Turkey: Insurance market seen as one of "modest growth, higher risk"
Source: Middle East Insurance Review | Dec 2016
Geopolitical turmoil and macroeconomic factors have triggered a downgrade in short-term prospects for the “frontier” insurance market of Turkey, said a report titled “Emerging Markets Matter”, by EY and Oxford Economics.
The report noted that while Turkey has been seen by many foreign insurance carriers as an intriguing insurance opportunity, the Syrian refugee crisis and political tension within Turkey have also heightened risks over the past 18 months. CAGR of 8% in insurance premiums is projected through 2020. Despite the political turbulence of two elections, Turkey achieved growth of 4% in 2015, making it one of the stronger performing emerging markets.
However, growth is expected to cool this year, amid continuing conflict with the Kurds, which in turn can be expected to cut into tourism revenues, an important driver of the domestic economy. Currency risks will also remain.
Nevertheless, a number of foreign companies have entered the Turkish market, and foreign insurers are estimated to generate about two thirds of non-life premiums.
Strong competition in the auto sector has led to price cutting, however, along with a decline in profitability. As a result, a cap on premiums for vehicle insurance is likely to be enacted. A return of political tranquility would likely boost investor confidence and lead to even greater investment in the insurance sector, as favourable demographics and rising household incomes could be expected to boost life insurance sales. In addition, household and health insurance are sectors that may offer high growth potential. Microinsurance is just beginning to take hold in the country, said the report.
EY created a risk-opportunity matrix which categorises the Turkish insurance market as “modest growth, higher risk”. Among the 22 insurance markets around the world ranked on the matrix, Turkey stands in the middle, at 13th in terms of opportunity and 15th in terms of risk.