No: 5684

Adoption Date: June 3, 2007

Publication Date: June 14, 2007

September 2007

ASSOCIATION OF THE INSURANCE AND

REINSURANCE COMPANIES OF TURKEY

INSURANCE LAW

ISBN No: 978-975-6109-26-7

This document is an unofficial translationof the original Turkish text

Association of the Insurance andReinsurance Companies of Turkey©

All rights reserved

Typesetting and PressCeyma Matbaacýlýk

MAS/SÝT Matbaacýlar Sitesi, 4. Cadde, No:123Yüzyýl Mahallesi - Baðcýlar - Ýstanbul

+90 212 629 02 63-64

PART IObjective, Scope and Definitions

ARTICLE 1ARTICLE 2

PART IIInsurance Companies and Reinsurance Companies

ARTICLE 3 -

ARTICLE 4 -

ARTICLE 5 -ARTICLE 6 -ARTICLE 7 -ARTICLE 8 -

ARTICLE 9 -

ARTICLE 10 -

PART IIIInsurance Contracts

ARTICLE 11 -ARTICLE 12 -ARTICLE 13ARTICLE 14-

- Objective and scope ............................7- Definitions .......................................... 8

Establishment of insurance companiesand reinsurance companies ............... 11Organization of insurance companiesand reinsurance companies ...............14License ..............................................16Assessment of license request ...........17Withdrawal of license ....................... 18Amendments to the articleof association .................................... 19Obtaining beneficial interest andvoting rights ......................................20Winding up, merger, acquisition,portfolio transfer and bankruptcy ..... 21

Insurance Contracts ...........................22Tariffs ................................................23

- Compulsory insurances .....................24Guarantee Account ............................25

ARTICLE 15-

.......33

Insurances that may be concludedabroad ..............................................27

PART IVFinancial Structure

ARTICLE 16 -ARTICLE 17 -ARTICLE 18 -

ARTICLE 19 -

ARTICLE 20 -

PART VActuaries, Intermediaries and Loss adjusters

ARTICLE 21 -ARTICLE 22 -ARTICLE 23 -

PART VIProfessional Organizations

ARTICLE 24 -

ARTICLE 25 -

Technical reserves .............................29Guarantees ........................................ 31Account principles, record order,basic financial statements andfinancial structure arrangementsProhibition of asset reducingtransactions ....................................... 35Strengthening financial structure ......36

Actuaries and brokers ....................... 39Loss adjusters ....................................41Insurance agents ................................46

Association of the Insurance andReinsurance Companies of Turkey ... 52Election principles for the bodies ofthe Association and prohibitions .......59

ARTICLE 26

ARTICLE 27 -

PART VIISupervision and Furnishing Information

ARTICLE 28 -

ARTICLE 29 -

PART VIIIArbitration

ARTICLE 30 -

PART IXMiscellaneous

ARTICLE 31 -

ARTICLE 32 -ARTICLE 33 -

PART XPenalties

ARTICLE 34ARTICLE 35 -ARTICLE 36

- Loss Adjusters ExecutiveCommittee .........................................64Insurance Agents ExecutiveCommittee .........................................72

Supervision ....................................... 79

Insurance arbitration .........................84

Insurance education centre and otherorganizations .....................................92Bona fides ......................................... 93Specialty committees ........................94

- Administrative penalties ................... 95Judicial penalties ...............................97

- Prosecution ..................................... 106

Obligation to furnish information ....83

PART XIReferences, Amended and Abolished Provisions

ARTICLE 37 -ARTICLE 38ARTICLE 39ARTICLE 40ARTICLE 41ARTICLE 42ARTICLE 43ARTICLE 44ARTICLE 45

PART XIITemporary and Final Provisions

PROVISIONAL ARTICLE 1PROVISIONAL ARTICLE 2PROVISIONAL ARTICLE 3PROVISIONAL ARTICLE 4PROVISIONAL ARTICLE 5PROVISIONAL ARTICLE 6PROVISIONAL ARTICLE 7PROVISIONAL ARTICLE 8PROVISIONAL ARTICLE 9ARTICLE 46 - eARTICLE 47 -

References .......................................107............................................................108

................................. 116

Entry into Forc .............................. 119Enforcement ....................................120

............................................................109

............................................................109

............................................................110

............................................................113

............................................................115

............................................................115

............................................................115

................................. 116

................................. 117

................................. 117

................................. 117

................................. 118................................. 118................................. 118................................. 119

7

PART I

Objective, Scope and Definitions

Objective and scope

ARTICLE 1 - (1) The objective of this Law is to regulateprinciples and procedures relating to the commencementof operations, management, organization, operationprinciples and procedures, termination and supervisionof activities of the parties which are subject to this Law,to regulate procedures and principles related to theinsurance arbitration system for the settlement ofdisputes arising from insurance contracts in order toprovide the development of the national insurancesector, to protect the rights and interests of peopleinvolved in an insurance contract, and ensure that thenational insurance sector operates effectively in a secureand stable atmosphere.

(2) Insurance companies,

latter.

reinsurance companies,Association of the Insurance and ReinsuranceCompanies of Turkey, intermediaries, actuaries and lossadjusters operating in Turkey are subject to theprovisions of this Law.

(3) Social security institutions, Export Credit Bank ofTurkey (Eximbank) and other establishments operatingin insurance in accordance with their special laws are outof the scope of this Law, the provisions of this Lawgoverning supervision are applicable for the

8

Definitions

ARTICLE 2 - (1) For the purposes of this Law,

a) “Actuary” shall mean a person, who calculatespremiums, reserves and dividends and prepares tariffsand technical principles in accordance with thelegislation by applying probability and statisticaltheories for insurance technique and relevantinvestment, financing and demography issues,

b) “Intermediary” shall mean insurance agent andbroker,

c) “Minister” shall mean the Minister, to which theUndersecretariat of Treasury is attached to,

ç) “Association” shall mean the Association of theInsurance and Reinsurance Companies of Turkey,

d) “Broker” shall mean a person representing the partieswho want to conclude an insurance or reinsurancecontract, acting impartially and independently in theselection of companies with which such contracts are tobe made, observing the rights and benefits of the peoplewho want to purchase coverage, having adopted it as aprofession to carry out preparatory works before theconclusion of the contract, and to assist if necessaryduring the implementation of the contract or payment ofclaims,

e) “Account” shall mean guarantee account,

9

f) “Business plan” shall mean a plan which details theestablishment objective of insurance and reinsurancecompanies, and shows their ability to meet theirestimates and liabilities, at least for the first three years oftheir operation,

g) “Commission” shall mean the Insurance ArbitrationCommission,

ð) “Register” shall mean registers which show therecords of real/legal persons who work actively, it will bekept by the Association for the insurance companies andreinsurance companies operating in Turkey, and by theUnion of Chambers and Commodity Exchanges ofTurkey for loss adjusters and insurance agents,

h) “List” shall mean insurance arbitrators list,

ý) “Minimum guarantee fund” shall mean an amountrepresenting at least 1/3 of the capital requirement of theinsurance and reinsurance companies,

i) “Undersecretariat” shall mean the Undersecretariatof Treasury,

j) “Equity” shall mean the amount remaining afterbalance sheet loss and the deduction of other items to bedeemed appropriate by the Undersecretariat from thepaid capital of insurance companies and reinsurancecompanies, or their capital allocated for Turkey, anyreserve fund, revaluation fund, retained profit, profit andcapital reserves, and capital like items and other

10

resources to be deemed appropriate by theUndersecretariat,

k) “Reinsurance company” shall mean reinsurancecompanies established in Turkey and Turkishorganizations of reinsurance companies establishedabroad,

l) “Insurance agent” shall mean a person who hasadopted it as a profession to intermediate to insurancecontracts in the name and account of the insurancecompany for a permanent term within a specific place orregion based on a contract without holding a title such ascommercial representative, commercial attorney, salesofficial or employee, or to perform such activity onbehalf of the insurance company and who carry out thepreparatory works before the conclusion of the contractand assist during the implementation of the contract andpayment of claims,

m)“Loss adjuster” shall mean an impartial andindependent person who determines the amount, reasonsand characteristics of losses and damages which arise asa result of the realization of risks which have been thesubject of insurance and who have adopted it as apermanent profession to execute tasks such as thedetermination of value by reconciliation, preliminaryadjusting and loss surveillance,

n) “Insurance arbitrator” shall mean a person who solvesdisputes arising from an insurance contract between the

11

policy holders or people who benefit from the insurancecontract and the party, which undertakes the risk,

o) “Insurance rapporteur” shall mean a person, who forthe purpose of solving disputes arising from an insurancecontract between the policy holder or people who benefitfrom the insurance contract and the party whoundertakes the risk, perform the preliminaryexamination upon complaints which have been referredto the Commission,

ö) “Insurance company” shall mean insurancecompanies established in Turkey and Turkishorganizations of insurance companies establishedabroad.

- (1) Insurance companies and reinsurancecompanies which are going to operate in Turkey have tobe established as a joint stock or a cooperative. Insurancecompanies and reinsurance companies shall not beengaged in other businesses except insurancetransactions and businesses which are directly related toinsurance operations.

(2) For insurance companies and reinsurancecompanies to be established as a joint stock,

PART II

Insurance Companies and Reinsurance Companies

Establishment of insurance companies andreinsurance companies

ARTICLE 3

12

a) It is compulsory that founders;

1) are not bankrupt or have not declared bankruptcy,

2) have the financial power and good repute which arenecessary to become a founder or shareholder of aninsurance or reinsurance company,

3) are not the holder of a share on the basis of a votingright or the capital, which is directly or indirectly tenpercent and higher, or less then ten percent but grants thepower to nominate members to the auditory board andthe board of directors in a way that shall be effective inthe auditing and management in such financialinstitutions which are subject to winding up, or whichhave been subject to the provisions of this Law, Article20, paragraphs two and three,

4) have not been sentenced to imprisonment or morethan one judicial fine, or should not have been convictedof infamous offences such as simple or qualifiedembezzlement, corruption, bribery, theft, fraud, breachof trust, fraudulent bankruptcy, gross misconduct as wellas smuggling offences, fraudulent acts in publicprocurements and purchases and sales, laundering theproceeds of crime, revealing secrets of the state or taxevasion except for crimes committed by imprudence,even if they have enjoyed amnesty,

5) if they are a legal person, those who havemanagement and auditory powers over such legal personshall meet the criteria other than financial power soughtin founders,

13

b) They should have shares issued in return of cash andregistered excluding the part that is publicly traded inlisted joint stock companies,

c) If they are to act within a holding, then the financialstanding of the holding company should be sufficient tocarry out insurance activities,

(3) Insurance companies and reinsurance companieswhich are established as cooperative and do not makeinsurance contracts with people other than theirmembers;

a) shall deal with mutual insurance,

b) shall not have less than two hundred partners,

c) shall not grant any privilege to their managers.

(4) In order for cooperatives to make contracts withpeople other than their members, the permit of theUndersecretariat is necessary, provided that this matter isincluded in their article of association. In order forcooperatives to make contracts with people other thantheir members, they have to raise their capital to anamount to be determined by the Undersecretariat.

(5) Principles and procedures regarding the operationof foreign insurance companies and reinsurancecompanies in Turkey are determined by the Council ofMinisters.

14

Organization of insurance companies andreinsurance companies

ARTICLE 4 - (1) Boards of directors of insurancecompanies and reinsurance companies shall not be lessthan five persons including the general manager, andauditors shall not be less than two persons. The generalmanager is a natural member of the board of directors.

(2) Members of the board of directors should meet thecriteria sought in founders of an insurance company andreinsurance company except the criteria of financialpower; the majority of them should hold anundergraduate degree of at least four years, and theyshould have at least three years of experience in any oneof insurance, economics, business, accounting, law,finance, mathematics, statistics, actuary or engineeringfields.

(3) General manager and deputy general managersshould meet the criteria sought in founders of aninsurance company and reinsurance company except thecriteria financial power, should hold an undergraduatedegree of at least four years, and those who are to beappointed as general managers should have minimumten years of knowledge and experience, and those whoare to be assigned as deputy general manager and willengage in insurance business and insurance techniqueshould have minimum seven years of experience in anyone of insurance, economics, business, accounting, law,finance, mathematics, statistics, actuary or engineering

15

fields, whereas those who are to be assigned to otherdeputy general manager posts should have minimumseven years of experience and knowledge in that fieldwhich they shall be responsible for. At least, one of thedeputy general managers should be responsible forissues related to insurance business or insurancetechnique.

(4) Managing directors should meet the criteria soughtfor the general manager.

(5) Even if they have been employed with other titles,other managers who perform duties and have powersequivalent or superior to the post of deputy generalmanager, are subject to provisions which are applicableto general managers and deputy general managers.

(6) Auditors should meet the criteria sought in foundersof insurance company and reinsurance company exceptthe criteria of financial power, should hold anundergraduate degree of at least four years, and theyshould have at least three years of experience in any oneof insurance, economics, law, finance, business andaccounting fields.

(7) Persons who enjoy the management and control oflegal entities which hold majority interest in an insuranceor reinsurance company are required to meet the criteriasought in founders of insurance and reinsurancecompanies except the criteria of financial power.

16

(8) Insurance companies and reinsurance companiesare required to establish an effective internal auditsystem, including risk management systems, in order toregularly control and audit the compliance of all theirbusiness and operations with insurance legislation andother relevant legislation, internal regulations of thecompany and its management strategy and policies, andto detect and prevent mistakes, frauds and unlawfulness.Internal audit service may also be outsourced.

- (1) For the purpose of commencing theiroperation, insurance companies and reinsurancecompanies have to obtain a license from theUndersecretariat for each insurance branch in which theywould like to operate. Licenses obtained are registered tothe Turkish Trade Registry, and published in the TurkishTrade Registry Gazette as well as any two of the dailynewspapers which are circulated across Turkey andwhich are ranked among the first ten in terms ofcirculation.

(2) Insurance companies can only operate in any one oflife and non-life insurance groups. Insurance branchesincluded in these groups are determined by the Minister.

(3) Insurance companies and reinsurance companieswhich have completed establishment formalities and areseeking for a license, have to raise their paid-up capitalsup to such amount to be determined by the

License

ARTICLE 5

17

Undersecretariat according to the insurance branches inrespect of which licenses are requested and to the givencoverages. This amount can not be less than five millionTurkish Liras. The Undersecretariat is authorized toincrease such amount provided that it does not exceed therate of increase in Producer Price Index declared by theTurkish Statistical Institute.

(4) An insurance company or reinsurance company thatfails to file an application for a license within one year asfrom the completion of the establishment proceduresshall not use the wording of insurance or reinsurancecompany in their trade names.

(1) License application shall be refused incase of the existence of one of the followings;

a) founders, managers and auditors of insurancecompanies and reinsurance companies fail to meet thecriteria stipulated in this Law,

b) it is found that the rights and benefits of the parties tothe insurance contract cannot be protected sufficientlyaccording to the business plan and the documentspresented, or liabilities are not organized in such amanner that they are executable in a permanent andsufficient way,

c) it is found that the application does not coversufficient statements or information or it fails to meet thecriteria stipulated in this Law,

Assessment of license request

ARTICLE 6 -

18

ç) it is found by way of inspection that the insurancecompany or reinsurance company fails to hold necessarytechnical equipment or sufficient number of qualifiedpersonnel, or is not capable of performing insurancebusiness in that field for which the license is required.

(1) Without prejudice to the provisions ofthis Law relating to the withdrawal of a license;

a) if part or whole of the terms relating to the grant of alicense are lost, and this has not been corrected within thegiven period, which should not be less than three months,by the Undersecretariat,

b) if no insurance or reinsurance contract is concludedwithin one year from the grant of the license or if noinsurance or reinsurance contract is concludedcontinuously for a six months time period, except forthose that are concluded with the approval of theUndersecretariat,

c) if it is found that as a result of practices that arecontrary to insurance legislation, the rights and benefitsof people related to an insurance contract areendangered,

ç) if the liabilities arising from the provisions of thisLaw, except the provision of Article 20, are seriouslyviolated, or the violation of duties have becomecustomary, and this has not been corrected within the

Withdrawal of license

ARTICLE 7 -

19

period, which shall not be less than three months, givenby the Undersecretariat,

d) if there have been major derogations from theobjectives set forth in the business plan except thederogations that the Undersecretariat is informed about,

then the license of the insurance or reinsurance companyin the relevant branch or all branches can be withdrawnby the Undersecretariat. License withdrawals areregistered to the Turkish Trade Registry, and published inthe Turkish Trade Registry Gazette as well as any two ofthe daily newspapers which are circulated across Turkeyand which are ranked among the first ten in terms ofcirculation.

(2) Companies whose licenses have been withdrawnhave to transfer their portfolios relating to the withdrawnlicense within the period, which shall not be longer thansix months, given by the Undersecretariat. Otherwise,the Undersecretariat shall be entitled to take all themeasures relating to the winding up of the portfolio,including ex officio transfer.

(1) Approval of the Undersecretariat shallbe sought in the amendments to the articles of associationof insurance companies and reinsurance companies.Draft amendments which are not approved by theUndersecretariat shall not be included in the agenda ofthe general meeting and discussed. The Registrar shall

Amendments to the article of association

ARTICLE 8 -

20

not register the amendments of the articles of associationin the trade register without the approval of theUndersecretariat.

(1) Share acquisitions which shall directlyor indirectly reach or exceed ten percent, twenty percent,thirty three percent or fifty percent of the capital of aninsurance company or reinsurance company as well asshare transfers which will cause the shares of ashareholder to achieve or to fall below such ratios aresubject to authorization by the Undersecretariat.

(2) A share transfer that grants the privilege ofnominating members to the executive boards in a mannerto influence the company's supervision and managementare subject to authorization by the Undersecretariatirrespective of ratio limitations.

(3) Share transfers which are carried out in violation ofthe provisions of the first and second paragraphs andwithout authorization, shall not be registered to the sharebook.

(4) The provisions of this article shall be applied to theacquisition of beneficial interest and voting rights.

(5) It is essential that shareholders who directly orindirectly hold ten percent or more of the capital orvoting rights and beneficial interest, or an interest whichis lower than the said ratios but gives the privilege of

Obtaining beneficial interest and voting rights

ARTICLE 9 -

21

nominating members to the executive boards of themanagement in a manner to influence management andsupervision, should meet the criteria sought in thefounders of the insurance company and reinsurancecompany. The insurance company and reinsurancecompany shall notify such shareholders who fail to meetsuch criteria to the Undersecretariat. Shareholders wholose the qualifications sought in the founders shall notbenefit from the shareholder rights except dividends. Inthat case, shareholder rights are exercised by the trustee.

(6) The Minister may introduce share limitations tosuch shareholders who, due to their fields of operations,may affect the financial structure of insurancecompanies and reinsurance companies

(1) Voluntary winding up of an insurancecompany, its merger with one or several companies, itsacquisition by another company with its assets andliabilities, transfer of insurance portfolio in part or inwhole along with guarantees and reserves are subject toauthorization by the Minister. The provisions of thisparagraph shall apply also to reinsurance companies.Winding up, merger, acquisition and portfolio transferswhich are contrary to this article will be null and void.

(2) The Undersecretariat, where necessary, may requirethe replacement of winding up agents.

Winding up, merger, acquisition, portfolio transferand bankruptcy

ARTICLE 10 -

22

(3) Mergers, acquisitions and portfolio transfers arepublished at least two times in any two newspaperscirculated across Turkey and which are ranked amongthe first ten in terms of circulation and between these twopublications there shall be a one week time period.Provided that the insurance contract is included in thetransferred portfolio, the assigner of the portfolio, peoplewho have concluded a contract with the company beingacquired or merged can terminate their contracts due toacquisition, merger or portfolio transfer within threemonths as from the date they have become aware of suchmerger, acquisition or portfolio transfer.

(4) In case of the bankruptcy of the insurance company,the insured shall participate in the bankrupt's estate in thethird rank.

(5) Where necessary, the Undersecretariat may requirereplacement of the authorities of the bankrupt's estate.

(1) The main content of insurancecontracts are arranged in accordance with the generalterms approved by the Undersecretariat and are to beapplied by all insurance companies in a similar way.However, insurance companies can determine specialconditions in accordance with the specialities of the

PART III

Insurance Contracts

Insurance contracts

ARTICLE 11 -

23

matter. In that case, these special conditions shall not bemisleading and will be shown clearly in the insurancecontract under the title of special conditions.

(2) If within thirty days as from the date the writtenoffer relating to the conclusion of the life assurancecontract is received by the insurance company, theinsurance company does not reject the offer, theinsurance contract shall be considered to be concluded.

(3) Information to be provided by the insurancecompanies and insurance agents to the policy holder,beneficiary and the insured during the formation andmaintenance of the contract shall be governed byregulation.

(4) Besides the risks covered, risks which are notcovered are also stated in insurance contracts clearly.The risks which are not stated will be considered to becovered.

(5) Foreign words shall not be used in insurancecontracts. Principally, the translation of foreign wordsshall be used as determined by the Turkish LanguageInstitute.

(1) Insurance tariffs are determinedfreely by insurance companies in accordance with theprinciples of insurance, and generally recognizedactuarial methods. However, amounts of coverages and

Tariffs

ARTICLE 12 -

24

tariffs and instructions for compulsory insurancesimposed by this Law and other laws are determined bythe Minister and published in the Official Gazette.

(2) If it is deemed necessary, the Minister may decide torequire the approval of the Undersecretariat for tariffs,premiums, formulas and schemes of life assurances andpersonal accident, health, sickness and facultativeearthquake insurances with terms longer than a year orwithout prejudice to the provisions of the special laws hemay decide to liberate agency commission rates whichare determined and announced by him and the tariffswhich are determined or subjected to the approval byhim.

(1) The Council of Ministers mayimpose compulsory insurances where it deems necessaryfor public interest. Insurance companies, withoutprejudice to the provisions of Article 20, paragraph twosubparagraph (b) and paragraph three of this Law, shallnot refrain from providing those compulsory insuranceswhich are within their fields of operation.

(2) The Undersecretariat is authorized to determine thepersons who will perform compulsory insurance auditafter it has taken the opinions of related institutions andestablishments which will make operations ortransactions on the benefit which constitutes the subjectof compulsory insurance.

Compulsory insurances

ARTICLE 13 -

25

(3) Those authorities that are authorized to grant apermit or license for the execution of an activity or use ofa thing, or to inspect the same, as well as institutions andestablishments that are determined under the secondparagraph, are obliged to inquire with respect to the actsand operations they shall carry out whether the relevantcompulsory insurances have been provided within therequired coverage limits. If such institutions andestablishments as well as authorities that are authorizedto grant permit or license and carry out inspections findthat the insurance has not been provided at requiredcoverage limits, no transaction shall be made. Untilrequired coverage is obtained, that activity of the insuredwhich constitutes the subject of compulsory insurance ishalted by the relevant authorities.

(1) In respect of the compulsory liabilityinsurances imposed by Article 13 of this Law; RoadTraffic Law No: 2918 and dated 13.10.1983; RoadTransportation Law No: 4925 and dated 21.12.1959 andcompulsory insurances imposed by the InsuranceSupervision Law No: 7397 and dated 21.12.1959 whichhas been abolished by this Law, a Guarantee Accountshall be established under the auspices of theAssociationof the Insurance and Reinsurance Companies of Turkeyin order to cover losses that arise as a result of theoccurrence of the following conditions up to the relatedcoverage amounts.

GuaranteeAccount

ARTICLE 14 -

26

(2) Application to the GuaranteeAccount is possible forthe following circumstances;

a) personal injuries to a person where the insured cannotbe identified,

b) personal injuries caused by parties which do not havethe required insurance coverage at the date the risk hasoccurred,

c) personal injuries and damages to property for whichthe insurer is obliged to pay in the case of the withdrawalof his licenses in all branches permanently or hisbankruptcy due to weakness in his financial situation,

ç) personal injuries for which the operator shall not beheld responsible in accordance with the Road TrafficLaw No: 2918 in an accident where the vehicle involvedis stolen or seized by violence,

d) the payments which shall be made by the TurkishMotor Insurance Bureau which deals with Green CardInsurance applications.

The Council of Ministers, if it deems necessary, maydecide that damages to property are partially orcompletely compensated from theAccount.

(3) Revenues of the Account consist of; participationfees paid by insurance companies as one percent of totalpremiums collected for compulsory insurances specifiedin the first paragraph and green card insurance, and the

27

participation fees to be collected as two percent of netpremiums from policy holders. The Minister isauthorized to reduce these ratios down to five perthousand or raise them up to the legal limits again.

(4) Insurance companies are required to deposit theparticipation fee which they have to pay in accordancewith the third paragraph until the end of February of thefollowing year and the participation fee collected frompolicy holders until the end of the month that follows thecollection month to theAccount.

(5) A separate account shall be opened for eachcompulsory insurance and green card insurance coveredby the Account, and incomes and expenses of insurancesare followed in these accounts.

(6) Revenues, expenses and transactions of theAccountare supervised by the Undersecretariat every year.

(7) Principles for the formation and operation of theAccount, accretion of fund assets, payments from theAccount, recourses to the related persons or to TurkishMotor Vehicles Bureau, the participation fee for theinformation centre to be created in accordance withArticle 24 herein and to the Commission as well as otherexpenses will be regulated by regulation.

(1) If they are located in Turkey,insurable interests of the residents of Turkey have to be

Insurances that may be concluded abroad

ARTICLES 15 -

28

insured in Turkey by the insurance companies operatingin Turkey.

(2) However the following insurances can be purchasedabroad:

a) Transportation insurance for the goods which aresubject to export and import,

b) Hull insurance to be provided for aircraft, ships,helicopters which are purchased with foreign loans,exclusively limited to the loan amount and applicable forthe term until the foreign debt is paid up, or limited to theperiod of financial leasing if the same are brought homeby financial leasing obtained abroad,

c) Liability insurances arising from the operation ofships,

ç) Life assurances,

d) Personal accident, sickness, health and motor vehicleinsurances, limited to the time people will be abroad ortheir temporary stay in abroad,

may be concluded abroad.

(3) The Council of Ministers is authorized to expandthe scope of insurances that may be concluded abroad.

29

PART IV

Financial Structure

Technical reserves

ARTICLE 16 - (1) Insurance companies andreinsurance companies are obliged to allocate reserves inaccordance with the principles specified in this article fortheir obligations arising from insurance contracts.

(2) Unearned premiums reserve; for each insurancecontract in effect, consists of that part of the grosspremium which extends to the next fiscal period orperiods on a daily basis, and in respect of annual lifeassurances in effect or those life assurances with periodslonger than a year for which accumulation premiums arecollected, it consists of that part of the gross premiumswhich extends to the next period or periods after theportion that has been set aside for the accumulation isdeducted. However, in reinsurance and retrocessiontransactions where it is impossible to calculate a reserveon a daily basis, unearned premiums reserve can beallocated according to 1/8 principle.

(3) Unexpired risks reserve; is a reserve which shall beallocated in those insurance branches for which it isaccepted that the level of risk undertaken and earnedpremiums throughout the contract term are notcompatible, and also where unearned premiums reserveis inadequate compared to the risk undertaken by thecompany and its level of expected cost.

30

(4) Equalization reserve; is a reserve which shall beallocated for the insurance branches determined by theUndersecretariat to balance the claims rate fluctuationsin following fiscal periods and to meet catastrophic risks.The Undersecretariat may decide the allocation ofprudence according to the determined principles andprocedures to substitute this reserve.

(5) Mathematical reserve; is the sum of the reservesspecified in the contract's technical terms and calculatedusing statistical and actuarial methods in order to coverthe liabilities of insurance companies to policyholdersand beneficiaries for life, health, sickness and personalaccident insurance contracts with periods longer than ayear, and if it is committed, the reserves for the partallocated to insured from the revenues derived from theinvestment of such reserves.

(6) Outstanding claims reserve; consists of the amountof claims that has been reported but not yet paid,estimated amount of claims that has been incurred butnot reported and reserves for expenses arising from suchclaims, and of additional reserves allocated according tothe principles set by the Undersecretariat for adequacywhen such amounts prove to be inadequate.

(7) Bonus and rebate reserve; consists of the amounts ofbonuses and rebates reserved for insured or beneficiariesaccording to the technical results of the current year if thecompany gives bonuses or applies rebates.

31

(8) It is essential that in technical reserves, the reinsurershare should be proportional to the risk and premiumbeing transferred. However, the Undersecretariat mayrequire that the reinsurer share is not deducted for thosebusinesses assigned to reinsurers which fail to meet thefinancial criteria to be determined by theUndersecretariat.

(9) Assets of insurance companies and reinsurancecompanies should be adequate to cover technicalreserves. Procedures and principles relating to technicalreserves as well as the rules on the assets in whichtechnical reserves are to be invested shall be determinedby regulation.

(1) Insurance companies have to allocateguarantees according to the principles set forth in thisarticle in order to meet their commitments arising fromthe insurance contracts they have concluded in Turkey.

(2) Insurance companies operating in the life branch areobliged, during the period determined by theUndersecretariat and on behalf of the Undersecretariat,to block or to mortgage as a guarantee the amount thatremains after deducting the loans given to the insured inaccordance with the Turkish Commercial Code No: 6762dated 29.6.1956 and the mathematical reserves thatcorrespond to the amount of premiums not yet collectedfrom the sum of outstanding claims reserve and

Guarantees

ARTICLE 17 -

32

mathematical reserves allocated according to the timeperiods determined by the Undersecretariat. For newlyestablished insurance companies, the guarantee amountto be allocated for the first three years shall bedetermined by the Undersecretariat taking into accountthe paid-up capital of the company. However, theprovisions of the fourth paragraph shall apply for life,personal accident, health and sickness coverages whichsuch companies provide for one year or periods less thana year.

(3) In respect of insurance companies which have tomake payments to the insured in the life branch within afiscal year exceeding the revenue from that branch, thatpart of the assets deemed appropriate by theUndersecretariat which have been presented asguarantee and blocked for the said branch is releasedtaking into account the portion being exceeded.

(4) Non-life insurance companies shall establish aminimum guarantee fund which should not be less thanone third of their capital requirement whose calculationmethod is to be determined by regulation. In any period,the minimum guarantee fund shall never be less than onethird of the capital requirement necessary for eachbranch in which the company is operating. TheUndersecretariat is entitled to decide the blockage orestablishment of mortgage over the assets of theminimum guarantee fund. However, the provision of thesecond paragraph shall apply to the guarantees allocated

33

for personal accident, sickness and health insurancecontracts with terms longer than a year.

(5) The Undersecretariat may release the guaranteeblockage in those branches in which the insurancecompany has terminated its operation provided that allthe payments for that branch have been made to theinsured. However, if the company faces insolvencyproblems, the Undersecretariat may decide payments tobe made to the insured from the guarantees.

(6) Guarantees shall not be included in the bankrupt'sestate or winding up estate, seized, exposed to injunctionand precautionary seizure unless all the receivables ofthe insured are paid. However, the Undersecretariat'sright of injunction on guarantees is preserved in order toprotect insured's receivables.

(7) The Undersecretariat is authorized to carry outarrangements related to financial structure and capitalrequirement of insurance companies, reinsurancecompanies and other establishments operating ininsurance business, and to determine the types of assetsto be blocked, the principles of valuation, procedures andprinciples relating to blocking, unblocking, imposingand revoking mortgages. Costs related to theseoperations are met by the relevant company.

(1) Insurance companies and

Account principles, record order, basic financialstatements and financial structure arrangements

ARTICLE 18 -

34

reinsurance companies are obliged to arrange, publishand send to the Undersecretariat their accounts andfinancial statements in accordance with the principlesand sample formats determined by the Undersecretariat.

(2) Insurance companies and reinsurance companieshave to make sure that their balance-sheets, profit andloss statements and other financial statements that wouldbe deemed appropriate by the Undersecretariat areaudited by independent audit firms and published. TheUndersecretariat is authorized to regulate the auditing ofthe insurance companies and reinsurance companies byindependent audit firms.

(3) If it is found that the financial statements publishedby insurance companies and reinsurance companies aremisrepresented, the Undersecretariat, taking intoconsideration the generally accepted accounting rulesand principles, can make sure that the corrected financialstatements are republished.

(4) The Undersecretariat is authorized to demandinsurance companies and reinsurance companies to keepdifferent books other than those compulsory under otherlaws, to determine the principles and procedures whichsuch books shall be subject to, to request all kinds ofinformation, statements, reports, account extracts andfinancial statements which comply with the principlesand samples to be determined by itself, where deemednecessary to publish financial statements, to determinefinancial ratios in order to strengthen the financial

35

structure of the insurance sector, to determine in whichassets and by which ratios the company's resources shallbe invested.

(5) Where necessary, the Undersecretariat is authorizedto demand all kinds of information, documents, andreports from the insurance companies, reinsurancecompanies, intermediaries and loss adjusters. During thepreparation of consolidated statements, theUndersecretariat can demand all kinds of informationand documents from parent company and the parentcompany can demand all kinds of information anddocuments from the establishments which are relatedwith the consolidated financial reporting.

(1) Shareholders, members of the boardof directors, auditors and employees of insurancecompanies and reinsurance companies shall not use thecompany resources directly or indirectly except forpayments, financial support and advances given to thepersonnel subject to provisions determined by thearticles of association of the company or by theresolution of the general meeting or the board ofdirectors, shall not execute transactions which reduce thevalue of an asset in conflict with the rules of goodwill,and shall not make disguised earning transfers by anymeans. Insurance companies and reinsurance companiesmay not pledge their assets as collateral for the benefit oftheir personnel, shareholders, affiliates or other persons

Prohibition of asset reducing transactions

ARTICLE 19 -

36

and establishments, or act as a surety and provide loansexcept for those arising from their own debts orinsurance transactions.

(1) If it is found that an insurancecompany or reinsurance company fails to meet theamount of minimum guarantee fund, to allocate theguarantee which it has to establish, to have sufficient andappropriate assets to cover technical reserves, to fulfil itsobligations arising from contracts or that its financialstructure is weakened to endanger the rights and benefitsof the insured, the Minister, by giving an appropriateperiod of time to the insurance company or reinsurancecompany, for the strengthening of the financial structuremay require the insurance company or reinsurancecompany;

a) to present and implement an encompassing recoveryplan that includes how it shall correct the weakness of itsfinancial structure and protect the rights and benefits ofthe insured,

b) to increase capital, to pay the outstanding portion, tomake payments to the company as compensation for thecapital, to stop dividend payments or to allocateadditional guarantee,

c) to dispose the assets in part or in full, or to stop suchdisposition, to stop acquiring new affiliates and fixedassets,

Strengthening financial structure

ARTICLE 20 -

37

ç) to take other measures to strengthen its financialstructure and liquidity, and to reduce the risks,

d) to convene an extraordinary general meeting with anagenda to be determined, or to postpone the generalmeeting,

e) to perform other similar duties.

(2) In addition, the Minister is also authorized;

a) to take all the measures to ensure that the insuranceportfolio in all branches in which the insurance companyis operating and in any one or whole of the insurancegroups in reinsurance companies are transferred toanother company or companies along with all guaranteesand reserves, and where no such assignee exists, then totake all the measures for the winding up of the portfoliowhich will be transferred,

b) to limit the insurance portfolio,

c) to replace part or all of the members of the board ofdirectors or auditory board, or to appoint new membersto these boards by increasing the number of existingmembers, or to request that the management of theinsurance company or reinsurance company is assignedto a trustee,

ç) to take similar measures in order to strengthen thefinancial structure.

Article 4 of this Law shall apply to persons to be

38

appointed in accordance with subparagraph (c) of this.

(3) When the measures stipulated in this article are notapplied or it is found that they are not going to be applied,or the insurance company or reinsurance companypostpones its payments, fails to comply with its liabilitiesto the insured, or the company's equity falls below theminimum guarantee fund, the Minister is authorized torevoke the insurance or reinsurance company's right toconclude further insurance contracts in all branches orthe relevant branches and its authority to renew policies,to withdraw its license and to block its assets.

(4) If it is found that institutions and establishmentsother than insurance companies and reinsurancecompanies, which operate in accordance with theirspecial laws and which conclude insurance andreinsurance contracts in accordance with the provisionsof the Turkish Commercial Code fail to comply withtheir liabilities arising from the contracts or have aweakening financial structure which may endanger therights and benefits of the insured, the Minister shall beauthorized to take measures to strengthen the financialstructure, to replace part or all of the persons inmanagement and audit positions, or to request thetransfer of the management to a trustee.

(5) Criteria for weakness in the financial structure aredetermined by regulation.

paragraph

39

(6) Those who are assigned to the company'smanagement and auditing in accordance with this articleshall not be held responsible for the existing or futurepublic debts of the company, debts to social securityinstitutions and other financial liabilities of the company.In order to institute a criminal action against publicofficials who are assigned in accordance with this article,authorization by the Minister is necessary, and any legalaction instituted against such persons are deemed to havebeen instituted against the Undersecretariat. Except foractions instituted by the Undersecretariat, litigationexpenses and the attorney fee determined in theminimum attorney fee tariff declared by the Turkish BarAssociation arising from the legal actions, investigationsand prosecutions against such persons shall be met fromthe budget of the Undersecretariat. Provisions of theTurkish Commercial Code relating to the release of theboard of directors shall not apply to those who areappointed in accordance with this article.

- (1) Insurance companies andreinsurance companies have to work with a sufficientnumber of actuaries. The Undersecretariat shall keep anActuaries Register where actuaries are registered. Noone shall act as an actuary unless registered in the

PART V

Actuaries, Intermediaries and Loss Adjusters

Actuaries and brokers

ARTICLE 21

40

register. Principles and procedures relating to theacquisition of the title actuary as well as the duties andauthorities of actuaries are determined by regulation.

(2) Brokerage is performed with a broker licenseob ta ined f rom the Unde r sec re t a r i a t . TheUndersecretariat may assign duties to non-governmentalorganizations and professional institutions for thepreparation of the procedures related to the license forexamination and approval. Procedures and principlesrelated to the brokers' duties and authorities aredetermined by regulation.

(3) Partners of insurance companies, insurance agentsand loss adjusters, persons in charge of management andaudit of these, persons who have signing power on theirbehalf, and company employees engaged in professionalactivity; shall not act as a broker, be appointed to theboard of directors and auditing board of any legal personbroker, use signing power on their behalf, becomepartner of these and accept any paid work from them.Such restrictions shall also apply to the spouses of thesepersons and the children under their custody.

(4) Any person banned from acting as an insurancebroker shall not be employed in any activity relating tobrokerage and cooperation shall not be made with thesepeople for the execution of the brokerage profession.

(5) Insurance brokers and their employees shall notdisclose any know-how or confidential information they

41

learn in the execution of their duties without thepermission of the relevant authority. However it isobligatory that any incidence giving rise to a criminaloffence is reported to competent authorities.

(1) Loss adjusting business is carried outby real or legal persons.

(2) Any person who wants to act as a loss adjuster;

a) shall obtain a loss adjusting license from theUndersecretariat,

b) shall be registered in the Register.

(3) Principles and procedures relating to foreign lossadjusters are determined by the Council of Ministers.

(4) The title of loss adjusters shall be acquired after aloss adjusting license is obtained. Persons, who work asloss adjuster, after having obtained their licenses, shallapply to the Union of Chambers and CommodityExchanges of Turkey to be registered in the Register. TheUndersecretariat may assign duties to non-governmentalorganizations and professional institutions for thepreparation of the procedures related to the license forexamination and approval.

(5) The register of the loss adjuster shall be removedfrom the Register if;

Loss adjusters

ARTICLE 22 -

42

a) all the licenses he has obtained have been withdrawn,

b) a decree has been issued for his dismissal from theprofession,

c) he has failed to execute his profession within sixmonths following his registration,

ç) he abandons loss adjusting business,

d) he fails to deposit the registration fee within thespecified period, or fails to pay his regular fee for aconsecutive period of three years.

(6) Before issuing a decision of removal from theRegister, a written defence is required from the lossadjuster. In addition, to be able to take a decision ofremoval from the Register, the loss adjuster should havebeen heard, or should have not complied with theinvitation for being heard. The decision for removal fromthe Register shall be reasoned.

(7) The loss adjuster who proves that thecircumstances, which resulted in his removal from theRegister no longer exist, has the right to be registered inthe Register again. However, those in respect of whom adecision of dismissal from the profession has been takenshall not be registered in the Register again. Noregistration fee shall be taken from a loss adjuster who isregistered again.

(8) Those who request to be registered again in theRegister may be required to prove the continued

43

existence of the criteria for registration in the Register.The decision for refusal of the request to be registeredagain in the Register shall be a reasoned decision.

(9) The person who has been removed from theRegister or whose request to be registered again has beenrefused may present a written objection to theUndersecretariat within fifteen business days. Uponsuch objection, the Undersecretariat has to notify itsdecision within fifteen business days at the latest. Suchdecision is final.

(10) Real person loss adjusters are obliged to performloss adjusting business as their habitual profession. Aslong as they perform this profession, real person lossadjusters shall not be engaged in any other profession astradesmen or businessmen, which are incompatible withthe nature of this profession, or engage in insuranceagent and brokerage activities.

(11) A real person loss adjuster shall not have more thanone office.

(12) Legal person loss adjusters shall perform lossadjusting business exclusively. Where business is carriedout with a legal person loss adjuster, the work is to beassigned to the legal person. However, a certificate ofauthorization is issued by the legal person to the lossadjuster who is to follow up the business. In the lossadjusting report, the seal of the company shall beaccompanied by the signature of the real person loss

44

adjuster. Loss adjusters who work for legal person lossadjusters shall not accept works other than those whichare delegated by the legal person, engage in a paid workor salaried job, and work in the name and account ofanother legal person loss adjuster.

(13) Loss adjusters shall be impartial. Loss adjustersshall not accept a loss adjusting business whereimportant causes which may give rise to doubts about theimpartiality of the loss adjuster with respect to any of theparties exist, or where they have a degree of relativity orbusiness partnership with any of the parties as specifiedin the Code of Civil Procedure No: 1086 and dated18.6.1927, Article 245, paragraphs (1), (2), and (3). Thisprovision shall also apply to those loss adjustersemployed by legal person loss adjusters. Reports whichhave been issued in violation of this provision shall bevoid.

(14) Partners of insurance companies, insurance agentsand brokers, persons in charge of management and auditof these, persons who have signing power on their behalf,and company employees engaged in professionalactivity; shall not act as a loss adjuster, be appointed tothe board of directors and auditing board of any legalperson loss adjuster, use signing power on their behalf,become partner of these and accept any paid work fromthem. Such restrictions shall also apply to the spouses ofthese persons and the children under their custody.

(15) Loss adjusters and persons working for them shall

45

not disclose any know-how or confidential informationthey learn in the execution of their duties without thepermission of the relevant parties. However, it isobligatory that any incidence giving rise to a criminaloffence is reported to competent authorities.

(16) Those that have been banned from acting as a lossadjuster shall not be engaged in activities related to lossadjusting, and no cooperation shall be made with thesepersons for the execution of the loss adjusting professionin whatever form.

(17) The report issued by authorized loss adjusters fortraffic accidents result in damage to property, and itsmodel to be determined by the Ministry of Interior, shallserve as accident report in the payment of claims asregards accidents and damages referred to in HighwayTraffic Code,Article 99. Reports issued by loss adjustersshall be evidentiary.

(18) Loss adjusters may reject the work proposed to themwithout any reason, but they have to notify in writing tothe proposing party whether they accept the work or notwithin three business days, at the latest, except for forcemajeure events and unexpected circumstances. Lossadjusters who fail to make such notices are deemed tohave accepted the work.

(19) A loss adjuster may be appointed freely by theinsurer, policy owner or people benefiting from theinsurance contract. The insurance contract specifies

46

which party is to cover the fee if a loss adjuster is to beappointed by the insurer, the policy owner or peoplebenefiting from the insurance contract. Where it is notspecified in the contract, the fee is paid by the insurer. Aperson whose offer is rejected by two loss adjuster mayrequire the assignment of a loss adjuster from the LossAdjusters Executive Committee. The assigned lossadjuster has to accept the work in return of the feedetermined by the Committee. However, the obligationto accept the work shall not apply in respect of theaccident and loss reports, which are issued in accordancewith the seventeenth paragraph of this article.

(20) The loss adjusting fee is determined freely betweenthe loss adjuster and the party appointing him.

(21) Loss adjuster courses, exams and internships areconducted separately for each branch of expertise.Insurance adjuster courses and other training activitiesare not subject to Private Education Institutions CodeNo: 5580 dated 8.2.2007.

(22) No one, other than those authorized in this Law,shall engage in loss adjusting or use words and phrases inhis trade name or in any document giving the impressionthat he is engaged in loss adjusting business.

(1) Insurance agency is carried out byreal or legal persons. Those who want to be engaged ininsurance agency shall be registered in the Register

Insurance agents

ARTICLE 23 -

47

maintained by the Union of Chambers and CommodityExchanges of Turkey.

(2) Principles and procedures on the qualifications ofinsurance agents are determined by regulation. Personswho will work as insurance agents shall obtain acertificate which confirms their qualifications from theUndersecretariat and shall apply to the Union ofChambers and Commodity Exchanges of Turkey, inorder to be registered in the Register. TheUndersecretariat may assign duties to the Union ofChambers and Commodity Exchanges of Turkey for thepreparation of the procedures related to the license forexamination and approval. The Union of Chambers andCommodity Exchanges of Turkey may decide tocooperate with non-governmental organizations orprofessional institutions for the realization of theseoperations.

(3) In respect of banks and establishments which havebeen established by a special law and authorized to carryout insurance agency activities, the obligation to beregistered in the Register as described in the firstparagraph of this article and the second paragraphconcerning the obtainment of a certificate from theUndersecretariat shall not apply.

(4) The register of the insurance agent shall be removedfrom the Register if;

a) he has lost the qualifications necessary to carry outinsurance agency,

48

b) he has been dismissed from the profession,

c) he has failed to operate within six months followinghis register in the Register,

ç) he has abandoned insurance agency,

d) his register has been removed from the chamber ofcommerce or chamber of industry and commerce,

e) he fails to deposit the registration fee within thespecified period, or fails to pay his monthly fee for aconsecutive period of three years.

(5) Before issuing a decision of removal from theRegister, a written defence is required from the agent. Inaddition, to be able to take a decision for removal fromthe Register, the insurance agent should have been heard,or should have not complied with the invitation for beingheard. The decision for removal from the Register shallbe reasoned.

(6) The agent who proves that the circumstances, whichresulted in his removal from the Register no longer exist,has the right to be registered in the Register again.However, those in respect of whom a decision ofdismissal from the profession has been taken shall not beregistered in the Register again. No registration fee shallbe taken from an insurance agent who is registered again.

(7) Those who request to be registered again in theRegister may be required to prove the continued

49

existence of the criteria for registration in the Register.The decision for refusal of the request to be registeredagain in the Register shall be a reasoned decision.

(8) The person who has been removed from theRegister or whose request to be registered again has beenrefused may present a written objection to the Board ofDirectors of the Union of Chambers and CommodityExchanges of Turkey within fifteen business days. Uponsuch objection, the Board of Directors of the Union ofChambers and Commodity Exchanges of Turkey has tonotify its decision within fifteen business days at thelatest. Such decision is final.

(9) Law on Protection of Consumers No: 4077, dated23.2.1995, Article 4/A, paragraph three shall only applyto insurance agents with respect to their servicesprovided related to agency operations. The insuranceagent is not responsible for defective services providedby the insurance company as the provider.

(10) Insurance agents who have been authorized toconclude contracts and collect premiums other thanbanks and establishment which are established by aspecial law and authorized to carry out insurance agencyand insurance agents who have been authorized toconclude contracts and collect premiums in respect oflife assurances or compulsory insurances, shall not haveany other commercial activities other than agencyactivities related to private pension transactions.

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(11) The Council of Ministers is authorized to makearrangements relating to the activities of foreigninsurance agents in Turkey and the intermediationactivities in Turkey by Turkish agents on behalf offoreign insurance companies.

(12) Persons in charge of management and audit ofinsurance companies, insurance brokers and lossadjusters and persons who have signing power on theirbehalf shall not assume duties in the board of directorsand auditory boards of agents, use signing power on theirbehalf, become partner of these and accept any paid workfrom them. Such restrictions shall also apply to thespouses of these persons and the children under theircustody. However, the restriction that applies to thespouses and children of persons in charge ofmanagement and audit of insurance companies andpersons who has signing power on their behalf is limitedwith the agency activities for the company where suchpeople work.

(13) Any real or legal person, other than those who areauthorized in this Law, shall not engage in insuranceagency activity and use words and phrases in his tradename or in any document giving the impression that he isengaged in insurance agency business.

(14) Those that have been banned from acting asinsurance agent shall not be engaged in activities relatedto insurance agency, and no cooperation shall be made

51

with these persons for the execution of the insuranceagency profession in whatever form.

(15) In case of the termination of the agency agreement,the insurance agent has the right to get the agentcommission for the works he has already accomplished,or he would have accomplished within a short period oftime if the agency agreement had not been terminated.

(16) After the termination of the agency agreement, if theinsurance company gains considerable benefit due to theportfolio of the insurance agent and if it is fair and just,the insurance agent has the right to claim compensationfrom the insurance company. However, in case theinsurance agent dissolves the contract without any soundreason or causes the dissolution of the contract as a resultof his own fault, his right to claim compensation shall beforfeited.

(17) Insurance agents and their employees shall notdisclose any know-how or confidential information theylearn in the execution of their duties without thepermission of the relevant parties. However it isobligatory that any incidence giving rise to a criminaloffence is reported to competent authorities.

(18) Provisions of the Turkish Commercial Codegoverning agencies shall also apply to insurance agents.

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PART VI

Professional Organizations

Association of the Insurance and ReinsuranceCompanies of Turkey

ARTICLE 24 - (1) Insurance companies andreinsurance companies are obliged to become membersof the Association of the Insurance and ReinsuranceCompanies of Turkey, which is headquartered in Istanbuland is a professional organization having the status of apublic legal entity, within one month after getting theirlicenses. However, the Council of Ministers isauthorized to abolish this obligation.Article 9, paragraphseven of the Law on the Union of Chambers andCommodity Exchanges of Turkey, and Chambers andExchanges No: 5174 dated 18.5.2004, shall not beapplicable to the insurance companies and reinsurancecompanies.

(2) A member insurance company and reinsurancecompany shall be immediately registered in the Registerby the Board of Directors of theAssociation. The registerof the insurance company or reinsurance company shallbe removed from the Register if;

a) all the licenses it has obtained have been withdrawn,

b) its authority to conclude insurance and reinsurancecontracts has been revoked in all branches,

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c) it has failed to conclude an insurance or reinsurancecontract within one year after getting its licenses or forsix months consecutively except those that are within theknowledge of the Undersecretariat,

ç) a bankruptcy or winding up decision has been issuedfor the insurance company and reinsurance company,

d) despite being notified, it has failed to pay theparticipation fees for the expenses and entrance feeswithin the specified period.

(3) An insurance company and a reinsurance companythat is not registered in the Register is not authorized toelect and to be elected in the General Assembly. Aninsurance company or a reinsurance company, whichproves that the circumstances which resulted in itsremoval from the Register no longer exist, has the rightto be registered in the Register again. No registration feeshall be taken from the insurance company orreinsurance company which is registered again.

(4) If the Board of Directors of the Association deemsnecessary it may request from insurance or reinsurancecompanies, which request to be registered again, toprove the continued existence of the criteria forregistration. The decision for refusal of the request to beregistered again in the Register shall be a reasoneddecision.

(5) The insurance and reinsurance company which hasbeen removed from the Register or whose request to be

54

registered again has been refused, may present a writtenobjection to the Undersecretariat within fifteen businessdays against the removal or refusal decision of the Boardof Directors. Upon such objection, the Undersecretariathas to notify its decision within fifteen business days atthe latest. The decision of the Undersecretariat is final.

(6) An insurance or reinsurance company whoselicenses have been withdrawn, in respect of which abankruptcy and winding up decision has been issued, orwhose operation is ceased due to other reasons shall loseitsAssociation membership.

(7) The objective of theAssociation is to;

a) ensure the development of the insurance profession,

b) ensure that its members work in solidarity, unity,integrity and discipline which the insurance professionrequires and in line with the needs of the economy,

c) take and implement the necessary decisions toprevent unfair competition.

(8) Duties and authorities of the Association are asfollows:

a) to take measures for the improvement of theinsurance profession, for this purpose to establishresearch institutions and support researches and studies,

b) to take necessary steps for the representation andawareness of insurance, to become a member of related

55

institutions in and outside Turkey and to send delegatesto these institutions,

c) if deemed necessary, to prepare guiding tariffs forinsurance contracts to be used by the sector,

ç) to comply with the duties arising from the insurancelegislation, and to monitor the implementation of itsdecisions and measures,

d) to determine the compulsory professional rules, toensure that members work in discipline which theinsurance profession requires in line with the needs of theeconomy, and to take and implements all kinds ofmeasures necessary to prevent unfair competition amongits members,

e) to cooperate with relevant institutions andassociations with the purpose of providing insuranceeducation, to organize seminars and conferences,publish books, magazines and booklets,

f) to establish insurance examination and researchcommittees in necessary quantity and quality, to arrangetheir duties, powers and methods of working,

g) to issue annual reports about the annual operationresults of its members, and to circulate these reports tomembers and concerned parties,

ð) to provide the registration of insurance relatedinformation and to establish a data centre for thispurpose,

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h) to organize the operation of insurance arbitration andto keep a list of insurance arbitrators.

(9) The Association shall follow the implementation ofthe decisions and measures it has taken according to thelegislation for the professions it is related to, and takethose measures that have been required by theUndersecretariat.

(10) The Association, with the approval of theUndersecretariat, is authorized to establish bureaus,companies, and foundations with legal personalityrelated to insurance, or participate in existing companieswithin the context of this Law.

(11) Bodies of the Association consist of the GeneralAssembly, the Board of Directors, Chairmanship,Presidential Committee, Disciplinary Board andAuditory Board. Insurance companies and reinsurancecompanies are represented with one full member in onlyone of these bodies except the GeneralAssembly.

(12) Insurance companies and reinsurance companiesare represented by the general manager or his deputy inthe General Assembly. The Undersecretariat may have arepresentative in theAssociation's GeneralAssembly.

(13) The Presidential Committee elected by the GeneralAssembly for two years consists of a president, a vice-president, and a controller which the Board of Directorsshall elect among its members at the first meeting.

57

(14) The Chairman of theAssociation, full and substitutemembers the Board of Directors, the Disciplinary Boardand the Audit Board are elected by the GeneralAssembly. The Chairman of the Association is theChairman of the Board of Directors as well. The numberof members in the Board of Directors is determinedaccording to the number of members registered at thedate the General Assembly is held. If the number ofmembers is fifty or below, then the Board of Directorsshall have seven members, if the number of members isbetween fifty and sixty, then the board shall consists ofnine members, and if the number of members is sixty orabove, the board shall consist of eleven members, and offour substitute members in any case. The DisciplinaryBoard andAuditory Board shall each consist of three fullmembers and two substitute members. The term of officeof the Chairman of the Association, Board of Directors,Disciplinary Board andAuditory Board is two years. TheDisciplinary Board and Auditory Board shall elect achairman at the first meeting.

(15) The working principles and scope of activities of theAssociation are regulated by regulation. Insurancecompanies and reinsurance companies have to complywith the decisions and measures taken by theAssociation.

(16) Insurance and reinsurance companies shall pay anentrance fee, the amount of which is determined by theGeneral Assembly, upon their membership to theAssociation and every year. The participation fees paid

58

for the expenses of the Association are calculated anddistributed based on the sum of the direct premiumincomes in Turkey obtained within a year by themembers as outlined by the principles in the regulation.If these fees are not paid within the periods determinedby the Regulation, the Association shall collect the sameby execution proceedings. Decisions related to thepayment of participation fees shall have the status ofwritten official document in the sense of the Law onExecution and Bankruptcy No: 2004 dated 9.6.1932,Article 68.

(17) TheAssociation may require participation fees frominsurance companies for the expenses of the data centreto be established. The participation fee shall bedetermined by the Undersecretariat up to the one perthousandth of the premium production realized by thecompanies in respect of such insurances which aredecided to be collected at the data centre. TheUndersecretariat is authorized to increase or decreasethis ratio up to fifty percent. If it is deemed necessary,expenses of the data centre shall be supported from thebudget of the Association, and from the Account subjectto the approval the Undersecretariat.

(18) In respect of members which do not timely and fullycomply with the decisions and measures taken by theAssociation according to this article an administrativefine from two thousand Turkish Liras up to six thousandTurkish Liras will be imposed by the Board of Directorsof theAssociation.

59

(19) All activities of the Association are supervised bythe Undersecretariat.

(1) Elections of the bodies of theAssociation shall be carried out by secret voting, andopen vote counting, and each member has one vote in thebodies.

(2) No later than fifteen days prior to the GeneralAssembly meeting during which the election shall beheld, a list indicating the representatives of the membersfor the election of the Association and a letter includingthe agenda, venue, date and time of the meeting and thedetails of the second meeting which shall be held in theabsence of quorum, shall be submitted to the judge whoserves as the chairman of the county election board ofthat locality. If there is more than one county electionboard in the locality where the election shall be held, theauthorized judge shall be determined by the SupremeElection Board. It is compulsory that meeting dates arearranged so that discussions are concluded until theevening of a Saturday, taking into account other issuesincluded in the agenda, and the elections are heldbetween nine a.m. and five p.m. on the next day which isSunday.

(3) The judges approve the list indicating the memberswho will participate in the election and other issues

Election principles for the bodies of the Associationand prohibitions

ARTICLE 25 -

60

indicated in the second paragraph, if necessary after theexamination of relevant registers and documents by thejudge and if exists after the completion of deficiencies byrelated parties. The approved list and other issues relatedto the meeting are announced in the billboards of theAssociation for three days.

(4) Objections to the list during the announcementperiod are examined by the judge, and decided withintwo days, at the latest.

(5) Lists that become final thereafter as well as otherissues related to the meeting are sent to the Associationafter the approval.

(6) The Judge assigns a polling committee whichconsists of a chairman and two members among thosewho are not candidates. In the same way three substitutemembers are determined by the judge. In the absence ofthe chairman of the polling committee, the oldestmember shall chair the committee.

(7) The polling committee is responsible for ensuringthat the election is carried out and managed inaccordance with the principles of the code, and forcounting of the votes, and this responsibility shallcontinue uninterruptedly until the election and countingof votes are completed.

(8) At the end of the election period, the results of theelection shall be registered in a minute to be signed by thechairman and members of the polling committee. If there

61

is more than one polling station, minutes are combinedby the judge. A copy of each minute is published at theelection site and in this way the provisional results of theelection are announced. Used vote papers and otherdocuments are submitted to the chairman of the countyelection board, along with a copy of the minute to be keptfor three months.

(9) Objections to the procedures carried out during theelection and to the election results within two days, as ofthe arrangement of the minutes, are examined by thejudge on the same day, and a final decision is given.Afterthe expiry of the objection period, and conclusion ofobjections, the judge announces the final results asdescribed above, and notifies theAssociation.

(10) A member whose name is not written in the list shallnot cast vote. Votes shall be cast after the electorateproves his identity with a certificate given by theAssociation or an official authority, and puts hissignature next to his name on the list. A vote shall be castby placing the voting paper issued collectively orseparately according to bodies into the envelope whichbears the seal of the county election board and givenduring the voting by the chairman of the pollingcommittee. Votes placed into other envelopes shall bevoid. Tools and equipment used in the elections aresupplied by the county election board, and the location ofvoting boxes shall be determined by the judge.

(11) In the case of invalidation of the election by the

62

judge due to irregularity or illegal practice which mayaffect the election results, the judge shall determine theSunday, to repeat the election, which is not earlier thanone month and later than two months, and notify theAssociation. On the determined day, only the election isheld, and election procedures are carried out as stipulatedin this article and other provisions of the Law.

(12) Remuneration shall be paid to the chairman of thecounty election board, the judge, chairman and membersof the polling committee in accordance with theprinciples specified in the Law on Basic Provisions ofElections and Register of Voters No: 298 dated26.4.1961. This remuneration and other electionexpenses shall be met from the budget of theAssociation.

(13) Offences committed against the chairman andmembers of the polling committee during the electionsshall be punished as if they have been committed againstpublic officials.

(14) The Association shall not be engaged in any activityoutside the scope of its establishment objectives.Political parties may not nominate candidates in theelections of the bodies of the Association. Bodies of theAssociation that act in violation of its objectives shall bedismissed by a court order upon the request of theMinister or the Public prosecutor, and new elections shallbe held.

(15) Bodies dismissed shall be replaced by new ones

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within one month at the latest. Those who are newlyelected shall complete the terms of office of formermembers.

(16) Provisions regarding dismissal shall not apply inrespect of the GeneralAssembly of theAssociation.

(17) The related bodies of the Association are obliged tofully comply with the decisions of the Minister andUndersecretariat on the procedures carried out by thebodies of the Association in accordance with this Law.Provisions of paragraph fourteen shall apply to thebodies of the Association which fail to obey thesedecisions without any legal reason or which give a newdecision for the same purpose with its previous decisionor which do not perform its legal duties despite thewarning.

(18) Criminal responsibilities of the dismissed membersof the bodies and representatives of legal persons shallcontinue. Dispositions which give rise to the dismissal ofsuch bodies, under the seventeenth paragraph, shall bevoid.

(19) If it is deemed necessary for national security, publicorder, prevention of commitment or continuity of anoffence, or arrest of criminals and a delay consideredunfavourable then the Minister may prohibit theactivities of the Association. The related decision of theMinister shall be presented to the approval of theauthorized judge within twenty four hours. The Judge

64

notifies the decision within forty eight hours; otherwisesuch administrative decision shall be automatically void.

(20) The persons in charge of management and audit ofthe Association and employees of the Association shallnot disclose any know-how or confidential informationthey learn in the execution of their duties without thepermission of the relevant parties. However, it isobligatory that any incidence giving rise to a criminaloffence is reported to competent authorities.

- (1) Seven full and seven substitutemembers of the Loss Adjusters Executive Committee,which consists of nine members in total who have beenappointed for a period of four years, are elected inaccordance with the rules and principles determined bythe Undersecretariat among loss adjusters who areregistered in the Register kept by the Union of Chambersand Commodity Exchanges of Turkey and who havegood repute and experience in the profession. Moreover,a board member of the Union of Chambers andCommodity Exchanges of Turkey and the SecretaryGeneral of the Union of Chambers and CommodityExchanges of Turkey or a deputy to be determined byhim are appointed to this Committee as permanentmember. To be eligible for election to the Loss AdjustersExecutive Committee, a person should have actuallyperformed lost adjusting at least for ten years. Criteriasought in full members shall also be sought in substitute

LossAdjusters Executive Committee

ARTICLE 26

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members. Loss Adjusters Executive Committee shallelect a chairman and a vice-chairman from among itsmembers at the first meeting. Legal person loss adjustersare represented at the Loss Adjusters ExecutiveCommittee by their general managers or people whohave been authorized to represent the legal person. Thosewho have been subject to disciplinary punishment withinthe past five years and those in respect of whom aninvestigation has been initiated due to an offence thatprevents acting as a loss adjuster shall not be elected tothe Loss Adjusters Executive Committee, or represent alegal person therein until such investigation is complete.If members of the Loss Adjusters Executive Committeelose their eligibility for election later on, or fail to attendin person, or by their representatives, three consecutivemeetings shall forfeit membership automatically.

(2) Loss Adjusters Executive Committee shall performthe following duties:

a) to establish professional rules in order to ensure thatloss adjusting activities are performed impartially and inan honest manner, business ethics are preserved, andmembers of the profession work with the attention,discipline and solidarity required by the profession,

b) to take and implement all measures necessary toprevent unfair competition between members of theprofession,

c) to follow professional developments, administrative

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and legal arrangements at home and abroad, and toinform members in these issues,

ç) to establish relations with national or internationalfinancial, economic and professional institutions andestablishments in the field of of loss adjusting business,

d) to organize training activities such as courses,seminars and conferences in order to develop the lossadjusting profession,

e) to follow developments in insurance and lossadjusting profession, to gather related publications andcourt decisions and submit them to the use of themembers of the profession,

f) to declare opinions to relevant authorities in respectof professional matters,

g) to carry out the registration procedures which arenecessary in order to act as a loss adjuster according tothe insurance legislation, and the procedure of removalfrom the Register,

ð) to give disciplinary punishments about loss adjustersin matters which relate to insurance activity,

h) to perform other duties to be assigned by theUndersecretariat.

(3) Loss Adjusters Executive Committee's decisionsare notified to the Board of the Union of Chambers andCommodity Exchanges of Turkey in fifteen days.

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Procedural transactions for the entry into force of thedecisions of the LossAdjusters Executive Committee areexecuted by the Board of Directors of the Union ofChambers and Commodity Exchanges of Turkey. TheBoard of Directors of the Union of Chambers andCommodity Exchanges of Turkey has to take necessarysteps for the decisions which are notified by the LossAdjusters Executive Committee in fifteen days from thenotice. LossAdjusters Executive Committee may, for thepurpose of fulfilling the operations specified in thesecond paragraph, authorized chambers of commerce orchambers of industry and commerce with the approval ofthe Board of Directors of the Union of Chambers andCommodity Exchanges of Turkey, and theUndersecretariat.

(4) Provision of the Law on The Union of Chambersand Commodity Exchanges of Turkey and Chambersand Exchanges,Article 94 are also applicable to the LossAdjusters Executive Committee. Attendance fees andother payments to the members of the Loss AdjustersExecutive Committee are determined by the GeneralAssembly upon the proposal of the Union of Chambersand Commodity Exchanges of Turkey's Board ofDirectors and the approval of the Undersecretariat.

(5) In order to secure that loss adjusting services arecarried out as required, Loss Adjusters ExecutiveCommittee shall apply the following disciplinarypunishments according to the nature and the degree ofseriousness of the act to those loss adjusters who act in

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violation of the honour of the profession, those who failto perform their duties, or who perform their dutiesdeficiently, or those who act in a manner damaging thetrust necessary for the profession:

a) Warning; is the notification to the loss adjuster by aletter that he should be much careful in the execution ofhis profession.

b) Censure; is notification to the loss adjuster by a letterthat he is deemed faulty in his duty and behaviour.

c) Temporary suspension of professional activity; is toprohibit professional activity for a period not shorterthan six months and longer than a year, provided that thetitle of loss adjuster is reserved.

ç) Dismissal from profession; is the dismissal of a lossadjuster from the profession, and prohibition of furtherexecution of the profession.

(6) Those who are authorized to represent and bind alegal person loss adjuster in respect of whom a decisionof dismissal from profession has been issued shall not actas loss adjusters and work as auditor or representative ofanother legal person loss adjuster.

(7) Those loss adjusters who act in violation of the rulesof the profession, the honour of the profession, those whofail to perform their duties, or who perform their dutiesdeficiently, or who act in a manner damaging the trustrequired by the duty shall be subject to a warning

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punishment, and to censure punishment if the same act isrepeated.

(8) Those loss adjusters who fail to perform their dutiesindependently, impartially and fairly, or who performtheir duties deficiently or act in violation of the generalprinciples of the profession shall be punished withtemporary suspension of professional activity.

(9) Loss adjusters who have issued false loss adjustingreports intentionally are punished with dismissal fromthe profession, if this is supported by the final judgementof the court.

(10) A loss adjuster in respect of whom an investigationis being carried out due to a work which may require thepunishment of dismissal from profession may beprevented from providing service as a measure with thedecision of the Loss Adjusters Executive Committee.The decision of prevention from providing service isnotified to the relevant authorities immediately. Thedecision for prevention from providing service shall berevoked when the investigation is cancelled or apunishment is given which does not prevent acting as aloss adjuster. The decision for prevention from serviceshall be revoked when the events and circumstanceswhich give rise to the issue of such decision cease to bevalid or when it is discovered thereafter that the same dono longer exist.

(11) In respect of a loss adjuster who commits acts whichare subject to disciplinary punishments, two or more

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times, in a period of three years, for each new offence apunishment which is heavier than the previous one shallbe applied.

(12) Loss adjusters who, having been punished withtemporary suspension of professional activity, repeat theoffence that necessitates such punishment within thesucceeding five-year period shall be punished withdismissal from profession.

(13) Inquiry and issue of a judgment shall not prevent theperformance of a disciplinary investigation and thetaking of disciplinary action.

(14) Investigations about the members of the LossAdjusters Executive Committee are carried out by theUndersecre ta r ia t . Dec i s ions taken by theUndersecretariat are final.

(15) No disciplinary investigation shall be carried out ifthree years have elapsed from the date on which actsrequiring disciplinary action have been committed.However, that period shall not be counted if the case hasbeen referred to the Loss Adjusters ExecutiveCommittee.

(16) No disciplinary punishment shall be given if fiveyears have elapsed from the date on which acts requiringdisciplinary action have been committed.

(17) If the act necessitating disciplinary actionconstitutes an offence at the same time, and a longer

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lapse of time has been determined in the relevant laws forthat offence, the lapse of time specified in the relevantlaws shall apply instead of the lapse of time specified inthis article.

(18) An objection to disciplinary decisions may be filedto the Undersecretariat within fifteen days as from thenotification of the decision by the Loss adjustersExecutive Committee. Undersecretariat gives itsdecision within a month and such decision is final.

(19) Decisions relating to disciplinary punishments shallnot be applied unless such decisions become final.

(20) Loss adjusters who have been subject to adisciplinary punishment other than dismissal fromprofession and temporary suspension of professionalactivity may apply to the Loss Adjusters ExecutiveCommittee five years after the execution of suchpunishments, and demand that the disciplinarypunishment about them is removed from their registers.If such party has not been subject to any disciplinarypunishment within that period, the disciplinarypunishment about him is removed.

(21) In respect of members who fail to comply with thedecisions and measures taken by the Loss AdjustersExecutive Committee in accordance with this article in atimely and complete manner, an administrative fine fromtwo thousand Turkish Liras up to six thousand TurkishLiras shall be imposed by the Loss Adjusters ExecutiveCommittee.

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(22) The Union of Chambers and CommodityExchanges of Turkey allocates a suitable setting,sufficient number of personnel and necessary technicalequipment for the Loss Adjusters Executive Committeeto perform its duties in an effective manner.

(23) The Loss Adjusters Executive Committee isauthorized to determine the fee for Registration or theregular fee with the approval the Board of Directors ofthe Union of Chambers and Commodity Exchanges ofTurkey. Such payments are registered as revenue in thebudget of the Union of Chambers and CommodityExchanges of Turkey.

(24) If the Undersecretariat discovers any violation ofapplicable legislation and general interests of theinsurance sector, it may require the Union of Chambersand Commodity Exchanges of Turkey to cancel thearrangements relating to loss adjusters or to introducechanges in such arrangements.

(25) The working principles and procedures of the LossAdjusters Executive Committee are determined byregulation to be issued by the Ministry of Industry andCommerce with the approval of the Ministry which theUndersecretariat is affiliated with.

- (1) An Insurance Agents Sector Councilshall be established within the Union of Chambers andCommodity Exchanges of Turkey. Members of the

InsuranceAgents Executive Committee

ARTICLE 27

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Council which consists of forty people are elected inaccordance with the principles and proceduresdetermined jointly by the Union of Chambers andCommodity Exchanges of Turkey and theUndersecretariat from among insurance agents who havecredit and experience in the profession and who aremembers of a chamber of commerce or a member ofindustry and commerce. Turkish Insurance AgentsSector Council shall not be bound by the provision ofsecond paragraph of Article 57 of the Law on the Unionof Chambers and Commodity Exchanges of Turkey andChambers and Exchanges.

(2) Insurance Agents Sector Council Members shallelect seven members and seven substitute members tothe Insurance Agents Executive Committee, which shallconsist of nine members to serve for a period of fouryears. A Board Member of the Union of Chambers andCommodity Exchanges of Turkey and the SecretaryGeneral of the Union of Chambers and CommodityExchanges of Turkey or the person who will beappointed by the Secretary General are appointed to thisCommittee as permanent member. In order to be eligibleto this committee, it is essential to have performedactually as an insurance agent for a period of at least tenyears. Criteria sought in full members shall also besought in substitute members. Insurance AgentsExecutive Committee shall elect a chairman and a vice-chairman from among its members at the first meeting.Legal person insurance agents w are represented at theInsurance Agents Sector Council and Insurance Agents

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Executive Committee by their general managers orpersons who have been authorized to represent the legalperson. Those who have been imposed to disciplinarypunishment within the past five years, those in respect ofwhom an investigation has been initiated due to anoffence that prevents acting as an insurance agent shallnot be elected to the Insurance Agents ExecutiveCommittee, or represent a legal entity therein until suchinvestigation is complete. Members who despite theirpresence in the Insurance Agents Executive Committeelose their eligibility for election later on, or who fail toattend in person, or via their representatives, threeconsecutive meetings shall forfeit membershipautomatically.

(3) Insurance Agents Executive Committee shallperform the following duties;

a) to establish professional rules in order to ensure thatinsurance agent activities are performed impartially andin an honest manner equitably and fairly, business ethicsare preserved, and members of the profession work insolidarity and with the attention and discipline requiredby the profession.

b) to determine the ethical codes and try to achieveuniformity in insurance agent practices.

c) to take and implement measures in order to preventunfair competition and unfair practices among insuranceagents.

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ç) to observe developments, administrative and legalarrangements related to insurance and insurance agencyprofession at home and abroad, and provide its membersand relevant parties with the information it gathers.

d) to establish relations with other professionalinstitutions related to insurance agency at home andabroad.

e) to organize training activities such as courses,seminars and conferences in order to improve theinsurance agency profession when necessary.

f) to determine minimum physical conditions necessaryfor the insurance agency activity.

g) to issue annual reports for submission to the Board ofDirectors of the Union of Chambers and CommodityExchanges of Turkey.

ð) to carry out the procedures of registration in theRegister which are necessary in order to act as aninsurance agent under the insurance legislation, and theprocedure of removal from the Register.

h) to give disciplinary punishments about insuranceagents in matters which relate to insurance activity.

ý) to determine criteria for the employees of theinsurance agent who will be entitled to draw up contractsand to keep records of these employees.

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i) to fulfil other duties to be assigned by theUndersecretariat of Treasury.

(4) Decisions taken by the Insurance Agents ExecutiveCommittee shall be notified to the Board of Directors ofTurkish Union of Chambers and Stock Exchanges withinfifteen days at the latest. Procedural transactions for thefulfillment of the decisions taken by the InsuranceAgents Executive Committee shall be performed by theBoard of Directors of the Union of Chambers andCommodity Exchanges of Turkey. Board of Directors ofthe Union of Chambers and Commodity Exchanges ofTurkey shall be obliged to perform what is necessitatedby the decisions notified by the Insurance AgentsExecutive Committee within fifteen days at the latestafter the date of notification. The Insurance AgentsExecutive Committee shall be entitled to assign anychamber of commerce or chamber of industry andcommerce for the fulfillment of the transactionsspecified in item three upon the approval of the Board ofDirectors of the Union of Chambers and CommodityExchanges of Turkey, if necessary.

(5) Insurance Agents Executive Committee shall bebound with the provision of the Law on the Union ofChambers and Commodity Exchanges of Turkey andChambers and Exchanges, Article 94. Attendance feesand other payments to members of the Insurance AgentsExecutive Committee are to be determined by theGeneral Assembly upon the proposal of the Union of

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Chambers and Commodity Exchanges of Turkey'sBoard of Directors and approval of the Undersecretariat.

(6) In respect of disciplinary punishments to be givenfor insurance agency activities of insurance agents, theauthorities specified in the Law on the Union ofChambers and Commodity Exchanges of Turkey, andChambers and Exchanges, Articles 87, 88 and 89 areexecuted by the InsuranceAgents Executive Committee,and Article 87 of the same Law applies to disciplinaryoffences and punishments to be given in respect ofinsurance agents. However, provisions of the Law on theUnion of Chambers and Commodity Exchanges ofTurkey, and Chambers and Exchanges, Article 87governing temporary dismissal from membership andlong term dismissal from membership are applied astemporary dismissal from profession and long termdismissal from profession. In respect of insuranceagency activities of insurance agents, the punishment ofdismissal from profession may be given for offences tobe determined by the regulation. Those who areauthorized to represent and bind a legal person insuranceagent in respect of whom a decision of dismissal fromprofession has been issued shall not act as insuranceagent and work as an auditor or representative of anotherlegal entity insurance agent. An insurance agent inrespect of whom an investigation is being carried out dueto a work which may require the punishment of dismissalfrom profession may be prevented from service as ameasure with the decision of the Insurance Agents

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Executive Committee. The decision for prevention fromservice shall be revoked when the investigation iscancelled or a punishment is given which does notprevent performing as an insurance agent, and shall berevoked by the Insurance Agents Executive Committeeif it is discovered that the events and circumstancesgiving rise to such decision do not exist, or havedisappeared later on. Both the decision for preventionfrom service and the revocation of such decision arenotified to the Chamber where the insurance agent isregistered and to the relevant authorities immediately.The Union of Chambers and Commodity Exchanges ofTurkey Higher Disciplinary Board shall be authorized toexecute disciplinary investigations to be carried out inrespect of members of the Insurance Agents ExecutiveCommittee only about the insurance agent activity, andto decide about the disciplinary punishments referred toin this paragraph. The provision of the Law on the Unionof Chambers and Commodity Exchanges of Turkey andChambers and Exchanges, Article 92 shall apply todisciplinary punishments to be given to insuranceagents.

(7) The Insurance Agents Executive Committee isauthorized to determine the fee for recording in theRegister or the regular fee with the approval of the Boardof Directors of the Union of Chambers and CommodityExchanges of Turkey. Such payments are registered asrevenue in the budget of the Union of Chambers andCommodity Exchanges of Turkey.

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(8) The Union of Chambers and CommodityExchanges of Turkey allocates a suitable setting,sufficient number of personnel and necessary technicalequipment for the Insurance Agents ExecutiveCommittee to perform its duties in an effective manner.

(9) If the Undersecretariat finds any violation oflegislation and violation of the general interests of theinsurance sector, it may require the Union of Chambersand Commodity Exchanges of Turkey to cancel thearrangements relating to insurance agents or to introducechanges in such arrangements.

(10) The working principles and procedures of theTurkish Insurance Agents Sector Council and InsuranceAgents Executive Committee are determined byregulation to be issued by the Ministry of Industry andCommerce with the approval of the Ministry which theUndersecretariat is attached to.

(1) Supervision of all insuranceoperations of insurance and reinsurance companiesoperating in Turkey, establishments engaged ininsurance operations in accordance with their speciallaws, insurance and reinsurance intermediaries, lossadjusting activities, actuaries and other persons

PART VII

Supervision and Furnishing Information

Supervision

ARTICLE 28 -

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operating in the insurance sector are carried out by theInsurance Supervisory Board.

(2) Insurance Supervisory Board is composed of achairman, insurance supervisors, insurance supervisoryactuaries and their assistants. Inspection, supervision,examination and inquiry duties and authorities vested inthe Ministry which the Undersecretariat is attached to orthe Undersecretariat, by the provisions of this Law andother laws governing insurance business, insurance andpersons and establishments operating in the insurancesector, shall be executed and exercised by insurancesupervisors, insurance supervisory actuaries and theirassistants.

(3) Examination, determination and inspection of theoperations, assets, affiliates, receivables, equities andliabilities of insurance companies and reinsurancecompanies, the relation and balances between their profitand loss statements, all other elements that affect theirfinancial structure and administrative structures, use andprotection of premiums collected and actuarial andfinancial accounts and balances of insurance companiesare carried out by insurance supervisors, insurancesupervisory actuaries and their assistants.

(4) Insurance supervisors, insurance supervisoryactuaries and their assistants are authorized to requestinformation they deemed necessary, for the provisions ofthis Law and other laws governing insurance business,from insurance companies and reinsurance companies,

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their affiliates, subsidiaries, branches, and representativeoffices, other real and legal persons includingintermediaries and banks, and to examine all their books,records and documents.

(5) Public institutions, the Association and other non-governmental and professional organizations are obligedto provide all kinds of information and documentation, ifthey are related with their duties, to the insurancesupervisors, insurance supervisory actuaries and theirassistants even if such information is confidentialnotwithstanding the prohibitive and restrictiveprovisions in special laws, except provisions relating tocircumstances which shall give rise to seriousconsequences against the security of the State, essentialforeign policy interests and the privacy of family life andthe right to defence, in appropriate period of time andplace, limited to the subjects and operations covered bythe scope of this article, to submit and make available therequired books and documents, to open the computersystem in line with the purposes of the supervision, andto ensure security of the data. Insurance supervisors,insurance supervisory actuaries and their assistants areauthorized to require minutes of meetings of the board ofdirectors and auditory boards of institutions covered bythis article and to carry out examinations with suchpersons, institutions and establishments that are relevantwith the carried out procedure.

(6) If it is required during the supervision, examinationand inquiry performed by insurance supervisors,

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insurance supervisory actuaries and their assistants, allkinds of support, including the assistance of employeesworking at risk management and internal audit systems,shall be supplied by the establishments that are beingsubject to supervision, examination, or inquiry.

(7) Within the scope of the provisions of this Law andother laws, the determination, analysis, monitoring andmeasurement of the operations, risk structures,receivables, equities, debts, liabilities, andcommitments, the relation and balances between theirprofit and loss statements and all other elements thataffect their financial structure of the institutions whichare subject to this Law, and the monitoring of the riskswhich may be faced by these establishments, areperformed by the Undersecretariat in accordance with aregulation to be issued.

(8) The Undersecretariat is authorized to monitor andanalyze the information and documents belonging to theestablishments subject to this Law; to verify thecompliance of the administrative and financial, on both aconsolidated and non-consolidated basis, structure ofthese establishments with the legislation; to evaluate thereports, financial statements and internal audit reports ofthese establishments by comparing them with thesupervision and monitoring results of theUndersecretariat; to ensure that all precautionarymeasures related to these establishments areimplemented and concluded taking into account the typeand size of their risk exposure, the reliability of their risk

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management systems and the audit risk according to theresults obtained by the Undersecretariat; to follow theimplementation of measures which affect or may affectthe operations of subsidiaries, financial affiliates andbranches of these establishments, and if necessary, takefurther measures with the relevant parties.

(9) Persons and establishments that are subject to thisLaw are obliged to present to the Undersecretariat theinformation, documents, statements, reports andfinancial statements which are prepared in such formatsdetermined by the Undersecretariat to be compatiblewith their account and record orders using suchcommunication channels and within the perioddetermined by the Undersecretariat. Information sent byestablishments by electronic means shall be in theresponsibility of the board of directors within the scopeof the internal audit system.

- (1) Persons subject to this Law andengaged in any professional activity related to insurance,affiliates of insurance companies and reinsurancecompanies, banks and other persons are obliged toprovide all kinds of information and documents requiredby the Undersecretariat, notwithstanding the prohibitiveand restrictive provisions in special laws, in relation tothe execution of this Law even if such information isconfidential. Any provision relating to circumstanceswhich shall give rise to serious consequences against the

Obligation to furnish information

ARTICLE 29

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security of the State, essential foreign policy interestsand the privacy of family life and the right to defence

(2) Within the scope of reciprocity and in relation to theexecution of this Law, demands of authorities,authorized to carry out supervision according to thelegislation of foreign countries, to carry out supervisionin, and require information from, Turkish branches andpartnerships of the establishments operating in insurancesector in their home countries, which are subject to thisLaw in Turkey, is conditional upon the permit of theUndersecretariat. Information required by theseinstitutions may be given by the Undersecretariat subjectto a non-disclosure condition. The Undersecretariat mayhave all kinds of cooperation and exchange ofinformation within the framework of agreements withthe supervisory bodies of foreign countries in mattersrelated to insurance.

(1) In order to settle the disputes arisingfrom the insurance contract between the policy holder orpeople benefiting from the insurance contract on the oneside and the party undertaking the risk on the other side,an Insurance Arbitration Commission shall beestablished within the Association. Those insuranceestablishments that want to become members of the

PART VIII

Arbitration

Insurance arbitration

ARTICLE 30 -

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insurance arbitration system have to notify theCommission in writing. A person who is in conflict withthe member establishments of the insurance arbitrationsystem may still benefit from the arbitration procedureeven if there is no special provision in the relevantcontract.

(2) The Commission is composed of a representativefrom the Undersecretariat, two representatives from theAssociation, one representative from a consumers'association and an academician lawyer who will bedetermined by the Undersecretariat. The representativeof the Undersecretariat must have a minimum workexperience of ten years in public service, should beexperienced in the insurance field, and should at leasthave the title of head of department; and therepresentatives of the Association shall meet the criteriasought in deputy general secretaries, as specified inArticle 4 of this Law. The representative of theconsumers' association shall be elected by theUndersecretariat from among three candidatesnominated by the consumers' association which has thehighest number of members in Turkey. The Commissionshall elect a president from within. In the Commission,decisions are taken with the absolute majority of the totalnumber of members. The President of the Commissionand the members of the Commission who are elected toserve for two years are paid a remuneration equivalent tothe monthly salary and other payments of the membersand the president of the board of directors of publiceconomic enterprises.

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(3) The Commission perform the following duties;

a) to appoint directors and deputy directors,

b) to prepare the budget of the Commission which is tobe followed in a separate account by theAssociation, andsubmit it to theAssociation,

c) to take measures to ensure that the arbitration systemoperates in a fair, impartial and effective manner,

ç) to prepare an annual report on the results of theactivities of the Commission, and send it to theAssociation and the Undersecretariat,

d) to prepare the computer infrastructure,

e) to perform other duties assigned by the laws.

(4) The Commission is authorized to open officeswhere it deems necessary. In that case, the office directorshall possess the same qualifications with those of theCommission director. Duties to be assigned to the officedirector are determined by the Commission.

(5) Adirector and two deputy directors, rapporteurs andsufficient number of personnel are assigned to workunder the Commission. Directors and deputy directorsare assigned by the Commission whereas rapporteursand other personnel are assigned by the Commissionaccording to the proposal of the director. Dismissal fromoffice is subject to the same procedure with that ofassignment. The director of the Commission shall;

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a) meet the criteria sought in founders of insurancecompanies and reinsurance companies except the criteriaof financial power,

b) at least hold an undergraduate degree,

c) have a minimum two years of experience in insurancelaw or a minimum five years of experience in insurance.

(6) Deputy directors shall possess the qualificationsspecified in the fifth paragraph except sentence (c). Inaddition, at least one of the deputy directors should havetwo years experience in insurance field.

(7) Disputes are settled by insurance arbitrators andrapporteurs who shall work in only one of the life andnon-life insurance groups.

(8) Insurance arbitrators shall;

a) meet the criteria sought in founders of insurancecompanies and reinsurance companies except the criteriaof financial power,

b) at least hold an undergraduate degree,

c) have a minimum of five years of experience ininsurance law or a minimum of ten years of experience ininsurance.

(9) Insurance rapporteurs who shall work at theCommission shall meet the criteria sought in the directorof the Commission.

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(10) Those who want to work as insurance arbitratorshall document their qualifications which are necessaryto be arbitrator and apply to the Commission. Those whoare deemed eligible are notified to the Undersecretariatfor acceptance. If the Undersecretariat accepts theapplication, the name of the relevant person shall beregistered in the Insurance arbitrators list which is to bekept by the Commission and a copy of which is to be sentto the Ministry of Justice, and any changes in the list arenotified to the Ministry of Justice and theUndersecretariat in six month intervals.

(11) The name of the insurance arbitrator shall beremoved from the list;

a) permanently if he has lost the qualifications necessaryfor working as an insurance arbitrator or it has beenproven that he has acted in violation of the principle ofimpartiality;

b) for a period of one year if he has failed to conclude thefiles received by him in due time for maximum threetimes a year.

(12) Those that want to become a member in thearbitration system pay a participation fee, and those whoapply to the Commission for the settlement of a disputepay an application fee. If a higher amount has not beendetermined with a written agreement expressly by theparties to the dispute, awards given by the arbitrator up toforty thousand Turkish Liras shall be final for both

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parties. Awards above forty thousand Turkish Liras maybe appealed. Under any circumstances, provisions of theCode of Civil Procedure, Article 533 are reserved.Principles and procedures relating to appeal aregoverned by the Code of Civil Procedure.

(13) In order to apply to the Commission, the person whois in conflict with an establishment which engage ininsurance business should have made the necessaryapplications to the insurance establishment regarding theevent causing the dispute, and document that his demandhas not been met in part or in full. The failure of theinsurance establishment to reply in writing within fifteenbusiness days since the application date is also asufficient reason for an application to the ArbitrationCommission.

(14) Applications shall not be filed to the Commissionregarding disputes which have been referred to Court orto the Arbitration Committee for Consumer Problemsaccording to the provisions of the Law on Protection ofConsumers.

(15) The application which has been submitted to theCommission by the person who is in conflict with theestablishment engage in insurance business shall be firstexamined by rapporteurs. Rapporteurs have to completetheir examination within fifteen days at the latest.Applications which cannot be settled by rapporteurs arereferred to the insurance arbitrator. The insurancearbitrator who shall deal with the dispute is selected by

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the Commission from the insurance arbitrators list. TheCommission may decide that a panel consisting ofminimum three insurance arbitrators is formedaccording to the nature of the case. However, where thedisputed amount is equal to or above fifteen thousandTurkish Liras, it is compulsory to form a panel. The paneldecides by majority. The Arbitrator may consider thecase on submitted documents only. The electedinsurance arbitrator shall not reject the duty except forforce majeure and unexpected circumstances. However,the parties may refuse the arbitrator referring to thecauses of refusal specified in the Code of CivilProcedure. The refusal request is presented to theCommission by a petition within five business days at thelatest, after being informed. Upon the refusal request, theCommission director takes his decision within fivebusiness days at the latest after hearing the views of bothparties.

(16) Arbitrators have to issue their awards within fourmonths, at the latest, as from the date they have beencommissioned. Otherwise, the dispute is settled by thecompetent court. However, this period can be extendedwith the express and written consent of the parties. Thearbitrator submits the award to the Commission director.The Commission director communicates the award tothe court which is competent to settle the case, withinthree business days at the latest, in order for it to takenecessary action according to the Code of CivilProcedure,Article 532.

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(17) Fees of arbitrators, application fee, and membershipparticipation fee are determined by the Undersecretariattaking into account the opinion of the Commission; feesof arbitrators are paid by the Commission.

(18) Persons in charge of management and audit ofinsurance companies, reinsurance companies, otherestablishments engage in insurance business, lossadjusters, insurance agents and brokers and persons whohave signing power on their behalf, and personsperforming professional activities for them and lossadjusters, insurance agencies and brokers shall not act asan insurance arbitrator. Such restrictions shall also applyto the spouses of these persons and their children. TheCode of Civil Procedure, Article 28 shall also apply toinsurance arbitrators.

(19) Persons who are in charge for the Commission,arbitrators and rapporteurs shall not disclose any know-how or confidential information they learn in theexecution of their duties without the permission of therelevant parties. However, it is obligatory that anyincidence giving rise to a criminal offence is reported tocompetent authorities.

(20) The structure and the duties of the Commission, thequalifications of the Commission director and deputydirectors of the Commission and their workingprinciples and procedures, the working principles andprocedures of rapporteurs and insurance arbitrators, theway of arrangement of the awards, principles of

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application to the Commission, principles related to thekeeping of the List and the budget and other issues suchas participation fee shall be determined by regulation.

(21) The Undersecretariat is authorized to increase thefixed monetary amounts specified in this article with thecondition that the rate of increase shall not exceed therate of the Producer Price Index declared by the TurkishStatistical Institute.

(22) Where this Law is silent, provisions of the Code ofCivil Procedure shall be applied to insurance arbitrationby comparison.

(23) Persons who will act as arbitrator in arbitrationproceedings which are realized according to the Code ofCivil Procedure shall meet the criteria sought ininsurance arbitrators in this article.

- (1) The Minister is authorized to set upan insurance education centre to make the necessaryexaminations on specific topics related to insurance in animpartial manner, meet training demands at home,abroad or within the framework of internationalagreements, and for similar purposes. Expenses of theinsurance education centre shall be met from the

PART IX

Miscellaneous

Insurance education centre and other organizations

ARTICLE 31

93

contributions of professional institutions operating in theinsurance sector, from the relevant public and privatesector institutions to which the centre serve and fromdonations in accordance with the principles to bedetermined by regulation. Training activities to becarried out by the insurance education centre are notsubject to the Law on Private Educational Institutions.

(2) Except institutions such as associations, federationsand unions which are established under certain laws,establishment of organizations for insurance andreinsurance practices is subject to the authorization bythe Minister.

(3) Issues related to the insurance education centre andthe organizations to be established in accordance withthe second paragraph shall be regulated by regulation.

(1) Insurance companies andintermediaries shall not design their brochures,explanatory notices, other documents and theiradvertisements and commercials in a way that results inan understanding outside the limits and scope of therights and benefits which they shall provide to theinsured, and shall not make statements that are unreal,misleading, deceiving or that give rise to unfaircompetition. Where violation of this provision isascertained the matter shall be referred to theAdvertisingBoard that acts upon the Law on Protection ofConsumers.

Bona fides

ARTICLE 32 -

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(2) Insurance companies, reinsurance companies,intermediaries and loss adjusters are obliged to refrainfrom acts which may endanger the rights and benefits ofthe insured, to act in accordance with the legislation andprinciples of the business plan, and to behave incompliance with the requirements of insurance and therules of goodwill.

(3) Insurance companies shall not delay the payment ofinsurance claims in violation of the rules of goodwill.

(4) The Undersecretariat is authorized to take all themeasures in order to ensure that insurance companies,reinsurance companies, intermediaries and loss adjusterscomply with the above mentioned rules.

(5) Rights of persons to choose an insurance companyshall not be restricted. In contracts, where one of theparties are obliged to buy insurance, provisions requiringthe conclusion of the insurance contract with a certaincompany shall be void.

(1) The Undersecretariat may establishspecialty committees composed of people withknowledge and expertise on insurance, to makeresearches and analysis on the tariffs and policies setforth in this Law and the development of the insurancesector. Expenses of such committees shall be covered bythe relevant professional institution operating in the

Specialty committees

ARTICLE 33 -

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insurance field under the principles approved by theMinistry.

(2) Working rules and principles of the specialtycommittees shall be regulated by regulation.

- (1) Those who violate the principlesreferred to in the fourth and fifth paragraphs of Article 3,workplaces which operate without obtaining a license inviolation of Article 5 shall be closed by thegovernorships upon the Minister's request up to one yearand their advertisements and commercials are preventedor collected.

(2) The following administrative fines shall apply:

a) Twenty five thousand Turkish Liras if the prohibitionof being engaged in another business referred to in thefirst paragraph ofArticle 3 is violated,

b) Eight thousand Turkish Liras if a company or a personthat is warned for appointing persons who fail to meet thequalifications referred to in the second to seventhparagraphs of Article 4, and the assignment of the dutiesspecified in such Article to persons who do not meet thecriteria specified in this paragraph fails to comply withthat warning within one month; ten thousand Turkish

PART X

Penalties

Administrative penalties

ARTICLE 34

96

Liras if an effective internal audit system is notestablished in accordance with eighth paragraph, or theobligation of recruiting sufficient number of internalaudit personnel is violated, and this fault is not correctedwithin six months after the company has been warned,

c) Eight thousand Turkish Liras if the necessaryregistration and publication procedures have not beencompleted in accordance with the first paragraph ofArticle 5,

ç) Twelve thousand Turkish Liras if necessaryregistration and publication procedures have not beencompleted in accordance withArticle 7,

d) Eight thousand Turkish Liras in case of the failure tomake necessary notification to the Undersecretariat inaccordance with the fifth paragraph ofArticle 9,

e) Twelve thousand Turkish Liras for failure to obtainnecessary authorization in accordance withArticle 10,

f) Ten thousand Turkish Liras in case of the breach ofgeneral conditions referred to in the first paragraph ofArticle 11,

g) Five thousand Turkish Liras for failure to act inaccordance with fourth paragraph ofArticle 14,

ð) Two thousand Turkish Liras for failure to meetnecessary costs referred to in the seventh paragraph ofArticle 17,

h) Twelve thousand Turkish Liras for failure to act inaccordance with the first, second and third paragraphs ofArticle 18, to comply with the obligation of keepingbooks and publish financial statements in accordancewith the fourth paragraph, and to act in accordance withthe principles and procedures determined by theUndersecretariat, including the asset structure of thecompany, in accordance with the fourth paragraph,

ý) Eighteen thousand Turkish Liras for failure to complywith the obligation to employ actuaries in accordancewithArticle 21,

i) Twenty thousand Turkish Liras for failure to complywith the measures taken in accordance with the fourthparagraph ofArticle 32, and to act in accordance with theprovision of the fifth paragraph,

j) Twelve thousand Turkish Liras for failure to complywith the decrees, regulations, communications and otherregulatory arrangements issued by the Council ofMinisters, the Ministry which the Undersecretariat isattached to and the Undersecretariat, if there is no otherspecific fine stipulated in this Law.

(3) Administrative fines are applied by theUndersecretariat.

- (1) Real persons and executives of legalpersons who are engaged in insurance business by

Judicial penalties

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undertaking the risk without obtaining a license asrequested in this Law, or use the name of establishmentsspecified in this Law in their trade names, or in all theirdocuments, advertisements and commercials, or publicstatements, or use such words and phrases in a manner togive the impression that they are engaged in activitiesregulated hereunder shall be sentenced to imprisonmentfrom three years to five years, and a judicial fine from600 days to 1000 days.

(2) Executives of cooperatives who conclude insurancecontracts without obtaining an authorization from theUndersecretariat, in violation of the third paragraph ofArticle 3 of this Law, shall be punished with a judicialfine from 500 days to 1000 days.

(3) Chairman and members of the board of directors,and other employees of insurance companies andreinsurance companies shall be sentenced toimprisonment from six months to twelve years if theyembezzle funds or other assets which are owned by theestablishments and in their custody, control andresponsibility due to their positions. Also such personsare sentenced to compensate the loss incurred by theestablishment.

(4) If the offence described in the third paragraph hasbeen committed by any fraudulent act aiming to deceivethe establishment and conceal the act, the offender shallbe sentenced to imprisonment not less than twelve yearsand to a judicial fine. However, the amount of the judicial

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fine shall not be less than three times of the loss incurred.If the loss is paid in full before the prosecution, the fine tobe imposed is reduced by one third.

(5) Real persons and executives of legal persons whofail to provide the information and documents requiredby the relevant authorities and supervisors specifiedherein and who prevent such supervisors to perform theirtasks are sentenced to imprisonment from one year tothree years and to a judicial fine which shall not be lessthan 200 days.

(6) Real persons and executives of legal persons whoprovide misleading, incorrect and unreal informationand documents to the relevant authorities andsupervisors specified herein, to courts and other officialdepartments are sentenced to imprisonment from oneyear to three years and to a judicial fine which shall not beless than 300 days.

(7) Those who intentionally damage the reputation orassets of establishments that are subject to this Law, orwho spread false news in that sense are sentenced toimprisonment from one year to two years, and to ajudicial fine which shall not be less than 200 days. If thisact has been committed by media specified in the PressLaw No:5187 dated 9.6.2004, or any of thecommunication media such as radio, television, video,internet, cable broadcast, electronic data communicationdevices or other similar media, the imprisonment shall besentenced from two years to four years. Those who

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spread false news which may rise doubts in the public asregards the reliability of the establishments which aresubject to this Law, even if no names are mentioned, orwhich may affect the financial structure of suchestablishments negatively shall be punished with ajudicial fine from 400 days to 1000 days.

(8) If persons who are in charge of the execution of thisLaw and the monitoring of its execution, insurancearbitrators and rapporteurs disclose the secrets about thepersons and establishments acting under this Law, theiraffiliates, entities and persons who are related toinsurance contracts, they learn due to their titles or in theexecution of their duties, to persons other than those whohave been authorized to learn such information inaccordance with this Law and special laws, even afterthey leave their duties, or use such information for theirown benefits, shall be sentenced to imprisonment fromtwo years up to four years and to a judicial fine whichshall not be less than 300 days.

(9) If the employees and executives of establishmentswhich are subject to this Law, with the exception of thepersons listed in the eighth paragraph of this Article,persons who are subject to this Law and their employees,and persons who serve in insurance sector byoutsourcing, disclose the secrets which are belong to theestablishments that are subject to this Law or personswho are related to insurance contracts, they learn due totheir titles or in the execution of their duties, to personsother than those expressly authorized by this Law shall

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be sentenced to imprisonment from one year to threeyears and to a judicial fine which shall not be less than200 days.

(10) If the persons specified in the eighth and ninthparagraphs disclose the secrets specified the aboveparagraphs for their own benefits or the benefit of others,they shall be sentenced to imprisonment from three yearsup to five years, and to a judicial fine. In addition,according to the importance of the act, they are bannedfrom executing their duties permanently or temporarilyfor six months to one year.

(11) Insurance company and reinsurance companyauditors who prepare or approve false financialstatements shall be punished with a judicial fine.However, such judicial fine shall not be less than onepercent of the false amount.

(12) Those who fail to obtain the authorizations specifiedin the first, second and fourth paragraphs of Article 9 ofthis Law shall be punished with a judicial fine not lessthan 300 days, and those fail to comply with the sharerestrictions specified in the sixth paragraph shall bepunished with a judicial fine not less than 400 days, andthose who cause share transfers to be registered to theshare book without obtaining authorization in violationof the third paragraph shall be punished with a judicialfine from 400 days to 1000 days.

(13) Those who apply tariffs in violation of the secondparagraph of Article 12 herein, without the approval of

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the Undersecretariat shall be punished with a judicialfine not less than 500 days, and those who givecommissions other than the intermediation commissionsdetermined and announced by the Undersecretariat shallbe punished with a judicial fine not less than 300 days,and those who receive such commissions shall bepunished with a judicial fine not less than 100 days.

(14) Those who refrain from concluding contracts inviolation of the first paragraph of Article shall bepunished with a judicial fine not less than 500 days.

(15) Those who purchase insurance for their interestswhich are insurable in Turkey from companies other thanthe insurance companies operating in Turkey and outsideTurkey in violation of Article 15 herein are punishedwith a judicial fine.

(16) Those who fail to allocate adequate reserves asrequired in the first paragraph of Article 16 herein andthose who allocate technical reserves in violation of thesecond to seventh paragraphs, and determine reinsurershare not as stipulated in the eighth paragraph; those whoallocate guarantees in violation of the first and secondparagraphs of Article 17, and a minimum guarantee fundin violation of the fourth paragraph and those who fail tomake payments from the guarantees according to thefifth paragraph shall be punished with a judicial fine.However, the amount of the judicial fine shall not be lessthan ten percent of the liability not fulfilled or the lackingpart of the liability if the liability has been fulfilled inpartially.

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(17) Those who violate the first paragraph of Article 19of this Law shall be punished with a judicial fine up toone thousand days; if this violation decrease the value ofthe asset by violating the rules of goodwill shall bepunished with a judicial fine up to two thousand days.However, the amount of the judicial fine shall not be lessthan twenty percent of the reduction in the asset.

(18) Brokers failing to comply with the third paragraphof Article 21 shall be punished with a judicial fine notless than 300 days, brokers acting as insurance agent andloss adjuster besides insurance brokerage shall bepunished with a judicial fine not less than 400 days andbrokers acting in violation of fourth paragraph of Article2 of this Law shall be punished with a judicial fine notless than 200 days.

(19) Those who violate the third paragraph of Article 22herein shall be punished with a judicial fine not less than300 days; those who engaged in another profession otherthan loss adjusting in violation of the tenth paragraphshall be punished with a judicial fine not less than 100days; those who open more than one office in violation ofthe eleventh paragraph shall be punished with a judicialfine not less than 60 days; real person loss adjusters andexecutives of legal person loss adjusters who violate thetwelfth paragraph shall be punished with a judicial finenot less than 100 days; real person loss adjusters andthose loss adjusters working with legal person lossadjusters who accept duties in violation of thirteenthparagraph or those loss adjusters who are in breach of

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impartiality shall be punished with a judicial fine not lessthan 500 days; those who violate the fourteenthparagraph shall be punished with a judicial fine not lessthan 300 days; those who act in violation of the sixteenthparagraph and who carry out activities related to lossadjusting although they are not allowed according to thisarticle shall be punished with a judicial fine not less than200 days; those who delegate their loss adjusting powersor titles to others for their use and those who use suchpowers and titles in violation of the twenty secondparagraph shall be sentenced to a judicial fine not lessthan 500 days; those who give the impression that theyact as loss adjuster shall be sentenced to a judicial finenot less than 100 days.

(20) Those who violate the tenth paragraph of Article 23of this Law shall be punished with a judicial fine not lessthan 100 days, those who violates the twelfth paragraphshall be punished with a judicial fine not less than 300hundred days, those who delegate insurance agentauthorities or titles to others, and persons who use suchauthorities and titles in violation of the thirteenthparagraph shall be punished with a judicial fine not lessthan 500 days, those who give the impression that theyact as an insurance agent shall be punished with a judicialfine not less than 100 days, those who violate thefourteenth paragraph and those who are engaged inactivities related to insurance agency although they arenot allowed shall be punished with a judicial fine not lessthan 200 days.

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(21) Responsible managers of insurance companies whoconclude insurance agent contracts with parties whichare not allowed to act as an insurance agent shall bepunished with a judicial fine not less than 500 days,responsible managers of insurance companies who grantthe authority to collect premium and to concludecontracts to parties who are not allowed to take suchauthority shall be punished with a judicial fine not lessthan 300 days, and those who accept such authoritiesshall be punished with a judicial fine not less than 200days.

(22) Those who have been dismissed from the professionby a decision but continue to work as an auditor or workwith powers to represent and bind a legal person lossadjuster in violation of sixth paragraph of Article 26herein, and those who employ such persons, or those whohave been dismissed from the profession by a decisionbut continue to work as an auditor or work with powers torepresent and bind a legal person insurance agent inviolation of sixth paragraph of Article 27 herein, andthose who employ such persons shall be sentenced toimprisonment from one year to two years, and to ajudicial fine not less than 300 days.

(23) Those who act as a broker or loss adjuster withoutobtaining a necessary license under this Law, whooperate as an insurance agent without obtaining acertificate of conformity from the Undersecretariat andthose who operate as an actuary without being registeredin the Actuaries Register shall be sentenced to

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imprisonment from one year to three years, and to ajudicial fine not less than 400 days.

(24) Executives of the insurance companies andreinsurance companies which have not become amember of the Association within the period specifiedherein, and those who act as a loss adjuster or insuranceagent without being registered in the Register shall bepunished with a judicial fine not less than 150 days.

(25) Persons who delegate actuary and broker powersand titles to others for their use and those who use suchpowers and titles shall be punished with a judicial finenot less than 500 days, those who give the impressionthat they operate as such shall be punished with a judicialfine not less than 100 days.

(26) Those who establish organizations in the field ofinsurance without obtaining the authorization referred toin the second paragraph of Article 31 herein shall bepunished with a judicial fine not less than 300 days.

(27) Those who violate the paragraph two of Article 32of this Law and who delay the payment of claims inviolation of the rules of goodwill referred to in the thirdparagraph of Article 32 shall be punished with a judicialfine not less than 300 days.

- (1) The initiation of a prosecution due tooffences specified herein is subject to a written

Prosecution

ARTICLE 36

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application by the Undersecretariat to the PublicProsecutor's office. Following such application theUndersecretariat shall gain the title of participant.

(2) If the Public Prosecutor decides that no prosecutionis justified, the Undersecretariat is entitled to object tothe notified decision in accordance with the Code ofCriminal Procedure No: 5271 dated 4.12.2004.

(3) The provisions of this Article shall not apply toprosecutions to be carried out in respect of acts ofintermediaries and loss adjusters who are considered asoffences hereunder and those prosecutions initiated forviolation of first paragraph of Article 15, and sixth toninth paragraphs ofArticle 35.

(1) The references made in other laws tothe abolished Insurance Supervision Law No: 7397 anddated 21.12.1959 shall be deemed to have been made tothe related provisions of this Law.

(2) All the terms used in other laws to connote theactuaries working in the supervision department of theUndersecretariat shall be implemented as “InsuranceSupervisionActuary”.

PART XI

References, Amended and Abolished Provisions

References

ARTICLE 37 -

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ARTICLE 38 - (1) The following amendments havebeen made to the Law of the Union of Chambers andCommodity Exchanges of Turkey and Chambers andCommodity Exchanges No: 5174 and dated 18.5.2004;

a) the paragraph below has been added to the end ofArticle 57:

“The provisions of Insurance Law relating to theinsurance agents sector council are reserved.”

b) the phrase below has been added to the end of thephrase “by the authorized bodies” in the subparagraph(b) of the first paragraph ofArticle 93:

“and by the Insurance Agents Executive Committee andLossAdjusters Executive Committee”

c) the provisional article below has been added:

“PROVISIONAL ARTICLE 15 - Loss AdjustersExecutive Committee elections shall be held within sixtydays succeeding the general body elections of thechambers. Until the Loss Adjusters ExecutiveCommittee is formed, the Undersecretariat of Treasurydetermines a provisional Loss Adjusters ExecutiveCommittee within one month after the publication ofInsurance Law.

InsuranceAgents Sector Council elections shall be madewithin sixty days after the general body elections of thechambers and Insurance Agents Executive Committee

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elections shall be made within fifteen days at the latestafter the formation of the Insurance Agents SectorCouncil. Until the establishment of the Insurance AgentsSector Council and with the decision of the Board ofDirectors of the Union of Chambers and CommodityExchanges of Turkey and authorization by theUndersecretariat of Treasury, a provisional InsuranceAgents Executive Committee shall be formed within amonth after the entry into force of Insurance Law.”

(1) The third paragraph of the additionalArticle 8 of the Highway Traffic Law No: 2918 and dated13.10.1983 has been amended as follows:

“The Association of the Insurance and ReinsuranceCompanies of Turkey shall keep the information relatedto the detection of the vehicles to be disqualified fromtraffic for the use of the Ministry of Interior or send thisinformation to the related departments of it.”

(1) The article below has been added tothe Decree related to Compulsory Earthquake InsuranceNo: 587 and dated 25.11.1999:

“ADDITIONAL ARTICLE 1 - The acts and operationsperformed within the scope of the Institution and thisDecree, shall not be bound with Public FiscalAdministration and Control Law No: 5018 and dated10/12/2003 and Public Procurement Law No: 4734 anddated 04/01/2002.”

ARTICLE 39 -

ARTICLE 40 -

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ARTICLE 41 - (1) The following amendments havebeen made to the Private Pension Savings andInvestment System Law No: 4632 and dated 28.3.2001:

a) paragraph (1) ofArticle 2 has been amended as below:

“l) Private pension intermediaries: Persons who act asintermediaries to the pension contracts of pensioncompanies or making these on behalf of the companies,”

b) The fifth sentence of the first paragraph of Article 5has been amended as, "In order to apply for transferringto another company, one must stay at the currentcompany for at least one year." and the second and thirdparagraphs have been amended as below:

“The company has to direct contributions to investmentat the latest, the second business day following the day ofdevolution to the company. The company which is inviolation of its repartition, transfer and investment dutiesspecified in this provision fully within the determinedtime limits shall be subject to the penalty for delayequivalent to twice the positive yield of the fundcorresponding to the related period which theparticipants partake in case of transfers and the fundwhich they will partake in case of investment and thisamount shall be added to the account of the participant.

In case the contribution is paid in full or partly by theassociations, foundations, professional institutions andother establishments or groups with legal personality andemployers which are a party to group pension contracts

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on account of their employees or members, thesecontributions and their yields shall be followed inseparate individual pension accounts and the principlesfor the exercise of rights and duties related to theaccumulation in these accounts are determined in thegroup pension contract within the scope of the principlesand procedures determined by the Undersecretariat. Thevesting period for these accumulations, in any case, maynot exceed five years starting from the date of accessionof the participation to the group pension contract.”

c) The last paragraph of Article 6 has been amended asfollows:

“Implementation principles for pension plans, and tariffsand technical standards relating to annuities shall bedetermined freely. The Minister may, where he deemsnecessary, subject the implementation principles, tariffsand technical standards to the approval of theUndersecretariat. Within the scope of this provision, theprinciples and procedures relating to the inquiries thathave to be done by the company and Central Bank of theRepublic of Turkey in order to find the cessionaries andthe keeping of the said amount by the company for tenyears and by the Central Bank of the Republic of Turkeyfor two years are determined by the Undersecretariatwith the approval of the Board.”

ç) The paragraph below has been added to the end of thefirst paragraph of Article 17 and the last sentence of thecurrent second paragraph has been amended as follows:

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“The portion of fund shares in the individual pensionaccount, whose amount corresponds to themultiplication of the minimum wage with the number ofmonths that the participant has been present in thesystem, and to the amount of monthly annuity paymentsthat do not exceed the minimum wage and which aremade to the retirees who have retired from the systemwithin the scope ofArticle 6 of this Law, except debts formaintenance, shall not be distressed, put in pledge orincluded in the bankrupt's estate. The actual grossminimum wage amount at the date of distress, pledge orbankruptcy shall be taken as the basis in implementingthe provisions mentioned in this paragraph.”

“Principles relating to the fund portfolio limitations andthe principles and procedures relating to the investmentof the assets in the fund portfolio are determined by theBoard with the consent of the Undersecretariat.”

d) The last sentence of the first paragraph of Article 18has been amended as “Portfolio managementagreements must be compatible with the minimumstandards determined by the Board.”

e) The paragraph below has been added to ProvisionalArticle 1:

“Provided that a decision be taken by the authorizedbodies; the pension accumulations and amounts relatedto pension commitments in the associations,foundations, provident funds, professional institutions

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or other companies with legal personality which engagein pension commitments towards their members oremployees may be transferred partly or in full toannuities or to the private pension system on thecondition that they be realized within the scope of theprinciples determined by the Undersecretariat and withinfive years following the enforcement of this paragraph.Operations relating to transfers, including the real estatesales aiming to make payments for accumulations andamounts related to pension commitments, shall beexempt from all kinds of taxes, duties and levies. Thisexemption also includes the income tax liability that mayarise. Within the scope of this paragraph, no entrancefees shall be charged to those that are transferred toannuities or to the participants who sign a pensioncontract and no deduction shall be made on thetransferred amounts.

The Undersecretariat shall perform the actuarialsupervision of the pension operations performed by theassociations, foundations, pension funds, professionalinstitutions or other companies with legal personalitywhich engage in pension commitments towards theirmembers or employees.”

(1) The article below has been added asto followArticle 20 of Law No. 4632:

“Pension Monitoring Center

ARTICLE 20/A - The Undersecretariat may assign a

ARTICLE 42 -

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legal person established within the provisions of privatelaw as the pension monitoring center in order to ensurethat the private pension system operates safely andeffectively, performs the operations related to forming aninfrastructure regarding the monitoring and supervisionof the operations of the companies and private pensionintermediaries for the purpose of protecting the rightsand interests of the participants, individual pensionaccounts, pension plans, consolidation of transactions,storage of the information belonging to the participants,informing the public and the participants, the productionof statistics, the registry of private pensionintermediaries and the private pension intermediaryexam, and perform other tasks that may be assignedregarding life insurance and other insurance branches.The provisions that must be included in the articles ofassociation of the pension monitoring center shall bedetermined by the Undersecretariat and the approval ofthe Undersecretariat shall be sought for any amendmentsto the articles of association. Pension companies andwith the approval of the Undersecretariat insurancecompanies operating in the life insurance branch, otherinstitutions and establishments may be shareholders ofthe pension monitoring center. Pension monitoringcenter shall be subject to the supervision of theUndersecretariat. The companies, institutions,establishments and persons falling under the scope ofthis Law shall transfer to the pension monitoring centerthe information and documents requested in order toensure the performance of the duties assigned by this

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Law. Working principles and procedures of the pensionmonitoring center shall be determined by theUndersecretariat.”

(1)After the phrase “Ministry of FinanceTax Inspectors” in the 8/a line of the ExecutiveCompensation Tables No (IV) attached to Civil ServantsLaw No: 657 and dated 14.7.1965, “InsuranceSupervisors and Insurance Supervisory Actuaries”phrase has been added.

(1)After the first paragraph of theArticle14 of Agriculture Insurances Law No: 5363 and dated14.6.2005, the following paragraph has been added:

“Insurance companies shall not conclude insurancecontracts outside the Pool system formed by this Law forthe risks, areas and products covered by the Pool withinthe scope of the decisions of the Council of Ministers.Those insurance companies that violate this provisionmay be disqualified from the Pool system within thescope of the principles that shall be determined by theBoard.”

(1) Insurance Supervision Law No: 7397dated 21.12.1959 has been abolished.

(2) Law Relating to Reinsurance No: 1160 dated25.6.1927 has been abolished.

(3) The third paragraph of Article 107, Article 108 andthe first and the second paragraphs of the additional

ARTICLE 43 -

ARTICLE 44 -

ARTICLE 45 -

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Article 8 of Highway Traffic Law No: 2918 dated13.10.1983 have been abolished.

(1) All of the liabilities,assets, claims and obligations of the Highway TrafficGuarantee Insurance Account are transferred to theAccount within a month after the entry into force of thisLaw.Actions and enforcement proceedings related to theHighway Traffic Guarantee Insurance Account shallcontinue in relation to theAccount.

(1) Regulationsrelating to the implementation of this Law shall be issuedby the Ministry that the Undersecretariat is attached to,within one year after the entry into force of this Law.

(2) Until the entry into force of regulations provided inthis Law enter, the provisions of the current regulationswhich are not contrary to this Law shall continue to beimplemented.

(3) Until the first paragraph of Article 12 of this Lawabout freedom of tariff and the fourth paragraph ofArticle 17 about the opportunity to block or establishmortgage over the minimum guarantee fund assets enterinto force, the related provisions of InsuranceSupervision Law No: 7397 abolished by this Law shallcontinue to be implemented.

PART XII

Provisional and Final Provisions

PROVISIONALARTICLE 1 -

PROVISIONAL ARTICLE 2 -

116

PROVISIONAL ARTICLE 3 -

PROVISIONALARTICLE 4 -

PROVISIONAL ARTICLE 5 -

(1) Those that do notmake necessary changes to comply with brancharrangements that shall be determined according toArticle 5 of this Law within a year after the entry intoforce of this Law, shall not conclude new insurancecontracts or make addendum, extension or renewalwhich may increase the risk.

(2) Mixed companies that had not transferred theirportfolio relating to life assurance before the entry intoforce of this Law, have to transfer the said portfoliowithin a year after the entry into force of this Law. If thereare one or more insurance companies which agree to takeover the portfolio of the companies, partly or in full,which do not perform this obligation, the portfolio shallbe transferred by the Minister ex-officio. The companies,their portfolio has not been transferred yet shall notconclude new insurance contracts or make addendum,extension or renewal which may increase the risk in thelife assurance branch until the transfer operation iscompleted.

(1) The sixth paragraphof Article 20 of this Law shall be in force for the personswho have been assigned by the Insurance SupervisionLaw No: 7397 abolished by this Law, and actions andenforcement proceedings against these persons.

(1) The earthquakeclaim reserves kept according to Article 25 of theInsurance Supervision Law No: 7397 abolished by this

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Law shall be transferred to precautionary reserve fundswithin three months after the entry into force of this Law.

(1) The loss adjusterand broker licenses given before the entry into force ofthis Law are valid until they are changed by theUndersecretariat. Those who do not change their licenseswithin a year after the coming into force of this Law shallnot continue professional activity. Loss adjusters have toregister in the Register within four months after the entryinto force of this Law to continue loss adjusting activity.

(1) Insurance agentshave to take certificate of conformity from theUndersecretariat and register in the Register within ayear after the entry into force of this Law. Those who donot comply with this obligation shall not continueinsurance agency activities.

(1) Even if they haveenjoyed amnesty, excluding crimes committed byimprudence before the Turkish Criminal Code No: 5237,those who have been sentenced to heavy imprisonment,or imprisonment more than five years, or imprisonmentor heavy pecuniary penalties more than once forviolation of insurance regulations notwithstanding thetype of the punishment decided, those who have beenconvicted of infamous offences such as simple orqualified embezzlement, corruption, bribery, theft,fraud, breach of trust, fraudulent bankruptcy, grossmisconduct as well as smuggling offences, fraudulent

PROVISIONAL ARTICLE 6 -

PROVISIONAL ARTICLE 7 -

PROVISIONAL ARTICLE 8-

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acts in public procurements and purchases and sales,money laundering, revealing secrets of the state or taxevasion or attempt to tax evasion, shall not be a founderin the insurance or reinsurance companies, act asinsurance agent, broker or loss adjuster and be ashareholder or employed in legal persons established forthis purpose.

(2) The provisions of the first paragraph shall beapplied to the references made to the qualifications of thefounders of the insurance and reinsurance companies inthis Law.

(1) As long as themoney currency in circulation is named as New TurkishLira according to the Law Relating to the Currency of theRepublic of Turkey No: 5083 and dated 28.1.2004, thisphrase shall continue to be used instead of Turkish Lira.

(1)

a) The first paragraph of Article 12 about freedom oftariff and the fourth paragraph of Article 17 about theopportunity to block or establish mortgage over theminimum guarantee fund assets shall enter into forcethree months after the publication of this Law,

b) The other provisions of this Law shall enter into forceat the date of publication.

PROVISIONAL ARTICLE 9 -

Entry into Force

ARTICLE 46 -

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Enforcement

ARTICLE 47 - (1) The provisions of this Law will beexecuted by the Council of Ministers.

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