Insurance Sector in Turkey
There is a notable growth in the Turkish insurance market despite the global economic crisis in the recent years. The rise of the prices, especially in the traffic insurance has a key influence over the total growth of the insurance sector at a rate of 24.59 per cent in Turkey. It should be noted that this growth is not only related to price. According to the statistics published by the Insurance Association of Turkey (“TSB”); the elemental insurance sector has grown 23.79 per cent and non-life insurance has grown at a rate of 29.48 per cent in the period of first 8 months of 2013.
The figures announced by TSB revealed that insurers in Turkey have produced a premium total of TRY 6.5 billion (approx. USD 3.4 billion) compared to the TRY 5.1 billion generated in the same period of 2012. The breakdown of the impressive total shows that non-life categories constituted the majority with TRY 5.6 billion, while the remainder came from the sales of life insurance products.
History of Insurance in Turkey
It is not possible to talk about an insurance market in Turkey before the 19th century. Ottoman Empire was not developed in terms of insurance, as Ottoman era social features, religion and financial structure were hindering the development of an insurance market. However a number of great fires and losses occurred as a result of these fires helped to remove the aforementioned negative opinions about the insurance.
English insurance companies carried out the first insurance activities in Turkey in 1872 through their representative offices. English insurance companies were followed by French, German, Italian and Swiss companies. Therefore, first years of the insurance market can be summarised as the foreign dominated years in terms of the insurance market in Turkey. In 1900 all the insurance companies established “Insurers Syndicate of Turkey” which covered all 81 insurance companies under one organization. It should be noted that all the insurance companies in Turkish insurance market were foreign companies.
Following the proclamation of the Republic in Turkey, significant steps were taken in terms of legal and institutional aspects. There are currently 62 insurance companies and 2 reinsurance companies in Turkey. However 5 insurance companies and 1 reinsurance company does not accept any new insurance and reinsurance agreements.
A considerable number of active insurance companies in Turkey, 45 companies, have foreign shareholders. This situation may be an indication that the Turkish insurance market is still under the foreign influence and
Overview of the Sector
In the recent years, attention on the insurance sector has significantly increased. The reasons for this interest are
Yapı Kredi had been planning to sell its shares in its insurance companies back in 2008, but all the companies interested in the sale withdrew their offers following the 2008 economic crisis, which started in the United States, but soon engulfed the world. Finally, their transaction will be successfully carried out thanks to the current positive economic environment in Turkey. Allianz Hayat ve Emeklilik has announced that it is to acquire the property and casualty insurer, Yapı Kredi Sigorta, including its subsidiary Yapı Kredi Emeklilik, the life and pension business.
Insurance sector is attractive for investors all around the world. In 2010, foreign-owned companies controlled more than 70% of the Turkish non-life insurance market, based on data from the Insurance Intelligence Centre. Bahrain-based Albaraka Banking Group stated their intention that they are planning to establish an Islamic insurance company in Turkey. However since Turkey does not have a legal basis to incorporate an Islamic insurance company they expressed their intention to the Turkish authorities.
In terms of the legal developments in insurance market; the new Turkish Commercial Code (the “New TCC”) published in the Official Gazette dated on 14 February 2011 is the most recent and important one. The New TCC does not only introduce fundamental changes on the insurance market, but it reshapes the all commercial relationships in Turkey. For instance, the New TCC now covers all types of insurance by its general provisions concerning insurance agreements, insurers and agencies are required to inform and enlighten insurance holders prior to the execution of and during the insurance agreement, liability insurance that does not covered by the previous law is regulated and therefore the New TCC is complied with the insurance practise. The New TCC also brings changes regarding the agency activities. One of these changes is the right to compensation for the agency. In the event, an agency contract is terminated; the agent may demand compensation from the insurance company providing that the conditions set forth in the New TCC are met.