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Slovenia Insurance Report Q1 2012
Business Monitor International, Dec 2011, Pages: 76
Slovenia's insurance sector differs from its peers in the rest of Central and Eastern Europe in a number of respects. One is that, thanks to the importance of health insurance premiums (which are still growing at an annual rate of about 3%), non-life penetration is high and stable at around 4% of GDP.
Another key difference is that local insurance companies are far more important than they are elsewhere in the region. In part because of past financial and economic crises, most governments in Central and Eastern Europe had to fully privatise the state owned insurance companies (which were often monopolies in the countries where they were based) long ago. In Slovenia, by contrast, the government remains the dominant shareholder in national champion Triglav. Triglav speaks for about 36% of total non-life premiums and just under one-third of life premiums. Its health insurance subsidiary accounts for another 4% of the non-life segment.
The next largest player is Maribor, in which local banking group NKBM and Sava Re are the main shareholders. As of late 2011, it appears that NKBM is considering its options since Sava Re rejected its offer for the latter's shares in Maribor in the middle of the year. Maribor's market shares in the non-life and life segments are, respectively, 14% and 11%. Adriatic Slovenica and Vzajemna each speak for about 15% of the non-life segment.
This begs the question: what happens to these companies in a market that is small in absolute terms and barely growing at all? There are no obvious catalysts for further development of the non-life segment.
The low level of life premiums (given Slovenia's overall per capita income levels) suggest that households do not see life insurance as an important channel for their savings. On solution – reflected in Triglav's strategy – is to raise more capital (at a time that Solvency II is a key issue for insurers across the entire European Union and beyond), seek new partners (the World Bank's IFC in Triglav's case) and expand overseas. Triglav is building a network of insurers throughout the former Yugoslavia (and the Czech Republic). The challenge with this approach is that the selected markets are small and/or underdeveloped: meanwhile, other competitors in the region are multi-national giants – many of whom are an order of magnitude larger than Triglav.
A positive wild-card for the life segment is unit-linked products. In spite of the volatility in European (especially) financial markets through the first three quarters of 2011, premiums are growing at over 5%. It remains to be seen if Slovenia's insurers can achieve faster growth over the next year or so. Meanwhile, premiums for traditional products are shrinking. For the non-life segment, the wild card is the government's plan to abolish ‘top-up' private sector health insurance.
At first glance, this looks like the nationalisation of what is a significant business for the Slovenian insurance sector. However, it is not clear what benefits will be available from a reformed health insurance system in which the government plays an important role and within which health insurance premiums are more closely tied to income levels than they have been in the past. It is not impossible that the changes to health insurance actually provide insurance companies with a new opportunity.
Business Monitor International's Slovenia Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Slovenia's insurance industry.
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