One by one, the insurance markets of Central and Eastern Europe begin to be less and less attractive to foreign investors, coming into the region with strategies and investments fueled by the high dynamics of growth of the underwritings and by the double digit annual rates of evolution. The crisis has shattered many of the ambitions and targets set-up for local markets, and forecasts of development for the region are limited to maintaining a negative impact upon the insurance industry, on the background of low economic performance.

Business during crisis, at Yalta

These realities are the starting point of the debates occasioned by the International Forum in Yalta, an event that already reached the ninth edition, which each year brings together the most representative leaders of the insurance and brokerage markets and of many other related areas, from over 25 countries in Central and Eastern Europe. This year, organizers have prepared in the 3 days of work of the event not less than 7 thematic conferences and 3 seminars of specialty, in which there were held over 50 presentations, having as main themes the analysis of the situation in the financial sector, both internationally and nationally, as well as identifying solutions to overcome the crisis tendencies.

A first impression of its impact on markets in Central and Eastern Europe could be got judging by the number of conference participants, which was reduced this year, still standing out a significant presence of local companies, which are in full process of strategies and reinsurance programs reorientation.

Natural selection of insurers in Ukraine

An important part of discussions in the first days of the conference was dedicated to the Ukrainian insurance market, which faces serious problems as a result of the financial crisis.

Thus, global economic recession, local political crisis, the collapse of metallurgical and motor industries, as well as of the construction sector, devaluing the national currency by over 38% against the U.S. dollar, the crisis in the banking system and lower volume of loans granted by banks, along with lower income of the popolation - all these have shattered the stability and performance of local financial institutions. As a result, the profile industry, which has experienced in previous years a positive dynamic growth of over 30-40%, is, since late 2008, in full recession.

Changing trend began in the last quarter of the previous year, when banks have virtually stopped lending. If the first nine months of 2008 the insurance segment grew by 41%, by the end of the year the growth rate decreased by 10% (according to Ukrainian experts, 70% of the insurance market was dependent on bank loans). Overall, we can talk about the decline of two basic indicators: the underwriting of insurance premiums and the payment of insurance claims. Thus, the Ukrainian insurance market has seen a reduction in the volume of underwritings of about 20% in first 6 months of 2009, compared to the same period of the previous year, totaling EUR 819 million, which is the time when the crisis has made its presence strongly felt, said Oleksandr FILONIUK, President of the League of Insurance Companies in Ukraine (LIOU).

One of the most affected industries was the motor segment, which decreased by about 30%, while the damage rate increased during the first six months by 26%, up to 86%. According to the most pessimistic estimates, every third company with business on this segment will leave the market by the end of 2009. The life insurance segment lies no better, so that in the first half it decreased by 17%, to EUR 35 million.

Among the negative trends that manifest in the last perios there can also be mentioned: blocking deposits of insurers by banks in difficulty - over EUR 26 million, 10,000 cases of non-payment of compensation to policyholders, totaling EUR 17 million, the debt of insurers in cases of regression and reinsurance in the first quarter, amounting to EUR 5.1 million, the 43% increase of cases resolved by the Guarantee Fund, and the increase of the attempted fraud by 10-15%, said at the conference Oleksandr ZALETOV, Vicepresident, LIOU.

Another phenomenon affecting the evolution of the market this year is reducing the volume of assets and of the capitalization of the companies, along with deteriorating of the of structure insurance stocks. Thus, the quota of reserves placed in bank deposits fell to the detriment of shares, and their value was reduced in the first half with EUR 112 million. It is clear that the financial market requires additional capitalization, so that insurers need to develop based on the capital injections from shareholders and not from the reserve account, said Yevgeniy BRYDUN, President of the insurance company ETALON.

These factors adversely affect the size of the liquidity of insurers, hence the inevitable delayes in payment of claims. Thus, according to officials of the supervisory authority, the number of complaints reached 3000, up from 700 the previous year, and 11 insurers have already lost their license of activity. At the same time, out of the 471 companies registered (396 active on the non-life segment and 75 - on life), about 64 are not having any activity. Also, the top 20 companies accounted for 56% of the underwritings, and top 50 have 80% of the market, the trend of concentration being more and more evident, added Oleksandr KLYMENKO, President of the Commission for the Non-Banking Financial Institutions of the Parliament of Ukraine.

He also stated that, in order to overcome this crisis, the supervisory authority is preparing a project of law that would grant it greater powers and that it is wanted a more active involvement of supervisory authorities in regulating the profile segment. There is also projected the idea of fusion of institutions and of the establishment of a single regulatory body for supervision and reglemantation of the financial market, which will help increase the efficiency of the process of having financial services by all players in the field.

Likewise, the President of LIOU concluded that only strengthening the positions of all authorities and players involved in the system may counteract the negative influences from outside and from the inside.

Among other topics of interest addressed in the thematic conferences in Yalta, we can also highlight: the regulation of financial markets in conditions of crisis, mergers and acquisitions, and reorganization of profile institutions, perspectives of development of the UK insurance market, insurance transparency, aspects of risk-management etc. As in previous years, the event was attended by many renowned speakers from Germany, France, Great Britain, Poland, Czech Republic, Switzerland, who spoke about the impact of the crisis upon national markets and have drawn attention to the need to increase the quality of management and of underwritings of local companies, highlighting the advantages of developing the life insurance, the liability segments and of the health and pensions system reform.

Also, in the seminars there have been held many discussions on topics like nuclear damage insurance, streamline of insurance audit, marine insurance perspectives, as well as motor insurance issues in the countries of the CIS space. On this, attention was drawn towards identifying practical ways of reducing the increasing damage, as well as towards the advantages of introducing the procedure of amicable report.

In addition to numerous conferences and technical debates of the event, the Forum of Yalta was also a good opportunity for business meetings, both in a formal environment and ina less official one, during the festive evenings: Ukrainian wine tasting, Ukrainian traditional evening, Bowling Cup and Official Banquet.