OREANDA-NEWS. Fitch Ratings has upgraded the ratings of three insurance companies in Indonesia, following a portfolio review of the country's insurance sector.

The review focused on the application of Fitch's recently updated criteria for Country-Specific Treatment of Recovery Ratings, and the purpose was to identify any ratings that should be changed as a result of the application of the updated criteria. Fitch has also considered the appropriateness of the relative ranking of ratings in the Indonesian insurance sector, where relevant, after initial consideration of updated recovery guidelines, as part of the portfolio review.

Fitch upgraded by one notch the Insurer Financial Strength (IFS) ratings of PT (Persero) Asuransi Kredit Indonesia (to 'BBB-'), PT Maskapai Reasuransi Indonesia Tbk (to 'BB') and PT Reasuransi Nasional Indonesia (to 'BB'). The ratings upgrade reflects a higher recovery assumption of 'RR3' under an effective insurance regulatory regime, despite Indonesia's country grouping in 'D'.

Fitch views the Indonesian insurance regulatory regime as effective, given the strengthening authority and monitoring of the OJK (Financial Services Authority). The OJK has actively introduced new policies and regulations in recent years. This includes a new insurance law in 2014 that gives policyholders priority if a conventional or sharia insurer or reinsurer is liquidated or becomes bankrupt. Other changes include optimising domestic reinsurance capacity and regulating tariffs for property and motor insurance.

A 'RR3' recovery rating typically assumes good recovery prospects given default. Standard notching is applied between the insurance operating company's IFS Rating and Issuer Default Rating (IDR) when insurance regulations are viewed as effective. In such cases, Fitch assumes regulators will intervene early enough in a distressed scenario to preserve assets to support an above-average recovery for the insurer as a whole and thus policyholders.

Fitch published the updated criteria for Country-Specific Treatment of Recovery Ratings on 22 February 2016. This followed the publication of an exposure draft of proposed criteria on 16 December 2015. The updated criteria retain the primacy of existing jurisdictional caps, while Fitch changed the reference data when determining country groupings.

KEY RATING DRIVERS
The key rating driver was the impact of updated criteria for Country-Specific Treatment of Recovery Ratings. See most recently published rating action commentaries or research reports for additional information on other key ratings drivers pertinent to specific entity ratings.

RATING SENSITIVITIES
Not applicable to this portfolio review, given its limited focus on implementing updated criteria for Country-Specific Treatment of Recovery Ratings. (See most recently published rating action commentaries or research reports for additional information on rating sensitivities pertinent to specific entity ratings).

FULL LIST OF RATING ACTIONS
PT (Persero) Asuransi Kredit Indonesia
- IFS Rating upgraded to 'BBB-' from 'BB+'; Outlook Stable

PT Maskapai Reasuransi Indonesia Tbk
- IFS Rating upgraded to 'BB' from 'BB-'; Outlook Stable

PT Reasuransi Nasional Indonesia
- IFS Rating upgraded to 'BB' from 'BB-'; Outlook Stable

LIMITATIONS
The portfolio review was limited in scope, only including an assessment of updated criteria for Country-Specific Treatment of Recovery Ratings. The updated criteria report does not apply to National Ratings. None of the factors outlined in Section I (Key Rating Factors), or any other elements discussed in Fitch's insurance master criteria were reviewed. Where relevant, Fitch considered the appropriateness of the relative ranking of ratings within Indonesian insurance sector, after initial consideration of updated criteria for Country-Specific Treatment of Recovery Ratings, as part of the review.