Legal and regulatory framework
What are the primary sources of insurance law in your jurisdiction (statute, case law, regulatory codes)?
The legal framework of insurance law in Türkiye is established by the Turkish Commercial Code No. 6102 (TCC) and the Law on Insurance No. 5684 (the Insurance Act). The TCC is the principal source of rules governing the parties’ contractual rights and obligations in an insurance contract. The Insurance Act, on the other hand, mainly regulates the establishment and structure of insurance companies, licensing and administrative requirements, and the regulatory supervision of insurance market participants. It also addresses regulatory provisions governing insurance contracts, including standard policy terms, disclosure of coverage and exclusions, tariffs, compulsory insurance and insurance arbitration. The Turkish Code of Obligations No. 6098 is the general statute governing contract law.
Additionally, the General Conditions published by the Insurance and Private Pension Regulation and Supervision Agency (SEDDK) should be considered an important source of Turkish insurance law.
Although decisions of the Court of Cassation (Türkiye’s highest court of appeal) do not generally have binding precedential effect under Turkish law, they constitute a significant interpretative tool, particularly in relation to the interpretation of policy terms, disclosure obligations, causation, and the enforceability of exclusions.
What is the role and authority of the insurance regulator?
SEDDK is the principal regulatory and supervisory authority in Türkiye for insurance, reinsurance, and private pensions.
As well as preparing and implementing secondary legislation, SEDDK is tasked with licensing and authorising insurance companies and other market participants, supervising their governance and taking measures to ensure the sound and orderly operation of the market and the protection of policyholders and beneficiaries.
As part of its administrative and enforcement powers, SEDDK may impose remedial actions, suspend or revoke licenses or issue administrative fines.
Are there restrictions on policy wording (eg, mandatory clauses, prohibited exclusions)?
Under Article 11/1 of the Insurance Act, the principal terms of an insurance contract must be drafted in accordance with the general conditions applicable to the relevant type of insurance. The general conditions may only be modified in favour of the insured. The parties may also agree special conditions, provided such terms do not contradict the applicable general conditions and are set out in the insurance contract under a clearly visible and separate heading titled “Special Conditions”.
According to Article 11/4 of the Insurance Act, exclusions must be expressly identified in the insurance contract. Any risks that are not expressly excluded are deemed to fall within the scope of coverage. Article 11/5 further prohibits the use of foreign language words in insurance contracts.
Furthermore, many rules in the insurance law section of the TCC are expressly stated to be mandatory, meaning that the parties are not permitted to modify them or to stipulate conflicting contractual provisions. Article 1404 of the TCC also provides that an insurance contract covering an interest arising from an unlawful or immoral act is invalid.
Pre-contractual duties and disclosure
What duties of disclosure apply to policyholders?
The policyholder is subject to disclosure obligations both before the insurance contract is concluded and throughout its term, pursuant to Articles 1434 and 1435 of the TCC respectively. Before entering into an insurance contract, the policyholder is required to disclose all material facts and circumstances related to the risk. Information is considered material if the insurer would have either declined to enter into the contract or imposed different terms, including increasing the premium, had it been aware of it. During the term of the contract, the policyholder must also notify the insurer of any material changes that increase the risk or alter the circumstances on which the insurer relied when concluding the contract. These obligations must be performed fully and in good faith.
Where the insurer provides the policyholder with a list of questions, the policyholder is generally not liable for failing to disclose matters not included in that list. However, the insurer may request further information by delivering additional specific questions.
What remedies are available to insurers for breach?
Insurer’s remedies are determined based on the policyholder’s culpability, the causal link between breach and risk and whether the breach was discovered before or after risk occurrence. The insurer may have the option to void the agreement, increase the premium, discount the payout or be discharged from the insurance obligation entirely depending on these factors. Negligent breaches usually result in discounted payouts, whereas intentional breaches may result in either a discounted payout or no payout at all.
Policy interpretation
What are the governing principles of policy construction? Does the jurisdiction apply contra proferentem?
The principal rules governing the interpretation of insurance policies reflect the protective approach adopted under Turkish insurance law towards policyholders, insured persons and beneficiaries. The rule that the general conditions may be amended only in favour of the insured and the requirement that excluded risks be express and clear are indicative of this approach. A further example is Article 1425/2 of the TCC, which deems that terms that differ from the parties’ agreement and are to the detriment of the insured or the policyholder are invalid.
Turkish law also recognises the contra proferentem principle. Under the general rules governing standard terms, ambiguous or unclear provisions are interpreted against the party that drafted them and in favour of the other party.
Clear and unambiguous policy provisions will generally be enforced as written, provided they do not conflict with the mandatory statutory provisions or the general conditions.
Are notification conditions strictly enforced?
Article 1446 of the TCC requires the policyholder or the insured to notify the insurer of the occurrence of the risk without delay upon becoming aware of it.
In terms of liability insurances, the insured must notify the insurer within 10 days of becoming aware of an event that may give rise to liability (Article 1475).
A failure to comply with the notification obligation may result in a reduction of the insurance indemnity, by reference to the degree of fault attributable to the policyholder or the insured and the causal effect of the delay on the indemnity or the insurer’s ability to investigate the claim. In sufficiently serious cases, particularly where the breach is intentional and has materially affected the insurer’s position, the insurer may be fully discharged from its obligation to pay.
Dispute resolution
What forums are available for the resolution of insurance disputes?
Insurance disputes may be resolved before the commercial courts of first instance or before the consumer courts. Turkish law also provides a specialised arbitration mechanism, introduced the Insurance Act, through the Insurance Arbitration Commission, incorporated under the Insurance Union of Türkiye. This is a unique arbitration mechanism that requires no arbitration agreement between the parties, provided the insurer is a member of the commission.
In addition, mandatory mediation may apply as a procedural prerequisite before court proceedings involving monetary claims. The parties may also agree to resolve their dispute through arbitration, provided the dispute is capable of settlement by arbitration under Turkish law.
What time limits apply to claims?
Article 1420 of the TCC subjects all claims arising from insurance contracts to a two-year limitation period from the maturity date. The insurance payout matures 45 days after the insured delivers all necessary information concerning the materialised risk to the insurer. In any event, all claims relating to an insurance indemnity or insurance sum are subject to a six-year limitation period from the risk occurrence.
Article 1482 provides for a different limitation period for liability insurance, which is 10 years from the date of the event constituting the subject of the insurance.
What are the rules on cost recovery?
As a general rule, the unsuccessful party is required to bear the costs of court proceedings. Where each party succeeds only in part, the court generally allocates the costs in proportion to the parties’ respective success and failure.
In addition to the procedural rules on cost allocation, the TCC imposes certain obligations on insurers to pay costs. Under Article 1426, the insurer must reimburse reasonable expenses incurred by the policyholder, the insured or the beneficiary for the purpose of determining the occurrence or scope of the insured event, the amount of the indemnity, or the insurer’s payment obligation, even where those expenses ultimately prove unsuccessful. In liability insurance, Article 1474 further requires the insurer to cover the reasonable costs associated with a claim made against the insured and, upon request, to make an advance payment of those costs. Costs exceeding the policy limit are recoverable only where the insurance contract expressly so provides.
Remedies and quantum
What remedies are available beyond an indemnity for covered loss?
In addition to payment of the indemnity or agreed benefit under the policy, the insured, policyholder or beneficiary may be entitled to default interest where the insurer fails to make payment when due and, subject to the applicable requirements, compensation for any further loss caused by the delay.
Turkish law does not provide for punitive damages.
In indemnity insurance, the amount payable is generally limited to the loss actually sustained, as the insurance payment may not place the insured in a better financial position than if the insured event had not occurred. This principle does not apply in the same manner to fixed-sum personal insurance under which the insurer is required to pay the amount agreed in the policy upon the occurrence of the insured event.
The insured may also recover the ancillary expenses provided for under Articles 1426 and 1474 of the TCC, including reasonable claim assessment and defence costs.
How are insolvency scenarios handled?
Turkish insurance law addresses insolvency primarily through a combination of preventive regulatory measures and rules governing the consequences of an insurer’s bankruptcy.
If the insurer is formally declared bankrupt, Article 1418 of the TCC provides that the insurance contracts terminate. Claims that became payable before the bankruptcy are satisfied first from the statutory security maintained by the insurer under the Insurance Act and, to the extent that this is insufficient, from the bankruptcy estate. Policyholders, insured persons and beneficiaries participate in the bankruptcy estate in the third priority class prescribed by the enforcement and bankruptcy legislation.
Additional protection is available through the Guarantee Account, which is a statutory compensation mechanism established under Article 14 of Insurance Act to protect claimants in relation to certain compulsory insurance schemes.
The insolvency of the policyholder or insured is governed principally by the ordinary enforcement and bankruptcy rules. In liability insurance, however, the insured’s insolvency does not extinguish the injured third party’s rights, as Article 1478 of the TCC gives the injured party a direct right of action against the insurer, subject to the terms and limits of the policy.
Subrogation and recoveries
When do subrogation rights arise? How are recoveries allocated between insurer and insured?
The insurer is subrogated by operation of law to the insured’s rights against liable third parties upon payment of the insurance indemnity and only to the extent of the amount paid (Article 1472 of the TCC). The insurer may therefore pursue the liable third party in the insured’s place. Where proceedings have already been commenced by the insured, the insurer may take over the claim to the extent of its subrogated interest. If the insured has been indemnified only in part, the insured retains the right to pursue the uninsured portion of the loss. The insurer may claim interest on the subrogated amount from the date on which it paid the insurance indemnity. The insured must also take reasonable measures to preserve the insurer’s subrogation rights and provide the information, documents and cooperation necessary for the insurer to pursue the liable third party.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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