An additional clause (“Additional Clause 6”) has been incorporated to the Turkish Insurance Law, dated 3 June 2007, numbered 5684, with the Law on Amendments to Certain Laws and Civil Procedure Law, dated 22 July 2020, numbered 7251, which came into force on 28 July 2020 (“the Amending Law”).
Second paragraph of Additional Clause 6 provides that receivables under insurance policies cannot be assigned to third parties. As a direct consequence of the Amending Law, the assignment of receivables under insurance policies shall no longer be available as an instrument of security as of 28 July 2020. For the avoidance of doubt, loss payee clauses (dain-i mürtehin kaydı), as an instrument of security, are still available, provided that a pledge is also established in favour of the loss payee on the insured goods. The reasoning of Additional Clause 6 provides that the objective of the provision is to protect the rights of the insured since many fraudulent acts have occurred in the past which deprived the insured of the full indemnity.
The new enactment unexpectedly does not provide any exception to enable the financial institutions and banks to take security over the insurance policies. However, the secondary legislation, which shall be prepared and published by the Insurance and Private Pension Regulation and Supervision Agency on the application of the Additional Clause 6 as per the third paragraph of Additional Clause 6, may elaborate on the legal status of the existing securities and ease the restriction for the assignments to be granted within the context of financings extended by the financial institutions and banks.
As indicated above, the Amending Law does not regulate whether or not the relevant prohibition has an adverse impact on the assignment of receivables under insurance policies agreements executed before 28 July 2020. Therefore, general principles of Turkish Civil Law will apply on this issue.