MILLI REASURANS ANNUAL REPORT 2018

Milli Re Annual Report 2018 50 / Financial Status According to 2018 year-end figures released by the Insurance Association of Turkey, insurance industry in Turkey has produced TL 54.7 billion premium with an increase of 17% over the previous year. This amount reflects the double counting effect emanating from the High Risk Insurance Pool for Land Vehicles Compulsory Liability Insurance on market data. 87% of the total premium was generated by Non-Life and 13% from Life insurance. The adverse impact of the slowdown in economy and increase in interest rates on consumer and housing loans was especially evident in Life insurance, respective share of this line decreasing from 15% in 2017 to 13% in 2018 in the total premium production. Despite the nominal increase of 20% in Non-Life premium income, there was no growth in real terms due to factors including decline in car sales, stagnation in housing projects, slowdown in economy and investments and the ongoing price cap application in Land Vehicles Liability Insurance. 50% of Non-Life premium emanated from Land Vehicles Liability and Land Vehicle (Motor Own Damage) Insurance. Factors such as the price cap application and the decline in vehicle sales over 2018 have had a negative effect on the premiums and the volume of these lines in the total industry premium remained lower than the previous years. Moreover, the limited premium increase in these lines has had a constricting impact on the growth of the industry’s total premium. While the share of Fire and Natural Disasters Insurance in Non-Life premium was 14.6%, more or less at the same level with 2017, premium income from this line increased by 21% in nominal term translating to a real growth of 1% only. Due to the economic downturn and the decline in housing loans in 2018, increase in premium from residential policies remained below the inflation rate and the nominal growth was 10% therein. Premium from commercial and industrial risks increased by 21% and 31% respectively in spite of competitive pressures on pricing and relative stagnation in investments. This was largely due to the fact that significant portion of the sums insured on such risks were either in hard currency or were indexed to inflation. Premium income for Natural Disasters accounting for 34% in Fire and Natural Disasters Insurance grew by 20%, more or less at the same growth rate for Non-Life. General Damages comprises of Engineering, Agriculture, Theft and Plate Glass Insurances and was able to grow by 21% in 2018, slightly above that of the Non-Life industry. More than 90% of the premium income in this line was generated by Engineering and State Subsidised Agricultural Insurance Scheme (TARSİM). The significant weakening in Engineering premium was largely compensated by the robust growth in Agriculture. The upsurge in construction industry in the recent years was replaced by a sharp decline in 2018 reflecting adverse developments in economy and resulting with a notable downturn in EAR/CAR business. This, combined with the real-term decrease in Machinery Breakdown premium mainly due to consistently intensifying competition in the recent years and the contraction in the Electronic Equipment Insurances which has a relatively small share in total Engineering premium, led to a modest 15% increase in total Engineering premium over the year. On the other hand, there was 27% growth in Agriculture premium in 2018 due to the spread of agriculture insurances after in losses caused by climate changes and the expansion of the scope in favour of the policyholders. Marine consisting of Hull (Sea Vehicles and Sea Vehicles Liability) and Cargo Insurances, has hardly accounted for over 3% in Non-Life premium for years. Cargo constituted more than 70% of the premium income, increased by 27%, largely reflecting rate of exchange movements. Despite the heavy competition, the growth was 38% in Hull where the majority In Non-Life premium income, there was no growth in real terms due to factors including slowdown in economy and investments and the ongoing price cap application in Land Vehicles Liability Insurance. TURKISH INSURANCE MARKET