Country Profile Turkey www.lloyds.com/TurkeyMI
April 2014 filip.wuebbeler@lloyds.com
KEY FACTS FULL NAME / CAPITAL CITY: Republic of Turkey / Ankara
GDP (PPP):
US$ 1181bn (Global Rank #16)
LANGUAGE:
POPULATION:
76m (Global Rank #18)
IMF CATEGORISATION:
“Emerging / Developing”
Turkish (official), Kurdish
MAIN EXPORT PARTNERS:
Germany 10%, Iraq 6%, UK 6% (2011)
MAIN IMPORT PARTNERS:
Russia 10%, Germany 10%, China 9% (2011)
MAIN EXPORTS:
Apparel, foodstuffs, textiles
MAIN IMPORTS:
Machinery, chemicals, semi-finished goods
2012 Rank
2013 Rank
Change in Rank
EASE OF DOING BUSINESS:
71
71
0
COMPETITIVENESS:
59
43
16
FREEDOM FROM CORRUPTION:
57
59
-2
DISASTER
YEAR
ECONOMIC COST (US$ x 1000)
Earthquake
1999
20,000,000
Flood
1998
1,000,000
Earthquake
1999
1,000,000
Earthquake
1992
750,000
Flood
2009
550,000
Source: Disaster Statistics based on: Prevention Web (2013); Export Statistics based on CIA World Factbook; Doing Business Indicators based on World Bank & World Economic Forum © Lloyd’s
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KEY STATISTICS GOVERNANCE INDICATORS
SIZE OF ECONOMY
WEALTH PER CAPITA
Percentile Rank (1-100) 2012
Purchasing Power Parity (PPP) basis in International $ bn
Purchasing Power Parity (PPP) basis in International $
2012
TR
RU
GR
Turkey
Russia
Greece
4,000
50,000
3,500
Control of Corruption
63
16
51
Regulatory Quality
66
39
68
21
38
2,500
1,500 1,000
1,109
2,000
30,000 20,000
19,660
13
40,000
3,000
14,812
62
11,865
41
1,584
65
Political Stability and Absence of Violence/Terrorism
823
Government Effectiveness
10,000
500
Rule of Law
57
24
64
0
0 2006
Voice and Accountability
41
20
2012
2018f
2006
RU
GR
TR
2012
2018f
67 TR
RU
GR
TOTAL NON-LIFE DIRECT INSURANCE MARKET*
NON-LIFE DIRECT INSURANCE MARKET
LLOYD’S 2012 GROSS SIGNED PREMIUMS
Premiums in US$ m
Premiums in US$ m; by OECD Class
Gross Signed Premiums in US$ m; by country of origin 300
30,000
Motor
233
25,000
Liability
5,000
1,614
2011 TR
2012 RU
2013 GR
Miscellaneous
100 50
MAT
0
150 4,704
121
Turkey 2012 US$ 9.5bn
134
200 2,437
123
Property
9,953
9,504
8,659
10,000
250
PA & Health
20,000 15,000
356 161
0 2011
2012
2013
TR
RU
GR
All data, sources & data limitations are available for download at www.lloyds.com/comparecountries; * 2013 total non-life based on CAGR projection
LLOYD’S TRADING POSITION Turkey www.lloyds.com/crystal
Insurance: No. Exceptions: Marine and aviation cargo insurances covering imports and exports; marine hull; aircraft hull insurance when purchased with overseas credit (or leased from overseas); liability insurances arising out of the operation of ships; vessels registered on the Turkish international register of shipping; personal accident, sickness, health and motor insurance for persons travelling outside Turkey; life assurance.
Reinsurance: Yes Coverholders: No © Lloyd’s
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BUSINESS ENVIRONMENT Corruption probe causes schism within ruling party. Six Justice and Development Party (Adalet ve Kalkınma Partisi: AKP) members have resigned from their posts, reducing the AKP's number of seats to 320 in the Grand National Assembly. The government is focusing on damage limitation in what local media claims is a power struggle between the AKP and the Gülen Movement. Disapproval within the AKP of the way in which the government has reacted to the probe raises the likelihood of parliamentary elections being held alongside presidential elections scheduled for July/August 2014. The Central Bank of the Republic of Turkey (CBRT) has finally increased interest rates, dramatically altering the short-term economic outlook. Given that the CBRT raised interest rates earlier and more aggressively than most had anticipated, the lira has stabilised and markets have calmed. With interest rates now significantly higher, domestic demand is expected to be much weaker than previously supposed. Although this economic slowdown is poor timing in regards to the election cycle, it will help to limit the country's current-account deficit, which returned to problematic levels in 2013. The gap will remain dangerously large and reliance upon "hot" portfolio investment inflows remains a critical risk, but at least there will be progress in correcting the problem in 2014. Although the Turkish currency is now more stable with the higher interest rates, it is still vulnerable to sudden and sharp slides in reaction to further political problems or external crises.
Peace talks between the government and Kurdish militant group PKK are likely to collapse, with full resumption in April 2014. The peace talks have made little progress since they started in November 2012. The PKK has started to issue threats to the government over what it perceives to be stalling tactics and has conducted sporadic, small-scale attacks on Turkish Gendarmerie units in an apparent attempt to pressure the administration to initiate substantive dialogue. IHS assesses that unless progress in the peace talks is made, the PKK is likely to resume full-scale insurgency in April 2014 when better weather conditions permit. Changes to municipal debt repayment to lead to pre-election spending. The new regulations allow municipalities to defer interest payments on debt issued by the central government. The majority of the interest payments can be deferred until 2017, after the 2014 municipal and presidential elections and the 2015 parliamentary elections.
GROSS DOMESTIC PRODUCT (GDP)
TOP-10 SECTORS (BY VALUE ADDED)
BUSINESS ENVIRONMENT INFORMATION
(nominal GDP levels in billion US$; Real GDP change)
(value added in billion US$ & 2014 Change in real %)
(provided by IHS Global Insight, April 2014)
1,500
10% 9.2%
9%
8.8%
1,200
TOP SECTORS
8% 7%
900
6% 5%
600
3.9%
3.9%
4.0%
4.4%
4.2%
3%
2.8% 2.2%
300
4%
2% 1%
0
0% 2010
2011
2012
2013
2014
2015
2016
2017
2018
2013 Value Added
2014 Percentage Change
1. Agriculture 2. Real estate 3. Retail trade - total 4. Wholesale trade 5. Communications 6. Business services 7. Construction 8. Public Admin. & Defence 9. Education 10. Land transport
64.0
1.3
53.2
5.0
51.9
4.1
49.5
4.0
42.0
3.1
40.8
5.5
37.5
5.7
33.2
1.9
24.8
3.9
23.8
5.0
Top-10 Total
420.7
For daily updates visit: > www.ihsglobalinsight.com © Lloyd’s
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INSURANCE ENVIRONMENT 2012 MAJOR DIRECT INSURERS
2012 DIRECT GROSS PREMIUMS
(Gross Written Premiums in US$ m)
(Gross Written Premium in % of total)
Other
QUICK LINKS / USEFUL SOURCES Insurance Market Profiles > www.iii.org/international/profiles
2,503.8
Axa
1,324.8
Anadolu
Motor
233
356 161
The Insurance Association > http://eng.tsrsb.org.tr
1,240.7
Allianz
PA & Health
802.2
Ak
728.0
Yapı Kredi
Property
2,437
Turkey 2012 US$ 9.5bn
681.4
Gunes
512.1
Mapfre Genel
492.2
Groupama
459.0
Eureko
380.5
Ergo
379.4 0
500
Liability
The Insurance Supervisory Board > www.treasury.gov.tr 4,704
Lloyd’s Agency Network > www.lloyds.com/agency Lloyd’s Claims Team > www.lloyds.com/claims
MAT 1,614
Miscellaneous
BUSINESS CULTURE GUIDE 1000
1500
Source: Association: > www.tsrsb.org.tr
2000
2500
3000
> http://www.kwintessential.co.uk
Source: Association: > www.tsrsb.org.tr
(View Resources > Culture Guide)
Non-life insurance market is worth US$ 9.5bn for 2012: Together with Poland, Turkey has been among the fastest growing insurance markets of its size in Europe. Along with the rapid growth in the Turkish insurance sector, there have been major changes to the Turkish insurance legislation in the last few years. New legislation has improved the regulatory framework and has brought the industry more into line with international practice. The general trend for the last decade in the Turkish non-life insurance market was that premium growth tends to be twice as high as economic growth. This trend is estimated to continue in the near future.
Foreign insurers: Turkey is seen by many foreign insurance companies as a prospective market. Some foreign players such as Axa, Allianz, Groupama and Mapfre have now gained a significant position in the Turkish market. It is estimated that around 2/3 of the Turkish non-life market is generated by foreign insurers. Broker Market: Agency networks currently account for around 70% of insurance sales in Turkey. Brokers are firmly established for complex products as the market demands and risks become more complex. New large projects (nuclear plants, rail roads, highways, sports events) and growth in special lines such as marine, liability and aviation are expected to create new opportunities for brokers. Foreign reinsurers dominate: The majority of the Turkish insurance industry’s need for reinsurance coverage is met by the international market, with the remaining coverage provided by Milli Re, the only domestic reinsurance company. Top reinsurers dominating the market are Munich Re, Swiss Re and Lloyd’s. Outlook: Currently, a reduction in the consumer purchasing power, a drop off in imports/exports and construction activity have resulted in rates being reduced and underwriting discipline relaxed. Current consensus is that the situation is unsustainable and the market is expected to recover. Many analysts expect positive outcomes for the insurance industry owing to the expansion of the Turkish economy, maturing relations with the EU and the alignment of laws and regulations with EU legislation. © Lloyd’s
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LLOYD’S BUSINESS 2009-2013 LLOYD’S TOTAL PREMIUMS
2013 LLOYD’S HIGH LEVEL CLASSES
Gross Signed Premiums; Direct versus Reinsurance; in million US$
Gross Signed Premiums; high level classes; in million US$
2013 GROSS SIGNED PREMIUMS*
160 140
Total
US$ 134m
Reinsurance Direct
US$ 96m US$ 38m
120
0.0 0.0
Property Treaty
100 111
80
UK Motor Overseas Motor
86
99
82
96
*COUNTRY OF ORIGIN PREMIUMS
40
Policyholders are based or headquartered in this territory;
Premiums may be written outside this territory;
34
26
37
38
38
0 2009
2010 Direct
2011
2012 Reinsurance
27.4
Marine
60
20
18.5
Property (D&F)
2013 X X
Not necessarily where risks are located May differ to what is reported to local regulator (dependent on local requirements).
52.7
Energy
7.2
Casualty
9.0
Casualty Treaty
0.0
Aviation
11.0
Accident & Health
7.7
0
10
20
30
40
50
SOURCE: Market Intelligence based on *Gross Signed premiums; Xchanging (2014); unaudited figures based on country of origin and processing by calendar year; see Appendix for details
© Lloyd’s
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APPENDIX MACRO-ECONOMIC & BUSINESS ENVIRONMENT DATA Source: IMF (www.imf.org/external/data.htm), World Bank (http://data.worldbank.org/), IHS Global Insight. Notes: GDP data on size and wealth of the economy is reported in Purchasing Power Parity (PPP) terms; this is the most accurate indicator of the true standard of living in each country and therefore potential demand. To calculate this, GDP is converted from local currency to an international $ currency using PPP exchange rates rather than the market exchange rate. The PPP local currency-to-international $ exchange rates are determined such that a standard basket of goods has the same price in international $ terms in each country. This adjusts for the differing costs of goods across countries, when converted at market exchange rates. INSURANCE MARKET DATA Source: Reported data derived by Lloyd’s Market Intelligence team; original source is regulatory bodies, associations, third party information providers. Notes: Data is reported in US$. For more information, see www.lloyds.com/comparecountries. Exchange Rates Note: Where required, data has been converted to US$ using annual average exchange rates as per www.oanda.com. LLOYD’S PREMIUM DATA Source: Reported data derived by Lloyd’s; original source is Xchanging (data therefore contains only premiums processed by Xchanging). Notes: Data is reported is US$, on a calendar year basis and is signed gross premiums. This differs from the data published in the Lloyd’s Annual Report, which is also on a calendar year basis, but is written gross premiums and sourced directly from Syndicates. Differences are therefore (1) timing inconsistencies between signed and written gross premiums; (2) inconsistent use of exchange rates by Syndicates and Xchanging; & (3) incompleteness of Xchanging data set for certain classes of business (a substantial amount of premium is not processed by Xchanging and missing from the REG 258 data set; this comprises, for example, UK Motor). Exchange Rates Note: Data has been converted to US$ using monthly exchange rates provided by Xchanging. Definitions: Gross Signed Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums. Calendar Year: Relates to the calendar year in which the premium, additional or return, is processed by Xchanging. This is irrespective of the actual underwriting year of account, which is determined by the inception date of each risk. Country of Origin: Denotes the domicile of the insured party (i.e. the coverholder or policyholder). This is the country from which demand for the insurance / reinsurance emanates, & is irrespective of the country to which the risk is classified for regulatory reporting purposes. Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by “Country Of Origin”, but “French” for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007 “Underwriting Year of Account” but may not be processed by Xchanging until 2008 and so be allocated to the 2008 “processing year”. ACCESSING THE DATA: to access the raw data in this document, and equivalent data for other countries, see www.lloyds.com/comparecountries.
DISCLAIMER: This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information, Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure, expression of opinion or belief contained in this document. © Lloyd’s
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