In the CEE economies, growth will slow from 4.2% in 2011 to about 2.5% in 2012, as both domestic and external demand moderate, states the latest World Economic Outlook's upgrade document released this autumn by the International Monetary Fund. Although still far from the pre-crisis dynamics, it seems the CEE economies are doing well and are also entitled to an optimistic attitude with regard to their future. Of course, as always, there are still some question marks pending and also a few warning signs. "Downside risks to the outlook are significant and larger than at the time of the previous edition of the Regional Economic Outlook. Although more sluggish global economic growth has always been a possibility, quelling the tensions in euro area debt markets has proved increasingly challenging. If tensions were to escalate further, the economic and financial outlook for the euro area would darken considerably and the repercussions for emerging Europe would be dire".

Once forewarned about a possible return to the decreasing path in the near future, let's see for a moment how the insurance market did in the first half of 2011, when all economies in the region showed more or less a positive trend.

The total CEE gross underwritten premium for 1H/2011 amounted to EUR17.78bn, 8.17% up as compared to 1H/2010. Best performance in this respect belongs to Latvia, which managed to place an impressive 29.39% growth in GWP, followed by Poland (about 16% increase) and Lithuania (almost 13% up). Out of the CEE region, as usually defined, Turkey registered also a high dynamic, as the four months results show an almost 23% y-o-y increase in GWP. There are only three countries which remained on the downside path, reporting y-o-y negative changes in the GWP volume for the first half of 2011: Estonia, Croatia and Romania. It is also worth mentioning that, due to the different variations in the local currency exchange rates, the y-o-y changes calculated in European currency are, in some cases, significantly different from that calculated in local currency. Hungary is probably the most relevant example in this respect, as the forint substantial appreciation "converted" a 3.2% decrease in local currency in a 4.4% increase when calculated in euro.

All in all, the CEE country ranking remained almost the same as in the previous year, with Poland gaining almost 3 percentage points in market share, up to 41.6% of the regional turnover. The Czech market ranks second, with an 18.7% share, followed by Hungary, with about 9%. Nevertheless, if the regional ranking tells something about the markets' dimensions, there is another indicator to consider when judging their maturity and also the growth perspectives: insurance density.

Probably the half year results are not the most relevant when speaking about density, considering the seasonal character of many of the business lines. Still, as this seasonality is a repeatable phenomenon, we can get some sense of the density variation by a y-o-y comparison. Thus, the CEE citizens spent for insurance, on average, about EUR141 during the first six months of 2011, meaning 10.6% more than in 2010. Looking at the regional statistics, there is an obvious breakdown in two distinct categories. On the one hand, Slovenia, Czech Republic, Poland, Slovakia, Estonia, Hungary and Croatia recorded an insurance spending of at least EUR150 per capita in the first half on the year. In all the other countries in region, the amounts allocated by their citizens for insurance, between January and June 2011, didn't exceed, in average, EUR80.

Life insurance, a saving tool

Looking at the CEE insurance market, it is obvious that, with very few exceptions, the life insurance segment was the most successful across the region. Only Latvia, Estonia and Croatia experienced a negative trend in life insurance, while Poland, Lithuania and Czech Republic posted double digit growth rates of 13 - 15%. Also, in the small markets, as Albania, Macedonia or Serbia, the life business line recorded impressive dynamics, specific to their early stage of development. It is worthy to note that in almost all the countries the Unit-Linked products were the most successful, setting the upward trend. In fact, some of market professionals who responded to our inquiries pointed out that the growth in life insurance was not so much on the protection side, as customers were mostly seeking an efficient saving tool.

Unfortunately, one would also notice that in many countries not only life insurance GWP grew, but also indemnities registered significantly higher values. Slovenia, Lithuania and Czech Republic are relevant examples, to limit this comment only to the "oldest" markets in the region.

Motor insurance - mixed results

Although no longer the business driver in the region, motor insurance still accounts for more than 28% of the CEE portfolio, being also the most challenging segment of the insurers' activity. At the regional level, the growth recorded for the motor insurance lines was of about 4%, with a higher pace for the MTPL class, of about 5.7%, while the Motor Hull class barely achieved a 1.6% growth in premium. Across the region, the country results showed a mixed picture, but some elements are common.

Generally, the Motor Hull business remained weak, mostly waiting for a significant revival of the car sales sector. Latvia, Lithuania, Poland and Slovenia are the only countries recording a positive change on this insurance segment. These countries also recorded a hike in car sales or, as in the Poland's case, benefitted from a stable demand for new cars all along the recent years.

As far as the MTPL line is concerned, its mandatory character preserved, in most cases, only the number of policies sold, as the profile markets became more and more competitive. During the crisis, MTPL tariffs decreased to a large extent, down to almost "neck breaking" levels. Starting the second half of 2010, this trend started to revert, and in many of the CEE countries insurers started to gradually increase the MTPL tariffs, aiming to a sound underwriting.

Finally, another common trend in motor insurance across de region is the better claims' costs management. As a result, the paid claims amount grew at a lower pace than the GWP, but, again, there are very mixed results when looking at them country by country.

Housing insurance, the winning bet

Property insurance lines, considering under this category the "fire and allied perils" class and "damage to properties" class, represented the winning bet for most of the CEE insurance markets. At the regional level, GWP for this insurance lines grew by 12.8%. With very few exceptions, as Albania, Bulgaria, Croatia and Serbia, all markets recorded positive change rates. Again Latvia, Lithuania and Poland placed the most impressive y-o-y growth rates, of over 23%. Romania and Hungary also recorded double digit higher underwriting, of 19% and 13% respectively.

The main source of growth was the housing insurance under the "fire and allied perils" class, with an about 15% higher turnover in 1H/2011, as compared to 1H/2010. Still, if in Romania the enforcement of mandatory dwelling insurance law determined an impressive growth of the housing stock insurance coverage, in other countries, as Lithuania, most of the property business growth came from the corporate sector revival and the higher crop insurance demand.

Financial risks awareness rising

Credit and other financial losses insurance lines, as well as the GTPL class still account for a very small slice of each market's portfolio in the region. As a result, whatever the dynamics of this lines are, it is hardly relevant for the overall business. Still, looking at the countries' results, it is obvious there is a higher demand for this kind of coverage. Some examples are relevant: Czech Republic, 38% growth on credit insurance; Hungary, 34% growth on financial loss insurance; Poland, 21% higher underwriting on credit insurance; Romania, 55% growth on warranties insurance and 23% higher written premiums for GTPL.

The champions

Life insurance Top 100 ranking is dominated by Polish and Czech insurers. Among the first ten companies in the region, according GWP in 1H/2011, accounting for about 44% of the CEE life insurance production, seven are from Poland and the remaining three from the Czech Republic.

In the non-life Top 100 ranking, Poland holds four out of the first ten positions, followed by Czech Republic, with two Top 10 participants, and Slovakia, Slovenia, Hungary and Croatia, each having one representative in the first 10 largest non-life CEE insurers.

In fact, it is obvious that, besides the inner quality and performance of the listed insurers, this "arithmetics" is only mirroring the relative dimensions of the markets themselves. Still, a better place, at least in the national ranking, if not in the regional one, remained a good incentive for growth for many years. Yet, the recent year's changes entitle new expectations and we will probably see not very far from now a race for a the best place in a profitability ranking.