The Insurance Disputes Law Review: Turkey

Overview

i The Turkish insurance and reinsurance market

According to data from the Insurance Association of Turkey,2 as at August 2021 there are 65 insurance companies in Turkey, consisting of 41 non-life insurers, 21 life and pension insurers and three reinsurers. This market is dominated by three big companies, Türkiye Sigorta AŞ,3 Allianz Sigorta AŞ4 and Anadolu Anonim Türk Sigorta Şirketi,5 which between them have a combined market share of more than 40 per cent, with the remainder distributed between the other 62 participants.

According to Ministry of Treasury and Finance data,6 66.5 per cent of the total insurers' equity in Turkey is foreign. The Turkish government has taken some concrete steps to moderate this foreign dominance in the insurance market – in a notable step, Türk Reasürans AŞ was founded in 2019 with a 100 per cent Treasury shareholding, which is a clear indication of Turkey's commitment to the insurance industry. Türk Reasürans AŞ, is only the country's third ever reinsurance company and its primary goal is to ensure that reinsurance premiums are held locally.7 Türk Reasürans AŞ gained momentum in 2020, with premiums totalling 3.023 million Turkish lira in value and a continued positive outlook predicted for the upcoming years given the limited local competition.

There are no other reinsurance companies in Turkey except Milli Reasürans Türk AŞ (founded in 1929 and the local reinsurance industry market leader) and VHV Reasürans AŞ. Therefore, a considerable portion of the reinsurance market is dominated by foreign reinsurers.

Over the past years, the Turkish insurance industry has witnessed notable mergers and share acquisitions. In particular, the Turkish insurance market witnessed a historic merger of three government-controlled insurers,8 Halk Sigota AŞ,9 Ziraat Sigorta AŞ and Güneş Sigorta AŞ,10 with the new merged entity named Türkiye Sigorta AŞ. The merger closed on 27 August 2020 and is expected to create economies of scale, lower costs, increase the share of the non-banking financial sector in the insurance industry and create a Turkish insurance giant in the region.11 Not surprisingly, Türkiye Sigorta AŞ was the market leader in terms of the total volume of premiums by the end of 2020, which marked a shift in Turkish insurance competition.

In addition to the Türkiye Sigorta AŞ merger, the German insurance giant Talanx Group (the majority shareholder of HDI Sigorta AŞ) has increased its insurance equity investment in Turkey by acquiring Liberty Sigorta AŞ, a subsidiary of Liberty Mutual Insurance Group and Ergo Sigorta AŞ, a subsidiary of Munich Reinsurance Company. This transaction increased HDI Sigorta AŞ's market share and presence significantly.

Another notable transaction was Vienna Insurance Group's acquisition of Aegon Emeklilik ve Hayat AŞ, a subsidiary of Aegon NV, for a purchase price of €830 million.12 This led to Aegon NV's exit from the Turkish market but solidified market share for Vienna Insurance Group, which is the parent company of Ray Sigorta AŞ, the 13th-largest13 company in terms of volume of premiums in 2020.

As evidenced by the high number of equity transactions in the Turkish insurance industry in past years, there is clearly appetite among investors, even despite the uncertainty created by the covid-19 pandemic. The insurance premiums collected in 2020 amounted to 82.6 billion Turkish lira in aggregate, which is an increase of 19.3 per cent in comparison with the total in 2019.14 The insurance market regressed following the devaluation of the lira in 2020,15 but in comparison with many other industries, the growth seen in the past year was notable.

That said, despite the covid-19 pandemic, 2020 was a year in which many insurers distributed profits. In particular, big market participants such as Türkiye Sigorta AŞ,16 Anadolu Anonim Türk Sigorta Şirketi,17 Allianz Sigorta AŞ18 and Axa Sigorta AŞ19 have all distributed profits to their shareholders, which is a promising indication of the prospects for the national insurance industry.

ii Insurance disputes and recent developments

Insurance disputes are considered commercial disputes under Turkish law and subject to dispute resolution processes that operate at certain levels. The traditional dispute fora are the Turkish commercial courts in what is mostly a lengthy process involving first instance litigation followed by two possible appeal stages.

In addition to court litigation, there is an insurance arbitration commission, established pursuant to Article 30 of the Insurance Code,20 and which is quite effective and busy. In 2020, the commission handled 128,878 cases.21

Another alternative dispute resolution option is mediation under Turkish law, which is principally a voluntary out-of-court settlement option22 and it is very popular in Turkey. However, this form of dispute resolution was reformed in the omnibus law23 effective as of 1 January 2019, and mandatory mediation has been introduced to the Turkish legal system for commercial disputes, including insurance litigation. Under this new regime, it is mandatory to have applied for mediation and failed to settle before filing to bring an action under Turkish law.

The year 2020 presented historic challenges given the uncertainty and changes in the way of doing business caused by the covid-19 pandemic. These in turn led to a decrease in the number of insurance claims, the interruption of judicial services and suspension of legal deadlines, and the transformation of existing and creation of new insurance products,24 along with an excessive rise in cyberattacks and corresponding developments in the cyber insurance market, a number of legal grey areas arose and a significant Constitutional Court decision revoked the principal legislation governing market-leading motor insurance claims.

The legal framework

i Sources of insurance law and regulation

Turkey has adopted a continental law system and many of its primary laws derive from Swiss law. Therefore, the codified law has legislative primacy.

In light of this, insurance has been defined as a contract under Article 1401 of the Turkish Commercial Code25 (TCC), whereby the insurer undertakes to indemnify the insured in the event of damage to an interest of the beneficiary that can be measured monetarily, in exchange for the payment of insurance premiums.

Given its nature, the insurance contract is subject to the articles of the Turkish Code of Obligations26 (TCO) governing contracts as the main source of legislation, in addition to insurance-specific articles of the TCC, and other legislation where applicable.

Under Turkish law, communiqués published by the Ministry of Treasury and Finance and named as general conditions are to be mandatorily included as terms under specific types of insurance to complement the TCC. These general conditions may vary depending on the type of insurance product. Note that there are no published general conditions covering all insurance types, and uniform conditions cannot be expected in view of the contractual nature of insurance. If there are no applicable published general conditions, freedom of contract principles apply to insurance contracts except in respect of public policy considerations and similar restrictions, as stated under the TCC and the TCO.

From a constitutional law standpoint, appeal court precedents do not have the status of legislation under Turkish law and therefore are not binding, but they are deemed to be discretionary proof and certainly have an influence on and provide guidance for local courts.

However, only the decisions of one high court, the High Court of the Joint Chambers of the Court of Appeals, have the force of law. The High Court of the Joint Chambers of the Court of Appeals is the competent court to decide on disputed matters in the event of a discrepancy between appeal court chambers' opinions on a specific matter. In cases of this kind, the High Court of the Joint Chambers of the Court of Appeals steps in to eliminate the discrepancy and establish a precedent that is binding for all citizens. However, this rarely occurs and only in extraordinary cases.

In addition to the laws and regulations governing insurance contracts, the Insurance Code governs the regulatory framework for insurers and insurance market participants such as brokers, agents and loss adjusters. The insurance regulator, the Insurance and Private Pension Regulation and Supervision Agency (IRSA), was established by Presidential Decree No. 47 of 201927 to prepare and implement applicable legislation and to monitor and direct its implementation.

Recent legislative developments

As in the rest of the world, the covid-19 pandemic dominated legal developments in Turkey in 2020. The Turkish parliament published two omnibus laws28 to mitigate and control the effects of covid-19. Nearly all industries have been affected by these laws as (1) official curfew and travel restrictions have been introduced, (2) judicial services and legal proceedings have been suspended, and (3) termination of employment contracts for unsatisfying performance has been prohibited, among many other similar and commonly effective legal changes that have been introduced.

Although there have been no regulations or legislation specifically on insurance contracts regarding the covid-19 pandemic, most of the legislation and administrative circulars introduced have had an effect on the insurance industry. One significant development in that regard was the publication by the Turkish Social Security Institution of a circular29 ruling out covid-19-related physical harm being deemed merely a disease but not an occupational accident. Employers are therefore very unlikely to be considered the party at fault in the event of covid-19-related losses, thus in practice such losses cannot be claimed against employer's liability insurance, except in very exceptional cases. However, there has not yet been an appeal court decision on this subject.

Many circulars have been published by the Ministry of Health and the Ministry of Interior Affairs imposing lockdowns to prevent the spread of the coronavirus. These administrative circulars suspended opening for many entertainment and service industry businesses, such as gyms, hairdressers, restaurants and cafés, and sports centres. Although there have been no court precedents such as the UK test case involving several insurers, Financial Conduct Authority v. Arch Insurance (UK) Ltd and others,30 we believe these official lockdowns may justify business interruption insurance indemnification under Turkish law and there are a high number of claims pending before the Turkish court now.

In addition to the above, one of the most significant changes affecting the insurance industry was the Constitutional Court31 decision cancelling the general conditions for mandatory motor vehicle third-party liability, which revoked the regulator's right to determine compensation principles for claims covered by compulsory liability insurance. Because of this decision, the basis for calculations has been shifted from Turkish life expectancy tables32 to the European table PMF 1931, which is in line with some court of appeal precedents. However, there is a great deal of controversy over whether these precedents are up to date.

In another significant development, the lira has faced a 30 per cent devaluation,33 which may have an impact on the lira-denominated property insurance market in terms of under-insurance. Article 1462 of the TCC stipulates that under-insurance must be considered when the sum insured is less than the insurance value, with the result that the insurance indemnity is paid in proportion to the under-insured value. Policyholders who did not protect themselves by paying higher premiums based on addendums faced losses in insurance claims.

Notwithstanding this, even on the basis of the covid-19-related challenges and the motor insurance market precedents, 2020 was a year both to remember and to learn from, with significant legislative changes and major developments affecting the insurance industry.

ii Insurable risk

The insurance contract

As stated briefly above, insurance is a contract insuring one party's risk, which is calculable on a monetary basis, in exchange for insurance premiums.

The contract can be executed free of any form requirement pursuant to the TCO and TCC, but the insurer must issue an insurance policy, and this document must state the parties' rights, the default terms and general conditions, as well as policy wordings, and a signed copy must be delivered to the policyholder pursuant to Article 1424 of the TCC. The burden of proof of compliance with this provision lies with the insurer. In line with this requirement, insurance contracts are generally in written form in Turkish insurance practice.

Parties to an insurance contract

Insurer

According to Article 3 of the Insurance Code, insurers or reinsurers operating within the territory of Turkey must be established locally in the form of either a joint-stock company or a cooperative. In addition to this, pursuant to Article 5 of the Insurance Code, insurers and reinsurers must obtain an individual operations licence for each of their insurance branches.

Named insured or policyholder

The policyholder is the party that executes the insurance contract with the insurer and is the party obliged to pay premiums.

The named insured is the party who benefits from the insurance. The policyholder and the named insured can be the same person.

Insurance in favour of someone else is also possible according to Article 1454 of the TCC. In this mechanism, the policyholder establishes a three-way relationship with the insurer and the insured. The insured and the insurer have mutual rights and obligations as parties to the insurance contract. The beneficiary is the person whose interest is insured and is not a party to the contract.

Risk

Risk is a fundamental element of all insurance contracts. Nevertheless, the TCC and the Insurance Code do not give a clear definition of this. Under Turkish doctrine, risk can be defined as an event whose occurrence is not known beforehand or, in the case of an unknown event, the fact of whose occurrence is not certain.

Because of the nature of the insurance contract, the risk is transferred with the payment of the insurance premiums, except for certain mandatory insurance policies, which allow the transfer of risk based on execution of the contract instead of payment of premiums.

Named perils versus all risks

The former TCC of 195634 adopted an 'all risks' approach to insurance whereby the insurer was the party liable to prove that a risk was not insured under the insurance contract (except for losses incurred during times of war).

However, given the changing times and the innovations introduced over the course of the past century, holding the insurer liable for risks that were not anticipated and certainly not charged for at the time of execution of the contract is not a fair approach. Therefore, instead of the all risks principle, its exact opposite, known as the 'perils principle', which holds the insurer liable only for those risks stated in the insurance contract, is generally accepted globally.

The former TCC's all risks approach was followed by the Insurance Code of 2007, Article 11 of which specifically stated that excluded risks must be stipulated in the contract and, if not, the insurer would be liable for non-excluded risks.

In 2011, with the promulgation of the new TCC, Turkey also finally shifted from the aforementioned, and extremely pro-insured, all risks legislative approach towards the named perils principle. According to Article 1409 of the new TCC, the insurer shall only be liable towards the insured for the specifically stated risks.

However, the Insurance Code permitting the all risks principle and the new TCC, which adopted the named perils principle, have both been effective since 1 June 2012, creating considerable ambiguity as legal interpretations may draw on two contradictory laws. However, the Court of Appeals General Assembly of Civil Chambers dealt with this matter clearly and in detail in a resolution in 201935 and it emphasised its support for the named perils principle, as follows:

According to Article 22 of the insurance contract, one of the elements of insurance coverage of the travel insurance policy is for the package tour journey not taking place, irrespective of whether the insurance agent is at fault. In addition to this, losses arising from the fault of the travel agent are not specifically excluded under the contract. In consideration of these elements together, the insurer cannot prove that the loss is excluded as the coverage specifically includes such loss

As noted above, there remain two contradictory laws in force in Turkey at present, therefore the handling of each claim requires detailed examination and careful legal assessment.

Insurable risk

According to Article 26 of the TCO, parties can freely determine the content of a contract within the limits stipulated by the law and principles of public policy and safety. In this respect, pursuant to Article 27 of the TCO, contracts that are contrary to the mandatory provisions of the law, morality, public order or personal rights, or whose subject is impossible, are strictly null and void. The invalidity of some provisions of the contract does not affect the validity of the others. However, if it is clearly understood that the contract is not to be concluded without these provisions, the entire contract will be null and void.

Just as public policy and morality concerns can invalidate a contact under the TCO, the TCC includes an identical (and therefore not strictly necessary) article in respect of insurance contracts. Pursuant to Article 1404 of the TCC, any insurance contract designed to cover a loss arising from actions of the policyholder that violate the personal rights of others or that are contrary to (1) mandatory provisions of law, (2) public policy, or (3) morality shall be deemed invalid.

As an example, cyber insurance, which has gained significant market momentum over the course of the past 10 years and is expected to grow strongly and more rapidly over the course of the next five,36 is not subject to a specific communiqué providing general conditions, nor to any similar rules under Turkish law and is considered a rather liberal area of insurance in comparison to more closely regulated contracts. Without a doubt, one of the key selling points of cyber insurance is the provision of coverage for regulatory penalties in the event of a data breach. However, administrative penalty insurance is quite controversial in terms of Article 1404 of the TCC as administrative fines are intended to maintain the integrity of the legal system and can only be issued to safeguard public policy and for the protection of society's well-being. From a public policy perspective, administrative fines must have a deterrent purpose and any insurance against regulatory fines can be deemed to be a tool encouraging violation. Therefore, the question of the insurability of regulatory fines and whether this would fall within the scope of valid insurance is a matter of debate and should be evaluated from many perspectives. The provision of coverage for ransomware demands or similar extortion payments is also very questionable in terms of the scope of Article 1404.

In light of the above, it can be stated that any risk that is not contrary to the mandatory provisions of Turkish law, public policy or morality can be insured. No clear limit has been drawn regarding insurable risk. This changeable nature of the basis of applicable Turkish law, subject to interpretation, emphasises the need for diligently crafted policy wordings and insurance contracts, especially for insurance coverage provided in the absence of applicable general conditions or similar communiqués published by the IRSA.

Insurable interest

Insurable interest has been defined as a risk that has the potential to cause material or moral loss to the insured in the event of damage and can be expressed as a monetary value under Turkish law. Insurable interest therefore broadly includes assets, loss of profit, intellectual property rights, bereavement damages and bodily injuries, among other things.

In light of the above, any risk that is monetarily measurable can be insured, except for public policy-related restrictions.

iii Fora and dispute resolution mechanisms

Litigation

According to Article 9 of the Constitution, the conventional dispute resolution mechanism in Turkey is court litigation and the courts' authority cannot be outsourced or transferred to third parties.

Given that the Civil Procedural Code37 (CPC) classifies claims according to value, the subject matter of the dispute and jurisdiction, and as the TCC regulates insurance disputes within the scope of commercial disputes, insurance disputes are principally heard before the commercial courts of first instance, except for certain personal insurance disputes, which can be heard before the consumer courts pursuant to Article 3 of the Consumer Protection Law.38 In jurisdictions where no commercial court has been established, civil courts are competent.

Commercial disputes follow the litigation stages determined by the CPC:

  1. application must be made to the mandatory mediator, with failure to settle a prerequisite before filing suit;
  2. submission of written statement of claims, defence and proof;
  3. preliminary hearing, at which certain procedural matters must be resolved, such as limitation period, case conditions, preliminary objections, competence of the court, jurisdiction of the court, objections on existence of arbitration agreements and similar,
  4. judge's assessment of submitted proof and collection of additional proof from third parties such as court-appointed experts;
  5. court of first instance decision;
  6. parties' right to appeal to the first appeals court for claims over 5,390 lira;39 and
  7. parties' right to appeal to the second appeals court for claims over 72,070 lira.40

Filing the claim with the court is subject to upfront payment of one quarter of 6.831 per cent of the total claimed value. The remaining three-quarters of the percentage of total claimed value is subject to payment during the appeals stages separately or, if the case is not appealed, upon the definitive resolution. In addition to this, according to the CPC, the attorneys' fees are borne by the unsuccessful party to compensate the counterparties for their expenses in hiring a mandatory attorney in line with the official tariff published by the Turkish Bar Association.41 There are also other court expenses such as expert fees, examination fees and postal fees to be taken into consideration. All these legal costs can be reclaimed.

Alternative dispute resolution

Insurance arbitration

According to Article 30 of the Insurance Code, insurance arbitration is an alternative dispute resolution method that has been established by law for the resolution of disputes between the insurer and the policyholder or third parties who benefit from the insurance contract. For this purpose, the Insurance Arbitration Commission was established under the Insurance Association of Turkey42 to resolve insurance disputes.

Arbitration in insurance differs from arbitration regulated under the CPC. According to the CPC, an arbitration agreement or arbitration clause is a precondition for the parties to apply for arbitration, whereas in insurance disputes parties can apply for arbitration without an arbitration agreement or clause.

This specific arbitration method has been developed in response to demand from insurers, mainly because of 'incurred but not reported'-related complaints and lengthy management of massive case volumes. It was legislated in 2013. Insurers do have the right to participate voluntarily and can be challenged by third parties to this alternative method, except in the case of mandatory insurance contracts such as motor vehicle third-party liability insurance.

The Commission offers a new and practical alternative means to resolve insurance disputes, allowing applicants to obtain results faster than through court litigation. In this framework, disputes before the Commission are resolved by independent arbitrators. The structure and duties of the Commission, such as participation fees, principles of application, and procedures have been determined by the Regulation on Arbitration in Insurance.43 The average time for arbitrators to decide on objections was 48 days in 2019 and 56 days in 2020.44

The insurance arbitration procedure follows stages determined by the Insurance Code:

  1. submission of one written statement of claims and one statement of defence along with proof;
  2. arbitrator's assessment of submitted proof and collection of additional proof from third parties such as court-appointed experts;
  3. Arbitration Commission's first decision;
  4. appeals to Arbitration Commission for claims over 5,000 lira; and
  5. appeals court for claims over 40,000 lira.

The first instance decision must be finalised within four months pursuant to Article 30/16 of the Insurance Code and appeals to the Commission must be finalised within two months pursuant to Article 30/12. These time limits can be extended by mutual agreement of the parties.

Analysis by topic of the proportional distribution of objection applications made against decisions in 2020 showed that the most objection applications (89 per cent) were made against decisions concerning motor vehicle third-party liability insurance.

Mediation

According to the Turkish Mediation Law (the Mediation Law),45 the mediator has been defined as a licensed, independent and impartial third party, whose objective is to bring the parties to a dispute together for the purpose of facilitating communication between them and for them to reach a settlement.

The settlement agreement arrived at through the mediator has the effect of a court judgment and any settled matters cannot be litigated again.

The Mediation Law was amended with effect as of 2018 to introduce a new principle: 'mandatory mediation', and this was extended to include commercial disputes as of 1 January 2019. The difference between voluntary and mandatory mediation relates to the appointment procedures for the mediators. In the absence of mutual agreement between the parties about the choice of mediator (i.e., only one of the parties elects a mediator), the mandatory mediator is appointed by the government (the Mediation Bureau in each courthouse). However, if the parties mutually agree on the appointment of a specific mediator, that mediator is allowed by law to act as the mandatorily required mediator.

That said, insurance disputes are mainly connected to disagreements about (1) the scope of the insurance coverage, (2) the existence of claims-handling documents, or (3) the amount of insurance indemnity. The last two of these disputes generally do not mandatorily require the involvement of a judge and therefore it is more likely that the parties may reach a mutual understanding once the missing document has been submitted or the calculation principles have been agreed.

Considering the lengthy litigation process in Turkey and economic risks such as devaluation and fluctuating foreign exchange rates, and the need for capital, out-of-court settlements have proved quite popular in recent years. Mediation gained quite a lot of momentum following the introduction of mandatory practice in law in 2018, and subsequently it has garnered market share in the insurance industry as well.

Important notes for claims handling

Notice of claims

According to Article 1446 of the TCC, the policyholder is obliged to notify a claim upon becoming aware of the occurrence of the insured event. Any indemnity obligation shall become due once the insurer's claim review is finalised but in any event within 45 days (15 days for life insurance claims).

If after the 45 days (or 15 days depending on the insurance product) the claim review has not been finalised, in principle, the insurer defaults.

Limitation period

According to Article 1420 of the TCC, claims arising from insurance contracts and claims for reimbursement of unnecessarily paid premiums or insurance amounts shall be time-barred after two years counted from the indemnity becoming due and payable.

Any third-party liability claims directed to the insurer shall be time-barred after 10 years counted from the indemnity becoming due and payable.

If the basis of the insurance indemnity is a tortious act that is also deemed to be a crime, the limitation period shall be extended in line with the punishment sentence stated under the Turkish Criminal Code.

In this regard, the limitation period for a specific claim should be calculated based on the nature and elements of the claim. A uniform statute of limitations has not been stipulated and it can change depending on the basis of the indemnity.

Subrogation right

The insurer's succession is singular succession and the insurer shall have the right to recourse in cases of indemnity payments because of illegal intervention by third parties.

The underlying reason for granting this right to the insurer is the prohibition of enrichment in casualty insurance. In the event of the realisation of the risk for which the policyholder has insurance cover, the losses incurred will be compensated by the insurer within the scope of the provisions of the insurance contract.

The necessary conditions for the succession principle are (1) a valid insurance contract, (2) incurred loss within the scope of the insured risk, (3) the insured's right to claim compensation against third parties, and (4) payment of the insurance indemnity made by the insurer to the insured.

The insured's rights to file a lawsuit and claims against third parties responsible for the hazard can be used by the insurer as a successor. If a third party causes damage, the insurer can claim compensation up to the amount of the indemnities. If the insured is the subject of a proceeding, the insurer may continue the proceeding in place of the insured.

Recent cases

Covid-19-related business interruption has been one of the key matters in the insurance legal industry in Turkey, as in most of the world in the past year. Many claimants from many different industries, generally led by hotels and restaurants and other service industry businesses, have filed claims for business-interruption losses. Insurers have generally tended not to settle these claims, arguing that pandemics cannot be foreseen at the commencement of the contract and therefore should not be included in coverage.

In addition to business-interruption claims, cyberattacks have risen significantly and, in line with this, we are witnessing major cyber claims in Turkey. Below is a brief list of recent publicly known cyberattacks in Turkey:

  1. Penti attack: Penti, a Turkish underwear manufacturing giant was paralysed by a cyberattack.46 The company issued a press release right after the attack and notified the Turkish Personal Data Protection Authority (KVKK), but the extent of any losses is unknown.
  2. e-bebek attack: e-bebek, one of the largest maternity product platforms in Turkey was badly hit by a cyberattack on 5 July 2020 according to public disclosures. Access to websites and network systems was denied for nine days.47 The denial of service also caused network interruptions in the company's physical stores during the attack.48
  3. Kariyer.net attack: one of the country's largest job-search platforms, Kariyer.net, was also subject to a cyberattack. The company has stated that the personal data of 50,000 individuals was stolen. The KVKK announced the data breach immediately after the incident but has yet to publish its decision on the matter.49

Trends and outlook

Digital transformation creates significant opportunities for innovation, efficiency and productivity for businesses. However, developing technologies come with digital security and privacy breach risks. Data theft and cyberattack risks are major threats for corporations and organisations.

Unfortunately, most organisations and corporations do not have sufficient protection to prevent data breaches and comply with privacy laws against these developing threats.

According to the Data Breach Investigations Report from Verizon, studies showed that 3,950 data breaches occurred in 16 different industries in 2020. Most of these breaches were perpetrated by external actors and organised criminal groups and 86 per cent of them were financially motivated.50

We believe cyber insurance has potential for skyrocketing growth and the booming number of cyber claims lately suggests cyber-related insurance products will play a major role in the Turkish insurance market in the near future.

In addition to cyber insurance's potential, the covid-19 pandemic has permanently changed the way most of us do business. In that respect, liability insurance such as employer's liability, directors and officers, errors and omissions and many more types of insurance, must adapt to the changes and innovations brought by remote working, and consideration must be given to the changing nature of the risks involved.

The Turkish government is currently planning major long-lasting construction projects,51 including a 45km canal in the middle of Istanbul, many highways, six bridges and many more concrete-related investments. The need for these projects is very questionable and the projects themselves are extremely controversial given their potential for environmental damage. However, the magnitude of the proposals and their potential timespan of at least 18 years (even prior to the inception stages) represent a tremendous potential business development opportunity for reinsurers.

Footnotes

1 Mahmut Barlas is a partner and Zeynep Ece Uyarer is an associate at Durukan Law Firm.

2 The Association of Insurance, Reinsurance and Pension Companies of Turkey, known as the Insurance Association of Turkey, is a professional organisation established under Article 24 of the Insurance Code No. 5684 to develop the insurance profession, to ensure solidarity between companies and to prevent unfair competition. This data is available at: https://www.tsb.org.tr/tr/istatistikler.

4 https://www.allianz.com.tr/tr_TR/hakkimizda/turkiyede-allianz/allianz-turkiye.html#:~:
text=Konsolide%20verilere%20g%C3%B6re%202020%20y%C4%B1l%C4%B1n%
C4%B1,oran%C4%B1nda%20pazar%20pay%C4%B1%20elde%20etti.

6 Annual Report About Insurance and Private Pension Activities, 2019, Republic of Turkey Ministry of Treasury and Finance, Insurance Supervision Board, available at: https://www.hmb.gov.tr/sigortacilik-ve-ozel-emeklilik-raporlari.

8 All three insurers are controlled by Turkey Wealth Fund, the Turkish sovereign wealth fund.

9 Halk Sigorta AS Public Disclosure Platform Notification, available at: https://www.kap.org.tr/tr/Bildirim/860356.

10 Günes Sigorta AS, Public Disclosure Platform Notification, available at: https://www.kap.org.tr/tr/Bildirim/852116.

13 Data from the Insurance Association of Turkey, available at: https://www.tsb.org.tr/tr/istatistikler.

14 In accordance with the Insurance Association of Turkey Sectoral Report 2020, available at: https://www.tsb.org.tr/tr/yayinlar.

15 The Central Bank of the Republic of Turkey exchange rate on 31 December 2019 (https://www.tcmb.gov.tr/kurlar/kurlar_tr.html) and the Central Bank exchange rate on 31 December 2020(https://www.tcmb.gov.tr/kurlar/kurlar_tr.html).

16 Türkiye Sigorta AS, Public Disclosure Platform Notification Regarding Dividend Distribution Transactions, available at https://www.kap.org.tr/tr/Bildirim/914375.

17 Anadolu Sigorta AS, Public Disclosure Platform Notification Regarding Dividend Distribution Transactions, available at; https://www.kap.org.tr/tr/Bildirim/921463.

19 Axa Sigorta AS independent auditor report for the accounting period 2020, available at; https://www.axasigorta.com.tr/media/t1/001/616/498/367/Axa-Sigorta-Hazine%20Raporu_31-12-2020-Final.pdf.

20 Insurance Code No. 26552, published in Official Gazette No. 26552 of 14 June 2007.

21 Insurance Arbitration Commission Annual Report 2020, available at: http://www.sigortatahkim.org.tr/files/FaaliyetRaporu_2020.pdf.

22 The Law on Mediation in Legal Disputes No. 6325, published in Official Gazette No. 28331 of 22 June 2012.

23 Published in Official Gazette No. 30630 of 19 December 2018.

24 Sompo Insurance AS covid-19 Travel Insurance, available at: https://www.somposigorta.com.tr/covid-19-
koronavirus-yurt-disi-seyahat-sigortasi.

25 Turkish Commercial Code No. 6102, published in Official Gazette No. 27846 of 14 February 2011.

26 Turkish Code of Obligation No. 6098, published in Official Gazette No. 27836 of 4 February 2011.

27 Presidential Decree No. 47 published in Official Gazette No. 30922 of 18 October 2019.

28 Omnibus Law No. 7226, published in Official Gazette No. 31080 of 25 March 2020; Law on Mitigating the Effects of the Novel Coronavirus No. 7244, published in Official Gazette No. 31102 of 17 April 2020.

29 The Social Security Institution Circular on Novel Coronavirus No. 96597630-010.06.02-E.5852699 of 7 May 2020.

30 Case No. FL-2020-000018, 15 September 2020, available at: www.fca.org.uk/publication/corporate/bi-insurance-test-case-judgment.pdf.

31 Turkish Constitutional Court decision of 17 July 2020, E. 2019/40, K 2020/40 Available at: https://www.anayasa.gov.tr/media/7006/2020-40.pdf.

32 TRH 2010 – Türkiye Kadin-Erkek Yasam Tablosu.

33 The Turkish lira was at 5.90 lira to the US dollar on 1 January 2020, but it was at 7.42 lira to the dollar on 31 December 2020.

34 Turkish Commercial Code No. 6762, published in Official Gazette No. 9353 of 9 July 1956.

35 Court of Appeals General Assembly of Civil Chambers Resolution 2017/2477 E., 2019/306 K., 14 March 2019 T.

37 The Civil Procedural Code No. 6100, published in Official Gazette No. 27836 of 12 January 2011.

38 The Consumer Protection Law No. 6502, published in Official Gazette No. 28835 of 28 November 2013.

39 Note that this value is subject to amendment year by year and as at 2021 stands at 5,880 lira.

40 This value is subject to amendment year by year and as at 2021 stands at 78,630 lira.

42 See the Association of Insurance, Reinsurance and Pension Companies of Turkey at footnote 2.

43 Regulation on Arbitration in Insurance, published in Official Gazette No. 31564 of 10 August 2021.

44 Insurance Arbitration Commission Annual Report 2020, http://www.sigortatahkim.org.tr/files/FaaliyetRaporu_2020.pdf.

45 Turkish Mediation Law No. 6325, published in Official Gazette No. 28331 of 22 June 2012.

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