Great potential of small market
More than 160 specialists in the field of insurance, leasing, auditing, broker services and banking gathered this week in Chisinau in order to discuss the urgent problems of this sector and perspectives for its development in the frame of the first National Insurance Conference.
The heightened attention was paid to the investment attractiveness of the Moldavian insurance sector. The representatives of insurance sector agree that the presence of foreign investments on the market will change the market in terms of quality: foreign company always brings the new instruments and products, new working methods, establishes a high standard and toughens the competitive environment. Frankly speaking, the inflow of foreign investments in one insurance companies may affect the plans of the other local companies.
It should be mentioned that the interest of foreign investors in the Moldavian insurance market grows year after year. According to Administrator of the company “Business Intelligent Service” Andrei Crigan, over the last four years the share of foreign capital in the charter capital of the Moldavian insurance companies increased from 21,1% in 2005 up to 37,1% in 2009. The largest share of foreign capital belongs to the companies: Moldasig – 80% (48 million lei), Grawe Carat Asigurari – 98,6% (41,7 million lei), Asito – 48,4% (22,5 million lei), Donaris-Group – 82,9%(18 million lei), Exim-Asint – 98% (9,6 million lei), Nobil Asigurari Generale – 50% (3,5 million lei). The greater part of insurance companies with the participation of foreign capital takes the leadership on the insurance market of Moldova.
The largest volume of foreign investments in 2009 came to the Moldavian insurance market from Cyprus – 48 million lei (35%), Austria – 41,7 million lei (30%), Great Britain – 22,5 million lei (16%), Lichtenstein – 18 million lei (13%), Holland – 4,8 million lei (3%) and Romania – 3,5 million lei (3%). On the local insurance market there exist the following foreign investors as: the international groups Grazer Wechselseitige (Austria) - Grawe Carat Asigurari, Vienna Insurance Management GmbH (Lichtenstein) - Donaris Group, and investment companies - Moldovan Investments Ltd (Great Britain) - Asito, Linekers Investments Ltd (Cyprus) - Moldasig.
Speaking of the investment opportunities of Moldova’s insurance market, Director General ASITO Eugeniu Slopac enumerated not only its advantages, such as neighborhood with EU, collaboration with international financial institutions, and “peculiarities” as well – low demand for insurance services, insufficient development of risk management, political instability, financial deficit, corruption, interference of the government in the activity of insurance companies.
Forum’s moderator, President Media Xprimm Sergiu Costache called political instability the most important factor for investment risk in Moldova. The participants of the market, answering his provocative questions on whether the situation will change after the elections on November 28, agreed with him reservedly and without any comments.
In general, the participants of the conference noted that the Moldavian insurance market was developing quite dynamically. According to Deputy Chairman of the National Commission of Financial Market (NCFM) Aurica Doina, the reforms, initiated several years ago and carried out pursuant to the European requirements, contribute to this process.
Under the influence of financial crisis the insurance companies found themselves in difficult situation: whereas over the last before-crisis years the growth of insurance market made up not less than 25%, in 2009 it reduced by 3%. In January-June 2010 this sector started to restore, however, according to the specialists, it is still in stagnation.
In January-June 2010 the volume of insurance premiums amounted to 438,84 million lei ($39 million) or by 15,1% more as compared to the same period of 2009 and the insurance payments amounted to 155 million lei ($13,7 million), reducing as compared to the same period of 2009 by 20,1%. The general assets of insurance companies of Moldova in January-June 2010 increased by 28,4% as compared to the same period of 2009, accounting for 1 billion 797,7 million lei, and net assets – by 40,6%, accounting for 984,8 million lei. The return of Moldavian insurance companies in January-June 2010 amounted to 67,5 million lei, increasing by 22,2% as compared to the same period of 2009. At the same time the index of insurance reserves important for the insurance companies increased by 15,1% as compared to January-June 2009, accounting for 533,9 million lei ($47,2 million).
According to preliminary information, the growth of Moldavian insurance market in January-September 2010 amounted to about 8% - volume of gross-premiums accrued reached 645 million lei against 595,5 million lei in January-September 2009.
In spite of positive tendency, the share of insurance in the Moldova’s GDP structure remains quite low. In 2009 this index made up 1,36%, while in the developed countries it exceeds 7%. The density of insurance per person increased from €7,3 in 2005 up to €14,8 in 2009. As a comparison, in Romania the density of insurance per person in 2009 amounted to €97,5.
According to Chairman of the Union of Insurers of Moldova Sergiu Puscuta, the insurance reflects the level of income of population and until the citizens have funds for minimal needs – they won’t be interested in the insurance. He enumerated a number of reasons that prevent better development of insurance in Moldova:
- The major part of insurance services in Moldova is based on the obligatory types of insurance, and the voluntary insurance of life, property, etc. – is practically undeveloped. At the same time, some types of obligatory insurance may get an impetus to the development and become more qualitative, if the insurance companies and private medical centers are admitted to this process. The alternative medical insurance must exist in the democratic country. At present we are discussing the possibility of participation of insurance companies in the system of obligatory medical insurance, - Sergiu Puscuta says. – Besides, the government could support the promotion of insurance of property against natural disasters. Now we advance the idea of making this type of insurance obligatory for all citizens of the country. For example, in Romania such law has been already adopted.
The Union of Insurers of Moldova intends to lobby this idea actively. The natural disasters of this year and the unfavorable forecasts for the future will possibly quicken this process.
Low culture of population and degree of confidence in insurance cause less optimistic mood of insurers. For the majority of citizens and clients of the companies the insurance services come to the obligatory auto insurance and are interpreted as additional tax. Few people understand the personal benefit in case of appearance of insured accident.
Such opinion is formed not only because of low culture of insured but because of presence of “dishonest professionals” on the market, who spoil the image of insurance in general through the lack of professionalism. For example, from 2009 the issue of falsification of insurance policies is urgent. Most often the policies of auto insurance Green Card are being falsified.
The head of the company ASITO Eugeniu Slopac is confident that the diversification of Moldavian insurance market can be carried out without foreign investors, calling the limited financial possibilities more topical problem. “Today the cost of reinsurance in Moldova is more urgent problem, – he noted. – Its price is rather high because of low volume of reinsurance premiums collected.” At the same time, Eugeniu Slopac declared against the monopolization and centralization of reinsurance, as it happened, for example, in Turkey, where the state reinsurance company was created.
They also discussed the sore point – damping. Director of the company Moldasig Vitalie Bodea expressed an opinion that the growth of volume of premiums collected in 2010 was provided due to the price policy in many ways, carried out by some companies. The head of Victoria-Asigurari Octavian Lungu supported him: “Client should become the only who wins in any competitive struggle. In the period of crisis, when the cheap products are in popular demand, one should explain the clients that the service quality suffers considerably under the low price.” The participants, justifying such situation, note that well-established competitive environment is a systematic problem that can be resolved not in one day, - the complex program is required. “At least it’s good that Moldova doesn’t have a state monopoly, prohibitive measures and favorites on the market,” told one of the participants of the conference.
It’s good and will be much better. At least, the insurers hope that they are waiting for positive changes that will have an effect on the insurance sector. It is possible that namely this conference will become another impetus to the development of insurance sector.
It is curious that the conference was organized not by the NCFM, Union of Insurers of Moldova or any other Moldavian organization, but by the company Media Xprimm – the largest media-holding in Romania that specializes in insurance: issues the editions on insurance, participates in international conferences of insurers, organizes similar events without assistance, renders telecommunication services in the field of insurance and PR-support of the companies, operating in this field. By the way, the experience and professionalism of organizers was at high level – in spite of partially remote preparation they managed to gather almost all players of Moldavian insurance market and to bring the “potential” partners from Romania, Turkey, Austria, Great Britain and Russia.
President Media Xprimm Sergiu Costache considers that the first specialized conference in the field of insurance will become a step to further development of insurance sector in Moldova. Besides, he said that on Sunday, October 24, 2010 the International Meeting of insurers and reinsurers would take place in Baden-Baden, where the Romanian company Media Xprimm will present Moldova, its investment potential and insurance sector…