AM Best's Milli Re upgrade is a Turkish macro call

AM Best has raised Milli Re's financial strength rating to B- (Fair) from C++ (Marginal) and its long-term issuer credit rating to 'bb-' from 'b', according to Reinsurance News, with both outlooks moved to positive from stable. The agency tied the upgrade to stronger risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, and to balance-sheet fundamentals supported by earnings retention and greater stability in Türkiye's economic conditions. Milli Re has posted consolidated and unconsolidated return on equity averaging more than 40% between 2021 and 2025, though that record sits over an inflation backdrop that has remained very high since 2021; the five-year weighted average combined ratio of 117% consolidated and 149% unconsolidated, with inflation and the lira's depreciation driving the pressure, shows the return is not coming from underwriting. Investment income in Türkiye's high-rate environment and foreign-exchange gains have carried the earnings.

AM Best rates Milli Re's balance sheet strength adequate and its operating performance adequate, while its business profile is neutral and its enterprise risk management is still assessed as marginal. The positive outlook is a bet that Turkish macro stability lasts long enough for retained earnings to keep building capital. Roughly half of Milli Re's business is written in foreign currencies, making the lira the swing factor; if the currency stabilizes in a way that removes the FX support, the earnings engine slows.

Milli Re's local position is real—it is the only domestically capitalised, privately owned reinsurer in Türkiye, and the country accounts for the majority of its business and assets—but this rating action reads less like a franchise upgrade than a macro upgrade, placing a Turkish reinsurer at the opposite end of the cycle from much of the market, where pressure comes from abundant capital and falling prices rather than inflation and currency weakness. As this publication has argued, the softening cycle is splitting by geography, and this is the Turkish branch: a local balance sheet moving up on macro support even as AM Best warns that reinsurer discipline faces a 2027 test and Fitch Ratings sees renewal price cuts of as much as 25% on nat cat lines. AM Best expects Milli Re's balance sheet strength to keep improving over the short to medium term, which is another way of saying the outlook stays positive until Turkish inflation and rates stop cooperating.