Klime POPOSKI, PhD, President of the Council of Expert Insurance Supervisory Agency, Macedonia 12 June 2014

12 June 2014 — Vlad BOLDIJAR
klime_poposki2XPRIMM: Which were the most important changes/trends, both - in the economy and insurance industry - in 2013?
Klime POPOSKI:
In 2013 the economy of Republic of Macedonia achieved real GDP growth of 3.1%, and indicators on the industry and the construction sector are showing further growth in these activities. The 2013 inflation data demonstrates that we have a moderate annual inflation of 2.8% with a declining trend for 2014.

2013 was a successful year also for the insurance sector in R. of Macedonia, both with regards to the growth of GWP and the number of sold insurance policies, and with regards to the increased profitability of the insurance companies, growth in capital, assets and financial investments as part of the assets, as well as the increased number of employees.

The GWP in 2013 was MKD 7.19 billion, an increase of 2.60% by comparison to the GWP in 2012 (2012: MKD 7.01 billion).

There are positive trends in both insurance segments, with GWP of MKD 6.47 billion (2012: MKD 6.41 billion) in the non-life segment, or 89.86% of the total GWP of the insurance sector, a 0.79% growth compared to the previous year.

As for the life insurance, representing 10.14% of the total GWP in the insurance sector, or GWP of MKD 729 million (2012: MKD 598 million), there was a 21.96% growth, the highest among the countries in South-Eastern Europe.

The real growth of the insurance market is much higher and is 4.04% compared to last year, if measured (expressed) through the number of insurance policies sold (2013: 1,058,074; 2012: 1.418.575). The high competition of the 11 non-life insurance companies resulted in price decrease, resulting in only slight growth of 0.79% of the GWP.

XPRIMM: How would you characterize the local insurance market's evolution in 2013?
K.P.:
In 2013, the number of insurance companies performing insurance activities on the market insurance in Republic of Macedonia remained unchanged (11 non-life and 4 life companies). However, the number of insurance brokerage companies increased by 6, or 26 in total.

The market concentration insurance companies is moderate and none of the companies exceed the threshold of 20% share in the total market. Nevertheless, there is a trend of reduction in the market concentration among the market leaders, where 5 non-life insurance companies have shares above 10% of the total GWP.

I would like to emphasize that after two years of showing losses at industry level, in 2013 the insurance sector achieved profits in the amount of MKD 211,695,988. Among the life insurance companies, two insurance companies showed losses in the amount of MKD 24,201,965 and two companies showed profits of MKD 70,470,878. Among the non-life insurance companies, two insurance companies showed losses in the amount of MKD 153,186,162 and the remaining nine companies showed profits of MKD 318,613,237.

Also, for the first time in the history of the insurance sector in R. of Macedonia, life insurance exceeded the threshold of 10% market share in the total GWP of the insurance sector. At the same time, it is worth mentioning that there is 52.66% growth of issued policies for agriculture insurance compared to 2012, that is to say, the total premium in these agreements was MKD 88.53 million. This is due to the measures of the Government of R. of Macedonia for subsidizing 60% of agriculture insurance premium, as well as to the ISA's promotional and educational activities for familiarizing the public about this type of insurance.

XPRIMM: For the local insurance industry, the year 2014 started better or worse than previous years (2008-2013)? Why?
K.P.:
The first quarter data has to be submitted by the insurance companies to ISA by 30th April 2014. Because of that, we are not in a position to answer the question. However, if you do not need the answers urgently, we may additionally reply to this question, as soon as we have the statistical data for the first quarter of 2014.

XPRIMM: Are there any major changes to be made in the near future that will target the insurance industry?
K.P.:
Since the reinsurance company Europe Re received its license from the Swiss regulatory body (FINMA) (December 2013), we are expecting the sales of the first property insurance from earthquake risk by the end of the first half of 2014 with very competitive prices. Additionally, one of the top priorities of the Europe Re project is creation of attractive products for the agriculture insurance. Following the long-term risk and damages analysis in the agriculture sector, caused by the global climate change, the most efficient and economical way of coping with these consequences is the purchasing of agriculture insurance.In that context, we expect this type of products, supported by Europe Re, will give a significant contribution to the development of this segment and the overall growth of the insurance market.

This year, for the first time we are expecting that the insurance companies will offer voluntary health insurance. Voluntary health insurance has a great development potential on the insurance market, much to the satisfaction of the citizens and the insurance companies as well.

Also, it is expected that the Insurance Supervision Law will be amended in order to harmonise it with the Law on payment of pensions and non-contributory benefits from the fully funded pension insurance, thus allowing the life insurance companies to offer annuity products for the persons eligible for pensions from the second and third pillar of the pension system.This will represent an additional factor for the development of the Macedonian life insurance market.

It is also worth mentioning that there is rising interest among the banks for insurance agency licenses for the purpose of offering credit life products.

XPRIMM: What are your expectations for the end of 2014? (Forecast for the local insurance industry)
K.P.:
In 2014, we are expecting growth in the GWP for both non-life insurance and life insurance.

The segment of life insurance will continue to grow by double digits this year as well. Furthermore, the increasing involvement of the banks as an alternative sales channel for these products and their bundling with the banking products is one of the challenges for the development of the life insurance segment. Also, relevant factor in the long-term prospects for development of the life insurance segment is the macroeconomic, monetary and fiscal stability of the country, as well as the continuously increasing rate of financial literacy among the citizens of R. of Macedonia.

The long-term sustainable strategy of the Government of R. of Macedonia for attracting foreign direct investments, which resulted in new production capacities, will continue and will increase the demand for property insurance, accident insurance, transport insurance, as well as liability insurance.

The implementation of the Europe Re Project is expected to dynamise the segments of property insurance and agriculture insurance, whereas the introduction of new innovative insurance products will undoubtedly incentivise the development of other categories of non-life insurance.

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