MILLI_RE_ANNUAL REPORT 2022

In particular, information about significant areas at estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amount recognized in the financial statements are described in the following notes: Note 4.1 – Management of insurance risk Note 4.2 – Financial risk management Note 7 – Investment properties Note 9 – Investments in subsidiaries Note 10 – Reinsurance assets/liabilities Note 11 – Financial assets Note 12 – Loans and receivables Not 17 – Insurance liabilities and reinsurance assets Not 17 – Deferred acquisition commissions Note 21 – Deferred income taxes Note 23 – Other liabilities and cost provisions 4 Management of insurance and financial risk 4.1 Management of insurance risk Objective of managing risks arising from insurance (reinsurance) contracts and policies used to minimize such risks Reinsurance risk is defined as a possibility of financial loss due to inappropriate and insufficient application of reinsurance techniques in the activities of taking insurance contract responsibility partially or completely. Potential risks that may be exposed in transactions are described, classified and managed based on the requirements set out in the Company’s “Regulative Framework on the Risk Management Activities, Risk Management Policies and Implementation Procedures and Principles of the Risk Management” issued by the approval of the Board of Directors. The main objective of the “Regulative Framework on the Risk Management Activities, Risk Management Policies and Implementation Procedures and Principles of the Risk Management” is to determine the risk measurement, assessment, and control procedures and maintain consistency between the Company’s asset quality and limitations allowed by the insurance standards together with the Company’s risk tolerance of the accepted risk level assumed in return for a specific consideration. In this respect, instruments that are related to risk transfer, such as; insurance risk selection, risk quality follow-up by providing accurate and complete information, effective monitoring of level of claims by using risk portfolio claim frequency, treaties, facultative reinsurance contracts and coinsurance agreements, and risk management instruments, such as; risk limitations, are used in achieving the related objective. Reinsurance risk is measured by quantitative methods and kept under pre-specified limits based on the “Limit over Acceptable Reinsurance Risk and Maximum Custody Share Limit” updated and approved annually by the Board of Directors. Reinsurance risk is monitored regularly according to criteria described in the “Limit over Acceptable Reinsurance Risk and Maximum Custody Share Limit” policy and results are analysed by the Risk Committee and reported to the Board of Directors. Action plan is determined by the Board of Directors in the case of having exposure higher than acceptable level of risk and probability. Sensitivity to insurance risk Insurance risks do not generally have significant unrecoverable losses in the course of ordinary transactions, except for risks associated with earthquake and other catastrophic risks. Therefore, there is a high sensitivity to earthquake and catastrophic risks. The case of potential claims’ arising from earthquake and other catastrophic risks exceeding the maximum limit of the excess of loss agreements, such risks are treated as the primary insurance risks and are managed based on the precautionary principle. Maximum limit of excess of loss agreements is determined based on the worst-case scenario on the possibility of an earthquake in terms of its severity and any potential losses incurred in accordance with the generally accepted international earthquake models. 134 MİLLİ RE 2022 ANNUAL REPORT Notes to the Unconsolidated Financial Statements As of December 31, 2022 Millî Reasürans Türk Anonim Şirketi (Currency: Turkish Lira (TL)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1 GENERAL INFORMATION FINANCIAL RIGHTS PROVIDED TO THE MEMBERS OF THE GOVERNING BODY AND SENIOR EXECUTIVES RESEARCH & DEVELOPMENT ACTIVITIES ACTIVITIES AND MAJOR DEVELOPMENTS RELATED TO ACTIVITIES