The world is facing a deep crisis as it tries to manage the consequences of impacts such as pandemics, climate change, and the increasing global inflation. While all sectors are affected by this crisis, they are developing different methods to emerge with less damage or to stay afloat.

The insurance and reinsurance industry is also among the most affected sectors.  It is reported that the insurance and reinsurance markets, which are negatively impacted by damages caused by risks such as natural disasters, climate change, terrorist incidents, and wars, are also experiencing capital issues. This situation causes the market to behave quite protectively. Even insurance companies, known as “leaders,” which have provided coverage for certain risks for many years, are now very selective, withdrawing entirely from certain risks or increasing the conditions to participate in risks. While a few years ago, there was competition even in assets considered risky, today we see that insured parties are forced to bear part of the risk. We are currently facing what is often called the “hard” market conditions.

Based on our observations, the effects we felt in 2022 are expected to deepen in 2023 when considering the profitability targets of the insurance and reinsurance markets. On the insured side, dissatisfaction arises from unprecedented levels of price increases. On the other hand, they are struggling to meet the changing risks and the increasing insurance needs associated with them.

We see that insured parties, trying to minimize the dual impact caused by both inflation and rising risks, are increasingly engaging with more insurance intermediaries or tend to change their existing brokers. There are also those who proceed without any insurance coverage as a reactive approach.

While this situation may seem positive for insurance intermediaries in terms of capturing new business opportunities, it also brings additional responsibilities for sustainable management of this process and the sector. With the awareness of facilitating insurance, insurance intermediaries, who have been working tirelessly to offer the best conditions at reasonable premiums and push the boundaries of competition, perhaps due to the current circumstances;

  • How sustainable are the conditions obtained?
  • Will we be able to find sources or resources to transfer risks in the future?
  • Is offering the lowest price truly protecting the insured?

While seeking answers to these questions, they should also make efforts to increase risk awareness.

Experts indicate that the impact of climate change will continue to increase. Considering the additional risks brought by an increasingly globalized and digitalized world, we can say that the conditions are not temporary and that the market is in a process of adopting a new position. This transition period, which can be called a phase of change, is quite challenging for all parties. Although risk perception and participation rates in insurance are still very low in our country, this process will be easier when all industry players act with the goal of “sustainability.”