Official Gazette Date: Friday, 18 May, 2012
Official Gazette Number: 28296
Catastrophe Insurance Law No. 6305
The decision on the Compulsory Earthquake Insurance Regulation was taken by the Council of Ministers on 25 November 1999 based on the authority provided by Law No. 4452 and dated 27 August 1999, and amended under Law No. 4484.
Scope and Purpose
Article 1 - (1) The purpose of this Law is to determine the procedures and principles regarding compulsory earthquake insurance which will be obtained in order to cover material losses which may occur in buildings as a result of earthquakes, and the insurance and reinsurance guarantees, which will be provided to cover the material and bodily damages which may occur as a result of various disasters and risks, for which a guarantee cannot be provided by insurance companies, or which may have difficulty in providing a guarantee.
Article 2 - (1) The terminology in this Law refers to the following.
a) Minister or Ministry: The Minister or Ministry to which the Undersecretariat of Treasury is affiliated,
b) Association: The Association of Insurance and Reinsurance Companies of Turkey,
c) Institution: The Turkish Catastrophe Insurance Pool,
d) Undersecretariat: The Undersecretariat of the Treasury,
e) Reinsurance company: The reinsurance company which was established in Turkey in accordance with the Insurance Law No. 5684 of 3/6/2007, and the organization of the reinsurance company established abroad in Turkey,
f) Insurance company: The insurance company which was established in Turkey in accordance with Law No. 5684 and dated 3 June 2007, and the organization of the insurance company established abroad in Turkey,
g) Technical operator: The company which executes the technical affairs of and the business and operations related to the Institution
h) Board of Directors: The Board of Directors of the Turkish Catastrophe Insurance Pool,
i) Compulsory earthquake insurance: Compulsory insurance which guarantees the material losses in buildings which is directly caused by an earthquake and material losses caused by any fire, explosion, giant wave (tsunami) and landslides which result from an earthquake.
The Turkish Catastrophe Insurance Pool (TCIP)
Article 3 - (1) The insurance and reinsurance guarantees to be offered in accordance with this Law are given by the Turkish Catastrophe Insurance Pool, which is a public legal entity established by the Ministry. The headquarters of the Institution is the location where the technical operator's headquarters are located. The Undersecretariat holds the rights to the registered name of the Institution.
(2) The Institution and its revenues are exempt from all kinds of taxes, duties and fees.
(3) the Institution and the work and transactions carried out within the scope of this Law are not subjected to the Law on the Regulation of the Supervision of State Economic Enterprises and the Funds by the Turkish Grand National Assembly No. 3346 and dated 2 April, 1987, the Law on the Court of Accounts No. 6085 dated 3 December 2010, the Allowance Law No. 6245 dated 10 February 1954, the Public Financial Management and Control Law No. 5018 dated 10 December 2003, and the Public Procurement Law No. 4734 and dated 4 January 2002.
(4) The movable and immovable assets and other rights, incomes and receivables of the Institution may not be seized and the Institution may not be followed through bankruptcy. Any insurance premium receivables of the Institution which are not paid in due time shall be collected in accordance with the provisions of the Law on the Collection Procedure of Public Receivables No. 6183 dated 21 July 1953.
(5) The annual accounts, work, transactions and expenditures of the Institution are audited by the Undersecretariat. The Undersecretariat shall inform the Planning and Budget Committee of the Turkish Grand National Assembly of the activities of the Institution and the audit results each year.
The Board of Directors of the Turkish Catastrophe Insurance Pool
Article 4 - (1) The Institution is managed by the Board of Directors of the Turkish Catastrophe Insurance Pool. The Board of Directors consists of at least one member from the Undersecretariat, the Ministry of Environment and Urbanization, the Disaster and Emergency Management Presidency and the Capital Markets Board at least at the level of deputy general manager, as well as one member each to be determined from among three candidates proposed by the Association of Insurance, Reinsurance and Pension Companies of Turkey and the Council of Higher Education, and a member representing the technical operator.
(2) The members of the Board of Directors must meet the conditions specified in sub-paragraphs numbered (1), (4), (5), (6) and (7) of the paragraph (A) of Article 48 of the Civil Servants Law No. 657 dated 14 July 1965. They must possess the necessary knowledge and at least ten years of experience in order to carry out their duties in insurance, emergency management, natural disasters, capital markets and similar areas which fall within the remit of their duties. Candidates to be recommended by the Council of Higher Education must have graduated from university in the field of civil engineering, geophysical engineering or geological engineering or an equivalent discipline and possess at least seven years of experience in the field of earthquakes.
(3) The members of the Board of Directors are appointed by the Minister upon the proposal of the relevant institutions and the proposal of the Undersecretariat. The representative of the Undersecretariat shall chair the Board of Directors.
(4) Persons appointed to the Board of Directors serve for a period of four years and can be appointed twice at most.
(5) If the members appointed to the Board of Directors leave the organizations they represent, their membership of the Board of Directors shall end. In the event that the membership of the members of the Board of Directors expires for this reason or for any other reason, apart from the expiry of their term of office, candidates shall be nominated by the relevant institution in accordance with the procedure specified in the first paragraph. These members are appointed in accordance with the procedure specified in the third paragraph. These members complete the terms of the members, who they are appointed to replace. In any case, they may be appointed a maximum of two times.
(6) The Board of Directors convenes with the participation of at least five members and takes its decisions with the same votes of at least four members.
(7) The representation of the Board of Directors is carried out by the chairman and the execution of the decisions taken by the Board of Directors is carried out by the technical operator.
(8) The chairman and the members of the Board of Directors are paid a salary which is equal to the monthly salary and other payments paid to the chairman and the members of the board of directors in State Economic Enterprises.
Duties of the Board of Directors
Article 5 – (1) The duties of the Board of Directors are as follows:
a) To prepare the work plan regarding the work and transactions of the Institution.
b) To determine the procedures and principles regarding compensation payments and to ensure that compensation payments are completed as soon as possible.
c) To approve the risk sharing, reinsurance and retrocession plan.
d) To determine the procedures and principles regarding the investment of the Institution's assets.
e) To decide on organizing the public relations, promotion and education campaigns.
f) To determine the procedures and principles regarding marketing.
g) To inform the Minister and the Undersecretariat of the Institution’s activities.
h) To fulfil other duties assigned by this Law and the regulations issued pursuant to this Law.
(2) The members of the Board of Directors may not disclose information which they have learned in this capacity, even if they have lost their membership status without the permission or approval of the Board of Directors.
Executing the business of the Institution
Article 6 - (1) The technical affairs of the Institution and its work and transactions regarding its operation are carried out by a technical operator selected by the Undersecretariat among the insurance or reinsurance companies, which are licensed in the fire and natural disasters branch. The technical operator is selected on the criteria of the soundness of its financial structure, its experience in the field of insurance and international reinsurance transactions and the management of disaster risks, its technical and human resources infrastructure and similar areas.
The Minister may decide that the technical affairs of the Institution and its work and transactions regarding the operation shall be carried out by a joint stock company established by the Institution and which will operate exclusively for this purpose.
(2) The Undersecretariat prepares a contract with the technical operator in order to carry out the work and transactions of the Institution. The contract is entered into for a maximum period of five years and can be renewed according to the same procedure. The operating fee to be paid to the technical operator is determined in the contract.
(3) The working procedures and principles of the Institution and the authorities and responsibilities of the technical operator are determined by the regulation prepared by the Undersecretariat.
(4) The Institution may become a member of international organizations deemed appropriate by the Minister. It may cooperate with these organizations and similar organizations in other countries in regard to their own working matters and may provide consultancy services at home and abroad, with or without a fee. In this context, software, licenses and similar assets whose legal rights belong to the Institution may be used in return for a fee, sale or a donation from the Institution.
(5) The Institution may become a partner in international insurance or reinsurance companies deemed appropriate by the Minister within the scope of international agreements.
Guarantees to be issued by the Institution
Article 7 - (1) The compulsory earthquake insurance guarantee is provided exclusively by the Institution. This guarantee may also be provided jointly together with insurance companies, if required by the conditions in terms of risk management and if deemed appropriate by the Minister.
(2) Where insurance companies are unable to provide a guarantee, insurance or a reinsurance guarantee may be provided by the Institution for earthquakes, floods, landslides, storms, hail, frost, avalanches and similar natural disasters, if deemed necessary in the public interest, by observing insurance principles. The issue of which of these guarantees will be provided by the Institution is determined by the Council of Ministers upon the proposal of the Minister. The Undersecretariat determines the limits regarding the guarantees provided by the Institution in accordance with this paragraph, the general insurance conditions and the method which the tariffs will be determined.
(3) The accounts, records and principles regarding the transfers between accounts regarding the guarantees given by the Institution are determined by the regulation prepared by the Undersecretariat.
(4) The application procedures and principles of the guarantees provided by the Institution and the principles regarding the issuance of joint insurance with insurance companies shall be determined by the Undersecretariat within the framework of insurance principles by consulting the Institution and the Association for their views.
Support for Excess of Loss
Article 8 - (1) In the event that adequate hedging cannot be provided from the national and international markets for the risks undertaken by the Institution, the decision may be taken for a portion of the excess, to be determined by the Council of Ministers, upon proposal from the Minister, to be committed by the State in return for a reasonable price.
Income of the Institution and where such income can be used
Article 9 - (1) The Institution’s income consists of insurance and reinsurance premiums, commissions from the reinsurance and retrocession transactions, income from the Institution's assets and other income.
(2) In cases deemed necessary for the payment of compensation, the Institution may borrow money upon approval from the Minister, provided that it does not exceed the total amount of annual premium income.
(3) The Institution’s income may be used by the Institution solely for the following purposes:
a) Compensation payments for insurance and reinsurance guarantees provided by the Institution, payments for damage assessment procedures and court costs.
b) Expenses necessary for the management and operation of the institution.
c) Payments for reinsurance and similar protection guarantees obtained from domestic and foreign markets.
d) Payments for studies and research to be conducted by the Institution on subjects falling within its scope of duty.
e) Payments for outsourced services such as consultancy services and investment management.
f) Payments for public relations, promotion and education campaigns.
g) Commissions paid to insurance companies and other brokerage institutions.
h) Interest and principal payments related to the repayment of debts taken out by the Institution.
i) Retrocession and reinsurance premiums and reinsurance commissions.
(4) In directing the Institution’s assets to investment, the Institution places importance on diversification in terms of investment instruments and the principles are primarily based on the liquidity of the assets, minimizing the risk of loss of principal and maximizing the rate of return.
Compulsory Earthquake Insurance Coverage and the obligation to obtain insurance
Article 10 - (1) Independent sections which fall within the scope of the Law on Property Ownership No. 634 and dated 23 June 1965, buildings which were built as dwellings on immovable property, which are registered in the title deeds and are subject to private ownership, the independent sections within these buildings which are used for commercial or office space or similar purposes, and the dwellings built by the State or with loans extended due to natural disasters are subject to Compulsory Earthquake Insurance.
(2) Buildings and independent sections which are subject to the Law on Public Housing No. 2946 and dated 9th November 1983 or used as public service buildings; buildings built in and around village settlement areas and in hamlets by those who are registered to the village population and who are permanent residents of the village, and buildings used for non-residential purposes even if they are within the scope of Law Property Ownership No. 634 are not subject to compulsory earthquake insurance.
(3) Compulsory earthquake insurance is purchased by the owners or beneficial owners for the buildings and the independent sections mentioned in the first paragraph, and this insurance is renewed every year.
(4) The Institution has the right not to insure buildings constructed in violation of the relevant legislation and the design. The Institution does not insure buildings which are determined to have been modified or weakened in a manner which would adversely affect their structural integrity. The Institution shall send the list of buildings where this assessment is carried out to the relevant administration.
Identification of insurance holders and checking insurance
Article 11 - (1) Those who are obliged to hold compulsory earthquake insurance are identified by the Institution within the framework of the provisions set out in Article 10. Public institutions and organizations, including local administrations, as well as real and legal persons are obliged to provide the information requested from them by the Institution for the identification and monitoring of insurance holders at regular intervals and on a regular basis. Such information may be shared electronically if necessary.
(2) Depending on the requirements of the owners or beneficiaries, title deed directorates may carry out the registration procedures regarding the independent sections and buildings subject to this insurance in the title deed registry or the cancellation procedures, except in cases where an immovable asset registered in the title deed is transformed into an immovable asset, which is not subject to registration. The title deed directorate cannot perform this unless it is documented that compulsory earthquake insurance has been purchased and is valid on the transaction date.
(3) The existence of compulsory earthquake insurance shall be checked by the relevant institution in the water and electricity sub&ion transactions made regarding the buildings and independent sections covered by the compulsory earthquake insurance. This check can be carried out with the information and by the means provided by the Institution in an electronic environment, if necessary.
(4) The procedures and principles regarding the implementation of the provisions of the second and third paragraphs shall be determined by the Undersecretariat by taking the views of the relevant institutions into account.
(5) The Institution may develop control practices with the management body of the buildings and housing complexes covered by the compulsory earthquake insurance in order to obtain and regularly renew the insurance.
Liability of the Insurance Holder
Article 12 - (1) The owner or the beneficiary is required to take the necessary measures in respect to any renovation or weakening of the building and each independent section which has been carried out in violation of the design and in a manner which will adversely affect its structural integrity.
(2) The owner or beneficiary forfeits the right to receive compensation from insurance if it is determined that the damage has occurred in violation of the design and due to the renovation work which adversely affected the structural integrity.
Tariffs and instructions, application principles and general conditions
Article 13 - (1) Tariffs and instructions regarding compulsory earthquake insurance and the maximum guarantee amount are determined by the Minister every year and published in the Official Gazette. In the determination of insurance premiums, the surface area of the building, the type and quality of its construction, the ground characteristics of the plot on which the building is located, the earthquake risk and similar factors are evaluated.
(2) Compensation for buildings with compulsory earthquake insurance which have been damaged in an earthquake shall be paid within thirty days at most following the completion of the necessary information and documents and damage assessment.
(3) Implementation procedures and principles regarding compulsory earthquake insurance and insurance general conditions are determined by the Undersecretariat.