Conclusions: TBILISI - the first Georgian International Insurance Conference

14 March 2019 — Daniela GHETU
Conclusions: TBILISI - the first Georgian International Insurance Conference
georgia2019lThe first Georgian International Insurance Conference took place on 14 March 2019. The event put under scrutiny the current status and the future development perspectives of the local market, in an attempt of identifying the main growth opportunities. The forthcoming launch of the mandatory MTPL system was the most important topic on the agenda, as this new line of business has the potential to provide for a significant growth, but also to become a market disruptor.

The event was produced and organized by XPRIMM, with the official support of the Insurance State Supervision Service of Georgia. Several local and international companies have supported the conference organization:
  • General Partner: ALDAGI
  • Official Partners: AON, Vienna Insurance Group, IRAO
  • Partners: SCOR, EUROINS, ARDI
  • With the support of the Georgian Insurance Association
Below you will find the main statements from the conference.

Chairman of Service, Insurance State Supervision Service of Georgia

  • the Georgian economy did very well during the last years and expect a positive evolution also in the next years; overall this is providing for a good growth environment also for the insurance industry ;
  • Georgia ranks 6th in the Top 10 in ease of doing business terms ;
  • the main legal acts governing the insurance sector are the Civil Code, the Law "on insurance" and the Law on non-State pension insurance ;
  • minimum capital requirements for the insurance companies will increase to GEL 7.2 million for non-life insurance and 4.8 million for life insurance, starting December 2020 ;
  • Georgian market's aggregated profit doubled from 2017 to 2018 , reaching some GEL 42 million ;
  • health insurance still keeps the largest share in insurer's overall portfolio, but it is the most loss bearing as well; Introduction of compulsory MTPL is expected to increase the share of motor insurance business by 150 to 200 mln. GEL within the next few years ;
  • increasing market capitalization is one of the main part of the preparation of the market for the introduction of Solvency II ;
  • our top priorities, as market authority, are: Introduction of full-scale Compulsory MTPL; regulation on per risk net retention (reinsurance regulation); regulation of insurance intermediaries; updates in claims analytical reports; supporting the market in the preparation to Solvency II, as well as IFRS 17 & IFRS 9.


Member of the Managing Board, VIG, Austria

  • Central and Eastern Europe is VIG's core market, which is in fact one of the differentiating factors in VIG's portrait ;
  • VIG is a first mover in the CEE ;
  • VIG's success story in the CEE is based on local entrepreneurship, multi-brand strategy, multi-channel distribution, conservative investment and reinsurance policy ;
  • in VIG's view banking partnerships are preferable to ownership of insurance companies by banks, providing for more transparency and better service for the customers ;
  • VIG believes that the insurance market as a driver for the economy in Georgia, and also an important stabilizer and facilitator of economic development; the local insurance law is modern, oriented towards the EU standards; the regulatory environment is stable for insurers ;
  • VIG targets a long-term market leadership in Georgia, also after the mandatory MTPL introduction.

CEO, ALDAGI, Georgia

  • there is significant room for growth in retail and SME insurance markets, in Georgia ;
  • it is good to see that the market becomes more profit oriented, paying more attention to the quality of underwriting; the role of actuaries is increasing ;
  • creation of the Compulsory Insurance Center, managing the distribution of the border MTPL insurance for foreign vehicles, was a really good move both the market and the customers ;
  • the next big step that follows for our market is the introduction of the mandatory MTPL insurance - there is a market of about 1 million cars to insure, which will open huge opportunities to up-sell and cross sell, as well as a mean to reach closer to much many clients and increase insurance awareness ;
  • one of the main challenges for us is to move from the product centric to a customer centric approach.

General Manager, Market Development. A.M. BEST, MENA South and Central Asia

  • not all emerging markets are the same; they have different features but also some similarities, for example a visible predominance of the motor business, and a rather low participation of the life segment to the portfolio ;
  • several factors drive insurance growth: GDP, financial inclusion, inflation, legal and regulatory factors, technology or insurance industry ;
  • economic growth and changing demographics almost guarantee that emerging markets will continue growing faster than mature markets ;
  • accelerating that growth further and reducing the protection gap is a challenging task ;
  • there is no single stakeholder that can increase insurance penetration on their own ;
  • growth does not guarantee improved profitability.

Treaty Reinsurance Broker, AON Benfield

  • Global reinsurance capital stood at USD 595 billion at September 30, 2018
  • Traditional capital fell 4 percent to USD 496 billion, while alternative capital rose by 11%
  • Globally, headline growth in alternative capital is slowing, as the continuing entry of new funds is being offset by loss development on past events and redemption requests from a relatively small number of investors looking to exit.
    • Many investors in the final quarter of 2017 have experienced some combination of lower than expected pricing, creep on 2017 events and further losses in 2018
    • Significant amounts of collateral have become trapped and the ongoing commitment of newer participants is being tested
  • AON expects the previous rate of growth to resume once losses are digested as may long-term investors have made good returns over time and the diversification strategy remains valid.
  • Catastrophe bond issuance totaled USD 9.7 billion in 2018, making it the second most active year on record
  • Total limit outstanding is at record high of more than USD 30 billion
  • Global insured losses in 2018 were tentatively listed at USD 85 billion, which is 47 percent higher than the 2000-2017 average of USD 56 billion
  • Tropical cyclone accounted for USD 29 billion in industry payouts (down from USD 94 billion in 2017)
  • US wildfire accounted for USD 17 billion, with the Camp Fire alone producing more than USD 11 billion in loss
  • For the second consecutive year, the US was the predominant driver of industry losses (65 percent). Followed by APAC with 23 percent, EMEA at 10 percent, and the rest of the Americas at 2 percent.

Anastasia LITVINOVA,
Director Insurance, FITCH Ratings

  • Key growth drivers of life insurance in CIS & Georgia differ from one region to the other:
    • Georgia: Payment protection products sold through the bancassurance channel form the core part of the sector premiums
    • Uzbekistan/ Azerbaijan: Tax incentives allow employers to use short-term life insurance as part of remuneration packages
    • Russia: Hybrid life products offered as a substitute for bank deposits were the key factor behind 51% compound annual growth rate of life premiums written in 2016-2018; the growth in Russia is expected to decelerate due to saturation and tighter sales regulation
    • Kazakhstan: Pensions annuities and payment protection products support growth. The annuities transferred from the state pension system are often associated with high acquisition costs paid to agents and are exposed to volatile surrender patterns
    • Belarus: Sector grows though traditional savings products, but it will take time to restore consumer confidence after the past experience of severe inflation and national currency depreciation
  • MTPL claims frequency is impacted by many factors, including road safety, claims settlement regime, conduct supervision, etc.
  • In the CIS region, low levels of the MTPL claims frequency often mean that claim filing and settlement procedures are uneasy for policyholders. This may undermine policyholder interest to basic insurance products and confidence to the insurance sector as a whole
  • Bonus-Malus system appears an efficient instrument for insurers to manage the MTPL loss ratio when claims settlement procedures are improved for the policyholders and the claims frequency grows
  • Key Risks and Opportunities for Insurance Sectors in CIS and Georgia:
  • Risks
    • Risk-adjusted capital strength weak relative to risks on the asset side and business volumes
    • Limited inflow of capital from outside of the sector
    • Quality and liquidity of investment assets constrained by the available range of instruments
    • Limited pricing expertise in a competitive environment with low or no tariff regulation
    • Reserve adequacy exposed to a wider range of factors, including regulation and FX
    • Slow progress of IT systems constrains accumulation of data and actuarial expertise
    • Wide branch networks require close supervision
  • Opportunities
    • Yet low contribution of the insurance sectors to GDPs suggests significant growth potential in a longer term subject to the macroeconomic stability
    • In individual lines, there might be yet significant demand for motor insurance
    • Commercial coverage could be widened

Johann FUCHS,
Senior Underwriter CEE, HANNOVER Re, Germany

  • The advantages of combining multiple types of reinsurance include: the possibility of taking advantage of specificities of each type, but also satisfying individual / specific needs. Optimal combination of types depends on target of cedent / risk management strategy
  • All combinations are theoretically possible, but most of solutions follow the principles:
    • Proportional reinsurance before non-proportional reinsurance
    • Per risk excess of loss before per event excess of loss
    • Stop loss should apply as last reinsurance type
  • When choosing reinsurance products, the advice is:
    • To purchase enough capacity (especially CAT XL)
    • Check your current treaty against other types of reinsurance
    • Consider to include other lines of business into present treaties
    • Choose the right partner who will support you in bad times
      • Strong financial background
      • Long-term and consistent approach to the market
      • Experience with typical challenges of developing markets

Daniela GHETU,
Editorial Director, XPRIMM Publications

  • Many businesses have suffered a dramatic change during the last decade facilitated by the technological advancement that made possible providing different kinds of services without actually owning the specific assets (Uber doesn't own any car, as Airbnb doesn't own any hotel); What if the largest insurance provider will not be an insurance company?
  • We are witnessing a continuous cycle of change, with changes in the customers' behavior requiring technological upgrades and new technological features available determining further changes in the customers' requirements; overall, a new business approach in insurance is evolving, triggering in turn changes in the regulatory field, which in turn are again determining the advancement in technology
  • Young customers expect/pretend an insurance experience similar to that offered by other non-financial services
  • The most important change in the insurance business' paradigm is moving from REDUCING FINANCIAL IMPACT to REDUCING RISK
  • Besides the financial issue, one of the most important challenges in digitalization are the potential crisis of talents and the cultural changes in the company
  • Enabling the use of strongly digitalized insurance solutions as micro-insurance, index-insurance etc., digitalization may provide access to a much larger mass of clients and thus helping in increasing the insurance penetration, which might be of vital importance for many countries' resilience

Product Manager - Agriculture, POLISH Re, Poland

  • in 2005, the Polish government decided to help the development of agricultural production insurance by implementing subsidized insurance system ;
  • the Polish legal system which influence crop & livestock insurance is based on two main EU regulations, 702/2014 and 73/2009 ;
  • the present system of subsidizing premiums for crop and livestock insurance and partial share of the state budget in paying compensations for damages caused by drought received an approval of the European Commission, which is valid until the end of 2020 ;
  • there is a specific EU legislation, dating from 1st January 2010 in all 28 EU countries: farmers who do not insure at least half of their production in case of a disaster receive assistance from the State reduced by half (EC Regulation 1857 of 2006); this scenario was executed in Poland after the flood of 2010 ;
  • Polish farmers are obliged to insure at least half of their crops since July 2008 ;
  • a few of the issues to regulate are the widespread of insurance of crops and livestock (mortality should be added to boost the market and satisfy farmers), the increase of scope of insurance coverage in crops and livestock, the insurance of fruits products, the insurance of income for farmers, more insurers to take care of agricultural production (only 5 out of 30 insurers from Poland offer agricultural insurance).

Chairman of the Board, Georgian Insurance Association

  • There is a draft Law for MTPL in the Parliament. Basically, the draft Law is very European
  • MTPL is a very important tool in raising insurance awareness, but this means that it must be a very good service, otherwise it will lead to adverse effect
  • considering the health insurance experience, we had in this country, I would say that we have understand how a good service should work; it is relevant that although the Government has withdrawn its subsidizing for health insurance, people didn't give up on insurance, meaning that they have understood its importance
  • Motor insurance is really the mass product, involving all categories of customers
  • Mandatory MTPL is a whole new thing for the Georgian market because it has features which are not encountered in other products
  • Unfortunately, we are missing essential statistics; for example, we have 1.3 million vehicles and the Georgian police is reporting only 40 thousand road accident per year, which means that not all this information is correct
  • On the claims side, the experience accumulated in Casco is of some help
  • The government has proposed to have a price corridor; starting with state controlled prices is necessary because of the lack of proper actuarial data, but setting a corridor will leave place to a so called price war; insurers think we should start with fixed prices established by the state, than switching to a corridor and only after some year going to a free market

General Manager, Polish Motor Insurance Bureau

  • Basic requirements for a functional MTPL system:
    • Laws for all type vehicles
    • Minimum guaranty sum
    • Free or regulated system of tariffs
    • Clear system of registration of vehicles
    • Central data base of the insured vehicles
    • Supervisory system on insurance companies
    • Insurance Guarantee Fund
    • Green Card Bureau
  • Without proper supervision, problems like dumping war, market instability, low reputation of insurance or insolvencies could arise;

President, Insurance Supervision Agency, Macedonia

  • About 1.25 million people die each year as a result of road traffic crashes but they also cause between 20 and 50 million non-fatal injuries;
  • Road traffic injuries are the leading cause of death among young people, aged 15-29 years;
  • 90% of the world's fatalities on the roads occur in low- and middle-income countries, even though these countries have approximately half of the world's vehicles;
  • There are few global estimates of the costs of injury - road traffic crashes cost countries app. 3% of their GDP and this figure rises to 5% in some low- and middle-income countries.
  • Motor insurance stabilizes the financial situation of individuals, families and business;
  • The availability of Motor insurance enables individuals and business to undertake risk activities that they would abstain from in absence of insurance;
  • Road accident frequency falls dramatically once the MTPL premium is linked to driver performance;
  • Compulsory MTPL insurance effects:
    • Raised awareness of the responsibilities of the driver;
    • Counterbalanced with compensation payments (to some degree) the injuries caused;
    • Improved community responsiveness to the need to improve safety in (a) road design, (b) vehicle design, (c) driver skills, (d) driver condition (for example, not drinking and driving), (e) matching driver experience to the capabilities of the vehicle (lower-power vehicles for younger drivers), (f) car occupant safety (use of seatbelts and child seats), and (g) pedestrian behavior;
    • Wider sales and broader penetration of insurance across all classes helps the economy in many ways;
  • Countries without compulsory MTPL insurance have made much slower progress in all of these important matters.
  • Regulation/Supervision characteristics:
    • Not popular and not cheap; needs resources, operational independence, to be accountable, to have high professional standards in its staff and be strong enough for the sector;
    • Poor regulation of the segment, just like poor maintenance of a car, leads to bad accidents and injuries;
    • Supervisory bodies should not be afraid to collect a levy if better regulation is needed;

The Croatian Financial Services Supervisory Agency, Croatia

  • Before 1 January 2008, in Croatia there were mandatory unique insurance conditions and premium system (bonus malus principle) for each insurance company
  • After 1 January 2008, as a result of the change of legislation as a part of negotiation for Croatia to become a member of European Union:
    • Start of "liberalization"
    • Systematical check of technical basis for premium calculation done by supervisor
    • Insurers can make their own insurance terms and conditions and tariffs: they tried to develop their own technical basis for premium calculation, but the issue was the lack of historical data
    • Terms and Conditions and technical basis for premiums remained the same
    • Premium based on vehicle type, its purpose, technical characteristics, type of insurance, town of residence (license plate), number of reported claims...
    • Premium groups based on vehicle types (passenger cars, freight vehicles, buses, tractors, work machines, mopeds and motorcycles, trailers, motor vehicles of foreign registrations)
    • Bonus-malus scheme relates to vehicle owner or vehicle user
    • Basis for functional premium depends on license plates: unsophisticated technical basis for premium calculation
  • Starting 1 July 2013, Croatia has become a member of the European Union and the MTPL law changed:
    • Premium adequacy (both for incurred claims and costs!)
    • Insurance conditions have to be complied on
    • Insurers have to inform HANFA about insurance terms and conditions no later than 60 days before their application, for the sole purpose of checking whether they are in compliance with regulation, insurance principles and rules of profession
    • HANFA can ask for technical basis for premium calculation in order to check whether they are in compliance with actuarial principles and Croatian legislation
  • Mid September 2013 - Start of "real" liberalization:
    • Started with aggressive marketing campaign (forbidden TV commercial and marketing campaign of one insurance company because it was not aligned with Insurance law principles)
    • Other companies followed latter on
    • HANFA asked for insurance conditions and technical basis for premium calculation
    • Insurers are collecting data for their own technical basis for premium calculation, including driver's age, number of kilometers, driving habits...

Executive Director, Compulsory Insurance Bureau Azerbaijan

  • CIB functions as a non-profit organization, being a union of 16 insurance companies operating compulsory insurance in Azerbaijan; CIB operates as Motor Insurance Bureau, Compensation Body, Information Center, Green Card Bureau and Guarantee Fund;
  • CIB is financed by different sources: a 5% contribution of participant members, monetary funds raised from debt securities issued by the Bureau, income derived as a result of direct and portfolio investment by CIB, funds received from grants, borrowed funds received to cover lacking amounts for compensation payments, funds received by exercising the subrogation right, fees for Green Card claim handling and other sources not prohibited by the legislation;
  • Digitalization of CMTPL should be considered, some of the advantages being:
    • elimination of paper blanks;
    • improving transparency in CMTPL market;
    • prevention of fraudulent attempts related to agent discounts and about bad debts problems;
    • increasing of CMTPL market penetration by diversifying sales policy;
    • real-time electronic tracking of CMTPL issue/payment lifecycle (all payments transacted through GPP - Government Payment Portal);
    • automatic authentication for individuals and legal persons by ID or tax ID (thanks to the integration with Ministry of Affairs and Ministry of Tax systems);
    • granting CMTPL policies to insured persons electronically which simplifies online access to the policyholder's data;
  • Future vision:
    • developing an information system for Direct Claim Handling (CMTPL - direct sett.);
    • building trust and promoting awareness about CMTPL insurance locally;
    • digitalizing other compulsory insurance types maintained by the centralized information system of CIB;
    • achieving technical integrations with databases of stakeholders such as State Property Committee, Ministry of Labor and Social Protection of Population, State Customs Committee etc.;
    • achieving the highest CMTPL penetration;
    • developing an information system for compulsory employers' liability insurance;
    • supplying insurers with underwriting data;
    • achieving higher penetration for compulsory property insurance types: stricter legislative regulations for uninsured property;

Risk & Monitoring Manager, Council of Bureaux, Brussels

  • The MTPL insurance offers protection of victims, protection of drivers, and improved road safety;
  • MTPL is, often, the main business line on various insurance markets and has an exceptional reach to the mass consumers;
  • The Green Card system is available in 48 countries and includes a fleet of over 450 million vehicles;
  • More than 450,000 cross-border accidents take place annually;
  • Over 1500 insurers are issuing Green Card policies;
  • The Green Card system is functioning under the aegis of the United Nations (UNECE). The system aims to facilitate international traffic and economical exchange, as well as the protection of victims of cross-border road accidents (caused by visiting motorists);
  • The advantages of the Green Card system include: the facilitation of travel for drivers (the insured is insured in his home country for foreign countries and does not have to buy local insurance), a better protection of victims (the victim does not have to deal with foreign drivers/ insurers), the consumers' trust in a stable international insurance system with efficient claims handling procedures.

GEORGIA 2019 CONFERENCE VIDEO footage available on


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