MTPL in CEE, 2014: Stable premiums, but scarce profitability and worsening technical results in the big markets

In 2014, among the motor insurance lines, the compulsory MTPL segment recorded the most stable evolution in CEE, with an almost insignificant y-o-y decrease in premium (EUR 5.46 billion). However, it should be said that the "regional stability" of the MTPL line is only the result of consolidation, at individual level the region's countries showing extremely divergent trends.

The total MTPL premiums volume decreased by about EUR 50 million, a negative results which sums the over EUR 230 million fall of the GWP recorded in Poland, Croatia, Slovenia and Bulgaria, with the significant growth in premiums recorded in Romania, Albania, Serbia and Slovakia, as well as with mixed results of the other markets in the region.

The most significant GWP decreases were determined primarily by the still ongoing price war. By far Poland experienced, in absolute terms, the largest drop in the MTPL premium volume, of about EUR 126 million. According to the insurers' association representatives, the competitive pricing was the main driver of the premium decrease, also leading to a worsening negative technical result.

Falling MTPL tariffs were also the main reason for which the Croatian specialty market saw one of its worst years in 2014, with GWP decreasing by over 18%. "Liberalizing of the motor third party liability insurance market resulted in a sharp downturn in MTPL market premium," explained Hrvoje PAUKOVIC, Director, Croatian Insurance Bureau, adding that "the 2014 figures reflect the intense competition between the insurers and the declining MTPL premium rates."

Among markets which recorded a positive dynamic of the MTPL segment, Romania posted the most impressive result in absolute terms (plus EUR 75.3 million against the 2013 GWP volume), as an aggregate effect of the average tariff increase and the growth of the policies' number. However, claims payments also increased, although to a lesser extend and by the end of 2014 the MTPL segment continued to remain unprofitable, with an aggregate combined ratio of 121.7%.

In relative terms, Albania was the undisputed champion of the MTPL premium growth, with an over 80% increase in GWP as a result of a necessary market correction required by the collapse of prices to a dangerous level during the first two years which followed the tariffs liberalization in 2011. "The Board of the Albanian FSA undertook two major decisions in order to discourage frequent fluctuations and under pricing: a compulsory cash reserve in earmarked accounts, for the sole purpose of paying MTPL claims and a three-year schedule for arrears payments due from the uninsured claims. These stabilization measures proved effective in terms of putting pressure toward more adequate pricing, which has been maintained for more than one year," Mrs. Enkeleda SHEHI, Chairperson of the Albanian FSA explained.

Changing of the market regulation was the main driver of the 7.7% growth of the MTPL premium volume also in Serbia.

On the other hand, although still modest in numbers, there are examples of CEE markets where the MTPL premium volume grew mainly due to the increase in the number of insured cars as a result of the vehicles sales growth. Hungary is one of them. "The premium revenue from MTPL insurance grew by 9.2 %, one of the main reasons being the increase of new contracts due to the purchases of new and old cars. The number of MTPL insurance contracts increased by 4.8 %. Yet, the increased number of contracts and more frequent use of cars (as a natural consequence of the recovery) resulted in more claims in the field of MTPL insurance, the total claims expenses for MTPL rising by 4.6% in 2014," as Anett PANDURICS, MABISZ President explained.

All in all, in most countries the MTPL segment is still dealing with a high volatility and produces poor financial results affecting the overall stability of the non-life insurance sector and of the insurance companies at individual level.

A detailed analysis of CEE, SEE and CIS motor insurance markets, comprising the full motor insurance statistical data for each country, as well as detailed data regarding the structure and evolution of the national vehicles stock and road accident statistics is available in the latest issue of the XPRIMM Motor Insurance Report which will be officially launches at Istanbul, on April 20th, on the occasion of the 5th edition of the IIF - Motor insurance-the road towards profitability conference.

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