Erhan TuncayEx Vice Chairman of TCIP’s BoD

(TURKEY)

Saturday, 28.9.2013

May 2010, ISTANBUL

TURKISH CATASTROPHE

INSURANCE POOL

AGENDA

Background of TCIP

Current Structure of TCIP

Basic Figures of TCIP

Emergency Action Plan of TCIP

HISTORY

The devastating Earthquakes in Marmara region on 17th August and 12th November 1999

Insured loss: around USD 800 milion

Economic loss: over USD 10 billion

Low insurance penetration (especially for residential risks)

Burden on public budget

Decree law no 587 – compulsory earthquake insurance as of 27th September 2000 untill 18th of August 2012

As from 18th August 2012 new 6305 Catastrophe Insurance Law

PRE-TCIP

WHY

Reactive solutions versus proactive solutionsShortage of funds in immediate needAllowance of funds to those in need is problematicPolitical and bureaucratic considerations may prevail Government priorities is on getting back to economic and social life

GOVERNMENT’S PRIORITIES

A compulsory earthquake insurance system for homeownersAffordable price for every homeownerTrue risk transfer mechanismClaims-paying capacity to limit government’s exposureBuild national catastrophes reserves by timeimprovement of risk culture and insurance consciousness in publicRely on distribution channels of Turkish insurance industry

ESTABLISMENT OF TCIP

LEGAL AND FINANCIAL BASE OF TCIP

Financed by Marmara Earthquake Emergency Reconstruction Project co-financed by

Turkish GovernmentWorld BankEuropean Bank for Reconstruction and Development

Decree law no 587 – compulsory earthquake insurance as of 27th September 2000. Eureko Sigorta is tendered for the following 5 years till August, 2015As from 18th August 2012 new 6305 Catastrophe Insurance Law

TCIPINSURERREINSURERSALES FUNCTIONSOPERATIONAL SERVICESRISK MANAGEMENT SUPPORTCLAIMS MANAGEMENT

HOUSEHOLDERSRISK MANAGEMENTBEHAVIOUR

AUTHORITIESREGULATION SUPERVISION LEGAL FRAMEWORKRISK MANAGEMENT SUPPORTDISASTER MANAGEMENT

PUBLIC-PRIVATE PARTNERSHIP

STRUCTURE OF TCIP

16 MILLIONHOMEOWNERS

THE TREASURYGENERAL

DIRECTORATE OFINSURANCE

TCIPBOARD OF DIRECTORS

INSURANCE COMPANIES

REINSURANCE

IT

FUND MANAGMENT

AGENCIES BROKERSBANC

ASSURANCEDIRECT & ADC

CONTRACTUALAGREEMENT

PR

CLAIM OPERATIONS

CLAIM

MANAGEMENT COMPANY

New Parliament law as from 18 August 2012Beside Land Registrar Office and Mortgage transaction, utility services request earthquake policiesPublic perception on public aid has not been changed

New Parliament law as from 18 August 2012Beside Land Registrar Office and Mortgage transaction, utility services request earthquake policiesPublic perception on public aid has not been changed

AFAD (Disaster and Emergency Management Presidency) has been establisheddecentralized cat managementIncreased cooperation between AFAD and other instittionsIncreased involvement into national earthquake issuesParticipating into Istanbul Disaster and Emergency Action PlanImproved the terms and conditions of Tariff and Earthquake General Conditions

AFAD (Disaster and Emergency Management Presidency) has been establisheddecentralized cat managementIncreased cooperation between AFAD and other instittionsIncreased involvement into national earthquake issuesParticipating into Istanbul Disaster and Emergency Action PlanImproved the terms and conditions of Tariff and Earthquake General Conditions

PROGRES

AFADCOORDINATING

NATIONAL ACTIVITIES

DASKMerkez

ACENTALARCOMPANIES / AGENTS

INTERNETINTERNETINTERNETINTERNET

DMZDMZ

WEB SERVERWEB SERVERWEB SERVER

DATABASE

J2EE APPLICATIONSERVER

J2EE APPLICATIONSERVER

CALL CENTERCALL CENTER

LEASED LINELEASED LINELEASED LINELEASED LINE

FIREWALLFIREWALL

DISASTER RECOVER CENTER -

WANWANWANWAN

DMZDMZ

WEB SERVERWEB SERVERWEB SERVER

DATABASE

J2EE APPLICATIONSERVER

FIREWALLFIREWALL

REPLICATION

LDAP

LDAP

ISTANBUL ANKARA

IT STRUCTURE

State of the art technology

99,9% service level

Investing into satellite and mobile technologies

30 INSURANCE

COMPANIES

APPX. 27.000 USERS

REAL TIME ON-LINE

OPERATION

IT INFRASTRUCTURE

Continuous improvement

Various level Back-up services, data and programs

Disaster Recovery Center is able to be in full operation within 2 hours

ACVIEVEMENTS and NEW LAW

ACHIEVEMENTS

Improved penetration from 4% to 35%Increased public awareness for earthquake and insuranceCentralized marketing activities and brand managementKept pricing at affordable levelClaims-paying capacity: USD 4 billionSolid reinsurance program Operational efficiency Improved coordinated work between the public agencies, the insurance industry, universities, etc..Model structure for effective public-private partnershipFinding quality capacityEthical sensitivity

NEW LAW

Inforce since 18th of August 2012: flexible framework enabling improvements on product and structure Improve awareness and sign of state supportIncreased check points in utility servicesAdditional natural perils to be included in case of market shortageAble to provide reinsurance support for natural perilsTreasury to act as the last resort by providing reinsurance support Able to establish alternative distribution channel Government aid being subject to having TCIP policyOther articles on cat response, scientific research, international coordination

NATIONALSTRATEGIC PLAN

FOR 2023

INSURABLE PROPERTY

In general meaning, intended for dwellings that remain inside the boundaries of the municipalities;Building constructed as dwellings on lands subject to private ownership and has registered title deed,Independent sections within the context of the Condominium Law No: 634,Independent sections situated inside residental buildings but used as small business establishment, bureau and similar purposes,By reason of natural disasters, properties built by the government or built by housing credit.

UN-INSURABLE PROPERTY

The properties that fall outside the Compulsory Earthquake Insurance are as follows:The dwellings belonging to public body and institutions,The dwellings built in residential areas of a villages,The dwellings entirely used for commercial and industrial purposes (Block of offices, business center, administ.sevice buildings, training center buildings etc.),The dwellings that are still under construction,

COMPULSORY EARTHQUAKE INSURANCE

INSURABLE PROPERTY

With the Compulsory Earthquake Insurance;

EarthquakesFires as a result of earthquakesExplosions as a result of earthquakesLandslides as a result of earthquakesTsunami as a result of earthquakes

INSURABLE PROPERTY

Building onlycausing material damages to the insured buildings are covered up to the sum insured by TCIP including foundations, main walls, common walls separating independent sections, ceilings and bases, stairs, platforms, halls, roofs, and chimneys.

COMPULSORY EARTHQUAKE INSURANCE

SCOPE OF COVER AND TARIFFICATION

TYPE OF CONSTRUCTION

Zone1

Zone2

Zone3

Zone4

Zone5

Steel, RC 2.20 1.55 0.83 0.55 0.44

Masonary 3.85 2.75 1.43 0.60 0.50

Others 5.50 3.53 1.76 0.78 0.58

TYPE OF CONSTRUCTION

UNIT ONSTRUCTION COST PER M²

Steel, RC 700 TL

Masonary 500 TL

Others 260 TL

Type of construction

Sum InsuredTurkish Lira

Zone1

Zone2

Zone3

Zone4

Zone5

Steel or R/C 70.000 164 119 68 49 41

Masonary 50.000 202 148 82 40 35

Others 26.000 153 102 56 30 25

Prices for a 100 square meter dwelling

SIMPLE TARIFF

Earthquake ZoneConstruction TypeM² of apartment

SCOPE OF COVER

Only Earthquake and following

Fires ExplosionsLandslidesTsunami

INSURABLE PROPERTY

Only BuildingNo contentsNo BI

BASIC FIGURES

Total No of policies

5.950.000

Total coverage

151.490.500.000 €

Annual premium

239.666.000 €

Avg. Sum insured

25.465 €

Avg. Premium

40 €

Total Claim Files

20.622

Total claims paid

56.996.000 €

* as 06.09.2013

BASIC FACTS OF COVERAGE

Compulsory for household owner’s

Only residential buildings

Only earthquake risk, no flood, windstorm, clearance etc.

Only building coverage, no contents, no business interruption, etc

Only TCIP is providing earthquake cover to households up to SI 150.000 TL

First loss based policy

Recently, Renewal Discounts provided

** Euro 2,714

BASICS OF TCIP

PORTFOLIO

PORTFOLIO DIST FOR EQ ZONES PORTFOLIO DIST PER REGIONS

   ZONE 51,0%

   ZONE 416,0%

   ZONE 310,9%

 ZONE 145,7%

   ZONE 226,4%

EAST ANATOLIA3,6%

MEDITERRAIN10,0%

EAGEN14,0%

MARMARA42,8%

BLACKSEA7,6%

SOUTH EAST ANATOLIA

3,0%

CENTRAL ANATOLIA

19,0%

159 2.

428

2.12

8

2.02

2

2.09

0

2.41

7

2.55

4

2.61

8

2.84

4

3.43

6

3.28

7

3.72

5

4.78

6 5.95

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

NUMBER OF POLICIES (000)

737.969 572.8931.164.909

1.543.486 1.707.403 2.046.411

3.252.134

227.511 179.717

461.681

610.854805.077

1.135.179

2.528.876

0

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

7.000.000

GÜ

NEY

DO

ĞU

DO

ĞU

AN

ADO

LU

KARA

DEN

İZ

AKD

ENİZ

EGE

İÇ A

NAD

OLU

MAR

MAR

A

UNINSURED HOMES INSURED HOMES INSURANCE PENETRATION

%23

,5 %

23,8 %

28,3 %

28,3 %32

,0 %35

,5

%43

,7

PENETRATION

6.000.000 policies

Increase communication and public relation activities

10.000.000 number of householders to reach

Excelling in claim management

Increased use of Technology

TCIP IN NEAR FUTURE

Why

Secure un-interrupted service availability

Plan “Pre-During-After” Earthquake

activities

Plan available resources according to size of

earthquake

Plan coordination activities with related

Institutions

EMERGENCY ACTION PLAN

LESSONS

Operational capacity is as important as financial capacityOutdated operational manualsProcedures must be simple and leanApplication of sum insured or indemnity limitsNecessity for collaboration between;

Industriescompanies and public officescities-countries

Lack of;adjusting capacitytechnologyField knowledge

LESSONS

Less loss of lives in the countries with stringent building codes (Chile and New Zealand)Multiple events are not unusual (1999 Turkev and 2011 New Zealand)Secondary risk causing severe damages (tsunami, aquafaction) Modeling has it’s limitationUnderestimated scenarios

EconomicPoliticalDemographic

Ambiguity on expectations from insurance industryImportance of strong construction industry

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

DASK

HASAR DANIŞMAKURULU

SORUMLULUK BÖLGELERİ

SORUMLULUK BÖLGELERİ

SORUMLULUK BÖLGELERİ

SORUMLULUK BÖLGELERİ

SORUMLULUK BÖLGELERİ

YÖ

NETİM

PLA

TFO

RM

U

EĞ

İTİM

P

LA

TFO

RM

LİSANSLI EKSPERLER

HASAR TESPİT UZMANLARI

SORUMLU EKSPER BÜROLARI

Strong and efficient client contact

Emergency call center services

Fast and accurate claim adjustingClaim adjusting resources

MainEmergency

Collaboration with reinsurers

TO IMPROVE DATABASE

TO IMPROVEUNDERWRITING

TO INCREASE COORDINATION W/ INSURANCE INDUSTRY

CAT EVENT CLAIM MANAGEMENT

TO INCREASE MODELLING CAPACITY

TCIP EMERGENCY CALL CENTER

OBSTACLES IN MASSIVE CLAIM OPERATION

Limited number of claim adjustersLong period of training and educationLimited number of training coursesNo promise of income for adjusters To be raedy for service in un-known time in the future

TRAINING PROGRAMS AND INSTITUTIONS

Construction knowledgePrinceples of insurance – TCIPClaim adjusting knowladgeClaim database modelling

UniversitiesInsurance InstitutesEngineering associationsClaim adjusters association

SOCIAL

RESPONSIBILTY

AWARNESS

IN P

ROFESSIONALS

OBSTACLES

FACE TO FACE COMMUNICATON

LOCAL COMMUNICATION

BRAND AWARENESS

BE CLOSE TO INSURANCE CO’S

INC POPULARITY OF EQ INSURANCE

GET SUPPORT OF PUBILIC OPINION LEADERS

TOUCHING YOUTH GENERATION

CITIES IN CONTESTEARTHQUAKE SEMINARS

EARTHQUAKE TRAILER

THE HURRIYET TRAIN

CAMPAIGN FOR AGENCIES AND BANK BRANCHES

TCIP LISTENING THE INDUSTRY

FREQUENT APPEREANCE ON TV

TCIP ON SOCIAL MEDIA

MEETING W/ ACADEMICIANS

COLLABORATION W/ UNIVERSITIES

3.NATIONAL FILM CONTEST

TCIP MEETING YOUTH

FUTURE COMMUNICATION PLAN

CONTINUES COMMUNICTION AND PUBLIC RELATION

CONTINUES COMMUNICATION AND PUBLIC RELATIONS

CHALLENGES AND OBJECTIVES

OBJECTIVES

Increasing number of policiesExcelling in Cat ResponseEstablishing strong synergy between institutions

Public officesInsurance companies, intermediariesClaim adjusters

Increasing Reinsurance capacityUsing alternative claim financing toolsImplementation of new projects

CHALLENGES

Low insurance awarenessEnforcement of new Catastrophe Insurance Law Low penetration rateRestructuring of TCIP after a decadeAligning with national databases Effective control level in public officesEnsuring sound reconstruction activities after claim paymentHigh cost of maintaining contingency capacity

TURKISH CATASTROPHE

INSURANCE POOL