XPRIMM: What is your view on how the insurance market has evolved during the first half of 2020?
Boris Saban: The year 2019 was encouraging for the whole insurance market. A record premium of EUR 94.7 million was recorded, driven by a growth of almost 9.7% when compared to 2018.
This positive trend continued throughout the first quarter of 2020. Unfortunately, the unexpected COVID-19 crisis has slowed down this trend in the second quarter of the year; a decrease of EUR 1.5 million was recorded when compared to the same period of the previous year [2Q2019], which translates to a decrease of 3.9%. I may, however, say that the premium decrease is smaller than we estimated at the beginning of the crisis. Therefore, the market stability has been preserved.
COVID-19 crisis has obviously affected the whole Montenegrin society. The drastic quarantine measures and partial or full suspension of almost all economic activities has certainly had a negative impact on insurance company businesses as well.
The measures introduces by our authorities led to urgent adjustment of insurers' business activities - implementing work from home regime, closing down their offices and such. The sale and services had to be organized in these new conditions.
I am glad to say that our insurers reacted quickly and continued their daily business despite new circumstances. Issuing of MTPL insurance policies and vehicle registrations were conducted smoothly during the whole period. These two facts are very important for keeping the market stability, considering the fact that compulsory insurance is still dominant in the premium structure of the whole market.
The most difficult period for the insurance market was in April, when the premiums decreased by 29.3%. The stabilization of premiums occurred during May and June.
The crises had a negative effect on Retail business, which was expected, due to the decrease in travel and economic activities. For example, when we compare it to the same period of 2019, Casco insurance decreased by 19.8%, Accident insurance decreased by 12.2% and Travel insurance went down by 27.7%. However, the decrease in nominal amounts was not so drastic for insurance market.
On the other hand, the property insurance, mostly corporate accounts, remained stable in the first half of 2020 which had a positive effect to the suspension of decrease of the total insurance premium in the first half of 2020.
Unfortunately, the awareness of the necessity of NatCat risk is not an issue. The property insurance in Montenegro is relatively modest and one investment can affect the premium increase in the relative amount.
Currently there are several large investment projects in Montenegro, the construction of the highway being one of the most significant one. This has certainly had a positive effect on the premium increase during this period.
Prior to COVID 19 crisis one of our priorities was to raise citizens' awareness of the importance of insurance. Property insurance is one of the key segments of the new strategy. Unfortunately, the crisis affected the delay of the activities on implementation of the new strategy.
Despite the relatively modest participation of life insurance in total premium in relation to other European countries, we can say that this segment signals positive trends. People are more and more interested in this type of protection. This above all relate to people that already have life insurance policy. They are willing to increase their life insurance premiums payments for their existing arrangements.
This trend has been mentioned in discussions with colleagues from life insurers. The invoiced premium increases, even though the number of signed insurance contracts, is at approximately the same level. This indicates that citizens gradually begin to understand and accept life insurance, since they invest more capital in their life insurance policies.
It will definitely be very difficult to achieve the premium level of 2019. COVID-19 crisis is still going on. It is extremely difficult to anticipate when it will end. This will most certainly impact in a negative way the evolution of some insurance business lines.
However, the increased interest in traditional insurance products in crisis conditions has proven an advantage, since the market stability and clients' security maintained. Our market has successfully resisted the first and most difficult crisis impact and I believe that during the following period it will manage to extenuate its negative impact.
National Bureau of Montenegro Insurers (NBOCG) is an institution founded for purpose of pursuing common interests of insurance companies conducting compulsory and other insurance business in Montenegro. After the declaration of independence of Montenegro in May 2006, there was a need of forming an institution which will represent common interests of insurance companies, and also protect the insured's' interests. National Bureau of Montenegro Insurers was established on 2nd April 2007 by the Decision of Assembly of the country
Find more information about the NBOCG at nbocg.me/en
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