Insurance market will continue to grow in 2020

 
 

KMPG Turkey published the insurance version of “Market Overview 2020”, a report series which evaluates 2019 and lists expectations for 2020 for various sectors. According to the report, Turkish insurance market where 62 companies operate including Ergo Sigorta, grew by 24 percent during the first 10 months of 2019, compared to the same period of previous year. During that timeframe, the market reached a premium volume of 54 billion TL and caught the overall market production of 2018 in 10 months. Preliminary data indicates that the insurance market will reach a growth over the averages in 2020, with its high potential driven by the growth dynamics in population and economy. 

 

Kerem Vardar, Financial Services Sector Leader at KPMG, evaluated the report and said: “State support in the strategic areas such as individual pension system, agricultural and natural catastrophic insurance stands out as one of the market’s strong suits. High rate of working young population is also another advantage. However, shrinking demand in main sectors such as automotive and construction, as well as geopolitical risks pose a threat to the insurance market. On the other hand, there are some signs that economic activities that began to liven up in the last quarter of 2019 will support the premium volume and incomes. Complementary health insurance products will become more popular, and products such as credit insurance and bond insurance will see better movement. Cyber insurance products also become more important day-by-day. In parallel with the expansion in credits, life insurance will continue to grow. Nursing insurance is also expected to witness some developments.”

 

Highlights from the Market Overview 2020 Report by KPMG Turkey include:

  • The market grew by 24.3 percent in the first 10 months of 2019, reaching a premium volume of approximately 54.5 billion TL.
  • Non-life production stood at 46 billion TL, and life production at 9 billion TL. 
  • Total claims paid in the first nine months of 2019 reached 23.1 billion TL, which indicates an annual growth of 18 percent. Share of traffic and motor lines in that total stands at 56 percent, while life insurance’s share is only 10 percent.

Foreign investors have an appetite for Turkish insurance business

  • In 2018, the insurance market attracted a foreign direct investment of 47 million USD; which increased up to 219 million USD in the first nine months of 2019. This brought total FDI in insurance market up to 8.1 million USD in the last 16 years.
  • Outstanding mergers & acquisitions of 2019 include the acquisition of Unico Sigorta by SBK Holding, Ergo Sigorta by HDI Sigorta, and Beha Sigorta by individual investors.
  • Since 2015, average growth in employment was limited to 1 percent; while 214 new employees joined the insurance market in 2018. At the end of 2018, total number of employees in Turkish insurance market exceeded the limit of 20 thousand.
  • Fund size in BES (Individual Pension System) reached 113.2 billion TL, including the state subsidy funds. Total number of participants reached 6.8 million, and total number of contracts reached 8.15 million. Fund size per participant stood at 12 thousand 888 TL in 2018, which climbed up to 16 thousand 588 TL in 2019.

Asset size exceeds 200 billion TL

  • During the first nine months of 2019, asset size of the insurance market, grew by 21.6 percent compared to the same period of previous year, reaching 215.6 billion TL. During this timeframe, non-life companies grew by 21.6 percent, and life and pension companies by 24.9 percent.
  • Share of receivables from main operations in the asset structure stood at 59 percent, while share of financial assets climbed up to 13 percent. These figures indicate a 41 percent growth in the financial assets of companies operating in Turkish insurance market. Growth rate stands around 25 percent for receivables from main operations.

Debts continue growing

  • At the end of 2018, payables from main operations increased to 98.9 billion TL; and then to 121.8 billion TL as of September 2019. On the other hand, total liabilities-to-equity ratio which stood at 17.7 percent in 2013, continued to decrease; reaching 11.8 percent as of September 2019.
  • Technical profit, which translates into insurance operations only, reached 5.6 billion TL, up by 27 percent compared to the same period of previous year. Non-life companies increased their technical profits by 23 percent, life and pension companies by 36 percent and reinsurance companies by 47 percent.

New amendments bring opportunities

  • Türk Re, which was founded in September 2019 with a capital of 600 million TL by the Ministry of Treasury and Finance, is expected to increase local reinsurance capacity. The company aims to keep reinsurance transactions of 1.2 billion TL worth inside the country.
  • Insurance Regulation and Supervision Agency (SEDDK), a new organization that is regarded as a significant structural reform in the market, is expected to take important steps towards increasing the insurance awareness and reinforcing financial structures.
  • Insurance companies that are owned by the state will be consolidated under the roof of “Turkish Wealth Fund”. The project is planned to be completed in the first quarter of 2020 with the aim of creating a scale economy and bringing the size of non-bank financial industry to the level of global averages.

Takaful will grow

  • Takaful will be one of the big opportunities in 2020. Global premium volume of takaful exceeds 20 billion USD, 85 percent of which are produced by Saudi Arabia, Iran and Malaysia.  
  • Analysts believe that this market will reach a size of 43 billion USD by 2023. In recent years, ethical banking is rapidly developing in also in developed European countries such as UK, Canada, USA and Australia. As an extension, takaful is estimated to become being the preferred insurance product.
  • Despite being a relatively new area, takaful is developing rapidly in Turkey. Total premium production in takaful was 2.2 billion TL in 2018, which increased up to 2.8 billion TL as of the end of October 2018.


 
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