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What's next for Turkey?
01 March 2017
As a large, rapidly developing country, Turkey has been an
attractive target for investment. Infrastructure investments
such as President Erdogan's $200 billion building spree on
'megaprojects' such as the Third Bridge and Eurasia Tunnel continue
to drive economic growth and Turkey is forecast to be in the
world's top 10 economies by 2023.
As regards insurance, the country is somewhat fascinating.
On the one hand the Turkish non-life market in 2017 remains
relatively under-developed but geopolitical factors such as the
Syrian refugee crisis and mounting political, social and economic
challenges for the president and government have revived the
potential risk of instability. Although terrorist attacks,
aimed mainly at killing people, have so far resulted in little
insured property damage - the 28 June 2016 attack on Ataturk
International Airport cost no more than USD 1mn, while the 23
December 2015 attack on Sabiha Gokcen airport caused no significant
reported insured loss. The Turkish insurance market is,
however, facing a significant possible terrorism-related loss of up
to TRY 5bn (USD 1.68bn) relating to south-eastern Turkey. In
December 2015 an unprecedented military operation against Kurdish
rebels was launched when around 10,000 police and troops entered
cities in south-eastern Turkey. Hundreds of vehicles and workplaces
were burnt down, with numerous claims made against insurance
companies especially from transportation and construction
companies.
Non-life penetration, excluding motor, is low and Turkey also
remains below other emerging European markets such as Poland and
Russia in terms of non-life premiums per capita. Axco's sources
explain the reasoning for poor penetration as: outside the motor
sector, insurance is quite simply not a priority for most people, a
fatalistic attitude to an event such as a fire or a burglary, and
no tradition of insurance, especially in country areas;
furthermore, many of the population cannot afford the cost. Despite
this, Turkey is currently the fastest-emerging market in Europe and
the OECD, and economic growth, favourable demographics,
urbanisation (Istanbul and Ankara are among the biggest cities in
the world in terms of GDP) and an expanding middle class are likely
to lead to increased penetration in the future. In addition,
insurers are increasingly focusing on low penetration sectors such
as homeowners and SMEs, and experimenting with alternative
distribution channels such as call centres, internet, social media
and the like.
The market is therefore seen as having considerable potential;
this has attracted the major foreign insurance groups and they now
have a dominant share of the market (72% of capital in 2015). In
the medium-term, although some observers argue that the influx of
foreign investment has improved the market's sophistication, others
say that the arrival of foreign insurers has intensified
competition to the detriment of the market, as new owners have
aggressively sought to grow their market share.
(click image to view full Infographic)
Further information can be round in Axco's Insurance
Market Report for Turkey. Contact your Axco representative for
details.
