The Turkish insurance sector has faced extremely challenging conditions in recent years, characterised by high inflation, severe currency devaluation, and natural catastrophes, but it has maintained strong revenue growth, robust returns on equity (ROE), and steady improvements in shareholders' equity, notes S&P Global Ratings (S&P).
The property and casualty (P&C) market has demonstrated resilience to product risks, and S&P now assesses its industry risk as moderately low. As a result, the global credit rating agency has revised its insurance industry and country risk assessment (IICRA) for Turkiye's P&C market to “Moderately high’ from ‘High’
S&P adds that it now views Milli Reasurans’ business risk profile as fair. The agency has raised its issuer credit and financial strength ratings on Milli Re to 'B+' from 'B' and its Turkiye national scale rating on the reinsurer to 'trAA-' from 'trA'. The outlook is stable.
S&P said, “The stable outlook reflects our expectation that, over the next 12 months, Milli Re will gradually improve its capital adequacy and competitive position by focusing on profitable business growth.”
Rationale
Elaborating on its rationale for the rating actions, S&P says that premium growth in the Turkish P&C insurance market has consistently outpaced inflation over the past few years. Gross written premium growth was reported at 41% in 2025, of which inflation accounted for about 35%. The remaining 7% represents real growth stemming from new business and rate increases.
S&P said, “In our view, this demonstrates that insurers can reprice when under inflationary pressure and still record real growth. By offering inflation-linked and foreign currency (FX)-denominated insurance policies, Turkish insurers provide products that maintain their value in real terms, helping to maintain the value of insurance premiums and policyholder cover despite high inflation and severe currency depreciation.
“This approach to risk management has been key to supporting Milli Re's competitive position in Turkiye’s challenging macroeconomic environment.
“We expect nominal premium growth to moderate down to 20%-25% over 2026-2027, as Turkiye enters a disinflationary phase--toward 19% by 2027 from nearly 72% in 2022.”
ROE
Furthermore, the Turkish P&C market reported ROE exceeding 40% over the last three years and S&P anticipates it will remain above 30% over the next two years.
Robust ROEs in recent years were primarily driven by investment income from high interest rates and investment revaluation gains, which have offset marginal underwriting losses. S&P expects these investment gains to continue supporting ROE and forecasts that ROE will decline marginally but remain above 30% as inflation cools and interest rates offered by local banks also start declining.
The market has reported a net combined ratio in excess of 100% for more than five years, indicating that underwriting performance is loss-making. Most lines of business have generally reported technical profits, but motor third-party liability (MTPL)—the largest line by premiums (about 25%)—is loss-making, resulting in overall underwriting loss for the whole industry. There are constant rate increases in MTPL, but these are not sufficient to make the branch profitable. In S&P’s base case, the agency anticipates the combined ratio will remain at 110%-115% over the forecast horizon.
Milli Re has consistently reported positive net income and a strong return on shareholders’ equity over the past five years, despite underwriting remaining technically unprofitable. Milli Re's net combined (loss and expense) ratio (on a consolidated basis) also remained broadly stable at 110%-115% over 2024-2025, compared with more than 130% during 2021-2023. Historically, high inflation and the weakening Turkish lira have contributed to highly volatile underwriting performance, but this was in line with market performance. The underwriting loss is offset by the company's high investment income, supported by high interest rates and the revaluation of invested assets and affiliates. S&P expects Milli Re's capital adequacy will remain above the 99.50% level over 2026-2028.
Business profile
Milli Re has a high geographic concentration in Turkiye and directly benefits from the improvement in S&P’s IICRA assessment, the agency said. Milli Re, is among the leading reinsurers in Turkiye. Its parent IsBank is one of the largest commercial banks in Turkiye and owns 87.6% of the reinsurer. In turn, Milli Re is the principal shareholder (57.3%) of Anadolu Anonim Turk Sigorta Sirketi (Anadolu), one of the largest non-life insurance companies in Turkiye. While Milli Re writes business in global markets, more than 90% of its premium income (on a consolidated basis) comes from the local market. That said, management continues to focus on international growth, which is balanced by a cautious risk appetite.
Outlook
S&P expects that, over the next 12 months, Milli Re will gradually improve its capital adequacy and competitive position by focusing on profitable business growth.