintaining strong capitalization, underwriting profitability and effective risk management will be important if Dunav-Re is to preserve its current ratings.
Dunav-Re enters the next phase of its development with several significant strengths.
Its risk-adjusted capitalization remains at the strongest level under AM Best’s BCAR assessment, while its long-term operating record demonstrates strong profitability and underwriting discipline.
The company’s position as Serbia’s leading reinsurer provides a strong domestic franchise, while its growing international portfolio creates additional opportunities for expansion and diversification.
At the same time, Dunav-Re will need to manage several challenges.
Its investment portfolio remains highly concentrated in Serbia, and its relatively small absolute capital base means that significant financial shocks could have a meaningful impact on capitalization.
The company also remains dependent on retrocession for part of its domestic business, although this risk is partly mitigated by a stable panel of highly rated retrocession partners.
Maintaining a disciplined approach to growth will therefore be essential.
AM Best’s decision to upgrade Dunav-Re’s Long-Term Issuer Credit Rating to “bbb+” from “bbb” reflects the company’s strong financial foundation, consistent operating performance and strategic importance within the Dunav Insurance group.
The affirmation of its B++ Financial Strength Rating and stable outlook further underline the reinsurer’s current financial resilience.
Dunav-Re’s strongest attributes include risk-adjusted capitalization at the highest level, a five-year weighted average return on equity of 21.0% and a five-year weighted average combined ratio of 84.7% between 2021 and 2025.
The company’s growing international business and status as Serbia’s leading reinsurer provide additional opportunities, while support from Dunav Insurance strengthens its overall credit profile.
Nevertheless, domestic investment concentration, a relatively small capital base and reliance on retrocession remain areas that require continued attention.
As Dunav-Re moves forward, its ability to preserve underwriting discipline, maintain strong capital generation and manage the risks associated with international expansion will be central to its continued financial strength.
For now, AM Best’s upgraded rating reflects confidence in Dunav-Re’s ability to maintain its strong operating and financial profile while benefiting from its strategic role within the broader Dunav Insurance group.
Source link: https://www.businesswire.com
