102... ingilizce ÖZETTC INSTITUTE OF BANKING AND INSURANCE DEPARTMENT OF INSURANCE REINSURANCE PRACTICE IN TURKISH INSURANCE SECTOR, MAIN PROBLEMS AND SOLUTIONS THESIS Advisor : Şahamet BÜLBÜL ARZU BAYER TEMİMHAN Istanbul. 1994CONTENTS INTRODUCTION Page C.ENERAL.LOOKING! AT REINSURANCE 2.L The Concept and Development of Reinsurance 2. 1. 1. Description of Reinsurance 2. 1.2. History of Reinsurance 2.1.3. General Principles of Reinsurance 2.2. Importance of Reinsurance 1 / 1 2 2 i METHODS OF REINSURANCE 3 3.1. Facultative Reinsurance 3 3..U. Non - Proportional Facultative Reinsurance 3 3.1.2. Proportional Facultative Reinsurance 4 3.2. Treaty Reinsurance 5 3.2. 1. Proportional Treaty Reinsurance 5 3.2.1.1.- Quota Share Treaty 5 3.2.1.2. Surplus Treaty 6 3.2.1.3. Pools and Facultative Obi iguatqry Treaties 6 3.2.2. Non. Proportional Treaty Reinsurance 7 3.2.2. 1. Excess of Loss Treaty 7 3.2.2.2. Stop Loss and Aggregate Excess of Treaty 7 4. REINSURANCE IN TURKISH INSURANCE SECTOR 4.1. Legal Basis of Reinsurance in Turkey 4.2. Main Methods applied in Turkey 4.3. Main Problems in Reinsurance in Turkish Insurance Sector 4.3. L Insufficient Reinsurance Agreements 4.3.2. Problems in Placement 4.3.3. Problems arising from Legal Regulations 4.3.4. Economic Problems 4.3.5. Lack of Statistical Datas 4.3.6. Lack of Qualified Personnel 8 8 9 9 9 11 11 11 12 12?Pane 5. SOLUTIONS TO PROBLEMS İN TURKISH INSURANCE SECTOR 12 5.1. Reasonable Reinsurance Agreements 12 5.2. GockJ Evaluation of Local and Foreign Reinsurance Market 13 5.3. New Legal Regulations 14 5.4. Good Evaluation of Economic Structure 14 5.5. Other Solutions 15 6. CONCLUSION 151. INTRODUCTION Reinsurance is the insurance of insurer. It provides insurer to cover various type and huge amount of risks, increases its capacity, creates stabilty and ştrenghs finances. As a result, all insurers need reinsurance for their protection. Reinsurance practicehas gained importance in Turkey, since there experienced a lot of difficulties for last years. In order to create a perfect free insurance market, it is necessary to solve the problems within the sector both in insurance and reinsurance side.On the other hand, since the sector is so new than other financial sectors, new applications and forrnules transferred to reality in very hard conditions.Especially, passing to free tariff system causes to some problems within sector such as wery low rates. This result in heavy reinsurance conditions. That is why, the problems have to be determined clearly and and supposed solutions to these problems have to be applied as soon as possible. A perfect insurance market could be established consequently. 2. GENERAL LOOKING AT REINSURANCE 2.1. The Concept and Development of Reinsurance. - 2.1,1. Description of Reinsurance Reinsurance is the insurance of insurance company. Insurance policy is a legal agreement between insurer and insured. Insurer takes a responsibility to pay claim in case of loss, and insured pays a premium to insured according to this agreement. Similar situation is also valid for a reinsurance agreement. The reinsurer provides similar protection to the insurer. Reinsurance therefore, plays a very important role in the insurance industry. Reinsured pays a premium to reinsurer, and reinsurer takes the responsibiltiy that compansites the reinsured in case of loss, but the parties are different from an insurance agreement. i.e. Reinsured and reinsurer. There is not any legal connection between insured and reinsurer. İn case of loss, insured ask to compansete his claim from insurer. Insurer has topay this. claim due to policy, then he asks to his reinsurer to compansate hi> claim. 2.1.2. History of Reinsurance History of reinsurance i$ as old as insurance. From the time of beginning of insurance* reinsurance has been also needed, because insurer looked for a cover tor himself. Once upon a time, i nsuerers worked as reinsurer for their relations between themselves, then, reinsurance companies which only concern with reinsurance business and not write any insurance policy. established. Nowadays, reinsurance companies play an important role in the financial market in the world and create a big financial potential for international businesses. In Turkey, first Reinsurance company which is colled Milli Reinsurance was established in first years of new Turkish Republic and a reinsurance monopoly was established in the identification of Milli Reinsurance. Today there are four reinsurance companies in Turkey. 2.1.3. General Principles of Reinsurance General principles of reinsurance are the same as insurance, which are as follows Utmost Goodfaith, Approximate Cause, Interest, Claims, Subrogation. 2.2. Importance of Reinsurance Reinsurance plays a very important role in insurance industry. Firstly, k provides capacity. In every branch of insurance, there are risks which an insurance company cannot afford to keep for its own account. In certain insurance markets, these risks are insured on a sharing basis by the irisxirance companies, each company rakes such a share of the risk as it can absorb itself and the remainder is insured with other companies. This practise is colled `co-insurance`. In other markets, the insurance company insures the whole risk itself and lays off some of the amount it. has accepted to other insurance or reinsurance companies, keeping only whatit can absorb. Thus, where the amount of any one risk or group or risks which forms one hazant İs such that it is beyond the limit which is prudent for one insurance company to carry, it is necessary for that insurance company to effect reinsurance. The next important reason for reinsurance is to even out the results of insurance company over a certain period. Wide swings in the results of an insurance company can be very damaging to its damage with the public and can also cause concern tp its shareholders. Results fluctuate as a result of an.accumulation of several large individual losses occuring over a period or as a result of one very large sudden catastrophic loss. Reinsurance minimises this fluctuation by limiting the exposure of individual risks to a loss and by restricting the losses to which a portfolio whould.be subject either for any one event or for any one year of account. The other main function of reinsurance is the financing aspect. One of the yardsticks used by regulatory bodies in controlling insurance companies is the measure of their solvency. Solvency is calculated by the percentage which the capital and free reserves of the company bears to its net premium income. These authorities have minimum ratios below which they would not allow companies to operate. This ratio is termed the ` minimum solvency ratio `. 3. METHODS OF REINSURANCE 3.1. ' Facultative Reinsurance Facultative reinsurance is the oldest method of reinsurance and although it is less frequently used than treaty reinsurance, it is necessary and usefull. 3.1.1. Non - Proportional Facultative Reinsurance This type of reinsurance has developed more recently as original rates paid on the insurance öf the risk have dwindled dramatically and companies have found it necessaiy to resort to excess of loss facultative in an effort to retain as much of the premium as passible whilst still limiting their exposure. Furthermore, several reinsurers favour this type of reinsurance as they can quota their own premiums for the excess amount they will accept irrespective of the original rate.The main problem with using non-proportional facultative is that the loss potential of the insurer becomeshigher than under the proportional facultative method. He is now a first loss situation! When the reinsurance, on a risk is only facultative with the remainder being for the net account of the insurer both parties are aware of the increased potential exposure. But when there are also proportional treaties involved, there could be some further problems. Whilst the insurer might favour this situation, the treaty reinsurers may not have been told that facultative excess of loss has been used by the insurer instead of non proportional facultative and are not aware of their potentially heghir exposure after a loss happened. This method of reinsurance must only be used after approval, by the treaty reinsurers has been obtained. 3.1.2. Proportional Facultative Reinsurance Each risk which necessitates a facultative placement is considered separately by the insurer. The insurance company must give the reinsurer all the material information about the risk to enable the latter to decide whether he will accept it or not and allow him to set an adequate rate. The reinsurer has the option to either accept 100 ck of the risk or a proportion of it or decline to participate. Original rate is the factor which is applied to the sum insured to calculate the premium due by the proposer to the insurer. The insurer in turn pays to the reinsurer a proportion of that premium depending on the share of the irsk taken by the reinsurer. The slip is shown to prospective reinsurers who upon acceptance will each initial it and place alongside their initials the share which they have accepted. The normal practise is for the insurer to send closings giving brief details öf the risks accepted by the reinsurer either on a monthly or quarterly basis together with accounts, covering all the transactions between the insurer and reinsurer during that period. The transactions include premiums due less commissions and small losses which have occured on earlier or on present insurances. Large losses are settled in cash immediately after settlement by the insurer to the insured without waiting for a monthly or quarterly account.3.2. Treaty Reinsurance Treaties are classified into two categories : Proportional and non- proportional. 3.2.1. Proportional Treaty Insurance A propöriinal treaty is an agreement entered into between an insurer and a reinsurer whereby the insurer agrees to cede and the reinsurer agrees to accept a proportional share of all reinsurances offered within the limits of the tretay. Those limits can be monetary, geographical, branch, section, etc. This means that automatic protection isşecured. It is obligatory for the reinsurer to accept all risks within the scope of treaty and it is also obligatory for the insurer to cede risks in accordance with the terms of the trety. 3.2.1.1. Quota Share Trety A quota share treaty is an agreement whereby the ceding company is bound to cede and the reinsurer is bound to accept a fixed proportion of every risk accepted by the ceding company. The reinsurer shares proportionally in all losses andreceives the same proportion of all premiums less commission. The quota share treaty has its advantages and disadvantages. What are advantages for the ceding company may sometimes ba disadvantages for the reinsurer and vice versa. For the new ceding companies companies entering into a new class of business or a new area. It would be the best way to get reinsurers to participate in portfolio with unknown experince and limited spread. A ceding company which wishes to accept reinsurance business itself and has to provide a share of its own business in reciprocity could also prefer quota share treaty. Reciprocal exchange between direct insurers enable each party to participate into a wider portfolio at minimal costs. This is very often used by companies belonging to the same group. Quota share treaty provides to increase the solvency ratio of a ceding company This is sometimes termed ` Surplus Relief `3.2.1.2. The Surplus Treaty A surplus treaty is an agreement whereby the ceding company is bound to cede and the reinsurer is bound to accept the surplus liability over the ceding companiy's retention. It allows the ceding company to reinsure under the treaty any part of the risk. The advantages of surplus reinsurance to the ceding company are as follws : Only the portion öf the risk which exceeds the company's retention reinsured. Should the size of a risk be less than the company's retention. It is bound to cede any share of that risk to the treaty and all p;remium for such risk is retained by the company. As the ceding company retains a fixed monetary limit, the portfolio it retains is homogenious. By retaininga larger amount of good risks and smaller amount of poor ones, the ceding company can keep more profitable business to itself than it gives to its reinsurers. The principle disadvantage to theceding company is that high cost administration as experienced persons must be employed to determine retention for each and every risk according to type, quality.exposure and calculating premium retained and the premium going to reinsurers accordingly. However use of computers has reduced this administrative burden to a large extent. 3.2.1 J. Pools and Fac/ Oblig Treaties The principle of a reinsurance pool is that all members of the pool put all or part of their premiums for a particular category of business into a common fund and they share the aggregate claims arising either in the same proportions as their premiums or in any other agreed manner. Profits, losses, expenses, are shared in the same way. In fact a pool acts as an insurance or reinsurance company created by its members without however those members having had to put up the necessary capital to form such a company. Pools are established for a variety of reasons. The main one is the creation of capacity to handle risks of a catastrophic nature or of a special category, for example, atomic energy risks. It might not have been possible to insure or reinsure those 'risks otherwise. In the past, pools have been created in ; certain countries or regions to reduce the flow of reinsurance business going to reinsurers outside that country or region. Facultative Obligatory Treaty has both eharecteristics of facultative cessions and ofobligatory treaties. In fact it is an agreement whereby the ceding company has the obtion to cede. as for facultative risks and the reinsurer is bound to accept, as under the treaty arrangement, a share of a specified risk underwritten by the ceding company. It normally comes after a surplus treaty and gives automatic reinsurance facilities to the ceding company when the capacity of the surplus has been exhausted. It acts therefore as a further surplus treaty except that the ceding company may not cede to it if other arrangements more beneficial to the cedirjg company can be found. The advantages for the ceding company are as follows : Immediate reinsurance after treaty facilities, Automatic facility for risks of specific nature of of irregular occurance pattern. 3.2.2. Non- Proportional Treaty Reinsurance 3.2.2. İ. Excess of Loss Treaty An excess of loss treaty is an agreement entered into between a reinsured and a reinsurer whereby the reinsurer agrees to pay the reinsured all losses which exceed a certain specified limit in respect of any one risk of any one event. a) Working covers are excess of loss treaties under which both reinsured and reinsurer accept there will be losses with routine regularity and thus they protect the normal daily exposure of the business covered. The deductibles are low and are easily attained by losses. They are thus exposed either for any one policy / any one risk or to a minor catastrophe. b) Catastrophe cover protects the reinsured against the risk of accumulation in the event of one catastrophe, for example, an earthquake or a cyclone destroying a whole town. Th e acceptances and retentions of the reinsured per building may have been reasonable, looked at individualy but the accumulation of reasonable limit in an area may reach a very high amount if several buildings in that area are insured with one company. 3.2.2.2 Stop Loss and Agreegate Excess Loss Treaty Stop Loss cover prevents the reinsured from losing more than a specified amount of loss for a «iven class of business. The amount is normally fixed in relation to the reinsured's8 annual premium income for the class of business in question and is represented as a percentage. Thus, the reinsurer is not liable for any losses until the loss ratio for the year exceeds an agreed percentage of the premiums. Thereafter he is liable for all losses, great or small, until the limit of liability under the treaty is reached. This limit is also expressed in the form of a loss ratio. Stop Loss covers are often used to protect crop portfolios.. It is difficult to establish what is one risk fora crop portfolio and the events, e.g. hail or cyclones are normally catastrophic ones and are not expected to occur with regularity. It makes it problematic to use other types of reinsurance alreary described except Quota share. An aggregate excess loss treaty works on the same principles as stopp loss but instead of representing the amount the reinsured is prepered to lose annually as a percentage of the annual premiums, it is stated in actual cash figures. Thus the treaty may covre the annual losses in excess of TL 3,000,000,000.- up to a further TL. 1000,000,000.- The reinsured pays all losses up toTL. 3,000,000,000.- but not more than TL. 2,000,000,000.- Any amount in excess of TL. 5,000,000,000.- will therefore revert to the reinsured. A reinsurer must be extremely careful in giving such a cover. If in the above example the reinsurer gave the cover based on a premium income of TL. 1,800,000,000.- and the reinsured wrote TL. 2,500,000,000.- of premium. In that case TL 2,000,000,000.- no longer represents 111 % loss ratio but 80% loss ratio. He may now be guaranteed a profit. 4. REINSURANCE IN TURKISH INSURANCE SECTOR 4.1. Legal Basis in Reinsurance in Turkish Insurance Sector Insurance companies in Turkey have a legal responsibility due to Turkish Insurance Law, in order to obtain to the limits of insurance, retention and reinsurance capacity. According to the same law, there is a reinsurance monopoly which is colled `Milli Reinsurance Company ` and all companies have to-retain 25 percent ( except motor branch ) to Milli Reinsurance Company after their retention. In motor branch which includes motor own damage, compulsory and facultative third party liabilities, the share of Milli Reinsurance is 1 5 pet. Milli Reinsurance's reinsurance commission is determined as sliding scale or fixed basis and insurance companies apply to these commission limits.4.2. Methods of Reinsurance in Main Branches Fire, transport ( hull and cargo ), accident ( general accident and motor ). engineering ( erection all risks and construction all risks ), agriculture and life are the main brunches in Turkish Insurance Sector. The main method in practise is surplus treaty; all reinsurance companies participate to bouquet, receive same share from different branches' surplus treaties. For example,' Reinsurer A determines his share in bouquet as 10 pet, it means that this reinsurer participates 10 pet to each of fire, marine,accident, engineering treaties accordingly. Each branch's surplus treaty determines technical characteristics after discussions with reinsurers. Regarding these discussions, surplus treaties could be one or more than one ( treaty limits which are colled ` line ` ) with various agreed lines. Again, other items like reinsurance commission, earthquake commission, profit commission, management / administrative costs, premium reserv deposits, claims reserv deposits carried forward period of loss, cash loss are determined in the technical side. Both parties sign a reinsurance slip for their agreement, then reinsurance wordings which are include more detailed information about conditions are forwarded by ceding company to all participated reinsurers for countersigning and returning one copy of each wording. The other main agreement is quota share treaty. Quota share treaty is especially applied in new branches or new established companies or small companies or in the branches with higher loss ratio. Since quota share treaty means a fortune cooperation between insurer and reinsurer, it is always used in Turkey in thenew orhigher loss ratio branches. Insurance companies also protect themselves and their relation with a excess of loss treaty. Excess of Loss treaty starts to work as cumulative losses exceed a limit and correspond to the risk. 4.3. Problems arising in Turkish Insurance Sector.4.3.1. Insufficient Reinsurance Agreements Reinsurance agreements in TIS are usually done with a classical method. It means that the quota share treaty is applied in new- branches or in the branches with higher loss ratio, surplus treaty is applied in main branches and retention is protected through excess of loss10 agreements. However, the main characteristic of treaties is the decision of retention. Insurance companies have to decide to retention due to statistical datas, but general aim in Turkey is to increase the retention in the proportion of inflation. On the other hand, a correlation between premium and loss has to be determined. The loss ratio is one of the important factors determining retention, the company's financial structure, policies, investment tools and the volume of respective portfolle. the loss probabilities affect the retention of company. Retaining minimum retention, means the transfer of some premium to abroad in spite of this premium could be in the retention of ceding company. One of the mistakes in surplus treaties iş to determine low number of lines. As the surplus treaty's capacity doesnot correspond to the risk, ceding company has to look for facultative reinsurance. Facultative reinsurance result in extra administrative charges and new reinsurers. treaty exclusions cause to district insurance policies contents. There are a lot of exclusions in all branches, both in surplus and quota Share treaties/These result in riot acceptance of insurance company for some risks, and clients are not happy with their rejected risks. Some items in surplus treaties result in arguments between insurers and reinsurers. One of them is deposits on premium reserves.There is premium reserv deposit item in all existing proportional reinsurance treaties. As it is known.premium rezerv deposits are held by ceding company but in fact, this money belongs to reinsurer. Ceding companyretains this amount as a security-in the case of loss. The period of retaining premium rezerv deposits is usually 12 months in Turkey and this amount is retained as Turkish Lira ( hot any other foreign currency ). This situation creates some problems in reinsurer side because the inflation in Turkey reduces the nominal value of amount. reinsurers receive alover amount TL than they expect. On the other hand, interests on deposits comes very low to reinsurers. All these factors cause in restricting reinsurance capacities. Premium payments to foreign reinsurers are delayed due to problems in premium collection from insureds and agencies. Reinsurers receive their premium share very late. Regarding political risks, the probability of risk is very high and insurance companies donot give importance to risk selection. Consequently, treaty conditions are not enough capable to solve general problems.It 4.3.2. Difficulties in Placement Number of Turkish reinsurance companies is very limited and these companies capacity are not enough to create necessary capcity in reinsurance which Turkish insurance companies ask. The most important reinsurance company is Milli Reinsurance which is also monopoly.Eventhough, compulsory cessions cessions to Milli Reinsurance provides a wide capacity, it is not enogh to solve the placement problems, Foreign insurance companies have experienced very big claims, especially catastrophic claims, so they decided to limit their reinsurance capacities all over the world. Turkey with Erzincan earthquake has been also affected from this decision, all reinsurerslimited their reinsurance capacity. This result in a very important placement problem in Turkish Insurance Sector. 4.33. Problems arising from Legal Regulations Legal regulations make hardier to establish reinsurance companies in Turkey, of which the number is very restricted. On the other hand, Milli Reinsurance plays an important role as a rule maker, most of risks are rejected to reinsure because of low rates or reinsurance agreement conditions are hardered.Even Milli reinsurance creates a capacity in reinsurance, the monopoly prevents the development in Turkish Insurance Sector. 4.3.4. Economic Problems The main problem of Turkish Insurance Sector is inflation. Inflation rate is very high in Turkey for many years. Economic recessions and devaluations of Turkish Lira against foreign currencies cause a lot of problems between turkish Insurance companies and foreign reinsurers. v Firstly, Turkish companies do not accept inward acceptances from foreign countries because any Turkish company could accept a reinsurance agreements which by a foreign currency. Secondly, foreign reinsurers have experienced serious financial losses from the12 inflation, devaluation and recessions in Turkey. The actual value of their shares are reduced due to these factors and it creates a financial loss in foreign reinsurers side. 4.33. Lack of Statistical Datas The keystone of insurance is statistics. In all kinds of insurance branches and in every decision taken, statistical datas are necessary and important. However, statistical information for previous year are not available, because it has not been given necessary importance to statistics. Reinsurers also ask statistical datas in all branches to cover, if statistical datas are not sufficient »reinsurers prefer higher rates and heavy conditions for they donot know the risk veil. 4.3.6. Lack of Qualified Employees One of the main problems in Turkish Insurance Sector, is the lack of qualified employees. As sector is new than other service sectors in Turkey, qualified people have preferred other sectors for many years. In fact, reinsurance operations need very high qualified employees since it requires technical language and a high education. 5. SOLUTIONS TO PROBLEMS IN REINSURANCE PRACTICE 5. 1. Reasonable Reinsurance Agreements Companies have to determine main points that may be caused to undevelopment of reinsurance. As foreign reinsurers wish to limit proportional treaty's portfolle, companies have to find any other types of reinsurance placement. One of the most important alternatives is non proportional treaties. Especially, all catastrophic risks have to be excluded from surplus treaties. For catastrophic risks, there could be established a catastrophic excess of loss cover. Companies revize their excess of loss treaty capacity and create a balance /13 between risk exposure and capacity. Catastrophic excess of loss is the most available method to be used in Trukey, because it provides a whole control of exposure to reinsurer at the same lime. If catastrophic risks are included to tretay, the following points are given importance :?' a. Rating has to be done very carefully, deductible and coinsurance proportion have to be increased. Reinsurance commission has to be arranged as both parties. b. Catastrophic risks are accounted seperately. from the main branches' accountancy. c An occurance limit has to be determined and this occurence limit has to be connected with deductible. d- Earthquake accumulation tables are evaluated very carefully and companies have to search if these figures are satisfactory or not. If there is a situation of limitation of the treaty, in this case, an average clause and * occurance limit clause have to be added to treaty conditions. Companies try not to insure earthquake risks if they could, so try to reduce earthquake portfoile. Coinsurance of insured has to be increased. A better way is practicing deductible and coinsurance together. Loss limit policy has to be applied in industrial risks. Premium rezerv deposit figures have to be determined according to inflation of.TL. and periods have to be lower than existing periods. Premium collection problem is also the problem for reinsurers, as it causes in delaying premium payments to reinsurers. Reinsurer premium share has to be paid on due dates to reinsurers. As a conclusion, requests of foreign reinsurers have to be given more importance in order to create reasonable treaties for both parties. 5.2. Ciood Evaluation of Local and Foreign Insurance Market Turkish Insurance market is one of the new established sectors. Free tariff system is not experienced very well because the application is so new.. İn this case, free tariff system has to be evaluated in order to avoid lower rates. Monopoly of Milli Reinsurance has to be abolished because it makes hardier to improve r.a free insurance system. Companies have to determine their places in insurance sector and try to learn more information on-other14 companies. Low rates which are the result of tariff system is a handicap for profitable reinsurance agreements. Foreign reinsurers insist on not covering risks with lower rates. Number of local reinsurance companies have to be increased, as it is necessary to create a wide local reinsurance capacity. Further, the financial capacity of Milli Reinsurance Company has to be increased. It must be given a prior importance to choose of foreign reinsurers. Foreign reinsurers have been experienced important catastrophic events for last few years and they paid big losses. Some of them have gone bunckrepcy,some others stopped to write insurance business or failed some methods of reinsurance, i.e. Facultative or liability reinsurances. That's why, it is a necessity to evaluate reinsurance companies to be worked in both financial and technical side very well and choose the ones which are real y good. Since most of foreign reinsurance companies have been decreased their capacity, Turkish insurance companies, have to make some devotions in order to create alternative placements. All insurance companies and sector as a whole have to prefer long term relations than short term relations than short-term relations with foreign reinsurers. Further, pools have to be encauraged and government support has to be provided for some kinds of branches. 5.3. New Legal Regulations Insurance companies are audited by Turkish Insurance Supervisory Office regularly, it isexpacted that this audits are frequently done and capitals and actives of insurance companies have to be increased frequently. Milli Reinsurance Monopoly has to be abolished, if it works as a free reinsurance company, it will be more beneficial for reinsurance activities. 5.4. Evaluation of Economic Structure Inflation is the fatal -problem of `Turkish economics. Devaluations, economic recessions also cause big problems in international businesses. Retention and treaty capacities are not15 enough within the year. This creates capacity problems within the year and causes in administrative costs. The solutions to these problems could be using of foreign currency instead of TL in all branches. Then, the capacities in foreign currency save the agreements nominally, in international relations. It is the most beneficial way from avoiding the effects of inflation. 5.5. Other Solutions One of the most important solution is making statistical analysis. Statistical datas have to be collected and worked for all branches. Employees must be choosen from qualified and technical persons who will solve problems in complexity. Company executives `save to be choösen from also technical and experienced employees who can give hard decisions easily. The number of executives has to be increased, so decision maker authorities have to be more than one in case of urgent situations. 5. CONCLUSION As Turkish Insurance Sector is dependent wholly to foreign reinsurers, it has not been established a cnarecteristic reinsurance program which could be applied generally. For creating a perfect program, it is necessary to determine the problems in sector and apply solutions. This will open the doors of a perfect reinsurance strata.
