Turkey: Govt consolidates outsourcing rules for insurance companies
Source: Middle East Insurance Review | Oct 2015
The Turkish Treasury has issued rules on outsourcing insurance support services, which will take effect from 28 November this year.
While the Treasury had previously issued several guidelines on insurers’ outsourcing activities, this is the first time it has compiled the guidelines in a single regulation, said Messrs Daniel Matthews and Muhsin Keskin, Istanbul-based Partners at international law firm Baker & MacKenzie. They outlined the requirements in an article on lexology.com.
Under the regulations, insurance and private pension companies may outsource ancillary services that are not central to their insurance business. These services include technical examinations and controls for underwriting and compensation management; mitigation of risks and losses; ancillary services for damage management; repair, maintenance and spare parts services; assistance services; medical treatment services; and call centre services; provided that an insurance company maintains ultimate control over its design and management.
Services provided by seconded employees from other firms, legal and tax consultancy services, and advertisement services do not fall within the scope of the regulation and can be freely outsourced.
Insurance and private pension companies are required to file an annual report with their board and the Insurance Information and Monitoring Centre (SBM), containing information on risk management and a cost-benefit analysis of their outsourced functions. They are liable for all damage and losses incurred by policyholders and policy beneficiaries arising from outsourced services. This liability cannot be limited or assigned to service providers. Insurance and private pension companies can request indemnification from service providers.
The Treasury acts as the regulator for service providers and requires them to have sufficient organisational sophistication, technical and human resources, and experience. Service providers must also have a clean track record in all jurisdictions within the last five years.
Service providers must register with the service provider list maintained by the SBM. Service providers that offer their services in Turkey must be incorporated as a Turkish company.
Insurance and private pension companies have to comply with the regulations by 28 August 2016.