Underwriters at Lloyd's have begun discussions with the Turkish government about the entry of Lloyd's into Turkey, reports international law firm Edwards Wildman.
Plans that have been in process since 2012 and earlier would see Lloyd's Turkey established as a locally based operation headquartered at the Istanbul Financial Centre. It would be subject to Turkish supervision and would thus be allowed to provide local insurance and reinsurance services to Turkey-based clients.
Currently, with a few exceptions, Turkish insurance legislation does not permit Lloyd's underwriters to write insurance in, or from, Turkey. On the reinsurance side, Lloyd's underwriters are only permitted to write reinsurance originating from Turkey on a cross-border basis – meaning that the underwriting must take place outside of Turkey. The coverholder model is not recognized in Turkey, Edwards Wildman said.
Foreign insurers can establish a branch in Turkey, but at present the country does not recognize the concept of syndicates and managing general agents as used by the Lloyd's model. Edwards Wildman observed that certain legal changes would be required before Lloyd's could set up a locally based "Lloyd's Turkey". A council of ministers decree would be required . "Further, any proposed legislation that comes out of Lloyd's discussions with the Turkish government would have to recognise Lloyd's legal form and propose an operating model in Turkey", the legal firm said.
Although the top three insurers (Axa Turkey, Anadolu Sigorta and Aksigorta) are Turkey-based, the market as a whole has a high level of foreign investment.
A recent Lloyd's survey of a small number of Turkish insurance players found that earthquakes remained the key business risk for the Turkish insurance sector. "The question being asked about the next major earthquake is not if, but when?" said Lloyd's. It noted that about 70% of the Turkish population and 75% of its industrial facilities were exposed to large-scale earthquakes. The second- and third-biggest risks facing the insurance sector, according to the survey respondents, were preparations for technological change, and the risk of a shift in demographics.