Whereas the global insurance industry saw growth slow over the course of 2013 and 2014, Turkey’s insurance sector displayed resilience, making it an attractive industry for investment and expansion opportunities. Despite fluctuations in other sectors and a depreciation of the local currency, in real terms Turkey’s insurance sector experienced significant expansion in both life and non-life segments.


One of the key drivers of growth in the sector has been the rise in mergers and acquisitions (M&A) in the country in recent years. In 2013 Turkey’s insurance segment saw more M&A activity than any other part of the country’s financial sector. Indeed, in value terms, some 70% of all M&As in finance were to do with insurance companies, with a record €874m in deals struck, according to a 2014 report by global consultancy PwC. The trend is illustrative of the recent strength of the sector, as well as of its ability to attract foreign investors – the largest M&A transaction was Allianz SE’s €684m purchase of a 94% stake in Yapı Kredi Sigorta. In 2014 the financial services sector was the second most active sector for M&A activity, with the vast majority of deals, including foreign investment, in banking and insurance.

International giants are thus looking at Turkey as a growth market, with the potential for significant expansion in life, pensions and more specialised non-life products. The implications for the wider financial sector in Turkey are significant, as the recent growth of the private pensions segment has given a welcome boost to the country’s asset management industry.

Yet challenges remain. Sustaining recent growth may prove demanding, while taking to the next level the number of Turks willing to pay in to non-compulsory insurance schemes will test companies’ resolve and ingenuity. Political uncertainties over the next year may also create greater caution, with consumers less likely to try out new products in consequence. Nonetheless, with growth rates that most European insurers would envy, along with some sound economic fundamentals, the insurance market is widely seen as a good pick for the years ahead.

Facts & Figures

According to data from the Insurance Association of Turkey (TSB), non-life by far exceeds life in terms of premiums. In January 2015 the split was 89.3% non-life, 10.7% life. Amongst the former segment, the biggest share of premiums was held by sickness/health, with 23.3%; followed by motor vehicle liability, with 17.7%; land vehicles, with 17.6%; then fire and applied perils, with 17.4%; and miscellaneous losses at 11.9%. After that, accident took 3.4%, general liability took 3%, and all the other lines of business took shares of less than 1%.

Based on a month-to-month comparison of the market shares recorded in January 2014, non-life slightly increased its share over the year – back then the split had been 88% to 12% – and the ranking spread by market segment saw sickness/health overcome motor vehicle liability. Over the course of 2014, sector premiums grew 10.7%, with non-life up some 12.4% and life down some 1.4%.

This was quite a different picture, however, from previous years, when the market shares held by the different lines of business maintained the same ranking – with motor vehicle liability in the lead – and both life and non-life also experiencing real growth. The TSB figures for 2012 and 2013, the latest years for which full-year data are available, show total premiums at TL19.8bn (€7bn) in 2012 and TL24.2bn (€8.5bn) in 2013 – growth of some 22.21% in monetary terms, or 13.79% if an inflation rate of 7.4% is factored in. Non-life grew 13.34% in real terms over those two years, from TL17.1bn (€6bn) to TL20.8bn (€7.3bn), while life grew 16.62% in real terms, from TL2.7bn (€954.2m) to TL3.4bn (€1.2bn).

This growth had come on top of overall growth in the 2011-12 period as well. The TSB figures indicate that total premiums for the first 11 months of 2011 of TL17.2bn (€6bn), compared to TL19.8bn (€7bn) for the first 11 months of 2012, or 8.8% real growth, with an inflation rate 6.16%. Non-life grew even faster over the period, at 11.35% in real terms, while life shrank, by 4.92%. The figures thus show robust growth for the past three years, although they also demonstrate a fragility in the life sector in particular. The reasons for continued growth in non-life and volatility in life lie in some of the fundamentals of the Turkish market.

Population Boom

One of the main growth factors is the country’s demographic composition. The Turkish Statistical Institute (TurkStat) declared that Turkey’s population stood at 77.7m at year-end 2014, up by nearly 1.3m over 2013 and indicating an annual growth rate of 1.7%. While in certain areas of the country the population regularly grows faster than the national average. Turkey’s largest city, Istanbul, is at the epicentre of this demographic trend. According to TurkStat, Istanbul saw population growth of 1.5% between 2013 and 2014 to reach 14.4m people. The city is home to 18.5% of Turkey’s total population.

The country is also young. TurkStat figures show a median age of 30.7 in 2014, slightly up from 30.4 in 2013. In 2008 the median was 28.5 years. Thus, the population is ageing, yet almost half of the people in Turkey are still under the age of 30. This implies a strong organic growth in the market, alongside increased future need for insurance products of all kinds, particularly in the currently non-compulsory vehicle, home, life, health and pensions areas. At the same time, Turks increasingly have the means to meet those needs. The Turkish economy has been growing, with a concomitant increase in per capita incomes and an expansion of the middle class.

Between 2010 and 2013, real GDP grew by some 24%, with 2010 seeing 9.2% and 2011, 8.8% growth, according to World Bank figures. While the economy has slowed since – 2013 saw GDP growth of around 4%, falling to 2.9% in 2014 – the long-term trend is a positive one. The World Bank’s data figures show per capita GDP rise from $8626 in 2009 to $10,660 in 2012, with TurkStat figures showing that rising again, to $10,822, in 2013. A recent BBVA report predicted that by 2020, Turkey’s affluent and medium-upper middle class will account for some 45% of the population – up from 27% in 2010. The insurance market thus looks set to grow robustly over the next few years, as the target market, especially for non-compulsory insurance, expands and more awareness of the insurance of insurance products grows.

Government Support

At the same time, the Turkish government has been eager to support the sector, with older compulsory insurance regulations recently complemented with some major incentives. Currently, only two major lines of insurance are compulsory in Turkey – motor and earthquake. For vehicles, motor third party liability (MTPL) is compulsory, along with bus seat personal accident insurance and passenger transport liability insurance. Earthquake insurance came in after the devastating 1999 quake, which hit just south of Istanbul. Many of Turkey’s urban centres lie on or near fault lines, with this also spurring a major urban renewal programme that has seen building codes tightened and widespread demolition and replacement of substandard housing – both with insurance implications.

There are also compulsory insurance regulations covering dangerous cargoes and their handling, storage and transportation, as well as workers’ compensation insurance. The latter is compulsory for all employees, but can only be handled by the state, although an employer may add on private insurance coverage for employees.

Motoring On

Compulsory motor insurance has been a mainstay of the non-life sector since it was instated in 1983, and the above figures for market share demonstrate its significance. The motor segment also had a better year in 2013 due to an increase in average premiums. For some time, companies in the motor segment had raised concerns about the low level of premiums allowed, particularly in a segment that often incurs high losses. For example, in 2012 the MTPL segment, which is required and regulated by the Traffic Law, recorded a TL1.3bn (€454m) technical loss, while motor vehicles liability recorded a technical loss of TL1.1bn (€387m). These losses were far higher than any other line of business.

After the premium increase, however, these losses were considerably reduced. The price increase, combined with general growth in the market fired by demographic and per capita income factors, led to a near doubling of premiums collected. The TSB figures show total net written premiums for 2012 stood at TL2.6bn (€919m) for MTPL, rising to TL4.1bn (€1.4bn) in 2013. For 2013 overall, MTPL recorded a TL654.4m (€230m) loss, while motor vehicle liability saw losses of TL479.8m (€169m). Motor vehicle physical damage also went from a loss of TL61.12m (€21.5m) in 2012 to a profit of TL702m (€247.2m) in 2013.

Another potential downside for the motor sector in particular is the devaluation of the Turkish lira, which slid 34% against the dollar between May 2013 and May 2015. With many spare parts imported, this will likely impact costs. A similar effect is expected in areas such as aviation and marine.

Pressure thus remains for further hikes in premiums in the year ahead and for further changes in the way the motor segment is regulated. A standardisation in the way claims are dealt with is also strongly advocated by the TSB, which works to end perceived inconsistencies in court judgements and has proposed amendment drafts to the Traffic Law. The year 2013 also saw the establishment of Turkey’s first MTPL club, with six firms joining. This should have an important impact on car valuations in particular, by helping to standardise procedures surrounding them.

Golden Years

Recently, the life segment – more specifically, pensions – was given a major boost thanks to government-led reforms. Private pensions are both a new industry in Turkey and, historically, a small one. In 2001 parliament approved the establishment of a private pensions sector, with this selling its first products in 2003. Six companies began offering these products, and by end-2013 there were 18 such firms. In 2012 the government, anxious to counter a significant decline in savings rates (World Bank data showed this rate had fallen from around 17% of national output during the 2002-08 period to just 12% in 2010), introduced a major new measure to support private pensions. This was to offer a direct matching contribution of 25% from the government on all contributions up to the national minimum wage.

The new rules also offered employers a tax deduction on pension contributions up to 15% of employee income, with a cap equal to the national minimum wage. The tax on distributions at retirement was also cut, from 3.75% of the total account value to just 3.75% of the investment income portion of the account. The new rules also allowed for transfers from defined benefit to defined contribution plans without any tax liability being imposed.

The package was considered by many to be a major success. According to Reuters, during the first month of implementation – January 2013 – 120,000 people joined private pension plans. This reached 1m by the end of 2013, a twofold increase over 2012. Industry figures show that 18 firms took advantage of the rise, investing €9.95bn for some 4.53m pension savers and boosting assets in the segment 29% in that year. By end-2014, the total number of contributors grew to 5.1m, with €12.21m in investments.

Sector Players

In 2013 the top three outfits in the life sector were Ziraat Hayat ve Emeklilik, Anadolu Hayat Emeklilik, and Garanti Emeklilik, which demonstrated gross written premium (GWP) market shares of 23.4%, 11.6% and 8.8%, respectively. Fourth place was held by Halk Hayat ve Emeklilik with 8.2% market share, and in fifth place stood the newly formed Allianz Ya şam ve Emeklilik at 7.1%, following Allianz’s purchase of Yapı Kredi Sigorta in early 2013. The top 10 companies in life held 84.8% of the total market between them. In non-life, the top three by market share of GWP in 2013 were Axa, with 15.2%; Anadolu Sigorta with 13.2%; and Allianz at 9.3%. The top 10 non-life firms had some 73.9% of the market between them, illustrating the more fragmented structure of the non-life business. Fourth and fifth place were taken by Ak Sigorta at 7.3% and Mapfre Genel, which rose two places from 2012 to a 6.5% market share.

All insurance and reinsurance companies working in Turkey are members of the TSB. The association has 40 companies in its non-life section, 26 in its life and pensions section, and two in its reinsurance section – Artı Reasurans and Milli Reasurans. According to TSB, some 18,137 people were employed, either full or part time, at these companies’ head offices at year-end 2013, up from 16,568 in 2010.

Recent times have also seen some major M&A activity in the sector. The largest of these deals was Allianz SE’s €684m purchase of a 94% stake in Yapı Kredi Sigorta in the first quarter of 2013, which included the Turkish company’s life and pensions arm, Yapı Kredi Emeklilik. After a subsequent mandatory tender offer, Allianz’s stake increased to 99.78%. Other insurance deals included Malaysia’s Avicennia Capital purchasing a 90% stake in health and life insurance provider Acibadem Sa ğlik ve Hayat Sigorta for $252m in November 2013, and the Lebanese/UAE Hariri family’s purchase of a 90% stake in Demir Sigorta.

In terms of distribution channels, there is great variation between life and non-life. TSB figures for the first two months of 2014 illustrate a pattern that has been in place for some years; in non-life, the bulk of written premiums were through agencies, capturing TL2.5bn (€880.25m) out of a TL4bn (€1.4bn) total, or 62.13%. Brokers wrote TL596.8m (€210m), or 14.87%, banks TL532.5m (€187.5m), or 13.27%, and direct channels accounted for TL390.1m (€137.4m), or 9.72%. In life, however, banks took the lion’s share, with 78.39% of all premiums written, or TL424.23m (€149.4m). Direct sales accounted for 10.98%, or TL59.4m (€21m), agencies for 9.17%, or TL49.6m (€17.5m), and brokers for 1.47%, or TL7.9m (€2.8m). This is partly because each Turkish bank branch is also considered an insurance agent, once it receives its license. The result is that the country’s four largest banks – Akbank, Yapı Kredi Bank, Garanti Bank and I Bank – have long been active in bancassurance, with the major insurers all having banking affiliates.

In terms of regulation, the sector is covered by the 2007 Insurance Law, along with a range of laws governing brokers, loss adjusters and others working in the sector. The Turkish Commercial Code covers insurance contracts and was updated in 2012, with stronger provisions for consumer protection and the categorisation of insurance classes. A Code of Obligations was also enacted in 2012, relating to the obligations between legal and natural persons, with this also having clauses pertaining to the insurance sector.

The General Directorate of Insurance (GDI) regulates the sector, while also issuing permits for insurance firms. These can be either Turkish joint stock companies or cooperatives, or Turkish branches of foreign insurance and reinsurance outfits. The GDI itself comes under the Undersecretary of the Treasury and also has the task of harmonising Turkish insurance legislation with that of the relevant EU acquis.

A number of new regulations were introduced into the Turkish insurance section in 2014, and a number of important amendments were signed as well. In April 2014 the new Insurance Agencies Regulation replaced the former regulation, with the aim of clarifying insurance agency activities and providing protective provisions for both insurers and the insured by institutionalising agency systems. Following the enactment of the new regulation, the Treasury also released a new circular in May 2014 known as the Implementation of the Insurance Agencies Regulation to regulate the implementation rules.

The law helps clarify the relationship between both parties in an insurance agreement, and reifies the scope of permissible insurance activities and obligations. Additional changes include a raise in minimum paid-in capital for incorporating an insurance agency to TL50,000 (€17,605); new mandatory provisions for agency agreements; new requirements on technical personnel; and the requirement that leasing, factoring and financing companies now form as separate firms to provide insurance services.

Profit & Loss

While premiums are up and the market fundamentals look healthy, many sector players have found profitability more of a challenge. Partly this is due to the high level of competition, particularly as companies seek to secure market share by charging lower premiums. In addition, the number of people taking up non-compulsory insurance policies remains low as a percentage of the population. “Turkey has a young and active population,” Tarık Serpil, executive director at Marsh, Turkey’s largest insurance broker, told OBG. “But there are perhaps only 2m willing clients. Turks are not buying insurance partly because the sector has not been providing policies that Turks want to buy.” That is now changing. In terms of persuading young Turks that insurance is something they should consider, companies have been moving more into the online world. All the main issuers have launched internet sites, while exclusive, online-only deals are also being offered as an incentive. Online advertising by insurers is also becoming a more frequently used channel. This all ties well into the young profile of Turkey’s potential insurance buyers.

Comparing premiums growth between 2012 and 2013 shows that non-compulsory areas benefitted from these strategies. Accident saw a technical profit of TL147.9m (€52m) in 2012 grow to TL241.5m (€85m) in 2013; fire and natural forces was up from TL47.5m (€16.7m) to TL218.8m (€77m) in the same period. Indeed, non-life overall went from a 2012 loss of TL658m (€231.7m) to a 2013 profit of TL768m (€270.4m) – though some losses were due to Axa strengthening its reserves, with a TL600m (€211.3m) loss reported. In the life segment, meanwhile, technical profits grew from TL246.7m (€87m) in 2012 to TL428.3m (€150.8m) in 2013. Life thus had annual average profit growth of 13% in the 2008-13 period.


Overall, the expectation is of continued premium growth in 2014-15, with companies also taking greater control of their technical results, boosting profitability. Pensions will likely continue seeing positive growth as well, although political uncertainties may impact consumers negatively in the period up to elections in 2015. With major international expertise increasingly widespread in the sector, combined with experienced local firms and employees, the standard and diversity of products is set to expand.