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Romania Insurance Report Q1 2008
Business Monitor International, Feb 2008, Pages: 30
The Romania Insurance Report provides independent forecasts and competitive intelligence on Romanias insurance industry.
This report differs from its predecessors in that it includes BMI’s Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI’s Country Risk Rating (CRR). It is now much easier to consider the business environment for the insurance sector in any one country relative to the business environment for other industries in that country that are surveyed by BMI, and the business environment for the insurance sector in other countries.
Romania’s IBER is 55.5. Relative to other countries in Central and Eastern Europe, it is very small insurance market for foreign insurers. Within the region, Romania stands out for the measure of openness of the non-life and life segments. The economic outlook is generally positive, although there are some political uncertainties and a growing budget deficit. The IBER is held back by the very small size of the industry and low levels of expected growth and penetration of both the life and non-life sectors. It is also held back by the legal framework and bureaucracy and external risks.
Over the forecast period, we anticipate that non-life premiums will grow by 18% annually in local currency terms and by 18% in US dollar terms. Life premiums are expected to increase by 21% annually in local currency terms and by 21% in US dollar terms. The key drivers of growth in the non-life segment in 2008-2012 are the anticipated rise in nominal GDP from around US$155.50bn to US$226.01bn and an expected increase in non-life penetration from 1.68% of GDP to 2.60%. The key driver of growth in the life segment is the envisaged rise in life density from US$26.63 per capita in 2007 to US$70.00 per capita in 2012. Romania’s total population is declining very moderately.
The Romanian non-life market is broadly similar to that of Hungary: extremely crowded, except it is more fragmented. A distinctive feature of the Romanian insurance market, as compared with neighbouring countries such as Bulgaria and Poland, is both the sheer number of local companies and the fact that none has a truly dominant position. The market is also small, making it not particularly attractive to cross-border firms. Nonetheless, the number of firms operating in Romania is amazing, given its small size.
The strengths of the sector lie in its relative openness to foreign players and Romania’s overall excellent Regulatory Framework, Development and Competitive Landscape. The economy is growing strongly, and although growth will likely slow, it is likely to continue to grow at around 4-5% through the period 2008-2012.
The main weakness of Romania’s insurance sector is the relatively low total size of the sector and the very low expected growth and penetration rates in relation to other countries in the Central and Eastern European region. There may also be threats from the global ‘credit crunch’ and some political uncertainty.
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