The Insurance and Private Pension Regulation and Supervision Agency (SEDDK) has published a circular requiring insurance companies to submit the parameters of the earthquake stress tests they plan to conduct.
The purpose of this circular, which applies to non-life insurance companies, is to determine the procedures and principles underlying the stress tests by insurance companies operating in Turkiye which is an active earthquake zone, to measure their financial resilience against possible earthquakes, especially the potential Marmara earthquake which is anticipated to be a massive disaster.
The earthquake stress tests should be conducted on a scenario basis using scientifically based catastrophic models and include the results obtained from the studies of two different modelling companies, at least one of which is based in Turkiye.
The circular also states that in the event that the insurance coverage provided by the company regarding earthquake risk is concentrated in a different CRESTA region other than the CRESTA 1-2-3-4 region, the insurer in question is also obliged to conduct a stress test including earthquake scenarios related to the CRESTA region for which it provides the most protection and report the results.
CRESTA Zones (Catastrophe Risk Evaluation and Standardising Target Accumulations) are part of an international geographic zoning system that helps the insurance industry manage natural hazard risk.