8 March 2013 Insurance

Non-life growth in Turkey means opportunities

A mixture of growing insurance penetration into what is a rapidly developing market and government initiatives to secure greater financial protection against natural disasters mean Turkey holds many opportunities for re/insurers, especially for non-life players.

That was the conclusion of a recent report and conference call held by rating agency Fitch examining the development of this market. Demand for non-life products grew substantially in 2011 with gross written premiums up 21 per cent compared with the year before to TL14.5bn ($8bn).

Stiff competition and inadequate rates have meant the non-life sector has not always been profitable in the country. But Fitch believes better pricing and regulator-driven improvements in reserving standards will now quickly lead to a trend of improving underwriting results in the market.

It also identifies the country’s exposure to natural catastrophes as both an opportunity and a risk to insurers. While this will inevitably lead to volatility in terms of profitability and results, the Turkish Government is seeking ways of protecting against this risk, something that could lead to more opportunities in the market.

“Turkey has a huge exposure rate for natural disasters. But the government is looking for solutions,” said Federico Faccio, senior director in Fitch's Insurance group.

Another driver of growth in the market is an increasing awareness among the young Turkish population of the need for insurance.

An increasing number of foreign insurers have been investing in the Turkish insurance market, encouraged by favourable legislation and attracted by the market’s growth prospects. Turkey has low non-life insurance penetration, with premiums amounting to only 1 per cent of GDP in 2011, compared with an average of 2.3 per cent across Europe. This implies significant scope for growth in the non-life market.

“We do think that Turkey is a very interesting place for non-life insurance business because there is a very low penetration rate,” said Vanessa Flores, associate director in Fitch's Insurance group. “You can see that there is scope for growth.”

Flores also notes that some local players would be interested in securing capital relief through quota-share agreements with international reinsurers.

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