No. 128, March 12th, 2009
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XPRIMM
News - THE ROMANIAN INSURANCE MARKET NEWSLETTER No. 128, March 12th, 2009 Click here to subscribe! Click here to unsubscribe! |
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| EDITORIAL |
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Since late 2008, the uncertain economic climate has stopped or significantly reduced production, thus leaving the services uncovered, too, as the ambiguous evaluation of the crisis effects depends on the degree of anticipation of the psychological effects on the population and on its inconsistency under pressure, rather than on the accuracy of the statistical forecasts. More specifically, regarding the insurance market, the accelerated growth scenarios promoted during 2008 were shattered by the crisis, as the insurers took without delay a defensive position and manifested a reserved optimism, because the current economical environment affects, firstly, the trust of the population and its openess towards investments. So, 2009 announces changes in the strategies of the insurance companies, with increased emphasis on existing customers retention, governed by the adaptability to the economic context, in all aspects: products portfolio, pricing policy, costs management, the focus on retail especially for life and health insurance and promoting the insurance classes which cover the risks that companies and people are facing these days. Also, the trend that is classic for the Romanian insurance market, namely the domination of motor insurance, will be maintained, even if diminished because of the reduction of sales of new cars. In the context, in which lending and leasing have been the major engines of growth for the general insurance market, blocking and respectively restricting of these activities have already manifested a serious impact on the volume of new business. For the future ... it is estimated a pronounced slowing of the growth, even more so as the banks expect credit standards for the population to continue to become more severe... The volume of insurance premiums will also be affected, to some extent, by the restriction of activity in industry and in constructions, but also by the declining financial availability of the companies, in all sectors of activity. However, insurance costs should not be suspended or reduced from the simple reason that under the current conditions of granting credits and financing, companies need quick access to financial resources in case of any unfortunate event that might occur. Thus, the insurance for non-payment risk and for loss of profits or the business interruption insurance could have evolution rates closely related to the financial crisis, this time positive ones... In terms of prices charged by insurers for 2009, an overall increase is expected, but at the same time, they will represent, more than in previous years, the main decision factor in aquiring an insurance. Thus, companies must find the compromise solution between the preservation of products' attractiveness and remaining within the prudential margin, considering the volatility of the economic environment... The insurance mediation market, in return, could have significant benefits in the current situation, in the context of the increased risk exposure and increased need to reduce the insurance costs that will push customers towards brokers and financial consultants to manage their insurance programs. Therefore, the effects of the financial crisis on the insurance market may not be statistically quantified until after the first half of this year, but until then, the behavior of the "consumer" of financial protection products will continue to "psychologically blackmail" the strategies of the companies... Up to this point, what is for sure is that the crisis will avoid those insurers that apply effective profit and staff management strategies and that refocus from an extensive growth and gain of market share at any costs towards making the activity more profitable, by the best management of operational costs and of the portfolio. by andreea.ionete@mxp.ro |
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| INTERVIEW |
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Karina ROSU: Reduced activity in production industries will also affect companies in the services field, and this reduction of the activity will also reflect itself, to some extent, in the volume of insurance premiums, at least of those directly related to the volume of activity and number of employees. At the same time, obviously, motor insurance will register a stagnation because of the reduction of the sale of new cars. However, there is still a large fleet of vehicles in circulation. We do not believe that reducing or renouncing at the cost of insurance is a good long term solution, especially in the current conditions for granting credits and financing, when following an accidental event companies will need quick access to financial resources. If customers want to reduce their insurance costs, we advise them to choose those alternatives that do not leave large uncovered risks. It is likely that the brokerage activity will be less affected than the insurance market, so customers, if they want to reduce insurance costs, will call on the knowledge and negotiating power of insurance brokers to design insurance programs appropriate to the risks they are exposed to and to negotiate the insurance conditions and premiums. XPRIMM: What product/insurance class do you consider to have the biggest growth potential for the next period of time, in our country? K. R.: The insurance class that had the most visible evolution, related to the financial crisis, is that of the insurance for the non-payment risk. The demands for this type of insurance have grown, but at the same time, we can expect a tightening of the conditions for granting such coverage by insurers and reinsurers. Insurance for loss of profit, concluded together with property insurance, should also show an increase, because after an event, resuming the company's activity, and consequently, the return to the revenues before the damage, can take a long time. In the context of crisis, companies will no longer have the financial resources necessary to support salaries and fixed costs during this period of reduction, or even cease, of the production. From our experience, the damage on the business interruption segment is much higher than the damage suffered by the society's heritage. In the retail segment, with the introduction of mandatory household insurance, there will obviously be an increase, not only for the mandatory insurance, but also for the voluntary one, which we believe can be sold very well, along with the mandatory ones. From our perspective, it is exactly this education of the insurance consumer that represents the the main advantage of involving the commercial insurance market in this project; by contrast, the distribution of this insurance to the financial administrations, which perhaps could have been easier to organize, would have had the great disadvantage of perceiving the insurance as a simple tax. With this method, we go beyond the concept of tax, and customers can learn more details about what the insurance product really is. Regarding the evolution of insurance premiums in 2009, theoretically we expect a general increase (passing to the level of "hard market"), but the practice so far does not indicate these increases yet; furthermore, in many European countries slight premium reductions can be noticed . In general, the Romanian insurance market is very competitive on most insurance classes, in terms of the premiums' value. XPRIMM: How would you assess the evolution of the insurance market, in the near future? K. R.: In the current conditions, it is difficult to assess what will the overall evolutionary trend be, but taking into account that there are still many sectors and insurance classes that had not been exploited yet, the market should follow an upward trend. If people understand that there is the option to insure, certainly the number of new clients will increase. However, taking into account the force reduction that is to take place, a matter to be considered would be the phenomenon of postponement or reduction of employee benefits packages, including insurance. XPRIMM: What is the most urgent problem encountered on the Romanian profile market? Do you have any solutions for solving it? K. R.: If we talk about the "normal situation", without making any reference to the influence of the crisis, two of the problems encountered on the Romanian market, in terms of offers from the insurers, are: the limited capacity to cover large projects and the lack of options for certain professional liability insurance classes. For example, there are consultancy companies with an activity that doesn't classify them as a typical insurance companies, and they do not have products specialized for these fileds. The solutions here are optional reinsurance placements, and AON BENFIELD Re can offer support or co-insurance arrangements in this case. Obviously, there is also the solution of the direct placement on the international market, taking into consideration the legal stipulations related to FoS (b. red.: Freedom of Services). This solution is used, in most cases, when the insurance product is not available as such to local insurers. For now, the demand for such insurance is not great, and the products that were developed have addressed, in particular, to large customers from abroad. If we talk about the current situation of the international crisis, AON designed and developed special products that provide protection in the event that one or more of the insurers involved in the insurance programme of a client become insolvent or get downgraded under a certain level by the rating agencies, and these policies "fill up" the capacity that remained uncovered. XPRIMM: A very large number of insurance companies in the European Union have notified the ISC of the intention to carry out activities in Romania. Do you collaborate with companies in this category? K. R.: From our experience, the majority of these insurers have notified of this intention in order to provide their international clients with coverage in Romania, through the international insurance programmes in force. Some of them, and especially those who have "niche" style products or approaches, really want to develop the relationship with the local brokers. For these insurers, the broker is essential as, in principle, it represents the only way they can reach the client, in the absence of a local network. We work with several insurers in this category, either on international programs, or for special insurance products. However, the local insurance market is still very competitive from the perspective of the charged premiums, and therefore it is still of interest that, for products and limits available to local insurers, we use this market. |
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| TOP PRESS |
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The FIAR attendance, a tradition for the big insurance and reinsurance
companies Shareholders must bring another EUR 300 million to the capital
of the Romanian insurers Four life insurance companies will officially enter the market
next month ISC: AOL Law will be enforced at 1st of July A third of the national insurance sales - the work of brokers AIG Life Romania doubles its profits in 2008 ASTRA business grew by 75% in 2008 GENERALI PPF Holding goes multibranding strategy Claims grew faster than the underwritings in 2008 Health Ministry: "The package of basic health services" and
the co-payment will be adopted starting the 1st of September 13% of the population of Bucharest want a voluntary health insurance A new law for the agricultural insurance Rapid fall for the credit insurance
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| CEE, RUSSIA&CIS |
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STANDARD& POOR's affirms 'A+' Rating for VIENNA Insurance GROUPAMA Poistovna launched on the Slovak Market Growth of financial loss insurance in Croatia MARSH Scores at Euro 2012 GUY CARPENTER launches Central and Eastern Europe flood model The Annual International Conference on Risk Management in Almaty All-Russia Conference on Reinsurance has come to its 13th edition |
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| FINANCIAL NEWS |
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GLOBAL FINANCE: Investments of some EUR 50 million in Romania DACIA joins the EUR 2 billion business club of companies ROMTELECOM: The market will continue to rise REAL: Romanians go to the hypermarket once a week but buy more |
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| EVENTS | ||
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THE EDITORIAL STAFF: |
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| XPRIMM
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