HISTORY DASK - TURKISH NATURAL CATASTROPHE INSURANCE POOL.

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2 HISTORY The devastating Earthquakes in Marmara region on 17th August and 12th November 1999 Insured loss: around USD 800 milion Economic loss: over USD 10 billion Low insurance penetration (especially for residential risks) Burden on public budget Decree law no 587 compulsory earthquake insurance as of 27th September 2000 untill 18th of August 2012 As from 18th August 2012 new 6305 Catastrophe Insurance Law

3 WORLD EXAMPLES Before the compulsory earthquake insurance regulation in Turkey, the best fit and tailor made system was created according to the Turkey conditions by examining the examples from the world like USA-California and New Zealand

4 PRE DASK WHY GOVERNMENT S PRIORITIES Reactive solutions versus proactive solutions Shortage of funds in immediate need Allowance of funds to those in need is problematic Political and bureaucratic considerations may prevail Government priorities is on getting back to economic and social life A compulsory earthquake insurance system for homeowners Affordable price for every homeowner True risk transfer mechanism Claims-paying capacity to limit government s exposure Build national catastrophes reserves by time improvement of risk culture and insurance consciousness in public Rely on distribution channels of Turkish insurance industry

5 ORGANIZATION CHART REINSURANCE DASK BOARD OF DIRECTORS FUND MANAGMENT CONTRACTUAL AGREEMENT MANAGMENT COMPANY CLAIM IT PR INSURANCE COMPANIES CLAIM OPERATIONS AGENCIES BROKERS BANC ASSURANCE DIRECT & ADC HOMEOWNERS

6 ESTABLISMENT OF DASK LEGAL AND FINANCIAL BASE OF DASK Financed by Marmara Earthquake Emergency Reconstruction Project cofinanced by Turkish Government World Bank European Bank for Reconstruction and Development Decree law no 587 compulsory earthquake insurance as of 27th September Eureko Sigorta is tendered for the following 5 years till August, 2020 As from 18th August 2012 new 6305 Catastrophe Insurance Law LEGAL AND FINANCIAL BASE OF DASK HOUSEHOLDERS RISK MANAGEMENT BEHAVIOUR DASK TREASURY MANAGEMENT COMPANY INSURERS SALES OPERATION RISK MANAGEMENT SUPPORT AUTHORITIES LEGAL FRAMEWORK, SUPERVISION, ESTABLISHING CHECK POINTS, DISASTER MANAGEMENT

7 SINGULARITY AND SIMPLICITY Product concept Singularity Product features Simplicity Line Property Understanding Only earthquake Single Peril Risk Earthquake Residential buildings Simple Acces Pricing All Channels 3 pricing factors Provider DASK Click product Few information requirements Post-sales operation Just call 125

8 SCOPE OF COVER AND TARIFFICATION SCOPE OF COVER Only Earthquake and following Fires Explosions Landslides Tsunami INSURABLE PROPERTY Only Building No contents No BI SIMPLE TARIFF Earthquake Zone Construction Type M² of apartment TYPE OF CONSTRUCTION Zone 1 Zone 2 Zone 3 Zone 4 Zone 5 Steel, RC Masonary Others TYPE OF CONSTRUCTION Steel, RC Masonary Others UNIT ONSTRUCTION COST PER M² 225 USD 161 USD 83 USD Prices for a 100 square meter dwelling (USD) TYPE OF CONSTRUC TİON SUM INSURED USD Zone 1 Zone 2 Zone 3 Zone 4 Zone 5 Steel or R/C Masonary Others

9 IN BRIEF SUSTAINED LOW PRICES IMPROVED PENETRATION STRONG RESERVES INCREASED PUBLIC AWARNESS LESS THAN US$ 33 ANNUAL PREMIUM FROM OVER 4% TO 45% US$ 1.4BILLION OVER 90% BRAND AND PRODUCT RECOGNITION RELEASE ON NATIONAL BUDGET LOW OPERATIONAL COST MARKET DEVELOPER EFFECTIVE PUBLIC-PRIVATE- PARTNERHIP STRUCTURE US$ 4.2BILLION CLAIM PAYMENT CAPACITY LESS THAN 2% 2 ND LOB 7.9 MILLION 6.7MILLION EARTHQUAKE HOMEOWNER POLICIES HAS BECOME A GLOBAL ROLE MODEL

10 .000 GROWTH PERFORMANCE % CAGR 7,5% CAGR % CAGR Before 2012, check and control points at land registry administration and mortgage loan, After 2012 check and control points at electricity, water and gas subscription HOMEOWNERS DASK

11 RENEWAL RATES 62% 66% 30% 36% 37% 36% 37% 34% 50% 47% 55% 53% 54% 54% 58% 15% -

12 VARYING REGIONAL PENETRATION / LOW COSTS ACROSS THE COUNTRY OVERALL 45% 55% 36% $ $ % $ % 34% $ $ $ % 32% AVERAGE PREMIUM - USD POLICIES $ $

13 PENETRATION IN SOME MAJOR PROVINCES BALIKESIR %51 ISTANBUL %55 54 % DUZCE %82 BOLU %75 SAMSUN %32 36% TRABZON %33 OVERALL 45% $ CANAKALE %60 BURSA %46 ANKARA %52 ERZINCAN %55 VAN %33 IZMIR %45 KONYA %36 ELAZIG %32 DIYARBAKIR %30 ANTALYA %48 ADANA %33

14 (.000) (.000) (.000) PORTFOLIO STATISTICS DISTRIBUTION ACCORDING TO FLAT SIZE %10 %17 %31 %19 %13 %9 - DISTRIBUTION ACCORDING TO BUILDING STRUCTURE STYLE %2 %97 REINFORCED CONCRETE %2 %1 MASONARY OTHER DISTRIBUTION ACCORDING TO DEGREE OF EARTHQUAKE RISK %46 1st Degree %26 2nd Degree %12 3rd Degree %16 4th Degree %1 5th Degree

15 (.000) (.000) PORTFOLIO STATISTICS DISTRIBUTION ACCORDING TO DISTRIBUTION CHANNELS %61 MORTGAGE BASED PORTFOLIO % % % AGENCY BANK - MORTGAGE NON-MORTGAGE DISTRIBUTION ACCORDING TO INSURED COMMITMENT %49 %42 %8 %2 1st Year 1-5 Years 6-10 Years Years

16 HISTORICAL DATA ABOUT REINSURANCE FUND AND TETENTION Fund (EUR) Retention (EUR) Reinsurance Capacity (EUR)

17 TREASURY SUPPORT REINSURANCE STRUCTURE 2017 Rapid growth pushes TCIP to buy additional capacity Great interest for diversifiers High capacity demand is prone to surcharge in reinsurance premium Cat Country Traditional Capacity available in the market is exhausting TCIP takes higher portion of the reinsurance capacity in the market Local insurance companies are getting difficulty in raising capacity Earthquake exposure leaves not much capacity for other natural perils M Layer: EUR M Layer: EUR M Sub Layer: EUR 100 M Retention: EUR 100 M Spread Loss: EUR 250 M Retention: EUR 400 M

18 CLAIMS EARTHQUAKE 539 Damaging Earthquakes No OF CLAIMS 22K Claim Files 455 Lawsuit Files PAYMENT Total 49 mio USD YEARS EARTHQUAKE FILE NUMBER AMOUNT (USD) TOTAL

19 CLAIMS & POLICY Before 2011 VAN earthquake, there was policy in Van and currently there are policy (270% increase) Before 2011 KÜTAHYA earthquake, there was policy in Kutahya and currently there are policy (161% increase) %9 %19 INSURANCE RATE %26 %27 %23 %30 % %12 %21 INSURANCE RATE %27 %28 %25 %29 %

20 PUBLIC PERCEPTION ON EARTHQUAKE AND INSURANCE We will die in an earthquake I trust my destiny The government will help An earthquake will not occur in near future I don t need it Fear and negligence discourage people to take precautions Insurance is expensive It s a tax It won t pay I do not have enough information Insurance is expensive My house is on solid rock

21 REACHING AND MANAGING WITH STAKEHOLDERS Insurance companies and intermediaries, banks Utility companies, land registration offices Local disaster management agencies Key ministries academic Community schools Teachers, clerics local Opinion leaders National opinion leaders DISTRIBUTION INSURANCE COMPANIES, BANKS AND INSURANCE INTERMEDIARIES, DASK DIRECT, WEB SALES CHECK POINTS UTILITY COMPANIES (ELECTRICITY AND WATER) LAND REGISTRATION OFFICES, MORTGAGE TRANSACTIONS PR ACTIVITIES NATIONAL AND LOCAL ACTIVITIES, HOMEOWNERS, OPNION LEADERS, PUBLIC OFFICERS, LOCAL AUTHORITIES

22 DASK CAT MANAGEMENT CAT MANAGEMENT STRUCTURE

23 NEXT HORIZON INCREASEING PENETRATION IMPROVING CAT MANAGEMENT 7.9 MILLION POLICIES 10 MILLION POLICIES HAVING ROBUST PLATFORM DEVELOPING CONTINGENCY RESOURCES IMPROVING COORDINATION EFFECTIIVE USE OF CHECK POINTS USE OF IMPROVED METHODOLOGIES AND RISK REDUCTION STUDEIS DIGITAL BRAND FOR CAT OPERATIONAL MANAGEMENT PROTECTION STRONG COORDINATION WITH STAKE HOLDERS AND CONTINOUS PUBLIC RELATION ACTIVITIES SUCCESS PENETRATION OPERATION

24 LESSONS LEARNED RAPID PAYMENT LESSONS Secondary risk causing severe damages (tsunami, liquefaction, nuclear damage) Modeling has it s limitation Ambiguity on expectations from insurance Industry Importance of strong construction industry Need for more involvement of Government support Operational capacity is as important as financial capacity LESSONS EXTENSIVE ASSESMENT Procedures must be simple and lean Necessity for collaboration between; Industries companies and public offices cities-countries Lack of; adjusting capacity technology Field knowledge DASK S STRATEGY FOR THE FUTURE o Haiti Earthquake o Chile Earthquake o New Zealand Earthquake o Australian Flood o Japan Earthquake o New Zealand Earthquake o Van Earthquake o Van Earthquake o 2012 Kütahya Earthquake

25 CAT MANAGEMENT STRUCTURE MAINTAINING LOW COST PRINCIPAL CONTINGENCY MANAGING CLAIM PROCESS EFFICIENCY MANAGING EARTHQAUKE PROCESS To achieve low cost product, services, operation and organization is critical for long term survival High annual operational cost is not sustainable Business process is about operational managemenet (claim notification, adjustment, claim payment etc..) Earthquake process is about field management (extent of damage, worst hit area, after shocks etc) CAT MANAGEMENT PLATFORM GIS PLATFORM

26 MANAGING EARTQUAKE PROCESS POLICY EXPOSURE FINANCIAL LOSS MODELLING HEAT MAP HIT MAP OPERATIONAL CAPACITY MODELLING CLAIM ADJUSTING CAPACITY MODELLING MASS OPERATION CONTINGENCY MANAGEMENT

27 MANAGING EARTQUAKE PROCESS DISTRICT BASED FINANCIAL LOSS MODELLING ADJUSTERS ROUTING CHANGE DETECTION CHANGE DETECTION

28 MANAGING EARTQUAKE PROCESS Notifications from Çanakkale-Ayvacık and Adıyaman Samsat EQs

29 SUCCES FACTOR

30 SUCCES FACTOR

31 ÖDÜLLER SUCCES FACTOR