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Bulgaria Insurance Report Q2 2010
Business Monitor International, Feb 2010, Pages: 69
The Bulgaria Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Bulgaria's insurance industry.
This report differs from its predecessors in several respects. In our analysis of competitive conditions, we provide a much more comprehensive ranking of insurance companies in the major segments from the point of view of the organisation that is providing the data (almost always the national insurance regulator or the national insurance trade association). In Bulgaria, for instance, the three largest non-life companies in H109, in terms of gross written premiums written, were: Bulstrad (Vienna Insurance Group), DZI General insurance and Lev Insurance, with market shares of 15.6%, 14% and 11.2% respectively. In the life segment, the leaders in H109 were Allianz Bulgaria Life, DZI and UNIQA Life, with market shares of 21%, 16.1% and 10.9% respectively. Over time, we hope to derive insights from observing how market shares change. We emphasise, though, that a decline in share of gross written premiums is not automatically a bad thing and is often the result of deliberate corporate decisions to focus on more profitable business lines.
In this report, we also provide a breakdown of the insurance sector by line – from the point of view of the regulator or the trade association. In Bulgaria, for instance, the largest non-life lines in 2008 were motor insurance (CASCO), compulsory motor third party liability (CMTPL) and fire and diverse risks. These accounted for 43%, 26% and 14% of total non-life premiums respectively. Over time, we should be able to use this information to bring greater sophistication to our forecasting process. Writing in January 2010, we have been able to ensure that the report includes actual data for 2008. We have generally been able to use data published in 2009 to adjust our forecasts for the year as a whole. We have also extended the forecasts out to 2014. We forecast total premiums for 2009 of BGN1,718mn, which includes non-life premiums of BGN1,491mn and life premiums of BGN229mn. In 2014, the corresponding figures should be BGN3,086mn, BGN2,322mn and BGN764mn respectively. In terms of the key drivers that underpin our forecasts, we expect non-life penetration to rise from 2.28% in 2009 to 2.68% in 2014, and for life density to rise from US$22 per capita to US$53. BMI’s Insurance Business Environment Rating for Bulgaria is 50.2.
We include a discussion in this report of developments within regional markets – on the basis of results published by major cross-border companies in relation to Q209 or Q309 and the latest information provided by the regulators and/or trade associations. In the non-life segment, there was a slight increase in gross written premiums from BGN953.5mn to BGN956.9mn. Trends in life insurance varied markedly from country to country round the region, but official figures showed double-digit falls in premiums in Bulgaria.
Bulgaria’s Insurance Sector In Q210 The latest figures from the Bulgarian Financial Supervision Commission (FSC), which relate to the first 10 months of 2009, show a rather difficult period. Non-life premiums contracted by 1% to BGN1,163mn, which was a respectable result given economic conditions for much of the year and the financial problems of neighbouring Greece. The figures show that across much of Central and Eastern Europe (CEE), nonlife premiums changed by 3% in local currency terms in 2009, so this outcome for Bulgaria was unexceptional.
As is the case in Greece, premiums for CMTPL cover increased, from BGN246mn to BGN302mn, while CASCO insurance premiums fell from BGN565mn to BGN505mn. Fire insurance premiums rose from BGN143mn in the first 10 months of 2009 to BGN170mn from the corresponding period in 2008. Bulgarian operators DZI, Lev Insurance and Armeec increased their market shares within the segment to 14.1%, 11.0% and 10.4% respectively. The other leading players in the non-life segment typically lost market share slightly. The local subsidiaries of Vienna Insurance Group (Bulstrad) and Allianz are the largest foreign groups, with market shares of 15.0% and 10.0% respectively.
However, life premiums have slumped, to the extent that we have revised down our forecasts for the segment in 2009 and subsequent years. The FSC’s data suggest a 20% fall in premiums to BGN177mn for the first 10 months of 2009. There were similarly large contractions in life premiums in Hungary, Poland and Russia. In the non-life segment there were even bigger shifts in market shares. The life operation of UNIQA’s market share fell from 15.0% in the first 10 months of 2008 to 9.6% in the same period of 2009. Several of other foreign controlled groups also experienced shrinkage in market share, although Bulstrad’s share of the segment rose to 10.0%. The three largest life groups are Allianz Bulgaria (21.83% market share), DZI (15.7%) and ALICO (10.2%).
Issues To Watch:
- Stabilisation of life premiums: This will be an indicator that local savers perceive an improvement in the medium-term outlook for Bulgaria’s economy and financial markets. ?? Motor insurance premiums: Given that the growth in CMTPL premiums is probably unsustainable, we expect a more difficult market for non-life insurance overall in the coming months.
- The competitive landscape: The small Bulgarian insurance market is crowded. Notwithstanding that some companies are committed because they see Bulgaria as an important part of a regional business strategy and/or because they hold dominant shares in at least one of the two major segments, we would not be surprised if there is rationalisation over the year. The contraction in the life segment, from what was a low level of development, is disappointing.
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