TURKEY: reinsurance pool to be formed under the New Economic Plan; employees' participation in the private pensions system mandatory for three years
The New Economic Plan (YEP) was presented by Treasury and Finance Minister Berat Albayrak on September 20. On this occasion the Minister reiterated the statement made in August concerning the establishment of a reinsurance model, specifying that the chosen form is that of a pool. The main reason for this decision is that of offering to the companies operating in certain industrial sectors - such as ginnery operators in the textile industry or dye and chemical plants - the chance to access an affordable insurance plan. Previously, representatives of these companies have voices their concern with regard the difficulties encountered in insuring their business, as considered "risky" by insurers and thus either not accepted in insurers or charged with very high premiums.
The new reinsurance pool, which will be managed by the Natural Disasters Insurance Authority (DASK), should fill this gap, providing for easy and affordable access to insurance for the "risky" companies.
The New Economic Plan (YEP) also provides for changes in the private pensions system (BES), introducing the obligation for employees to remain in the system for at least three years following their automatic enrolment by the employers. The BES was established in 2017. The participation in BES is voluntary, but the system works based on automatic enrollment of workers aged under 45, once employed. Those not willing to participate have to opt out in a two-month period.
Since BES's inception, about 60% of the 12 million workers enrolled have left the system, contradicting Governments expectations that around USD 16 billion of additional resources will be created over the next decade.