Fitch Ratings reports that the Turkish insurance market [4] has been facing one of the most challenging business environments in the last decade.
Insurers may be forced to raise funds or sell their entities to more powerful competitors as their solvency falls below regulatory requirements.
Numerous factors are believed to contribute to high pressure on the industry, including macroeconomic risks, high inflation and the continuation of the MTPL price cap.
In May 2022, the Turkish Consumer Price Index (CPI) increased by 70%. The rating agency expects inflation to rise further until the end of 2023. Due to this increase, the loss experience is likely to rise and this will lead to reserve shortfalls in some classes of business, especially in motor insurance. The increase in the CPI would also reduce the disposable income of the insured, thus weakening their ability to take out an insurance policy.
The downgrading of Turkey's credit rating and that of local banks by Fitch Ratings has also negatively impacted the rating of insurance companies.
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