STATISTICS: GEORGIA, FY 2014: Excluded from the state health insurance program, insurers have improved profitability

Georgian insurers were confronted with a challenging year in 2014, mainly because of the health insurance program cessation. "The state health insurance program - initiated by the Government of Georgia in 2007 in order to provide medical insurance to vulnerable groups of Georgian population via private insurance companies -, represented app. 45% the total 2013 GWP. In 2014 the program was canceled. As a result, despite the robust growth in corporate sector, the insurance market shrank by 30%," Vakhtang DEKANOSIDZE, CEO IRAO told XPRIMM.

All in all, GWP by the Georgian insurers amnounted to EUR 133.6 million, 32.3% down y-o-y (GEL 302.6 million). The main reason of this decline lies in the complete removal of the insurance companies, starting April 1st, 2014 from all the government's projects, such as the universal healthcare program. However, as Lasha NIKOLADZE, Head of the Insurance State Supervision Service of Georgia explained for XPRIMM, although this decision affected the companies' revenues, it also led to a visible improvement in the market players' profitability: "We can clearly conclude that the removal of financial programs, which aggravated the financial situation of companies, caused an increase in revenue and an improvement in the balance."

Life insurance doubled its share in the market portfolio, from 21.67% in 2013 to 5.5% in 2014, GWP on this market segment increasing by almost 40%, to EUR 7.35. Still, life insurance remains a very small part of the market and is still in its infancy, as a business line.

Apart the segment related to the national health program, non-life insurance lines performed well, recording double impressive digit growth rates on all lines, although GWP volumes are very small as compared with the other markets in the CEE and CIS regions. According DEKANOSIDZE "the most promising business line based on market capacity and potential is the motor line. The point is that, among officially registered 900,000 vehicles, approximately 7% are insured with motor hull risks and about 6% are MTPL insurance holders. With the implementation of MTPL Law, which is planned for next year within the EU Association Agreement, the motor insurance has to become the line that fuels whole insurance industry." It should be reminded in this context that MTPL insurance is not yet mandatory in Georgia. "However, competition is still high between local insurance companies' on the motor segment. Nevertheless, the market has plenty of space for expansion and we are striving to broadening of our customers number by setting up affordable motor insurance system and reliable reimbursement policy. Currently motor business is profitable," said the IRAO head.

As for the 2015 perspectives, Vakhtang DEKANOSIDZE said: "Considering the rapidly growing market conditions and the fact that insurance industry becomes more popular in Georgia, insurance products are shifting from luxury goods to the necessity goods category. Compulsory MPTL law is still on the agenda in Georgia. Within the South Caucasus region, Georgia is the only country where the law is still not enforced. This legislation initiative will significantly increase and stimulate the growth of motor insurance market share itself."

GPI Holding, established in 2001, is part of the Vienna Insurance Group since 2006. The company holds the leading position on the Georgian insurance market, with a market share of 26.2%. IRAO, the secong insurer owned by VIG in Georgia, was founded in 2004. Currently the company ranks fourth, with an about 9% market share.

The full version of the interview with Mr. Vakhtang Dekanosidze, CEO of IRAO, will be soon available on xprimm.com.

Access www.xprimm.com and download the FY2014 Georgian insurance market statistics.

Market portfolio & market ranking (in EUR and GEL):
  • Gross written premiums
  • Paid claims
  • Growth rates

Follow XPRIMM Publications on LinkedIn, for more data on the insurance and financial industry.

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