Page 13 - Turkinsurance Digital Magazine

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Insurance is the sector that provides

the most significant added value to the

Turkish economy after banking

Turkish Insurance Association Chairman Atilla Benli; “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, we can increase the additional contribution
of our sector to the national income of our country up to 421 billion TL with indirect
contributions.”

The Private Pension System (BES) continues to grow after of market developments. During this period, stock-weighted funds
many innovations that have been implemented recently. How performed successfully and provided a return of close to 66%.
do you interpret the recent growth and potential strength in
the field of BES? On the other hand, as of August 26, 2022, the weighted average
return of BES funds was around 78% compared to the same peri-
Turkey has covered much ground since the establishment of BES. od last year. The return on equity-weighted funds exceeded 120%
When we put this ground into numbers, a table appears as follows: compared to the previous year’s period.
As of August 31, 2022, the number of participants in BES and
OKS exceeded 14 million, while the total fund size, including state How are private pension practices in our country compared to
contributions, exceeded TL 340 billion with an increase of 80% international examples?
compared to the same period last year. “While the number of par-
ticipants under 18 who completed their first year at the system The organization, sale, marketing, and scaling of pension funds
exceeded 436 thousand, the size of the fund was recorded as 1.6 abroad differ. Instead of pension funds offered by companies in our
billion liras together with the state contribution. country, there are large structures established abroad in the form of
pension funds; in addition, there is no company structuring. It seems
Since the beginning of 2022, that is, in the last 8 months, the that the pension systems in these countries are the only address for
number of contracts has exceeded 1.1 million with 770 thousand accumulation, there is no social security, or they are receiving an
new participation with 30% state contribution and the entry of un- increasingly low share. While the share of pension investment funds
der-18s into the system. We believe that we can carry the rising in GDP in OECD countries is at the level of 100%, this level is
trend with the increase of the state contribution to 30% and allow- around 3.5% in our country. Our insurance sector is the sector that
ing the under-18s to enter the system, transferring from founda- makes the most significant contribution to the Turkish economy af-
tions and funds to BES to much better levels by granting Turkish ter banking. We have the potential to do much more to generate
citizenship in return for foreign currency investments made in the more value for our national economy and to protect the importance
BES, meeting the financial needs of the participants with partial of our insured people. We are determined to use this potential to the
withdrawal, and allowing the transfer of savings in the system. fullest and reach stronger tomorrow with a more robust insurance
sector.
With the latest regulations, we anticipate that we will be able to
reach the total number of participants in BES and OKS, which are On the other hand, many countries have successfully transitioned
our 2023 targets, to reach 17 million and that the total fund size from social security systems to private retirement. Due to the aging
will reach TL 500 billion by the end of 2023 sooner. population and the increasing social security burden, savings are
being made with private workplace-based pension plans. In these
I have to underline one point here. We encounter situations where countries, employees are encouraged to save with incentives such
BES participants can exit the system to meet their cash needs. This as automatic participation, compulsory stay in the system, and em-
means that they lose both their savings, their fund returns, and the ployer contribution.
state contribution. However, BES was designed as an utterly long-
term pension system. Staying in the system for a long time means How has the insurance sector developed since the beginning of
having a return above inflation. the year?

Looking at the system with periods of five and ten years, the aver- Our country and the whole world are going through a different and
age return of pension mutual funds is higher than the CPI and the challenging period in every sense. As we are experiencing many de-
BIST-100 index. As of the beginning of 2022, the weighted average velopments that contain significant macroeconomic problems and
return of BES funds has hovered around 32% within the framework risks such as pandemics, climate change, natural disasters, and