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ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY–TSRŞB

ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY–TSRŞB. TURKISH INSURANCE SECTOR March 2011. ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY.

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ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY–TSRŞB

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  1. ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY–TSRŞB TURKISH INSURANCE SECTOR March 2011

  2. ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY • The Association of the Insurance and Reinsurance Companies of Turkey is a specialist institution with the characteristics of a unique non-governmental institution operating under Insurance Law No. 5684. • All local or foreign insurance and reinsurance companies operating in Turkey are members of the Association. As of March 2011, the Association has a total number of 64 members, 62 of them being insurance companies and the remaining 2 being reinsurance companies.

  3. COMMITTEES OF THE ASSOCIATION The Association established the following committees to facilitate the preparation and revision of all legislation, tariffs, working guides and general clauses relating to insurance; to foster the insurance sector and to conduct studies and research on sectoral problems: Fire Insurance Health Insurance Marine Insurance Liability Insurance Casualty Insurance Agriculture Insurance Non-life Claims Financial & Accounting Engineering Insurance Law & Legal Protection Life Insurance AML/CFT

  4. INTERNATIONAL MEMBERSHIPS • CEA, The European Insurance and Reinsurance Federation www.cea.eu • IAIS, International Association of Insurance Supervisors www.iaisweb.org • IMIA, International Association of Engineering Insurers www.imia.com • IUMI, International Union of Marine Insurance www.iumi.com • ICC, International Chamber of Commerce www.iccwbo.org • FALIA, The Foundation for the Advancement of Life & Insurance www.falia.jp

  5. TURKISH INSURANCE SECTOR

  6. MAIN CHARACTERISTICS OF THE MARKET • The Turkish insurance market is a fast growing market. • The market faces a problem in its technical profits stemming from price competition, especially in the motor branch. • Two different licences are required for the operation of life insurance and private pension system. • As of March 2011, 2.4 million people are in the private pension system. The total amount of participants’ funds is 8.3 Billion USD.

  7. TURKISH ECONOMY IN 2010 • National Income: • GDP *: 1.080 Billion TL = 717 Billion USD • GDP per capita*: 9 728 USD • Inflation: • CPI (consumer price index):6.40 % • PPI (producer price index):8.87 % • Unemployment:11.4 % *: Estimatedfigures

  8. WORLD INSURANCE SECTOR & TURKEY (2009) • Total premiums:4.1 Trillion USD (- 1.1 % decrease) • Premium size in: • Developed countries: 3.5 Trillion USD • Developing countries: 533 Billion USD • Turkey: 7.9 Billion USD • Real increase (inflation-adjusted): • Developed countries : - 1.8 % • Developing countries : 3.5 % • Turkey:- 18.9 % ( - 2.3% in local currency)

  9. WORLD INSURANCE SECTOR & TURKEY (2009) • World premiums in percent of GDP : 7% • Developed countries: 8,6 % • Developing countries: 2,9 % • United Kingdom: 12,9 % • Poland 3,8 % • Hungary 3,1 % • Turkey: 1,3 % • World premiums per capita:595 USD • Developed countries : 3 405 USD • Developing countries: 92 USD • United Kingdom:4 579 USD • Poland 630 USD • Hungary 398 USD • Turkey: 109 USD SOURCE: Swiss Re, Sigma No: 2/2010

  10. WORLD INSURANCE SECTOR & TURKEY (2009) ($) SOURCE: Swiss Re, Sigma No: 2/2010 and TSRŞB Annual Report 2009.

  11. EU INSURANCE SECTOR AND TURKEY (2009) ($) Data related to premiums are taken from Swiss Re, Sigma No: 2/2010. * Data related to number of companies and employees are taken from CEA Statistics No: 37, European Insurance in Figures, Oct. 2009. ** Data related to Turkey are taken from TSRŞB, Annual Reports 2008-09.

  12. TURKISH INSURANCE SECTOR INSURANCE AND REINSURANCE COMPANIES As of March 2011, the Association has 64 members. Out of these 64 companies, 62 are insurance (10 life, 14 life and pension and 38non-life companies )and remaining 2 are reinsurance companies.

  13. EMPLOYMENT IN INSURANCE AND REINSURANCE COMPANIES As of the end of 2010, the number of people employed in the insurance sector reached 20.418. Around 16.000 agents, 81 broker and 1.072 loss adjuster operate in Turkish insurance market.

  14. PREMIUM PRODUCTION (2006 – 2010)

  15. PREMIUM INCOME-ANNUAL CHANGES-PERCENTAGE BRAEKDOWN ACCORDING TO THE BRANCHES (2010)

  16. DATA ON CASCO AND MOTOR TPL INSURANCE (2009-2010) TL

  17. TOP TEN INSURANCE COMPANIES (2010)

  18. DISTRIBUTION CHANNELS (2010)

  19. TOTAL PREMIUM PRODUCTION IN % OF GDP * In 2007, there has been a decrease in total premium production in percent of GDP stemming from the revision of national income calculations. As a result of this revision, national income in 2007 increased by 65% from 400 Billion USD to 658 Billion USD.

  20. NON-LIFE PREMIUM PRODUCTION IN % OF GDP * In 2007, there has been a decrease in total premium production in percent of GDP stemming from the revision of national income calculations. As a result of this revision, national income in 2007 increased by 65% from 400 Billion USD to 658 Billion USD.

  21. LIFE PREMIUM PRODUCTION IN % OF GDP * In 2007, there has been a decrease in total premium production in percent of GDP stemming from the revision of national income calculations. As a result of this revision, national income in 2007 increased by 65% from 400 Billion USD to 658 Billion USD.

  22. TOTAL PREMIUM PRODUCTION PER CAPITA($)

  23. NON-LIFE PREMIUM PRODUCTION PER CAPITA($)

  24. LIFE PREMIUM PRODUCTION PER CAPITA($)

  25. TECHNICAL PROFIT/LOSS ACCORDING TO THE BRANCHES – 2010

  26. PROFITABILITY, ASSETS AND EQUITY

  27. PRIVATE PENSION SYSTEM FIGURES (USD) 27

  28. SWOT ANALYSIS OF THE SECTOR STRENGTHS WEAKNESSES strong legislative framework human resources experience with crises growth potential knowledge good relations with public authorities price competition reputation problems deficiencies in publicity sale skills low technical profitability OPPORTUNITIES THREATS low penetration level need for new products optimization of distribution channels conservation cost controls • shrinking economy • contraction in the reinsurance market • increasing earthquake risk

  29. DEVELOPMENTS IN THE EU HARMONIZATION PROCESS

  30. The Association and EU Harmonization… • TAIEX Seminars on “EU Insurance Legislation” and “EU Legislation on Reinsurance and Insurance Groups” in cooperation with DG Enlargement • The new Insurance Law and 20 other legal documents on insurance were translated into English • Sessions are allocated to the “EU Harmonization of the Insurance Sector” in national and international symposiums held by the Association • Series of conferences are held on the “Primary Problems of the Turkish Insurance Sector throughout Turkey’s EU Membership Process” • Regular meetings are held with the officials of the Turkish Treasury General Directorate for Insurance, Delegation of the European Commission to Turkey, Secretariat General for EU Affairs and State Planning Organization • PUBLICATIONS: • EU Insurance Legislation Guide (EN+TR) • EU and EU Single Insurance Market in 15 Questions • EU Solvency II Project • Insurance Intermediation in the European Union • Regulation in the EU and Turkish Insurance Markets • Insurance Accounting in Turkey and the EU • Solvency II and Risk Management in Turkey and the EU • The EU Taxation System and the Insurance Sector • Alternative Dispute Resolution in the EU

  31. CURRENT STATUS OF THE NEGOTIATION PROCESS WITH THE EU The screening process under Chapter 9, “financial services” (the chapter including insurance) has been finalized; HOWEVER following the recommendation of the EU Commission, the EU Council decided to suspend negotiations with Turkey under 8 chapters, one of which is “financial services”. This has brought the process to a major halt. The Turkish insurance sector, on the other hand, has accelerated the harmonization process unilaterally. There has been significant progress in the area of insurance and supplementary pensions and the Turkish insurance sector is to a great extent in harmony with the EU insurance acquis.

  32. LEGISLATIVE DEVELOPMENTS

  33. Turkish Insurance Law • “Turkish Insurance Law” enshrines 12 chapters and 47 articles. • All insurance and reinsurance companies operating in Turkey, the Association of the Insurance and Reinsurance Companies of Turkey, intermediaries, actuaries and insurance experts are subject to this law. • Turkish Insurance Law was approved on June 3, 2007 at the GeneralAssembly of the Turkish Parliament and published in the Turkish OfficialGazette (No: 26552) on June 14, 2007.

  34. Turkish Commercial Code &Code of Obligations • The new Turkish Commercial Code was recently enacted. The new Turkish Commercial Code introduces important novelties in the field of consumer protection, categorization of insurance classes, information society, etc. The Code will enter into force by July 2012. • The new Code of Obligations was recently enacted. The code which regulates obligations between legal and natural persons and contains provisions relating to insurance sector will enter into force by July 2012.

  35. Draft Law on Catastrophe Insurances • Another important legal development in the Turkish insurance market is the Draft Law on Catastrophe Insurances. • The Draft Law not only foresees the extension of the penetration level for compulsory earthquake insurance through new measures but also the completion of legislative and technical infrastructure work for the extension of the Turkish Catastrophe Pool (TCIP) indemnity to cover all natural catastrophes (flood, landfall, storm, avalanche, hail), environmental pollution and terrorism. • The draft Law is still pending.

  36. Draft Law Amending the Motorways Traffic Law No. 2918 • Draft Law Amending the Motorways Traffic Law No. 2918, which is prepared in line with EU standards, envisages the introduction of new traffic measures. • The Association of the Insurance and Reinsurance Companies of Turkey has formulated the views of the insurance sector on the Draft Law, specifically on measures relating to compulsory third party liability insurance. • The Draft Law also empowers the Association to authorize “special experts” to intervene traffic accidents with material damages. After the coming into force of the Law, traffic police will only intervene such accidents when traffic security necessitates. • The draft Law is still pending.

  37. OTHER DEVELOPMENTS

  38. Activities of Agents and Loss Adjusters • Turkish Insurance Law has foreseenthe establishment of executive committees for agencies and loss adjusters under the auspices of The Union of Chambers and Commodity Exchanges of Turkey (TOBB) and integration of those professions to the sector in an organized and disciplined manner.

  39. Regulation on Information Regarding Insurance Contracts • Regulation on Information Regarding Insurance Contracts came into force on 1 March 2008. • The implementation of the Regulation is sustained within the framework provided by the sample forms sent by the Undersecretariat of Treasury Directorate General of Insurance. • The Regulation obliges the insurance companies and agencies to inform the insureds during the conclusion of the contract and contract period.

  40. Solvency II • In Turkey’s EU harmonization process, the Turkish insurance sector has been conducting studies on the implementation of Solvency II. • Within this context, a “Specialized Committee on Solvency II” was established in accordance with Art. 33 of the Turkish Insurance Law No. 5684. • A sample of ten insurance companies were determined to conduct Quantitative Impact Study 4 (QIS 4), which had previously been conducted by the European Commission in EU countries. QIS 5 was also started to be applied from December 2010. • The Solvency II Directive was also translated into Turkish and distributed to companies by the Association.

  41. Technical Reserves • There have also been major amendments to the “Regulation on Technical Reserves of Insurance, Reinsurance and Pension Companies”. In this context, a more developed and sophisticated actuarial chain ladder method for the calculation of IBNR reserves has been introduced.

  42. Medical Malpractice Insurance • Medical malpractice insurance became compulsory in Turkey in July 2010. • With the introduction of “Compulsory Liability Insurance on Medical Malpractice”, doctors and dentists are required to be covered by professional liability insurance. • Doctors working at public or private institutions will pay half their insurance premiums and their institutions will pay the remainder. Doctors working at their own private offices will pay the entire premium.

  43. Coastal Facilities Sea Pollution Compulsory Liability Insurance • Another compulsory insurance that was introduced in 2010 with the publication of tariffs and procedures is the “Coastal Facilities Sea Pollution Compulsory Liability Insurance.” • In this context, all coastal facilities (including refineries, gas terminals, power houses, industrial production facilities, shipyards, etc.) are obliged to be covered by insurance against sea pollution.

  44. Studies for the Development of Life Insurance • The portfolio of saving life insurance intends to decline due to the private pension system. • The portfolio structure of life insurance is mainly comprised of life insurances related with credit. • In this context, a study was prepared by the Association on the development of life insurance and it was submitted to the Undersecretariat of Treasury. • The studies on the development of life insurance, especially theannuities, will continue.

  45. Mortality and Morbidity Tables • The study on Mortality and Annuity Table of Turkey” initiated in 2009 by the Undersecretariat of Treasury and conducted with Hacettepe and Marmara universities under coordination of Insurance Information Center was completed in June 2010. • The results of the mortality and morbidity study which was conducted to examine the sickness and death rates in Turkey were introduced to the insurance sector.

  46. ASSOCIATION’S SUBSIDIARIES

  47. ASSURANCE ACCOUNT Assurance Account was founded within the body of the Association of the Insurance and Reinsurance Companies of Turkey as per article 14 of the Insurance Act 5584 dated June 14th 2007. Assurance Account meets medical treatment expenses of those who suffer bodily injuries (such as injuries, disabilities and death) under any coverage provided under compulsory insurances, and pays disability indemnities to those who become disabled due to such accidents and also death benefits to dependents who have been deprived of the deceased’s support in case of death.

  48. INSURANCE INFORMATION CENTER The Insurance Information Center was established in August 2008 within the Association. The Center is responsible for collecting data on life, health, traffic and compulsory insurances including compulsory liability insurance on medical malpractice; achieving consistency in insurance practices; realizing sound pricing; preventing fraudelent activities and developing reliable statistics. The Center comprises four sub-information centers, namely, TRAMER (Traffic Insurance Information Center), SAGMER (Health Insurance Information Center), HAYMER (Life Insurance Information Center) and HATMER (Insurance Loss Pursuit Center). Through TRAMER, it has become possible to issue on-line real time motor third party liability insurance policies.

  49. INSURANCE ARBITRATION COMMISSION Insurance Arbitration Commission was established within the Association for the resolution of disputes between insurance companies and the insureds. As of August 2009,the commission has started to accept complaints. Insurance Arbitration Commission composed of 46 member company, has 123 arbiters working in non-life branch and 14 arbiters in life branch. As of 2010 1.133 application have been made to Commission. 1.063 of them belong to non life insurance branches and 70 of them to life insurance branches. 614 of the applications have been concluded and 519 of them are still in process. % 83 of applications belong to real persons, % 17 of them to legal persons.

  50. INSURANCE TRAINING CENTER Insurance Training Center (SEGEM) was established to enable the holding of necessary examinations on specific topics related to insurance in an impartial manner and to meet training demands both at home and abroad and within the framework of international agreements. SEGEM heldthetraining on AgencyTechnicalPersonnelfornearly 40.000 candidateslastyear. Nearly 10.000 peopleappliedfortheexperttraining. 163 peopleappliedfortheactuarialexaminations. 5.700 peopleappliedforthetraining of trainers.

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