Kuwait Finance House, or KFH, the main partner of Kuveyt Türk, which operates in Turkey’s participation banking sector, is making Turkey its hub for insurance operations, according to an executive familiar with the operations.

Having entered Turkey’s insurance sector by establishing Neova Insurance in its non-life branch in 2009, KFH is also looking to establish a life insurance and pension company in Turkey.

Speaking to the business daily Referans on Friday, Neova Insurance Chief Executive Officer Özgür Koç said his company’s partners are five corporate bodies that are also KFH subsidiaries.

The group has been established in the banking industry in its own region for many years but is new to insurance, he said.

Kuveyt Türk, which obtained permission for insurance transactions from the Banking Regulation and Supervision Agency, or BRSA, at the end of 2009, will also increase its presence in insurance through Neova Insurance.

In addition to credit-related insurance, the company will also offer property insurance directed toward tenants, personal accident and liabilities insurance and popular insurance products aimed at individual customers in the coming months.

The bank has a 25 percent share in the sales channels of Neova Insurance but is expected to raise its share to 30 or 35 percent in 2012.

Agencies constitute 75 percent of the sales channels for Neova Insurance. The company is expected to raise the number of its agencies from 110 to 180 by the end of the year.

Neova Insurance, which will focus on organic growth in Turkey, is not planning acquisitions at present. Instead, it plans to reach a premium production of 61 million Turkish Liras this year, 95 million liras in 2011 and 120 million liras in 2012.

The firm also aims to rank among top 40 this year and take its place among the top 30 companies next year in non-life branch insurances – including the non-life production of life and pension companies.

Activity in insurance

Emphasizing Turkey as the Kuwaiti company’s hub through the establishment of Neova Insurance, Koç said, “In the future, the group may establish insurance companies, open branches or be involved in strategic cooperation in places such as Kazakhstan, Azerbaijan and Tatarstan, where Neova Insurance’s partners Turkapital Holding and Kuveyt Türk have operations.”

Asked about possible investments in the life and pension branches, Koç said the group had conducted feasibility studies in the past about establishing a life insurance and pension company in Turkey but had never arrived at a decision.

Nonetheless, Koç said, the group may establish a life and pension company if there is an opportunity in the near future.

Expressing his expectations for the overall sector this year, he said: “I do not expect noteworthy growth in the sector this year as there will not be ample credit sources. Besides, consumers don’t have much desire to buy new houses and cars. Therefore, I expect the sector’s growth to be 1 to 2 percent over the inflation.”

Price competition is inevitable for the sector, according to Koç. “However, what is important is to see the pie grow. Insurance companies should display further efforts to reach new customers. I expect the Treasury to more closely monitor the companies with capital inadequacy.”

Neova Insurance, whose leading shareholder is Turkapital Holding with 53 percent, also includes First Takaful Insurance Company, Kuveyt Türk, Al-Muthanna Investment Company and Autoland as partners.

Neova’s premium production totaled 264,300 liras in non-life branch in December 2009, according to data from the Association of Insurance and Reinsurance Companies of Turkey.