The ratings reflect Dunav-Re's balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Dunav-Re's risk-adjusted capitalization remains at the strongest level on a standard basis, as measured by Best's Capital Adequacy Ratio (BCAR), in spite of strong business growth over the past two years. AM Best expects further growth in future years to be supported by internal capital generation and financial support from its parent company. Risk-adjusted capitalization on a catastrophe-stressed basis is significantly lower, in part due to the company's dependence on retrocession to manage catastrophe risk. However, the credit risk associated with this dependence is partially mitigated by the excellent credit quality of the company's retrocession panel. Offsetting factors in the balance sheet strength assessment include the company's concentration toward Serbia's financial system and the small size of its capital base.
Dunav-Re has a track record of good underwriting performance, with a five-year (2016-2020) weighted average combined ratio of 77.9%. However, the company's business outside Serbia has grown rapidly, with net written premium more than doubling during 2019 and 2020. Although initial indications suggest that this new business is performing well, its long-term performance will not be clear for some time. Dunav-Re's results remain susceptible to potential volatility due to its exposure to catastrophe events.
Dunav-Re is a multiline reinsurer operating in Serbia. It has a dominant position in its core market, where it generates the majority of its business, with Dunav Insurance being its largest cedant. The company is active outside of its domestic market, where it wrote approximately half (USD 10.8 million) of its net written premiums during 2020.