While Turkish insurers demanded increased reinsurance capacity and lower prices at the 2024 Baden-Baden Reinsurance Meeting held last week, reinsurers were cautious about providing capacity and generally demanded higher price.
Mr Ahmet Yasar, vice president of the Insurance Association of Turkiye (TSB) and Maher Holding Insurance Group president, who was a member of a delegation to Baden-Baden led by TSB president Ugur Gulen, told Insurance Media that the reinsurers cited factors such as rising risks, inflationary pressures and difficulties in the insurance market to justify their price demands.
Likely concessions to reinsurers
For reinsurers to continue providing or increasing capacity, insurers may have to make concessions. For example, accepting higher retention levels for some risks may help provide capacity at more affordable prices, Mr Yasar said.
He added, “In short, as we approach the renewal season, uncertainties continue regarding how reinsurers will manage capacity demands in Turkiye and how insurance companies will price risks. The Turkish market will enter a critical period in terms of capacity expansion and balancing prices, especially for the 2025 renewals. Reinsurers will analyse risks more carefully and determine their pricing policies in light of data obtained from local modelling.
“Considering market conditions and current risks, achieving both capacity increase and price reduction at the same time is a difficult goal. Insurers need to collaborate with reinsurers to provide innovative solutions and mutual benefits.”
Traffic insurance
During the Baden-Baden talks, discussions were held too on a pool to cover bodily injuries in motor third-party liability insurance (dubbed traffic insurance) in Turkiye. Reinsurers in Baden-Baden were cautious about how such a pool would be structured, managed, and whether it would be sustainable in the long term. Among the concerns of reinsurers is that costs could increase further if the pool is not managed properly and this situation would be reflected in reinsurance prices.
Earthquake modelling
Another topic discussed was regulations on earthquake modelling and local technology solutions. A more precise analysis of earthquake risks in Turkiye may lead to a re-evaluation of capacity in the reinsurance market. In particular, increased risk levels in some regions as a result of more accurate modelling may cause reinsurers to be more cautious in meeting capacity demands in these regions. This may create capacity gaps, as reinsurers may demand higher premiums to provide more coverage against increasing risks.
Modelling updates, especially those made close to reinsurance renewal dates, may require insurance companies to restructure their reinsurance agreements and accept higher retention levels. This may cause insurance companies to take on more burdens in major risks such as earthquakes.
Although increasing capacity demands and slightly rising prices create challenges for insurance companies in Turkiye, appropriate regulations and strategic partnerships will play a key role in managing reinsurance.
The 2024 Baden-Baden Reinsurance Meeting is considered the last rendezvous of the year before the renewal of reinsurance agreements for 2025. This year, the general focus at the Meeting was on climate change, natural disasters, inflation, and cyber risks.