MILLIRE 2021 ANNUAL REPORT

13 MİLLİ RE ANNUAL REPORT 2021 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 recoverable from the insurance industry. Texas winter storm, the second costliest catastrophe of 2021 in the US, is projected to have caused insured losses amounting to USD 15 billion. On the other hand, the floods in Europe have made the costliest catastrophe of 2021 outside the US for the insurance industry. Total economic damage caused by the floods is projected to surpass USD 50 billion, with insured losses amounting to USD 13 billion. In our country, the aggravating impacts of the climate crisis have also led to natural catastrophes that deeply saddened us particularly in the summer months. After the deadly flood disasters that hit our Western Black Sea Region, the fires that scorched our forests along our Mediterranean coastline housing an extraordinarily rich biodiversity have been destructive. As a consequence of all these developments, increased concerns about secondary perils and the high inflation environment, as well as climate change and the increased frequency and severity of natural catastrophe damages exerted an upward force on prices in January 2022 renewals. Market conditions caused numerous reinsurers to curb their capacities for certain regions and programs they deem unsatisfactory in terms of prices and conditions, and even to withdraw completely from certain programs. While prices varied greatly depending on the loss history of ceding companies, prices of catastrophe excess of loss retrocession programs went up by 15% on average in parallel with the rise in retrocession costs. As the reinsurance industry in our country was also negatively affected by reinsurers’ reduced appetite as a result of declined technical margins of the programs due to the ongoing competitive conditions and increased claim costs in the insurance industry coupling with exchange rate movements and inflation, placement gaps and price pressures were observed in 2022 renewals. Accounting for 83.2% of the sector’s total premium, the non- life insurance industry decreased by 5.6% in real terms with the added effect of the Land Vehicles Liability insurance in particular, which shrank by 16.4% in real terms and saw its share in total premium decline from 30% to 27%. The share of Fire and Natural Catastrophe Perils in non-life premiums rose to 16% in parallel with the 32.7% nominal increase in premium income as compared with the previous year. With 36% growth, Fire insurance got 68% share out of the premium income of the overall branch, while 23.7% contraction of Compulsory Earthquake insurance despite the increase in natural disasters pulled down also the share of premiums from Natural Catastrophe Perils branch in total premiums. Life insurance, on the other hand, saw a nominal growth of 22.8% in connection with the change in individual loans volume, although it contracted by 9.7% in real terms, and its share in total premium went down from 17.5% to 16.8%. Owing to the strengthened positive perception of Health insurance during the pandemic and to the impact of medical inflation on premiums, premiums from Private Health and Complementary Health insurances grew by 29.5%, and specifically Complementary Health insurance registered a real growth of 27.3%. Natural catastrophes take the top spot on the agenda. With respect to the insurance and reinsurance industry in the world and in our country, the global climate crisis, and in turn natural catastrophes whose frequency and severity are gradually increasing in addition to the pandemic have gained prominence as one of the most important agenda items. In 2021 when insured catastrophe losses rose to USD 120 billion, Hurricane Ida went down in the records as the costliest catastrophe of the year with USD 65 billion. Around USD 32 billion of this amount is expected to be THANKS TO ITS ROBUST CAPITALIZATION AND TECHNICAL INFRASTRUCTURE, MİLLİ RE COMPLETED 2021 WITH SUCCESSFUL RESULTS DESPITE THE PANDEMIC AND THE VOLATILE ECONOMIC CONJUNCTURE.