The series of earthquakes which struck Türkiye on 6 February was among the strongest in the last 100 years and have caused a massive death toll, and damaged nearly 8,000 buildings.
“The preliminary estimate of economic loss due to the current catastrophic event is more than $1.0 billion, and it will take years for Turkish insurers to settle the insured losses. The economic loss is expected to be more than two times the losses from a similar earthquake in 2020.” said Md. Shabbir Ansari, Senior Insurance Analyst at GlobalData.
“According to GlobalData’s Global Insurance Database, property insurance gross written premiums (GWP) stood at TRY 26.1 billion ($2.9 billion) in 2021 and accounted for 29.8% of the Turkish general insurance market. The Turkish property insurance market registered an underwriting loss in 2021 as the combined ratio crossed 100% for the first time in the last 10 years and stood at 107.2%.”
“The combined ratio, which is a combination of loss and expense ratio, is expected to deteriorate further over the next few years due to the current catastrophic event.” continued Mr Ansari.
“The Turkish Catastrophe Insurance Pool (TCIP) along with its major reinsurance partners including Munich Re and Swiss Re is expected to absorb a major share of the losses arising from this earthquake. TCIP is a public institution that was set up in the year 2000 with a provision to settle catastrophic insurance claims of up to $2.5 billion.”
“Insurers in Türkiye were already reeling under the pressure of high inflation that impacted their profitability. Inflation in the country stood at 58% in January 2023 and was 49% in the same period last year. High inflation rates lead to higher average cost of claims for insurers.”
“As companies are yet to recover from the impact of the 2020 earthquake, the recent earthquake will further impact the profitability of property insurers. As a result, Turkish property insurers are expected to register underwriting losses in 2023 and 2024.”
“Increased frequency of such large-scale natural calamities will further create the demand for natural catastrophic insurance in the country and support its growth. However, the profitability of insurers is expected to remain challenged over the next few years due to increasing claims and rising inflation.” concluded Mr Ansari.
