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Latvia Insurance Report 2011
Business Monitor International, Nov 2010, Pages: 50
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 provides a fairly chilling example of what can happen to demand for insurance in a country where external imbalances and a fixed exchange rate regime bring about a depression. Premiums in the underdeveloped life segment, which had been growing strongly in the years up to and including 2007, slumped by over a quarter in 2008 and stabilised in 2009. However, the number of people covered by life insurance, accident insurance and health insurance fell by 14.2%, 8.9% and 50.3% respectively, according to the regulator, the Financial and Capital Market Commission (FKTK). Non-life insurance premiums, which were also expanding rapidly, contracted by over a quarter in 2009 and, according to figures released by the FKTK, appear to have fallen by another quarter in 2010.
The data for the organisations regulated by the FKTK (a majority of the total, which also includes Latvian incorporated companies and subsidiaries of multinationals, but not branches of foreign companies) make grim reading. Premiums for compulsory motor third-party liability (CMTPL) insurance – the most basic of lines in the non-life segment – that were written by these companies dropped by over a third in 2009. Voluntary land vehicle insurance (CASCO) slumped by over a half. Claims paid by credit insurers soared by 1,200%.
At this stage, BMI expect that the economy will remain reasonably stable from late 2010 and into 2011. However, as they discuss in this report, the political environment remains uncertain given that the government following October’s election is a weak coalition.
It is fortunate for Latvia that the insurance sector is dominated by the local subsidiaries or branches of multinationals such as the Vienna Insurance Group, ERGO, Swedbank, SEB and Sampo. These are all companies that have the financial strength and commitment to developing regional businesses, whether in the Baltic countries or across Central and Eastern Europe. However, it appears that the smaller local operators have also weathered the economic and financial storm, with all non-life players reporting falls in premiums of 20-40% year-on-year (y-o-y) in H110.
In mid-2010, the country’s largest non-life insurer, BTA, announced plans to complete reorganisation by merging BTA Draudimas in Lithuania and a branch in Estonia with the Latvian company’s headquarter operations by the end of the year. BTA plans to unite its Baltic operations into a single European company and register it with the European Business Register. BTA will have a central office in the Latvian capital Riga and branch offices in Estonia and Lithuania.
BMI forecast a revival in the fortunes of the life segment from 2010 and of the non-life segment from 2011. Total premiums in 2010 were LVL220mn. This includes non-life premiums of LVL170mn and life premiums of LVL50mn. In 2015, the corresponding figures are forecast to be LVL446mn, LVL371mn and LVL75mn. In terms of the key drivers that underpin BMI’s forecasts, they expect non-life penetration to rise from 1.29% of GDP in 2010 to 2.03% in 2015. They anticipate that life density will rise from US$35 per capita in 2010 to US$45 in 2015. BMI’s proprietary Insurance Business Environment Rating for Latvia is 51.7.
Key Features Of This Report
The structure of this report is substantially similar to that of its predecessors. They have updated comments and data using information made available by regulators, trade associations and insurance companies over the course of 2010.
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