Ervin METE: The insurance market has mostly continued its post-covid recoverypositive trends amidst the headwinds from the supply chain disruptions, the war in Ukraine, mounting inflation and economic uncertainty.
In 2021, the value of gross technical provisions at a market [level] increased by 4.5% (ALL 946 million) for both life and non-life insurance. Gross written premiums increased 22.7 % for life insurance, and 15.4% for non-life insurance. In the first half of this year gross written premiums increased further by 25.2% for life insurance and 10.2% for non-life insurance compared to the same period last year.
In the first half of 2022, the solvency ratio remained above the required levels for both the non-life and life insurance companies. Assets covering technical provisions, reached 134% for non-life insurance companies and 124% for non-life insurance companies in June this year.
Gross claims paid for life insurance that jumped by 60.7 % in 2021 mostly as a result of Covid-19, have come down by 36.1% in the first half of 2022. Non-life insurance saw a decline of 10.6% in gross paid claims for 2021 and a further decline of 15% in the first half of 2022, because most of the claims following 2019 earthquakes were settled during 2020. Another positive development in 2022 has been the policies numbers with life insurance increasing by 30% and non-life insurance by 20%.
XPRIMM: Did the Albanian market recently experience some relevant structural changes? (M&As, new entries on the market, exits etc.)
E.M.: Most of the major market structural changes in Albania took place early in the transition period, including financial markets. Barriers for local and foreign insurance companies to enter the market have been removed.
Now the markets have entered a consolidation phase with a stable number of non-life insurance companies in the last years. The life insurance market has reached 4 companies, with the last company entering the market in 2019, bringing the total number of insurance companies licensed by AFSA to 12.
XPRIMM: The insurance gap is quite large in your country, especially when it comes about housing insurance and NatCat risks. Did your market see some progress in this respect lately?
E.M.: Indeed. The insurance market in Albania is still far from its full potential especially for non-MTPL products. As of 2021, voluntary insurance was still less than half of the market share at 38.3% with compulsory insurance (MTPL) still dominating. As for the NatCAT risks, only 3 in every 100 households are insured, which shows we need to put more efforts in expanding this market. We need to increase the awareness that the state compensation in case of disaster is not automatic or affordable in many cases, as well as improve the level of financial literacy. AFSA is particularly focusing on financial education amongst students and youth.
After the 2019 earthquakes, homeowners' awareness on the importance of voluntary home insurance increased, reflected in gross written premiums. Until June this year, the premiums reached 13.1% of the market share from 12.8% in 2021 and 10.4% in 2020. Albeit the small size, the market showed a good performance during the crisis thanks to the effective risk transfer mechanism of reinsurance and of regulations in place to limit earthquake risk retention.
XPRIMM: Are there any regulatory changes recently implemented or soon to be expected in the Albanian market?
E.M.: There have been many legal and regulatory advances in the last few years. A new Law "On compulsory insurance in the transport sector", was approved in 2021. Ten bylaws were prepared as part of the new law, which should have a positive impact in the development of the insurance market. The new legal framework brings several improvements like better protection of policyholders' interests; more efficient claim handling processes; increases in the amount of compensation and liability limit; fairer pricing based on the risk profile of the insured.
XPRIMM: High inflation, geopolitical unrest, the energy crisis, as well as the supply chain crisis are generally expected to impact on the insurance business as well. What are your expectations for the Albanian insurance market?
E.M.: So far, the insurance market has shown good resilience through several shocks, from the earthquakes to the pandemic. AFSA took a proactive approach in both crises, by increasing the frequency of reporting and supervision, closely monitoring liquidity and solvency ratios to ensure market stability.
The emerging global shocks, find insurance companies with well-diversified portfolios and the reinsurance buffer unaffected. We are aware though that the full impact of these shocks is still ahead of us. The most immediate risk relates to the tightening of monetary policy with several implications for both companies' and individuals' assets and loans reevaluation. The initial impact seems to be contained but we are monitoring very closely the developments. The increased cost of energy and other inputs is denting companies' performance but so far, the 'freezing' of electricity tariffs has largely cushioned the shock. Albania has little exposure to the Russian gas and the country risk remains contained.
AFSA has re-established a rigorous approach to manage the ongoing crisis potential impact and risks. We are in a continuous collaboration with international peer institutions, and we remain confident that the stability of the insurance market as a whole will not be jeopardized.