MILLI RE 2023 ANNUAL REPORT

Notes to the Consolidated Financial Statements As of December 31, 2023 Millî Reasürans Türk Anonim Şirketi (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish) 4 Management of insurance and financial risk 4.1 Management of insurance risk Insurance risk is the risk that may arise from the failure to apply the insurance technique correctly and effectively in the process of providing coverage to probable events. It arises from the selection of the risk and the erroneous determination of the scope, conditions and price of the collateral to be given to the selected risk, or the erroneous determination of which of the guarantees given to the insured will be kept within the Group, up to what amount, and under which conditions and to whom the transfers will be transferred. Objective of managing risks arising from insurance (reinsurance) contracts and policies used to minimize such risks Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies is to determine the risk measurement, assessment, and control procedures and maintain consistency between the Company’s asset quality and limitations allowed by the insurance standards together with the Company’s risk tolerance of the accepted risk level assumed in return for a specific consideration. In this respect, instruments that are related to risk transfer, such as; insurance risk selection, risk quality follow-up by providing accurate and complete information, effective monitoring of level of claims by using risk portfolio claim frequency, treaties, facultative reinsurance contracts and coinsurance agreements, and risk management instruments, such as; risk limitations, are used in achieving the related objective. Risk tolerance is determined by the Board of Directors, taking into account the Company’s long-term strategies, equity resources, expected returns, and general economic expectations, and is expressed in terms of risk limits. Authorization limits in the insurance process include the authority to accept risks granted to agents, regional directorates, technical directorates, coordinators, assistant general managers, and the Executive Board for risks, special risks that cannot be accepted or could be accepted with prior approval, coverage scopes, and geographical regions during the policy issuance stage, and the authority to pay claims granted to the claims management department, motor claims department, non-motor claims department, health claims department, legal and subrogation processes department, treaty transactions department, claims coordinator, and the Claims Board consisting of the general manager and assistant general managers. In any case, risk acceptance is based on technical income expectations under the precautionary principle. In determining insurance coverage, policy terms and fee, these expectations are based accordingly. It is essential that all the authorized personnel in charge of executing policy issuance transactions, which is the initial phase of insurance process, should ensure to gather or provide all the accurate and complete information to issue policies in order to obtain evidence on the acceptable risks that the Group can tolerate from the related insurance transactions. On the other hand, decision to be made on risk acceptance will be possible by transferring the coverage to the reinsurers and/or coinsurers and considering the terms of the insurance policy. In order to avoid destructive losses over Group’s financial structure, Company transfers the exceeding portion of risks assumed over the Group’s risk tolerance and equity resources through treaties, facultative reinsurance contracts and coinsurance agreements to reinsurance and coinsurance companies. Insurance coverage and policy terms of reinsurance are determined by assessing the nature of each insurance branch. Insurance risks do not generally have significant unrecoverable losses in the course of ordinary transactions, except for risks associated with earthquake and other catastrophic risks. Therefore, there is a high sensitivity to earthquake and catastrophic risks. The case of potential claims’ arising from earthquake and other catastrophic risks exceeding the maximum limit of the excess of loss agreements, such risks are treated as the primary insurance risks and are managed based on the precautionary principle. Maximum limit of excess of loss agreements is determined based on the worst case scenario on the possibility of an earthquake that Istanbul might be exposed to in terms of its severity and any potential losses incurred in accordance with the generally accepted international earthquake models. The total amount of protection for catastrophic risks of the Company is identified taking into the compensation amount for an earthquake will occur in a 1000 years. 211 2023 Annual Report GENERAL INFORMATION FINANCIAL RIGHTS PROVIDEDTOTHE MEMBERS OF THE GOVERNING BODY AND SENIOR EXECUTIVES RISKS AND ASSESSMENT OF THE GOVERNING BODY ACTIVITIES AND MAJOR DEVELOPMENTS RELATED TO ACTIVITIES RESEARCH & DEVELOPMENT ACTIVITIES FINANCIAL STATUS FINANCIAL INFORMATION