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TURKISH INSURANCE SECTOR October 2011

TURKISH INSURANCE SECTOR October 2011. ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY.

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TURKISH INSURANCE SECTOR October 2011

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  1. TURKISH INSURANCE SECTOR October 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 October 2011, the Association has a total number of 66 members, 64 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 Risk Engineering Actuary

  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. TURKISH ECONOMY IN 2010 • National Income: • GDP: 1.105 Billion TL (736 Billion USD) • GDP per capita: 10.079 USD • Inflation: • CPI (consumer price index):6.40 % • PPI (producer price index):8.87 % • Unemployment:11.4 %

  7. WORLD INSURANCE SECTOR & TURKEY (2010) Total premiums:4.3 Trillion USD (2.7 % increase) Premium size in: Developed countries: 3.69 Trillion USD Developing countries: 650 Billion USD Turkey: 9.4 Billion USD Real increase (inflation-adjusted): Developed countries : 1.4 % Developing countries : 11 % Turkey: 4.8% (in terms of USD)

  8. WORLD INSURANCE SECTOR & TURKEY (2010) World premiums in percent of GDP : 6.9% Developed countries: 8,7 % Developing countries: 3% United Kingdom : 12,4 % USA : 8 % Turkey: 1,3 % World premiums per capita:627USD Developed countries : 3 528 USD Developing countries: 110 USD United Kingdom : 4 497 USD USA: 3 759 USD Turkey: 128 USD SOURCE: Swiss Re, Sigma No: 2/2011

  9. EU INSURANCE SECTOR AND TURKEY (2010) ($) Data related to premiums are taken from Swiss Re, Sigma No: 2/2011.

  10. TURKISH INSURANCE SECTOR INSURANCE AND REINSURANCE COMPANIES As of October 2011, the Association has 66 members. Out of these 64 companies, 64 are insurance (11 life, 14 life and pension and 39non-life companies )and remaining 2 are reinsurance companies.

  11. EMPLOYMENT IN INSURANCE AND REINSURANCE COMPANIES As of the end of 2010, the number of people employed in the insurance sector is 16.568. Around 16.000 agents, 89 brokers and 1.072 loss adjusters operate in Turkish insurance market.

  12. PREMIUM PRODUCTION (2006 – 2010) ($)

  13. PREMIUM INCOME ACCORDING TO THE BRANCHES ($)

  14. TOP TEN INSURANCE COMPANIES (2010)

  15. DISTRIBUTION CHANNELS (2010)

  16. TOTAL PREMIUM PRODUCTION IN % OF GDP

  17. TOTAL PREMIUM PRODUCTION PER CAPITA($)

  18. PROFITABILITY, ASSETS AND EQUITY (USD) Financialprofitratio= financialprofit / grosspremium Balancesheetprofitratio = balancesheetprofit / grosspremium Equityratio = equityprofit / total equity Assetratio = balancesheetprofit / total assets

  19. PRIVATE PENSION SYSTEM FIGURES (USD) Total amount of contributionsreferstotheamountpaidbytheparticipants Total investedamountreferstotheamountpaidbytheparticipantsminusmanagementexpenses Total amount of participantsfundsrefersto total amount of thecontribution of theparticipantsandtheirinvestmentyields 19

  20. MOST ATTRACTIVE SEGMENTS IN FUTURE • General liability insurance • products should be more customer-focused • Mortgage insurance: • new system (legal background established in 2007) • new insurance products are expected to be introduced • Unemployment insurance: • becomes more important in times of global financial crises • Unemployment insurance products are widespread in countries like the UK, Netherlands, Italy, Spain, etc. These products are expected to be more widely demanded in the Turkish market in the near future.

  21. 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

  22. DEVELOPMENTS IN THE EU HARMONIZATION PROCESS

  23. 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.

  24. LEGISLATIVE DEVELOPMENTS

  25. 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.

  26. 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.

  27. 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.

  28. 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.

  29. OTHER DEVELOPMENTS

  30. Solvency II • In Turkey’s EU harmonization process, the Turkish insurance sector has been workingon 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 beenconducted by the European Commission in theEU 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.

  31. 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.

  32. 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.

  33. ASSOCIATION’S SUBSIDIARIES

  34. 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.

  35. 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 fraudulent 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.

  36. 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 48 member companies, has 123 arbiters working in non-life branch and 14 arbiters in life branch. As of 2010, 1.133 applications have been made to theCommission. 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.

  37. 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.

  38. TURKISH MOTOR INSURANCE BUREAU Turkish Motor Insurance Bureau, in the frame of Civil  Liability Insurance  regarding the use of motor vehicles  in countries participating in the Green Card  System where the insured vehicle circulates, was founded based on the Regulation regarding working methods and principles of the Turkish Motor Insurance Bureau which was published in the Official Journal dated 28.06.2008 with number 26920 and based on article no:24 of the Insurance Law to issue internationally valid documents and provide settlement for damages caused in that regard and to handle and settle claims of accidents in Turkey caused by foreign plated vehicles which have a valid green card.

  39. TURKISH INSURANCE INSTITUTE Turkish Insurance Institute (TII) is founded in 1970, by the equal shares of the Association of the Insurance and Reinsurance Companies of Turkey and Milli Re. TII aims to disseminate the use of insurance in Turkey as well as to carry out activities that will raise the public awareness, improve the insurance industry, bring in staff to insurance industry through vocational trainings, determine the economic, legal and technical aspects as well as problems in all branches of insurance including the social securities, prepare informative publications on these matters and assist the Turkish insurance sector to take its place at the highest level in economic and social life as well as in the process of development. In order to improve the quality and efficiency of employment in the insurance sector, TII provides short- and long-term training programmes to those working at the insurance companies (newcomers, experts, managers), brokers (newcomers, experts), to the agencies (newcomers, managers), experts and their employees.

  40. OTHER INSTITUTIONS Turkish Compulsory Insurance Pool (TCIP) The Turkish Agricultural Insurance Pool

  41. TURKISH COMPULSORY INSURANCE POOL Subsequent to the Marmara earthquake which took place on 17th of August 1999 and caused loss of thousands lives and properties, great numbers of precautions were taken in order to minimize the damages of Earthquakes by the public authority. On of the most significant precautions is the execution of the Turkish Compulsory Insurance Pool (TCIP). The intent of the Compulsory Earthquake Insurance is to have a standard cover with a minimal premium. Consequently, TCIP grants cover in specified maximum sum insured determined by using unit cost of building construction. As of 1st of January 2011 maximum sum insured amount granted by TCIP policies in all structure types is determined as 150.000 Turkish Lira (100.000 USD).Nearly 3.5 Milliondwellingshold TCIP policy . The sum insured is determined according to the magnitude and structure type however not exceeding the maximum sum insured amount of the dwellings. If the value of the dwelling exceeds the sum insured amount given by TCIP, the insured optionally can get additional cover for the exceeding amount from the insurance companies.

  42. TURKISH AGRICULTURAL INSURANCE POOL In order to provide the coverage the risks threatening the agricultural industry of our country, "Agricultural Insurance Code No. 5363" was enforced as of 14/06/2005. The Agricultural Insurance Pool establishes the conditions for transferring risk under reasonable provisions, ensure centralized payment of the indemnification upon occurrence of the risk, improves and popularizing the agricultural insurances TARSIM, a management entity, was established with equal share as a corporation by the insurance companies writing agricultural business in order to carry out all tasks of the Pool, within the context of the law. Insurance companies issue insurance contracts with their own name and all risks together with the premiums on 100% thereof is transferred to Agricultural Insurance Pool and through retrocession, the individual insurance companies can take share optionally from the Pool. The Government contributes 50 % exclusively to insurance contracts executed under the Code, in terms of the premium on behalf of the farmers; the amount of which to be determined by Council of Ministers on annual basis, with respect to the crops, risk, region and premises scale.

  43. THANK YOU FOR YOUR ATTENTION… ASSOCIATION OF THE INSURANCE AND REINSURANCE COMPANIES OF TURKEY www.tsrsb.org.tr

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