MILLI_RE_ANNUAL REPORT 2022

Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements In the current year, there are no material changes in the assumptions of measurement of insurance assets and liabilities. 4.2 Management of financial risk Introduction and overview This note presents information about the Group’s exposure to each of the below risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. The Group has exposure to the following risks from its use of financial instruments: • credit risk • liquidity risk • market risk The Group is subject to credit risk, market risk (foreign currency risk, interest rate risk and price risk in relation with financial investments) and liquidity risk due to assets and liabilities. The Group’s exposure to each of the above risks is assessed according to “Application Principles in Respect of Risk Limits”. The Group monitors its receivables by obtaining comprehensive information about the debtors and debtors’ activities. The risk over investment portfolio is managed by measuring and reporting the market risk daily, reassessing the results validity and applying different scenario analyses. The Group’s exposure to each of the above risks is measured by Internal Control and Risk Management Service independently, reported to Board of Directors and units of İş Bankası through the Risk Committee. Credit risk Credit risk is the risk of financial loss to the Group if counterparties (parties issued financial instrument, insurance companies, reinsurance companies and other debtors) having business relationship with the Group fails to meet its contractual obligations. The Group manages this credit risk by regularly assessing reliability of the counterparties. Credit risk is measured by both quantitative and qualitative methods and the weighted reinsurers in retrocession programs, credit ratings of them that indicate their financial strengths and their financial positions are analysed. Reinsurance contracts are the most common method to manage insurance risk. This does not, however, discharge the Group’s liability as the primary insurer. If a reinsurer fails to pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalization of the reinsurance contract. Doubtful receivables are monitored quarterly. In addition, concentration of the investment portfolio is assessed quarterly. The results evaluated by the Risk Committee and reported regularly to the Board of Directors. Action plan is determined by the Board of Directors in the case of having exposure higher than acceptable level of risk and probability. 223 MİLLİ RE 2022 ANNUAL REPORT Notes to the Consolidated Financial Statements As of December 31, 2022 Millî Reasürans Türk Anonim Şirketi (Currency: Turkish Lira (TL)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1 RISKS AND ASSESSMENT OF THE GOVERNING BODY UNCONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITORS’ REPORT THEREON CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITORS’ REPORT THEREON FINANCIAL STATUS