MILLI_RE_ANNUAL REPORT 2022

Given the risk-focused nature of insurance business, insurance and reinsurance companies establish risk management systems and processes and systematically monitor risk exposure as a part of their primary activities. Therefore, our Company has been implementing risk management techniques for many years; development of these techniques has gained even greater importance due to the adverse developments in the Turkish and global financial markets during the recent years, as well as the disasters that have occurred. The aim of the risk management system is to define the risks arising from Company’s activities, to determine related limits, to measure, monitor, control the risks effectively, to take necessary measures and to do the necessary reporting to the Board of Directors and related authorities, as well as to protect Milli Re’s reputation and to ensure that liabilities to insurance companies are fulfilled completely and in a timely manner. The “Risk Catalogue”, which aims to form a common terminology within the Company and in which possible risks are classified and defined by examples, is updated in accordance with changing conditions and approved by the Board of Directors. Moreover, the measurement methods of the risks that the Company is/may be exposed to, risk tolerance, duties and responsibilities related to risk measurement, risk limits, determination methods of these limits, action plans in case of limit violations, authorizations and responsibilities related to limits, and situations that necessitate approval and confirmation are detailed in the “Application Principles in Respect of Risk Limits”, which is approved by the Board of Directors and updated in accordance with changing conditions. The duties and responsibilities of the Risk Management Department are as follows: • To determine, define, measure, monitor and control risks, • To determine the risk management policies predicated on risk management strategies and to submit them to the Board of Directors, • To declare risk management principles, procedures and policies throughout the Company, • To provide the implementation of risk management policies and compliance with them, • To develop risk management techniques and methods, to ensure that risks are within determined limits and to monitor limit violations, if any, • To carry out reporting and announcement activities to the Board of Directors and related authorities in respect of risk management, • To control capital adequacy calculations performed according to the related legislation, • To carry out the processes in respect of disaster management, • To establish and operate early warning systems that monitor risk and take timely measures, • To evaluate new products, operation and planned activities in terms of compliance with the legislation and the risks involved. Basic Risks and Measurement Methods Risks that the Company is and/or may be exposed to are classified under two headings: financial and non-financial risks. Definitions of basic risks and their assessment methods are stated below. Financial Risks Underwriting Risk This risk arises from the inaccurate and inefficient application of reinsurance techniques in the process of making profit by underwriting and retrocession activities. When measuring underwriting risk, assessment of compliance with predetermined underwriting limits and principles and compliance of Company’s retention and reinsurance protection limits with the criteria set out in the “Application Principles in Respect of Risk Limits” is conducted. Company’s capital structure, market conditions, underwriting limits in respect of the lines of business which will be subject to retrocession contracts, risk profiles, loss experience, accumulation that may occur in the event of a catastrophe risk, regional event limits, and modelled loss amounts, if applicable, are taken into consideration during arrangement of retrocession contracts which are prepared in order to cover the liabilities arising from underwritten business.. Credit Risk This risk expresses the probability of loss arising from the full or partial default of the counterparties (security issuers, insurance/reinsurance companies, other debtors) with which the Company has a business relationship. Risk Management Practices 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 86 MİLLİ RE 2022 ANNUAL REPORT