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May 20 10 , ISTANBUL

RECENT DEVELOPMENTS AND CAT MANAGEMENT PHILOPHY IN TCIP. TURKISH CATASTROPHE INSURANCE POOL. May 20 10 , ISTANBUL. MAJOR CHANGE IN TURKISH CATASTROPHE INSURANCE POOL. %30. CARG %7,5. %28. CARG %1. Improved penetration from 4% to 35 %

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May 20 10 , ISTANBUL

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  1. RECENT DEVELOPMENTS AND CAT MANAGEMENT PHILOPHY IN TCIP TURKISH CATASTROPHE INSURANCE POOL May 2010, ISTANBUL

  2. MAJOR CHANGE IN TURKISH CATASTROPHE INSURANCE POOL %30 CARG %7,5 %28 CARG %1 • Improved penetration from 4% to 35% • Increased public awareness for earthquake and insurance • Centralized marketing activities and brand management • Kept pricing at affordable level

  3. NEW ERA IN CAT MANAGEMENT OPERATIONAL CAPACITY AS IMPORTANT AS FINANCIAL • 12.01.10  7.0 Haiti Earthqauke • 27.02.10  8.8 Chile Earthquake • 04.09.10 7.1 New Zealand Earthquake • 11.01.11 Australian Flood • 11.03.11  8.9 Japan Earthquake • 22.02.11 6.3 New Zealand Earthquake • 23.09.2011 Van Earthquake • 09.11.2011 Van Earthquake • 2012 Kütahya Earthquake

  4. EXPERIENCE GAINED IN TURKISH EARTHQUAKES

  5. SURVIVAL IN CATASTROPHES TO EXCELL IN: FINANCE OPERATION

  6. CAT FINANCE 400 MAINTAIN VERTICAL AND HORIZONTAL CAPACITY 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

  7. TRANSACTION SCHEMATIC • Rapid growth pushes TCIP to buy addittional capacity • Great interest for diversifiers • High capacity demand is prone to surcharge in reinsurance premium • Cat Country capacity available in the market is exhausting • TCIP takes higher portion of the capacity in the market • Domestic property insurance companies are getting difficulty in raising capacity • Earthquake exposure leaves not much capacity for other natural perils 3 BILLION EURO TCIP FUNDED INITIALLY WITH 190 DAYS OF INTEREST SPREAD AMOUNT CALCULATED ON THE ORIGINAL PRINCIPAL AMOUNT ISSUER PAYMENTS REINSURANCE AGREEMENT PREMIUMPAYMENTS ANDADDITIONALPREMIUM PREMIUM PAYMENT DEPOSIT ACCOUNT 310 CAT BOND SECURITY INTEREST 400 MIO PROCEEDS REPAYMENT AMOUNT U.S TREASURY MONEY MARKET FUNDS OR CASH BOSPHORUS 1 RE LTD SERIES 2013-1 CLASS A NOTEHOLDERS PERMITTED INVESTMENTS YIELD + INTEREST SPREAD OR EXTENTION PERIOD PERMITTEDINVESTMENTS YIELD CLASS A COLLATERAL ACCOUNT 400 MIO PROCEEDS INITIALPERMITTEDINVESTMENTS 450 MIO MEAG BOSPHORUS

  8. STATE OF THE ART TECHNOLOGY IN FINANCIAL INSTUREMENT • High quality of information/data for Investors • Transparent • Reliable • On-line • Unprocessed/row data from field • Sponsored by TCIP • Established and operated by Kandilli Observatory • 70 seismograph station established to measure ground motion activities in Istanbul • 70 seismograph measuring effects of any earthquake occurrence to individual station • Providing necessary data for calculating agency • Providing on line data through web site as earthquakes occur • Availability of Historical data • Not only data but also availability of tools for calculation • Independent maintenance EXAMPLE OF CALCULATION LOCATIONS’ IERREWS GROUND MOTION DATA KARADENIZ EARTHQUAKE, ML 4.5 PEAK GROUND ACCELERATION ATTHE CALCULATION LOCATIONS

  9. RED SCENARIO BLUE SCENARIO YELLOW SCENARIO LIKELY EVENT SCENARIO FOR TURKISH POOL • Hazine Müsteşarlığı • Türkiye Sigorta ve Reasürans Şirketleri Birliği • Sigorta Şirketleri • AFAD Afet ve Acil Durum Yönetimi Başkanlığı • TOBB Türkiye Odalar ve Borsalar Birliği • Eksperler İcra Kurulu • İstanbul Valiliği - Acil Durum Başkanlığı • AKOM • Çevre ve Şehircilik Bakanlığı • Valilikler, Belediyeler ve diğer yerel Yönetimler • Çağrı Merkezi Şirketleri • Taşıma ve Ulaştırma Şirketleri • Telekominikasyon Şirketleri • Catering (yiyecek-içecek) Şirketleri • Oteller • Güvenlik Şirketleri • Kargo ve Kurye şirketleri • Mobil Banka Hizmetleri 4 COORDINATION W/STAKE HOLDERS DO WE HAVE ROBUST INFRASTRUCTURE 1.000.000 INSUREDS 3 MANAGEMENT OF OPERATION CENTER X 1.000.000 CALLS 1 CAT EVENT DO WE HAVE ENOUGH RESOURCES OPERATION CENTER CALL CENTER 1.000.000 CLAIMS DO WE HAVE EFFECTIVE RESPONSE PLAN 2 CLAIM ADJUSTMENT 1.000.000 REPORTS • Claim files approx 5.000 – 10.000, resources:31 • 24 Standard TCIP Group • 3 Additional ES Claim Call Center • 1 Additional ES Call Center • 3 Claim • Claim files approx 10.000 – 25.000, resources:40 • 24 Standard TCIP Group • 3 Additional ES Claim Call Center • 8 Additional ES Call Center • 3 Claim • 1 Human Resources • 1 Adc • Project is underway 2.000-3000 ADJSUTER

  10. OPERATIONAL MODELS OPPORTUNITY TO TEST DIFFERENT OPERATING MODELS

  11. EARLY LOSS ASSESMENT NOTIFICATION TCIP CAT MANAGEMENT STRUCTURE ADJUSTER LOGISTICS • Critical Discussion Point: Response plans/Emergency Plans without enough resources • Individual corporate/public planning based on same resources is illusionary capacity • 3 Pillars in TCIP’s Philosophy: • Ensure having robust platform • Develop committed capacity • Implement scenario based Cat Response Plan • Investing in Cat Management, especially for low frequency/high severity events, may commercially be unfeasible for predictable future • Not-investing in Cat Management, in case of occurrence, may socially and economically be fatal CAT RESPONSE PLAN LOSS ASSESMENT/CLAIM MANAGEMENT ADJUSTMENT OPERATION MANAGEMENT RESOURCE MANAGEMENT START VALUATION APPROVAL PR AND COMMUNICATION PAYMENT EARLY ASSESMENT – FINANCIAL ANALYSIS REPORT/COMPLAIN/PERFORMANCE MANAGEMENT APPOINTMENT COMMUNICATION WITH PARTNERS COORDINATION WITH FINANCIAL INST COORDINATON WITH PUBLIC OFFCICES FOLLOW UP

  12. HEAT MAP OF THE CAT MANAGEMENT OPERATION MANAGEMENT RESOURCE MANAGEMENT • Study/analyze each activity in the event chain: • Effective methodology • Robust Platform/application • Enough resources/human capacity • Excel on: • Modeling/pre-event • Estimation/post-event • Develop desktop application for early loss assessment • Develop simple, standard claim adjusting methodology • Develop tools to control construction/claim cost • Segment your expertise: • Must provide engineering service to structural damages • Distribute Roles/responsibilities before the event (as possible) EARLY LOSS ASSESMENT GEO-APPLICATION ELER LOSS ESTIMATION TOOL OPEX CENTER DASK CENTER NOTIFICATION GEO-APPLICATION EXISTING METODOLOGY OPEX CENTER CALL CENTER OPEX ADJUSTER LOGISTICS GEO-APPLICATION CLAIM APPLICATION DASK CENTER CALL CENTER OPEX ADJUSTMENT EXISTING METODOLOGY LOSS ADJUSTMENT TOOL CLAIM CATEGORIZATION ADJUSTING OFFICES DASK CENTER VALUATION GEO-APPLICATION CLAIM APPLICATION ADJUSTING OFFICES DASK CENTER APPROVAL CLAIM APPLICATION ADJUSTING OFFICES DASK CENTER PAYMENT CLAIM APPLICATION DASK ACCOUNTING/PAYMENT OFFICE REPORT/COMPLAIN/PERFORMANCE MANAGEMENT MAIN APPLICATION DASK

  13. DEVELOPING PROJECTS CHANGE DETECTION AND FINANCIAL LOSS ASSESMENT TOOL WEB BASED CLAIM ASSESMENT TOOL CLAIM OPERATION PLATFORM • Developing desktop application for early loss assessment • To use for resource planning • Monitoring geographic penetration of the portfolio • Monitoring and recording of the field/loss development following aftershocks • To assist claim managers/adjusters in valuation • Developing tool for standard claim assessment • Control/monitor unit cost of construction • Transparent, simple adjusting tool • Supporting whole event-chain before-during-after earthquake • Enabling using contingency capacity • Allowing multi layer hierarchy

  14. CAT RESPONSE PLAN T² • Different levels of expertise and resources needed for different scenarios • More operational capacity needed as the event gets bigger • More expertise need for structural damages, regardless of number of buildings • Characteristics of the event may get worse due to subsequent events/aftershocks • The plan should allow to change the scenarios during operation • Timing of field deployment is critical sooner/later to be in the field for operation • Early field assessment is critical in planning • Realistic and regular role playing activities are life saving T¹ T° BIG EVENT BIG /LIGHT BIG /HEAVY • LOW EXPERTISE • HUGE OPERATIN • EXTREME SCENARIO • CONTINGENCY CAPACITY • HIGH EXPERTISE • HUGE OPERATION • EXTREME SCENARIO • CONTINGENCY CAPACITY EVENT-SEVERITY/FREQUENCY • LOW EXPERTISE • LIMITED OPERATION • ORDINARY SCENARIO SMALL/LIGHT SMALL/HEAVY • HIGH EXPERTISE • LIMITED OPERATION • ORDINARY SCENARIO SMALL EVENT LIGHT DAMAGE HEAVY DAMAGE RISK-BUILDING DAMAGE SEVERITY/FREQUENCY

  15. WHAT HAS BEEN DONE PIONEERING USAGE OF NATIONAL ADRESS CODES IN TURKEY • LESS DOCUMENTATION NEEDED • ENTEGRATION ACHIEVED WITH PUBLIC OFFICES • CLEARENCE ACHIVED ON SCOPE OF COVER • BUILDING BASED CLAIM ADJUSTMENT

  16. RECENT DEVELOPMENTS AND CAT MANAGEMENT PHILOPHY IN TCIP TURKISH CATASTROPHE INSURANCE POOL May 2010, ISTANBUL

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