Recovering Investor Losses from Insurers in Turkey: Directors’ Liability Insurance under Commercial Code Art. 361, Professional Liability Insurance and the Direct Claim under Art. 1478

When investors suffer losses through the fault of directors, auditors, appraisers or intermediaries, the defendants may not be able to pay a large judgment, and liability insurance can then become the main source of recovery. Under the Turkish Commercial Code, a person who suffers loss may claim compensation directly from the liability insurer, up to the sum insured (Art. 1478). The insurer cannot set off premiums or other amounts owed under the policy against that payment (Art. 1480). Insurance against directors’ liability is not compulsory for Turkish listed companies, but cover above 25% of share capital must be announced and is taken into account in assessing compliance with corporate governance principles (Commercial Code Art. 361; Principle 4.2.8 of Communiqué II-17.1). Independent auditors must carry professional liability insurance (Independent Audit Regulation Art. 33), as must real estate appraisal firms working in the capital markets (Communiqué III-62.3 Art. 25). SPK may require it from investment firms and crypto asset service providers (Capital Markets Law Art. 39(6)). An insurer is never liable for loss the insured caused intentionally (Art. 1477), so cover is most relevant to claims based on negligence, such as failures of oversight or audit. Claims for compensation against the insurer become time-barred ten years from the insured event (Art. 1482). This guide explains the legal framework for foreign institutional investors. It reflects the legislation in force as at 26 October 2026.

Why insurance matters for recovery

Investor claims arising from the 2026 fund and market manipulation cases can be directed at several groups. These include board members and managers of listed companies, independent auditors who signed the financial statements, appraisers who valued fund assets, and the intermediaries and portfolio managers that handled client assets. Liability rests on different provisions. Directors and managers are liable to the company, shareholders and creditors for loss they cause by culpably breaching their legal and statutory duties (Commercial Code Art. 553(1)). Auditors are liable to the same persons for loss caused by fault in performing their statutory duties (Art. 554(1)). Independent audit firms are liable, together with those who signed the report, for loss caused by financial statements not audited in accordance with the legislation. Audit, rating and valuation firms are also liable for loss caused by false, misleading or incomplete information in their reports (Capital Markets Law Art. 63(1)). How these claims are built is explained in our guides to suing directors and auditors of Turkish listed companies and financial reporting fraud and audit failures.

A judgment is only as valuable as the defendant’s ability to pay. Individual directors rarely have assets on the scale of an institutional investor’s loss, and the assets of persons under criminal investigation may be seized or confiscated in the criminal process. Audit and appraisal firms may also be unable to meet large claims. Liability insurance changes this position. It is a separate, solvent source of payment, and Turkish law gives the injured person a direct claim against the insurer rather than leaving it to depend on the insured.

Insurance is not a separate head of liability. The claimant must still establish the insured’s liability, the loss and causation under the ordinary rules. What insurance adds is a defendant that can pay, subject to the sum insured, the terms of the policy and the mandatory limits set by the Commercial Code.

Which insurance may respond

Several types of liability insurance can be relevant to capital markets losses. Some are compulsory by law; others are voluntary or can be required by a regulator.

Directors’ liability insurance of listed companies

The Commercial Code. The Code does not require companies to insure their directors. It provides that where the loss that board members may culpably cause the company in performing their duties is insured for an amount exceeding 25% of the company’s share capital, and the company is thereby protected, this must be announced. In listed companies, the announcement is made in the bulletins of SPK and, where the shares are traded on the exchange, the exchange. The cover is taken into account in assessing compliance with corporate governance principles (Commercial Code Art. 361(1)).

The corporate governance principles. Principle 4.2.8 annexed to SPK’s Corporate Governance Communiqué II-17.1 provides that the loss board members may cause the company through their fault in performing their duties is insured for an amount exceeding 25% of the company’s capital, and that this is disclosed on the Public Disclosure Platform (KAP). Principle 4.2.8 is not among the principles that listed companies must apply (Communiqué II-17.1 Art. 5(1)). Companies must, however, state in their annual reports whether they apply the corporate governance principles and, if not, give reasons (Art. 8(1)). Compliance reports are published in a format announced by SPK (Art. 8(2)). The corporate governance framework is explained in our guide to corporate governance in Turkish listed companies.

Whose loss is covered. Both Art. 361 and Principle 4.2.8 describe the cover by reference to loss caused to the company. Whether a particular policy also responds to claims by shareholders and other third parties, and on what terms, depends on the policy wording. Shareholders who suffer loss directly may sue directors under Art. 553(1), and a shareholder may also seek compensation for loss suffered by the company, but only for payment to the company (Art. 555(1)).

Managers and employees. Where a liability policy has been taken out for liability connected with the insured’s business, it also covers, unless the contract provides otherwise, the liability of the insured’s representatives and of persons managing, supervising or employed in the business, and is deemed to be made for their benefit (Art. 1473(2)). A company’s own liability policy may therefore extend to its managers even where they are not named.

Professional liability insurance of auditors, appraisers and intermediaries

Independent auditors. Under the Independent Audit Regulation issued by the Public Oversight, Accounting and Auditing Standards Authority (KGK), audit firms and independent auditors who take on audits must obtain professional liability insurance covering all their audits, starting with their first engagement (Art. 33(1)). The audit contract must contain a clause on professional liability insurance (Art. 29(1)(h)). The date of the policy, and changes to the policy or the insurer, must be notified to KGK within 30 days (Art. 34(1)(ç)). Failing to obtain the insurance is a breach that attracts a warning sanction (Art. 40(1)(e)). Audit firms auditing banks must also carry liability insurance under the Banking Law, with insurers established in Turkey or abroad (Banking Law Art. 36).

Real estate appraisal firms. Appraisal firms working in the capital markets must take out professional liability insurance for their valuation reports, under general conditions set by the Ministry of Treasury and Finance. A copy of the policy must be sent to SPK within six business days of issue (Communiqué III-62.3 Art. 25). Their valuation contracts with clients must include information on that insurance (Art. 21(3)(g)). The role of appraisal reports in fund valuations is explained in our guide to real estate and venture capital funds in Turkey.

Investment firms. SPK may require professional liability insurance for the provision of investment services, activities and ancillary services (Capital Markets Law Art. 39(6)). Under Communiqué III-39.1, it may do so at licensing or during operations, for all firms or for a particular firm (Art. 16), and may require liability insurance for services outsourced by brokers (Art. 49(6)). These are powers, not automatic requirements, so the position of a particular intermediary must be checked. The liability of intermediaries is explained in our guide to claims against brokers, custodians and portfolio managers.

Crypto asset service providers. SPK may require crypto asset service providers to obtain professional liability insurance at licensing or during operations, for the sector as a whole or for a particular provider (Communiqué III-35/B.1 Art. 9(9)).

How liability insurance works under the Commercial Code

The Commercial Code sets out general rules for insurance contracts (Arts. 1401–1452) and specific rules for liability insurance (Arts. 1473–1486). Several of these rules protect insured persons and injured third parties and cannot be changed by contract.

What is covered. Unless the contract provides otherwise, a liability insurer pays the injured person, up to the amount stated in the policy, for the insured’s liability arising from an event that occurred during the insurance period, even if the loss arises later (Art. 1473(1)). The Code thus starts from the date of the event, but allows the parties to agree on a different trigger. The insurer bears the burden of proving that a risk falls outside the cover (Art. 1409(2)).

Defence costs. When a claim is made against the insured, the insurer pays the reasonable costs related to the claim. Costs exceeding the sum insured are payable only if the contract so provides, and the insurer must advance costs at the insured’s request (Art. 1474). These rules cannot be changed to the insured’s detriment (Art. 1486(3)).

Notification. The insured must notify the insurer within ten days of events that may give rise to its liability, and must notify a claim made against it immediately unless otherwise agreed. On that notification, or where the injured person applies directly to the insurer, the rules on the insurer’s payment obligation in Art. 1427 apply (Art. 1475(1)–(2)). A failure to notify may lead to a reduction of the indemnity according to the degree of fault, if it increased the amount payable (Arts. 1475(3) and 1446(2)).

Conduct of the defence and settlement. Within five days of notification, the insurer must tell the insured whether it will take over the defence of the claim at its own cost. If it does not, it pays the compensation finally awarded against the insured. A settlement made by the insured without the insurer’s consent is not binding on the insurer if consent was not given within fifteen days of notification, but the insurer may not refuse consent without just cause (Art. 1476). For claimants, this means that a settlement with an insured director or firm should be coordinated with the insurer.

Retroactive cover. Insurance may cover a period before the contract was made. It is invalid, however, if at the time of contracting the insurer and the policyholder knew, or the insured knew, that the risk had already materialised (Art. 1458(1)). A policy bought after the events became known will usually not cover them.

The direct claim against the insurer

The right. The injured person may claim compensation directly from the insurer for the part of its loss up to the sum insured, provided it does so within the limitation period applicable to the insurance contract (Commercial Code Art. 1478). The claim does not depend on an assignment from the insured or on a prior judgment against it. It is limited by the sum insured, and the insurer’s obligation remains defined by the contract.

What the claimant must show. A direct claim requires the claimant to prove that the insured is liable to it, the amount of the loss, and that the loss falls within the policy. In practice, the liability of the insured director, auditor or firm is the central issue, and the evidence is the same as in a claim against the insured. Quantification is explained in our guide to calculating damages in Turkish securities claims.

Information to the insurer. To determine the event and the amount of the loss, the insurer may ask the injured person for information. The injured person must provide all relevant documents that it can reasonably be expected to obtain and that may properly be requested. If it fails to do so after written notice, the insurer’s liability is limited to the amount it would have had to pay had the documents been provided (Art. 1479). A claimant should therefore respond to reasonable requests in full and keep a record of what it has supplied.

No set-off. The insurer may not set off against the indemnity payable to the injured person any amounts due to it under the insurance contract, such as unpaid premiums (Art. 1480).

Payment and default. The indemnity becomes due after the risk materialises, the relevant documents are delivered and the insurer’s investigations are complete, and in any event 45 days after notification of the event. If the investigations cannot be completed within three months of notification, the insurer must pay at least 50% of the loss as an advance, on the basis of agreement or a preliminary expert assessment ordered by the court. Once the debt is due, the insurer is in default without further notice, and contract terms freeing it from default interest are invalid (Art. 1427(2)–(5)). Under Art. 1475(2), these rules apply where the injured person applies directly to the insurer.

Subrogation. After paying, the insurer takes over the insured’s rights against other responsible persons up to the amount paid, and may continue proceedings already started (Art. 1481). Payment by one insurer does not prevent the claimant from pursuing other defendants for any part of the loss that remains unpaid.

Joining the insurer to the action. Several persons may be sued together where the facts and legal grounds of the claims are the same or similar (Code of Civil Procedure Art. 57(1)(c)). A claimant may therefore consider suing the insured and the insurer in the same proceedings, each claim remaining independent (Art. 58).

Intentional acts, disclosure and other limits of cover

Intent. The insurer is not liable for loss resulting from the insured’s intentional causing of the event giving rise to liability (Art. 1477). The rule is mandatory: contracts to the contrary are invalid (Art. 1486(1)). Market manipulation, insider dealing and fraud are offences committed with intent. Where an insured person’s liability rests on such conduct, the policy will not respond to that person’s liability. The exclusion is personal to the insured whose intent is in question, so other insured persons whose liability rests on negligence, for example board members who failed to supervise or auditors who failed to detect, are in a different position. How a particular policy allocates cover between insured persons depends on its terms.

Disclosure at inception. The policyholder must disclose all material facts it knew or should have known when the contract was made (Art. 1435(1)). If material facts were not disclosed or were misstated, the insurer may withdraw from the contract within the statutory period or claim additional premium. After the risk has materialised, negligent non-disclosure leads to a reduction of the indemnity according to the degree of fault, and intentional non-disclosure connected with the risk releases the insurer (Art. 1439).

Voluntary and compulsory insurance. For compulsory liability insurance, the Code provides that the insurer’s obligation to the injured person continues up to the compulsory amount even where the insurer has been released, wholly or partly, from its obligation to the insured, and that termination of the insurance takes effect against the injured person only one month after the insurer notifies the competent authority (Art. 1484). The Code does not extend that protection to voluntary insurance such as directors’ liability insurance. For a claimant relying on a voluntary policy, the policy terms and the insured’s own compliance with them therefore matter.

Several policies. Where the same interest is insured with several insurers for the same period and risks, the policies are valid only up to the value of the insured interest, and each insurer is liable in proportion to its sum insured (Art. 1466(1)). Where a director is covered both under a company policy and another policy, the allocation between insurers does not increase the total recoverable beyond the loss.

No guarantee fund for voluntary cover. The Guarantee Account under the Insurance Law pays certain losses where an insurer’s licences are revoked or it is declared bankrupt, but only for the compulsory insurances listed in the Law (Insurance Law No. 5684 Art. 14). Losses under voluntary liability policies are not covered by it, so the insurer’s own financial strength matters.

Limitation periods

The Code’s provisions. All claims arising from an insurance contract are time-barred two years from the date the claim becomes due and, subject to Art. 1482, claims for the indemnity are in any event time-barred six years from the date the risk materialised (Art. 1420(1)). For liability insurance, claims for compensation against the insurer are time-barred ten years from the insured event (Art. 1482), and contract terms contrary to Art. 1482 are invalid (Art. 1486(2)). The direct claim must be brought within the limitation period applicable to the insurance contract (Art. 1478).

A cautious approach. The Code does not spell out in detail how these provisions interact for every type of claim. A claimant should plan on the basis of the shortest period that could apply and, in any event, act within the limitation period of its claim against the insured. That claim is governed by its own rules, which are explained in our guide to limitation periods for investor claims in Turkey. Where a policy is based on claims being made during the policy period, the timing of the claim against the insured may also decide whether the policy responds at all.

Mediation, insurance arbitration and the courts

Commercial character. Disputes arising from matters regulated in the Commercial Code are commercial cases regardless of whether the parties are merchants (Commercial Code Art. 4(1)(a)). Insurance contracts and the direct claim are regulated in the Code, so a claim against the insurer is a commercial case.

Mandatory mediation. In commercial cases concerning a sum of money, applying to a mediator before filing suit is a precondition for the action (Commercial Code Art. 5/A(1)). The mediator must conclude within six weeks of appointment, extendable by up to two weeks (Art. 5/A(2)). Mediation as a precondition does not apply where a special law requires arbitration or another alternative dispute resolution method, or where there is an arbitration agreement (Mediation Law No. 6325 Art. 18/A(18)).

The Insurance Arbitration Commission. The Insurance Law establishes an Insurance Arbitration Commission within the Insurance Association of Türkiye for disputes between policyholders or persons benefiting from an insurance contract and the insurer. Where the insurer is a member of the system, a person in dispute with it may use arbitration even if the contract contains no arbitration clause (Insurance Law Art. 30(1)). Before applying, the applicant must have applied to the insurer and show that the request was wholly or partly rejected, or that the insurer did not reply in writing within fifteen working days (Art. 30(13)). An application cannot be made if the dispute is already before a court or a consumer arbitration board (Art. 30(14)). Rapporteurs first examine the application within fifteen days. Unresolved applications go to an insurance arbitrator or to a panel of at least three arbitrators, which is mandatory above a monetary threshold; the arbitrators decide on the documents (Art. 30(15)). The award must be given within four months of appointment unless the parties agree in writing to extend this; otherwise the dispute is decided by the competent court (Art. 30(16)). Awards below a threshold are final; above it, an objection may be filed within ten days, and above a higher threshold the decision on objection may be appealed (Art. 30(12)). The thresholds are fixed amounts that the authority may increase (Art. 30(22)), so the current figures must be checked. Whether the Commission is available for a particular claim depends on the claimant’s position under the contract and on the insurer’s membership, and should be assessed before choosing the route.

The courts. A claim in court proceeds as an ordinary commercial case, with written pleadings, expert evidence and appeals. The steps are explained in our guide to how a securities lawsuit proceeds in Turkey, and arbitration under agreements between the parties in our guide to arbitration of investor disputes.

Finding out whether cover exists

Public sources. For listed companies, directors’ liability cover exceeding 25% of share capital must be announced (Commercial Code Art. 361(1)), and Principle 4.2.8 calls for disclosure on KAP. Annual reports and corporate governance compliance reports state whether the principles are applied and, if not, why (Communiqué II-17.1 Art. 8). These disclosures usually do not reveal the full policy terms, but they show whether cover exists and its approximate level.

Regulatory filings. Audit firms notify their policies to KGK (Independent Audit Regulation Art. 34(1)(ç)), and appraisal firms send copies to SPK (Communiqué III-62.3 Art. 25(2)). These filings are not public, but they confirm that a policy should exist.

In proceedings. Parties must produce documents in their possession that they or the other side rely on (Code of Civil Procedure Art. 219). A party may ask the court to order the other side to produce a document. If the conditions are met, the court sets a final deadline for production and may draw consequences from a failure to comply (Art. 220). A policy held by a defendant director or firm can be sought in this way. The tools for obtaining evidence are explained in our guide to obtaining and preserving evidence in Turkey.

Notification by the insured. An insured that receives a claim must notify its insurer (Art. 1475(2)). Sending a reasoned claim to the potential defendant early therefore also brings the matter to the insurer’s attention and starts the insurer’s procedures.

Points for foreign institutional investors

Identify insured defendants early. When mapping potential defendants, list for each whether liability insurance is required by law or may exist voluntarily, using the table above. Auditors and capital markets appraisal firms are required to be insured; listed company directors may be.

Frame claims with cover in mind. Because intentional conduct is excluded (Art. 1477), claims against board members who did not take part in wrongdoing but failed to supervise, and against auditors and appraisers whose failures were negligent, may be the claims for which insurance is available. The legal basis of each claim should be pleaded accurately.

Coordinate settlement. A settlement with an insured is not binding on the insurer without its consent (Art. 1476(4)). Settlement discussions with insured defendants should therefore involve their insurers.

Watch the sum insured. The direct claim is limited to the sum insured (Art. 1478), and several claimants may compete for the same limit. Claimants who act early, and who coordinate with other investors in the same position, are better placed. Group strategies are discussed in our guide to joint and collective claims in Turkey.

Frequently asked questions

Can an investor claim directly from a liability insurer in Turkey?

Yes. The injured person may claim compensation directly from the insurer, up to the sum insured, within the limitation period applicable to the insurance contract (Commercial Code Art. 1478).

Must Turkish listed companies insure their directors?

No. Cover exceeding 25% of share capital must be announced and is taken into account in corporate governance assessment (Art. 361). Principle 4.2.8 recommends it on a comply-or-explain basis.

Where is directors’ liability insurance disclosed?

Cover above 25% of capital is announced in the bulletins of SPK and the exchange (Art. 361), and Principle 4.2.8 calls for disclosure on KAP. Annual reports explain whether the principles are applied (Communiqué II-17.1 Art. 8).

Are independent auditors insured?

They must be. Audit firms and auditors must carry professional liability insurance covering all their audits (Independent Audit Regulation Art. 33).

Are appraisal firms insured?

Real estate appraisal firms working in the capital markets must carry professional liability insurance for their reports (Communiqué III-62.3 Art. 25).

Are brokers required to be insured?

Not automatically. SPK may require professional liability insurance for investment services, generally or for a particular firm (Capital Markets Law Art. 39(6); Communiqué III-39.1 Art. 16).

Does insurance cover market manipulation or fraud?

No insurer is liable for loss the insured caused intentionally, and contracts to the contrary are invalid (Arts. 1477 and 1486(1)). Cover is relevant mainly for negligence-based claims.

Can the insurer deduct unpaid premiums from the payment?

No. The insurer may not set off amounts due under the contract against the indemnity payable to the injured person (Art. 1480).

What information must a claimant give the insurer?

Relevant documents that it can reasonably obtain and that may properly be requested. If it fails to provide them after written notice, the insurer’s liability is limited accordingly (Art. 1479).

When must the insurer pay?

After its investigations, and in any event 45 days after notification. If investigations take longer than three months, it must advance at least 50% (Art. 1427).

Can an insured settle without the insurer?

A settlement without the insurer’s consent is not binding on it if consent was not given within fifteen days of notification; the insurer may not refuse consent without just cause (Art. 1476(4)).

How long does a claimant have to claim against the insurer?

Compensation claims against a liability insurer are time-barred ten years from the insured event (Art. 1482). Shorter periods in Art. 1420 and the limitation of the claim against the insured should also be respected.

Is mediation required before suing an insurer?

Yes, for a money claim in a commercial case, unless an arbitration agreement or a special law requiring another route applies (Commercial Code Art. 5/A; Mediation Law Art. 18/A(18)).

What is the Insurance Arbitration Commission?

A body under the Insurance Law that resolves disputes with insurers that are members of the system, on documents, within four months of appointment (Insurance Law Art. 30).

Does a policy bought after the scandal cover it?

Generally not. Retroactive cover is invalid if the parties, or the insured, knew when contracting that the risk had already materialised (Art. 1458(1)).

Related guides

• Turkey’s 2026 Fund and Market Manipulation Crisis: Legal Guide for Foreign Institutional Investors — the entry point to this series
• MSCI’s Turkey Index Freeze and the Legal Response
• Lease Certificates (Sukuk) in Turkey
• Inflation Accounting in Turkey: TMS 29 and the Tax Books
• Individual Application to Turkey’s Constitutional Court and the ECHR
• Privileged Shares in Turkish Listed Companies
• Enforcing a Money Judgment in Turkey
• Turkey’s Emissions Trading System and Climate Law No. 7552
• Anti-Money Laundering Rules for Foreign Investors in Turkey
• Suing Directors and Auditors of Turkish Listed Companies
• Financial Reporting Fraud and Audit Failures in Turkish Listed Companies
• Claims Against Brokers, Custodians and Portfolio Managers in Turkey
• Real Estate and Venture Capital Funds in Turkey: Valuation and Liability
• Calculating Damages in Turkish Securities Claims
• Limitation Periods for Investor Claims in Turkey
• How a Securities Lawsuit Proceeds in Turkey
• Arbitration of Investor Disputes in Turkey
• When a Turkish Issuer or Broker Becomes Insolvent