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Dünya reasürans piyasalarındaki gelişmeler ve Türkiye'de reasürans tekeli uygulaması

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  1. Tez No: 71788
  2. Yazar: BELKIS AKALIN
  3. Danışmanlar: YRD. DOÇ. DR. ŞEVKİ KAYLAV
  4. Tez Türü: Yüksek Lisans
  5. Konular: Sigortacılık, Insurance
  6. Anahtar Kelimeler: Belirtilmemiş.
  7. Yıl: 1998
  8. Dil: Türkçe
  9. Üniversite: Marmara Üniversitesi
  10. Enstitü: Bankacılık ve Sigortacılık Enstitüsü
  11. Ana Bilim Dalı: Sigortacılık Ana Bilim Dalı
  12. Bilim Dalı: Belirtilmemiş.
  13. Sayfa Sayısı: 109

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Özet (Çeviri)

82 3. DEVELOPMENTS IN THE WORLD REINSURANCE MARKETS In this chapter world reinsurance markets will be evaluated in three points of wiev. Firstly conditions of the world reinsurance markets and the developments of it in recent years, secondly the buyers of reinsurance and their changing expectations and the lastly the products that are presented by reinsurers and developments of them. 3.1. Conditions of the World Reinsurance Markets In the past, 15-20 years ago reinsurance application was made in proportional treaty methods. In this period reciprocity wellcomed by many insurance companies and most of direct insurance companies started to accept reinsurance in all over the world. Naturally brokers played a big role in this formation. Accepting business more than capacity limits was seen usuall. Retrocession was developed in this period also. Due to high overriding comissions and brokerage fees most of reinsurance companies lost almost all their technical profits. As this companies did not have enough financial profits reinsurance market could not create the sufficient cash for surviving the market. In the middle of 1980' s non-proportional bussinesses took the place of proportional ones. As the catastrophes' made a spiral effect market ended up with a noncovered point. Reinsurers like Weaver fell in to insolvency where as some reinsurer like NRG went in to run-off situation. As a result of these situation most of insurance companies decided to stop running business. In 1992 the market became to the position of lacking capacity. On the other hand it is understood that buying reinsurance more than neded is not a solution and the main problem is collecting money. Small reinsurance companies fell in to diffuculty due to the decreasing retrocession capacity and coverage limits. '%83 All this progresses in the market put the sufficiency in obligations, the importancy of quality, globalisation on the agenda. Same progresses made the ceding companies and brokers searh for strong reinsurers. Competition and the unsufficant loss reserves forced the companies merge. In recent years as a reaction to this progress a new trend began to take place in market which is called capital intensity. At this point the trend of capital golabalisation is seen in three different ways: 1 -Mergers 2-Acquisitions 3-Strategic Alliances-Partnerships The benefits of these kinds of mergers to the big companies can be summarized as followed. - To create a balanced portfolio with the geographical risk distribution and the product variation, - Decrease in the cost of advertising, presantation and marketing, - Decreasing average costs as the companies merges 3.2. Buyers of Reinsurance The main reasons for buying reinsurance is still the same where as the conditions of reinsurance markets are being changed continiously. Firstly insurers still wish to increase the capacity and secondly keeping stable to their activity results. The buyers of reinsurance could be classified as, Direct Insurers, Captive Insurance Companies, Reinsurers and State Insurance and Reinsurance Companies. 3.2.1. Insurance Companies Main buyers of reinsurance are direct insurance companies. The need“'îö%, reinsurance in any country is determined by the structure of the insurance market.nv82 3. DEVELOPMENTS IN THE WORLD REINSURANCE MARKETS In this chapter world reinsurance markets will be evaluated in three points of wiev. Firstly conditions of the world reinsurance markets and the developments of it in recent years, secondly the buyers of reinsurance and their changing expectations and the lastly the products that are presented by reinsurers and developments of them. 3.1. Conditions of the World Reinsurance Markets In the past, 15-20 years ago reinsurance application was made in proportional treaty methods. In this period reciprocity wellcomed by many insurance companies and most of direct insurance companies started to accept reinsurance in all over the world. Naturally brokers played a big role in this formation. Accepting business more than capacity limits was seen usuall. Retrocession was developed in this period also. Due to high overriding comissions and brokerage fees most of reinsurance companies lost almost all their technical profits. As this companies did not have enough financial profits reinsurance market could not create the sufficient cash for surviving the market. In the middle of 1980' s non-proportional bussinesses took the place of proportional ones. As the catastrophes' made a spiral effect market ended up with a noncovered point. Reinsurers like Weaver fell in to insolvency where as some reinsurer like NRG went in to run-off situation. As a result of these situation most of insurance companies decided to stop running business. In 1992 the market became to the position of lacking capacity. On the other hand it is understood that buying reinsurance more than neded is not a solution and the main problem is collecting money. Small reinsurance companies fell in to diffuculty due to the decreasing retrocession capacity and coverage limits. '%83 All this progresses in the market put the sufficiency in obligations, the importancy of quality, globalisation on the agenda. Same progresses made the ceding companies and brokers searh for strong reinsurers. Competition and the unsufficant loss reserves forced the companies merge. In recent years as a reaction to this progress a new trend began to take place in market which is called capital intensity. At this point the trend of capital golabalisation is seen in three different ways: 1 -Mergers 2-Acquisitions 3-Strategic Alliances-Partnerships The benefits of these kinds of mergers to the big companies can be summarized as followed. - To create a balanced portfolio with the geographical risk distribution and the product variation, - Decrease in the cost of advertising, presantation and marketing, - Decreasing average costs as the companies merges 3.2. Buyers of Reinsurance The main reasons for buying reinsurance is still the same where as the conditions of reinsurance markets are being changed continiously. Firstly insurers still wish to increase the capacity and secondly keeping stable to their activity results. The buyers of reinsurance could be classified as, Direct Insurers, Captive Insurance Companies, Reinsurers and State Insurance and Reinsurance Companies. 3.2.1. Insurance Companies Main buyers of reinsurance are direct insurance companies. The need ”'îö%, reinsurance in any country is determined by the structure of the insurance market.nv82 3. DEVELOPMENTS IN THE WORLD REINSURANCE MARKETS In this chapter world reinsurance markets will be evaluated in three points of wiev. Firstly conditions of the world reinsurance markets and the developments of it in recent years, secondly the buyers of reinsurance and their changing expectations and the lastly the products that are presented by reinsurers and developments of them. 3.1. Conditions of the World Reinsurance Markets In the past, 15-20 years ago reinsurance application was made in proportional treaty methods. In this period reciprocity wellcomed by many insurance companies and most of direct insurance companies started to accept reinsurance in all over the world. Naturally brokers played a big role in this formation. Accepting business more than capacity limits was seen usuall. Retrocession was developed in this period also. Due to high overriding comissions and brokerage fees most of reinsurance companies lost almost all their technical profits. As this companies did not have enough financial profits reinsurance market could not create the sufficient cash for surviving the market. In the middle of 1980' s non-proportional bussinesses took the place of proportional ones. As the catastrophes' made a spiral effect market ended up with a noncovered point. Reinsurers like Weaver fell in to insolvency where as some reinsurer like NRG went in to run-off situation. As a result of these situation most of insurance companies decided to stop running business. In 1992 the market became to the position of lacking capacity. On the other hand it is understood that buying reinsurance more than neded is not a solution and the main problem is collecting money. Small reinsurance companies fell in to diffuculty due to the decreasing retrocession capacity and coverage limits. '%83 All this progresses in the market put the sufficiency in obligations, the importancy of quality, globalisation on the agenda. Same progresses made the ceding companies and brokers searh for strong reinsurers. Competition and the unsufficant loss reserves forced the companies merge. In recent years as a reaction to this progress a new trend began to take place in market which is called capital intensity. At this point the trend of capital golabalisation is seen in three different ways: 1 -Mergers 2-Acquisitions 3-Strategic Alliances-Partnerships The benefits of these kinds of mergers to the big companies can be summarized as followed. - To create a balanced portfolio with the geographical risk distribution and the product variation, - Decrease in the cost of advertising, presantation and marketing, - Decreasing average costs as the companies merges 3.2. Buyers of Reinsurance The main reasons for buying reinsurance is still the same where as the conditions of reinsurance markets are being changed continiously. Firstly insurers still wish to increase the capacity and secondly keeping stable to their activity results. The buyers of reinsurance could be classified as, Direct Insurers, Captive Insurance Companies, Reinsurers and State Insurance and Reinsurance Companies. 3.2.1. Insurance Companies Main buyers of reinsurance are direct insurance companies. The need“'îö%, reinsurance in any country is determined by the structure of the insurance market.nv82 3. DEVELOPMENTS IN THE WORLD REINSURANCE MARKETS In this chapter world reinsurance markets will be evaluated in three points of wiev. Firstly conditions of the world reinsurance markets and the developments of it in recent years, secondly the buyers of reinsurance and their changing expectations and the lastly the products that are presented by reinsurers and developments of them. 3.1. Conditions of the World Reinsurance Markets In the past, 15-20 years ago reinsurance application was made in proportional treaty methods. In this period reciprocity wellcomed by many insurance companies and most of direct insurance companies started to accept reinsurance in all over the world. Naturally brokers played a big role in this formation. Accepting business more than capacity limits was seen usuall. Retrocession was developed in this period also. Due to high overriding comissions and brokerage fees most of reinsurance companies lost almost all their technical profits. As this companies did not have enough financial profits reinsurance market could not create the sufficient cash for surviving the market. In the middle of 1980' s non-proportional bussinesses took the place of proportional ones. As the catastrophes' made a spiral effect market ended up with a noncovered point. Reinsurers like Weaver fell in to insolvency where as some reinsurer like NRG went in to run-off situation. As a result of these situation most of insurance companies decided to stop running business. In 1992 the market became to the position of lacking capacity. On the other hand it is understood that buying reinsurance more than neded is not a solution and the main problem is collecting money. Small reinsurance companies fell in to diffuculty due to the decreasing retrocession capacity and coverage limits. '%83 All this progresses in the market put the sufficiency in obligations, the importancy of quality, globalisation on the agenda. Same progresses made the ceding companies and brokers searh for strong reinsurers. Competition and the unsufficant loss reserves forced the companies merge. In recent years as a reaction to this progress a new trend began to take place in market which is called capital intensity. At this point the trend of capital golabalisation is seen in three different ways: 1 -Mergers 2-Acquisitions 3-Strategic Alliances-Partnerships The benefits of these kinds of mergers to the big companies can be summarized as followed. - To create a balanced portfolio with the geographical risk distribution and the product variation, - Decrease in the cost of advertising, presantation and marketing, - Decreasing average costs as the companies merges 3.2. Buyers of Reinsurance The main reasons for buying reinsurance is still the same where as the conditions of reinsurance markets are being changed continiously. Firstly insurers still wish to increase the capacity and secondly keeping stable to their activity results. The buyers of reinsurance could be classified as, Direct Insurers, Captive Insurance Companies, Reinsurers and State Insurance and Reinsurance Companies. 3.2.1. Insurance Companies Main buyers of reinsurance are direct insurance companies. The need ”'îö%, reinsurance in any country is determined by the structure of the insurance market.nv84 Considering the retention rates, it is seen that the the retention rates determined by the size of the any probable loss or the probability of acumulazation of losses sourcing from by one event and the size of business and the amount of reserves holded. Therefore the more number of companies in insurance market means the larger need for reinsurance demand. As a result of merging insurance companies': - The retention rate of a company's that's portfolio is made up with the merge of two different company's merged portfolio is higher than the retention rates of the two companies' s retention rates holded before but is lower than the average of two companies' retention rate. As the expected cost of loss discreases demand for reinsurance is lower than before. - Reinsurers lose a large share of their premium income and their bargain power weakens. 3.2.2. Captive Insurance Companies Large trade, industry and finance companies usually hold the small risks on their own portfolio but buy insurance coverage only for big risks (Self-Insurance). In recent years this trend has seen in the professional associations founded by doctors, lawyears or accountants. 3.2.3. Reinsurers Although reinsurers are on the supplying side of the market at the same time they might play a role as a demander by retrocession. Technically reinsurers demand reinsurance for the same reasons as direct insurers. Reinurers prefer to buy protection with non-proportional methods of reinsurance especially for the risks like liability businesses that comes with the big possibility of acumulisation of losses that can not be predicted.85 3.2.4. State Insurance and Reinsurance Companies State insurance and reinsurance companies have effects on reinsurance markets by the monopoly rights to given them in the local market. Although this kind of foundations main effects are on the insurance market, often their two types of effects have seen on reinsurance markets as well. - This type of foundations discrease the business to be dealed internationally either by the compulsory cessions taken from other insurers in local market or having the higher capacity than the others as monopoly applier. - A state company can be the only reinsurance buyer in the international market of the country and therefore has more experience and bargain power than the others could have. 3.3. Products Presented by Reinsurers and their developments Financial reinsurance products are for protecting the reinsurer's balance sheets and many types of them are experienced. A few examples of those can be summurized as below: - Coverages that's fix the insurance company' s loss ratio. - Coverages taken in to practise when the loss ratio of market is higher than the rate agreed, (reinsurers' share in the loss is not taken in to consideration). - Coverages fix the loss ratio of market for agreed branches. - Coverages of those reinsures take over the insurer's loss reserves and cover the probable deficiency. However some types of new financial solutions had to be applied as the rapid industrial developments and unsufficiant substructure of insurance and reinsurance were seen in markets. Derivatives and Securitization of Risks.86 Derivatives: Agreed on an index linked to a pool gathered with smilar risks, if a insurance company's losses higher than the index the institution pay the loss who has written the term agreement but if it is lower than the index, the premium is lost and the investor benefits. Securitization of risks: If the predicted losses have not occurred, bonds, which are printed for choosen risks and quantities, bring higher interest than the other arguments of market. But if the predicted losses occur than the interest payments are stopped and nominal value is paid to investors in an agreed time.87 4. REINSURANCE MONOPOLY AND THE REASONS FOR THE MONOPOLY Reinsurance monopoly is reinsuring a specific and a limited proportion of the business compulsorly by a state owned company. Implemantation of monopoly is determined by state for the proportions of cessions and branches and the methods of compulsory cessions. Methods of intervention with the reinsurance markets differs from one country to another. But the main reasons for reinsurance monopoly ususally as given below; 1) Encouraging nationalization of the market 2) Discreasing outflow of foreign exchange 3) Income to treasury 4) Supervision of tariff and losses 5) Other aims: a) Setting up a thrusty atmoshpere between the companies b) Help to technical education c) Collection of statistical data d) Protecting the national market from being nationalized by state's reinsuring it's own business. 4.1. A Brief History of Insurance Before Reinsurance Monopoly 4.1.1. Insurance in the World The evolution of the insurance business is closely related to the industrial and commercial developments. Marine insurance, the oldest branch of insurance, started in Italy in the medieval times. In 1779,“Lloyd's Policy”was adopted as the standard form for marine insurance and was drawn up by professional scribes.88 Insurance against loss by fire was the next branch of insurance developed within the framework of historical evolution. Mutual fire insurance clubs began to be formed in the year following the London Fire. The Sun Fire Office, the first important fire insurance company, was organized in London in 1710, as a partnership with 24 partners. Life insurance policies started to be drawn in 15th century in Italy. First life policy written in 1574. Those policies were calculated in empirical methods. Taking mathematical methods in to insurance, life insurance started to have recent meaning. Development of industry caused to start of different types of liability and engenering insurance policies to be drawn. After the First World War coverages are given for aviation and war risks. In 19th century reinsurance as a nonseperating part of insurance was taken in application and the concept of insurance become international structure. 4.1.2. Insurance in Turkey Insurance sector's characteristics before 1927 are summarized below: 1) There were no fully national insurance companies. Turkish insurance companies were either supported or supervised by foreign groups. 2) Almost all of the foreign companies were working as an agent of their headoffices in abroad. Their capacities were not sufficient and the retention rates were very low. 3) The Insurance Legislation did not contain articles relating to effective protection for the right of policyholders. 4) Most of the people work for insurance sector either was foreigners or resident minorities. 5) The economical reforms has had started in all over the country and the importancy of insurance sector had been pointed out by all the participants of İzmir Economic Conference.89 6) Premium rates used by foreign insurance companies were not subject to effective supervision. Fierce competition in the market was affecting both the companies' financial structure and the policyholders. 7) Among the Muslims, there was a common disbelief and distrust on the concept of insurance. 4.2. Some Countries Applied Reinsurance Monopoly A- South America 1.Argentina 2.Brasil 3. Chile B- Europe In Europe some countries like France, Italy and Ireland have applied Reinsurance Monopoly for a period of time. C- Other Countries 1. India 2. Iran 3. Egypt 4. Morocco 5. Pakistan 6. Japan 4.3. Implemantation of Reinsurance Monopoly in Turkey 4.3.1. Developments in Politics of Insurance The political situation for the implemantation of reinsurance monopoly can be summurized as: - Until the establishment of republic there were no insurance company in sector that is founded with Turkish capital. After the foundation of republic as the national organizations started to run business some foreign groups who worked in insurance sector started to work to protect their advantages against to nationalization...w90 - In 1925 Union Group who owned an insurance company called Union National (İttihadi Milli) and had big interests in Turkey made a colloboration with Türkiye İş Bankası in insurance. As a result of this colloboration Anadolu Sigorta was founded. - Asikiiraziyoni Group who was the first foreign group made colloboration with İş Bankası and the biggest rival of Union Group took a place in sector against the Union Group. - Loosing power and control in sector Union Group started look to for remedies. Inspired by Jozef Kayyon's budget plan who were in government in France in those years, representative of Union Group brought up the Insurance Monopoly idea. Aiming that; Union Group should have the old advantages as supervising and interventing with the all companies' in tariff and loss payments by the Reinsurance Monopoly. An attempting proposal made to the Government. Insurance companies will develop by Reinsurance Monopoly. The outflow of foreign exchange will be stopped even an income will be gained. 4.3.2. Legal Development a) Proposal to Prime Minister: As a result of the meeting of Executive Board hold on 16th of May in 1926 an official message given to Turkish Grand National Assembly at the same date pointing that:“Almost 50 insurance companies make bussines in insurance sector and their premium production is 6.000.000 TL yearly but nearly this entire premium is being paid to foreign insurance companies by reinsurance. Therefore the premium paid for reinsurance is a loss for national wealth and an increasing effect on expenditures of the payments bill. In order to find a solution to this problem the proposal given to Prime Minister can be summurized as:91 National or foreign insurance companies would be obliged to cede the 50 % of the written premium after their retention to a Reinsurance Monopoly which will be founded by government. Therefore a few billion Turkish Liras will stay in Turkey every year and the income created will be for treasury. b) Justification made by Prime Minister: Justification made by Prime Minister included two points: Firstly, evry year about 4.000.000 TL is being paid to abroad by reinsurance without gaining any profit for treasury and incresing the expenditures of payment bill. Secondly, instead of ceding the all premium abroad 50 % of the premium after retention will be kept in country by Reinsurance Monopoly and the treasury will have an income item 25.03.1926”c) Opinions of the Commissions: After having examined the proposal Turkish Grand National Assembly decided that all the reasons given by goverment were appropriate. On the other hand the compulsory cession ratio would not be calculated after retention due to technical difficulties and 50 % of the premium must be ceded to Reinsurance Monopoly. Trade commission especially pointed the role of Milli Reasürans for establishing companies with national capital. The Budget Commission pointed out it's opinion for the Rreinsurance Monopoly and added that the Reinsurance Monopoly will be an income item for treasury but gaining this income should be managed without bringing a burden to insurance companies. \ 'j «92 4.3.3. The Laws Related to Reinsurance Monopoly The Laws related to Reinsurance Monopoly are given in chronical order below. 1) Law No: 1 160 about Reinsurance Monopoly 2) Law No: 1173 added to law about Inspection and Supervision of Insurance Companies 3) Article 1 and 2 of Law No: 3392 and Law No: 1149 about Inspection and Supervision of Insurance Companies 4) Article 59 and 4 of Law No: 7397 Supervision of Insurance Companies 5) Regulations on Reinsurance Supervision 6) Decision No: 7720 dated 27.2.1929 about Reinsurance Monopoly in Turkey 7) Decision No:3/498 dated 1.3.1966 about Reinsurance Monopoly in Turkey 8) Decision No:4/2620 dated 25.3. 1954 about Reinsurance Monopoly in Turkey 9) Decision No:4/3689 dated 11.10. 1954 about Reinsurance Monopoly in Turkey 10) Decision No:4/12205 dated 24.9. 1959 about Reinsurance Monopoly in Turkey 1 1) Decision No:5/969 dated 27.3.1961 about Reinsurance Monopoly in Turkey 12) Decision No: 6/1 24 12 dated 7.8. 1969 about Reinsurance Monopoly in Turkey 13) Decision No:7/3587 dated 27. 12. 1971 about Reinsurance Monopoly in Turkey 14) Insurance system of Development Plan-Second Five Year 1968-72 15) Decree No: 355 of Law 7/3505 about Reinsurance Monopoly published on Offical Journal dated 30.12.1971 No: 14058 (about the implamentation of Development Plan 1971-1972) 16) Decision No: 7/9222 published on Offical Journal dated 9.12.1974 17) Decision No:7/l 1103 published on Offical Journal dated 12.12.1975 18) Decision No:7/12958 published on Offical Journal dated 31.12.1976 19) Decision No:7/l 5 142 published on Offical Journal dated 1.4.1978 20) Decision No:7/l 8505 published on Offical Journal dated 28.12.1979 21) Decision No: 8/4008 published on Offical Journal dated 25.12.1981 22) Decision No: 91/2276 published on Offical Journal dated 16.9.1991 \' ; if93 4.3.4. Structure of Milli Reasürans Structure of Milli Rasürans is summurized in legaly and technicaly. 4.3.4.1. Legal Structure Milli Reasürans was founded as a monopoly to carry out reinsurance business in the sector. It's operation, as mentioned in the Law on Reinsurance Monopoly, continued for 15 years, with in the framework of a contract was signed with İş Bankası. It's capital is 660.000.000.000 TL. 4.3.4.2. Technical Structure Altough Milli Reasürans has a big capital and an experience of 68 years it hasn't got the enough technical equipmant. In recent years the technical investments of Milli Reasürans has been increased as it will be operating as an ordinary reinsurer after 2001. Edutacional situation of the staff employed by Milli Reasürans is given on Table l(page: 67) 4.4. Implemantation of Reinsurance Monopoly in Periods 4.4.1. First Period (26.3.1929-1.3.1954) When we look at the years during which Milli Reasürans was founded, it is observed that all Turkish insurance companies in the field were dependent on foreign insurance and reinsurance companies. İş Bankası was a semi-private bank was encouraged by the State to do the job. Milli Reasürans thus founded, was considered to be a semi-private owned Reinsurance company. But the control of Bank belonged to the private shareholders.Most criticism directed to the monopoly system was justified at this point.94 The profits of Milli Reasürans were composed of two parts; technical and financial profits. It means due to the cumpulsory cession at 50 % steemed from the transactions related with cumpulsory cession of the business conducted in the Turkish insurance market. The first transfer contract of the Company provided for payment, to the Treasury, of 30 % of it's profits.These percentages were later increased to 40 % over the period of 1939-53. The system stipulated by the Law on Inspection and Supervision of the Insurance Companies dated 1927, was to implement the monopoly on the portion of the insurance in transactions excess of the companies' own retention tables approved by the Ministry of Commerce. The system considered to be used was the“Surplus System”. 4.4.2. Second and Third Period (1.3.1954-31.10.1954) - (11.10.1954-31.12.1959) According to the decision of Council of Ministers dated 25.3.1954 and numbered 4/2620, the Concession period of Milli Reasürans was extended for 8 months. Eight months later on 11.10.1954 a new decision was made by the Council of the Ministers numbered 4/3689. According to this decision the Concession period of Milli Reasürans was extended as of 31.12.1959. While the monopoly practise was extended for an adiditional 5 years, the cumpulsory cession ratio was reduced to 30 % and the life insurance was taken out of the scope of the monopoly. 4.4.3. Fourth Period (1.1.1960-31.12.1969) The Concession period of Milli Reasürans was extended as of 31.12.1969 by the decision 4/12205 on 24.9.1959 and the cumpulsory cession ratio was reduced to 25 % and the life insurance was still kept out of the scope of the monopoly..rfp'“1”-*'“'(»....95 4.4.4. Fifth Period (1.1.1970-31.12.1971) The Concession period of Milli Reasürans was extended for two years according to the desicion 6/12412 dated 7.8.1969. No changes were neither made on the branches nor on the cumpulsory cession ratio. The reason for extending the monopoly for two years was the decision made in the 2nd 5-Year Development Plan, which was suggesting that the monopoly would be operated by an institution to be formed through the participation off all Turkish insurance companies. 4.4.5. Sixth Period (1.1.1972-31.12.1974) The Concession period of Milli Reasürans was extended for an other three years with the decision of The Council of Ministers dated 27. 12. 1971 and numdered 7/3587. The biggest change brought the sector was taking the life insurance in the scope of monopoly again. 4.4.6. Seventh Period (1.1.1975-31.12.1981) This period was a problematic period of the reinsurance monopoly. The decrees were issued in this period is given below. This shows that there was not a clear-cut opinion formed about the implementation of the monopoly. The provisions included in the Development Plans could not be put into practise and the coalition goverments were in power and therefore freguent changes were made. These were responsible for the abundance of the Decrees during this period.96 4.4.7. Eighth Period (1.1.1982-31.12.1991) This is the period in which the Surplus System was adopted simultaneously with the establishment of the insurance companies' retention rates and reinsurance policies. The only branch that the Quota-Share System applied was the motor branch. The cumpulsory Cession Ratios in this period were For The period of 1/1/1982-31/12/1984 Surplus: %35 ; Quota Share: %20 For The period of 1/1/1985-31/12/1991 Surplus: %30 ; Quota Share: :%15 When the Quota Share and Surplus systems are compared, The Quta Share system seemed to be more advantageous during the early years of the monopoly.But, this system caused the insurance companies to be inactive and prevented them from spending effort to strenghten their financial structure and improve upon the retention rates through risk selection. Since the companies did not make any risk selection through the establishment of their own uderwriting policies and retain more risk, the Surplus system caused the insurance companies to act as reinsurance intermediaries for a long time, the situation became the structural characteristic of the sector. 4.4.8. Ninth Period (1.1.1992-31.12.2001) The Concession period of Milli Reasürans was extended for ten years with the decision of The Council of Ministers dated 16.10.1991 and numdered 91/2276. In this period motor branch is the only branch that Qouta Share System is applied. Life insurance is sttill kept out of reinsurance monoploy and Surplus system is still applied for all the other branches. The cumpulsory Cession Ratios in this period are 1/1/1992-31/12/1994 Surplus: %25; Quota Part: %15 1/1/1995-31/12/1997 Surplus: %20; Quota Part: %15 1/1/1998-31/12/2001 Surplus: % 15; Quota Part: %1097 4.5. Results of the Reinsurance Monopoly Implementation in Turkey and Criticisms on Implementation Results of the Reinsurance Monopoly implementation is given below with the opinions in positive and negative manners. 4.5.1. The Role Flayed on the Development of Insurance Sector Looking at the positive criticisms made firstly, it can be said that implementation of Reinsurance Monopoly played an important role on the development of sector. A supporting, reliable and encouraging environment was created in the sector Since the new comers in sector know that 50 % of the risks covered would be reinsured automaticaly, a supporting, reliable and encouraging environment was created in the sector. As a result of proliferation of domestic insurance companies, the market share of the foreign insurance companies declined and lead to an increase in the Turkish public and private insurance companies' share in the direct premium productions. On the opposite of these criticisms it is said the development of sector is not due to the Reinsurance Monopoly and the development of sector is parallel to other sectors' development since the foundation of Republic. 4.5.2. Foreign Exchange Savings The introduction of Reinsurance Monopoly was to minimize the amount of money transferred abroad. However, even though the purpose was to ensure savings in foreign exchange, the introduction of Reinsurance Monopoly was not necessarily achieving this purpose; since the insurance premiums were not a unilaterally determined. The need for the foreign reinsurance coverage meant that a part of the potential loss was to be paid by the foreign insurance companies. In cases where the loss/premium rate was high, the amount of foreign exchange inflow could be higher. 4.5.3. Income to Treasury Comparing to the other income sources of treasury the income gained from the Reinsurance Monopoly is not worth mentioning.98 On the other hand insurance and reinsurance sectors are not for creating income to treasury but for giving security and quaranty to public and entrepreneurs. 4.5.4. Supervision of Tariff and Losses The duty of supervision must be undertaken by the Government. It can not be transferred to private companies. In the early years of implementation of Reinsurance Monopoly it was impossible to control insurance sector with a limited number of officials and with the existing institutional structure of Ministry of Commerce. So, the supervision of insurance companies was performed by Milli Reasürans for a long time. The Insurance Supervisory Board was limited to reinsurance business of the companies. The contents of the supervision was the application of an uniform tariff and the control over the claim settlements and loss payments. 4.5.5. Collection of Statistical Data Improved statistical data regarding the insurance portfolio would help to readjust the tariffs which were approved by the Ministry of Commerce. It can not be logical to establish a monopoly for the collection of statistical data and the foundation to collect statistical data for insurance sector is Supervisiory Board as determined on the article 32 of Law No: 7397. 4.5.6. Educating Staff for The Sector The shortage of educated staff was seen as an important problem in the first years of Turkish Insurance Sector. Mostly stuff whose main profession was not insurance had played important roles in sector. To meet this need in 1972 Milli Reasürans consolidated the insurance courses it had been conducting since 1962, in the form of a Foundation. However, nowadays insurance companies have efficent budgets to educate their stuff and Insurance is being studied as a science in Universities. 4.5.7. The Impact on the Relations of Insurance Companies' s with Foreign Reinsurers The Turkish insurance sector started to gain respect abroad. Sector which acquired^ a more stable and orderly structure by Milli Reasürans banning high rates of reductions in99 price rates and prevention by Milli Reasürans of abuses in loss idemnification, obtained reinsurance cover under more favorable terms. The right of preference had taken place for the first time in the Decree no.6/12412, dated August 7, 1969 and the Decree no 7/3587 dated December 3 1, 1971. The right of preference could be interpreted as enabling Milli Reasürans to take over, if it deems necessary, a part or whole of the reinsurance portfolios of the insurance companies, under the same treaty terms and conditions of those companies engaged in free reinsurance transactions. Exercise of such a right of preference was optional and Milli Reasürans was not required to rexercise this right equally throught the whole sector. At this point of exercising right of preference is criticisied mostly in negative manners. 4.5.8. Reinsurance Monopoly is Antidemocratic and Against to Constitution One of the criticisms directed Milli Reasürans and Reinsurance Monopoly was Reinsurance Monopoly's antidemocratic rules. Because application of the monopoly was against the provisions of The Agreement of Europa Economical Cooperation that was signed by Turkey as well. 4.5.9. Reinsurance Monopoly was Hindering The Insurance Sector's Development This thought was accepted between the years 1960 and 1970 and the justification was made below: ”Before the Reinsurance Monopoly the premium producted in Turkish Insurance Sector was about 6 billion TL. Comparing the premium production with the devaluation of Turkish Lira and the big development of the public sector's share in Insurance Portfolio and the development of all economical life, it was discussed that the situation of Insurance Sector in recent years was pointing out the regression not the development. 4.6. Overall Evalution The periods of Monopoly applications' s and the systems used is given on Table n. Table HI. is prepared to show the develpoment of Insurance Sector since 1929. Milli Reasürans served a protective role in the process of the development of theV domestic insurance sector against the foreign insurance companies and encouraged the ??/.?100 foundation of new companies in the sector. Furthermore, by exploiting the adverse effects of the reinsurance monopoly created on insurance companies, the national insurance sector developed rapidly and Milli Reasürans contributed significantly to this development. The insurance monopoly can be said to have speeded up the development process. Becoming the operator of the reinsurance monopoly Milli Reasürans acquired tremendous financial power and gained a lot of experience in time and could compete in international insurance markets. Turkish insurance sector had a powerful reinsurance company as an important quarantee for this sector even if it was created by the law. Milli Reasürans and the insurance companies improved the techniques and learned to obtain the maximum benefits from the foreign insurance companies. While the overall insurance costs incurred by the Turkish insurance sector was reduced, the commission rates they received increased. In addition, the retention rates of insurance companies were also increased. Table IV, V, VI and VH show the technical results of Milli Reasürans for each branch between the period of 1929-1990. Table VEQ shows the total technical resuts of Milli Reasürans for the period of 1990 and 1996. It can be seen on the tables that the retention rates of Milli Reasürans is increased by years. During the early years of implementation of the reinsurance monopoly, abuses were prevented by effectively supervising the price rates as well as the loss imdemnification; since the sector was kept under dicipline and managed to attain a stable structure. On the other hand, it can hardly be claimed that Milli Reasürans succeded in compiling statistical data to be used to determine the probability of risk materalization.101 5. CONCLUSION Looking at this thesis as a whole it will be seen that the problems of reinsurance sector are same as the insurance sector' s and it's supplementaries. The most important problem of Turkish insurance sector is unconsciousness of our population. Even nowadays, in some branches of insurance like marine, export and credit.. An other important problem seen in sector is the competition on the premium rates which was started after the implementation of Free Premium Rate on 1990. An unhealty competitive environment has been created, due to the insurance companies making large reductions in the premium rates without having done any risk analysis. The newly founded companies charged very low premium rates in order to increase their market share. Certain transactions subject to the reinsurance monopoly can still not be reinsured by Milli Reasürans for the reason that low premiums are being charged against high risks, as a result of the premium rate competition prevailing in the sector. But the environment is the sector operated in will not be lived for long. Not much but a few catastrophical losses will force the insurance companies to make risk selection and appropriate pricing. However, without living such an experience it will be logical to intervene the pricing strategies by supervising organs. An other point not to miss out is that while buying internetional reinsurance low priceses stop insurance companies chance. Other important factor for XL coverages bought from foreign reinsurers is the loss experience of the company's. Therefore insurance companies are forced to make good risk selection. Like in developed countries, it is favorable to pursuade the candidate policy buyer to take preventive measures for reducing the risk. Untill this development provided the intervention of supervising organs will help to stop ecomomical losses. Having this sort of problems in sector the criticisms on the implementation of monopoly is not in common nowadays. \ XtHtKSi102 It is not likely to apply developed reinsurance types in our insurance sector as given in the third chapter of the thesis. Not the financial products but even the traditional policies can be sold with difficulty in many cases therefore firstly expecting the development in liability and personal business will be logical. Still the insurance sector in our country creates 12 % technical profit and a good investment income with low foundation and administrating costs. Therefore the trend of newcomers in sector will be continued. Although a different trend is seen in Turkish Insurance Sector from the developed countries it is inevitable that merges and acquisitions will be started. In conclusion, the reinsurance monopoly can be said to have occupied an extremely important place in the development process of the Turkish Insurance Sector. However, continuing the process of development and taking a place in developed markets will be obtained by risk selection, appropriate pricing, diversity in products, increasing the education level, globalisation and bearing in mind that insurance is an universal system not by applying preventive and monopolistic systems. Although one of the main rules in insurance is supervision, supervision in insurance sector must be obtained by self- supervision.“ '”j*.'* > v< -\

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