Financial crisis does not affect the insurance market

 

Effects of financial fluctuations on foreign markets are not felt in Moldova’s insurance market. The demand has not decreased within this period; moreover, the insurance sector has been in ascension as compared to the previous year when the market has grown by 24.9%.

   Within nine months of 2008 the total amount of premiums underwritten of all insurance companies made up 633 million lei (47.3 million euros), the development rate made up 23.46%, and insurers are expected to exceed this rate by the end of the year. The amount of insurance premiums received from individuals has achieved an even higher growth rate of 34.36%. The role of individuals in market evolution becomes more and more important. Thus, in January-September 2007 their share in total premiums underwritten made up 45.59%, then within nine months of this year it has reached 49.6%.

   Financial crisis does not affect the investment and development strategy of insurance companies. In case of Moldova, the enormous growth potential of insurances due to a difference in development with other markets (insurance density – insurance premium value per capita – in the Republic of Moldova is 8 times lower than in Romania, 30 times lower that in Hungary and 160 lower than in Belgium) acts as a safety lever against crisis.

The most striking example is the voluntary property insurance sector that has the highest share in the total insurance contracts – about 36.4%. Insurance companies have concluded more property insurance contracts with both business companies and, especially, with farming units which in a year characterized by numerous floods have brought insurers 3 times more contracts in money value than within nine months of 2007. Insurance companies have earned a total of 65.7 million lei in premiums underwritten from property insurance, which is 2.1 times more than within the same period last year. Statistical data by the National Commission of Financial Market do not justify concerns that life or health insurance could be affected by the crisis. Even though the health insurance segment has almost stagnated (+2.4%), the life insurance segment has continued it tendencies of the previous years, growing by 43.25%. However, if the economic crisis continues to span and affects Moldova, there is a risk that life insurance could lose in volume.

 On the back of decreasing growth rates of car sales, auto civil liability insurance growth rates were below expectations and made up 10.5%.  The insurance market has matured; therefore, it can cope more easily with eventual problems caused by crisis, estimate specialists. Essential changes took place with paid authorized capital that has grown by 107.4 million lei within nine months reaching an amount of 313.2 million lei.

 However, not all companies are equally protected against negative effects of the crisis. Out of the 33 companies included in the report by the National Commission of Financial Market six have concluded the year with losses, while ten insurance companies have not underwritten insurance premiums or accumulated an amount under 1 million lei. At the same time, amounts of damages calculated by insurers are much higher than those paid, although damage rate in the market’s total is quite high – 29.9%.

    Professional participants state that certain companies keep practicing a policy oriented to maximum profits, including through dumping, which undermines trust in the market.  Registration of the professional association that united 14 insurance companies holding 90% of the market is supposed to be followed by creation of self-adjustment mechanisms that will increase the insurance market’s “immunity” against eventual effects of the crisis, tax unfair competition and prevent certain companies that presently only imitate activity from declaring themselves insolvent.

 

 

 

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