As the death toll from the 7.8-magnitude earthquake that struck Turkey and Syria on Monday ( February 6 ) continues to rise, a preliminary estimate of the economic loss from the devastating event is already more than US$1 billion in Turkey alone.

The catastrophe has claimed thousands of lives and damaged nearly 8,000 buildings, and it would take years for Turkish insurers to settle the insured losses, estimated to be more than two times those incurred from a similar earthquake in 2020, according to GlobalData, a London-based data analytics and consulting firm.

“Insurers in Turkey were already reeling under the pressure of high inflation that impacted their profitability. Inflation in the country stood at 58% in January 2023 and was 49% in the same period last year,” Shabbir Ansari, senior insurance analyst at GlobalData, says, noting that high inflation rates lead to higher average cost of insurance claims.

“As companies are yet to recover from the impact of the 2020 earthquake, the recent earthquake will further impact the profitability of property insurers. As a result, Turkish property insurers are expected to register underwriting losses in 2023 and 2024,” he adds.

The Turkish Catastrophe Insurance Pool ( TCIP ), along with its major reinsurance partners such as Munich Re and Swiss Re, is expected to absorb a major share of the losses arising from this earthquake. TCIP is a public institution that was set up in 2000 with a provision to settle catastrophic insurance claims of up to US$2.5 billion.

Property insurance gross written premiums ( GWP ) stood at 26.1 billion liras ( US$2.9 billion ) in 2021 and accounted for 29.8% of the Turkish general insurance market, according to GlobalData’s global insurance database.

The Turkish property insurance market registered an underwriting loss in 2021 as the combined ratio ( a combination of loss and expense ratios ) crossed 100% for the first time in the last 10 years and stood at 107.2%. The combined ratio is expected to deteriorate further over the next few years due to the latest event.

"Increased frequency of such large-scale natural calamities will further create the demand for natural catastrophic insurance in the country and support its growth. However, the profitability of insurers is expected to remain challenged over the next few years due to increasing claims and rising inflation,” Ansari says.