Corporate, regulatory and operational matters of stakeholders of Insurance sector such as insurers, reinsurers, insurance intermediaries, actuaries and loss adjusters are regulated in the Insurance Code, No. 5684 (“IC”).
Insurance and reinsurance contracts are mainly regulated under the 6th book of the Turkish Commercial Code No. 6102 (“TCC”) titled “Insurance Law”. Provisions of Turkish Code of Obligations, No. 6098 apply where there is no specific provision in the TCC with regard to the insurance contracts.
Pursuant to Article 2 of the Law on the Structures and Duties of the Treasury Undersecretariat and The Foreign Trade Undersecretariat, Turkish Undersecretariat of Treasury (“Treasury”) is entitled to issue regulations, communiqués, circulars, sector announcements and general terms for insurance lines. These secondary legislation also plays a major role in regulating the insurance sector.
Treasury with its service units such as General Directorate of Insurance and Insurance Inspection Board is the primary state authority which regulates and supervises the insurance sector. Duties and powers of the Treasury can be summarized as follows:
- to carry out the duties prescribed by the relevant insurance legislation;
- to draft, implement, and monitor and guide the implementation of insurance legislation by the insurance sector;
- to conduct the work of harmonizing such legislation with the European Union;
- to take measures for the development of the Turkish insurance sector and for the protection of the insured.
Under Article 3 of the IC, insurers and reinsurers which are going to operate in Turkey shall be established as joint stock companies or cooperatives (for mutual insurance activities).
However pursuant to Article 15 of the Regulation on Establishment and Working Principles of Insurance Companies and Reinsurance Companies, foreign insurers and reinsurers may also operate in Turkey by establishing a Turkish branch office.
Insurance companies may engage in either life insurance or non-life insurance lines. In terms of operating in Turkey, within one year following their establishment, all insurers and reinsurers must obtain a license from the Treasury for each insurance line they would like to operate.
Pursuant to Circular No. 2007/5 on Resolution No. 2007/12467 of International Practices in Insurance Sector foreign reinsurer cannot directly solicit Turkish insurers and in any way market their products without obtaining a license in Turkey. Nonetheless it is not prohibited to conclude a reinsurance contract where a Turkish insurer directly or indirectly through a reinsurance broker requests reinsurance from the foreign reinsurers.
Under Turkish Law, insurance intermediaries consist of agents, brokers and private pension intermediaries. Brokers, agents and Private Pension Intermediaries are regulated under their own regulations which are respectively; Regulation on Insurance and Reinsurance Brokers, Regulation on Insurance Agents and Regulation on Private Pension Intermediaries. Agents of insurers and insurance and reinsurance brokers are subject to supervision and regulations of the Treasury. There are minimum capital requirements and working conditions foreseen by their respective regulations for the brokers and agents. No broker or agent can perform such activities without holding a relevant license from the Treasury.
Pursuant to Article 2/1-m of the IC, the agent is defined as a legal or real person having adopted it as a profession to intermediate to insurance contracts in the name and account of the insurers for a permanent term within a specific place or region based on a contract without holding a title such as commercial representative, commercial attorney, sales official or employee, or performing such activity on behalf of the insurance company and who carry out the preparatory works before the conclusion of the contract and assist during the implementation of the contract and payment of claims.
Pursuant to Article 2/1-d of the IC, the broker is defined as a legal or real person having adopted it as a profession to observe the rights and benefits of the clients who want to purchase coverage, provide preparatory works before the conclusion of insurance and reinsurance contracts, assist clients in the application of such contracts and payment of the indemnity by representing them and acting impartially and independently in the selection of insurers or reinsurers who will provide coverage under such contracts.
Private Pension Savings and Investment System Code, No. 4632 (“PPC”) defines private pension intermediaries as persons who act as intermediaries to the pension contracts of pension companies or executing the same on behalf of the pension companies. Private Pension Intermediaries may be employed by brokers. Such Private Pension Intermediaries are entitled to get quotes from all private pension companies on behalf of the participants who are represented by private pension intermediaries employed by the brokers.
Certain transactions such as mergers, acquisitions, portfolio transfers or share transfers and winding up of an insurance company are subject to the Treasury’s approval.
Pursuant to the Article 11/5 of IC, foreign words shall not be used in insurance contracts. Principally, the Turkish translation of foreign words shall be used as determined by the Turkish Language Institute.
According to Article 11/1 of the IC, the main content of insurance contracts is arranged in accordance with the general terms approved by the Treasury. However, parties can determine special conditions in accordance with the specialties of the matter. In that case, these special conditions shall not be misleading and shall be shown clearly in the insurance contract under the title of special conditions.
Pursuant to Article 15 of the IC, insurable interests which are located in Turkey and belong to residents of Turkey have to be insured in Turkey by the insurers which are operating in Turkey.
However under Article 15/2 of the IC, the following insurances can be purchased abroad:
a) Transportation insurance for the goods which are subject to export and import;
b) Hull insurance to be provided for aircraft, ships, helicopters which are purchased with foreign loans, exclusively limited to the loan amount and applicable for the term until the foreign debt is paid up, or limited to the period of financial leasing if the same are brought home by financial leasing obtained abroad;
c) Liability insurances arising from the operation of ships;
d) Life assurances;
e) Personal accident, sickness, health and motor vehicle insurances which are made only for and to the extent of the duration that the insured will spend abroad or which are temporarily made during the time spent abroad by the insured;
f) Other insurance products which can be expanded by the Council of Ministers such as liability insurance in relation to clinical pharmaceutical researches and insurances of all vessels registered on the Turkish International Ship Registry.
Under Article 31/A of the IC, any person or cooperation and/or its employees, officers and directors which are subject to IC shall not disclose any information acquired during their services to anyone other than the competent authorities expressly authorized by the IC and shall not use such information for the benefits of themselves or any third person. The scope of this confidentiality obligation does not include any information and document exchanges made directly by insurance companies, reinsurance companies and pension companies among themselves or through the Insurance Information and Monitoring Centre to be used for making a confidentiality contract and for risk assessment purposes.