Risk Management Policy

Türkiye Sigorta Risk Management Policy

The policies established for Türkiye Sigorta’s riskexposure are regularly reviewed in line with thechanges taking place in the market conditions.

The risks considered in the risk managementprocess are provided below:

Insurance Risks

Risks arising from the insurance contracts concluded and these risks can be exemplified as; failure to select the insured risks in a sound manner, failure to set insurance premiums at a level to cover future losses, and concentrations arising from the failure to allocate risk.

Market conditions, reinsurance agreements, turnover, profitability and sustainable growth targets are taken into account as a whole when preparing tariffs and individual pricing.

At Türkiye Sigorta, at the levels of agencies, regional directorates and general directorates, which risks and under which conditions will be covered are determined and updated annually by technical service directorates within the framework of risk acceptance principles by utilizing reinsurance treaties and past loss experiences. A booklet on the principles of application, including the principles of assumption of risk, which shows the conditions under which, how and to whom insurance products may or may not be sold, is distributed to sales channels every year for informational purposes.

Retention ratios by branches and conditions oftreaties to be purchased are determined by the Reinsurance and Special Risks Directorate andSenior Management, taking into consideration the Company’s customer portfolio, past claims statistics, business volume planned for the following year, shareholders’ equity structure,and the current market conditions. Risks not covered in reinsurance treaties, exceed treaty terms and capacities or are disruptive to the Company’s treaty balance are provided assurance by making use of domestic and international optional reinsurance support.

Within the scope of TSRS 2, the Company includes climate-related risks that can reasonably be expected to affect its future financial adequacy in its risk management process. In this context, the Company analyzes health risks arising from acute and chronic risks related to climate change and evaluates indemnity payments related to climate-related diseases, especially in health insurance, as a separate category. The share of such indemnity payments in total indemnity payments is regularly monitored and reinsurance strategies are updated accordingly.

Credit Risk

Credit risk is defined as the probability of nonfulfillment of liabilities towards the Company by the parties having a material relationship with the Company. Reinsurance transactionsand premium receivables due from agencies arethe main areas giving rise to credit risk for theCompany. The Company follows up receivablesarising from insurance operations within theframe of collection policies, and limits thesame via coverage policies established. Whenselecting reinsurers, the “List of Reinsurance Companies Satisfying Financial and Technical Criteria” created by the T.R. Ministry of Treasuryand Finance is taken into account, along with theratings of reinsurers, and the Company monitorsthe impacts of market conditions upon ratings.

 

Market Risk

Possible losses that may occur in the values of the instruments in the Company's portfolio within the scope of currency risk, commodity risk, interest rate risk and equity position risk arising from movements in market prices are evaluated within the scope of market risk. These risks are monitored through reports prepared for foreign currency position and securities.

Türkiye Sigorta addresses the market risk arising from its investment portfolio within the scope of TSRS 2. For this purpose, the Company follows a strategy to increase the adaptation of its investment portfolio to the low carbon economy and takes climate-related transition risks into account in its market risk assessments.

Liquidity Risk

Liquidity risk is the risk of the Company’s inabilityto satisfy its matured liabilities. This risk resultsfrom the inability to sell and liquidate assetsparticularly at times when cash is needed.Liquidity risk increases when the terms of assetsare longer than the terms of liabilities. The Company’s cash flow is monitored on daily,weekly and monthly bases, and assets andliabilities are managed by following up maturitymismatches and foreign currency positions viathe balance sheet.

The effects of acute physical risks that may arise due to climate change and economic fluctuations on the Company's operational cash flow are evaluated and integrated into liquidity risk management processes.

Operational Risks

The risk of direct or indirect loss resulting from inadequate or failed internal processes, personnel and systems, or from external events.

The activities carried out throughout the company and the practices required to be carried out in the processes have been documented in written procedures and the job descriptions of the employees involved in the processes have been formally determined.

Türkiye Sigorta also takes into account the physical risks associated with climate change in its operational processes, assesses the potential impacts of extreme weather events on operations within the scope of business continuity plans and takes preventive measures.

The authorizations of business units and users in the processes and the approval mechanisms to be applied are determined by the Board of Directors, General Manager and Assistant General Managers and defined within the scope of written regulations and procedures.