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Hungary Insurance Report Q1 2012
Business Monitor International, Dec 2011, Pages: 72
Business Monitor International's Hungary Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Hungary's insurance industry.
Taking a five-year view, it will be amazing if the fragmented competitive landscape of Hungary’s insurance sector is not substantially different from what it is today. In essence, past deal-making – usually the result of strategic plans to build insurance (or bancassurance) businesses across Central and Eastern Europe – has resulted in literally dozens of players in what is a small market. Worse, by many metrics (such as absolute premiums in both segments, life density and non-life penetration) the market is shrinking. To a greater extent than the Czech Republic and Slovakia (although not the countries that are the components of the former Yugoslavia), there are also a number of significant (in local terms) indigenous insurers. Hungary is, in short, a market which could change dramatically over the medium term as a result of mergers and acquisitions: some of the deal-making will probably involve multinational companies taking the view that Hungary is not a country in which they need to maintain a presence.
As is the case across much of Central and Eastern Europe, the ostensible problem in the non-life segment is brutal competition – and falling premiums – for motor-related lines. Virtually all the multi-national insurance companies that are active in the non-life segment and which have commented on their performance in H111 or the first nine months of 2011 have alluded to this. While BMI agrees that the challenging economic conditions in Hungary will have caused demand for motor-related insurance to fall, it suggests that the problem is more fundamental. None of the players currently has pricing power, however, the relative absence of large-scale claims – and various company-specific initiatives – mean that the slump in revenues has not, as yet, had a similar impact on profitability.
Life insurance density in Hungary remains at a little over US$200 per capita. This suggests that life insurance has not developed as a major channel for organised savings. Nevertheless, the general stability in premiums suggests that those Hungarian households which actually use life insurance can, and do, continue to see it as being valuable. The relatively high percentage of unit-linked premiums (almost 70% of the total in H111) suggests that these households are fairly risk-tolerant in terms of where and how they invest. Comments from particular companies in relation to the first half of 2011 suggest that some of the players have been able to grow their businesses quite rapidly –at the expense of others – through the development of particular products and/or astute exploitation of specific distribution channels.
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