MILLIRE ENG2024

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(Milli Reasürans) Reinsurance risk is the risk that may arise from the incorrect or ineffective application of reinsurance techniques during the process of converting the portion or the entirety of the liabilities assumed by insurance companies into commercial profit, whether by accepting a portion or the entirety of the responsibility through reinsurance or by transferring a part or all of the responsibility through retrocession. Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies 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. “Risk tolerance” is determined by the Board of Directors, taking into account the Company’s long-term strategies, equity resources, expected returns, and general economic expectations, and is expressed in terms of risk limits. Authorization limits in the insurance process include the authority to accept risks granted to agents, regional directorates, technical directorates, coordinators, assistant general managers, and the Executive Board for risks, special risks that cannot be accepted or could be accepted with prior approval, coverage scopes, and geographical regions during the policy issuance stage, and the authority to pay claims granted to the claims management department, motor claims department, non-motor claims department, health claims department, legal and subrogation processes department, treaty transactions department, claims coordinator, and the Claims Board consisting of the general manager and assistant general managers. In any case, risk acceptance is based on technical income expectations under the precautionary principle. In determining insurance coverage, policy terms and fee, these expectations are based accordingly. It is essential that all the authorized personnel in charge of executing policy issuance transactions, which is the initial phase of insurance process, should ensure to gather or provide all the accurate and complete information to issue policies in order to obtain evidence on the acceptable risks that the Group can tolerate from the related insurance transactions. On the other hand, decision to be made on risk acceptance will be possible by transferring the coverage to the reinsurers and/or coinsurers and considering the terms of the insurance policy. Objective of managing risks arising from insurance (reinsurance) contracts and policies used to minimize such risks (Anadolu Sigorta) In order to avoid destructive losses over Group’s financial structure, Company transfers the exceeding portion of risks assumed over the Group’s risk tolerance and equity resources through treaties, facultative reinsurance contracts and coinsurance agreements to reinsurance and coinsurance companies. Insurance coverage and policy terms of reinsurance are determined by assessing the nature of each insurance branch. Objective of managing risks arising from insurance (reinsurance) contracts and policies used to minimize such risks Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies 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. Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies 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. 224 Millî Reasürans Türk Anonim Şirketi (Currency: Turkish Lira (TL)) Notes to the Consolidated Financial Statements As of December 31, 2024 (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish) MİLLİ RE