The Romanian National Bank: The insurance penetration rate decreased in 2011, reaching the minimum of the last 4 years

26 September 2012 —
bnr_sediu2In 2011, the Romanian insurance market continued the downward trend of the past years, although the decreasing rhythm slowed down due to the influence of macroeconomic conditions on the consumers' financial behavior, shows the Romanian National Bank's Report on financial stability, published on the 18th of September. Life insurance was backed up by the economic increase and returned to a positive level of real growth, while the slow-down of non-life insurance led to an insurance penetration drop in GDP to the minimum value of the last 4 years, falling for the first time under 1.5%.

The National Bank Report also shows that the profitability of insurance companies remained vulnerable to the effects of the financial environment's volatility, in the context of a low investment performance.

In 2011, the volume of gross premiums written by Romanian companies dropped 5.81%, the decreasing rhythm being inferior to the one registered in 2010. Non-life insurance decreased in nominal terms by 8.37%, while life insurance registered a nominal increase of 4.36%.

"In real terms, this is the first year after the beginning of the financial crisis in which the life insurance segment returned to a positive growth rate, and the decrease rhythm of the general insurance market reduced. In 2011, the life insurance market followed the evolution of the economy, while non-life insurance market had a slower recovery. The change of the consumers' financial behavior in the past two years, translating into the limitation of sums paid for insurance products, continued to influence, even if by a smaller degree, the evolution of gross written premiums", shows the Report.

In 2011, the insurance penetration rate continued to decrease, dropping for the first time under 1.5% of GDP, due to the decrease registered on non-life market and the nominal increase of GDP. Because life insurance represents a small share on the market, its evolution had a limited influence on the aggregated indicator.

As far as paid claims are concerned, their decrease on the non-life insurance sector was more pronounced in 2011 than that of gross written premiums on the same segment. These variations were mainly influenced by the decline of income generated by underwritings on the Motor Hull and MTPL segments, as well as the reduction of sums spent with gross indemnities paid on Motor Hull.

According to National Bank specialists, the reducing of the ratio between gross paid indemnities and gross written premiums for general insurance has a positive influence on the profitability and capitalization of the insurance companies on this segment.

However, in 2011, for the first time after 2008, the ten largest insurers on the market by total assets registered a decreasing profitability, thus reaching negative values.

"The profitability levels can be affected by tensions on the international financial markets and by the evolution of the internal economic environment, through their effects on investment performance and on the recovery rhythm of the gross written premiums' value", is mentioned in the financial stability report.

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