Evolutia pietei asigurarilor din Republica Moldova in anul 2009
Republic of Moldova: The insurance market evolution in 2009
The Republic of Moldova, a small South-Eastern European country, faced enormous difficulties in 2009. Already Europe's poorest country, one of its major challenges was the need to tackle the consequences of the economic and financial crisis as it is probably in the most precarious economic situation of all European Union's Eastern neighbours. It is also one of the most politically unstable.
In addition to a huge budget deficit and a high national debt, trade and industrial production have collapsed. Industrial production fell 22% in 2009, with a 32.1% drop in mining, a 24.3% fall in manufacturing and a 1.5% decline in the energy sector. Exports fell 18% to approximately 1billion EUR and imports declined 33%, to 2.3 billion EUR. In addition, remittances from Moldavian citizens abroad, which in the past amounted to more than one third of the country's GDP, dropped dramatically. And domestic demand has plunged. The deterioration in the major economic indicators contributed to a sharp drop in nominal GDP, which decreased by 6.3% in euro terms.
This decline will further exacerbate the difficulties experienced by the population, especially by the most vulnerable in society.
What about insurance?
The economic crisis has also affected the insurance sector. Following nine years of growth, when between 1999 and 2008 written premiums increased 7.5 times and paid claims 4.9 times, the local market dropped 4% to 52.6 million EUR in 2009.
Despite the years of growth, the insurance sector is still underdeveloped compared to those in the neighboring countries. Insurance penetration in terms of GDP was a modest 1.4% in 2009, significantly lower than a European average of about 8%. At the same time, insurance density (GWP per capita) was 16 EUR, down from 16.6 EUR in 2008.
The main contributors to this situation are the low level of per capita income, an underestimation of the role played by the insurance sector, a lack of trust in companies active in this sector and in legislative regulations, a low level of market capitalisation and the generally inadequate level of professional training of insurance personnel.
Apart from mandatory MTPL insurance, other insurance segments are underdeveloped. Household insurance and liability are practically non-existent, as is insurance for most private and public sector enterprises. In addition, the life insurance market is small, accounting for only 6.2% of the overall market.
Insurers' premiums on Green Card policies slumped by 25%, due to a 50% reduction in the activity of transporters abroad. The transport segment continued to play an important role in the insurance market, motor insurance having a 60% share in the total written premiums on the market.
Premiums, claims, profitability?
There were 26 insurance companies on the local market in 2009, down from 33 in 2008, of which four - GRAWE Carat, SIGUR Asigur, ASITO, ASTERA Group - were also carrying life insurance operations. There are 45 brokerage companies, up from 32 in 2008.
With premiums of 49.1 million EUR, the non-life insurance sector accounted for 93.8% of total market underwriting. According to data provided by the National Financial Market Commission (CNPF), motor insurance was the biggest non-life class, at 65.8%, of which MTPL policies represented 43.1%, or 21.2 million EUR. Property insurance came second, with 11.5%, or 5.6 million EUR, followed by aviation, 5.6%, and health insurance, 5%.
Total paid claims rose by more than 30% to 19.3 million EUR, to give a claims ratio of 44.2%. Approximately 95.2% of the total paid claims went to the non-life insurance segment.
As to gross written premiums, the biggest share, 72.4%, was held by the motor insurance classes, followed by property, 11.1%.
Last year also saw a significant increase in the amount of paid claims due to the lack of traffic discipline of drivers, and three companies reported a claims ratio for the Motor Hull segment in excess of 100%. The claims rate was lower for MTPL policies at 40%.
Local companies' total assets rose 13.4% to 98.9 million EUR and insurance reserves totalled 31.1 million EUR, up from 28.5 million EUR in 2008. Only eight of the 26 insurers reported profits while total pre-tax profits fell 20.5% to 9.3 million EUR, according to the asigurare.md portal.
The trend towards market concentration was steady in 2009. The five leading companies accounted for almost 76% of all gross written premiums. Moreover, together the two market leaders, MOLDASIG and ASITO, accounted for 53.2% of all premium volume. MOLDASIG had a 31.2% share of the non-life sector, ASITO 22%, third-ranked GRAWE Carat - 10.6% or 5.6 million EUR, followed by DONARIS Group with 6.5% or 3.4 million EUR, and MOLDCARGO 4.6% or 2.4 million EUR.
It is worth mentioning that there were some changes in the Top 10 ranking, with three insurers - AFES-Moldova, ARTAS and GARANTIE - dropping out of the Top 10 ranking and being replaced by ACORD Group, KLASSIKA and EUROASIG Group.
The concentration trend will continue in 2010 as more than 82% of the market is controlled by seven insurers. In addition, a legal requirement to increase authorised capital is reinforcing a tendency towards a reduction of active insurers on the local market.
Expectations for 2010
Although facing a period of economic and political instability, the authorities, the business community and insurance companies have eventual EU accession as a goal and aim to adopt their business strategies in that direction. In particular, representatives of the local insurance association have expressed an intention to work on the liberalisation and development of mandatory health insurance. The state has already implemented compulsory medical insurance, but it provides only minimal coverage. Several insurers have entered this market and their positive feedback indicates that the sector has considerable potential.
Similarly the life insurance segment, which is still at a very low level, has the opportunity for rapid development if necessary legal adjustments come into force.
It should be borne in mind that the Moldavian industry is young and penetration still very underdeveloped, so opportunities are likely to exist in just about every business line, distribution channel and client type.
Meanwhile, insurers are focusing on tackling the immediate local market difficulties, including a strong orientation towards motor insurance, the meagre financial power of the people, a lack of information and, most critically, a lack of general education in choosing types of insurance.
However, foreign groups are looking closely at the Moldovian market, some are already present and in the near future more may consider entering the market. Their presence would increase competitiveness and market maturity. It would also give a boost to the capital market and to overall economy expansion.
PRIMM Insurance&Pensions Magazine