“A world at risk”, Lloyd’s second underinsurance report which was published recently, shows there is a global insurance gap of US $ 162.5 billion in 2018. Emerging economies account for US $160 billion (96%) of the total global insurance protection gap.
In relative terms, Turkey has the eighth highest insurance gap at 0.8% of GDP, estimated at US $ 6.7 billion. This is similar to the level recorded in the 2012 report and represents a significant share of the country’s economy and major potential loss in the case of a catastrophe.
In absolute US dollar values, Turkey ranks as the 4th country in the list of top ten countries facing the highest risk as a proportion of their GDP. As was the case in 2012, Turkey has a very high expected losses from natural disasters with an expected high annual loss of 0.38 % of GDP. Combined with the low insurance penetration level which is 1.2 %, this leaves the country highly exposed to the impacts of natural catastrophes.
Unfortunately, Turkey is located on several earthquake belts and is prone to severe seismic activity. Flooding is also common in Turkey. With the changes in the climate, severe winds, destructive hurricanes also started occurring. All these natural perils result in loss of life and destruction of infrastructure on a large scale and can have an adverse impact not only on the public finances of an economy but also can impinge on the very subsistence of poor and vulnerable communities. It is a known fact that most of the natural disasters are not covered by any type of insurance.
However, insurance diminishes the reliance on ex post resources and secure the needed resources in advance. It pushes the burden of loss from state/ community to insurer. It has multiple approaches as it works on to identify/reduce/transfer risks. Resulting risk reduction is a tool for sustainable development.
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