MILLIRE_2019_Annual Report

Milli Re Annual Report 2019 47 Activities and Major Developments Related to Activities Financial Status Risks and Assessment of the Governing Body Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Consolidated Financial Statements Together with Independent Auditors’ Report Thereon General Information Financial Rights Provided to the Members of the Governing Body and Senior Executives Research & Development Activities General Damages comprises of Engineering, Agriculture, Theft and Plate Glass Insurances and more than 90% of the premium income in this line was generated by Engineering and State Subsidized Agricultural Insurance Scheme (TARSİM) in 2019. Due to the large- scale contraction in Engineering in 2018 which continued over 2019, premium income in General Damages was merely driven by the more robust growth in Agriculture. Adverse developments in the Turkish economy and the significant decline in investments/ projects resulting with a sharp drop in EAR/CAR premium. Combined with the real-term decrease in income from Machinery Breakdown mainly due to the intensifying competition in the recent years and the limited growth in Electronic Equipment which has a relatively small share in total Engineering premium, there was only a weak 4% nominal increase in this line over the year. On the other hand, Agriculture premium grew by 18% because of increased awareness and penetration in respect of agriculture insurances following a number of losses caused by climate changes and the expansion of the scope in favour of the policyholders. The share of Marine consisting of Hull (Sea Vehicles and Sea Vehicles Liability) and Cargo in the Non-life premiums has been at the level of 2% for several years. Cargo premiums which accounted for more than 70% of the total income, increased by 21% over 2019 largely reflecting rate of exchange movements. Despite the intense competition, the growth was 38% in Hull where most policies are in foreign currency; hence premiums being elevated in relation with currency movements. Consequently, Marine grew at par with Non-life market in general terms, with approximately 21% year-on increase. General Liability is one of the few lines that have been able to grow in real terms, with a 23% increase in premium income compared to 2018. Accordingly, the share of General Liability in Non-life premium has reached 3% and it is considered among the lines with the greatest growth potential. Comprised of 13 sub-branches, 90% of the total premium in General Liability emanate from General Third Party Liability, Employers’ Liability and Professional Indemnity. While the growth in Third Party Liability and Employers’ Liability remained limited due to competitive pressures, there was 37% real increase in premiums from Professional Liability Insurance. In line with the higher level of awareness on rights and obligations and the increased tendency to resort to litigation in the society, the demand for Liability Insurance is expected to expand even further in the coming period. Owing to the positive developments in products with important growth prospect such as Health and Complementary Health Insurance, Health and Sickness premiums grew by more than 34%. It is anticipated that the pace of growth in this line will show continuity. Although the market share is currently very small, it is expected that the positive trend in financial insurances such as Surety and Credit, which grew by more than 40% in 2019, will continue to develop in line with the economic conjuncture and state support. Along with the product diversity related with Cyber Risk Insurances and the expected increase in demand for these products, this insurance is anticipated to be at the top of the insurance industry agenda. Positive developments in takaful insurance in recent years have been enhanced by the regulation enabling necessary legal and operational framework for this segment, as well as the emphasis given by the state to alternative financial markets. Total premium produced in this segment has reached 5% of the industry premium income at the end of 2019. One of the most important developments in the Turkish insurance market was the establishment of Insurance and Private Pension Regulation and Supervision Authority. With this structure, it is envisaged that managing insurance industry through an exclusive entity will enable the maintenance of an optimum coordination between regulatory and supervisory functions and addressing the problems of the industry in a more rapid, efficient and effective manner. On the other hand, as an extension of industry reforms, three insurance and three pension companies which are currently subsidiaries of state-owned banks will be merged to operate as two companies - a pension company and an insurer- within a single holding structure under the