Motor insurances weigh as millstone upon the industry, but financial insurance offset losses in some companies
The Financial Supervision Commission (FSC) of Bulgaria announced the final data on the financial situation of the insurance industry in 2008. At the end of the year the gross premium income of
insurers amounted to BGN 1,804.642 million versus BGN 1,505.070 million at the end of 2007. This is a 19.9 percent annual growth.
Total assets in the sector increased by 17.8 percent compared to 2007, reaching BGN 2,548.994 million.
Non-life insurance generated assets totaling BGN 1,649.005 million (64.7 percent of the total assets for the insurance industry), and life insurance assets total BGN 899.989 million (a share of
35.3 percent). The analyses indicate an increase of 21.5 percent in the assets of non-life insurance on a year-on-year basis, while those in life insurance have grown by 11.5 percent.
Own capital of insurance companies increased by 6.3 percent on a year-on-year basis reaching a total of BGN 873.599 million, including BGN 456.110 million on the part of insurers operating in the
field of non-life insurance and BGN 417.489 million with life insurers.
Non-life insurance
At the end of 2008 gross premium income in non-life insurance amounted to BGN 1,534.395 million, which records annual growth of 20.9 percent. Premium income
from direct non-life insurance stood at BGN 1,513.272 million compared to BGN 1,259.882 million at the end of 2007. The amount of obtained active reinsurance premiums at the end of the period was
BGN 21.123 million versus BGN 9.664 million recorded a year earlier.
Claims made in the field of general insurance accounted for BGN 772.618 million with annual increase of 37.9 percent. Gross technical reserves (funds required for payment of future benefits)
increased by 30 percent on a year-on-year basis hitting BGN 1,197.655 million.
The technical outcome reported by companies is negative – minus BGN 4.694 million compared to plus BGN 34.328 million for 2007.
It has been for years that motor insurance is the key driving force for the insurance business in Bulgaria. Unlike global trends where people insure with priority their life and home, in the newest
member state of the EU customers traditionally subscribe to Motor Third Party Liability – because of its mandatory nature, and Autocasco – for the vehicle’s security. The data released by the FSC
come to verify this fact – in 2008 the largest market share in general insurance was attributed to Autocasco (45 percent) and MTPL (25.1 percent) or 70.1 percent of total gross premiums in the
sector. A total of 84.63 percent of all benefits paid out last year cover claims under motor insurance policies.
The MTPL is the most dramatic product, which pulls back the market as millstone.
According to the FSC, insurance premiums subscribed under the MTPL (including Green Card) amounted to BGN 383.8 million (BGN 1,534 million is the total revenue in the non-life insurance
segment).
The product occupies some 40-50 percent of the insurance portfolios with some companies, for example with Municipal Insurance Company it forms 50.09 percent of the company’s portfolio; with HDI –
41.79 percent; with Lev Ins – 40.91 percent; with Victoria – 40.36 percent. With Bulgarski Imoti it stands for 72.88 percent.
Largest market share in the segment of this compulsory insurance is held by Lev Ins (16.90 percent), DZI General Insurance (15.51 percent) and Bulstrad (12.87 percent).
At the same time the size of paid benefits amounted to BGN 161.273 million, which is on average 27.16 percent of all claims paid out by the companies.
There are certain companies (Bulgarski Imoti) where the benefits under the MTPL form more than 63 percent of all benefits paid.
The statistics revealing the share of benefits paid under the MTPL compared to the general portion of paid benefits show that the highest percentage share is recorded by DZI General Insurance
(19.85 percent), Bulstrad (17.74 percent) and Uniqa (12.23 percent).
A few weeks ago the head of the Financial Supervision Commission (FSC) Ralitsa Againe alarmed that the insurance tends to record dramatically high negative technical result for the year. For 2008
gross losses reached BGN 108 million.
Namely the MTPL bears the largest share of total annual losses. In all, the sector recorded losses of nearly BGN 2.4 million.
The fierce competition for more customers among the companies has been intensifying for years. At the end of last year, the FSC did not know which way to turn eventually imposing on 10 companies
compulsory administrative measure banning them to reduce tariffs and to sell at a price lower than the one specified in their tariffs. Given that the companies bear the risk under the MTPL for a
period of 5 years it would be no surprise if any company goes off.
No better is the picture with Autocasco insurances. According to the FSC, the premiums recorded by the companies last year amounted to just over BGN 690 million. The paid claims accounted for BGN
341.3 million, or 57.47 percent of all claims paid out.
Largest market share in Autocasco is generated by Bul Ins (18.35 percent), DZI General Insurance (14.73 percent), Bulstrad (14.12 percent), Armeec (12.77 percent) and Allianz Bulgaria (10
percent).
Аutocasco accounts for 81.73 percent of Bul Ins’ insurance portfolio; 60.4 percent of the portfolio of Armeec; 51.15 percent – of Uniqa’s, and just over 50 percent of the portfolio of DZI General
Insurance.
Bul Ins runs ahead of its competition as per percentage of paid claims out of all claims paid by the company – 90.45 percent. Above average pay and other industry companies - Armeec (68.12
percent), Allianz Bulgaria (65.19 percent), Uniqa – 59.42 percent. It is worth recalling that because of Autocasco results at the end of November last year Uniqa announced it terminates its
Autocasco contracts. Some observers considered it as the reason for changing the CEO of the company in early 2009.
Apart from the growing insurance claim rate, the companies are pressed by more difficulties under Autocasco – increasing price rate of services, increased prices of spare parts, unfair competition
on the part of colleagues. You can add to this the decline in purchases of car vehicles. According to the Association of Car Manufacturers and their authorized representatives in Bulgaria, the
total number of new cars sold in Bulgaria in 2008 amounts to 57,927. Given the average price of BGN 25,000 and Autocasco price rate of 5 percent of the car’s value, this market is estimated at BGN
70 million, and a large part thereof has now dried off. Moreover, there is a decline in the sales of old cars. This automatically leads to a decrease in sales of Autocasco and MTPL. Therefore the
whole industry is worried about this year's performance. A month ago Rumen Yanchev, CEO of Insurance and Reinsurance Company Bulstrad Vienna Insurance Group, warned that motor insurance will be
among the most affected sectors of the current economic and financial crisis.
According to annual data released by the FSC, financial insurance accounts for 4.2 percent of the portfolio structure of non-life companies versus 2.8 percent a year earlier. The subscribed premium
income from these products amounts to BGN 64.543 million, including BGN 30.023 million from insurance "Credits", BGN 3.487 million from "Guarantees" and BGN 31.032 million from insurance
"Miscellaneous financial losses".
On a year-on-year basis the realized growth of premium income is 222 percent in "Credits", 3.5 percent in "Guarantees" and 34 percent under insurance "Miscellaneous financial losses".
On an annual basis, the highest growth of premium income is reported in the following insurance segments: "Rail vehicles" (100 percent) and "Disease" (83 percent) and these classes occupy a
relatively small share in the non-life insurance portfolio of the companies.
The top five companies in the non-life insurance sector generate a total of 58.9 percent market share.
This year's front runner in subscribed premiums is Bulstrad generating premium income of BGN 221.937 million and a market share of 14.48 percent. DZI General Insurance runs up with BGN 202.150
million of subscribed premiums and 13.19 percent market share. The companies ranking from third to fifth place literally rub shoulders with nearly identical recorded results. The third in the
ranking – Allianz Bulgaria – records BGN 165.031 million in premiums and a market share of 10.77 percent. Fourth comes Lev Ins with a market share of BGN 158.560 million and a market share of 10.35
percent, while the fifth top insurer – Bul Ins – records BGN 155.002 million in premiums and 10.11 percent market share.
Life insurance
Gross premium income realized by life insurers at the end of 2008 amounted to BGN 270.247 million, which makes for annual growth of 14.7 percent. Premium income from direct life insurance is BGN
269.577 million versus BGN 234.147 million at the end of 2007. The amount of premiums received from cedants is estimated at BGN 670,000 at the end of the reported period versus BGN 1,376,000 a year
earlier.
Claims paid by life insurers amounted to BGN 92.240 million and the annual growth was 18.6 percent. Gross technical provisions increased by 22.9 percent annually and reached BGN 456.455 million.
The technical result reported by life insurers is also negative, alike in the general insurance, standing less than BGN 1.642 million versus plus BGN 11.359 million for 2007.
The highest relative share in both premium income and the amount of paid claims is recorded with annuity insurance – respectively 75 percent and 78.9 percent. The biggest growth in premium income
on a year-on-year basis was recorded with insurance “Accident” – 32.3 percent, and marriage and child insurance – 19.2 percent.
Leader in premium income in life insurance is Allianz Bulgaria Life. The company recorded BGN 65.722 million in premiums, earning it a market share of 23.61 percent. Running up far back are DZI –
with BGN 42.141 million in premium income and 15.14 percent market share, Uniqa Life – with BGN 37.784 million in premium income and 13.57 percent market share, and AIG Life Bulgaria and Bulstrad
Life – respectively with premium income and market share of BGN 31.818 million (11.43 percent) and BGN 24.396 million (8.76 percent).
In 2008 the sector remained highly concentrated – the top five companies generated 72.51 percent of the life insurance market, whereas the first three companies out of these hold half the
market.
It is obvious that the global financial crisis has hampered the development of the life insurance market, which even in normal times faces difficulty to gain momentum in Bulgaria.
Generally, insurance experts in the country are cautious in their forecasts for this year. The head of the FSC Ralitsa Againe expects that 2009 is to be even more complex than the previous year for
the entire sector.
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