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Turkey is Europe’s sixth largest economy, and at 17th in the world rankings, it will soon become a $1 trillion powerhouse. Its 29th position in non-life insurance coverage, then, promises […]

Turkey is Europe’s sixth largest economy, and at 17th in the world rankings, it will soon become a $1 trillion powerhouse. Its 29th position in non-life insurance coverage, then, promises great potential. And as a manufacturing- and services-led economy, insurance performance reflects macroeconomics, not least in the corporate sphere, such as marine, property, and liability insurance. Like many emerging markets, growth of the insurance sector, along with the broader financial markets, is predicated on several key factors beyond economic growth, such as the rise and rise of the middle class. According to Yılmaz Yıldız, CEO of Zurich Sigorta, insurance has become a $20 billion market, expanding annually by around 15%-20%. With penetration remaining low at 1.35% in 2012, far short of the 7.6% European average, the opportunity exists for creative, and moreover, foreign players with well-trained staff, and innovative packages and distribution systems, to make their mark. “In February of 2014, we started to provide Motor Third Party Liability (MTPL) and casco insurance quotes within one minute and policies within three-five minutes,” said Mine Ayhan General Manager of Generali Sigorta. She sees strong potential in Turkey as its average insurance premium per capita tops off at $146, well below that of the $646 recorded in the US.


Turkey’s demographics, with a favorable age pyramid and population of close to 80 million, in contrast to established European markets, suit this scenario perfectly. The 2007 Insurance Law set the industry’s regulatory and legal framework in place. The government, too, has been supportive of private pension plans by incentivizing the public to see insurance as an investment and savings instrument. Turkey has some interesting metrics that point to a stronger sector based on relatively low penetration of most banking services, where the household debt to GDP ratio is at 21%, alongside a 7% mortgage to GDP ratio. Meanwhile, the pension funds to GDP ratio of 1.7% suggests that to thrive the sector will likely see consolidation and an aggressive program of education for industry professionals and the public alike.


Foreign investor interest in the Turkish insurance scene is substantial, holding 70% of paid-in capital and half of the overall market. More evidence of this emerged on 12 July 2013, as banking giant Yapı Kredi Bank sold its 94% stake in YK Sigorta to Allianz in a deal valued at ‚¬684 million. Allianz holds a combined 15.6% market share in non-life and 20.4% in the pensions bracket. It rules the roost in the health branch with a 33% market share. “Our purchase of Yapı Kredi Sigorta is the start of a broader consolidation that will occur over the coming five years,” Solmaz Altın, CEO of Allianz Turkey told TBY. Yet he qualified the comment by stressing that, “there is still the opportunity to enter with a brand new establishment, rather than through M&A activity.”

Separately, Belgian outfit Ageas arrived on the Turkish non-life insurance scene in 2011 having purchased a 31% stake in Aksigorta, then Turkey’s fourth largest non-life insurer by market share. Data for that year revealed that 28 of Turkey’s 35 non-life insurers were foreign partnerships, and that 23 of the 28 life and pension firms had some foreign participation.

Nonetheless, the regulatory environment and laws such as Solvency II demand better risk management and adjustment, plus higher solvency ratios, which will pressure many firms and potentially trim the field. Meanwhile, for 2013 Aksigorta posted 26% YoY growth in bancassurance to claim 21% of the market.


The Turkish insurance industry is regulated by the General Directorate of Insurance of the Undersecretariat of the Treasury. Changes to the regulatory environment have positively impacted the private pension (BES) segment. BES, today operated by 17 pension companies, has come far since its launch in October of 2003. Where formerly BESs were available exclusively to the employed, as of January 1, 2014 all persons over the age of 18 qualify for the scheme that the government makes an incentivizing 25% contribution to. As of 2013, BES participants had reached 3.1 million and had assets worth some TL19.7 billion. According to Turkinsurance the first quarter rise alone of 200,000 policy holders encouragingly marked a more than four fold YoY rise. More interestingly yet, data reveals that the 18-34 age group, accounting for 42% of total participants, rose markedly confirming that in Turkey the word is getting round that saving today is a wise move that goes beyond the traditional preference for gold or property. By October of 2013, state contribution had breeched TL700 million, making for a segment value of TL24.2 billion. Premium generation for the non-life segment is forecast at TL63 billion by 2023, the 100th anniversary of the Turkish Republic, with life insurance foreseen at TL16 billion. Pension Monitoring Center data for 1Q2014 indicates that participants rose by 28% YoY to 4.41 million people, amid a total fund volume of around $12 billion. The number of participants who have retired from the system reached 9,462. A volatile Turkish lira led to a total fund size reduction of 0.2% for the quarter.


Following the disastrous earthquake of 1999, and partially out of EU harmonization efforts, Turkey has introduced certain mandatory insurance products. The Turkish Catastrophe Insurance Pool (TCIP) was formed after the tremors that also caused industrial damage to major national assets. Compulsory earthquake insurance followed in 2008. Earthquake insurance coverage, at 500,000 homes in 1999, has risen to 6 million today, with penetration up from 4% to 35%. This is still far short of TCIP Chairman Selamet Yazıcı’s 2017 target of 10 million homes on 60% penetration.


As the first quarter of 2014 closed, Garanti Emeklilik led the field with 18% of private pension participants, at 804,000. Anadolu Hayat Emeklilik followed closely at 17% and around 761,000 participants, while AvivaSa Emeklilik ve Hayat ranked third on 15% and roughly 647,000 members. These firms claimed 50% of participants, and the first five 68%. Anadolu Hayat Emeklilik (20% market share) claimed the lion’s share in fund size at $2.4 billion. Next on 19% came AvivaSA Hayat ve Emeklilik, with a fund size of $2.3 billion. Third on the podium was Garanti Emeklilik and its 16% stake and fund size of $2 billion. Close behind was Allianz Yaşam ve Emeklilik, revealing funds of $1.9 billion and a 15.9% market share. The top three companies by fund size owned 55% of the total.

Incidentally, the insurance sector is no mean employer, with around 300,000 people chasing those premiums. Its future looks bright as awareness spreads and the unbanked number declines, while the younger generation takes a greater interest in tomorrow.

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