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Serbia Insurance Report 2011
Business Monitor International, Nov 2010, Pages: 48
Serbia Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Serbia's insurance industry.
Like many of its peers in Central and Eastern Europe, Serbia’s insurance sector is never going to be particularly large. Where it differs from many other markets in the region is that the global financial crisis did not cause a collapse in non-life premiums (notwithstanding that premiums in many voluntary lines have fallen), while life premiums have grown strongly over the last two years, albeit from a low base. The Serbian economy is likely to remain fairly weak through the next few years as the global economic crisis affects key trading partners and the domestic environment waits for households to move beyond this period of saving. With Serbia’s Q110 real GDP growth coming in at a disappointing 0.6% year-on-year (y-o-y), BMI see growing risks that the domestic economy will undershoot their 2010 growth estimate. For now they hold to their 2.7% prediction as they saw scope for a stronger performance from the export sector given the weakness seen in the dinar. However, they note that on balance the risks were skewed to the downside.
Political risks still rate highly but, although Serbia’s short-term political risk rating of 48.1 out of 100 is discouraging, this doesn’t reflect the significantly divergent outlook on the nature of threats through the medium term. Although Serbia denounced the ruling of the International Court of Justice (ICJ), which determined that Kosovo did not breach international law by declaring independence on February 17 2008, BMI believe it will slowly moderate its position over the issue. Serbia is likely to gradually move towards accepting Kosovan independence as the breakaway nation gains increasing international recognition and Belgrade takes steps to alter its pariah status over the issue. The main political risk facing Serbia in light of the ICJ’s ruling is that support for nationalist parties such as the Serbian Radical Party grows as Serbs express their dismay over the government’s handling of the Kosovo issue (it was the Serbian government that referred the case to the ICJ).
None of Serbia’s political risks have bothered global multinationals, such as Generali and ALICO, or regional players such as GRAWE, the Vienna Insurance Group and UNIQA. Of the largest insurers, AIG started operations in Serbia in 2007 (though it has since sold its business to MetLife as a part of the disposal of ALICO), Generali acquired Delta Osiguranje in 2006 and Wiener Städtische Osiguranje a.d.o. Beograd (Vienna Insurance Group) has been present in the Serbian market since February 2003. France’s Société Générale established a new life insurance operation in Serbia in July 2009. The privatisation of DDOR Novi Sad has ultimately resulted in the entry to the market of Italy’s Fondiaria SAI, which moved to total control of the Serbian insurer at the end of 2008. This deal is interesting because Fondiaria, unlike Generali or the Austrian groups, did not previously have a significant commitment to developing a business in Central and Eastern Europe.
Total premiums in 2010 amounted to RSD58,288mn. This includes non-life premiums of RSD49,071mn, and life premiums of RSD9,216mn. In 2015, the corresponding figures a forecast to be RSD96,051mn, RSD83,519mn and RSD12,531mn. In terms of the key drivers that underpin BMI’s forecasts, they expect nonlife penetration to rise from 1.80% of GDP in 2010 to 2.15% in 2015. They forecast life density to rise from US$16 to US$21. BMI’s proprietary Insurance Business Environment Rating for Serbia is 43.5. Notwithstanding that life insurance and organised long-term savings are developing rapidly from a very low base, it is difficult to imagine that every company operating in the Serbian insurance sector is absolutely committed to remaining in the market. The majority of the companies – be they mainly life, mainly non-life or reinsurance operations – are writing annual premiums of less than US$5mn. This includes several subsidiaries of multinationals. In other words, very few players are, or are ever likely to be, able to achieve meaningful economies of scale. Dunav clearly has advantages in terms of brand and distribution network, but would be regarded as no more than a medium-sized insurer in most countries. The National Bank of Serbia (NBS)’s figures indicate that the relative importance of the different lines in the non-life segment were, in H110, broadly the same as they had been a year previously. In relation to total premiums, compulsory motorists’ third-party liability (CMTPL) and property insurance accounted for 29.3% and 28.6% of the total respectively. Voluntary motor insurance (CASCO) accounted for 13.0% of total premiums, while ‘other non-life’ and life accounted for 14.9% and 14.2% respectively.
Key Features of This Report
In terms of structure, this report is not dramatically different to its predecessor. BMI have sought to update all data. The main sources are the NBS’ Insurance Sector in Serbia report for the second quarter of 2010 and company reports.
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