The Bosnian insurance market is one of the few in the CEE that managed to stay in positive territory in 2009 when considering its results in euro terms. Its national currency, the convertible mark (KM), is pegged to the euro and a modest 0.96% growth was posted in KM terms.

However, the 2009 figures did not confirm expectations of a more substantial growth. The 2009-08 growth rate was several times lower than that recorded in the earlier years, said Midhat TERZIC, director of the SARAJEVO Insurance. All indicators show that the global financial crisis and the poor recovery of the domestic economy have caused stagnation in the Bosnia & Herzegovina (BiH) insurance market.

The 2009 GWP volume totalled EUR173.30m, of which EUR31.54m, or 18.2%, was for the Life insurance market. Although there are no recent data for the Non-Life portfolio, on the basis of older statistics we can assume the Motor insurance lines accounted for more than 60% of the GWP, of which about 45% came from the MTPL insurance line.

The strong dominance of the Motor insurance sector is, in fact, the underlying reason for most of the Bosnian insurance market’s major problems. The market is divided by the country’s federal character, and this division is also reflected in the supervisory body, the Insurance Supervisory Agency, which has the challenge of coexisting with sub-national insurance supervisory entities. For example, one of the most-discussed issues in 2009 was that of the feared unfair competition practices of the insurance companies in Republika Srpska (RS), one of the BiH federal divisions, once they are licensed to expand operations to the whole federation.

According to a representative of the BiH insurers’ association: The main concern is related to dumping prices that have no foundation in the premium system or the price list approved by regulatory bodies. This kind of commercial practice could cause the collapse of whole system of insurance in the federation.

In response, RS companies’ representatives dismiss such concerns are mere window dressing, adding that even in the event that they were real, the small market share of the RS companies could not really affect the entire market.

The tariffs for MTPL insurance are regulated by law and verified by the police during a vehicle’s registration, so [a tariff] wouldn’t be accepted if it were not compliant with official rules, said Brinijo JARÄŒEVIĆ of BR-GAS Insurance, a RS-based company recently licensed to sell insurance throughout the federation.

Beside the emotional reactions that underline such fears, the fact remains that the Bosnian Motor insurance market has to deal with many unsolved problems. These include frequent unpaid losses, which require the strict intervention of the supervisors. Unfortunately, the supervisory agency had a very weak presence during 2009, mainly due to a prolonged absence of its director.