Latvia’s insurance industry succumbed to the troubles of the wider national and global economy. In 2009 Latvia registered the most dramatic fall seen among CEE insurance markets, with a GWP decline of over 25.5%, while the Latvian economy as a whole shrank by more than 18%.

According to SWEDBANK apdrosinasana estimates, insurance premiums could fall by up to a further 20% in 2010, as the economic recession continues to affect the insurance market. In fact the results of the first two months showed a 36% year-onyear contraction of sales in the risk insurance market. Insurers will not see better times until 2011, and it is possible that the results this year will be worse than last, company officials said.

The Latvian “class book”

At end-2009, there were 14 insurance companies operating in Latvia, of which four were engaged in Life insurance and 10 in Non-Life insurance business, including one mutual Non- Life insurance co-operative society. In addition, there were 11 branches of foreign insurance companies.

At the end of 2009, one Life and three Non-Life companies operated as subsidiaries of insurers from other EU states (German-parented ERGO Latvija dzÄ"vÄ"ba and ERGO Latvija, Danish-parented BALTA and Finnish-parented SEESAM Latvia), and one Non-Life insurer was a subsidiary of an insurance company from an European Economic area member state (Norwegian-owned GJENSIDIGE Baltic). Together these companies accounted for 54.3% of total gross premiums written in 2009.

The downward stroke

Gross insurance premiums written in 2009 totalled EUR377.47m, 25.5% down from the end of 2008, and gross claims paid out fell 10% to EUR244.22m. Following a decline in business activities, the insurance density also decreased by 22.9% to about EUR160.

According to data from the financial supervisory commission (FKTK), gross premiums written by branches of foreign insurance companies more than doubled, reaching a 13.7% share of total gross written premiums. Still, most of this growth does not reflect a real increase in business volume, but only a formal change, as premiums written directly, based on the freedom to provide services, by foreign insurers which also have branches in Latvia were transferred in many cases to the Latvian branches.

By end-2009, gross premiums written for Life insurance constituted 69.5% of the Life insurance companies’ gross premium portfolio, and Health insurance provided a further 28.2%. Endowment insurance accounted for 60.1% of gross Life insurance premiums and premiums written for unit-linked life insurance accounted for 8.7% of gross Life premiums.

In 2009, Non-Life insurance companies gross premiums written fell 27.7% on the year to EUR311.65m. Gross claims paid also contracted by 15%. At about EUR1.4m, general Thirdparty liability insurance was the largest segment for insurance claims in terms of volume.

Still profitable

Both their Life and Non-Life Insurance companies managed to comply with the legal requirements set for solvency and liquidity. The combined ratio of the Non-Life segment was 96.0%, while the operation ratio amounted to 92.2%. As a result, 8 out of 10 Non-Life insurance companies reported a profit in 2009, with the consolidated financial result amounting to EUR16.3m. Despite two Life insurance companies posting losses, overall the Life insurance market’s financial result remained positive, if at the very low level of EUR14,000.