60 seconds with Muzaffer Aktas
Fri 21 Sep 2012
In the week that Lloyd’s hosted Turkey Insurance Day we look at how the Turkish economy offers new opportunities for the market.
On 18 September, Lloyd’s hosted Turkey Insurance Day. The event looked at opportunities in the rapidly growing Turkish economy that sits between Europe and the Middle East. Muzaffer Aktas, Willis’ managing director for the Middle East and Africa, explains why Turkey is such a key market for insurers.
What is so compelling about the Turkish insurance market for Lloyd’s practitioners?
Turkey has a growing economy and a large population, but insurance penetration is in its infancy. That’s why it’s an attractive market. International insurance firms have operated in Turkey for the past 10 years and around 80% of the insurance market is in the hands of these companies, which include Axa, Liberty Mutual and Chartis. But there is plenty of potential for growth, especially for international reinsurers who might be seeing low insurance growth in their home markets.
What are some of the factors that are driving growth in Turkey?
Turkey’s economic growth is second only to that of China yet insurance penetration remains low. So something is wrong. I believe the opportunity to increase penetration on the primary side has not been taken, if you look at the number of houses and cars the country can potentially insure.
If you look on the commercial insurance side, it’s also growing and, in the last 20 to 25 years industrial growth has been tremendous. Sums insured are increasing and new mega risks are coming into the market, such as the new high-speed railway and bridge over the Bosphorus.
The Turkish construction and contracting industry is huge and Turkish Airlines is now larger than British Airways. Turkey is the second-largest television manufacturer in the world and is also capturing the export market. Tourism is also one of the fastest-developing sectors in the country. All these commercial risks require insurance. In the meantime, construction and yacht insurance are other growth areas.
What is the role of the insurance broker in the Turkish Market?
It’s evolving. Twenty years ago, agencies ran the show. But now it’s shifting more to brokers and they are having a bigger role to play. Brokers concentrate on the major risks such as construction, marine and large property business.
Turkey is highly exposed to earthquakes. What is the role of reinsurance in providing cover for that peril?
The market buys an enormous amount of catastrophe cover and so it is a major market for all reinsurance carriers. The Turkish Catastrophe Insurance Pool (TCIP) is the compulsory residential earthquake scheme in Turkey. It was set up in 2000 and most other countries now use it as an example when setting up similar pools. The World Bank, Turkish Treasury and local reinsurer Milli Re played a tremendous role in creating this pool.
Due to a new law making household earthquake insurance compulsory, the growth of household insurance will no doubt be the fastest growing. At present about four million houses are insured in the pool, but that number will definitely increase.
We’d anticipate that in six years around 10 million properties would be in the pool. Continental reinsurers are heavily involved, but at the moment Lloyd’s involvement in it is on a small scale, which is a great pity because it is very successful, very profitable and it is growing. Lloyd’s is a great name and a very mature institution. It can only add value to the market with its presence in Turkey.
Read more about opportunities for the Lloyd’s market in Turkey in a special feature in Market magazine, out this October.