MILLIRE 2021 ANNUAL REPORT

ACTIVITIES AND MAJOR DEVELOPMENTS RELATED TO ACTIVITIES GENERAL INFORMATION FINANCIAL RIGHTS PROVIDED TO THE MEMBERS OF THE GOVERNING BODY AND SENIOR EXECUTIVES RESEARCH & DEVELOPMENT ACTIVITIES 54 MİLLİ RE ANNUAL REPORT 2021 GLOBAL REINSURANCE MARKET AND MİLLİ RE While climate change, increase in the frequency and severity of the natural catastrophe losses as well as the rising concerns about secondary perils coupled with high inflation environment were the prevailing themes heading into January 2022 renewals, reinsurers were persistent on substantial price improvements. As this led to lengthy and in some cases challenging negotiations between reinsurers and buyers, January 2022 renewals were completed later than usual. Differentiation being the key driver, reinsurers assessed programs and clients individually based on factors such as track record, underlying portfolio, geographical scope as well as appropriateness of retention level, which resulted in great variation in final terms and capacity commitment. While loss-hit programs saw significant price increases, price adjustments remained at relatively moderate levels for loss-free programs. Although reinsurers had limited appetite for low level cat layers, aggregate covers and per risk programs, nonetheless many buyers managed to obtain required protection as overall reinsurance capacity remained at sufficient levels. Nevertheless, looking at January 2022 retrocession renewals, reinsurers were more prudent in deploying capacity and there was significant reduction in alternative capital allocated to retrocession. 2021 being another year with high level of losses from secondary perils, supply was restricted especially for aggregate covers and many buyers had to increase retention levels in order to secure required protection or scale down their portfolio with the aim of limiting outwards spend in consideration of profitability targets. While prices showed great variation depending on the loss history of cedants, as it has been the case previously, increases in the cost of retrocession outpaced the upward movements in reinsurance pricing and retrocession catastrophe excess of loss rates escalated by 15% on average. EUROPE 2021 was a very active year in Europe in terms of natural catastrophe activity with record level of losses driven by the devastating floods and severe weather conditions. Although negotiations were mainly shaped around contractual wording issues last year, pricing was the main focus of 2022 property renewals. As reinsurers adopted client and country specific approach in their assessment, buyers in countries, such as Germany, Belgium, Austria, Switzerland that were heavily impacted by 2021 natcat events; experienced tough renewals owing to challenging market conditions. On the other hand, in unaffected territories such as UK and Nordic Countries, renewals were orderly with sufficient capacity and less pressure on pricing. While Europe-wide loss free cat programs experienced up to 5% price increases, price adjustments for loss impacted cat programs exceeded 50% in some cases, not being less than 15% on risk-adjusted basis. As far as the property risk programs are concerned, loss-free programs renewed stable to 7.5% up, whereas loss impacted programs experienced price increases fluctuating between 5% to 25%. NORTH AMERICA Despite the fact that there were no new market entrants and alternative capital was under pressure given the amount of trapped collateral and diminishing profits after 2017, total capacity remained strong due to increased appetite of some reinsurers for catastrophe business. In consideration of the increased loss activity especially from secondary perils, Covid‑19 It is still difficult to predict the ultimate impact of the pandemic, which undoubtedly continued to be one of the hot topics for the insurance and reinsurance industry, with total reported insured losses reaching USD 48 billion by the end of 2021.