For the first time in six years Bulgaria’s insurance market witnessed a contraction on an annual basis, with premiums falling 8.2% to EUR849.99m, according to Financial Supervision Commission (FSC) figures.
Life insurance tumbled 18%, to EUR114.87m, while paid benefits and claims for the Life lines decreased by 1.2% year-onyear, to EUR46.98m. Life insurers posted a technical result of EUR5.36m and a financial result of EUR12.05m.
The general insurance market, which so far managed to remain in the black thanks to the Motor insurance lines, saw its premium income fall 6.2%, to EUR735.12m.
The market has fallen by almost as much as the Bulgarian economy, which shows the sector is taking its cue from the broader economy, Ivo GRUEV, Deputy Executive Director of BULSTRAD, told local business newspaper Dnevnik. In fact, Bulgaria’s GDP shrank by around 5% in 2009, meaning that the insurance market dropped even further than the macroeconomy.
Unlike the Life segment, Non-Life insurance paid claims rose 10% to EUR346.55m. Non-life companies reported technical negative growth of EUR5.62m from EUR2.4m in 2008. Companies blamed the MTPL insurance line for most of their sour performance, as an around 14% increase in premiums failed to offset paid claims that were 30% higher on the year. Weaker new car sales and the decision by old car owners to scrap their policy as their income fell seemed to be the most important reasons for the almost 13% fall in Motor Hull insurance premiums. Unfortunately, Motor Hull paid claims rose but around 13%.
Among the little good news were positive results for the household insurance with almost 7% growth in premiums and a slight decrease in paid claims, and a somehow positive financial result of EUR12.53m.
Assets up 49%
According to preliminary data from the Bulgarian National Bank (BNB), the assets of the 66 insurance, reinsurance and health insurance companies operating in Bulgaria totalled EUR2.03bn at the end of 2009, an annual increase of 49%.
falling turnover
Assets of the 20 Life insurance companies rose 9.2% to EUR507.97m. Life insurers’ assets accounted for 25% of the total assets, down from 34.1%, according to the BNB.
The assets of the 26 non-life insurance companies rose 71.5% to EUR1.49bn. The Non-Life insurance companies have the highest proportion of the total assets of the sector – 73.3%, up from 63.7%.
The most important part of the assets of insurance, reinsurance and health insurance companies was invested in securities other than equities (34.1%, up from 24.8%), deposits (27%, from 27.6%), and receivables (13.9% from 16.9%), according to BNB data. The bulk of the assets 54.6% down from 80.3%, were denominated in Bulgarian lev and 22.4%, down from 17.5%, were in euro.
Investments in Bulgarian assets rose 7.7% to EUR1.23bn and investments in EU countries surged 326.2% to EUR704m. As a result, the proportion of investments in Bulgaria stood at 60.4% at the end of 2009, down from 83.6% a year earlier.
Liabilities of the sector totalled EUR2.03bn, with the largest proportion (52.3%, down from 47.3%) being for the technical reserves. The equity of the companies stood at 34.6% of total liabilities, from 34.9%. Technical reserves increased 64.5% to EUR1.06bn.
According to BNB, the largest share of the total insurance technical reserves was the liabilities to households and the local non-commercial organisations that serve them, which amounted to 18%, from 26% a year earlier. Liabilities to domestic insurance companies and pension funds were 14.6%, from 22%.
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The government changes the tax system A government’s announcement that it intended to change the tax treatment of insurance, to a turnover tax from an income tax made the Bulgarian insurance industry face a new challenge. Preliminary projections of the new rate suggest a range of between 5% and 10%. According to the authors of the initiative, were the plan to be implemented, the tax rate on premiums would be lower than the current rate on profit so the tax burden on insurers would be unaffected for 2010. Insurance industry groups have responded that most companies would register abroad if the plan came into force. Consequently, were the change to affect only insurers and not reinsurers, the insurers would cede 80% or even 100% of the cashed premiums to reinsurance. Moreover, money invested in the local capital market or in bonds could be withdrawn and redirected to other countries. Industry professions add that in any case the new system would cause lay-offs and massive losses for insurers as well as a hike in insurance prices. |
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Police and motor insurers to link IT systems From 1 June, the IT systems of Bulgaria's traffic police and the Guarantee Fund, a national insurer database, will be linked. As a result, the police will be able to spot immediately MTPL uninsured cars. Also, as new policies would be added to the system at the time premiums were taken out, it would be up to date and backdating insurances would no longer be possible. The new system would allow the introduction of a bonus-malus system by enabling insurance companies to check the driving records of applicants for policies. Those with a clean record would be eligible for discounts, while those who had caused traffic accidents in the past would face increased premiums. |
