MILLI_RE_ANNUAL REPORT 2022

Turkish Reinsurance Market and Milli Re in 2022 Record-breaking insured catastrophic losses in 2022 are put at around USD 100 billion worldwide. USD 50-60 billion of these losses were associated with Hurricane Ian in September and the remainder are mostly attributable to climate-change induced extreme weather events and disasters that occurred throughout the year. Owing to these losses as well as to such factors as unremitting inflationary pressures throughout the world, the serious impact of a contraction in retrocession on reinsurance capacity, steadily worsening political tensions, energy bottlenecks, and spiraling uncertainties about economic problems in many regions including developed countries and their social impact, the process of renewing reinsurance contracts for 2023 has, in many respects gone on record as unlike anything ever witnessed in the history of the world’s reinsurance industry. Reinsurance capacity shortfalls were encountered in nearly every region and branch. Many reinsurers drastically reduced the capacity they were willing to allocate for regions and programs whose scope, capital costs, prices, and terms they deemed to be unsatisfactory; indeed even some pulled out of programs entirely. The trend among reinsurers in recent years to discriminate among customers, programs, and branches in capacity- availability and pricing approaches continued and became even more pronounced in 2023. As a result of protracted quotation processes and the reluctance of many reinsurers to give any quotes at all, reinsurance renewals were delayed, and many programs suffered placement shortfalls. For these reasons, January 2023 renewals were completed much later than usual. Insurers who had filed claims were confronted by serious reinsurance renewal surcharges while minimum (rate-on-line) limits were increased across the board, even for those who had not. Turkey’s reinsurance market last year suffered especially from a steady erosion in technical margins in programs whose premiums are denominated in Turkish liras in line with practices in our country but whose limits are set in euros and further exacerbated by stiff insurance industry competition and by the increasing occurrence and frequency of claims and by exchange rate movements and inflation as well as from reinsurers’ reluctance to take on risk in the face of the increasingly greater pressure of catastrophe liabilities. With some reinsurers which hitherto had played important roles in placements reducing capacity significantly and others even exiting programs entirely, renewals were delayed. There were also serious problems with placements even though both proportional and non- proportional programs were revised substantially in favor of reinsurers. With great difficulty, insurers eventually covered their placement shortfalls through agreements with their existing reinsurers as well as by having recourse to new ones. In the conduct of 2023 renewals, changes were made in the coinsurance clauses of proportional Fire and Comprehensive machinery insurance coverage contracts reducing both limits and follower coinsurance capacity ratios in all treaties across the industry in which Milli Re was either the leader or a participant. This was done to ensure the continuity of reinsurance capacity in the face of an ever-more onerous burden of claims, of the increasing share of local capacity and treaty assignments going to major risks, and of deteriorating market conditions in recent years. A stipulation was made Providing capacity to 25 companies and as the leading provider in the reinsurance treaties of 21 companies, Milli Re secured a 30% market share of overall premium production. 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 56 MİLLİ RE 2022 ANNUAL REPORT