MILLIRE 2021 ANNUAL REPORT

FINANCIAL STATUS 59 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 A strong growth and rather high inflation are expected, justifying the start of the monetary tightening in CEE. In 2021, most of the CEE insurance markets saw a positive momentum resulting with some markets recording even double-digit growth rates. The main drivers in the markets that achieved the most notable GWP growth were property insurance, which suffered from the impact of some extreme natural hazard previous year and motor insurance due to the increasing number of car registrations. However, the largest contribution to GWP growth was provided by life insurance segment. 2021 has been another active year in terms of catastrophic losses particularly in Europe including some of the CEE countries such as Czechia, Hungary and Romania. Devastating secondary peril activity included severe convective storms in June, with thunderstorms, hail and tornadoes causing widespread damage to property. The resulting insured losses are estimated at USD 4.5 billion. Accordingly, in respect of the catastrophic excess of loss programs in 2022 renewals, market showed real distinction between loss free and loss affected renewals. For loss free programs, risk adjusted flat and modest increases were possible to achieve. On the other hand, reinsurers expected significant pay-back which resulted in double digit price increases on both risk adjusted and on monetary basis. Reinsurers have been more flexible in respect of risk excess of loss programs, trying to maintain existing relationships. Thus, loss affected programs achieved risk adjusted increases but mostly 2021 capacities were offered to the market. In addition, commissions remained mostly flat in pro-rata treaties. Over-placement has reduced significantly on both proportional and non-proportional agreements. NORTH AFRICA In 2021, North Africa’s GDP growth has been approximately 4% displaying a similar trend to pre-pandemic economic conditions. Owing to quick actions taken by North African governments to offset the impact of global economic problems, Region’s economy recovered in 2021 after suffering from major setbacks in 2020 caused by the lockdowns as well as collapse in oil prices and reduced tourism income. However, as Covid-19 pandemic is still a threat and accordingly restrictions are still in force in many places, North African countries could face liquidity problems. Accordingly, in the near term, inflation is likely to rise across the Region due to increasing costs for food and energy. In parallel with their economic recovery, North African insurance markets have seen 8%-10% growth rates, except Algeria that grew by 4.3%, predominantly as a result of life insurance premiums, showing a double-digit rise. Following the swift recovery in the economy, despite the imbalance in the supply and demand, non-life insurance market is expected to see higher growth rates in the upcoming year. Despite, 2021 being a quiet year in respect of the loss severity and frequency, Region’s markets could not elude from the impact of the global hard market conditions. Indeed, due to lack of reinsurance capacity, larger programs have seen big rate increases. IN 2021, MOST OF THE CEE INSURANCE MARKETS SAW A POSITIVE MOMENTUM.