Turkiye: Earthquakes pose another challenge to the (re)insurance industry
Source: Middle East Insurance Review | Mar 2023
The impact of two powerful earthquakes in south-eastern Turkiye on 6 February 2023, represents another blow for the local (re)insurance industry, according to a commentary from AM Best.
While initial information indicates that insurance penetration in the region is relatively low compared with the most populous centres in western Turkiye, the tremors occurred against a backdrop of a prolonged period of extreme economic turbulence, which AM Best believes significantly weakened the creditworthiness of the local (re)insurance market.
The commentary, ‘Devastating Earthquakes Add to an Already Challenging Operating Environment for (Re)insurers in Turkiye’, noted that while earthquake insurance is compulsory for residential homes, there is no legal penalty for not being covered. Consequently, the rating agency expects that – as with previous natural disasters in the country – there will be a significant variance between the economic and insured losses from the two earthquakes.
Although AM Best expects outwards reinsurance to partly protect the balance sheets of local (re)insurers from the impact of the recent catastrophes, the tragic events represent yet another headwind for a market already facing an extremely challenging operating environment, characterised by significant inflation and a weakening currency. M