TCIP

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TURKISHCATASTROPHE

INSURANCEPOOL

International ECO Symposium on Disaster EconomicsAFAD- ECO - DPPI SEE

3 April 2013stanbul/Turkey

Catastrophes and InsuranceLessons, Challanges and Trends

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HISTORY

The devastating Earthquakes inMarmara region on 17th August and12th November 1999

Insured loss: around USD 800 milion

Economic loss: over USD 10 billion

Low insurance penetration (especiallyfor residential risks)

Burden on public budget

Decree law no 587

compulsoryearthquake insurance as of 27thSeptember 2000 untill 18th of August2012

As from 18th August 2012 new 6305Catastrophe Insurance Law

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PRE-TCIP

WHY

Reactive solutions versus proactivesolutionsShortage of funds in immediate need

Allowance of funds to those in needis problematic

Political and bureaucraticconsiderations may prevailGovernment priorities is on gettingback to economic and social life

GOVERNMENTS PRIORITIES

A compulsory earthquake insurancesystem for homeowners

Affordable price for every homeownerTrue risk transfer mechanismClaims-paying capacity to limit

governments exposure Build national catastrophes reservesby timeimprovement of risk culture andinsurance consciousness in publicRely on distribution channels ofTurkish insurance industry

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ESTABLISMENT OF TCIP

LEGAL AND FINANCIAL BASE OF TCIP

Financed by Marmara EarthquakeEmergency Reconstruction Projectco-financed by

Turkish GovernmentWorld BankEuropean Bank forReconstruction andDevelopment

Decree law no 587 compulsoryearthquake insurance as of 27thSeptember 2000.Eureko Sigorta is tendered for thefollowing 5 years till August, 2015

As from 18th August 2012 new6305 Catastrophe Insurance Law

TCIPINSURERREINSURER

SALES FUNCTIONSOPERATIONAL SERVICES

RISK MANAGEMENT SUPPORT

CLAIMS MANAGEMENT

HOUSEHOLDERSRISK MANAGEMENT

BEHAVIOUR

AUTHORITIESREGULATION SUPERVISION

LEGAL FRAMEWORKRISK MANAGEMENT SUPPORT

DISASTER MANAGEMENT

PUBLIC-PRIVATE PARTNERSHIP

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EARTHQUAKE INSURANCE

2002-2012 CAGR %8,3

ZONE 5 49.809

ZONE 4 838.594

ZONE 21.380.059

ZONE 12.388.346

ZONE 3 559.480

%45,7

%26,4

%10,9

%16,1

%00,9

EARTHQUAKE ZONES

% 1 9

, 6

% 2 1

, 1 % 2 4

, 2 % 2 4

, 2 % 2 9

, 2 % 3 1

, 2

% 3 8

, 7

PENETRATION

Total No of policies 5,2 mio Annual premium 310 mio USD Avg. Sum insured 37.579 USD Avg. Premium 59 USD Total Claim Files 20.475 Total claims paid 84 mio USD Total Penetration %30,8

TARGET10.000.000

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STRUCTURE OF TCIP

16 MILLIONHOMEOWNERS

THE TREASURYGENERAL

DIRECTORATE OFINSURANCE

TCIPBOARD OF DIRECTORS

INSURANCECOMPANIES

REINSURANCE

IT

FUND MANAGMENT

AGENCIES BROKERS BANC ASSURANCE DIRECT & ADC

CONTRACTUAL AGREEMENT

PR

CLAIMOPERATIONS

CLAIM

MANAGMENT COMPANY

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DASKMerkez

ACENTALAR

COMPANIES / AGENTS

INTERNETINTERNET

INTERNETINTERNET

DMZ

DMZ

WEB SERVER

WEB SERVER

WEB SERVER

DATABASE

J2EE APPLICATIONSERVER

J2EE APPLICATIONSERVER

CALL CENTER

CALL CENTER

LEASED LINELEASED LINE

LEASED LINELEASED LINE

FIREWALL

FIREWALL

DISASTER RECOVER CENTER-

WANWAN

WANWAN

DMZ

DMZ

WEB SERVER

WEB SERVERWEB SERVER

DATABASE

J2EE APPLICATIONSERVER

FIREWALL

FIREWALL

REPLICATION

LDAP

LDAP

ISTANBUL ANKARA

IT STRUCTURE

State of the art technology

99,9% service level

Investing into satellite andmobile technologies

IT INFRASTRUCTURE

Continuous improvement

Various level Back-up services,data and programs

Disaster Recovery Center is ableto be in full operation within 2hours

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ACVIEVEMENTS and NEW LAW

ACHIEVEMENTS

Improved penetration from 4% to 32%Increased public awareness forearthquake and insuranceCentralized marketing activities andbrand managementKept pricing at affordable level

Claims-paying capacity: USD 4 billionSolid reinsurance programOperational efficiencyImproved coordinated work betweenthe public agencies, the insuranceindustry, universities, etc..Model structure for effective public-private partnershipFinding quality capacityEthical sensitivity

NEW LAW

Inforce since 18th of August 2012: flexibleframework enabling improvements onproduct and structureImprove awareness and sign of statesupportIncreased check points in utility services

Additional natural perils to be included incase of market shortage

Able to provide reinsurance support fornatural perilsTreasury to act as the last resort byproviding reinsurance support

Able to establish alternative distributionchannelGovernment aid being subject to havingTCIP policyOther articles on cat response, scientificresearch, international coordinationNATIONAL

STRATEGIC PLANFOR2023

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6.000. 000 policies

Increased communication and public relation activities

Excelling in claim management

Increased use of Technology

TCIP IN NEAR FUTURE

TARGET

10.000.000

Increased Coordination between Institutions

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LESSONS

Operational capacity is as important asfinancial capacityOutdated operational manualsProcedures must be simple and lean

Application of sum insured or indemnitylimitsNecessity for collaboration between;

Industriescompanies and public officescities-countries

Lack of;adjusting capacitytechnologyField knowledge

LESSONS

Less loss of lives in the countries withstringent building codes (Chile and NewZealand)Multiple events are not unusual (1999Turkev and 2011 New Zealand)Secondary risk causing severe damages(tsunami, aquafaction)Modeling has its limitation

Underestimated scenariosEconomicPoliticalDemographic

Ambiguity on expectations from insuranceindustryImportance of strong constructionindustry

NEW ERA IN CAT MANAGEMENT

12.01.10 7.0 Haiti Earthqauke

27.02.10 8.8 Chile Earthquake

04.09.10 7.1 New Zealand Earthquake

11.01.11 Australian Flood

11.03.11 8.9 Japan Earthquake

22.02.11 6.3 New Zealand Earthquake

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CLAIM PAYMENT CAPACITY

Diversify the Tools Alternative solutions (cat bond,structured deals, swaps etc)

Diversify the RegionsSpread through all regions

Diversify the MarketMore capacity from financial markets(credit lines, bonds etc)

Diversify the CurrencyPolicy, construction industry,reinsurance program

Diversify the Payback conditionsEnsure solvency of the system

CAT FINANCE

2 2 0

2 0

2 0

3 6

8 0

8 0

1 0 0

1 5 0

1 7 5

2 0 0

2 2 5

2 5 0

5 1 1

7 6 0

5 8 5

5 6 5

7 7 5 8

4 0

8 4 0

1 , 1

5 0

1 , 2

5

0

1 , 3

2 5

1 , 5

5 0

1 , 5

7 5

1 . 9

5 0

201120102009200820072006200520042003200220012000 2012

RISK ASSESMENT

Increased risk perception causing higherloss estimatesEver increasing claim protection needsIncreased sensivity on removing burdenon national budgetIncreased willingness to collaborate

Reinsurance Program 2011-20121.780.000.000 R/I protection

250.000.000 priority

A rated panel of Reinsurers

One of the biggest R/I Program in the

world

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3MANAGEMENT OF

OPERATION CENTER1

CAT EVENT

2CLAIM

ADJUSTMENT

Hazine Mstearl Trkiye Sigorta ve Reasrans irketleri Birlii

Sigorta irketleri AFAD Afet ve Acil Durum Ynetimi Bakanl

TOBB Trkiye Odalar ve Borsalar Birlii Eksperler cra Kurulu

stanbul Valilii - Acil Durum Bakanl AKOMevre ve ehircilik Bakanl

Valilikler, Belediyeler ve dier yerel Ynetimler ar Merkezi irketleri

Tama ve Ulatrma irketleri Telekominikasyon irketleri

Catering (yiyecek- iecek) irketleri Oteller

Gvenlik irketleri Kargo ve Kurye irketleri

Mobil Banka Hizmetleri

4COORDINATION

W/STAKE HOLDERS

OPERATION CENTER

CALL CENTER

CAT EVENT

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CHALLENGES AND OBJECTIVES

OBJECTIVES

Increasing number of policiesExcelling in Cat ResponseEstablishing strong synergy betweeninstitutions

Public officesInsurance companies, intermediariesClaim adjusters

Increasing Reinsurance capacityUsing alternative claim financing toolsImplementation of new projects

CHALLENGES

Low insurance awarenessEnforcement of new CatastropheInsurance LawLow penetration rateRestructuring of TCIP after a decade

Aligning with national databasesEffective control level in public offices

Ensuring sound reconstruction activitiesafter claim paymentHigh cost of maintaining contingencycapacity

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CONTINUES COMMUNICTION AND PUBLIC RELATION

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CONTINUES COMMUNICTION AND PUBLIC RELATION

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TURKISHCATASTROPHE

INSURANCEPOOL

International ECO Symposium on Disaster EconomicsAFAD- ECO - DPPI SEE

3 April 2013stanbul/Turkey

Catastrophes and InsuranceLessons, Challanges and Trends