Fitch Ratings, a credit rating agency known for its comprehensive financial analysis and market insights, has provided an updated outlook on the Turkish non-life insurance sector.

Their latest report highlights a cautious yet optimistic path toward market stabilisation, driven by improved pricing strategies and high interest rates that are expected to support strong earnings in 2025. Despite these positive signs, Fitch emphasises that several risks persist which could impact insurer profitability.

The Turkish non-life insurance market has experienced significant expansion in recent years. From 2021 to 2024, the number of companies operating in the sector increased from 40 to 50, while gross written premiums (GWP) surged from TRY 88 billion to TRY 739 billion.

Total assets also grew robustly, reaching TRY 773 billion by the end of 2024. Fitch-calculated return on equity figures for the sector remained solid, standing at 37% in 2024, reflecting improved financial performance amid a challenging environment.

The operating environment is becoming more stable as inflation rates gradually decline, with annual inflation dropping to 44% in 2024 from over 60% in prior years and falling further to 35% by May 2025.

Fitch forecasts continued easing of inflation to 28% by the end of 2025 and 21% by the end of 2026, alongside a corresponding reduction in policy interest rates from 46% in mid-2025 to an expected 24% by the end of 2026. This gradual shift is anticipated to decrease investment income slightly; however, it should still adequately offset underwriting losses given insurers’ typical short-term investment strategies.

Insurance premiums have risen sharply in response to inflation and increased claims costs, with GWP climbing 107% in 2023 and 73% in 2024.

Growth has been particularly strong in motor, health, and property insurance lines, which are expected to continue leading the sector’s expansion. However, pricing restrictions in the motor third-party liability (MTPL) segment, introduced by regulatory caps since 2017, have caused persistent underwriting losses. The MTPL line recorded a combined ratio of 145% in 2024, reflecting significant challenges.

Fitch notes that recent regulatory measures, including a monthly indexing mechanism for premium caps introduced in May 2024 and a one-off 14% premium increase in early 2025, have somewhat alleviated losses but are insufficient to eliminate them without structural reforms.

Investment income remains crucial for the sector’s profitability, especially as underwriting losses from MTPL persist. The Central Bank of the Republic of Turkey (CBRT) has maintained a high policy rate of 46% as of June 2025 following fluctuations earlier in the year linked to political events and market volatility.

Fitch underscores that the sector’s reliance on investment returns from bank deposits and government bonds means that any future interest rate reductions could impact earnings.

Fitch projects that the overall non-life insurance sector will maintain positive inflation-adjusted profitability in 2025, supported by improved underwriting results and strong investment gains. However, intense price competition continues, with insurers focusing more on technical profits rather than expanding market share.

The combined ratio for the sector is expected to hover around 110% in 2025, indicating ongoing challenges. While motor damage and property insurance lines are likely to deliver positive technical results, the health insurance segment faces profitability pressures due to rising demand and competitive market conditions.

The Turkish Catastrophe Insurance Pool (TCIP) has played a vital role in managing risks from natural disasters, such as the devastating 2023 Kahramanmaras earthquakes, which resulted in insured losses estimated at TRY 117 billion. The TCIP’s efforts to expand coverage to additional perils including floods, landslides, and wildfires aim to enhance sector resilience and provide more comprehensive protection for policyholders.

Regulatory oversight remains strong, with tightened capital adequacy requirements and closer monitoring of solvency positions.

The regulator’s actions in late 2024 and early 2025 to halt new business for undercapitalised insurers and limit excessive premium growth in the motor segment demonstrate a commitment to maintaining sector stability. Non-life insurers reported a regulatory solvency ratio of 156% at mid-2024, up from 147% the previous year, reflecting improved capitalisation supported by favourable financial results and high interest rates.

In summary, Fitch Ratings views the Turkish non-life insurance sector as moving toward greater stability, with supportive macroeconomic conditions and regulatory improvements underpinning this progress.

Nevertheless, challenges remain, particularly in the MTPL segment and amid evolving economic variables, making continued vigilance essential for sustained profitability and sector health.

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