The Belarusian economic environment in 2009 was influenced by the global financial crisis, which created difficulties in major economic segments. According to official statistics, GDP totalled approximately EUR35.5bn, far below the planned rate of growth over the last year and the lowest rate of growth since the mid-1990s according to the government. In part this was due to a reduction in orders by customers of traditional Belarusian products. Consequently, the government began to seek new markets in order to improve the local economy.

However, the situation was not so bad for the Belarusian insurance market. Thus, on the 1 January 2010 the volume of insurance premiums for all types of insurance totalled EUR290.5m, up 18.68% in Belarusian rubles on the previous year, and the total of insurance losses was EUR164.4m, up 37.18%. However, in foreign currency terms there was a 9% decrease in premiums because the Belarusian currency dropped by a third against the dollar in 2009.

It should be noted, though, that despite this growth the volume of insurance premiums remains very low when compared with that in most other European countries. Thus, in 2009 the contribution of insurance premiums to GDP was 0.8%, and the density rate was EUR31. This indicator is significantly lower than that in Belarus’ closest neighbours – Russia, Ukraine and Poland. Regarding the losses, the state-owned BELGOSSTRAKH topped the table but private insurer B&B Insurance Co was ranked second.

The Belarusian insurance market consists of 19 non-life insurers and four life insurers (STRAVITA, BELARUSIAN Insurance Pension Fund, SEVENTH Line and PENSION Guarantee). There are also four insurance brokers and one reinsurance company (Belarusian National Reinsurance Organisation) while international reinsurance broker BEAUCHAMP & SAVRASSOV has a representative office. In 2008 GENERALI became the first locally registered insurance company with 100% foreign capital. Still the amount of foreign capital remains low. Foreign capital accounted for only 2.4% of statutory funds out of a possible quota of 30%.

Assessing the trends evident in the development of the insurance market in 2009 one should draw attention to the positive dynamics of basic indicators.

The total authorised capital of the insurance companies rose 35.5% on the year to EUR430.6m while own capital of the market’s players increased by 35.2% to EUR486.3m.

Rise in all non-life lines

Looking closer at the 18.68% increase in total premiums and the 37.18% rise in total claims, the year saw a notable increase in premiums for construction risks insurance and compulsory medical insurance for foreign citizens and stateless persons temporarily residing or sojourning in the Republic of Belarus. The bulk of insurance claims were from the motor insurance sector.

Growth was recorded in all market segments, although it was greater in some than in others. Premiums grew confidently in personal insurance, notably for medical expenses and accident insurance which increased by 150% during the year.

Claims paid for voluntary property insurance also increased, except for Cargo insurance where the indicator decreased by 8.2%. Voluntary liability insurance increased to 9.19% of total premiums.

Mandatory insurance also posted increases. Premiums for personal insurance grew by 12.2% while premiums for MTPL and Green Card insurance boosted liability insurance by 36.53%.

An analysis of the claims on the market shows a 54.78% rise in payouts in the voluntary insurance sector. Claims under facultative insurance contracts rose by 24.61% while most claims were registered on the Motor Hull segment, which saw a 65.32% increase. As for mandatory insurance, one can again highlight the significant 38.31% growth of MTPL segment.

Voluntary insurance contributed to 46.4% of total premiums, compared to 44% in 2008. Breaking the total down by type shows that personal insurance accounted for 23.6%, property - for 69.8% and liability insurance - for 6.6%. Concerning mandatory insurance, EUR105.5m were collected by the insurance organisations, representing 53.6% of total revenue.

Life market - still in its infancy

Belarus’ market is characterised by the underdevelopment of life insurance. For example, the life sector, which represented 5.5% of the market’s premium income in 2009, showed only a 0.5% increase over the previous year.

According to data from the Insurance Supervision Office, the total paid losses reached EUR164.5m. The 2009 claims ratio was 56.7% of collected premiums. Concerning reserves, total insurance reserves of the insurance companies on 1 January 2010, amounted to EUR222.8m.

In 2009 revenue from the placement of insurance reserves amounted to EUR24m, while the shareholders' equity of Belarusian insurance companies increased by EUR127m, or by 35.2%, on the year to reach EUR487m. On 1 January 2010, their authorised capital was EUR431.3m.

In 2009 the insurance sector employed some 13,459 people, of which 8,355 were company staff.

Constrains, as a drawback

However, the market has certain weaknesses. In addition to the poor development of the long-term insurance segment already alluded to, it is also highly concentrated, being dominated by state-owned companies. According to experts, the result is that there is not enough competition in the insurance market. They also note that the sum of the insurance companies’ capital and reserves is insufficient for sustainable development.

In addition, the profitability of the local insurance players in the current situation is not high. It is also necessary to emphasise that the profitability differs between the various types of insurance. Thus, the main losses come from the mandatory insurance classes. Because of the prevailing trends in the country, unequal conditions have been created for the activities of public and private insurance companies, with private organisations being denied the opportunity to engage in mandatory insurance.

The Belarusian insurance market is also characterised by a failure to include the expenses of many voluntary insurance products in the net cost. Further, the fact that state enterprises are required to insure their risks with the state insurance organisations and so cannot choose their own insurance companies, is an additional significant drawback.

Looking to the future, several changes due to come into force in mid-year will certainly affect the local motor insurance market. From on 1 July 2010, Belarus will implement a European Protocol that introduces a system of direct compensation and raises the compensation sum to EUR200. The resulting new type of insurance policy will include both MTPL and Motor Hull. This comprehensive insurance policy will apply only to car accidents. It will replace the current situation where even car owners who are recognised as the guilty persons in an accident could count on receiving indemnity.