The Insurance and Private Pension Regulation and Supervision Agency (SEDDK) has published a circular concerning the motor insurance premium/equity coefficient.
The 'Circular on the Application of Premium/Equity Coefficient in Land Vehicles Insurance' stipulates that the sum of the gross premiums produced by insurance companies for all motor insurance policies in a calendar year cannot exceed three times the last declared equity capital.
The new limit takes effect from 1 July 2025. The objective is to strengthen the insurance sector’s risk management and financial structure.
The coefficient may be increased or reduced subject to conditions. For instance, if the share of motor insurance premiums in the total premiums (concentration ratio) is not over 50% or if the last calculated capital adequacy ratio remains under 115%, the premium/equity coefficient to be applied is 2.5.
On the other hand, if the concentration ratio is below 40% and the latest calculated capital adequacy ratio is 135% and above, the premium/equity coefficient to be applied is four (4).
The concentration ratio is calculated by dividing the total gross written premiums for motor insurance policies by the gross written premiums for all branches.
The equity announced as of the end of December and June will be taken into account in the coefficient calculation. The capital adequacy results as of December and June are taken into consideration.
Gross written premiums will be determined based on data from the Insurance Information and Monitoring Centre (SBM).
An insurer will be barred automatically from accepting new motor business by the SBM if its motor business hits the limit during the year.
In addition, if a cash capital increase is obtained from external sources during the year, or if conditions change in favour of the insurance company, the insurer will be granted a higher limit at the determined coefficient.