Fitch Ratings says in a newly-published report that the Turkish insurance market is growing strongly, driven by economic growth, favourable demographics, urbanisation and an expanding middle class.
The Turkish non-life market made a strong profit of TRY768m in 2013 (EUR260m at today's exchange rate) after four years of poor results. The improvement was driven by hardening rates in motor pricing, a reduction in reserve strengthening and improved investment returns.
The Turkish life market is reporting steadily increasing profits with an average annual profit growth of 13% in 2008-2013 and profit of TRY462m in 2013. Strong premium growth has been buoyed by strong growth in credit in Turkey but Fitch believes that this will be tempered in 2014 as some adverse effects from economic readjustment could feed into insurers' results. However, regulatory solvency is strong and Fitch considers the life market to have sufficient capital to withstand shocks in the near term.
Assets under management in Turkish pension schemes have trebled in the past five years to TRY25bn. Since the start of 2013, the government has added 25% to pension contributions as an incentive to encourage saving. Fitch believes this will generate significant expansion in the pensions market - a big opportunity for insurers.
Turkish insurers have benefited from a period of political stability and policy decisions and incentives that have encouraged savings and the use of insurance. Any political instability, breakdown of order, corruption, widespread fraud or significant policy change, especially after the presidential election in August 2014 and general election in June 2015, could have a detrimental effect on the insurance sector and threaten solvency if asset prices fall.
The report "Turkish insurance Sector - Non-Life Back to Profit, Life Performance Steady" is available at www.fitchratings.com.
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