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Romania Insurance Report Q1 2012
Business Monitor International, Dec 2011, Pages: 72
It is a good thing that Romania’s insurance sector is dominated by subsidiaries of well-capitalised multinationals that have access to significant economies of scale from operating across Europe. Three months ago, we noted that conditions for the insurers in H111 had been ‘difficult’. Conditions have worsened since then. The main problem appears to be a downturn in the numbers of cars being sold and leased – which, in turn – has caused a slump in motor related premiums. As of November 2011, the latest numbers published by the regulator, which pertain to H111, indicate that compulsory motorists’ third party liability (CMTPL) premiums and voluntary motor insurance (CASCO) premiums have contracted by around 20% relative to H110.
There are a few bright spots. Thanks in part to the development by the major insurers of innovative new products, premiums for fire and all-risks cover –as well as general liability insurance – have soared by over 20%. Unfortunately, though, these lines are not sufficiently large for their growth to compensate for the shrinkage of motor-related premiums. The data from the regulator (in relation to H111) and the major multi-national players (in relation to the first nine months of 2011) confirms that non-life penetration for 2011 as a whole is likely to be around 0.90% of GDP.
This suggests that, over the last two-to-three years, penetration has contracted faster in Romania than in almost any other country whose insurance sector is monitored by BMI. In this dismal situation, the major insurers are struggling to cut costs – in some cases through merging subsidiaries in Romania that had previously run as semi-autonomous operations. However, many of the companies commenting on the first nine months of the year have highlighted increasing combined ratios for their non-life operations, or even write-offs of premiums booked, but ultimately not received.
Intriguingly, premiums are holding up in the life segment. Some of the companies that are active in the segment in Romania have indicated that their life premiums actually rose in the first nine months of 2011.
This implies that density – although low by most standards – is actually increasing. The resilience of premiums for unit-linked products, which account for nearly 40% of all life premiums in Romania suggests that those (few) households who actually use life insurance are actually quite risk tolerant. While we envisage a further rise in density (which has been rising, but in a very erratic way over the last six years or so), we do not foresee that life insurance will become an important conduit for organised savings over the forecast period.
Business Monitor International's Romania Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's insurance industry.
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