SIGMA: Central and Eastern Europe reverses growth trends
A weak economic recovery in Central and Eastern Europe in 2010 will continue to reduce demand for motor and other lines sensitive to the business cycle, the latest SIGMA report published by SWISS Re states. The potential for rate increases will also be limited. Non-life premium growth is likely to revive slightly in 2011 as the economic recovery regains some momentum; however, growth will be more muted than in the past ten years.
Life insurance premiums in Central and Eastern Europe (CEE) fell by 20% to USD 18 billion in 2009, up 20% from 2008 level, according to SIGMA. This clearly reflects the severe economic crisis in the region, where real GDP fell, on average, more than in the European Union. Only Poland's economy continued to grow. Poland has the region's largest life insurance market and generates 46% of regional premium volume. After a surge of premiums in 2008 (+52%) following the introduction of new savings products, premiums contracted by 29% in 2009. Premiums in the region's other major markets declined, often at double-digit rates. In the Baltic states, which were still in deep recession at the end of 2009, life premiums fell by 28% while in the Czech Republic premiums were flat with unit-linked products and single premiums supporting growth. In Hungary, premiums shrank by 14%, the same as in 2008, due to lacklustre sales of unit-linked products, which accounts for more than 60% of the market.
A quick recovery of the life market is unlikely since the economies in the CEE region are set to make only a weak recovery in 2010. Consumer indebtedness in many markets will have a further negative impact on demand for life insurance. In contrast, the rebounding stock markets should help to reignite demand for unit-linked products in the medium term.
In what non-life insurance is concerned, premiums shrank by 7.5% in Central and Eastern Europe to USD 67 billion in 2009, a 6.8% hike compared to 2008. Poland (+0.3%) and Slovenia (+4.1%) were the only major countries reporting positive growth. Growth of property and general liability insurance compensated for the drop in motor lines in Poland. In Slovenia, MTPL (motor third party liability) fell sharply, but was offset by strong growth in property and motor hull. Elsewhere, premium volumes contracted in real terms, often at double-digit rates. The fall in premiums in the Baltic states (-15%) and the Ukraine (-26%) reflected the deep economic recessions in these countries. In the Czech Republic (-8.4%) and Hungary (-5.9%), the decline affected most lines of business, with only property and motor third party liability showing signs of growth. In Russia, which has a regional market share of almost 60%, the non-life sector shrank by 7.8%, due to the deep recession. Only liability, which is a small business line, and non-risk bearing compulsory medical premiums grew. In the South Eastern European countries, premiums declined by 5.4%.
