XPRIMM: How focused are you on the Turkish market, considering that it is your home market?
Kaan ACUN: MILLI Reasurans, the only local reinsurance company in Turkey, has been operating for 86 years and has a unique position in the market by taking into account its historical background. Our company is accepting business from nearly all local insurance companies both on treaty and facultative basis and its market share is 25% in the proportional treaties and is 10% on the catastrophe non-proportional side. Within this context, MILLI Re is a reinsurance company having the highest market share thanks to its technical knowledge, long experience and strong relationship with the insurance companies. On the other hand, this high market share reflects the prestigious position of MILLI Re in the eyes of foreign capitalized insurance companies and groups which constitutes 75% share in total paid-up capital of the market. Our major target is to maintain the current market share and to establish a stable technical profitability.

After implementing a withdrawal strategy from loss-yielding branches such as Motor and Health insurances, MILLLI Re currently has a premium portfolio which shows a considerable difference from the one of the market: Motor and Health lines generate a total of 6% for MILLI Re compared to 53% in the market. Given the fact that Motor and Health insurances affect companies' results negatively and damage their balance sheets considerably, it is clear that MILLI Re has implemented a proper withdrawal strategy in respect of its underwriting policy.

XPRIMM: How do you comment on the reinsurance strategies of insurers in Turkey? Is in-group reinsurance becoming the preferred choice of companies?
K.A.: The majority of the companies design their risk protection on proportional bouquet treaties and they employ catastrophe excess of loss agreements in order to protect cumulative Fire and Engineering risks in their retentions against natural catastrophe events, mainly to earthquake and flood. As it was mentioned before, MILLI Re is holding a 25% share in the proportional treaties and a 10% share in the catastrophe excess of loss treaties. In addition to this, our company is currently leading 15 companies' proportional bouquet treaties which demonstrates that MILLI Re is popularly esteemed leading reinsurer in the eye of international insurance investors being in Turkey.

In the past two or three years, there were only three companies that have changed their reinsurance policy and designed their reinsurance protection by way of in-group reinsurance program rather than approaching international reinsurance markets. However, such decisions are made completely in accordance with the groups' initiative, not in relation to the market dynamics or any other external facts. The main reason behind this decision is the insufficient profit level made by the affiliated companies so that parent companies absorb the big part of the premium produced by way of reinsurance. In addition to this, the main groups can determine the reinsurance terms, conditions on his own account rather than being dependent on the international reinsurance markets' terms. However, there is no increasing trend currently in the market regarding in-group reinsurance. On the contrary, internationally capitalized companies in the Turkish market will presumably continue to cooperate with the local reinsurer on the grounds that cooperation with the local leading reinsurer and making the best use of its technical knowledge and experience is more advantageous for them in the long term.

XPRIMM: Which are the current developments regarding reinsurance in the region and how would you describe pricing within the current reinsurance environment?
K.A.: Foreign inward acceptances of MILLI Re from developing markets have been carried out by a team in its Head Office since 2006 and by its Singapore branch office since 2008, with the aim of becoming more active in the global reinsurance arena. Main common developments in these emerging markets are explicitly the soft market conditions as well as high reinsurance capacity offered by both global and regional reinsurers.

Furthermore, there is an increasing emphasis to ratings by the players. The MENA region, GCC in particular, continues to attract international and regional reinsurance capacity due to its growing insurance markets while the major concern for the region remains the current competition in the market and pressure on rates, terms and conditions.

The excess capacity may give an end to the tightening trend in terms and conditions since 2011. Back then, the Arab Spring combined with massive global catastrophe losses gave way to a wide-range tightening through the introduction of event limits and reinsurers' tougher stance on inward facultative acceptances by their clients. In addition to the MENA region, soft market conditions continue in Latin America and Asia Pacific as well, with the effect of greater capacity offered by existing players and new capacity entering the region despite the ever-present threat of natural peril losses in these regions, especially the typhoon seasons in the Western Pacific Ocean and the Caribbean.

Typhoon Haiyan (Yolanda) in November 2013, the strongest typhoon ever recorded to make landfall seems to remind the sector of this factor. Capacity provided to the Central and Eastern European (CEE) region has also increased, both with new players trying to penetrate and existing players increasing their appetite. On the other hand, international reinsurance capacity need for the region decreased due to the increase in the capacity provided by group reinsurance companies to their group insurance companies, which stimulated a very soft market condition in the region.

Significant regulatory changes are observed in some regions, affecting the position of international reinsurers. For instance, China's C-ROSS (China Risk Oriented Solvency System) has implications on both onshore and offshore reinsurers transacting business in China from 2016 through a more sensitive risk-based capital requirement when dealing with reinsurance companies, particularly offshore reinsurers. Most countries in the CEE region are getting ready to implement the Solvency II regime. Standards set by Solvency II in respect of capital are expected to affect some companies, especially the smaller ones. As a result, it is observed that new reinsurance solutions such as buying adverse development covers were searched by the companies during renewals.

Furthermore, new rules seem to put pressure on reinsurers in terms of ratings. Regulatory trends in Latin America are also moving towards applying Solvency II-type regulations and risk based capital requirements. Besides, most countries continue to apply registration requirements for foreign reinsurers. In India, the Union Cabinet in July 2014 approved a proposal to relax foreign direct investment (FDI) limit in the domestic insurance sector to 49% from the previous 26%, signaling the Centre's intent to bring capital and investment into the sector. This is foreseen to improve the fall in industrial activities and investment in new projects which might increase the premium in commercial insurance lines.

We also see the impact of currency fluctuations and sanctions in countries like Venezuela and Russia.

In Venezuela, due to the serious devaluation of VEF against USD, insurance players started to revert VEF limits and premiums in their treaties to USD with fixed rates, supported by currency fluctuation clauses. However, it is recently observed that the insurance players prefer to determine monetary units, especially premiums, directly as USD in their treaties in order to avoid bureaucratic delays in the payment of VEF premiums in USD. Despite experiencing frequently risk losses, the Venezuelan re/insurance market continues to be soft.

The Russian insurance market is affected by the economic stagnation mainly caused by the heavy devaluation of RUB against core currencies as well as the political sanctions imposed by the USA and EU. As a result, the growth in the market, especially in the property business, has declined. Moreover, wordings of the treaties are revised to diminish the negative effect of a possible further and a more severe devaluation of RUB or introduction of more severe sanctions. The market experienced large losses in the recent years. However, the largest loss in its history continues to be the engineering market loss, namely "Zagorskaya", which occurred in 2013 and affected many companies in Russia. There were other big losses in 2014 (e.g. Anchinsk refinery explosion). Nevertheless, while there were no satisfactory rate increases in the programs hit by losses, the low pricing trend of the reinsurance market also continued despite the market still experiencing big losses. Rates are still lower than the standard levels.

XPRIMM: Which are the main business segments you focus on?
K.A.: As a non-life reinsurance company in the international markets, MILLI Re's foreign inward acceptances are composed of classical non-life branches such as Fire, Engineering, Marine and General Accident. We do not write other lines of reinsurance business (such as liability, aviation, energy etc.) unless they are offered as part of a bouquet. The foreign inward acceptances of MILLI Re are in majority on a treaty basis for which the company offers variable capacities to each and every region. Regarding our business strategy, we prefer to avoid long-tail risks, but rather write short-tail business.

XPRIMM: Which are your plans for development in the near future? Are there any specific markets that you believe hold great potential?
K.A.: As part of the strategy of transforming from a local reinsurance leader into an international player, MILLI Re has actively engaged in accepting business from emerging markets including Middle East, Asia, Northern and Continental Africa, Latin America, CIS and Eastern Europe starting from 2006 to create a geographical diversification in the portfolio, having been able to increase the volume of overseas business from 2.5% in 2006 to 25% at the end of 2014. International business is underwritten by three main teams. The Head Office Marketing Team is specialized in markets including the Middle East, Asia, Northern and Continental Africa, CIS, Eastern Europe and Latin America, Singapore Branch is responsible for Asia Pacific markets and the Head Office Retrocession Team is in charge of selected business from Continental Europe and Lloyd's.

Given the fact that MILLI Re has been able to penetrate into most of the target territories over the 9 year period, the main aim for the medium term is to achieve further diversity in business written from these markets by adding accounts which would be selected on the basis of their potential profitability and related exposure and further reduce the retro element in this book in order to avoid clash of exposures. Being the largest business source for MILLI Re's Foreign Inward Account, MENA region continues to be of vital importance to MILLI Re, which is followed by Asia. Our Singapore branch office carries on its efforts to increase our portfolio further in Asia-Pacific region. Besides the MENA and Asia regions, we see a strong potential to grow further with the CIS and CEE countries as well as the African and Latin American regions. MILLI Re has been trying to establish a stable portfolio in these regions by regularly visiting the markets therein to establish a long-term relationship with target companies and emphasize MILLI Re's strengths; attending international conferences to gather first-hand information regarding conditions and developments in insurance and reinsurance markets of each region.