THE TURKISH CATASTROPHE INSURANCE POOL 2013 THE TURKISH CATASTROPHE INSURANCE POOL COMPULSORY EARTHQUAKE INSURANCE ANNUAL REPORT ANNUAL REPORT 2013

Call Center: Alo 125 / Fax: 0216 474 23 64 Address: Altunizade Mah. Ord. Prof. Fahrettin Kerim Gökay Cad. No: 20 34662 Üsküdar-Istanbul /Turkey www.dask.gov.tr

This annual report has been printed on 100% recycled paper.

Assessment by the Management THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

Selamet Yazıcı TCIP Chairman Message from the Chairman RAISING INSURANCE AWARENESS

Disaster damage resulting from natural events has increased significantly across the world in recent years. During this time, the Turkish Catastrophe Insurance Pool (TCIP) has become a best practice globally with its role in covering losses due to disasters.

2 Dear Stakeholders, In parallel with the growing number of dwellings under insurance coverage, the risk categories covered by the Pool 2013 was a year in which the Pool undersigned important have also risen significantly. In addition to its own funds and reinsurance capabilities, TCIP has started to make use of 6 projects and initiatives. While earthquake-related losses were at one of the lowest levels in recent years, we had a alternative risk transfer instruments at an attractive cost. As very active and productive period preparing for disasters, a first for Turkey, the Pool issued 3-year catastrophe bonds million increasing the insurance penetration rate, and raising totaling USD 400 million in April. Additionally, the Pool awareness about earthquakes as well as Compulsory has also increased its reinsurance protection by 32% over insurance Earthquake Insurance. the previous year, thus bringing TCIP’s indemnity payment capacity in case of an earthquake event to above the 11 policies In one outstanding achievement, we reached our year- billion TL end target of 5 million insurance policies much earlier In one outstanding than expected, by March 2013. For the year as a whole, In 2013, we also made a significant capital investment achievement, we we increased the number of policies by 26% over 2012 to enhance our disaster management system. Our new with total insured dwellings climbing to over 6 million. The disaster management platform will launch in the coming reached our year-end advent of the Disaster Insurance Law on August 18, 2012, period. Work to improve our loss assessment and appraisal target of 5 million and the establishment of new insurance check points were processes and further develop our human capital has insurance policies key factors underlying this great achievement. The fact reached the final stages. By making use of cutting edge much earlier than that over 2 million additional dwellings were insured in the technology, we have started setting up loss estimation 16-month period after the law went into effect underscores systems based on our geographical information systems expected, by March the critical importance of legal regulation in this field. infrastructure and change detection through satellite 2013. For the year as imaging. In order to carry out the most efficient and a whole, we increased In order for insurance to function in a meaningful way, the prompt loss assessment in case of a major earthquake, the number of policies rapid growth of recent years needs to continue and the we conducted training programs for our loss adjusters. insurance penetration rate must rise from its current level In cooperation with AFAD (Disaster and Emergency by 26% over 2012 of 35% to above 60%. While pursuing these targets, we Management Presidency), we provided support to the with total insured must also narrow the insurance penetration gap between project launched in 2013 to update Turkey’s earthquake dwellings climbing to different regions of the country. While the penetration rate map. We are also providing support to the Ministry of over 6 million. is about 45% in the Marmara Region, it unfortunately hovers Environment and Urbanization’s orthophotography initiative at only 24% in Southeastern Anatolia. that covers the entire country, and which will commence in 2014. The prompt renewal of new insurance policies in subsequent years is very important to maintain the Meanwhile, we geared up our promotional campaigns sustainability of the system. In addition to our promotional and educational activities to strengthen public awareness and advertising related activities, we increased our budget of earthquakes and insurance. By using mainstream this year and made significantly more calls from the call media, social media, special initiatives and other mass center, in order to raise awareness among policyholders and communication tools, TCIP has reached out to a huge remind them to renew their policies on time. As we know all audience. The Pool makes use of a wide array of media too well, an earthquake can hit Turkey at any time. and methods to carry out a diverse and intensive communications campaign. Examples include various TV In recent years, unfortunately, there has been a huge rise commercials, the Fault Line Truck, television programming, 60% across the globe in the material damages incurred by the “Cities Compete, Policyholders Win” contest, a short TCIP aims to raise natural disasters. In 2013, the total loss caused by such film competition which is set to go international next natural events including earthquakes worldwide amounted year, educational activities in schools, cooperation with the penetration rate to some USD 140 billion. The average annual loss incurred local government, as well as social media campaigns. The from its current level in the last 10 years is about USD 190 billion, of which Earthquake Resistant Building Design Competition planned of 35% to above only 32% was under insurance protection. Although the for next year is another event expected to draw public 60%. percentage covered by insurance in Turkey is relatively attention. Furthermore, our call center ALO DASK 125, lower, this figure will naturally increase as the penetration the capacity of which we expanded recently, makes calls to rate rises. policyholders whose insurance policies have expired and need to be renewed. In this way, we place telephone calls to Following its formation, the Turkish Catastrophe Insurance hundreds of thousands of policyholders every year. All these Pool (TCIP; DASK in Turkish) has established a significant various activities will be expanded and extended further in institutional and financial capacity, to become one of the coming years with the contribution and support of our the best practices globally in this field. Many countries invaluable stakeholders. that suffer from the destructive effects of disasters closely monitor our operation, drawing inspiration from This year once again, I would like to wholeheartedly extend our successful experience in order to develop their own my gratitude to all our employees for adding so much systems. Given that disaster damage caused by natural value to the Pool with their hard work and dedication, to events has risen dramatically in recent years across the our stakeholders for their unfaltering support and to our world, it is logical for such an effective practice to attract esteemed policyholders for their trust in us. widespread interest. TCIP is a global standout thanks to a successful business model which blends the organization’s Best regards, pioneering role in covering disaster-related losses, a high penetration rate in a relatively underdeveloped insurance market, the ability to provide insurance at low prices, a high ındemnity payment capacity which includes reinsurance and catastrophe bonds, as well as public-private partnership. The positive attention that TCIP garners is a source of pride for both our country and the Pool. 3 Assessment by the Management THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

Okan Utkueri Board Member Message from the General Manager of General Manager of Pool Management Company Eureko Sigorta Pool Management Company Eureko Sigorta FIRM STEPS TOWARDS A SECURE FUTURE

A shining example of public-private partnership, TCIP has shown that it is positioned to become the strongest supporter of the Turkish people during times of natural disaster.

4 Dear Stakeholders, Public campaigns strengthen disaster insurance awareness. The Disaster Insurance Law has boosted TCIP’s In our new commercials around the concept TL 11 operations. “guest by necessity,” we pose the question, “Who TCIP has once again left behind a year filled with would accept you as a guest in case your home billion productive activity. By capitalizing on the fact that was damaged in an earthquake?” The video urged TCIP now has the 2013 saw minimal disaster losses, we further homeowners to plan for the aftermath of a quake, capacity to pay and the campaign yielded positive results. As a result, reinforced our infrastructure against a major TL 11 billion in we have decided to extend the awareness campaign earthquake and focused on enhancing our ındemnity claims for a single payment capacity. In addition, we continued our into 2014 around the same concept. earthquake event. efforts to increase the number of policyholders who participate in our system. Meanwhile, we continued with other initiatives that have almost become annual traditions at TCIP. On This was a successful year for the Pool in terms tour since 2010, TCIP’s Fault Line Truck visited 11 of improving our penetration rate. The favorable locations and reached out to some 30 thousand effects of the Disaster Insurance Law enacted in people this year. Designed to increase awareness of 2012 spilled over into 2013. Since the law introduces insurance and expand coverage, our contest “Cities checks for Compulsory Earthquake Insurance prior to Compete, Policyholders Win,” under the patronage electricity and water subscriptions, we experienced a of Deputy Prime Minister Ali Babacan, continued in significant rise in the number of our policyholders. 2013. Participation in the contest continues to rise year after year, prompting Provincial Directorates Integration with the National Address of Disaster and Emergency to implement a number Database (UAVT) is complete and the Disaster of creative initiatives to promote Compulsory Management Project was launched. Earthquake Insurance. To meet our responsibilities, which have grown in tandem with the rising penetration rate, we carried TCIP is powered by a public-private partnership. out a range of activities in 2013 to facilitate disaster Another project we initiated in 2013 was the TCIP management, boost our ındemnity payment capacity Earthquake Resistant Building Design Competition, and enhance operational efficiency. the first of its kind in Turkey. This competitive event, which has already generated buzz among civil Our first initiative under the Disaster Management engineering students, is designed to raise awareness Project was to integrate the addresses of the on the importance of safe structures. In another dwellings in our system with the National Address key development during the year, our Short Film Database (UAVT) in order to greatly improve the Competition went international. Held annually among 30 efficiency of post-earthquake operations. This data university students, the competition will accept integration will avoid possible address errors while participants from 21 countries including Turkey in its thousand policies are being written, and ensure that the most 2014 edition. up-to-date addresses are entered into the system. people As an exemplary public-private partnership initiative, As a result, we will facilitate and accelerate access Touring around TCIP demonstrated a remarkable performance in to our policyholders as well as the loss assessment Turkey since 2010, process in case of an earthquake. To ensure prompt 2013 and laid the groundwork for 2014. As the TCIP’s Fault Line and efficient loss assessment at these addresses, we Pool Management Company Eureko Sigorta, we are Truck has reached have planned training programs for loss adjusters. proud to play a role in TCIP’s successful operations out totally 212 Thus, we will have well-trained human resources and to contribute to the Pool’s progress. At this thousand people ready to intervene in the aftermath of an earthquake time we would like to extend our gratitude to our to date and visiting in large cities. Thanks to geographical information partners in making this tremendous achievement and change detection systems, we will be able to possible; to insurance companies, insurance brokers 11 places reached estimate possible damages related to earthquakes and loss adjuster for their cooperation; to the roughly 30 thousand and take appropriate preparatory measures by Undersecretariat of Treasury for its full support; and people in 2013. making use of different scenarios. to TCIP’s Chairman and Board Members for their diligent efforts. In addition to such efforts to offer better services to our policyholders, we also carried out a wide range Best regards, of activities to reach out to potential policyholders and raise awareness on earthquakes and insurance protection.

5 Table of Contents

47

24

38 7. KEY PROJECTS AND OPERATIONS 38 7.1. Address Codes in Compulsory Earthquake Insurance Policies 33 39 7.2. Phone Call Reminders for Policy Renewal 39 7.3. SMS Notifications 40 7.4. Title Deed Integration 40 7.5. Matching with Company Policy Numbers

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE 40 7.6. Policy Number and Policy Detail Services 40 7.7. Policy Queries via the E-Government 40 7.8. Policy Queries with the Address Code 41 7.9. Phone Number Algorithms 41 7.10. Urban Transformation 41 7.11. Reporting

42 8. PUBLIC CAMPAIGNS AND PR ACTIVITIES 43 42 8.1. Communications Activities 43 8.1.1. Press Conference on 5 Million Policies 43 8.1.2. Special Communications Activities 10 1 OVERVIEW 44 8.1.3. TCIP’s Secure Life Parks Openings 10 1.1. Earthquakes and Turkey’s Seismicity 44 8.1.4. Red Crescent’s ‘Organizing Community Leaders’ 12 1.2. TCIP’s Formation and Purpose Project (TLT) 14 1.3. TCIP’s Organizational Structure 45 8.1.5. Earthquake-Resistant Building Design Competition 15 1.4. Board of Directors 45 8.1.6. International Short Film Competition 15 1.5. Pool Management Company 46 8.1.7. ‘Cities Compete, Policyholders Win’ 16 1.6. Compulsory Earthquake Insurance 46 8.1.8. Public Campaigns 16 1.6.1. Scope of Operations 47 8.2. Social Media 17 1.6.2. Check Points 17 1.6.3. Authorized Insurance Companies 48 9. STATISTICS 48 9.1. Policy Production by Year 20 2. TARIFFS AND INSURANCE PRACTICES 49 9.2. Policy Production by Company 50 9.3. Policy Production by Month 22 3. REINSURANCE PROTECTION AND 50 9.4. Penetration Rate by Region CATASTROPHE BONDS 51 9.5. Penetration Rate by Province 53 9.6. Policy Distribution by Region 28 4. FUND MANAGEMENT 54 9.7. Policy Distribution by Risk Region 55 9.8. Policy Distribution by Building Construction Year 30 5. CLAIMS MANAGEMENT AND DISASTER 56 9.9. Policy Distribution by Building Surface Area MANAGEMENT PROJECT 30 5.1. Indemnity Payments 57 10. AUDIT REPORT 31 5.2. Disaster Management Project

34 6. INFORMATION TECHNOLOGY AND DATA MANAGEMENT 34 6.1. Hosting Services 35 6.2. Network Management and Service Level Agreements 36 6.3. TCIP Monitoring Services 36 6.4. Security Architecture and Policies 36 6.5. Emergency Center Management 37 6.6. Data Security and Backup 37 6.7. Application Software

6 COMPULSORY EARTHQUAKE INSURANCE IS OUR SOCIAL RESPONSIBILITY

Established in 2000, the Turkish Catastrophe Insurance Pool (TCIP; DASK in Turkish) is a public institution and a legal entity, which is charged with providing, implementing and managing Compulsory Earthquake Insurance services across Turkey.

Operating with the slogan, “The earthquake will pass, and life will go on,” TCIP aims to ensure that citizens continue their daily lives in safety in the aftermath of an earthquake. Compulsory Earthquake Insurance provides material assurance to insured homeowners against risks of earthquake TCIP and related fire, explosion, landslide and tsunami losses. The Pool promptly TCIP supports its insurance compensates policyholders for damages incurred to buildings, whether operations with public campaigns heavily or partially damaged, and assists in the return to daily life. to raise public awareness on the issue and underscores the fact that Compulsory Earthquake TCIP facilitates access to Compulsory Earthquake Insurance via a wide Insurance is, above all, a social distribution network that includes partner insurance companies, their responsibility for everyone. agencies and bank branches, and ensures that everyone regardless of means can enjoy such assurance, by keeping premiums low.

TCIP supports its insurance operations with public campaigns to raise public awareness on the issue and underscores the fact that Compulsory Earthquake Insurance is, above all, a social responsibility for everyone.

Since earthquakes have been the most common natural catastrophe to hit Turkey over the last 60 years and as nearly the entire country is considered earthquake-prone, these are events to be expected. Furthermore, earthquakes can also inflict severe economic losses not only in a single geographic area but also across the entire nation.

While providing insurance to individual dwellings, Compulsory Earthquake Insurance also constitutes a claims pool for the whole country. The size of this financial pool becomes extremely important in the aftermath of an earthquake, as it provides a guarantee to all those in need across the country, and not just those in a single province.

TCIP provides insurance for individuals as well as efficient assistance to impacted regions, thereby effectively extending social solidarity awareness. 7 THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

“I fully grasped the importance of TCIP after the earthquake. If not for TCIP, I wouldn’t have quickly and safely returned to my normal daily life following the earthquake that hit Van in 2011.” Mehmet Zülfü KAYA

8 9 1. Overview CATASTROPHE AWARENESS MUST BE RAISED FURTHER

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE Earthquakes can cause great number of deaths and property in the areas affected.

1.1. EARTHQUAKES AND Rise in material loss from natural disasters TURKEY’S SEISMICITY Earthquakes can cause great number of deaths and 32% property as well as very high insurance claims in the Natural disasters A natural catastrophe that leads to multiple areas affected. As a result, disaster management including damages… efforts place a special focus on the phenomenon. In earthquakes that Throughout history, earthquakes have been the order to minimize possible loss of life and property took place across natural disasters that have exacted the heaviest resulting from earthquakes, developed countries the world in 2013 toll on human life. Earthquakes are a result of use a variety of tools and methods such as disaster resulted in USD 140 seismic waves triggered by unexpected explosions management, seismological observation, scientific billion in material of energy across the Earth’s crust, which lead research as well as civil defense efforts by the state losses. Over the last to tremors on the surface of the planet. Despite and NGOs. 10 years, this figure advances in building technology, earthquakes can has averaged USD result in great number of deaths and property even A global analysis reveals a significant rise in the 190 billion annually, in the most developed nations. material losses triggered by natural catastrophes only 32% of which over the last decade. Natural disasters including was under insurance Around 500 thousand earthquakes take place earthquakes that took place across the world in protection. every year across the world; of these, humans 2013 resulted in USD 140 billion in material losses. physically feel some 100 thousand. Earthquakes Over the last 10 years, this figure hovered around tend to concentrate in certain geographic belts, an annual average of USD 190 billion, only 32% of such as the Ring of Fire in the Pacific or the Alpine- which was under insurance protection. Himalayan region. Certain regions located far from these earthquake zones are completely immune to tremors.

10 TURKEY’S EARTHQUAKE REGIONS MAP According to Turkey’s Earthquake Zones Map, 66% of the country and 71% of the entire population are located in first and second degree earthquake zones.

Regions with the highest risk

I. Degree II. Degree III. Degree IV. Degree V. Degree Provincial Center Provincial Boundary

General observations on earthquakes globally Historically an earthquake-prone country… • In recent years, there has been a sharp increase in Turkey is a high earthquake-prone country due to natural disasters across the globe. its location on the Alpine- Himalayan belt, one of 17% • As living standards improve, people’s awareness the world’s main earthquake zones, which starts Worldwide, of disaster risk and insurance rises considerably. in Indonesia (Java-Sumatra) and passes through some 17% of all • In more developed nations, in parallel with the the Himalayas and the Mediterranean to end in earthquakes take evolving social structure, individuals tend to rely the Atlantic Ocean. Worldwide, some 17% of all place in the Alpine- on institutions rather than other family members earthquakes take place in the Alpine-Himalayan Himalayan belt, when catastrophe strikes. belt, which includes Turkey. which includes • Since at-risk regions tend to undergo urban Turkey. development, earthquakes result in even heavier According to the latest Turkey’s Earthquake Zones economic losses. Map, 66% of the country is located in first and • Disaster management efforts tend to emphasize second degree earthquake zones, home to 71% of awareness prior to the catastrophe, as much as the total population. An analysis by province reveals measures to be taken during and after the event. that 57 out of 81 provincial centers are located in first and second degree earthquake zones.

11 1. Overview THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

In Turkey, earthquakes Decisive steps in disaster management 1.2. TCIP’s Formation and Purpose are responsible for Due to its geographical conditions and climate, 81% of all dwellings Turkey is vulnerable to not only earthquakes, but Established by Executive Decree No. 587, TCIP destroyed by also other natural catastrophes such as flooding, has offered Compulsory Earthquake Insurance catastrophe, which landslides and avalanches. In recent years, the coverage for dwellings since September 27, results in an urgent Turkish state has led efforts to establish a more 2000. The legal basis of TCIP’s operations was need to renew the institutional-based disaster management policy. In strengthened further upon the enactment of the housing stock, Turkey, earthquakes are responsible for 81% of all Disaster Insurance Law No. 6305 on August 18, especially in large dwellings destroyed by catastrophe, which results 2012. cities, and to raise in an urgent need to renew the housing stock, awareness of disaster especially in large cities, and to raise awareness of TCIP is an insurance pool that is a public legal management and disaster management and insurance. entity, and has been set up to provide Compulsory insurance. Earthquake Insurance. Established through a public-private partnership, TCIP is a non-profit institution with a unique organizational structure. Its ındemnity payment capacity is independent of the government budget. Currently, 31 authorized insurance companies and their agencies offer Compulsory Earthquake Insurance on behalf of TCIP.

12 STANDING BY THE TURKISH PUBLIC SINCE 2000 Focusing on more concrete goals following the enactment of the Disaster Insurance Law, TCIP expends great effort to fully meet its duties and responsibilities.

The system put in place has already demonstrated • Ensuring the distribution of risk domestically, Established through a successful performance and has been designated and distributing the financial risk associated a public-private by multilateral institutions as a best practice for with earthquake events across international partnership, other countries. reinsurance and capital markets via insurance TCIP is a non- policies, profit institution TCIP’s primary objectives include: • Creating the necessary long term resource with a unique • Bringing all eligible dwellings under earthquake accumulation to compensate for earthquake organizational insurance coverage in return for an attractive damages, and structure. premium, • Raising insurance awareness among the general • Establishing a payment capacity independent of public. the government budget,

13 1. Overview

TCIP’s 1.3. TCIP’S ORGANIZATIONAL TCIP operates to ensure the continuity of organizational STRUCTURE existing insurance policies and to attract those structure blends the homeowners who have yet insured their strengths of public In terms of its structure and operation, TCIP dwellings. In order to ensure sustainable growth of and private sector constitutes one of the best examples of public- Compulsory Earthquake Insurance, the Pool both enterprises. private partnerships. The Pool’s technical and manages policy production and undersigns high- operational transactions are provided by an profile promotional and social campaigns that raise insurance or reinsurance company, which is earthquake and insurance awareness. designated by the Undersecretariat of Treasury for five-year periods. Although the Pool provides Technically, TCIP is an insurance pool. As such, it insurance coverage, the insurance companies does not need a physical organization to manage offer the Compulsory Earthquake Insurance to its operations. Instead, and in order to improve homeowners. As a result, TCIP has created an efficiency and minimize cost, the Pool outsources efficient mechanism that blends the strengths of its operations. The Pool’s general organizational public and private sector enterprises. structure is as follows: THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

UNDERSECRETARIAT OF TREASURY POOL MANAGEMENT COMPANY TCIP BOARD OF DIRECTORS SUPPORT SERVICES

CONTRACT FUND MANAGEMENT

POOL MANAGEMENT COMPANY REINSURANCE

EUREKO SİGORTA IT

PUBLIC RELATIONS

LOSS ADJUSTMENT AND TRAINING

CLAIMS ASSESSMENT AND PAYMENT INSURANCE PROVIDERS

AGENCIES BROKERS BANKS DIRECT SALES

HOME OWNERS

14 1.4. BOARD OF DIRECTORS various institutions and organizations, consists of TCIP’s technical the members listed below. The current structure and operational TCIP is managed by a seven member Board of of the Board of Directors ensures sufficient processes are Directors, including a chairman. The Board of representation of relevant parties as well as outsourced. Pursuant Directors, which also includes representatives from efficient governance of TCIP. to an agreement signed with the Undersecretariat Chairman and Members of the Treasury in accordance with NAME ROLE TITLE & ORGANIZATION Article 6 of Disaster Insurance Law No. Selamet YAZICI Chairman Deputy Director at the General Directorate of Insurance, 6305, the maximum Undersecretariat of Treasury service period of any Ercan TIRAŞ Member Undersecretary at the Ministry of Environment and Urbanization outsourcing company Prof. Dr. Mustafa ERDİK Member Director at Kandilli Observatory and Earthquake Research is five years, following Institute which the agreement is renewed. Bekir Sıtkı ŞAFAK Member Deputy Director at Capital Markets Board Mehmet KALKAVAN Member Assistant General Secretary at the Association of the Insurance and Reinsurance Companies of Turkey H. Okan UTKUERİ Member General Director at Pool Management Company Eureko Sigorta A.Ş. Member AFAD (Disaster and Emergency Management Presidency)

1.5. POOL MANAGEMENT with the Pool, informing the Board of Directors The dual objective COMPANY about the activities of said portfolio management of Eureko Sigorta’s Pursuant to an agreement signed with the companies, provision of pool Undersecretariat of the Treasury in accordance • Keeping special and separate accounting records management services with Article 6 of Disaster Insurance Law No. 6305, for the Pool’s revenues and expenses, as well as to TCIP is to increase the maximum service period of any selected other accounts and transactions, the insurance company is five years, following which the penetration rate and to agreement has to be renewed. For the five-year • Conducting public relations, promotional and carry out problem-free period from August 8, 2010 to August 8, 2015, training campaigns, claims operations. TCIP’s technical operations are being carried out, • Carrying out the necessary correspondence for the second time, by Eureko Sigorta A.Ş. on behalf of the Pool with relevant individuals, institutions and organizations, storing relevant Efficient technical and operational processes data, information and documentation as required, The Pool Management Company is responsible and procuring the goods and services outsourced for managing TCIP’s technical and operational by the Pool, processes in line with the principles outlined in the • Preparing the analytical studies, information and relevant legislation and the service agreement as reports demanded by the Undersecretariat of well as the resolutions of TCIP’s Board of Directors. Treasury. The main responsibilities of the Pool Management Company include: The dual objective of Eureko Sigorta’s provision of pool management services to TCIP is to increase • Printing and distributing policies, collecting the insurance penetration rate, and to carry out premiums, carrying out the necessary managerial problem-free claims operations. To these ends, and operational related activities in cooperation Eureko Sigorta strives to ensure that the Pool uses with all the stakeholders for loss assessment and the latest technology in all its operations while ındemnity payment purposes, providing TCIP with an efficient claims service • Implementing risk transfer and reinsurance plans, infrastructure to respond to any earthquake event, • Channeling the institution’s resources to prudent which would allow the Pool to promptly mobilize investments pursuant to the stipulated guidelines vast financial resources. All these efforts are carried and limits, managing relationships with the out mindful of the Pool’s social responsibility based portfolio management companies that cooperate operating philosophy. 15 1. Overview CLAIMS MANAGEMENT IN EARTHQUAKES IS A KEY ISSUE

As of year-end 2013, 31 authorized insurance providers and their agencies across Turkey offered Compulsory Earthquake Insurance on behalf of TCIP. THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

1.6. COMPULSORY Dwellings with no separate title deed as of yet can be 31 EARTHQUAKE INSURANCE insured upon the insurers’ declaration and according to the information provided in the title deed for the Currently, 31 1.6.1. Scope plot. authorized insurance Compulsory Earthquake Insurance is an insurance providers and agencies system largely designed for dwellings located within Structures outside the scope: across Turkey municipal areas. • Buildings registered to village residents and offer Compulsory constructed on residential village and hamlet lands Earthquake Insurance Disaster Insurance Law No. 6305 and related rules and environs, on behalf of TCIP. In and regulations clearly identify the structures eligible • Buildings that are used entirely for commercial or addition, the Pool for this insurance. industrial purposes, engages in direct • Buildings and their independent sections subject to selling to ensure that The buildings under the scope of the Disaster Public Residences Law No. 2946 dated November insurance policies are Insurance Law include: 9, 1983 or used as public service buildings, renewed at the end of • Residential structures built on land that is privately • Buildings not associated with a development each year. owned and registered in the land registry, project and that have not been constructed using • Separate sections defined in Property Ownership engineering services, Law No. 634, • Buildings with a load bearing system that is • All separate sections, within these buildings, used detected to have been incorrectly renovated or for commercial purposes, office space or for otherwise weakened, similar purposes, • Buildings with a load bearing system that has been • Dwellings built by the state for natural disaster constructed incorrectly, in breach of the applicable relief or those built using dedicated loans by the legal framework and the development project, state. • Buildings that have been set aside for demolition by public authorities as well as neglected, damaged All buildings consisting of shared apartments that or deserted structures not fit for residential use. satisfy the above conditions, as well as all those not yet classified in the land registry and listed as “plot” Compulsory Earthquake Insurance policies are or the like, and all co-op housing not yet registered in offered by authorized insurance providers and the land registry also require Compulsory Earthquake agencies on behalf of TCIP. Currently, 31 authorized Insurance. insurance providers and agencies across Turkey offer TCIP’s Compulsory Earthquake Insurance to homeowners. 16 1.6.2. Check Points In order to facilitate title deed related transactions The presence Electricity and Water Subscriptions and to lighten the operational burden of title deed of Compulsory Article 11 of Disaster Insurance Law No. 6305 offices, the electronic information systems of Earthquake stipulates that “the existence of Compulsory various relevant institutions has been integrated. Insurance coverage Earthquake Insurance must be checked by is checked during relevant institutions prior to electricity and Housing Loans water and electricity water subscription sign-ups for buildings and According to Article 13 of Insurance Law No. subscription sign- individual sections that fall within the scope of the 5684, Article 24 of the TCIP Operating Principles, ups, title deed Compulsory Earthquake Insurance.” As a result, Article 5 of the Regulation on Insurance Practices related transactions Compulsory Earthquake Insurance checks have Re: Private Loans as well as Article 7 of the and housing loan been initiated by all electricity and water service Compulsory Earthquake Insurance Tariff and procurement. providers as of August 18, 2012. Instructions, housing loans extended by banks also require that homeowners purchase Compulsory Title Deed Transactions Earthquake Insurance and renew this coverage for Since 2000, title deed offices have regularly the duration of the loan. checked dwellings for insurance coverage prior to formal transactions taking place, such as purchase, 1.6.3. Authorized Insurance Companies sales and mortgage. The legislation on this issue Compulsory Earthquake Insurance policies are was amended by Article 11 of Law No. 6305. provided by the 31 authorized insurance companies and agencies on behalf of TCIP.

17 THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

“We endured a lot of hardship during the 2011 Van earthquake. TCIP helped us tremendously. They arrived promptly and resolved all our problems in about a month.” Salih CEBE

18 19 2. Tariffs and Insurance Practices RATES FOR COMPULSORY EARTHQUAKE INSURANCE

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE On January 1, 2013, Compulsory Earthquake Insurance rates per square meter were revised by the Undersecretariat of Treasury.

Insurance Tariffs and Premium Calculations The Compulsory Earthquake Insurance tariff per The monthly premium to be paid is arrived at by square meter was amended as of January 1, 2013. TL 150 adding the fixed amount of 10 TL to the amount The following per square meter costs are valid as calculated by applying the tariffs for the earthquake of January 1, 2012. These figures represent the thousand zone and construction type given below. The fixed average cost per square meter used to calculate Regardless of amount for risk within the province of Istanbul is the insurance premium. earthquake zone or 15 TL. However, the monthly premium cannot be Cost Per Square Meter by Construction Type construction type, less than 25 TL, regardless of earthquake zone and the Compulsory construction type. Earthquake 2013 Insurance coverage »» A- Steel, Reinforced Concrete Frame TL 700 cost of a dwelling Structures: cannot exceed TL »» B- Masonry Stone Structures: TL 500 150 thousand. »» C- Other Structures: TL 260

Earthquake Tariff Prices per Construction Type by Region (‰)

Construction Type I. Region II. Region III. Region IV. Region V. Region ‰ ‰ ‰ ‰ ‰ A- Steel, Reinforced Concrete 2.20 1.55 0.83 0.55 0.44 Frame Structures B- Masonry Stone Structures 3.85 2.75 1.43 0.60 0.50 C- Other Structures 5.50 3.53 1.76 0.78 0.58 20 The sum insured and premium are calculated as Commission Percentages follows: For policies within the borders of Istanbul Sum insured = Gross area of the dwelling (m2) x province, a 12.5% commission of the Compulsory 20% + Cost per square meter by construction type (TL) Earthquake Insurance premium is paid to insurance companies authorized to provide Compulsory Regardless of earthquake zone or construction Earthquake Insurance on behalf of the Pool or 10 % type, the Compulsory Earthquake Insurance cost of themselves. This commission is 17.5% for policies a dwelling cannot exceed TL 150 thousand. in other provinces. According to the new tariff which Premium = (Sum insured TL x Tariff rate (%) However, for each insurance policy, the minimum came into effect in commission to be paid to the insurance company 2013, policyholders Discounts are applied before the fixed cost is is 10 TL. An amount of 3 TL of the paid minimum who renew their added. commission goes to the insurance company while Compulsory the remaining 7 TL goes to the agency. In the Earthquake Renewal and Construction Year Discount event the commission to be paid to the insurance Insurance in the 30 • In the event the insurance policy is renewed company exceeds 10 TL as calculated as prescribed day period following within 30 days following the end of the policy above, the agency commission can be set freely by its expiry date term, a renewal discount of 20% is applied to the the insurance company and the agency, providing will receive a 20% tariff rate for the renewed policy. that it is not below the minimum amount. renewal discount, • In policies written after March 1, 2013, for as well as a 10% structures that have a building permit dated Voluntary Insurance construction year 2007 and later, a construction year discount of Persons and institutions other than TCIP cannot discount if their 10% will be applied to the tariff rate. provide Compulsory Earthquake Insurance. dwelling was built However, in case the cost for the reconstruction of after 2007. Deductibility and Insurance Term the independent sections and structures covered For each claim of loss, a 2% deduction of the by Compulsory Earthquake Insurance exceeds the insurance cost is applied. The institution is sum insured, voluntary earthquake insurance can be responsible for the portion that exceeds the provided by insurance companies for the amount deductible amount calculated in this manner. In the exceeding said sum, as long as the dwelling is application of the deduction, each 72-hour period covered by Compulsory Earthquake Insurance. is deemed a loss. The term of the insurance policy coverage is one year. The insurance needs to be renewed at the end of this term.

21 3. Reinsurance Protection and Catastrophe Bonds DIVERSIFIED RISK TRANSFER PRACTICES

TCIP’s reinsurance coverage was renewed on November 1, 2013 in line with the characteristics

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE of the current portfolio; as a result, reinsurance protection amounting to EUR 2,348 million has been secured for excess loss.

Since its establishment, TCIP has considered the • Reinsurance support has been secured from the following factors while determining the Pool’s Turkish state. 32% Indemnity payment capability and drawing up its The pages that follow provide detailed information In parallel with its reinsurance program: about the Cat Bond and the state’s reinsurance rising capacity, support. TCIP has increased • Providing opportunities to develop the its reinsurance institution’s resources, The Pool’s reinsurance protection scheme was protection for the • Creating a high quality and dependable panel of renewed as of November 1, 2013, with due 2013-2014 period by reinsurers, consideration of a possible rise in claims following an 32% over the prior • Ensuring reinsurance diversification, earthquake (PLA), as well as the characteristics of year. • Taking necessary measures by accurately the current portfolio. An excess of loss reinsurance calculating the total claims amount that the protection amounting to EUR 2,348 million has been portfolio can bear. secured and consists of nine tranches, and includes reinsurance solutions restructured via capital market In order to meet the total loss that could be instruments. incurred by the TCIP portfolio, which has expanded rapidly since the enactment of Law No. 6305, With regard to conventional reinsurance protection coverage protection limits have been raised. In for the period 2013-2014, the Council of Ministers parallel with these higher protection limits, the resolved to provide reinsurance support amounting to Pool has prioritized efforts to ensure reinsurance EUR 2.35 billion. diversification in 2013: USD 400 million in additional capacity • The Pool’s reinsurance capacity was restructured As a result of efforts related to alternative reinsurance via capital market instruments and has also markets, a three-year Cat Bond was issued in April increased, 2013, generating an additional capacity of USD 400 • The first ever Turkish Cat Bond, Bosphorus 1, million. 22 which covers earthquake risk, has been issued, The Pool’s total indemnity payment capacity, which In addition to the reinsurance protection secured In a critically consists of its institutional funding and reinsurance annually from the international reinsurance market, important step capacity, stands at about TL 11 billion. The Pool’s the Pool issued a cat bond in 2013. With this forward in 2013, liabilities arising from its insurance policies are transaction, TCIP secured reinsurance coverage TCIP issued monitored on a regular basis and the required with a financial instrument, a first in Turkey, and Turkey’s first ever reinsurance protection limits are set according to enhanced its indemnity payment capacity in the Catastrophe Bond the results of reliable earthquake loss models. event of a possible earthquake. As a result, the (Cat Bond). Pool introduced an innovative capital market risk Reinsurance application strategy transfer instrument to Turkey and the country’s Premiums paid for reinsurance protection make up insurance sector. the Pool’s largest cash outflow. We expend great effort each year to achieve the cost and placement The Pool demonstrated interest in the cat bond structures described above; as a result, we have markets with the IANUS Cat Bond issued in 2009 in managed to achieve optimal placements each year. which Munich Re assumed the role of reinsurance leader. Investors showed ample interest in the • Roadshow Bosphorus 1 Cat Bond issued in 2013. The US • DFA Analysis typhoon and earthquake risk and European flood • Risk Modeling and typhoon risk account for the largest share • Service Level Agreements of the global cat bond market. Investors seem to • Alternative Risk Transfer have appreciated that a Turkish earthquake bond • Formation of a Brokers Panel has been placed on the market following the • Placement Strategies issuance of a number of Japanese bonds related to earthquake risk. Due to the new controls imposed by the new legal and regulatory framework, the number of insurance Investors to monitor Istanbul’s earthquake risk policies is rising rapidly, requiring an increase in in real time TCIP’s indemnity payment capacity. This upward A seismographic connection has been made under trend is expected to continue in the foreseeable the the supervision of the Kandilli Observatory and in future. The Pool’s rising capacity requirements will cooperation with the company Sentez Ltd. Şti. This be met in part via traditional reinsurance markets. link allows investors to monitor earthquake data In addition to restructured insurance programs, on a real time basis, access historical and specific TCIP also continues to work on methods to tap data, and complete transactions. The integration of other capital markets instruments such as cat the engineering and scientific infrastructure with bonds in the coming period. The Pool strives to the cat bond was much appreciated by investors. diversify and differentiate its indemnity payment The cat bond attracted ample demand and its products and instruments on the basis of region, interest rate hit historic lows, clear indicators of the market, exchange rate and product. widespread trust in the Turkish economy.

Research on alternative reinsurance markets is Bosphorus 1 in brief: ongoing in hopes of creating additional protections • SPV: Bosphorus 1 Re Ltd. similar to the cat bond issued in April 2013. Work • Issuer: TCIP on ex-ante/ex-post indemnity payment instruments • Placement and structuring: Munich Re as leader, has continued throughout the year. GC Securities as co-structurer and book runner • Risk modeling/calculation: RMS • Reporting: Boğaziçi University’s Kandilli Observatory • Amount: USD 400 million • Duration: 3 years • Trigger type: Parametric • Rating: S&P: BB+sf • Coupon payment spread Class A: 2.50% • Expected loss ratio: 1.01%

23 3. Reinsurance Protection and Catastrophe Bonds

The successful launch of the cat A 3-year USD 400 million bond The Pool collaborated with Boğaziçi University’s bond has allowed The three-year cat bond Bosphorus 1 has a value Kandilli Observatory and the Earthquake Research TCIP to reinforce of USD 400 million. This amount will be kept in an Institute (BÜ-KRDAE) to establish the trigger the Pool’s funding independent bank account and invested in short- mechanism. Thirty-five new stations were added sources significantly. term US Treasury bonds. In addition to the return to the severe tremor registry stations at the on these bonds, investors will receive income Istanbul Earthquake Emergency System in order equivalent to the insurance premium to be paid to strengthen the monitoring infrastructure. In by TCIP in three years. During this period, in the addition, data from 70 of 130 total stations started event an earthquake hits Istanbul and “triggers” to be fed into the earthquake index that would the cat bond, and if the set parameter is exceeded, trigger the cat bond. In order to facilitate investor TCIP will be free to use the USD 400 million in this access to data about a possible earthquake, a account for indemnity payment and will not be new and transparent Internet infrastructure was obligated to repay the amount. The cat bond will set up. (Visit http://www.ew-istanbul.com for be triggered by an index calculated on the basis of details.) Investors can access real time data flow the data provided by seismographic devices. If no and earthquake data, and analyze the severity of earthquake occurs, the funds will be returned to tremors. A trigger index has also been created by the investors. BÜ-KRDAE in relation to the cat bond.

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE Six-fold demand from international investors The successful launch of the cat bond has allowed In the bidding period for the cat bond, total demand TCIP to reinforce the Pool’s funding sources reached six times the initial prediction of USD 100 significantly. million. As a result, the total volume of bonds issued rose to USD 400 million, with an annual premium of 250 bps. The bonds generated brisk demand due to the investment diversification opportunity that it provides.

Bosphorus 1 Cat Bond Scheme

TCIP

PREMIUM STORAGE ACCOUNT BOND REINSURANCE PREMIUM PAYMENT CONTRACT PAYMENT

USD 400 MILLION REPAYMENT IN REVENUE

BOSPHORUS 1 RE LTD

ALLOWED RETURN ON INVESTMENT + BOND US SECURITIES PREMIUM PAYMENT SERIES 2013-1 MARKET FUND CLASS A BOND ALLOWED RETURN ON INVESTMENT CLASS A INSURANCE ACCOUNT

USD 400 MILLION IN PAYMENT ALLOWED INVESTMENTS

MEAG BOSPHORUS

24 Bosphorus 1: Earthquake Monitoring and Investor Notification Web Site (http://www.ew-istanbul.com) The additional Bosphorus 1 has also introduced to the global cat capacity made bond market risks associated and has led the Turkish possible by the state support along insurance sector in the use of alternative markets with the cat bond and products in catastrophe financing. have been crucial in expanding the reinsurance capacity required by the Reinsurance support from the state The EUR 235 million in reinsurance support Turkish insurance As of January 1, 2014, the Pool has increased its provided by the Turkish Treasury does not include sector. reinsurance protection by securing government cash transfers under normal circumstances. This support in the event of a major earthquake. A support will be activated only if TCIP’s indemnity total of EUR 235 million of the Pool’s reinsurance payment exceeds EUR 800 million in the event a coverage for the year has been provided by the severe earthquake strikes Turkey. At that time, the state. In parallel with the expanding Compulsory state and reinsurance providers will cover 10% of Earthquake Insurance customer portfolio and the indemnity payments in excess of this amount. Under Pool’s increasing penetration rate, TCIP requires no circumstances will the state’s total contribution more reinsurance from the markets to meet its exceed EUR 235 million. In return for this support, rising liabilities in 2014. Although the Pool has TCIP will pay the Treasury at the same rate that it expanded the reinsurance coverage secured from pays reinsurance companies. international markets by 32% over the previous year, TCIP requested a limited amount of support from The Pool does its utmost to meet its funding the state in order to ensure maximum protection for needs via alternative resources. The additional policyholders. As a result, resource diversification capacity made possible by the state support along in the risk transfer and coverage scheme was the with the cat bond has been crucial in expanding Pool’s top priority in 2013. In this very significant the reinsurance capacity required by the Turkish development, pursuant to Article 8 of the Disaster insurance sector. Insurance Law, the state has provided excess of loss reinsurance support to TCIP. Bosphorus 1 has also introduced to the global cat bond market risks associated with the Turkish geography, and has led the Turkish insurance sector in the use of alternative markets and products in post-catastrophe financing.

25 THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

“I am very glad that this system exists. You can get insured for a small amount, and then they you pay for your home in case of a disaster. It is great all around. I am very happy to have learned about TCIP.” Yunus CAMUSCU

26 27 4. Fund Management CONSISTENT RISE IN FUND VOLUME

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE TCIP’s fund grew 22.05% over the prior year to total more than TL 2.5 billion.

Set up in 2011 As in previous years, the Pool’s funds were provided by the Board of Directors during 2013. to ensure more managed in compliance with Article 25 of TCIP’s TCIP’s total fund expanded 22.05% over the effective and active Working Principles Regulation and the “The previous year to TL 2,548,632,255.34 as of management of the Investment Principles and Strategies” guidelines December 31, 2013. fund, the Investment Committee and Total Fund the Investment Steering Committee 3,000 continued their respective activities in 2013. 2,500

2,000

1,500

1,000

500

0

DecemberDecember 00 December 01 December 02 December 03 December 04 December 05 December 06 December 07 December 08 December 09 December 10 December 11 December 12 13 28 Toplam YEAR TOTAL DEPOSITS BREAKDOWN BILL/BOND BREAKDOWN OTHER BREAKDOWN The primary PORTFOLIO - TL responsibilities

December 00 5,215,999.07 1,633,640.00 31.3% 3,569,688.42 68.4% 12,670.65 0.2% of the Investment Steering Committee December 01 38,222,985.00 32,080,730.11 83.9% 6,030,809.00 15.8% 111,445.89 0.3% include making all December 02 97,331,469.95 70,079,665.04 72.0% 26,252,897.78 27.0% 998,907.13 1.0% executive decisions in relation to the December 03 116,025,753.04 63,373,633.25 54.6% 51,084,848.95 44.0% 1,567,270.84 1.4% implementation December 04 202,232,650.24 80,940,496.99 40.0% 115.483.686.14 57.1% 5,808,467.11 2.9% of the Annual December 05 311,559,315.11 206,235,409.61 66.2% 104,244,547.56 33.5% 1,079,357.94 0.3% Investment Plan that may be required December 06 499,463,532.03 409,962,055.36 82.1% 89,500,583.45 17.9% 893.22 0.0% during the course December 07 681,508,658.89 579,947,288.19 85.1% 98,265,366.01 14.4% 3,296,004.69 0.5% of the year in

December 08 931,934,659.40 842,084,206.36 90.4% 84,764,349.70 9.1% 5,086,103.34 0.5% light of emerging developments, December 09 1,186,378,964.07 944,737,214.36 79.6% 237,600,393.34 20.0% 4,041,356.37 0.3% and guiding December 10 1,433,659,435.77 1,179,029,220.67 82.2% 250,382,588.78 17.5% 4,247,626.32 0.3% the Investment

December 11 1,660,681,919.29 1,552,648,289.51 93.5% 96,291,662.59 5.8% 11,741,967.19 0.7% Committee which monitors December 12 2,044,378,962.42 1,893,441,851.56 92.6% 81,516,910.36 4.0% 69,420,197.63 3.4% and assesses December 13 2,548,632,255.34 2,322,418,804.42 91.1% 183,633,422.31 7.2% 42,580,028.60 1.7% the investment process and related operations.

The Pool’s General Fund Management approach is Steering Committee and the Board of Directors; outlined below: participating in issues for treasury bills and • As in previous years, the key objectives are to government bonds; monitoring markets for reverse protect the principal, preserve liquidity, and repo and similar transactions; communicating with generate a high return, other financial institutions; and performing all • Maintaining stable and consistent fund growth related operational procedures. Additionally, the through accurate data interpretation, exact Investment Committee evaluates the performance timing and efficient decision-making, of the Pool Management Company and the • Developing innovative, pioneering products in portfolio management companies according to response to the economic environment and in the criteria specified in the Annual Investment line with the corporate culture and organizational Plan. The Committee also evaluates the portfolio structure, in order to generate higher returns. management company’s data, its requests for revisions to the criteria, and strategy modifications. Committees in charge of fund management Set up in 2011 to ensure more effective and active Meanwhile, the responsibilities of the Investment fund management, the Investment Committee and Steering Committee include making all executive the Investment Steering Committee continued decisions in relation to the implementation of their respective activities in 2013. the Annual Investment Plan that may be required during the course of the year in light of emerging The Investment Committee’s responsibilities developments, and guiding the Investment include developing the Annual Investment Plan; Committee which monitors and assesses the trading in investment instruments in line with investment process and related operations. the investment plan approved by the Investment

29 5. Claims Management and the Disaster Management Project INFRASTRUCTURE UPGRADED FOR IMPECCABLE SERVICE

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE TCIP closely monitors earthquakes and post- earthquake developments in Turkey and across the world in order to carry out improvements in its service infrastructure as deemed necessary.

5.1. INDEMNITY PAYMENTS TOTAL INDEMNITY PAYMENT PER YEAR (as of 31.12.2013) TL 156 Indemnity Payments of TL 156,153,498 for 425 EARTHQUAKE NUMBER OF NUMBER OF PAYMENT earthquakes YEAR EARTHQUAKES CLAIMS (TL) million From the time of its establishment until year- 2000 1 6 23,022 From its end 2013, TCIP has made Indemnity Payments establishment until totaling TL 156,153,498 in response to 425 major 2001 17 336 126,052 year-end 2013, earthquakes that have struck Turkey. As 2013 was 2002 21 1,558 2,284,835 TCIP has made a relatively calm year for claims operations, TCIP 2003 20 2,504 5,203,990 focused more on its Disaster Management Project. ındemnity payments 2004 31 587 768,927 amounting to TL From 01.01.2013 until 31.12.2013: 2005 41 3,488 8,119,871 156.1 million in • Number of total claim notifications: 581 2006 23 500 1,303,673 response to 425 • Number of claim files closed: 498 major earthquakes 2007 42 995 1,381,599 • Number of claim files with Indemnity that have hit Turkey 2008 45 481 558,849 Payment: 223 during that time. 2009 37 267 498,852 • Total claims paid: TL 463,996 Total outstanding 2010 36 455 718,347 claims currently 2011 42 7,736 129,878,904 amount to TL 363.9 thousand. 2012 56 1,646 5,028,959 2013 13 133 231,296 TOTAL 425 20,693 156,153,498

30 In 2013, there were no major or deadly adjuster appointment without claim notification, earthquakes in Turkey. However, 13 earthquakes loss categorization, integrated loss assessment occurred which resulted in material damage, and a for buildings and independent sections, as well total of TL 231,296 was paid in claims for 133 loss as standard costing. The Pool cooperated with claims. the consulting firm Accenture to evaluate the appropriateness and integrity of the Target Model 5.2. DISASTER MANAGEMENT and to formulate a road map for its application. PROJECT After a preparatory stage of close to three months, Accenture provided an analysis of the current situation, created maps for business processes and TCIP has reevaluated the platform and resources system application components, completed the of its disaster/loss management process in Target Model analysis, and laid out a road map for the the aftermath of New Zealand, Japan and Van Target Model’s application. earthquakes.

Projects related to disaster claims All the processes, as well as the matrix of Major/ management… Minor Earthquakes and Heavy/Light Damage In order to set up the infrastructure that will help to Buildings were revised. Parameters such as TCIP manage claims from disasters of any scale notification, loss adjuster appointment, loss including major earthquakes, this initiative will be adjuster mobilization, loss assessment, loss carried out in cooperation with well-experienced appraisal, aftershock operations, payments and business partners and at the most attractive cost claims processes were analyzed and a new Target structure. Model was set up. The new Target Model features innovations such as creating a claims file and claims

31 THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

“At first, I did not believe that I would receive so much assistance, but I saw it with my very own eyes. They visited me in person without putting me through any trouble, made a phone call, and deposited the money in my bank account immediately. They gave me a hand during a very rough time, and thank God for that.” Yıldız ALACAN

32 33 6. Information Technology and Data Management CUTTING- EDGE DATA MANAGEMENT

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE The Emergency Center infrastructure established in Ankara is tested periodically. During these testing periods, all applications running on systems located in Istanbul are shut down, and the emergency system in Ankara is activated.

Real time data TCIP’s IT management approach is based on three 6.1. HOSTING SERVICES transfer and online key principles: are the two methods • All TCIP hardware is maintained and managed on used to write • Using up-to-date and advanced technology, site at Garanti Teknoloji, in accordance with our insurance policies. • Applying state-of-the-art security protocols, Service Level Agreements. The policy related • Ensuring business continuity. • There is a leased 20 Mpbs data transfer link data thus generated between TCIP systems in Istanbul and the is simultaneously Real time data transfer and online are the two Emergency Center in Ankara. recorded in the TCIP methods used to write insurance policies. The • The link is monitored and operated round-the- database. policy related data thus generated is simultaneously clock. recorded in the TCIP database. • TCIP has a 2x34Mbps backed-up, leased link between the Pool’s systems in Güneşli, Istanbul According to internal measurements, the system and TCIP’s employees in Altunizade, Istanbul. has performed at an average of 99% uptime • The link is owned by Eureko Sigorta. The required without a significant breakdown. telecommunication infrastructure service (router, TDM, PCM infrastructure) has been provided for The Emergency Center infrastructure established this link and is monitored and operated round- in Ankara is tested periodically. In these testing the-clock. periods, all applications running on systems located in Istanbul are shut down, and the emergency system in Ankara is activated. The system tests have revealed that TCIP is capable of becoming completely functional in only two hours.

34 COMPANY CALL CENTER

INTERNET

INTERNET ISTANBUL ANKARA

FIREWALL EMERGENCY FIREWALL CENTER

CENTER

WEB SERVER WEB SERVER WAN DMZ DMZ

J2EE J2EE J2EE APPLICATION APPLICATION APPLICATION SERVER SERVER SERVER

LDAP LDAP ORACLE ORACLE DATABASE DATABASE

6.2. NETWORK MANAGEMENT The system’s capacity utilization is constantly At TCIP, database AND SERVICE LEVELS monitored and improvement efforts are carried management is out in order to protect this key asset. Furthermore, performed by a team analytical studies are performed in accordance with of well-experienced As part of the service offering from Garanti growth requirements; technologies and solutions and certified systems Teknoloji, TCIP provides services over Garanti’s most appropriate for the needs requirements are experts. nationwide connection network. Garanti Teknoloji recommended. owns and operates service centers at key hubs across Turkey. From these centers, services are Well-skilled, specialized IT personnel provided to distribution channels all over the Database management is carried out by a team of country. well-experienced and certified systems experts, around-the-clock. As a result, TCIP is part of an extensive network, and is capable of providing the same level of service The system is protected by firewalls designed from all the centers in Turkey if the need arises. specifically for TCIP. All attempts to attack the systems infrastructure are monitored by Garanti The services provided by Garanti Teknoloji are Teknoloji personnel as well as by contracted monitored round-the-clock at specified service overseas companies; in addition, alarms are in place. levels (SLA); interventions are performed in cases To ensure the full security of the systems, patches of malfunction and are reported regularly. are evaluated and applied monthly at the system level.

35 6. Information Technology and Data Management

Thanks to its 6.3. TCIP MONITORING extensive network, 6.5. EMERGENCY CENTER TCIP is capable of SERVICES MANAGEMENT providing the same level of service from IT Security Architecture in line with Control Targets Service infrastructure supported with state- all centers in Turkey The following processes are monitored and of-the-art technology if the need arises. maintained on a 24/7 basis as part of TCIP’s The functionality of TCIP’s back-up servers for services supplied by Garanti Teknoloji. cases of emergency is tested periodically. In these testing periods, all applications running on • System accessibility systems located in Istanbul are shut down, and the • Mail operations emergency system in Ankara is activated. • Server • Network services At the same time, all operations and functionality • Internet accessibility services of the Internet and the GZUB web services • Internet page accessibility were tested by TCIP users. It was observed that • Application accessibility emergency servers continued to function without • Performance management any problems and in an updated manner.

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE 6.4. SECURITY ARCHITECTURE AND POLICIES

Garanti Teknoloji provides the security architecture and policy related services detailed below. These services comply with Banking Regulation and Supervision Agency provisions and COBIT standards, which are legally required for the companies that Garanti Teknoloji serves.

FRAMEWORK INTEGRITY ACCESSIBILITY ETHICS

APPLICATION

SYSTEM AND TERMINAL POINT DATA SECURITY DATA NETWORK PRIVACY MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT HARMONY AND RISK IDENTITY AND ACCESS AND ACCESS IDENTITY MONITORING AND LOG AND LOG MONITORING

PHYSICAL

PROCEDURE STANDARD TRAINING

POLICY

36 The TCIP insurance 6.6. DATA SAFETY AND 6.7. APPLICATION SOFTWARE policy application BACK-UP includes web, Rapid and efficient business flows software application The current software runs on Java and the TCIP Capital investment in data security and database layers. system stores its data on the Oracle database. The current back-up procedure functions The hardware All entries made into the database are also saved automatically with cutting edge technology, requirements of these offline at the Emergency Center in Ankara. TCIP’s without any manual operation. The daily backup of layers can vary based system functions with two application servers that the TCIP Prod database is performed every day and on their utilization. the five latest copies are stored. perform regular backups. A separate application runs frequently requested reports. The complete backup process formerly took around six hours with the Oracle database present TCIP’s IT process flow between insurance on the legacy hardware. This duration has been providers, agencies and policyholders are as follows: shortened to just one hour with the new database, a six-fold improvement. The TCIP insurance policy application includes web, software application and database layers. The hardware requirements of these layers can vary based on their use. In order to respond to this variability and growth, as well as to ensure optimal resource use, analytical studies have been performed for hardware and infrastructure renewal at Istanbul Güneşli and Ankara Emergency Center.

The hardware purchased is use for the purpose of production, development and emergency event services.

PRODUCTION

Agency

PRODUCTION LOSS/PARAMETER TCIP User SERVICE LAYER

LOSS DEDUCTIBILITY QUERY Policyholder

Web Application

WS

Company Web Services Services 37 7. Key Projects and Operations INNOVATIVE PROJECTS AND EFFECTIVE SOLUTIONS IN CLAIMS MANAGEMENT THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE All Compulsory Earthquake Insurance policies written by TCIP since March 1, 2013 feature the policyholder’s address code in full compliance with the National Address Database (UAVT).

In 2013, TCIP 7.1. ADDRESS CODE IN Earthquake Insurance will be eliminated. Most launched a number COMPULSORY EARTHQUAKE importantly, when a dwelling with Compulsory of initiatives in order Earthquake Insurance is damaged in an earthquake, to better manage INSURANCE POLICIES the standardized Address Code system will make the loss claims that it much easier to find its exact location and deliver Thanks to a state system that standardizes all the could be filed in the service. It will also be more practical to identify addresses within the borders of Turkey, institutions event of a possible and notify those homeowners who have yet to which deal in transactions related to dwellings are earthquake. purchase an insurance policy. expected to be better coordinated and integrated. The increased use of the address code in such Expanding the use of the Address Code scheme transactions will lead to higher quality services for The Address Code scheme will ensure that all citizens and more efficient operations. portfolio risk follow-up and post-catastrophe operations are carried out more efficiently by the TCIP’s new scheme will prevent the signing of insurance sector. In policies covering civilian and erroneous or duplicate policies due to insufficient commercial risk, especially those related to fire and or incorrect address data. The upgrade will also engineering insurance, the expansion of the use of ensure that relevant dwellings are better monitored address code will lead to more efficient business and that renewal discounts are automatically processes. applied. In addition, the erroneous signing of policies for buildings ineligible for Compulsory

38 7.2. PHONE CALL REMINDERS FOR 7.3. SMS NOTIFICATIONS TCIP is a pioneer in POLICY RENEWAL expanding the use of SMS communication with policyholders the address code. High success rate in renewal efforts… SMS messages have started being sent to The Pool has been reminding policyholders to policyholders whose policies cover dwellings of renew their policies since May 2011. Nearly 50% of less than 50 square meters, to ensure that the the policyholders contacted have expressed their area insured is not smaller than its actual size. wish to renew their policy and accordingly their Otherwise, in the event of a major earthquake, respective agencies were notified. At the same these policyholders can suffer severe losses. time, it was observed that some policyholders have unfortunately suffered severe losses due to lack of renewal monitoring.

In order to increase Turkey’s insurance penetration rate, ensure that policyholders benefit from renewal discounts and avoid severe losses in case of a major earthquake, policyholders whose policies expired two weeks earlier are called by TCIP. During the call, a TCIP representative provides the customer with relevant information, directs the lapsed policyholder to their respective agency, and complete the renewal transaction instantly if the policyholder chooses to do so.

39 7. Key Projects and Operations

To facilitate insurance companies’ provision of voluntary earthquake insurance, TCIP has offered new application functionality such as matching company policy number and Compulsory Earthquake Insurance policy number, accessing policy details with the Compulsory Earthquake Insurance policy number and making policy queries with the address code.

The Pool provides a service to insurance providers to ensure that they run the TCIP check in a more 7.4. TITLE DEED INTEGRATION 7.6. POLICY DETAIL SERVICE comprehensive WITH POLICY NUMBER Collaboration with Title Deed Directorates… manner and

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE During the year, the Pool carried out efforts to Policyholders receive detailed information… offer voluntary ensure that Compulsory Earthquake Insurance The Pool provides a service to insurance providers earthquake checks are performed more efficiently during to ensure that these companies run the TCIP insurance under title deed transactions and that irregular policy check in a more comprehensive manner and offer tighter controls, cancellations are prevented. Now, during real voluntary earthquake insurance under tighter while writing estate transactions at Title Deed Directorates, civil controls, while writing insurance policies for insurance policies servants can immediately check for Compulsory dwellings. This service allows insurance providers for dwellings. Earthquake Insurance coverage. As a result, the to access details such as the policy number, Turkish operational workload of directorates has decreased Republic Identification Number/Tax ID Number, and significantly while the control mechanisms the latest version of the Compulsory Earthquake functions much more effectively. Insurance policy.

7.5. MATCHING WITH COMPANY 7.7. POLICY QUERIES VIA POLICY NUMBERS THE E-GOVERNMENT

Policy transactions made easier… For policyholders to list and access the Compulsory In order to render policy transactions easier for Earthquake Insurance policies in the Pool via the insurance providers, the Pool has set up a system e-Government application, TCIP has completed the in which insurance companies can enter the policy required systems integration. Now, policyholders numbers of voluntary insurance policyholders and with an e-Government password can access their match these with the TCIP policy number, renewal TCIP policy information by visiting https://www. records and supplementary insurance data. turkiye.gov.tr/.

Additionally, TCIP has launched an online service 7.8. POLICY QUERIES VIA THE that allows insurance providers to make queries ADDRESS CODE with the company policy number and renewal number. Innovative solutions in policy queries… The Pool provides a service to insurance providers to ensure that these companies run the TCIP check in a more comprehensive manner and offer voluntary earthquake insurance under tighter controls, while writing insurance policies for dwellings. This service allows insurance providers to access details such as the policy number, Turkish Republic Identification Number/Tax ID Number, and the latest version of the Compulsory Earthquake 40 Insurance policy. All policyholders can now access their Compulsory Earthquake Insurance via the e-Government application.

7.9. PHONE NUMBER 7.11. REPORTING ALGORITHM A new step for data analysis: Reporting Phone number checks have been added to make initiative sure that the mobile and fixed line phone numbers In parallel with the Pool’s rapid growth, TCIP has of policyholders are entered correctly while TCIP a rising need to perform a number of detailed insurance policies are written. This prevents analyses via its database. the entry of wrong data, and ensures healthy communications with policyholders after disaster In order to analyze and report these data strikes. independently of the IT unit, TCIP plans to develop a number of software modifications. After the modifications go live, employees will be 7.10. URBAN TRANSFORMATION able to access the database via TCIP’s web site with username and password, and publish the TCIP’s urban transformation scheme is designed to managerial and statistical reports they need. This avoid the signing of policies for structures which reporting initiative is currently underway. are set aside for demolition by the Ministry of Environment and Urbanization, and for which the demolition order has been sent to the Title Deed Directorates.

41 8. Public Campaigns and PR Activities REACHING OUT TO THE PUBLIC VIA DIFFERENT CHANNELS

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE TCIP’s various promotional and public relations activities are designed not only to inform stakeholders about the Pool’s operations, but also to raise public awareness about the possible effects of earthquakes.

Insurance providers 8.1. COMMUNICATIONS A new channel in corporate communications: and agencies, which ACTIVITIES Social media are TCIP’s key As TCIP has a widely diverse audience, the Pool business partners makes use of not only TV and newspaper channels, Communications activities based on in extending but also social media in its communications transparency and mutual trust Compulsory campaigns. Keeping a close watch on new While designing its various communications Earthquake Insurance developments in social media, the Pool adapts its activities, TCIP focuses on projects that will raise across the country, messaging to current day trends. The objective is awareness about earthquakes and earthquake play a crucial role in to come up with concepts that offer a 360-degree preparedness. The Pool reaches out to a vast developing pre- and integrity in communications, promotion, social and audience that includes homeowners, insurance post-disaster service traditional media. providers and brokers, primary school, high school procedures. and university students, public agencies and local The Pool’s objectives in communications activities governments. for 2013 were: • Investing in the Pool’s reliability and Insurance providers and agencies, which are TCIP’s trustworthiness, key business partners in extending Compulsory • Enhancing the risk perception related to TCIP, Earthquake Insurance across the country, play a and crucial role in developing pre- and post-disaster • Ensuring customer continuity while acquiring service procedures. TCIP also works in close new policyholders. cooperation with public agencies, which allows the Pool access every corner of Turkey.

42 Initiatives focused on trust and reliability: 8.1.1. 5 Million Policies Press Conference TCIP works in close • 5 Million Policies Press Conference Media-focused communications with cooperation with • Secure Life Parks stakeholders public agencies, which • Communication of Special Issues and Projects, After reaching the year-end target of 5 million allows the Pool to • Meetings and Sponsorships Compulsory Earthquake Insurance policies in the access every corner of • Projects to enhance risk perception: first months of 2013, TCIP held a press conference Turkey. • Fault Line Truck in Ankara at the invitation of Deputy Prime Minister • TLT Project Ali Babacan. At the press event, information was • Earthquake Resistant Building Design provided on the development of Compulsory Competition Earthquake Insurance and the disaster relief efforts • International Short Film Competition following the Van earthquake. In addition, a number • Advertising (TV, newspaper and other media of provinces were presented awards under the channels) “Cities Compete, Policyholders Win” initiative.

Projects to ensure customer continuity and acquire 8.1.2. Special Communications Issues and new policyholders: Projects • Posters and flyers for water and electricity Themed corporate communication projects companies In 2013, TCIP launched special communication • E-Bulletin initiatives on special occasions such as the anniversaries of the August 17 Marmara These various projects and media campaigns were Earthquake and the enactment of the Disaster supported with social media activities and the Law, transition to the UAVT system and the cat “Cities Compete, Policyholders Win” contest. bond issue, as well as on such relevant issues as the renewal of insurance policies and the Pool’s Indemnity Payment capacity.

43 8. Public Campaigns and PR Activities

TCIP strives to raise awareness on disaster management through its own projects and initiatives as well as via collaborations with other institutions.

TCIP has 8.1.3. Opening of TCIP Secure Life Parks Under this joint TCIP-Turkish Red Crescent participated as a A signature project from TCIP: “Secure Life initiative, the following activities have been carried project partner Parks” out to date: in the Turkish The cities of Bursa, Bolu and Tunceli, which • One of the main documents of the project is Red Crescent’s made it to the winners’ podium during the “Cities the Participant’s Booklet, which was distributed Organizing Compete, Policyholders Win” contest in 2011, to community leaders (mukhtars, teachers, Community Leaders were presented with “Secure Life Parks” by TCIP. clergymen and community supported police

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE campaign, which The parks in Bolu and Tunceli were completed and officers) who participated in local training was initiated in 2007 inaugurated with ceremonies attended by local programs. The booklet was published through across the country. residents, public officials, and TCIP representatives. a joint collaboration with TCIP. The Pool also The TCIP Secure Life Park in Bursa is currently supported the publication of other materials such under construction. as Community Leader Training Set, Trainer’s Sets, Community Training Booklets, and Reference Secure Life Parks are built in city centers to ensure Book for Teachers and Students. easy access to all citizens. These areas feature • TCIP also took part in the publication of 235 green space, playgrounds, sports areas and park copies of the “I Learn about Secure Living from benches, as well as open-air movie theaters. The Turkish Red Crescent” classroom calendars in parks also host training seminars on earthquakes 2013. The calendars were distributed to first, and Compulsory Earthquake Insurance. second, third and fourth grade classrooms across Turkey by the local branches of the Red Crescent 8.1.4. Turkish Red Crescent’s Organizing and Province/District National Education Community Leaders Campaign Directorates. (TLT) Collaborating with Turkish Red Crescent This initiative also rapidly distributed publications An initiative was developed to inform the featuring information about TCIP and Compulsory community leaders who participate in the Red Earthquake Insurance to community leaders Crescent’s seminars and their followers about through Red Crescent’s extensive branch network. TCIP and Compulsory Earthquake Insurance. As a result, the project’s target audience was Implemented as a joint collaboration with Turkish reached directly and efficiently through rapid and Red Crescent, the TLT Campaign’s Disaster extensive organization. Loss Minimization Program started out with the publication of information materials on TCIP and Compulsory Earthquake Insurance.

44 TCIP’s “Earthquake Resistant Building Design Competition” planned for 2014 will target students of civil engineering and architecture, and attract attention to the importance of earthquake resistant buildings across Turkey.

“Fault Line Truck” hits the road 8.1.6. International Short Film Competition In parallel with the collaboration between TCIP In 2013, TCIP completed the preliminary work for and Turkish Red Crescent under the Organizing a short film competition open to undergraduate Community Leaders campaign, Fault Line Trucks and graduate students from 21 countries including started touring in November and December Turkey. In its fifth edition, the competition will go 2013. With this innovative approach, TCIP made international for the first time. The 2013 theme contact with teachers and students during the of the film competition was “Where would you go seminars delivered by Boğaziçi University’s Kandilli if your home were damaged in an earthquake?” Observatory and Earthquake Research Institute Student contestants will compete to portray in the and the earthquake simulation in the Fault Line best manner the experience of homeowners whose Truck. Mosque-goers also participated in the dwellings are heavily damaged after an earthquake. seminars following Friday prayers. In 45 days, Since the competition has become an international the trucks visited 11 centers, four provinces event, the objective has expanded to raising and seven districts. In Devrek, Zonguldak, Ereğli, earthquake awareness not only in Turkey but Balıkesir, Edremit, Gönen, Bandırma, Türkoğlu, also in all participating countries. With this goal in Kahramanmaraş, Elbistan and Osmaniye, a total mind, all of Turkey’s earthquake-prone neighboring of 133 training seminars were attended by 30 countries were included in the event. The deadline thousand participants. for applications via www.daskfilm.com is June 20, 2014. 8.1.5. Earthquake Resistant Building Design Competition Participants are asked to shoot films of a The starting point of the struggle against maximum of three minutes to depict the problems earthquake destruction: earthquake resistant experienced by homeowners whose residences buildings are severely damaged in an earthquake. Entrants The main objective of the Earthquake Resistant will have the chance to compete in an international Building Design Competition, to be held with TCIP arena and receive awards. sponsorship, is to draw attention to the importance of secure structures, raise public awareness of In addition to the awards designated by the jury, earthquakes and remind individuals of the need TCIP’s followers on Facebook (www.facebook. to obtain insurance coverage. The first edition com/dask) will also cast votes to select winners of the competition will take place in 2014 and of a Special Audience Award. Two filmmakers will preparations commenced in 2013. receive the Special Audience Award.

Competition web site: The TCIP International Short Film Competition’s http://www.daskbinatasarimi.com/ web site offers detailed information about the event:

www.daskfilm.com

45 8. Public Campaigns and PR Activities

The “Cities Compete, Policyholders Win” contest is designed to raise awareness about earthquake insurance and preparedness.

8.1.7. “Cities Compete, Policyholders Win” The following provinces completed their efforts Generating more and more interest each year, and applied to the competition in late 2013: Bolu, the “Cities Compete, Policyholders Win” contest Burdur, Bursa, Çanakkale, Sakarya, Tunceli and entered its third year in 2013. Yalova.

The competition is announced extensively According to the jury’s assessment, the following through direct mail and promotional posters provinces made it to the winners’ podium for 2013:

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE sent to all Governor’s Offices and Provincial Directorates of Disaster and Emergency, as well • First prize: Burdur as via a promotional video. Those Disaster and • Second prize: Sakarya Emergency Management Presidency (AFAD) • Third prize: Çanakkale officials who would like to carry out provincial informational campaigns to extend the penetration Each year, an increasing number of provinces of Compulsory Earthquake Insurance are provided participate in the contest with original promotional with promotional materials related to TCIP and campaigns. Compulsory Earthquake Insurance throughout the year. The application deadline is December and the 8.1.8. Promotional Campaign Efforts information packs are sent until the end-January. Advertising strategy designed to raise Generating more During the competition, provinces are evaluated earthquake risk awareness and more interest on their Compulsory Earthquake Insurance TCIP’s 2013 promotional campaign concept each year, the performance from January 1 until December 31. was based on the results of an opinion survey “Cities Compete, conducted in 2012. The most striking result from Policyholders Win” The Compulsory Earthquake Insurance the survey was the very low level of earthquake contest entered its performance of provinces is assessed according to risk perception among potential policyholders. As third year in 2013. the following criteria: a result, TCIP’s advertising campaign highlighted the significant earthquake risk to homeowners, the 1. Penetration rate reached at the end of the adverse effects of earthquakes other than loss of period, human life and the impact on daily lives, and the 2. Percentage increase in the number of policies importance of Compulsory Earthquake Insurance during the year, and for resuming everyday life after the earthquake. 3. Compulsory Earthquake Insurance public campaigns (publicity) carried out during the The promotional films: year. • focused on the values of community and hospitality, Overall performance is assessed along these three • upheld the concept of post-disaster solidarity criteria and the top performing provinces are among people, designated by the competition jury. • emphasized the importance of long-term rather than ad hoc disaster relief plans, • mentioned the problems associated with protracted stays in others’ dwellings, and • underscored the importance of Compulsory Earthquake Insurance for resuming everyday life after the earthquake. 46 8.2. SOCIAL MEDIA ACTIVITIES Social media efforts based on integrated Over 200 thousand communications followers in social More than 200 thousand followers in social In addition to the regular communications via media… media its Facebook page, TCIP also carries out various As of year-end 2013, TCIP had over 200 thousand special campaigns to communicate a new concept followers in the Pool’s various social media to users and to reach the following objectives: channels. Regular daily posts on its Facebook page allow TCIP to access a monthly average of 50 • To use the “guest by necessity” concept in social thousand individual followers in an organic fashion media and continue integrated communication (without advertising). With the use of advertising, efforts, the monthly average of individual visitors to • To deliver the messaging of the general the Pool’s Facebook page jumps to 5 million. advertising campaign to the target audience in Thanks to regular communications via Facebook line with the dynamics of social media, over the last three years, TCIP has succeeded in • To make best use of the strengths of social generating significant awareness about Compulsory networks and drive home the main concept. Earthquake Insurance. Various prize contests and applications launched via the Facebook page have Award-winning social media campaigns allowed TCIP to gain more than 100 thousand new TCIP’s promotional campaign “40 Kuruş a Day to followers in 2013 and bring the overall figure to the Penny Bank,” which blends online and offline 175 thousand by year’s end. channels, was deemed worthy of the “Best Event Management” designation at TÜHİD’s Golden Compass Awards. The campaign also made it to the short list of the International Digital Communication Awards in the category “Best Social Responsibility Project.” In addition, the “40 Kuruş a Day to the Piggy Bank” app was designated a model application by Facebook Studio.

47 9. Statistics

The number of Compulsory Earthquake Insurance policies, which are a key part of TCIP’s responsibilities, have increased steadily each year since the Pool’s establishment, climbing to more than 6 million. As of end-2013, some 35.5% of all dwellings in Turkey were covered by Compulsory Earthquake Insurance.

9.1. POLICY PRODUCTION BY YEAR

Number of Policies and Penetration Rate by Year

7,000

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE 6,029 6,000

5,000 4,786

4,000 3,725 3,435 3,316 3,000 2,844 2,618 2,428 2,417 2,555 2,128 2,000 2,022 2,090

1,000

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of Policies (000)

NUMBER OF INCREASE IN YEAR POLICIES (000) INCREASE (%) PREMIUM (000 TL) PREMIUM (%) 2013 6,029 26.0 674,181 32.2 2012 4,786 28.5 509,778 34.6 2011 3,725 12.3 378,783 18.6 2010 3,316 -3.5 319,415 -0.8 2009 3,435 20.8 322,065 18.1 2008 2,844 8.6 272,637 16.2 2007 2,618 2.5 234,615 14.0 2006 2,555 5.7 205,799 29.4 2005 2,417 15.6 159,085 26.0 2004 2,090 3.4 126,216 47.3 2003 2,022 -5.0 85,688 30.3 2002 2,128 -12.4 65,756 20.6 2001 2,428 - 54,526 - 48 9.2. POLICY PRODUCTION BY COMPANY

COMPULSORY EARTHQUAKE INSURANCE POLICY PRODUCTION REPORT (AS OF 31.12.2013) 2012 2013 PRODUCTION BY COMPANY Number of Policy Number of Policy Increase Policies Rate (%) Policies Rate (%) (%) ANADOLU SİGORTA A.Ş. 601,439 12.6 749,159 12.4 24.6 AXA SİGORTA A.Ş. 617,690 12.9 663,107 11.0 7.4 AKSİGORTA T.A.Ş. 410,127 8.6 639,690 10.6 56.0 GÜNEŞ SİGORTA A.Ş. 331,204 6.9 420,811 7.0 27.1 ZİRAAT SİGORTA A.Ş. 351,030 7.3 376,795 6.2 7.3 YAPI KREDİ SİGORTA A.Ş. 253,774 5.3 302,830 5.0 19.3 HALK SİGORTA A.Ş. 248,375 5.2 280,429 4.7 12.9 GROUPAMA SİGORTA A.Ş. 189,542 4.0 250,033 4.1 31.9 ERGO SİGORTA A.Ş. 198,311 4.1 236,863 3.9 19.4 EUREKO SİGORTA A.Ş. 236,037 4.9 235,689 3.9 -0.1 ALLIANZ SİGORTA A.Ş. 184,769 3.9 228,645 3.8 23.7 HDI SİGORTA A.Ş. 147,481 3.1 212,982 3.5 44.4 SOMPO JAPAN SİGORTA A.Ş. 160,346 3.4 187,891 3.1 17.2 IŞIK SİGORTA A.Ş. 139,856 2.9 177,470 2.9 26.9 MAPFRE GENEL SİGORTA A.Ş. 99,453 2.1 142,501 2.4 43.3 EURO SİGORTA A.Ş. 49,604 1.0 117,273 1.9 136.4 ZURICH SİGORTA A.Ş. 102,697 2.2 115,096 1.9 12.1 LIBERTY SİGORTA A.Ş. 56,995 1.2 93,843 1.6 64.7 AVIVA SİGORTA A.Ş. 53,863 1.1 88,187 1.5 63.7 NEOVA SİGORTA A.Ş. 58,361 1.2 81,992 1.4 40.5 RAY SİGORTA A.Ş. 73,003 1.5 79,561 1.3 9.0 ANKARA ANONİM TÜRK SİGORTA 40,314 0.8 75,439 1.3 87.1 ŞİRKETİ HÜR SİGORTA A.Ş. 40,816 0.9 58,472 1.0 43.3 GENERALİ SİGORTA A.Ş. 33,584 0.7 45,467 0.8 35.4 SBN SİGORTA A.Ş. 33,948 0.7 42,522 0.7 25.3 DUBAI GROUP SİGORTA A.Ş. 39,941 0.8 33,598 0.6 - 15.9 TÜRK NİPPON SİGORTA A.Ş. 11,634 0.2 32,760 0.5 181.6 DEMİR SİGORTA A.Ş. 10,734 0.2 17,465 0.3 62.7 AIG SİGORTA A.Ş. 5,761 0.1 15,723 0.3 172.9 TCIP - - 13,771 0.2 - KORU MUTUEL SİGORTA 6,137 0.1 13,005 0.2 111.9 TURİNS SİGORTA A.Ş. - - 22 0.0004 - TOTAL 4,786,826 100 6,029,091 100

49 9. Statistics

9.3. POLICY PRODUCTION BY MONTH

7,000

6,000

5,000

4,000

3,000

2,000

100

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE 0 January February March April May June July August September October November December

2008 218,694 223,428 338,672 277,787 258,430 225,056 209,217 201,449 207,181 203,879 228,509 246,964

2009 226,242 247,505 378,733 342,736 442,599 374,740 256,397 222,279 222,145 231,418 224,262 267,012 2010 230,945 255,333 380,717 323,534 310,812 304,243 243,326 228,359 236,806 255,577 233,085 313,345 2011 254,043 272,671 441,151 353,195 347,102 334,235 268,157 253,661 264,411 301,752 296,336 369,199 2012 284,008 299,371 426,278 360,962 384,729 361,370 314,274 342,398 479,215 488,943 507,477 537,649 2013

9.4. PENETRATION RATE BY REGION 44.7%

3,194,319

35.6%

32.1% 2,047,592 29.1% 1,706,255 28.3% 1,526,739 2,586,691 23.6% 1,166,005 24.8% 737,773 1,133,998 566,326 806,225 627,601 460,585 227,707 186,284 MEDITERRANEAN EASTERN AEGEAN SOUTHEASTERN CENTRAL BLACK SEA MARMARA REGION ANATOLIA REGION ANATOLIA ANATOLIA REGION REGION

NUMBER OF COMPULSORY EARTHQUAKE INSURANCE POLICIES NUMBER OF DWELLINGS WITHOUT INSURANCE 50 9.5. PENETRATION RATE BY PROVINCE

REGIONS AND NUMBER OF INSURED PENETRATION Risk PREMIUM PROVINCES DWELLINGS DWELLINGS RATE (%) INSURANCE PREMIUM level PER 100 M2 AEGEAN REGION 2,512,480 806,225 32.1 56,882,685,780 117,114,166 MUĞLA 232,920 101,579 43.6 6,644,201,940 14,129,162 1 164.0 İZMİR 1,077,190 367,656 34.1 26,568,180,640 55,152,294 1 164.0 DENİZLİ 240,590 64,905 27.0 5,220,177,920 10,790,421 1 164.0 AYDIN 270,940 102,934 38.0 6,898,655,740 14,798,991 1 164.0 UŞAK 80,400 18,983 23.6 1,416,218,580 2,249,019 2 118.5 It is estimated MANİSA 297,560 76,683 25.8 5,280,777,520 11,297,977 1 164.0 that 16.9 million AFYON KARAHİSAR 165,360 35,152 21.3 2,311,742,540 4,240,811 2 118.5 dwellings in Turkey KÜTAHYA 147,520 38,333 26.0 2,542,730,900 4,455,490 2 118.5 fall within the scope MEDITERRANEAN of the Compulsory REGION 2,154,340 627,601 29.1 45,219,169,820 65,995,265 Earthquake ANTALYA 579,660 221,982 38.3 15,412,752,160 21,807,183 2 118.5 Insurance in Turkey. MERSİN 427,920 131,952 30.8 10,196,301,840 8,349,983 3 68.1 This table provides ADANA 435,770 108,490 24.9 8,794,401,020 13,051,526 2 118.5 information about BURDUR 61,060 14,542 23.8 918,131,160 2,128,730 1 164.0 the number of ISPARTA 118,330 27,566 23.3 1,695,413,300 3,836,366 1 164.0 dwellings and HATAY 261,630 65,282 25.0 4,217,050,260 8,968,754 1 164.0 policies by province. OSMANİYE 86,760 19,031 21.9 1,491,750,920 2,983,002 1 164.0 K. MARAŞ 183,210 38,756 21.2 2,493,369,160 4,869,720 1 164.0 EASTERN ANATOLIA 752,610 186,284 24.8 14,590,049,840 25,925,875 ERZİNCAN 43,610 17,474 40.1 1,249,477,920 2,699,178 1 164.0 TUNCELİ 14,350 4,343 30.3 331,088,340 532,399 2 118.5 ERZURUM 115,330 27,284 23.7 2,212,069,020 3,368,381 2 118.5 KARS 31,800 7,900 24.8 533,006,260 843,965 2 118.5 ELAZIĞ 117,350 31,005 26.4 2,613,868,500 4,053,963 2 118.5 ARDAHAN 7,370 2,572 34.9 179,667,400 273,723 2 118.5 MALATYA 161,080 39,056 24.2 3,032,733,380 6,347,003 1 164.0 VAN 81,450 18,518 22.7 1,768,023,840 2,712,432 2 118.5 AĞRI 39,890 9,197 23.1 563,971,160 1,018,294 2 118.5 IĞDIR 20,350 3,841 18.9 252,882,300 405,012 2 118.5 BİTLİS 36,550 8,717 23.8 656,643,540 1,161,602 1 164.0 MUŞ 31,150 4,764 15.3 307,421,300 665,388 1 164.0 HAKKARİ 22,390 2,092 9.3 149,030,240 327,984 1 164.0 BİNGÖL 29,940 9,521 31.8 740,166,640 1,516,549 1 164.0 SOUTHEASTERN ANATOLIA 965,480 227,707 23.6 15,715,039,240 18,686,490 GAZİANTEP 281,660 73,995 26.3 5,329,761,940 4,829,776 3 68.1 DİYARBAKIR 207,350 46,370 22.4 3,694,988,820 5,443,324 2 118.5 ŞANLIURFA 165,430 42,652 25.8 2,464,128,240 2,413,641 3 68.1 ADIYAMAN 76,750 17,413 22.7 1,361,266,280 2,201,418 2 118.5 KİLİS 20,790 5,144 24.7 308,755,660 290,150 3 68.1 MARDİN 89,060 19,892 22.3 1,139,804,260 1,114,318 3 68.1 SİİRT 32,180 4,642 14.4 271,707,200 594,341 1 164.0 BATMAN 59,260 14,290 24.1 967,392,300 1,499,048 2 118.5 ŞIRNAK 33,000 3,309 10.0 177,234,540 300,474 2 118.5

51 9. Statistics

9.5. PENETRATION RATE BY PROVINCE

MARMARA REGION 5,781,010 2,586,691 44.7 182,654,392,470 333,038,091 YALOVA 76,190 45,501 59.7 3,091,991,220 6,466,378 1 164.0 İSTANBUL 3,558,860 1,649,170 46.3 116,358,220,490 211,627,872 1 169.0 TEKİRDAĞ 253,390 138,421 54.6 9,961,877,200 11,268,305 2 118.5 KIRKLARELİ 85,250 36,573 42.9 2,682,799,280 1,705,699 4 48.5 EDİRNE 94,780 43,922 46.3 3,029,294,780 2,783,149 4 48.5 KOCAELİ 401,570 180,204 44.9 13,020,103,600 26,919,096 1 164.0 SAKARYA 182,230 88,671 48.7 6,188,871,080 13,029,653 1 164.0 ÇANAKKALE 118,560 52,511 44.3 3,383,673,700 7,292,058 1 164.0 BALIKESİR 321,870 118,934 37.0 7,663,131,220 16,402,562 1 164.0 BURSA 639,790 216,310 33.8 16,158,096,900 33,379,259 1 164.0 BİLECİK 48,520 16,474 34.0 1,116,333,000 2,164,060 1 164.0

THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE CENTRAL ANATOLIA 3,181,590 1,133,998 35.6 82,269,141,560 66,595,435 ANKARA 1,446,040 635,682 44.0 47,732,697,920 30,862,199 4 48.5 ESKİŞEHİR 216,770 98,767 45.6 6,096,099,760 9,465,472 2 118.5 ÇANKIRI 43,110 10,719 24.9 630,869,940 1,321,843 1 164.0 KAYSERİ 324,150 87,451 27.0 6,749,469,920 5,932,405 3 68.1 KIRŞEHİR 57,500 17,375 30.2 1,086,356,160 2,345,518 1 164.0 SİVAS 127,700 35,201 27.6 2,273,373,000 2,363,703 3 68.1 NEVŞEHİR 71,720 18,845 26.3 1,218,702,840 1,190,327 3 68.1 KARAMAN 55,080 16,660 30.2 1,231,444,000 672,174 5 40.8 KONYA 493,720 138,042 28.0 10,313,205,320 7,692,518 4 48.5 AKSARAY 87,300 21,561 24.7 1,564,573,640 910,503 5 40.8 NİĞDE 86,410 18,586 21.5 1,196,789,020 803,555 4 48.5 YOZGAT 97,590 22,563 23.1 1,383,164,000 1,429,695 3 68.1 KIRIKKALE 74,500 12,546 16.8 792,396,040 1,605,523 1 164.0 BLACK SEA REGION 1,626,590 460,585 28.3 32,123,203,440 46,825,889 BOLU 55,600 33,371 60.0 2,429,608,240 4,951,771 1 164.0 DÜZCE 44,930 25,403 56.5 1,807,998,600 3,737,096 1 164.0 AMASYA 71,520 22,213 31.1 1,392,745,000 3,065,099 1 164.0 SİNOP 41,760 13,589 32.5 872,865,120 835,911 4 48.5 KASTAMONU 70,310 19,669 28.0 1,369,875,120 2,502,151 1 164.0 ÇORUM 123,360 36,436 29.5 2,510,366,340 3,991,431 2 118.5 ZONGULDAK 135,010 32,181 23.8 2,213,584,040 3,730,168 2 118.5 SAMSUN 273,920 67,807 24.8 5,002,755,320 7,023,535 2 118.5 BARTIN 29,460 10,094 34.3 643,622,860 1,400,522 1 164.0 KARABÜK 53,940 15,511 28.8 1,007,817,080 2,205,710 1 164.0 TRABZON 198,720 47,911 24.1 3,619,338,860 2,337,479 4 48.5 ORDU 163,270 47,703 29.2 3,353,454,600 3,505,569 3 68.1 ARTVİN 30,960 9,843 31.8 676,661,200 538,953 3 68.1 GİRESUN 98,810 21,902 22.2 1,573,782,440 1,162,788 4 48.5 TOKAT 123,900 34,480 27.8 2,029,103,280 4,508,902 1 164.0 RİZE 73,590 14,792 20.1 1,096,808,680 713,393 4 48.5 GÜMÜŞHANE 25,750 5,209 20.2 341,082,580 448,986 3 68.1 BAYBURT 11,780 2,471 21.0 181,734,080 166,426 3 68.1 TURKEY 16,974,100 6,029,091 35.5 429,453,682,150 674,181,211 52 9.6. POLICY DISTRIBUTION BY REGION

MEDITERRANEAN REGION CENTRAL ANATOLIA 10.41% 18.81% TOTAL NUMBER OF POLICIES EASTERN ANATOLIA BLACK SEA REGION 6,029,091 3.09% 7.64%

AEGEAN REGION MARMARA REGION 13.37% 42.90%

SOUTHEASTERN ANATOLIA 3.78%

POLICY NUMBER OF INSURED PENETRATION DISTRIBUTION REGION DWELLINGS DWELLINGS RATE (%) RATE (%) PREMIUM MEDITERRANEAN REGION 2,154,340 627,601 29.1 10.41 65,995,265 EASTERN ANATOLIA 752,610 186,284 24.8 3.09 25,925,875 AEGEAN REGION 2,512,480 806,225 32.1 13.37 117,114,166 SOUTHEASTERN ANATOLIA 965,480 227,707 23.6 3.78 18,686,490 BLACK SEA REGION 1,626,590 460,585 28.3 7.64 46,825,889 MARMARA REGION 5,781,010 2,586,691 44.7 42.90 333,038,091

CENTRAL ANATOLIA 3,181,590 1,133,998 35.6 18.81 66,595,435 TURKEY 16,974,100 6,029,091 35.5 100 674,181,211

53 9. Statistics

9.7. POLICY DISTRIBUTION BY RISK REGION

1st LEVEL 4th LEVEL 45.28% 16.07% TOTALNUMBER OF POLICIES 2nd LEVEL 5th LEVEL 6,029,091 26.46% 0.99% THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

3rd LEVEL 11.20%

POLICY PRODUCTION Number of Rate (%) Premium Rate (%) BY RISK REGION Policies 1st Level 2,729,801 45.28 405,738,448 60.2 2nd Level 1,595,079 26.46 175,917,122 26.1 3rd Level 675,451 11.20 44,682,034 6.6 4th Level 968,788 16.07 45,495,727 6.7 5th Level 59,972 0.99 2,347,881 0.3 TOTAL 6,029,091 100.00 674,181,211 100.0

54 9.8. POLICY DISTRIBUTION BY BUILDING CONSTRUCTION YEAR

BEFORE 1975 2000-2006 6.05% 39.53% TOTAL NUMBER OF POLICIES 1976-1996 2007 AND AFTER 6,029,091 25.22% 20.53%

1997-1999 8.67%

PRODUCTION PER Number of Rate (%) Premium Rate (%) CONSTRUCTION YEAR Policies Before 1975 365,052 6.05 36,253,682 5.4 1976-1996 1,520,212 25.22 173,033,205 25.7 1997-1999 522,785 8.67 60,681,716 9.0 2000-2006 2,383,447 39.53 268,564,733 39.8 2007 and After 1,237,595 20.53 135,647,875 20.1 TOTAL 6,029,091 100.00 674,181,211 100.0

55 9. Statistics

9.9. Policy Distribution by Building Surface Area

LESS THAN 75 M2 126-150 M2 23.91% 13.61% TOTAL NUMBER OF POLICIES 76-100 M2 150 M2 AND ABOVE 6,029,091 32.30% 10.38% THE TURKISH CATASTROPHE INSURANCE POOL ANNUAL REPORT 2013 REPORT ANNUAL POOL INSURANCE THE TURKISH CATASTROPHE

101-125 M2 19.80%

POLICY DISTRIBUTION BY Number of Rate (%) Premium Rate (%) BUILDING SURFACE AREA Policies Less than 75 m² 1,441,798 23.91 98,509,029 14.61 76-100 m² 1,947,408 32.30 199,417,850 29.58 101-125 m² 1,193,911 19.80 145,601,170 21.60 126-150 m² 820,475 13.61 115,638,943 17.15 150 m² and above 625,499 10.38 115,014,219 17.06 TOTAL 6,029,091 100.00 674,181,211 100.00

56

THE TURKISH CATASTROPHE INSURANCE POOL 2013 THE TURKISH CATASTROPHE INSURANCE POOL COMPULSORY EARTHQUAKE INSURANCE ANNUAL REPORT ANNUAL REPORT 2013

Call Center: Alo 125 / Fax: 0216 474 23 64 Address: Altunizade Mah. Ord. Prof. Fahrettin Kerim Gökay Cad. No: 20 34662 Üsküdar-Istanbul /Turkey www.dask.gov.tr

This annual report has been printed on 100% recycled paper.