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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.

Infographic, Turkey 

(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.