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Canada Insurance Report Q2 2010
Business Monitor International, March 2010, Pages: 68
The Canada Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada'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 (in practice almost always the national insurance regulator or the national insurance trade association). In Slovakia, for instance, the three largest non-life companies in the first half of 2009 – in terms of gross written premiums – were Allianz - Slovenská poistovna, Kooperativa poistovna and Generali Slovensko poistovna whose market shares were 38.6%, 29.8% and 11.3% respectively. In the life segment, the leaders in the first half of 2009 were Allianz - Slovenská poistovna, Kooperativa poistovna and AMSLICO AIG Life poistovna whose market shares were 24.4%, 18.2% and 11.6% 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 a deliberate corporate decision 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 Slovakia, for instance, the largest non-life lines in the first half of 2009 were compulsory motor third party liability (CMTPL), land vehicles voluntary insurance (CASCO) and fire and diverse risks. These accounted for 32%, 29% and 24%, respectively, of total non-life premiums. 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 that have been published over the course of 2009 to adjust our forecasts for the year as a whole. We have also extended the forecasts out to 2014. We estimate total premiums in 2009 of EUR2,122mn. This includes non-life premiums of EUR1,010mn and life premiums of EUR1,112mn. In 2014, the corresponding figures are forecast to be EUR3,756mn, EUR2,087mn and EUR1,669mn. In terms of the key drivers that underpin our forecasts, we are looking for non-life penetration to rise from 1.55% in 2009 to 2.51% in 2014, and for life density to rise from US$290 to US$391. BMI’s proprietary Insurance Business Environment Rating for Slovakia is 59.8. This quarter, we include a discussion 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 regulators and/or trade associations. In local currency terms, we saw non-life premiums shrink marginally for Slovakia in a similar fashion to Croatia and Hungry.
Slovakia’s Insurance Sector In Q210 As of January 2010, the latest figures from either the National Bank of Slovakia (NBS) or the insurance trade association SLASPO pertained to H109. Although the absolute premium figures from the two sources differ slightly, the trends are consistent. According to the NBS, total life premium in H109 was EUR506mn, or 7% lower than in H108. Meanwhile, non-life premium fell by 3% to EUR524mn. In both segments, the numbers of insurance contracts outstanding was higher at the end of June 2009 than it had been one year previously. Given the generally dismal economic environment – and the volatility in financial markets following the Global Financial Crisis – this is a positive outcome; however, it suggests that most of the Slovak insurance sector faced downwards pricing pressure.
In the life segment, the total number of life policies outstanding rose from 8.570mn at the end of June 2008 to 8.925mn at the end of June 2009. The number of traditional life assurance policies dropped from 2.693mn to 2.380mn. However, the number of unit-linked policies rose from 600,522 to 702,317, and the number of supplementary policies increased from 4.588mn to 5.106mn. In short, it was the broadening of the client base of these two lines that underpinned the resilience (by the standards of the rest of Central and Eastern Europe) in life premiums.
In the non-life segment, the total number of policies rose from 6.687mn at the end of June 2008 to 7.175mn at the end of June 2009. The number of liability insurance policies fell from 1.135mn to 1.124mn, but numbers rose for virtually all other classes. Most noteworthy, though, were trends in the motor insurance lines. CMTPL premiums fell by 12% to EUR166mn, even as the number of policies rose by 11% to 2.075mn. The number of CASCO policies increased by 38% to just over 752,200. However, CASCO premiums dropped by 2.5% to EUR150mn. Fire insurance stood out as a line where the number of policies remained more or less unchanged, but where premiums actually rose by 8% to EUR126mn. Few of the major cross-border insurance companies actually commented on their operations in Slovakia. However, Vienna Insurance Group, whose companies (Kooperativa, Komunálna and Kontinuita) accounted for nearly 30% of the non-life segment and a marginally smaller portion of the life segment in the first half of 2009, according to SLASPO, noted in its report for the first three quarters of 2009 that it had achieved double digit growth in life premiums in Slovakia (among other countries). This indicates that these companies have been gaining ground in Slovakia. We suspect that the gains were at the expense of at least one of Allianz, ALICO or Generali/PPF, whose subsidiaries in Slovakia were the next three largest players in the life segment, with respective shares of 24%, 12% and 9%. The non-life segment is also fairly concentrated. The Vienna Insurance Group companies are, combined, Slovakia’s second largest non-life group. The subsidiaries of Allianz and Generali/PPF are the largest and the third largest players in that segment, with market shares of 39% and 11% respectively.
Issues To Watch
Pricing In The Motor Insurance Segments In spite of the structure of the non-life market, it appears that the protagonists do not have pricing power. If prices fail to stabilise and the number of policies stops growing, premiums for CMTPL and CASCO could slide.
Policy Numbers For Unit-Linked And Supplementary Life Products As noted above, it is the growth in the number of policies in these lines that has underpinned the stability of the life segment. Should the number of policies being issued stabilise or fall, the market will weaken.
Investment Earnings Some of the insurance companies may find it difficult to maintain investment earnings during 2010, especially if volatility in other regional bond markets affects that of Slovakia. Fortunately, most of the major insurers are subsidiaries of very large multi-national groups.
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