NATIONAL BANK OF SERBIA
Insurance Supervision Department

XPRIMM: How do you comment on the 2016 overall results of the insurance market in your country? What are the main trends recorded during the period?
NBS:
Developments in the Serbian insurance market indicate positive trends. Insurance sector maintained its position as the second most important segment of the Serbian financial market increasing its share of the financial sector's balance sheet total. Capital adequacy, measured by Solvency I ratio, was very good in both non-life (217.0%) and life (244.7%) segment of the market. Last year was also a very profitable one, both for non-life (RoE of 12.9%) and life (RoE of 9.9%). Positive premium development continued in 2016. at a rate of 10.1% y-o-y driven mainly by positive developments in the life premium segment.

XPRIMM: What are your expectations for the current year's results?
NBS:
There is a lot of catchup potential of the domestic insurance market, having in mind the level of its development compared the EU average. We can expect to see a continuation of positive premium developments coupled by a healthy increase of technical provisions. This should translate into sufficient capital adequacy and a continuation of positive trends in profitability, provided that cost pressures are kept in check.

XPRIMM: Has the market seen any legal changes of some relevance in 2016? Are any in preparation for the near future?
NBS:
Last year was dominated by alignment of operations of market participants with the requirements of the new Insurance Law. This year, the most important legal change has been an amendment of the National bank of Serbia's Decision on technical provisions in April 2017. In line with the developments in other European markets and a strong decrease in the yields on Serbian long-term government bonds, we have cut the technical interest rate for the calculation of mathematical provision from 3.0% to 2.25% for euro denominated life insurance products. This change will affect contracts concluded from August this year onwards. We expect insurance companies to adjust their product offerings before this date without any problems and we will continue to closely monitor ALM risks in the life insurance market.

XPRIMM: As the statistical data show, a significant increase was seen both in the GWP and in the indemnities paid for life insurance in 2016. Can you please provide more details on this trend? Which were the main growth drivers?
NBS:
Life insurance is the most dynamic segment of the Serbian insurance market. It recorded a 19.4% growth rate to reach premium share of 25.9% for the first time. This segment of the market shows signs of maturing evident in significant increase of payouts to beneficiaries while still maintaining double digit premium growth. Diversification of life insurance products is increasing as can be observed in the prominence of bank assurance and pure endowment products, as well as introduction of group life policies and unit-linked products.

XPRIMM: Please comment on the MTPL market evolution - trends, profitability, evolution of the average premium and average claim values etc.
NBS:
MTPL, as a compulsory line for 2.4 million vehicles, maintains the first place in the Serbian insurance market with a share of 34.0% in the total premium, down slightly compared to previous year. MTPL recorded modest premium increase of 4.3% y-o-y after a strong increase in premium in the previous period. 10 insurance companies offer cover with an average premium of little over a hundred euros, which has been stable for some time, with a slight increase of the rate of claim settlement.

XPRIMM: Are there any changes to be expected for 2017 in the market's structure? (privatizations, other M&A operations etc)
NBS:
Serbian insurance market is dominated by subsidiaries of EU insurance groups which have a share of 77.0% in the balance sheet total. Having this in mind, the number and the structure of market participants has been influenced by global strategies of insurance groups present in the Serbian market and the region. This year we expect the merger of two former subsidiaries of Axa with a local subsidiary of Vienna Insurance Group, as a part of a regional deal between these two groups. No other plans and developments have been announced so far.

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