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Stating that the insurance sector will grow rapidly and further increase its weight in financial markets, TSB Secretary General Özgür Obali says: “The sector will continue to work with all its might to provide added value to the Turkish economy. It is possible to create a demand of 30 billion pounds sterling for government domestic debt securities.”
The technical profit of life and pension insurance in the first quarter of 2022 was TL 806 million, an increase of 25% compared to the same period last year, and the net profit along with financial revenues was tl 1.9 billion, an increase of 33%. On the other hand, non-life insurance decreased by 121% compared to the same quarter of the previous year, resulting in a technical loss of 423 million TL. Together with the financial revenues, a total net profit of TL 264 million was achieved with an 85% decline.
Evaluating the technical results of the first quarter, the Secretary General of the Insurance Association of Turkey (TSB) Özgür Obali underlined that they expect the insurance sector, which has grown by an average of 15 percent in the last 10 years, to continue to grow for the next 5 years. Noting the great potential of the insurance sector in the “Economic Impact Analysis of the Turkish Insurance Sector” prepared by TSB together with Boğaziçi University, Obali continued his words as follows:
“In parallel with the development of our country's economy, we expect the insurance sector to grow rapidly and increase its weight in financial markets. If the penetration rate of the Turkish insurance sector increases from the current rate of 2.2% to the level of 4.5% observed in equivalent countries, the additional contribution of our sector to the national income of our country, together with indirect contributions, may amount to 421 billion TL. This additional contribution corresponds to a 7.5% growth in national income. As TSB, which has a duty to provide added value to the Turkish economy, we will continue to work with all our might as a sector for this goal.”
Emphasizing that the insurance sector has grown by about 74% in premium production despite the factors that negatively affect its profitability, the TSB Secretary General also noted that the insurance sector is an important force with the support of funds offered to the economy and said: “We need long-term bonds in this direction. We are ready to contribute as a sector. It is possible to create a demand of 30 billion pounds sterling for government domestic debt securities.”
“Assurance of a sustainable economy insurance sector”
Underlining that the inflation and exchange rate impact are especially taken into account when implementing the pricing policies of insurance companies, the TSB Secretary General made the following assessments:
“As of the end of April 2022, premium production increased by 81% compared to the same period last year and reached TL 49.4 billion in non-life insurance, we made a loss on the technical side during the first quarter balance sheet period. Our current number of traffic policies is close to 21 million, and during this period, the net damage premium rate in the traffic branch is 188%, and the net compound ration is 214%.
For every 100 TL premium that our companies pay, there are 214 TL expenses including damage payments, compensation provisions, brokerage commissions, overhead expenses. In the first quarter of 2021, a technical profit of TL 656 million was achieved in the motor insurance branch, while a technical loss of tl 599 million occurred in this period. In motor insurance, the net damage premium rate increased to 126% and the net compound ration was 156%. The main reason for this loss is that the costs in the engine branch, which is the most important production source of our industry, have increased significantly. We are living in a period where costs and premiums do not match; costs are high and premiums remain low. Traffic insurance premium levels should both protect the future and eliminate all uncertainties that will occur in the future.
In the first quarter of the year, inflation, fluctuations in the exchange rate, the increase in spare parts and labor costs due to the increase in the minimum wage, and the problems experienced in the supply of parts also caused the compensation amounts paid to exceed the premium amounts.
On the other hand, it is expected that the supply problem in chips will continue in 2022. This, in turn, will negatively affect the automotive and, indirectly, the insurance sector. On the other hand, the investment income in the 25%-30% band that our companies receive in exchange for their assets that they direct to investment to meet their obligations is not enough to cover technical losses. In this context, it will be appropriate to issue investment instruments indexed to inflation with a minimum amount of TL 30 billion to cover the increased costs of compensation to be paid above the norm and to increase the premium ceilings applied in new jobs for the sustainability of our branch. "
"The resource we get with premiums is returned to the economy with damage payouts"
Paying attention to the fact that the sector has restored the resources obtained from premium production to the economy with damage payments, Özgür Obali continued his words as follows: “We are strong true friends. The asset size of our sector companies, which is the largest indicator of this, increased by 39% compared to the same period of the previous year on the non-life side and reached TL 142 billion.”
Referring to the health insurance between the locomotive branches of the sector, the TSB General Secretary said: “There is no harm, but it is a fact that technical profitability is falling. In the first quarter of the year, our companies announced a technical profit of TL 447 million in health insurance. In the first quarter of last year, a technical profit of 682 million TL was achieved in this area. On the other hand, the net compound ratio in this area increased to 117% as of the first quarter. As for the net damage/premium ratio, the ratio of 74% in the first quarter of last year in health increased to 89% this year.”
"Life insurance continues to make a profit"
Stating that premium production in the life branch increased by 60% compared to the same period of the previous year as of the end of April 2022 and reached a size of 8.1 billion TL, Obali said: “The technical profit of this branch increased by 25% in the first quarter compared to the same quarter of the previous year to TL 806 million, and together with financial revenues, net profit for the period increased by 33% to TL 1.9 billion. The main reasons why the increase in the profit amount fell behind the increase in premiums are the increase in the general life branch market share of mixed life insurance products with relatively low profit margins and the increased mathematical provisions within the scope of the gross refund application in credit-linked insurances that came into effect in 2022. On the other hand, the net loss/premium ratio in this area was 29% and the net composite ratio was 61%.”
“BES makes us smile”
Stating that “The insurance sector, thanks to its benefits to the economy, is key to alleviating the burden on the public. The increase in the insurance rate, in this sense, makes a direct contribution to the national economy” The Secretary General noted that the momentum in the Private Pension System (BES) continues successfully. Obalı said: “Interest in BES and the growth of the system continue. The most important reason for this is the trust of our state in the system. Supports that are not anywhere in the world are available in our country. We are proud of our Private Pension System, which is perhaps one of the most important success stories of our country's financial system and has been successfully strengthening day by day for 18 years. “
According to the announcement of the Pension Supervision Center dated March 31, 2022; a total of 13.5 million participants were reached in BES and OKS; the fund size of TL 277.1 billion, of which TL 26.5 billion were state contributions. In the BES under the age of 18, in the first first quarter of 2022, the number of participants reached 284.6 thousand, and the size of the fund approached 692.5 million TL, including the state contribution. |
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