OREANDA-NEWS. Fitch Ratings says in a new report that the Turkish insurance sector's profitability remains largely driven by the performance of the motor insurance segment.

The weak results of the motor insurance segment threaten to depress the overall non-life insurance sector performance once more due to rising bodily injury claims and a significant increase in reserves. In 1H15, the non-life insurance made a net loss of TRY216m (1H14: net profit of TRY338m). The life insurance and pensions sector's profitability has been stable and supported the overall profits of the insurance sector.

Rising bodily injury claims could pose a serious threat to the Turkish non-life insurance sector's profitability and solvency. The frequency and severity of bodily injury claims have increased significantly in recent years fuelled by an increasing number of injury lawyers and claim management companies, who offer to pursue claims on the claimants' behalf for a fee. The agency believes that insurers and the regulator collectively need to respond but a solution is expected to take time.

Fitch believes that there is a high likelihood of the non-life insurance market hardening to re-build the sector's capital. Strong competition has driven motor premiums to unsustainably low levels and incurred-but-not-reported reserve adjustments are likely to put further pressures on the sector's capital. The non-life sector has been strengthening its reserves following the regulation change in 2014, which provides autonomy to insurers to set their own claims reserving method.

The full report, entitled 'Turkish Insurance Sector: Profitability to Be Driven by Motor Insurance Results' is available at www.fitchratings.com.