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Poland Insurance Report Q4 2011
Business Monitor International, Sep 2011, Pages: 75
Business Monitor International's Poland Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Poland's insurance industry.
Among the countries that have joined the EU over the last 10 years, Poland has often been seen as the country that is too large to ignore, and with good reason. This explains many of the clear strengths of the Polish insurance sector. Foreign multinationals have delivered capital, know-how, product innovation and the benefits of economies of scale to Poland – and to a far greater extent than in other countries in Central and Eastern Europe. The former (wholly, now partially, state-owned) monopoly insurer continues to operate as an independent entity – unlike in the Czech Republic (especially), Slovakia or Hungary – and is competing effectively on the basis of price, brand, product innovation and distribution. Unlike in other countries in Central and Eastern Europe, there has not been cutthroat competition in auto-related non-life lines, which continue to dominate that segment.
Nevertheless, there are grounds for caution about the medium-term outlook for Poland’s insurance sector. In the non-life segment, the key feature is the stability – around 1.6% of GDP of non-life penetration. This is a strength in that it indicates that demand for non-life insurance is not vulnerable to fairly dramatic changes in the country’s economic fortunes. However, it is also a weakness. At 1.6% of GDP, non-life insurance is neither clearly underdeveloped nor overdeveloped. It is not clear what could be the catalyst to take non-life insurance to the next stage of development. It may be that Poland becomes a rare example of a fairly large and progressive economy in which (multinational) insurers handle most of the largest corporate and institutional risks through London and other global centres.
The challenges are more profound in the life segment. Density has stabilised over the last two years or so but is still way below the levels that prevailed prior to the global financial crisis. The latest comments from PZU, the former state-owned monopoly that is still the dominant composite insurance group (and one of the largest in Central and Eastern Europe) identify tactical reasons why the company has been able to expand its life insurance business (as well as its non-life business). However, unless there is a very substantial increase in life density in Poland over the next two years, the life market runs the risk of being seen as irrelevant. If, in a middle-income country, life density has stagnated at around US$300 per capita, the implication is that most households are saving and providing for their long-term futures in ways other than life insurance. In such a circumstance, some of the insurers in Poland but that have global aspirations may seek to leave. In the last year, it is possible to identify three major transactions in Poland that have been driven by external factors: the merger of the local operations of MetLife and ALICO, KBC’s planned divestment of Warta and Kredyt Bank, and the desire of the government to reduce its holding in PZU.
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