1. Hakan Sezik Insurance Group Manager HSBC Homeowner Insurance & Compulsory Earthquake Insurance

2.  Turkish Insurance & Pension Market Overview  Characteristic of Turkish Insurance Market  Home owner policy & Compulsory Earthquake milestones  Features of compulsory earthquake & Home owner policies  Distribution channels

3. 3 RESTRICTED Compulsory Earthquake CAGR 4% CAGR 19%  As end of 2011, the penetration is 22,84 %  Number of policy CAGR is 4% while insurance sector CAGR is 11% in the same period  Istanbul is the main city that accumulated 29% of total policy number * Data is updated on a monthly basis. ISTANBUL TURKEY

4. 4 RESTRICTED HOME OWNER POLICIES CAGR 14%  Home Insurance penetration in market is 6 % as end of 2011 results with 2.8m of policies.  As end of 2011, 75% of Compulsory earthquake policyholders have an home owner policy  Only 18% of houses are covered with Home Insurance in Turkey ( 2,8m out of 16m houses )  Number of policy CAGR is 14% while insurance sector CAGR is 9% in the same period Home Insurance Penetration in market

5. 5 RESTRICTED Characteristic of Turkish Insurance Market * Turkish Market is focused on products having high loss frequency such as;  Health ( 12% market share )  Motor own damage ( 22% market share )  Liability Compulsory Traffic ( 17% market share ) where as home owner market share is 2,2 % excluding earthquake coverage *Low appetite to long term maturity products such as insurance, long term deposits, pension etc Due to;  High inflated history  Culture

6. Milestones of Compulsary Earthquake & Home Owner Insurance  Home owner product was used to be one of the main products of insurance industry since the beginning.  Turkish Catastrophe Insurance Pool was established in 2000 with the contribution of World Bank.  Earthquake policy provided by Turkish Catastrophe Insurance Pool became a compulsory in 2001.  Insurance manufacturers revised their home owner products and propositions further to this new constitution.  Compulsory earthquake policy penetration reached to 23% where as home owner’s remained on 18%.

7. Features of Compulsory Earthquake & Home Owner Insurances Home Owner Insurable Property Independent sections situated inside residental buildings but used as small business establishment, bureau and similar purposes, Independent sections within the context of the Condominium Law No: 634, Building constructed as dwellings on lands subject to private ownership and has registered title deed, Independent sections situated inside residental buildings but used as small business establishment, bureau and similar purposes. (Optional/Available in the Market) Independent sections within the context of the Condominium Law No: 634 (Optional/Available in the Market ) Building constructed as dwellings on lands subject to private ownership and has registered title deed (Main Scope) Compulsory Earthquake

8. Snowdrift Features of Home Owner & Compulsory Earthquake Insurances Insurable Property Compulsory Earthquake Earthquakes Fires as a result of Earthquakes Explosions as a result of Earthquakes Landslides Tsunami as a result of Earthquakes causing material damages to the insured buildings are covered up to the sum insured by TCIP (Turkish Compulsory Insurance Pool) including foundations, main walls, common walls separating independent sections, ceilings and bases, stairs, platforms, halls, roofs, and chimneys. In Turkish market, majority of home insurance products guarantees home against damages ranging from fire to earthquake or lightning; from impact of vehicles to burglary through named perils or all risk coverages. Home Owner Fire Flood - inundation Storm Impact of land vehicles Damages caused by smoke Impact of sea vehicles Snowdrift Window insurance Debris removal expenses Burglary Expenses for moving elsewhere due to damages Personal accident Damages to audio-visual equipment incurred as the result of accidents Personal third party liability Earthquake Landslide Fire - explosion liability Strike, lockout, disorder, public acts, malicious acts Rental loss and loss of use Terror Electrical damages OR VERY RARELYA LL RISK

9. Features of Home Owner & Compulsory Earthquake Home Owner Tariff Rates & Premiums Compulsory Earthquake The TCIP's premium tariff is determined by the Treasury Undersecretariat and 3 factors determine the insurance premium amount: Location of the building according to earthquake Risk Zones, Construction Type of the building Gross square area of the dwelling Descriptions of the structure styles that are indicated in the tariff are as follows A- Steel, Reinforced Concrete Frame Structures: These structures are made up of steel or reinforced concrete bearing frames. B- Masonry Stone Structures: These are structures that do not have frames, bearing walls made by rubble stones, hewn stone, brick or filled, unfilled concrete briquette, and floorings, stairs and ceilings made up of concrete or reinforced concrete. C- Other Structures: Structures that do not enter into the above mentioned groups.  Premium depends on the apetite of insurance company.  Autonomous tariff system (Excluding the xs earthquake premium)  Rates are based on tariff established by Ministry of Treasury.

10. Same earthquake map is valid for xs earthquake cover. Features of Home Owner & Compulsory Earthquake Home Owner Tariff Rates & Premiums Cont. Compulsory Earthquake There are 15 tariff rates determined according to 5 Risk Zones and 3 different Construction Types. Allocation of the Risk Zones is based on the “Turkey Seismic Zones Map” which is prepared by the Ministry of Public Works and Settlement.

11. Features of Home Owner & Compulsory Earthquake Home Owner Distribution Channels’ Potential Compulsory Earthquake Distribution ChannelLowMediumHigh Bank * Agency Broker Direct Channels Distribution ChannelLowMediumHigh Bank * Agency Broker Direct Channels * Banks are potential distribution channel due to mortgage loans

12. Structure of Home Owner & Compulsory Earthquake Total Dwelling Worth: 500,000 TRY Value assured by Compulsory Earthquake Insurance: 300,000 TRY Primary and mandatory coverage against earthquake is provided by Compulsory Earthquake Insurance. Nevertheless it is likely to under insure the dwelling’s actual value. Exceeding value is insured by home insurance product. Exceed Value assured by Home Insurance Product: 200,000 TRY Structure of Joint Assurance

13. Opportunities  Urban transition  Leading strategy of bank mortgages  Goverment Incentives  Using banks as an effective channel to touch customer to sell home owner & compulsory earthquake policies