Chapter 1
Turkey
Aysel Korkmaz Yatkın, Görkem Bilgin, Asena Aytuğ Keser and Edanur Atlı[1]
I. Introduction
i. Nature of the insurance and reinsurance market
There are currently 74 active insurance companies incorporated in Turkey, consisting of 50 non-life insurers, 19 life and pension insurers and five reinsurers.[2]
The premiums collected in 2023 amounted to approximately 486 billion Turkish lira, an increase of 106.8 per cent compared with the previous year. Of this aggregate value, approximately 429 billion Turkish lira was derived from non-life insurers, whereas approximately 57 billion Turkish lira was derived from life insurers.[3]
Insurance sales in Turkey are conducted via direct sales, agencies, bancassurance and brokers. Agencies have the biggest share with 54.4 per cent as at 31 December 2023. Agency sales are followed by bancassurance sales with 20.7 per cent as at 31 December 2023.[4]
Banks function as agents, bringing together insurers and clients demanding simple and low-cost products from trusted financial institutions. Bancassurance, just like other distribution channels, comes under close scrutiny from the Ministry of Treasury and Finance.
As there are only four Turkish companies active in the reinsurance market, reinsurance cover is mostly provided to Turkish insurance companies by foreign reinsurers.
Türk Re, one of the five local reinsurance companies, was established on 6 September 2019 with capital of 600 million Turkish lira and the Ministry of Treasury and Finance as the sole shareholder. Türk Re stated that it made a profit of 695 million Turkish lira with premium production of 3.9 billion Turkish lira for the year 2022.[5]
As in the previous years, foreign investors’ interest has grown significantly, thanks to efforts to comply with the European Union regulations and the considerable insurance potential in Turkey. Accommodation and food service activities were the sector that grew the most, by 32.1 per cent in 2022.[6]
Structural reforms and initiatives such as the promotion of a personal pension scheme are expected to foster development of the market. The Insurance and Private Pension Regulation and Supervision Agency (IRSA) established a circular to integrate special insurance products such as education, health, personal accident and life insurance into personal pension schemes to meet the different needs of the citizens. IRSA also established a regulation that regulates the procedures and principles regarding the transfer of pension rights of associations, foundations, unions and other organisations in the relevant institutions to the private pension scheme. In addition, citizens under the age of 18 are also included in the personal pension scheme. With the developments at the beginning of 2022, the age limit of 45 for employees has been removed and employees who are older than 45 years old can accordingly also be a part of the scheme. In addition, with this development, the state contribution rate is increased to 30 per cent from 25 per cent[7].
Despite a growing awareness of insurance, there is a significant lack of legal and practical experience, particularly with respect to various types of complex policies, such as all risks construction and engineering policies.
ii. The legal landscape for insurance and reinsurance disputes
Enforcement through the Turkish court system is a lengthy process. The vast majority of insurance disputes are handled by first instance commercial courts. In addition to other hurdles of Turkish litigation, lack of sufficient experience and specialisation coupled with the inadequacy of the legislative provisions of the old Commercial Code (replaced by the new Turkish Commercial Code (TCC) as of 1 July 2012) leads to a considerable level of uncertainty over the outcome of court proceedings.
Out-of-court settlements are therefore frequently used. Other than these arbitrary and voluntary settlement arrangements, there is also mandatory mediation prior to court litigation for commercial disputes, which was introduced by the legislature (see Section IV.vi for more information about mediation).
In 2007, a voluntary insurance arbitration system was introduced as an alternative to court proceedings. The total number of disputes settled by the Insurance Arbitration Commission was 1.405.811 as at 31 December 2023.[8] The dramatic and constant increase in disputes settled this way in recent years clearly demonstrates that arbitration is becoming more popular.
II. Regulation
i. The insurance regulator
On 18 October 2019, IRSA was established by Presidential Decree No. 47 and became the new insurance regulatory agency.
An insurance company in Turkey can only operate in the form of a joint-stock company or, in the case of mutual insurance funds, as a cooperative company. Before incorporation, insurance companies must obtain approval from IRSA. They must also apply to IRSA to be licensed in each insurance licence class.
An insurance company is not allowed to be active in both the life and non-life insurance divisions or in any sector not related to insurance.
The minimum paid share capital of a non-life insurance company applying for a licence as of 27 November 2023, cannot be less than 1,6 billion Turkish lira paid in cash. This requirement is 825 million Turkish lira for a life insurance company and 700 million Turkish lira for a reinsurance company[9].
A foreign insurance company can only operate in Turkey by opening a branch, by incorporation of a company in Turkey or by acquisition of shares of a local insurance company. However, according to Undersecretariat of Treasury Circular No. 2007/5, IRSA does not consider an ‘operation’ to be conducted in Turkey if the foreign reinsurance company merely receives, and accepts, a proposal from a local insured or broker to underwrite a risk in Turkey – without the foreign company engaging in any marketing activities in Turkey.
Insurable interests of residents in Turkey must be insured by insurance companies established in Turkey with a limited number of exceptions, such as the import and export of freight, ship chartering and life insurance. Therefore, fronting arrangements are frequently made between foreign and local insurance companies, especially for facultative insurance for big projects with high-risk capacity.
There are a considerable number of areas of compulsory insurance in Turkey, particularly for hazardous activities. The most widespread type of compulsory insurance is cover for motor vehicles.
Various activities, including transactions related to the commencement of operations, voluntary windings-up or mergers and acquisitions, acquisitions of other companies and their assets and liabilities, and the transfer of insurance portfolios are all subject to authorisation by IRSA.
ii. Taxation
Insurance company transactions remain exempt from value added tax but are subject to a banking and insurance transaction tax (BSMV) and fire insurance tax. Except for the specific exemptions, the general rate of BSMV is determined as 5 per cent of the insurance companies’ transactions and the fire insurance tax, levied at 10 per cent, applies to insurance premiums collected on fire insurance purchased for movable and immovable properties within municipal boundaries and adjacent areas. As of 6 July 2023, the BSMV is set as 15 per cent on the money received as collateral in consumer loans[10].
III. Insurance and reinsurance law
i. Sources of law
Turkey’s adopted legal system is one of continental law and legislation is the principle and primary source of law. The provisions of the Turkish Code of Obligations are applicable to insurance contracts where the insurance chapter of the TCC is silent.
Although court decisions are in principle not binding, in giving their judgments, local courts tend to rely heavily on the judgments of the Supreme Court of Appeal. However, established and consistent case law is lacking with regard to analysis and interpretation of insurance terms and conditions in most disputes, especially if the dispute requires technical or engineering expertise, because such disputes are mostly resolved by means of out-of-court settlements.
Turkish law does not explicitly contemplate reinsurance contracts. The only and main provision that particularly concerns reinsurance agreements is included in the TCC. Accordingly, insurance companies may reinsure the risk on whatever terms and conditions are deemed fit and necessary.[11] Despite the wording of this particular provision and the fact that there is no other provision that directly concerns reinsurance agreements in TCC, many academics take the view that reinsurance agreements are ultimately subject to the mandatory pro-insured provisions governing insurance agreements. Therefore, in addition to the general rules of contract law, insurance law provisions in the TCC would, to the extent possible, apply to reinsurance relations by analogy. However, it is not clear to what extent and how provisions of insurance law in each case would apply to reinsurance.
The Insurance Act and subsidiary legislation provide the regulatory framework for the insurance and reinsurance industry.
ii. Making the contract
The insurer must issue an insurance policy, recording the mutual rights, obligations (including default and special provisions) and general conditions predetermined by IRSA and signed by the insurer. Written form is not a condition for validity but a regulatory requirement, as a tool for evidencing the content and scope of the coverage, for the protection of the insured.
In this respect, the Insurance Act requires insurance contracts to be drafted in Turkish and devoid of any words in a foreign language. Similarly, the Law on Compulsory Usage of Turkish Language among Commercial Entities (Law No. 805)[12] also requires all private law contracts to be drafted in Turkish.
Scholars suggest that the provision in the Insurance Act stipulating the form of the policies should not apply to policies concluded abroad. However, they are concerned that Law No. 805, which is an imperative piece of Turkish law by reason of its particular purpose of public order, is applicable regardless of the designated law and place of execution. The courts, according to recent precedents, apply this requirement for contracts concluded with entities established under the laws of foreign states. There is no concrete consequence of violation of this requirement; however, use of foreign language, depending on the circumstances, may cause exclusions incorporated into the contract or insurance policy to be deemed void or interpreted to the detriment of the insurer.
The following can be identified as the main elements of insurance to be taken into account when drafting the contract or insurance policy, apart from formal requirements.
Insurable interest
The TCC refers to an ‘interest measurable in monetary terms’. According to established doctrinal views and practice, an insurable interest in indemnity insurance consists of proprietary, intellectual or personal rights and receivables that are measurable in monetary terms and capable of enforcement by legal action.
With respect to life insurance, the TCC provides that the policyholder can take out insurance on the policyholder’s own life or on the life of another person (the person subject to the risk) against death or survival. In the case of insurance on the life on another person, it is required that the beneficiary has an interest in the survival of that person.
Lack of insurable interest, not only at the time of the conclusion of the contract, but also at any stage, will result in invalidity of the contract. Provisions to the contrary will render the insurance contract invalid.
According to the TCC, insurance cannot be provided to cover a loss which is the result of an action that is against mandatory rules of law, moral values, public order or personality rights.
Risk
Depending on the type of insurance contract, the risk is transferred to the insurer as soon as the premium is paid, or the contract concluded.
The insurer’s obligation to indemnify is subject to the occurrence of the identified risk and the occurrence of a loss as a result of the occurrence of the risk. However, if the risk occurs because of intentional acts of the insured, the insurer shall be released from liability and shall not reimburse the premiums paid.
Insurance sum
The insurance sum is subject to the limit of the insured value and the actual loss in indemnity insurance. The TCC forbids agreeing on an insurance sum exceeding the value of the insurable interest.
Insurance premium
The TCC provides that ‘unless otherwise contracted, liability of the insurer starts at the time of actual payment of the premium or the first instalment’.
Compliance with the payment schedule is crucial for the insured to retain coverage because, subject to certain notification prerequisites, the TCC provides the insurer with the opportunity to avoid the insurance contract without any legal consequence if the insured or policyholder fails to pay the premium instalments.
iii. Interpreting the contract
General principles concerning interpretation of contracts in civil law apply to insurance contracts. When trying to establish the actual meaning of the wording, the definitions of the Turkish Language Association are considered. When ambiguity or contradictions exist in the wording, interpretation in favour of the insured prevails because the primary duty of providing proper wording is on the insurer. The principles of protection of the insured and keeping the insurance contract alive are dominant. One of the main points to be considered in the interpretation is the principle of balance between the risk carried by the insurer during the term of the contract, the premium collected and the interests.
Incorporation of terms
Each and every insurance contract should refer to a set of general conditions, which are approved by IRSA. Apart from the general conditions, it is possible to incorporate special provisions according to needs of the insured within the framework of the mandatory provisions under the TCC; however, insurers should ensure that there is no ambiguity when interpreting the contracts.
The Insurance Act provides that the insurer should not content itself with merely writing down the risk covered under the contract; it must also expressly mention the exclusions. If exclusions are not mentioned by the insurer, they shall be deemed to be part of the insurance coverage.
The insurer, when negotiating and concluding the insurance contract, is under a strict duty to enlighten the insured about the details of the coverage; in the absence of which, the insured is entitled to rescind the insurance contract owing to the undesired terms incorporated into the insurance policy within 14 days.
Types of terms in insurance contracts
Special provisions of insurance contracts have to be drafted in accordance with the standard general terms approved by IRSA and the mandatory provisions of the TCC. Non-compliance with mandatory provisions may render the contract or the relevant contract provision invalid. There are various legal provisions that cannot be contracted out contrary to the interests of the policyholder, the insured or the beneficiary.
Warranties – conditions precedent
Sanctions attached to certain warranties or conditions precedent to cover do not necessarily give the terms the intended effect and may be caught by semi-mandatory or mandatory provisions of the TCC. Where a condition or warranty relates to the duties already provided for by the TCC, such as the duties of disclosure and notification before and during the contract (regarding any increase in the risk) and upon the occurrence of the insured-against event, then semi-mandatory provisions that cannot be amended contrary to the interests of the policyholder, the insured or the beneficiary with respect to such duties and sanctions are highly likely to be applicable.
iv. Intermediaries and the role of the broker
Position of brokers
According to the definition of the Insurance Act, a broker is the person who acts independently and impartially to appoint the insurance companies for contracting insurance policies.
Pursuant to the Regulation on Insurance and Reinsurance Brokers (the Brokers Regulation) enacted in mid 2015, brokers must obtain a brokerage licence from IRSA.
How brokers operate in practice
There are various obligations and prohibitions set out for brokers in the Brokers Regulation. For instance, although brokers can conclude protocols with insurance and reinsurance companies, they are prohibited from engaging in any other business. Brokers are also prohibited from preparing insurance policies and similar documents. Brokers established in a foreign country can continue its operations in Turkey only by establishing a branch.
Under the Brokers Regulation, a legal entity broker’s minimum capital is set at 2,5 million Turkish lira and additional 500 thousand Turkish lira for each licence request in life and non-life insurances; and additional 1,000,000 Turkish lira for each licence request in the reinsurances[13].
Agencies and contracting
Agencies operate on behalf of insurers, on the basis of a contractual relationship between them and the insurance company.
Agencies can be a real person or a legal entity. The headquarters of legal entity agencies should be located in Turkey. Legal entity agencies also need to be incorporated as joint-stock or limited liability companies, obtain approval from IRSA and be registered on the Agency Registry, indicating whether or not they are granted power to conclude contracts and collect premiums. The approval shall be then promulgated by the Turkish Union of Chambers and Commodity Exchanges.
In April 2013, insurance agencies were prohibited from engaging in business other than agency work in the insurance sector.
v. Claims
Duty of disclosure
One of the statutory duties of the policyholder is the duty of disclosure, which includes the duty not to misrepresent facts known or reasonably expected to be known to them before the conclusion of the contract.
The TCC imposes a duty of disclosure on the insured at three different stages, namely, before the conclusion of the contract, during the contract and at the time of occurrence of the risk.
Regarding the duty of disclosure before policy inception, the TCC provides that the policyholder is under a duty to disclose important facts that are, or should be, known to them. When the undisclosed facts are of a nature that would require the contract not to be concluded or to be concluded with heavier terms, such facts are considered important. Questions posed by the insurer orally or in writing are presumed important unless proven otherwise. The policyholder is also obliged to disclose facts that are not queried by the insurer if they can reasonably predict that these would be deemed important by the insured.
In cases of non-compliance with the duty of disclosure before policy inception, the TCC provides alternative rights for withdrawal of the policy or to request a change in the premium. Where such a request for a change has not been accepted within 10 days, the insurance will terminate automatically.
Where a breach of the duty of disclosure has been discovered after occurrence of the risk, a reduction of the insurance indemnity will be made according to the degree of negligence of the policyholder in failing to disclose, provided that the negligence has the potential to affect the occurrence of the risk or the amount of the indemnity.
Furthermore, the TCC provides for the duty of immediate notification of an increase of the risk during the term of the contract and provides that the insured and the policyholder must refrain from acts that would increase the amount of insurance indemnity by way of aggravating the risk or current conditions. Where the increase has been learned of subsequently, the policyholder must notify the insurer within 10 days of learning at the latest.
The insurer has the right to terminate the policy or request a premium difference within one month of becoming aware of the increase in the risk. Where the non-disclosure was wilful, the insurer will keep the paid premiums. If payment of the premium difference has not been accepted within 10 days, the policy will be deemed terminated.
Where the increase has been learned of after the occurrence of the risk, the insurance indemnity will be reduced according to the gravity of negligence in the failure to disclose, provided that the non-disclosure is of such gravity that it may affect the amount of the insurance indemnity or the occurrence of the risk. Where the policyholder’s non-disclosure was intentional, the insurer has the right to terminate the policy, provided that there is a connection between the non-disclosure and the occurrence of the risk. When there is no connection, the indemnity shall be paid taking into consideration the proportion of the paid premium and the premium that should have been paid if the circumstances had been disclosed.
The policyholder also has a duty of disclosure upon occurrence of the risk that relates to the disclosure of the facts affecting the occurrence of the loss. Upon occurrence of the risk, the TCC introduces a duty for immediate notification of the occurrence. The insured shall also notify events that may give rise to his or her liability within 10 days. When the notification of occurrence of the risk has not been made or made with delay, the indemnity to be paid shall be reduced according to the gravity of negligence, provided that the failure increased insurance indemnity.
Good faith and claims
Although the good faith principle exists in all kinds of contractual relationships, it has a heightened importance in insurance law. The Insurance Act expressly requires the insurers to act in good faith, in particular when carrying on marketing activities, enlightening the policyholders, protecting the insured’s rights and making timely insurance payments.
In the event that a risk materialises or that materialisation of the risk becomes highly probable, the policyholder must, as long as circumstances permit, take measures to prevent the loss or the increase in its likelihood, to mitigate the loss and to protect the insurer’s rights of recourse against third persons.
Set-off and funding
The insurer is entitled to deduct the premiums due from the indemnity amount or the fixed sum to be paid with the exception of liability insurance.
IV. Dispute resolution
i. Jurisdiction, choice of law and arbitration clauses
The Turkish Civil Procedure Code, applicable to local disputes, restricts the freedom of choice of local jurisdictions to agreements between merchants and agreements between public legal entities. Insurance agreements with no ‘foreign element’ concluded with those who do not qualify as merchants shall therefore be subject to the jurisdiction rules provided for in the Civil Procedure Code and this cannot be altered contractually. Accordingly, for loss insurances, the courts of the place where the insurable interest or risk is located are vested with jurisdiction, as an alternative to the courts of the respondent’s domicile and the place of performance agreed under the contract. For life insurances, the courts of the domicile of the policyholder, insured or beneficiary have exclusive jurisdiction.
The Code on International Civil Procedure, regulating conflict of laws, provides with respect to insurance contracts involving a foreign element that the following jurisdiction rules cannot be avoided by contract: (1) claims against insurers are subject to the jurisdiction of the courts at the insurer’s principal place of business or the place of incorporation of the insurer’s branch or Turkish-incorporated agent that concluded the contract; and (2) where the claim is against the policyholder, the insured or the beneficiary, the courts that have jurisdiction are the courts of its domicile in Turkey.
The main limitation to the application of foreign law would generally be the absence of a foreign element and Turkish public policy. The general approach under Turkish law is that mandatory rules are not necessarily matters of public policy.
The requirement of the existence of a foreign element, however, is controversial. In a decision of the Supreme Court of Appeal in an insurance case filed by an insured, it was concluded that the choice of a foreign law between two Turkish parties would, in itself, suffice for fulfilment of the foreign element requirement even if there were no foreign element with respect to the dispute.
The parties can choose arbitration for insurance disputes. Arbitration clauses can be inserted into the insurance and reinsurance agreement as a clause, or a separate arbitration agreement can be concluded between the parties. The arbitration clause must clearly indicate the parties’ intention to resolve the dispute before an arbitration panel and the arbitration clause or the arbitration agreement should be concluded in written form.
ii. Litigation
Claims to be pleaded directly to the insurer
With regard to liability insurance, the TCC provides that third parties are entitled to direct their claims to the third-party liability insurer of the person responsible for the loss.
Notification before the pleading
The insured shall notify the loss that is thought to be within the insurance coverage as soon as possible. Maturity of the indemnity payment arises upon conclusion of the insurer’s investigations into the scope of the indemnity and, in any case, 45 days after notification of the occurrence of the risk. The investigation of the insurer must be concluded within three months of notification. The policyholder is obliged to provide each and every document that is necessary to determine the extent of the risk or the indemnity upon the request of the insurer in a reasonable amount of time. Also, the policyholder is obliged to take the appropriate measures expected from them and to let the insurer carry out an inspection in the places where the risk has occurred.
Stages of litigation
Insurance disputes are, in principle, dealt with by the first instance commercial courts. The stages of litigation before the commercial courts are as follows: the parties make a written submission of their claim, defence, rebuttal and rejoinder, and evidence; a preliminary hearing date is set, where issues such as case conditions and preliminary objections are to be resolved; hearings are held on the disputed elements of the case, where the court can hear witnesses and obtain expert reports; upon assessment of all evidence and facts, the court delivers a short judgment followed by a reasoned judgment; and according to the Turkish Civil Procedural Code, the appeal procedure is to be conducted by a two-tier system comprised of regional appellate courts[14] and the Supreme Court.[15]
Mediation is a compulsory remedy to be pursued before filing a lawsuit in commercial matters, to decrease the workload of the judicial bodies (see Section IV.vi).
This is also to enable the Supreme Court to evaluate the merited issues of a dispute and prepare more diligent reasoning for its awards, which, hopefully, may develop case law where legislation or practice is ambiguous. This is particularly important for insurance law, because the Supreme Court has not thus far provided guiding principles for complex insurance disputes, which often require considerable effort in interpreting facts and contracts to resolve a wide range of issues (e.g., deductibles, exclusions, subrogation).
Evidence
Under Turkish civil law, the adversarial system prevails.
The burden of proof of the existence of the contractual relationship, the occurrence and amount of the loss lies with the insured. The insurer, on the other hand, must prove the lack of cover and application of exemptions. Every transaction exceeding 23,450 Turkish lira must be proven by a deed. Witness evidence would only constitute supportive evidence.
Turkish courts frequently refer disputes to a court-appointed panel of experts, even in legal matters. In a change to procedure, parties are now granted the opportunity to submit expert views, subject to questioning by the judge and the parties (without any common-law-style cross-examination procedure),[16] as supportive evidence and without the need to obtain a judge’s order in this regard.
Costs
Of the claimed amount, 6.831 per cent must be paid as court fees. One-quarter of this amount must be paid to the court in advance by the claimant. Court fees and court expenses are recoverable in the event of the case being found in favour of the claimant. The court orders legal fees in favour of the winning party (or to the extent of acceptance by the court of the claimed amount) in accordance with an official tariff. The parties cannot recover actual fees they may have paid to their lawyers. Lawyers’ fees ordered by the court belong to the lawyers unless agreed otherwise between the lawyers and their clients.
Claimants who are of foreign citizenship may also be obliged to submit a warranty to the court, the amount of which shall be determined by the court, subject to exemptions provided by bilateral and multilateral agreements (such as the Hague Convention on Civil Procedure).
iii. Arbitration
Pursuant to Law No. 6570 dated 29 November 2014, the Istanbul Arbitration Centre[17] was established and parties have the opportunity to refer disputes, in addition to ad hoc arbitrations and conventional arbitration institutions, to the Centre or to the Insurance Arbitration Commission, whose functions are explained below. The Centre presents an efficient alternative to court litigation, as the costs are low and the length of proceedings is short.
Arbitration clauses
Parties can refer to arbitration for the resolution of insurance disputes by inserting an arbitration clause into the insurance and reinsurance agreement or concluding a separate arbitration agreement between themselves.
Insurance Arbitration Commission
The Insurance Act foresees an institutional arbitration proceeding irrespective of the existence of an arbitration clause. Proceedings before the Insurance Arbitration Commission lack certain elements of traditional arbitration as no arbitration agreement is concluded between the parties and the arbitrators are appointed by the Commission (rather than by the parties) from its list of registered arbitrators. This procedure is therefore regarded as a unique, ombudsman-like dispute resolution mechanism, instead of regular arbitration. The arbitrators in the Commission must finalise the dispute within four months of their appointment, otherwise the dispute shall be resolved by the competent courts. However, it is possible to extend this four-month period with the clear and written consent of the parties.
Most of the awards rendered by the Commission in 2023[18] concerned car insurance policies, compulsory traffic insurance, voluntary liability insurance and state-sponsored herbal products. Compared with court judgments, the awards contain more comprehensive examinations and reasoning.
A decision of the Supreme Court of Appeal dated June 2020 on the unification of conflicting judgments ruled that as of 20 July 2016, decisions of the arbitration committee of the Commission shall be directly subject to the highest appellate procedure, bypassing the appellate examination before the regional court of appeal, to ensure a more expeditious and cost-effective trial.
iv. Alternative dispute resolution
Complaints of the insured
If the insured has a complaint arising from interpretation of the regulations or conduct of an insurance company, it can apply to IRSA via the Turkish government’s online system. This system is established for IRSA to transfer the disputes arising from insurance and pension contracts to the insurance and pension companies. In this way, the disputes should be resolved easily and quickly by receiving a response from the insurer. IRSA does not have authority to resolve the disputes as an expert, an arbitrator or a court, but rather acts as an intermediary to transfer the claims from the insurer to the relevant insurance company.
v. Mediation
Mediation was recognised in Turkish law for the first time by the Mediation Act, which entered into force in June 2013. With the amendment of the TCC,[19] which entered into force on 1 January 2019, mediation became a compulsory remedy to be pursued for all commercial monetary claims (including insurance disputes) as a cause of action to be exhausted before proceedings are commenced, leaving filing a lawsuit before the state courts as a last resort.
In the event of a settlement following mediation, the parties may request an annotation regarding the execution of the agreement from the court at the place of jurisdiction. The annotation gives the agreement the power of a court judgment.
V. Year in review
Turkey is reported as one of the countries where cyberattacks show most growth. Although cyber insurance is still a new and emerging concept in Turkey and the legislative regulations are yet to come into effect, the insurance sector continue to issue new products regarding cyberattacks, under the name of identity protection insurance, digital protection insurance or personal and commercial cybersecurity insurance to cover the damage incurred because of attacks targeting digital platforms such as computers, electronic devices or automated teller machines.
According to the Turkish Insurance Association’s 2022 Sector Report, the insurance, reinsurance and retirement sector ranked as second in the financial sector with a 4.8 per cent share totalling 780,5 billion Turkish lira. The Sector Report states that in 2022, while the world economy recovered significantly from the challenges of the COVID-19 pandemic, it was a tough year for Turkey due to high costs caused by exchange rate increases and high inflation, and the resulting increase in damages. However, these problems led to an increase in insurance awareness, and the total amount of compensation undertaken by the insurance industry reached 87.6 billion Turkish lira. The Sector Report also highlights that the amount of compensation covered for nearly 10 thousand life insurance holders within the scope of the Kahramanmaraş-based earthquake disaster dated 6 February 2023 is over 1 billion Turkish lira.
On 1 October 2023, The Communique on Financial Reporting for Insurance and Reinsurance Companies and Pension Companies was published in the Official Gazette No. 32326. The Communique will come into force on 1 January 2025 and it regulates the format and content of consolidated and unconsolidated financial statements based on Turkish Financial Reporting Standards (TFRS) , and their disclosure to the public. The Communique on Presentation of Financial Statements dated 18 April 2008 will be abolished with the new Communique. The Communique on Insurance Uniform Accounting Plan and Prospectus was also published in the said Official Gazette and will come into force on January 1, 2025. This regulation aims to facilitate the preparation of financial statements in line with TFRS and ensures consistency in accounting records and reporting, enabling companies to fulfil their responsibilities and monitor their financial strength.
On 13 May 2023, Amendments to the Regulation on Financial Reporting for Insurance and Reinsurance Companies and Pension Companies were published in the Official Gazette No. 32189. The amendments will come into force on 1 January 2025. The amendments explain the scope of the regulation and obliges of the companies to comply with “TFRS 17 Insurance Agreements” which determines the principles for recognition, measurement, presentation, and disclosure of insurance agreements in the financial statements.
On 7 June 2023, Amendments to the Regulation on Insurance Arbitration were published in the Official Gazette No. 32214. The amendments present new arrangements regarding the working procedures of reporters, objection authorities, and insurance arbitrators' experience, which will allow electronic applications to the insurance arbitration system and the Appellate Arbitral Tribunal. In addition, the preliminary eligibility examination to be made by the reporters is extended, covering initiation of enforcement proceedings in addition to court, or arbitration proceedings and those before the Consumer Arbitration Committee.
VI. Outlook and conclusions
According to the European Commission’s Turkey 2023 Report, although Turkey made a limited progress in the reporting period by strengthening the insurance market and developing new alternative financing instruments, a 2022-2025 participation finance strategy is released to ease the burden of insurers, with the aim of building a legal, administrative and corporate infrastructure for participation finance; the Capital Markets Board adopted some amendments to the sale methods and distribution principles applied to initial public offering of shares to protect investors’ rights as regards financial market infrastructure. The report also mentions the electronic applications for insurance arbitration system as well as the measures taken by Insurance and Private Pension Regulation and Supervision Agency (SEEDK) to ease the burden of insurers following the earthquake “such as extending the maturities of all expired mandatory earthquake insurance policies or removing the penalty for delays to compulsory motor insurance.”[20]
With the new emerging risks, such as cyberattacks, climate change and natural disasters, developments in the insurance and reinsurance sector with regard to legislation and practice will keep on evolving in the future. Considering that cyberattacks are increasing in Turkey at one of the fastest rates, cyber security and personal data protection insurances are expected to be two of the fastest growing fields in Turkish insurance law. In addition, rent insurance and natural disaster insurance (especially earthquake insurance as a result of the latest disaster happened on February 2023) should also be considered as rapidly growing areas of Turkish insurance law.
[1] Aysel Korkmaz Yatkın and Görkem Bilgin are partners, Asena Aytuğ Keser is a managing associate and Edanur Atlı is a senior associate at Gün + Partners.
[2] https://www.tsb.org.tr/tr https://www.tsb.org.tr/tr/uye-sirketler.
[3] Direct and Indirect Premiums 2023 – 12, Insurance Association of Turkey, available at: https://www.tsb.org.tr/tr/istatistik/genel-sigorta-verileri/prim-adet
[4] https://www.tsb.org.tr/tr/istatistik/genel-sigorta-verileri/prim-adet
[5] https://www.turkreasurans.com.tr/faaliyet-raporlari
[6] https://data.tuik.gov.tr/Bulten/Index?p=Yillik-Gayrisafi-Yurt-Ici-Hasila-2022-49742
[7] https://www.seddk.gov.tr/tr/raporlar/kurum-faaliyet
[8] www.sigortatahkim.org.tr/files/E-BULTEN-56.pdf
[9] www.seddk.gov.tr/upload/2023-27_Sayili_Genelge.pdf
[10] https://www.lexpera.com.tr/resmi-gazete/metin/rg801y2023n32241s7345/1/madde-1
[11] Article 1403.
[12] Law No. 805 published in Official Gazette No. 353 dated 22 April 1926.
[13] https://www.lexpera.com.tr/resmi-gazete/metin/rg801y2024n32433p14/1/madde-4
[14] Article 341 of the Civil Procedural Code.
[15] Article 361 of the Civil Procedural Code.
[16] Umar, Bilge; Civil Procedure Code Annotation, page 801.
[17] http://istac.org.tr/en.
[18] www.sigortatahkim.org/files/karardrgs56.pdf
[19] Law on Starting Legal Proceedings for Monetary Receivables Arising from Subscription Agreements No. 7155, published in the Official Gazette No. 30630, dated 19 December 2018.
[20] https://neighbourhood enlargement.ec.europa.eu/system/files/202311/SWD_2023_696%20T%C3%BCrkiye%20report.pdf
First published by The Law Reviews in Jun 20, 2024.