Turkish Insurance Sector on the 100th Anniversary of the the Republic of Türkiye -5

Main Challenges and Opportunities

The year 2023 started with challenges for the insurance industry. The following are some highlights:

1. The premiums rising due to high inflation and technical losses in the motor branch taken over from the previous years caused some customers with a low loss ratio to exit the insurance system.
2. It is estimated that a sectoral loss of approximately 5 billion USD total cost of insurance and reinsurance companies) occurred in the SouthEast region of Turkey on 06 February 2023 due to the devastating earthquake damage that affected 11 cities, excluding the losses in the motor branch. (Aon, 2023)
3. Due to the high MTPL loss/premium ratios, insurance companies are reluctant to issue policies despite many new regulations of the regulatory and supervisory authority (SEDDK), and there is no insurance company keen to issue TPML policies, which is a compulsory product.
4. In addition, the earthquake that occurred on February 06, 2023 increased the concerns for the insurance sector players (specially reinsurers) about the consequences of the upcoming great Marmara Earthquake.
5. There will be a shrinkage in both life and non-life premium production in the bancassurance channel due to bank loans falling and coming to a halt due to rising interest rates and contraction-oriented inflation reduction policies.

Main Opportunities:

1. In 2022, population for Turkey was 85.3 million persons. It increased from  1973 to 2022 growing at an average annual rate of 1.66%. (Source https://knoema.com/atlas/Turkey/Population, September, 14th)

2. As of 2022, the median age of the Turkish population is 33.5 years (up from 28.3 in 2007).  (Source https://en.wikipedia.org/wiki/Demographics_of_Turkey, September, 14th)

3. With the effect of rising interest rates, improvements are observed in the Financial Revenues item in P&L of 2023 compared to previous years.

4. Adjustments were made in line with inflation in earthquake/property  (fire) and health branch premiums. Except for MTPL in 2023, there will be a significant improvement in the technical profitability and bottom line figures of the sector in general.

5. Turkish GDP is approximately 1 Trillion US dollars. With insurance sector’s very low share in GDP (around 1,3%) when compared to the World figure (around 7%), the Turkish insurance industry still keeps its potential to grow.

6. Very well regulated legislation in line with European Union Legislation.

7. Huge potential for Digital Insurance. (i.e.: Almost 82% of the population are internet users)