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Latvia Insurance Report 2010
Business Monitor International, Dec 2009, Pages: 256
Business Monitor International's Latvia Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Latvia's insurance industry.
Latvia’s insurance industry has succumbed to the plight of the wider national and global economy. Latvia endured a horrendous first half, its economy shrinking 18.0% year-on-year (y-o-y) in Q109, with industrial output tumbling 19.3% y-o-y in May. The publisher believes the Latvian economy is likely to contract by 18.4% in 2009. Moreover, as a result of the government's rigid internal devaluation strategy and the massive overhang of private sector debt, the publisher believes that domestic demand will remain somewhat weak over the medium term, with real GDP forecast to shrink by 2.3% in 2010 before posting positive growth of 2.9% in 2011. As in the other Baltic states, the income of insurance companies has contracted more swiftly than the wider economy. Life density declined in 2008 and is likely to decline further in 2009, while non-life penetration is also falling.
Total gross premiums collected by life and non-life insurers fell by -26% to LVL204mn (US$426mn) in January-September 2009. Premiums collected by Latvia’s 11 non-life insurance undertakings fell 26% to LVL235mn. This marked the abrupt end of a period of rapid growth. According to the Latvian Insurers' Association (LAA in Latvian), non-life premiums (including health premiums) had risen from LVL163mn in 2005 to LVL215mn in 2006 to LVL344mn in 2007 to LVL372mn in 2008. On the basis of figures released by the LAA in relation to the first three quarters of 2009, the publisher is looking for non-life premiums (including health premiums) of LVL271mn in 2010.
The four companies that constitute Latvia’s life sector have followed a similar pattern of rapid growth and sudden recession. According to LAA, life premiums (excluding health premiums) rose from LVL12mn in 2005 to LVL20mn in 2006 to LVL49mn in 2007 to LVL37mn in 2008. Between January-September 2009 gross written premiums in the life sector declined by -21% on the previous corresponding period. One company, ERGO Latvija (a subsidiary of Munich Re’s ERGO), was responsible for almost the entire decline; its gross written premiums fell by LVL6.35mn from the previous corresponding period, while the entire life sector grossed LVL8.14mn below the previous period. On the basis of figures published by the LAA in relation to the first three quarters of 2009, the publisher is looking for life premiums (excluding health insurance) of LVL33mn in the year as a whole.
The prospects for the insurance industry are closely tied to the pace of Latvia’s overall recovery. The publisher is pessimistic, predicting a CAGR of -2% between 2008-2013 in local currency, and -9% in dollar terms. Other factors influencing the sector’s prospects include the rate and success of economic and monetary convergence with eurozone, to which the government of Latvia (as a full if new member state of the European Union) is committed.
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