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Creditor Insurance in Northern and Central Europe Product Image

Creditor Insurance in Northern and Central Europe

  • Published: September 2008
  • Region: Central Europe, Europe
  • 185 Pages
  • Finaccord

FEATURED COMPANIES

  • AIG
  • APRIL Financial Services
  • Cardif
  • Genworth Financial
  • Marsh
  • Uniqa
  • MORE

Creditor Insurance in Northern and Central Europe offers updated and detailed insights into the market for creditor insurance, sometimes also referred to as payment protection insurance or loan-related insurance, in ten countries. Often categorised as a niche market, creditor insurance was worth around €9.40 billion in gross written premiums in the region in 2007, including coverage for life and permanent disability as well as the temporary disability and unemployment elements. Moreover, with sustainable growth likely in many markets and with profit margins relatively high, creditor insurance remains an attractive business for both lending institutions and underwriters to cultivate. Drawing on the results of a survey of over 530 lending institutions in ten countries (Austria, Czech Republic, Denmark, Germany, Hungary, Norway, Poland, Slovakia, Sweden and Switzerland), the report analyses the provision of creditor insurance by lending institutions, variances in provision by underlying lending product, operating models for provision of creditor insurance and partnership configurations. Moreover, the PartnerBASE™ database that accompanies the report details each of the c. 770 READ MORE >

0.0 EXECUTIVE SUMMARY
There is considerable scope for growth in creditor insurance in all markets other than Germany…
… with the market value already having reached €9.40 billion in gross written premiums in 2007…
… within which cover for temporary incapacity and unemployment makes up a significant amount
Consumer lending markets have made notable advances in all territories other than Germany
Creditor insurance can provide a valuable source of commissions to banks and other lenders
Providers of creditor insurance can be grouped into five main categories
Captive underwriters of creditor insurance are most widespread in Denmark, Norway and Poland
Beyond the short term, the outlook for creditor insurance in the region remains positive…
… with a number of factors throwing up opportunities for new distribution relationships

1.0 INTRODUCTION
Rationale
Across 18 European countries, creditor insurance was worth around €35.1 billion in 2007…
… although it remains a poorly documented market for a variety of reasons
PartnerBASE™
Methodology
The research is based on a survey covering 528 banks and other lending institutions
Definitions

2.0 REGIONAL OVERVIEW
Introduction
Market analysis - lending
Robust growth in all countries other than Germany boosts balances outstanding to €2.65 trillion
Five countries see mortgage balances expand at an average annual rate in excess of 10%
Norway and Sweden both experience a surge in retail non-mortgage credit outstanding
lending markets in Northern and Central Europe can be grouped into three main categories
Retail lending markets in Northern and Central Europe can be grouped into three main categories
Switzerland's huge mortgage market makes it the region's largest in per capita terms
although mortgage balances per capita remain below €2,000 in four of the countries analysed
… although mortgage balances per capita remain below €2,000 in four of the countries analysed
Owner occupation rates exceed 75% in Hungary, Norway, Poland and Slovakia
Retail non-mortgage balances per capita in Norway are almost 50% higher than in Denmark
Non-mortgage credit increases as a proportion of total retail lending in the Nordic countries
Credit and other pay later cards issued advance most rapidly in the Czech Republic…
… while Poland's market has accelerated past Norway, Sweden and Switzerland in recent years
In per capita terms, Germany's market for credit cards could soon be the region's least developed
Market analysis - creditor insurance
A dearth of published market and competitor data makes creditor insurance difficult to measure
Broadly defined, the total market is worth in the region of €9.40 billion in gross written premiums
Narrowly defined, six of the ten nations now possess a market valued at more than €100 million
Mortgage-related policies represent the largest component of the market when defined broadly
The German market for creditor insurance dwarfs those which exist elsewhere in the region…
… whether defined in broad or narrow terms
Markets can also be measured as a percentage of total life, accident and health insurance
Creditor insurance is likely to have grown most rapidly in Hungary over the 2003-7 period
Most creditor insurance policies are organised by means of a link with a single, external partner…
… although captive insurers have at least some presence in all countries other than Switzerland
International competitors - creditor insurance
Competitors in creditor insurance in Europe can be segmented into five main categories
APRIL Financial Services is seeking to position itself as a leading independent provider…
… and is a sister company to Axéria Prévoyance within France's fast-growing April Group
Cardif secured almost €2.9 billion in gross premiums written from creditor insurance in 2007…
… with a 25% growth rate in international markets excluding the Netherlands and the UK
Genworth Financial underwrites payment protection policies in 17 territories other than the US…
… with a sales strategy based on over 600 bancassurance and other distribution relationships

3.0 AUSTRIA
Introduction to the banking sector
The Austrian retail lending market is populated by a variety of different types of competitor
Market analysis - lending
Retail mortgages and consumer credit in Austria continue to make solid progress…
… although the market for credit cards is characterised by very modest growth
Product analysis - creditor insurance
Provision of creditor insurance is almost ubiquitous for mortgages and personal loans in Austria
Over three quarters of Austrian lending institutions offer fully comprehensive creditor insurance
Competitor analysis - creditor insurance
Captive and joint venture underwriters play a relatively limited role in the creditor insurance sector
Few underwriters of creditor insurance lay claim to three or more bank distribution relationships
Vienna Insurance Group has acquired majority stakes in the insurers belonging to Erste Bank
Cardif is identifiable as the most prolific partner in loan payment protection insurance
Vienna Insurance Group also controls the bancassurance subsidiary of UniCredit's Bank Austria
Market analysis - creditor insurance
Future outlook
The mature characteristics of the market may enhance competition among incumbent suppliers

4.0 CZECH REPUBLIC
Introduction to the banking sector
Retail banking in the Czech Republic is largely dominated by entities owned by foreign parents…
… with many overseas firms now seeking to assert themselves in different market segments
PPF Group, the owner of Home Credit, is the main competitor remaining under Czech ownership
Market analysis - lending
Growth in retail lending in the Czech Republic shows no signs of abating…
… and the credit card market continues to soar in terms of the number of cards issued
Provision of creditor insurance linked to credit cards is relatively common in the Czech Republic
Fully comprehensive payment protection insurance is now the norm in the Czech Republic
Competitor analysis - creditor insurance
Tied relationships with external underwriters account for most deals for creditor insurance…
… although Home Credit's use of Ceská Pojištovna in addition to Cardif is a hybrid model
Cardif Pro Vita has established itself as the leading specialist provider in the Czech Republic…
… and is growing its gross premium income at an average annual rate in excess of 30%
Market size - creditor insurance
Future outlook
Beyond the short term, the prospects for creditor insurance remain apparently favourable

5.0 DENMARK
Introduction to the banking sector
Denmark is populated by a relatively high number of lending institutions in spite of its small size
Market analysis - lending
Both mortgage and non-mortgage balances grow at an annual average in excess of 10.0%...
… although only a minority of consumers have taken out a credit or other pay later card
Product analysis - creditor insurance
Creditor insurance, narrowly defined, is less widespread in Denmark than elsewhere in Europe…
… although some banks promote økonomisikring which can sometimes be tied to loan repayments
Creditor policies covering temporary incapacity and unemployment are restricted to certain lenders
Competitor analysis - creditor insurance
Single partnerships and captive insurers account for all creditor insurance provision in Denmark
Non-captive distribution deals are concentrated among a relatively small pool of underwriters
Market size - creditor insurance
Future outlook
Relative to the size of the protection market, creditor insurance has seen limited development

6.0 GERMANY
Introduction to the banking sector
Germany's crowded retail banking sector is entering a fresh round of restructuring…
… with a number of the country's landesbanken having run into financial difficulties
The credit co-operatives have been subject to significant rationalisation in recent years
Foreign entrants show that reasonable returns can be generated from German retail banking…
… with the financial arms of BMW, Daimler and Volkswagen having also broadened their remit .
The Bauspar system plays a fundamental role in the German residential mortgage lending market
Market analysis - lending
Most German consumers remain reluctant to accumulate either mortgage or non-mortgage debt…
… and the number of credit and other pay later cards issued has shown little progress since 2003
Product analysis - creditor insurance
Programs for credit card payment protection insurance remain comparatively scarce in Germany ....... 98
The percentage of lending institutions offering redundancy cover has almost doubled since 2003 .... 100
Competitor analysis - creditor insurance
A majority of initiatives for creditor insurance are organised through a single, external underwriter
… although use of multiple partners is more common for mortgage payment protection insurance
APRIL Financial Services is the leading independent provider of creditor insurance in Germany
Public sector savings banks display an increasing propensity to work with alternative underwriters
Cardif continues to occupy a position of leadership in Germany's creditor insurance market…
… although numerous other specialist and composite insurers compete for distribution mandates
Market size - creditor insurance
Future outlook
The continuing rationalisation of the German banking sector may throw up new opportunities

7.0 HUNGARY
Introduction to the banking sector
Numerous foreign entrants chase opportunities in Hungarian retail banking…
… although the independent OTP Bank retains market leadership in many segments
Overseas competitors lessen concentration and improve efficiency in Hungarian banking
… but some participants may be forced to exit the market as competition intensifies
Market analysis - lending
Consumer credit balances in Hungary expand at an average rate per annum in excess of 30.0%...
… fuelled in part by the rapid progress made by the market for credit and other pay later cards
Product analysis - creditor insurance
The number of initiatives for creditor insurance in Hungary has risen sharply in recent years
Policies covering temporary incapacity and unemployment are becoming more widespread
Competitor analysis - creditor insurance
Most lending institutions have chosen to collaborate with a single, external underwriter
… with some insurers having built up relationships with several bancassurance partners…
… although others are limited to a single partnership
A key event was the acquisition of 100% of OTP Garancia by Groupama in February 2008
Market size - creditor insurance
Future outlook
Beyond the short term, the outlook for further growth of creditor insurance in Hungary is favourable

8.0 NORWAY
Introduction to the banking sector
Market analysis - lending
The Norwegian market for consumer credit grows at over twice the rate of mortgage lending…
… with cards per capita standing far ahead of the rest of Northern and Central Europe
Product analysis - creditor insurance
Payment protection policies are most commonly offered by lending institutions offering home loans
Typically, creditor insurance propositions in Norway provide comprehensive cover to borrowers
Competitor analysis - creditor insurance
Frende Forsikring was established as a new competitor in 2007 by a consortium of savings banks
Both Frende Forsikring and Gjensidige NOR also possess several non-captive partnerships
Genworth Financial and Marsh are influential for policies linked to personal loans and credit cards
Cardif began operating in the Norwegian market for protection policies as recently as 2007
Market size - creditor insurance
Future outlook
Several factors may cause the creditor insurance sector to develop from its current level

9.0 POLAND
Introduction to the banking sector
Numerous overseas organisations have entered Poland's consumer lending sector…
… although a number of significant lending institutions remain under local ownership
Market analysis - lending
Mortgage lending overtakes consumer credit in terms of balances outstanding in 2006
Credit and other pay later cards per capita reach 0.21 in 2007 but should continue to grow rapidly
Product analysis - creditor insurance
The provision of creditor insurance by Polish lending institutions has risen sharply since 2005…
… with the proportion of policies incorporating cover for unemployment also having increased
Competitor analysis - creditor insurance
Several captive underwriters are active in Poland's market for payment protection insurance…
… with Europa achieving particularly strong growth as a result of its focus on bank distribution
Growth opportunities in Polish creditor insurance attract a large number of competing insurers
Banking institutions commonly co-operate with different underwriters for different forms of policy
Genworth Financial had accumulated over 700,000 policyholders by the fourth quarter of 2007
Market size - creditor insurance
Future outlook
Several underwriters are well-placed to benefit from the future development of creditor insurance

10.0 SLOVAKIA
Introduction to the banking sector
Foreign banks dominance retail banking in Slovakia…
… with five captive finance arms belonging to car manufacturers having commenced operations
Market analysis - lending
Both mortgage and non-mortgage credit expand at an average rate per annum in excess of 30%
The number of credit cards in circulation is likely to have exceeded one million during 2007
Product analysis - creditor insurance
A majority of lending entities in Slovakia now operate programs for payment protection insurance
Coverage for unemployment is included within over three quarters of policies marketed
Competitor analysis - creditor insurance
Single partnerships represent the preferred operating model for most lending institutions
… with Cardif having been central to the development of comprehensive policies in Slovakia
Market size - creditor insurance
Future outlook
Although the smallest market, the outlook for creditor insurance in Slovakia remains promising

11.0 SWEDEN
Introduction to the banking sector
A variety of second tier banks and specialised lenders challenge the big four banking groups…
… with six automotive brands having set up captive or joint venture finance entities in Sweden
Market analysis - lending
Non-mortgage credit surges at an average rate per annum of 25.0%...
… although the market for credit cards has made limited progress only in recent years
Several schemes for credit card payment protection insurance have begun in recent years
The vast majority of creditor insurance policies offered by Swedish lenders are fully comprehensive
Competitor analysis - creditor insurance
Several major lending institutions source creditor insurance from captive underwriting entities…
… although GE Money Bank and Nordea utilise a co-insurance model with Genworth Financial
Cardif Nordic and Genworth Financial account for the vast majority of external relationships
Aon Sweden acts as an administrator of payment protection insurance for several institutions
Market size - creditor insurance
Future outlook
Several competitors are helping comprehensive creditor insurance to make progress in Sweden

12.0 SWITZERLAND
Introduction to the banking sector
Six main categories of bank compete for retail lending business in Switzerland
The cantonal banks collectively hold a share of over one third of mortgage balances
29 regional and savings banks operating 122 branches are affiliated to Clientis
If viewed as a single entity, the Raiffeisen banks are country's third largest grouping
Swiss One Finance was formed as a result of a three-way merger in February 2008
Market analysis - lending
Non-mortgage credit accounts for only a little over 10% of total retail lending in Switzerland
New co-branded cards launched by Coop Schweiz and Migros help to redefine the market
Market analysis - creditor insurance
Banks with no payment protection offering are mainly smaller local and savings banks
Provision of cover for temporary incapacity and unemployment has advanced in recent years
Competitor analysis - creditor insurance
Many of Switzerland's cantonal banks source insurance products through Swiss Canto
Several providers of creditor insurance possess multiple bancassurance relationships
Many banks intermediate unsecured personal loans sourced from centralized lending entities
Market size - creditor insurance
Future outlook
More propitious conditions are emerging for the promotion of creditor insurance in Switzerland

GRAPHICS / TABLES

- AIG
- APRIL Financial Services
- Cardif
- Genworth Financial
- Marsh
- Uniqa

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