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Turkey 2012 | FINANCE | REVIEW: INSURANCE

While non-life compulsory lines rule the roost, the life sector is looking to expand health and pensions coverage to tip the balance in its favor.

Despite having an overpopulated insurance market, the insurance industry is still working hard to make inroads locally. In 2011, Turkey's insurance premium ratio stood at 1.3% of GDP, according to figures released by the Association of the Insurance and Reinsurance Companies of Turkey (TSRSB). However, as Turkey's demographics mature, the industry is looking to expand its presence in the life and pensions sector, while in the non-life segment, auto-related insurance continues to dominate the sector, squeezing margins. However, the long-term outlook of the sector is positive. As Gökhan Gürcan, CEO of Acıbadem Sigorta, told TBY, “Turkey boasts a young population, high growth rate, and increasing rates of employment," which are all indicators of future growth opportunities for both life and non-life players.

The sector has 60 active companies in the market, including 35 non-life players, nine devoted to the life segment only, and another 16 dealing with life and pensions. Total written premiums in 2011 were up 21.54% over the same figures in 2010, at TL17.17 billion, according to the TSRSB. Non-life premiums accounted for 84.36% of total written premiums in 2011, coming in at TL14.49 billion, leaving non-life with a more sedate TL2.69 billion. In terms of growth, life companies showed 23.13% growth in annual terms, marginally above the 21.25% recorded by the non-life segment.

Although the Turkish market has a wide variety of players, the top-10 players in the life and non-life sectors combined have a market share of 64.17%. The dominance of the top 10 becomes more pronounced in the life segment, with the main players accounting for 85.56% of total written premiums over 2011. Life premiums sold through banking channels also show a similar level of market centralization, with eight of the top-10 companies being a part of a larger banking group. The top-5 players are Ziraat Hayat ve Emeklilik (Ziraat Bank), Anadolu Hayat ve Emeklilik (İş Bank), Garanti Emeklilik (Garanti Bank), Halk Hayat ve Emeklilik (Halkbank), and Yapı Kredi Emeklilik (Yapı Kredi). Although an expansion of the pensions sector has been occurring in Turkey, many of these companies have a captive market in providing policies to their employees and their families.

On the life side, the health and sickness category is beginning to make inroads, with written premiums for 2011 reported at TL2 billion, having 11.64% of both the life and non-life market combined and showing an annual growth rate of 17.24%. Health insurance is considered a major growth opportunity going forward.

For the non-life segment, motor policy and vehicle-related written premiums combined totaled TL6.76 billion, and had a 39.38% market share of the life and non-life markets. Much in line with its far larger market size compared to the life segment, competition within the non-life industry is fiercer. The top-10 companies only accounted for 74.32% of written premiums over 2011. French player AXA Sigorta remains the largest in the local market, accounting for 13.79% of all non-life premiums written, with Anadolubank's non-life component coming in second with a 13.29% market share. Aksigorta, a subsidiary of Akbank, commands third place with a 7.42% market share, while global player Allianz comes in at fourth at 8.33%. The last of the top five for 2011 was Yapı Kredi Sigorta, with a 6.35% market share.

The other major component of the non-life market is that related to fire and natural forces, which represented TL2.31 billion in written premiums over 2011, up 16.69% in annual terms. Although compulsory earthquake insurance has been a part of the insurance market over the past decade, only around one-third of all Turkish housing units are presently covered by it, indicating a future growth area for the non-life segment.

Profitability has long been an issue for the sector, with many companies over the 2008-2011 period reporting underwriting losses. Many of these losses were related to a mismatch between premiums charged and the risks the companies took on board. In order to repair balance sheets, the sector as a whole needs to look carefully at both expanding the number of policy holders, as well as ensuring that the premiums charged are at a high enough level to ensure that sound underwriting standards are maintained.