HUNGARY: MNB: The Russian-Ukrainian conflict has no significant impact on the domestic sector

31 March 2022 — Marina MAGNAVAL
The pandemic only temporary stopped premium income production of the Hungarian insurance market, the increase of more than 10% in 2021 raised the premium income in the sector above HUF 1,300 billion, (~EUR 3.52 billion) as noted Gergo SZENICZEY, prudential of the Hungarian National Bank (MNB), Executive Director for Consumer Protection and Market Surveillance at the 2022 Portfolio Insurance Conference.

The insurance market's premium income decreased during 5 years after 2007 and then started to grow dynamically from 2017 after slow consolidation.

Over the years, the structure of premium income has also rearranged: in the past, life insurance produced more premiums, while today non-life is dominant. Gergo SZENICZEY emphasized, however, that penetration was falling short of expectations: the central bank had set a 3% target, but it was still around 2.5%. Although the figures are developing nicely in nominal terms, we can only talk about stagnation in proportion to GDP.

The MNB Executive Director mentioned, speaking about life insurance, that regular life premium income is growing steadily, even as the number of contracts has stagnated in the last few years. Emergence of pension insurance and ethical regulations provide a stable background, he explained. Pension savings account for a quarter of regular premiums. According to the experts, after stagnation in 2020, there was a 27% increase last year. Traditional products also performed well, but two-thirds of the growth is related to unit-linked.

Non-life increased by 7.9%, within which, in addition to the minimally rising MTPL, Motor Hull achieved almost double-digit growth. According to MNB, MTPL claims increased in the second half of 2021. However, the adjusted result, which takes into account development of losses and tax changes, is already approaching the pre-pandemic level. Transparency in claim settlement is increasing, supported by new regulation on non-life insurance, which require insurers, among other things, to publish claim settlement information on their website.

Housing Insurance is also moving towards transparency and greater competition. The number of contracts has now exceeded 10,000 and the insured assets HUF 400 billion. However, according to the MNB, the upswing could be even more dynamic.

Speaking about profitability, it was mentioned that the sector closed another strong year: profit of around HUF 80 billion is at the pre-crisis level. However, the structure of the profit is much more favorable, the technical result dominates, the profit margin is 20.7%. Capital adequacy remains stable, with the domestic sector doubling the level required by law, all insurers are above 150%.

Gergo SZENICZEY also covered the impact of the Russian-Ukrainian conflict, emphasizing that it is not significant on the domestic sector. The supervisory dividend cap also contributed to the high capital adequacy (206%), making the market resilient to shocks. At the same time, the MNB intensively monitors potential risks, thus assessing, among other things, asset exposure directly related to the region and the impact of changes in foreign exchange rates. The direct impact is not significant, but changes in the external environment, such as rising yields, need to be taken into account, he said.

*EUR 1 = HUF 369.22

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