MILLIRE_2019_Annual Report

Milli Re Annual Report 2019 46 Economic slowdown, volatility in the currency and inflation, combined with the high interest rate environment which significantly hampered economic activities during 2018 and in the first half of 2019, have had adverse impact on the insurance industry, reducing the growth potential especially in lines such as life, motor own damage, motor liability, construction and residential risks. On the other hand, existing portfolios of corporate commercial and industrial risks of insurers have been largely maintained. Signs of recuperation in the second half of 2019 were to some extent reflected to the insurance industry. It is anticipated that the growth in insurance industry will accelerate with the upturn in the economy in 2020. According to 2019 year-end figures released by the Insurance Association of Turkey, insurance industry in Turkey has produced TL 69.2 billion premium with an increase of 27% over the previous year. This amount reflects the double counting effect emanating from the “Risky Insureds’ Pool” for Land Vehicles Compulsory Liability Insurance on sectoral data. 84% of the total premium was generated by Non-life and 16% from Life insurance. The share of Life in the market premium increased from 13% in 2018 to 16% in 2019, due to around 64% growth in this line, owing to the impact of the reductions made in interest rates in the second half of 2019 on consumer and mortgage loans. While a nominal 21% upward movement was recorded in Non-life in 2019, real growth was only around 8%. The decline in interest rates since the third quarter of the year had a positive effect on the premium income of Non-life, especially in lines such as Personal Accident and Land Vehicles (Casco). 49% of Non-life premiums emanated from Land Vehicles Liability and Land Vehicles. Due to the continuation of the price cap in Land Vehicles Liability and the sluggish vehicle sales compared to previous years, the premium increase in these lines remained muted and given their size, constrained the total industry growth. The share of Fire and Natural Catastrophe Perils in the Non-life premium was 14.6%, same level as in 2018, showing a nominal 21% annual increase which corresponds to a real growth of 8%. Against the subdued growth in the premium income from residential policies due to economic circumstances, premium related to commercial and industrial risks increased by 22% and 25% respectively in nominal terms, despite competitive pressures on pricing and the stagnation in investments. This was largely due to the fact that majority of corporate risks were insured either in hard currency or were indexed to inflation. Premium from Natural Catastrophe Perils which accounted for 33% in Fire and Natural Perils Insurance grew by 18%. TURKISH INSURANCE MARKET The sector showed a 27% increase in premium production. 27% Signs of recuperation in the second half of 2019 were to some extent reflected to the insurance industry and the insurance industry in Turkey has produced TL 69.2 billion premium.