MILLIRE 2021 ANNUAL REPORT

FINANCIAL STATUS 57 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 Covid‑19 claims in the Region are manageable due to robust capital of most insurers. The Cyclone Shaheen which occurred at the Gulf of Oman between 2-4 October 2021 was the only major event of the year in the Region. Cyclone Shaheen made a historic landfall along the northern coast of Oman and was the first tropical cyclone in the modern record to made landfall in this Region. Heavy rains from Shaheen caused substantial damage in Oman and generated an economic toll which minimally reached into the hundreds of millions (USD). Although the insured loss figure is not yet known clearly, it is expected to range between USD 150 million and USD 200 million. During January 2022 renewals, there was sufficient proportional and excess of loss capacity in the Middle East Region. Commissions of the most profitable proportional treaties remained the same, while there was some reduction for those treaties with poor performance. Rate adjustments for loss free non proportional treaties ranged from risk‑adjusted flat to 10% up, while increases on loss affected ones saw roughly 20% upward movements. INDIA The Indian economy contracted by 7.7% in 2020-21 fiscal year, as opposed to a growth of 4.1% in 2019-20 year, because of the adverse impact of the Covid-19 pandemic on the economic activity. However, the widespread deployment of vaccine along with favorable government policies is expected to limit the downside risk. India is the 4 th largest insurance market in Asia and the 14 th largest globally in respect of premium production. However, India is a significantly under-penetrated market with only 1% penetration rate, with per capita non-life premium corresponding to meagre USD 19. The industry attained a compound annual growth rate of 17% over the last two decades and is expected to continue its commendable growth trajectory in the future years. The market share of private sector companies in the non-life insurance market rose from 15.0% in 2004 to 49.3% in 2021. The gross direct premium underwritten by general insurance industry displayed a growth of 5.2% on year-on-year basis, with health, fire and crop insurance being the main drivers. The onset of the Covid-19 pandemic changed the landscape of the Indian non-life insurance industry. Besides increasing the insurance penetration rate, the ongoing changes due to the pandemic have brought about a conscious shift in the insurance product mix. It has triggered awareness on insurance and demand for protection products, especially health insurance. In 2021, the Insurance Regulatory and Development Authority of India (IRDAI) has lowered the obligatory cession rate on the sum insured on each general insurance policy that is to be reinsured with GIC of India to 4% for policies with effective dates of 1 April 2022 and onwards. Insurance policies covering terrorism and nuclear risks will be excluded as these risks are covered by special pools. As far as April 2021 renewals are concerned, prices of loss hit non-proportional cat programs increased by 5% to 7.5% while rate decreases up to 5% were witnessed in respect of loss- free programs. There was an increase in the cat purchase of some cedants particularly for their earthquake layers. On the risk side, the reduction in loss free layers was limited by 2.5% while there was increase in the pricing of loss hit programs up to 7.5%. There was an increase in the appetite of reinsurers for the proportional bouquets, which boosted the premium income on the back of the endorsements issued by GIC Re on minimum rates and minimum PML to be applied in Fire branch and increased the appetite Whilst treaty structures of the state companies remained unchanged, some private companies secured increased capacity. Additionally, the commission levels for the state companies were flat but some changes were observed in favor of the private companies. THE INDUSTRY ATTAINED A COMPOUND ANNUAL GROWTH RATE OF 17% OVER THE LAST TWO DECADES AND IS EXPECTED TO CONTINUE ITS COMMENDABLE GROWTH TRAJECTORY IN THE FUTURE YEARS.