1. Alper TAN Special Risk and Casualty Manager Yapı Kredi Insurance WORKER’S COMPENSATION

2. Definition To provide legally mandated benefits to workers who are injured, disabled our died at work or who develop a job-related illness as a result of their employment Benefits may include payment for medical bills, lost wages, pain and suffering

3. History Employer’s liability law in 7th September, 1880, England An Act to extend and regulate the Liability of Employers to make Compensation for Personal Injuries suffered by Workmen in their service.

4. Employer’s Liability Law 1. Where after the commencement of this Act personal injury is caused to a workman (1.) By reason of any defect(a) in the condition of the ways(b), works(c), machinery, or plant(d) connected with or used in the business of the employer(e) ; or(a)(b)(c)(d)(e) (2.) By reason of the negligence of any person in the service of the employer who has any superintendence entrusted to him(f) whilst in the exercise of such superintendence(g) ; or(f)(g) (3.) By reason of the negligence of any person in the service of the employer to whose orders or directions the workman at the time of the injury was bound to conform(h), and did conform, where such injury resulted from his having so conformed(i) ; or(h)(i) (4.) By reason of the act or omission of any person in the service of the employer done or made in obedience to the rules or byelaws of the employer, or in obedience to particular instructions given by any person delegated with the authority of the employer in that behalf; or (5.) By reason of the negligence of any person in the service of the employer who has the charge or control(k) of any signal, points, locomotive engine, or train upon a railway(l),(k)(l) the workman, or in case the injury results in death, the legal personal representatives of the workman, and any persons entitled in case of death(m), shall have the same right of compensation and remedies against the employer as if the workman had not been a workman of nor in the service of the employer, nor engaged in his work(n).(m)(n)

5. Pricing Legal structure : Tort liability vs social security to strict liability Risk categories: 1 to 12 Wages: Common mistake ! It has an impact but not linear Additional perils: Pain and suffering; occupational disease (trigger: claims made) Number of workers * liability limit : Bell curve Reserves

6. Risk classes by Turkish Social Security Examples Risk category 1: Ice cream production Risk category 2: Orange juice production Risk category 3: Erection Risk category 4: Construction of road Risk category 5: Iron and steel industry Risk category 6: Iron ore mining Risk category 7: Construction of building Risk category 8: Construction of port Risk category 9: Construction of tunnel or bridges Risk category 10: HEPP construction Risk category 11: Ship builder’s yard Risk category 12: Coal mine Please note that if base rate category 1 is 1 than rate for category 12 is going to be 12

7. Modelling and Tariff Indemnity LimitIncerease / decrease < mean / 4-75% mean / 4 - mean /2-50% mean/2 - 3/4 mean-25% mean mean - 1.5 mean25% 1.5 mean - 2 mean50% 2 mean - 3 mean75% 3 mean - 5 mean100% 5 mean - 10 mean150%

8. Modelling and Tariff Number of workersIncrease/ decrease 0 - 15-30% 16 - 20-20% 21 - 30-10% 31 - 50- 51 - 7510% 76 - 10020% 101 - 15030% > 15150%

9. An example of premium calculation What is the worker’s compensation premium of erection work of 18 months for an indemnity limit of 150,000 € including pain and suffering Number of workers: 85 Average wage is 2.5 times of per capita income Base rate of category 1 is 2 and erection is classified at category 3 Average indemnity for a death is 50,000 € Per capita income at origin Formula : 50,000 / 1000 * 2 (base rate) * 3 (category multiplier) * 20% (for number of workers) * 30 % (high level of salary) * 1.5 (duration) * 2 (indemnity limit) * 30% (for pain and suffering) Premium is 1,825.20 €