Turker Re, a Lloyd’s broker with a significant insurance and reinsurance broking footprint in the Turkish marketplace and surrounding region, has launched a new product offering of a Turkey earthquake industry loss warranty (ILW) as the first under a new Capital Solutions unit.
The broker hopes to create a new market category for insurance, reinsurance and insurance-linked securities (ILS) companies, offering the Turkish earthquake ILW as an effective hedging tool for any companies with property exposure in the region.
Turker Re is aiming to cement a role for itself in helping the Turkey, MENA and Eastern Europe regions access the capital markets and insurance-linked securities (ILS) investors for reinsurance capacity and has launched a Turker Capital Solutions division, to focus on this opportunity.
Eray Turker, Director and CEO of Turker Re, explained, “We have big ambitions and our new EQ ILW is an important step forward in developing that market. The ILW product brings additional and alternative capacity for Turkey EQ and any insurer or reinsurer being exposed to Turkey EQ risk can benefit from that.
“Considering the hardening retrocession market, we believe that this product will be a good complementary and alternative to the existing reinsurance and retro programs. Innovative products like the new ILW demonstrate our technical abilities and willingness to be a market leader in Alternative Risk Transfer (ART) in the region.”
ILW’s are commonly used structures in global reinsurance, retrocession and insurance-linked securities (ILS) markets, but less frequently used in locations like Turkey.
One other Turkish quake ILW structure that we have covered was a transformed and securitized ILW transaction that went through the Tullett Prebon owned Insurance-Linked Note platform earlier this year.
Sources suggest a handful of other ILW’s have featured Turkish earthquake risks as one of their perils, but these have typically been ILW’s that provide coverage across a range of global perils, of which Turkey quake is just one.
The Turker Re ILW product utilises an industry loss trigger provided by PERILS AG and also makes use of the firms industry exposure database as well.
It represents the first Turkish ILW product to be sold by a broker directly located in the region, with Turker Re’s headquarters being in Istanbul and it having a significant market share in the country.
The Turker Re ILW product has been designed to create a combined industry event loss table (ELT) and associated Occurrence Exceedance Probability (OEP) curve from the Turkey EQ Industry Loss Curves based on PERILS Industry Exposure Data and Loss Index.
Director and CEO of PERILS, Luzi Hitz, commented on his firms involvement, “We are pleased that Turker Re has selected PERILS as the reporting agency for this new ILW product. Turkey is a high-growth economy with large earthquake exposures. Any solution which facilitates risk capital into the market will be beneficial to manage this growing earthquake risk.”
Turker Re hopes that its new ILW solution will help to establish an effective alternative earthquake risk transfer and reinsurance market, presenting insurers and reinsurers with opportunities in Turkey and across the broader regions its business focuses on.
It’s worth noting that PERILS reporting threshold for a Turkish earthquake is set at EUR 200 million, while PCS also operates a Turkey catastrophe industry loss reporting service and its threshold is much lower at just US $10 million.
PCS, to-date, is the only company to have reported on insured catastrophe industry losses in the country, having designated the recent earthquake affecting the Izmir region of Turkey as a catastrophe to track, and previously reported on industry losses from hailstorms and flood catastrophes in 2017.
The Turkish market and surrounding countries in the MENA and Eastern European region are rather underserved with solutions for insurers and reinsurers to access alternative forms of reinsurance and retrocession capital.
Turker Re is hoping that with its new Turker Capital Solutions division it can help to bring alternative risk transfer and insurance-linked securities (ILS) markets closer to cedents in the region, offering a range of products such as this ILW, alongside collateralised protection, parametric products and even catastrophe bond replica coverage.