Law

Law No: 6305
Date of Acceptance: : 09/05/2012
CATASTROPHE INSURANCE LAW

Objective and scope

Article 1 - (1) The objective of this Law is to determine the procedures and principles for the compulsory earthquake insurance to cover the financial losses which may arise in buildings due to earthquakes and for the insurance and reinsurance coverages to be presented in order to cover the material and physical damages which may arise as a result of various disasters and risks which cannot be covered by insurance companies, or which bring about challenges with regards to offering coverage.

Definitions

Article 2 - (1) The following terms shall have the following respective meanings in this Law;
a) Minister or Ministry: The Minister or Ministry that the Treasury Undersecretariat operates under,
b) Association: Association of the Insurance and Reinsurance Companies of Turkey,
c) Pool: Turkish Catastrophe Insurance Pool,
ç) Undersecretariat: Treasury Undersecretariat,
d) Reinsurance company: Reinsurance companies founded in Turkey as per the Insurance Law of 3/6/2007 No. 5684, and the Turkish organisations of reinsurance companies founded abroad,
e) Insurance company: Insurance companies founded in Turkey as per the Law No. 5684, and the Turkish organisations of insurance companies founded abroad,
f) Technical operator: The company conducting the technical matters, as well as the operation related affairs and businesses of the Pool,
g) Board: Turkish Catastrophe Insurance Pool Board of Directors,
ğ) Compulsory earthquake insurance: compulsory insurance offering coverage for material damages in buildings caused directly by earthquakes as well as material damages due to fires, explosions, tsunamis, and landslides caused by earthquakes..

Catastrophe Insurance Pool

Article 3 - The insurance and reinsurance coverages to be offered pursuant to this Law shall be given by the Catastrophe Insurance Pool, which is a public legal entity founded within the Ministry. The headquarters of the Pool is located at the administrative centre of the technical operator. The registered name rights of the Pool are held by the Undersecretariat.
(2) The Pool and the revenues thereof are exempt from any and all taxes, duties and fees.
(3) The Pool and the affairs and the procedures carried out within the scope of this Law are not subject to Law of 2/4/1987, No. 3346 concerning the Arrangement on the Supervision of Public Economic Enterprises and Funds by the Turkish Assembly; Court of Accounts Law of 3/12/2010, No. 6085; Allowances Act of 10/2/1954, No. 6245; Law of 10/12/2003, No. 5018 on Public Finance Management and Control, and Public Procurement Law of 4/1/2002, No. 4734.
(4) The movable and immovable properties of the Pool, as well as other rights, revenues and receivables of the Pool may not be distressed, and the Pool may not be subject to proceedings via bankruptcy procedures. The Insurance Premium receivables of the Pool not paid in due time are collected in accordance with the provisions of the Law of 6183 21/7/1953, No. 6183, on the Procedures for the Collection of Public Receivables.
(5) The yearly accounts, businesses and procedures as well as expenditures of the Pool are audited by the Undersecretariat. The Undersecretariat shall inform the Planning and Budget Committee of the Grand National Assembly of the Turkish Republic every year on Pool activities and the outcomes of the audit.

Catastrophe Insurance Pool Board of Directors

Article 4 - (1) The Pool is managed by the Catastrophe Insurance Pool Board of Directors. The Board Of Directors consists of one member each at least the Assistant General Manager level, from the Undersecretariat, the Ministry of Environment and Urbanization, the Head Directorate of Disasters and Emergency Management, and the Capital Market Board, one member to be nominated among three candidates each to be recommended by the Association, the Board of Supreme Education, and one member that is the representative of the technical operator.
(2) The members of the Board of Directors must possess the conditions specified in the sub paragraphs (1), (4), (5), (6) and (7) of Paragraph (A) of Article 48 of the Civil Servants Law of 14/7/1965 No. 657, must have sufficient knowledge in at least one of insurance, emergency management, natural disasters, capital markets, and similar topics to be able to carry out their duties, and an experience of at least ten years. The candidates to be nominated by the Supreme Education Board need to have graduated from relevant departments of faculties such as civil engineering, geophysics and geology engineering or equivalent departments, and they need to have at least seven years of experience in earthquakes.
(3) The members of the Board of Directors shall be appointed by the Minister upon the recommendation of the relevant entities and the proposal of the Undersecretary. The representative of the Undersecretariat chairs the Board of Directors.
(4) Persons who are appointed as members of the Board of Directors shall serve for a period of four years, and they may be appointed at most two times.
(5) In case the members appointed in the Board of Directors leave the institutions they represent, their board memberships shall cease. In case the memberships of the Board of Directors members cease due to this, or any other reason with the exclusion of the expiry of their terms, the relevant entity shall nominate candidates as per the procedures specified in the first paragraph and such members shall be appointed as indicated in the third paragraph. These members shall complete the terms of the members in whose places they are appointed for, and in any case they may be appointed at most two times.
(6) The Board of Directors shall convene with the attendance of at least five members and their resolutions shall be made with favourable votes of at least four members.
(7) The Board of Directors is represented by the chairman and the resolutions made by the Board of Directors shall be implemented by the technical operator.
(8) The chairman and the members of the Board of Directors are paid salaries and other payments corresponding to the sums paid to chairmen and members of the board of directors in public economic enterprises.

The Duties of the Board of Directors

Article 5 - (1) The duties of the Board of Directors are as follows:
a) To regulate the working plan of the Pool with regards to their works and affairs.
b) Determining the procedures and principles for claims' payments and ensuring that the claims payments are made as soon as possible.
c) Approving risk sharing, reinsurance, and the retrocession plan.
ç) Determining the procedures and principles for investing the Pool assets.
d) Deciding on holding public relations, promotions, and education campaigns.
e) Determining the procedures and principles for marketing.
f) Informing the Minister and the Undersecretariat about the activities of the Pool.
g) To fulfil other duties assigned by this Law as well as the regulations issued as per this Law.
(2) Even if the Board of Directors members cease to become members, they may not disclose the information they have acquired due to such status, without the approval or the permission of the Board of Directors.

Carrying out the Pool affairs

Article 6 - (1) The technical matters of the Pool, and the operation related works and procedures shall be carried out by a company to be determined by the Undersecretariat among the insurance or reinsurance companies licensed in fire and natural disasters, as the technical operator. When determining the technical operator, the soundness of the company's financial structure, its experiences in insurance business and in international reinsurance business as well as in disaster risks, technical and human resources infrastructure, and similar other issues are taken into account.
(2) The Undersecretariat makes a contract with the technical operator in order to carry out the Pool business and affairs. The contracts are executed for a period of at most five years, and they may be renewed as per the same procedures. The operational fee to be paid to the technical operator shall be established with a contract.
(3) The procedures and principles for the operation of the Pool, and the powers and the responsibilities of the technical operator shall be determined by the regulations prepared by the Undersecretariat.
(4) The pool can become a member of international entities approved by the Minister, and may cooperate with such entities as well as similar entities of other countries in relation with its own field of activities, and may offer
consultancy services abroad in return for a fee, or free of charge. Within this scope, the software, licenses, and similar assets the legal rights of which belong to the Pool may be offered by the Pool, for being used in return for a fee, they may be sold, or they may be donated.

Guarantees to be given by the Pool

Article 7 - (1) Coverage for compulsory earthquake insurance is given exclusively by the Pool. This coverage can also be given jointly with insurance companies if required by the conditions with regards to risk management, and if approved by the Minister.
(2) In case coverage cannot be given by insurance companies, if required for the public good in cases of earthquakes, floods, landslides, storms, hale, frost, avalanche, and similar natural disasters, insurance or reinsurance coverage may be given by the Pool taking into account the principles of insurance. The decision as to which among these coverages may be given by the Pool shall be determined by the Cabinet with the proposal of the Minister. The limits with regards to the guarantees given as per this paragraph by the Pool, the insurance general conditions and how the tariffs shall be established shall be determined by the Undersecretariat.
(3) Calculations concerning the guarantees given by the Pool, records, and principles related with transfers between accounts shall be determined with the regulation prepared by the Undersecretariat.
(4) The procedures and principles for implementing the guarantees given by the Pool, and the principles for joint insurance with insurance companies shall be determined by the Undersecretariat with the opinion of the Pool and the Association, as per the principles of insurance.

Support for excess of loss

Article 8 - (1) In case sufficient protection cannot be provided through the national and international markets under favourable conditions for the risks undertaken by the Pool, it may be decided that a portion to be determined by the Cabinet is committed by the State, with the proposal of the Minister.

Revenues of the Pool and where they can be utilised

Article 9 - (1) The revenues of the Pool include insurance and reinsurance premiums, commissions received from reinsurance and retrocession transactions, revenues obtained from Pool assets, and other revenues.
(2) Where deemed necessary, the Pool may borrow money with the approval of the Minister, provided that such borrowing does not exceed the total amount of its yearly premium revenues, in order to ensure the payment of claims.
(3) The revenues of the Pool may be used by the Pool and only for the below purposes:
a) Claim payments for insurance and reinsurance coverage granted by the Pool, payments related with damage discovery procedures and court expenses.
b) Expenses necessary for the management and the operation of the Pool.
c) Payments for reinsurance and similar protection guarantees provided from domestic and international markets.
ç) Payments related with the studies and researches that the Pool will cause to be carried out in its relevant field of duties.
d) Payments for outsourced services such as consultancy services and investment management.
e) Payments for public relations, promotions and education campaigns.
f) Payments made to insurance companies and other intermediaries.
g) Interest and capital payments for the re-payment of the loans borrowed by the Pool.
ğ) Retrocession and reinsurance premiums, and reinsurance commissions.
(4) When diverting the pool assets for investment, investment instruments are diversified, and as a priority, the principles such as assets being liquid, the capital loss risk being the lowest, and the yield rate being high are taken as the basis.

Scope and obligation to be insured

Article 10 - (1) Independent sections within the scope of the Condominium Law of 23/6/1965 No. 634, buildings constructed as dwellings on areas subject to private ownership and has registered title deeds, independent sections situated inside residential buildings and used as business establishments, bureaus and for similar purposes, and the properties built by the State or through the loans provided due to natural disasters are subject to compulsory earthquake insurance.
(2) Buildings and independent sections which are subject to the Law on Public Residences, of 9/11/1983 No. 2946 or which are used as public service buildings, rural settlement areas registered with the village, used by permanent residents of the village, buildings built around the villages and outskirts of villages, and buildings, which, even if included in the scope of the Law 634, are entirely used for non-residential purposes are not subject to compulsory earthquake insurance.
(3) Owners or holders of easement rights shall procure compulsory earthquake insurance for buildings and independent sections referred to in the first paragraph, and this insurance shall be renewed every year.
(4) The Pool reserves the right not insure buildings constructed against the relevant legislation and the designs. The Pool shall not insure buildings which are found to have been modified or weakened in such a way to adversely affect the bearing system. The list of such buildings shall be sent to the relevant administration by the Pool.

Determining the liabilities and checking insurance

Article 11 - (1) Those who must procure compulsory earthquake insurance shall be determined by the Pool as per the provisions of Article 10. Public entities and authorities including local administrations as well as real persons and legal entities must provide the information to be requested from them by the Pool in order to determine and monitor insurance liabilities, regularly and with certain intervals. When required, information on this matter can be shared in electronic medium.
(2) Depending on the requests of title registration directorates, owners or holders of easement rights; the registration procedures at the title deed registration directorates related with such independent sections and buildings subject to insurance, or the cancellation procedures with the exception of converting a property registered with the title deed registration directorate to a property not subject to registration may not be carried out unless it is certified that the compulsory earthquake insurance has been procured, and that it is effective as of the date of the transaction.
(3) In the case of water and electricity subscription procedures in relation with the buildings and independent sections within the scope of compulsory earthquake insurance, the relevant entities shall check the presence of compulsory earthquake insurance. When necessary, such checks may be carried out using the information and the means provided by the Pool in electronic medium.
(4) The procedures and principles related with the implementation of the provisions of the second and third paragraph shall be determined by the Undersecretariat taking the opinion of the relevant entity.
(5) The Pool may develop control procedures with the managements of buildings and condominiums included in the scope of compulsory earthquake insurance to ensure that the insurance is procured, and is renewed on a regular basis.

The responsibility of the insured

Article 12 - (1) The owner or the holder of the easement right is obliged to take the measures necessary to prevent the modification or the weakening of the building and each independent section, against the project and in a manner to adversely affect the bearing system.
(2) In case it is discovered that the damage has occurred due to modifications against the project, affecting the bearing system adversely, the owner or the holder of the easement right will lose his/her right to receive damages from the insurance.

Schedules and instructions, and principles of implementation as well as general terms and conditions

Article 13 - (1) The schedule and the instructions for compulsory earthquake insurance as well as the maximum guarantee shall be determined by the Minister every year and published in the Official Gazette. The surface area of the building, type and quality of construction, the ground characteristics of the area that the building is located on, earthquake risk and similar factors are taken into consideration when determining insurance premiums.
(2) Claims related with the buildings which have compulsory earthquake insurance and which are damaged due to earthquake shall be paid within thirty days at most following the completion of necessary information and documents, and the damage discovery efforts.
(3) The implementation procedures and principles for the compulsory earthquake insurance as well as the insurance general conditions shall be determined by the Undersecretariat.

Miscellaneous

Article 14 - (1) The regulations related with the implementation of this Law shall become effective within one year following the date this Law is published.

Abolished provisions

Article 15 - (1) The Decree on Compulsory Earthquake Insurance of 25/11/1999, No. 587 has been abolished.

Article 16 - (1) The below article has been added to Article 29 of the Law of 15/5/1959, No. 7269 on the Measures to be taken and Aids to be Provided due to the Disasters Affecting Public Life.
"For the buildings within the scope of compulsory earthquake insurance, the liabilities of the State for granting housing loans and constructing buildings, pursuant to this Law and other relevant legislation shall cease upon it being established that the compulsory earthquake insurance has not been procured."

PROVISIONAL ARTICLE 1

(1) All the assets and liabilities of the Catastrophe Insurance Pool founded with the Decree No. 587, abolished with this Law, shall be deemed to be transferred to the Catastrophe Insurance Pool founded with this Law, without the need for taking further action.
(2) Board of Directors Members appointed as per Article 7 of the Decree No. 587, abolished with this Law shall continue serving in their positions until the end of their terms, with the exclusion of those appointed as per paragraph (a) of the same article.

PROVISIONAL ARTICLE 2

(1) Until the regulations and other arrangements referred to in this Law become effective, the provisions of the current arrangements which are related with the matters governed by such regulations and arrangements and which are not in contradiction with this Law shall continue to be applicable.
(2) The contract between the Undersecretary and the technical operation signed before the date this Law became effective shall continue until it expires.

Entry into force

Article 17 - (1) This Law shall become effective at the end of three months following the date of publication.

Enforcement

Article 18 - (1) The provisions of this Law are enforced by the Cabinet.