The Turkish property and casualty (P&C) market's return on equity (ROE) will remain robust at above 30% over the next two years, said S&P Global Ratings (S&P). The ratio consistently exceeded 40% over the past three years as investment income, led by high interest rates, and revaluation gains offset marginal underwriting losses.
In a report titled “Insurance Industry And Country Risk Assessment: Turkiye Property/Casualty”, S&P said, “We forecast this trend will continue and that even as the ratio declines marginally, it will remain above 30% as inflation cools and interest rates offered by local banks ease.
S&P forecasts the ROE trend even as the market has reported a net combined ratio in excess of 100% for more than five years, reflecting that underwriting performance remains loss-making.
“Though most lines of business have typically reported technical profits, motor third-party liability (MTPL) — the largest line by premiums (about 30%) — remains loss-making. Constant rate increases in MTPL are inadequate to make the segment profitable. In our base case, we anticipate the combined ratio will remain at 110%-115% over the forecast horizon.”
Revenue growth
Premium growth prospects remain supportive of the sector’s profitability. The insurance market’s strong revenue growth over 2023- 2025 outpaced steep inflation in Turkiye. This primarily stemmed from new business after the February 2023 earthquake and continual increases in policy premiums in response to inflation and increased insurance cover.
S&P added, “In our view, this demonstrates insurers have the ability to reprice when under inflationary pressure and still record real growth. By offering inflation-linked and foreign currency-denominated insurance policies, Turkish insurers provide products that maintain their value in real terms, helping maintain the value of insurance premiums and policyholder cover despite high inflation and severe currency depreciation.
“While we recognise premium growth has marginally lagged the inflation rate in 2026 amid a gradual easing of prices, we do not believe this will negatively affect P&C insurers’ profitability. We expect nominal premium growth to moderate to 20%-25% over 2026-2027, as Turkiye enters a disinflationary phase-- toward 19% by 2027 from nearly 72% in 2022.”
Risk
S&P assesses industry risk as moderately low while country risk remains high.
The rating agency added, “The Turkish P&C sector has improved its management of product risk over the years; we now see a limited likelihood that product risk will weigh on the sector’s profitability.
“The Turkish Catastrophe Insurance Pool plays a particularly important role in managing potential volatility and exposure to natural disasters such as earthquakes. We consider that the high country risk assessment overstates the risk faced by the P&C insurance sector in Turkiye. Therefore, we adjust our IICRA (Insurance Industry and Country Risk Assessment) on this sector to ‘Moderately high’ from ‘High’, based on the moderately low industry risk. Our base case does not incorporate a persistent and material decline in the sector’s profitability--if one were to develop, we may adjust the IICRA to ‘High’.”