MILLIRE 2021 ANNUAL REPORT

FINANCIAL STATUS 55 MİLLİ RE ANNUAL REPORT 2021 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 reinsurers meticulously assessed program attachment levels and opted for deploying their capacity on layers above a certain threshold in respect of modelled loss return periods. Moreover, strategic partnerships gained importance and many reinsurers provided property catastrophe capacity asking for lines in non-cat programs in return. With respect to quota share programs, some reinsurers that increased their participations in the previous year in order to make most of the improved rate environment in the insurance market, experienced high amount of losses in 2021 and insisted on improved terms during 2022 renewals. While risk-adjusted prices of loss affected cat programs increased between 10% to 25%, for loss free cat programs, upward adjustments remained in the range of 2.5% to 10%. Following a similar trend to cat program prices, loss-impacted risk programs saw upward price movements between 10% to 25%. On the other hand, loss-free risk programs renewed with price uplifts fluctuating between 2.5% to 10%. Given the increased severity and frequency of the climate- related catastrophes affecting Canada in 2021, the overall insured losses exceeded USD 1.5 billion. While risk-adjusted price rises were capped at a maximum of 10% for loss free cat programs, upward price movements varied between 10% to 20% for loss impacted programs. In respect of risk programs, loss affected programs saw 10% to 20% upward price adjustments. On the other hand, for loss free programs, price increases remained between 5% to 10%. ASIA 2021 started with all the uncertainty from 2020 which had its repercussions on the insurance markets. However silver linings were observed as the year wore on. Vaccinations gathered pace in some countries, vaccinated travel lanes were established, and commercial activity gained momentum once again. Players were generally cautious and disciplinary approach kept prevailing. Reinsurance capacity continued to tighten particularly in less technically priced proportional treaties. The year saw fewer number of severe natural catastrophes than in the recent past but there were record setting events such Fukushima Earthquake and China Floods to add to the challenges of navigating in the Covid-plagued market place. Record flood losses between June and September triggered by the seasonal monsoonal rains in China reminded the complexity of these seasonal or regular catastrophes that bring record losses in a fast-growing economy coupled with high urbanization rate. Super Typhoon Rai made landfall in the Philippines in December with maximum sustained winds at 260 km/hr. This is the third Category 5 typhoon to make landfall in the Philippines in two years and it is the third-costliest typhoon for the country. Economic loss is estimated to be in excess of USD 1 billion while insured losses are to be ascertained. Continuous torrential rain over 3 days caused massive flooding in eight states in Malaysia including capital city Kuala Lumpur in December. Severe flooding has been observed at greater frequency in recent years and the Malaysian government declared this as a 1 in 100 event. The floods resulted in an economic loss of USD 1.55 billion while the estimated market insured loss is expected to reach up to USD 0.5 billion. 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.