Polish insurance market: growth and potential

Full text

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Polish Insurance Association June 2012

Polish insurance market: growth and potential

1. Polish insurance market – general information 2. Non life insurance in Poland

3. Life insurance in Poland 4. Regulatory framework

Table of contents

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POLISH INSURANCE MARKET – GENERAL INFORMATION

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20 years of liberalized insurance market

Insurance law of 1990:

Liberalized insurance market and opened the market for foreign investors

Introduced legal division between non-life and life insurance

Introduced prudential regulations and established insurance supervision

Year 2011 (euro) Life Non life

Insurers 29 33

GWP 7.7 bln 6.1 bln Reserves 17.7 bln 8.8 bln Year 1991 (euro)

Life Non life

Insurers 4 16

GWP 0.2 bln 1.2 bln Reserves 0.01 bln 0.6 bln

Polish insurance market – general information (1)

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Polish insurance market – general information (2)

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Fast growing market (GPW in bn PLN)

• Poland is a medium size market in Europe with a 1.2% share in European insurance market insurance measuerd by GPW.

• The life segment was constantly growing untill 2009 slowdown, moderate recovery since 2010.

• Non life segment was less affected by current economic crisis.

Source: Polish Financial Supervision Authority

Decrease mainly due to slump in bancassurance (GPW in single premium life products – mainly anti-tax products - went down by

32% in 2009 YoY)

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Life and non life segments – GWP structure

Life segment increased its share in total GWP from 34% in 1995 to nearly 56% in 2011

Source: Polish Financial Supervision Authority

Polish insurance market – general information (3)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

GWP - Life GWP – Non life

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Polish insurance market – general information (4)

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Insurance penetration

Insurance penetration - premium to GDP ratio (2010)

Source: Insurance Europe

• Polish insurance penetration is below the world average but very high as far as the region is concerned.

• In 2010 Polish insurance market has leading position in Central-eastern Europe and the Baltic states with 43%

share in total premium within the region.

3,8%

Insurance Europe average 8,2 %

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Netherlands United Kingdom France Finland Switzerland Portugal Denmark Belgium Sweden Ireland Italy Germany Slovenia Austria Spain Malta Luxembourg Cyprus Norway Czech Rep. Poland Hungary Slovakia Estonia Iceland Croatia Greece Bulgaria Latvia Romania Turkey

Insurance density

Polish insurance market – general information (5)

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Insurance density - average total premiums per capita (in EUR, 2010)

Source: Insurance Europe

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Europe Insurance average 1 873 EUR There are huge differences in insurance density from country to country.

Excluding Liechtenstein, it ranges from EUR 93 in Romania to EUR 5 071 in Switzerland (effect of its privatised health insurance system).

Central-Eastern Europe and the Baltic states are still lagging behind.

Poland: Life – EUR 206 per capita Non life – EUR 149 per capita

0 1000 2000 3000 4000 5000 6000

Switzerland Netherlands Luxembourg Denmark Finland United Kingdom France Sweden Ireland Norway Belgium Germany Italy Austria Portugal Spain Cyprus Slovenia Iceland Malta Czech Rep. Greece Slovakia Poland Estonia Hungary Cratia Latvia Bulgaria Turkey Romania

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Insurance sector aggregated financial results (non-life and life)

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Year 2011 (euro)

Gross written premium 13.9 bln Gross claims and benefits 8.2 bln

Net profit 1.5 bln

Total assets 31.6 bln

Own capital 7.5 bln

Polish insurance market – general information (7)

With total premium amounting to 13.9 bln euro, Poland is the biggest insurance market within Central-eastern Europe and the Baltic states.

Number of insurance companies

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Polish insurance market – general information (8)

Among 62 insurers licensed in Poland only 8 are mutuals.

Decrease in number of insurers:

market consolidation effect

Moreover, on the Polish market there are (2011):

• 21 branches of foreign insurers

• ca. 550 notified insurers 6 insurance companies went

bunkrupt

Last bunkruptcy (TUiR Polisa SA) was declared in 2000

Number of foreign insurers Number of domestic insurers

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Mutual Insurance Companies in Poland

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mutual company active since

Macif Życie TUW 2004

Rejent Life TUW 1995

Concordia Polska TUW 1997

Cuprum TUW 1994

Pocztowe TUW 2003

SKOK TUW 1996

T.U.W. TUW 1992

TUZ TUW 2003

Concordia Capital S.A. 2001

SKOK Życie S.A. 2000

Polish insurance market – general information (9)

Polish mutual companies are small operators with limited market share in total market, but with strong ties to their local and social environments.

NON LIFE INSURANCE IN POLAND

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Non-life market is dominated by motor insurance Non life insurance in Poland (1)

13 Source: Polish Insurance Association

• Motor insurance dominates the market although its share in total non-life premium has been constantly decreasing

• Share of premium from financial risk insurance has doubled since 2005

Motor insurance: premium level stabilization and gross claims paid growth (PLN bln)

Non life insurance in Poland (2)

MTPL premium

14 Source: Polish Financial Supervision Authority

• Poor car market responsible for the stabilization of motor insurance premium growth

• Visible tendency of increase in MTPL and Casco claims tempered in 2011

• After the period of low tariff policy, in 2010 insurers started to rise prices for motor insurance cover

MTPL claims AC premium AC claims

2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011

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Non life insurance (3)

15 Non-Life Combined ratio (%) Non-Life technical result (PLN mln.)

96.9

87.6

92.5 91.5 99.4

106.3

2011

2006 2007 2008 2009 2010

Effectiveness factors indicate critical 2009-10 years for Polish non-life insurance.

2009 increase mainly due to growing claims in motor insurance and higher acquisition costs, 2010 increase mainly do to catastrophic claims.

Non life insurance in Poland (4)

Key development driver, opportunity and challenge

16 Key

development driver

Substantial increase in private assets (especially cars number)

Opportunity Premium penetration significantly lower than in Western Europe – room for growth

Challenge

Motor market: price competition (among others due to development of direct distribution channel) combined with increase in claims resulted in negative technical result in 2009-10.

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LIFE INSURANCE IN POLAND

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Life insurance in Poland (1)

• Life insurance gross written premium is rapidly increasing.

• The market slumped in 2009 due to the economic recession.

Nevertheless, compound average growth rate (CARG) for 2001-11 scored 13,4%

Growing life insurance market

18 Source: Polish Financial Supervision Authority

9 10 11 13

15 21

26 39

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Gross written premiums (in PLN billion)

2001 2002 2003 2004 2005 2006 2007 2008 2009

CAGR 13,4 %

1991 0.2

2010 3131

2011 32

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Life insurance in Poland (2)

Life premium structure: individual vs. group

19 Source: Polish Financial Supervision Authority

Group insurance includes mainly:

1. group insurance joint by employees in their companies:

traditional Polish product - close to 100% of participation by employees in the socialist times

2. bancassurance Gross written premiums (in PLN billion)

Group insurance Individual insurance

Life insurance in Poland (3)

Growing life insurance market – what is behind the growth?

20 Source: Polish Financial Supervision Authority

Single premium products are responsible for growth in life market

• In 2004 a 19% capital-gains tax was introduced with an exemption for life insurance products.

• This paved the way for life insurance contracts with single premium distributed by banks.

• Expansion of single premium products stopped in 2009.

Gross premium written in PLN billion

Periodical premium insurance Single premium insurance

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Life insurance in Poland (5)

Key development driver, opportunity and challenge

Key development

driver

Wealth increase in the society

Opportunity High potential for the market increase

Challenge

Premium volatility caused by high share of single premium products related to tax optimalization which give relatively low

yield for insurance companies

REGULATORY FRAMEWORK

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Regulatory framework (1)

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Polish Motor Insurers’ Bureau

• Green Card System

• Deals with claims involving vehicles registered abroad

Insurance Ombudsman

• Investigates market irregularities and individual complaints

Insurance Guarantee Fund

• Pays indemnities under compulsory MTPL insurance when the vehicle’s holder is not identified or insured

• Settles claims in case of bunkruptcy of insurance company

Polish Insurance Association

• Industry representative organization

• Assists legislative works

• Increases common understanding of the sector

Polish Financial Supervision Authority

• Ensures regular operation of the market

• Undertakes measures aimed at market development

Polish Financial Supervision Authority

• Ensures regular operation of the market

• Undertakes measures aimed at market development

INSURANCE COMAPNIES

Insurance market institutional framework

Office of Competition

& Customer Protection

•Ensures market competition

• Protects customers’ collective interests

• Register of prohibited clauses

Polish Insurance Association (PIU)

• PIU was established in 1990

• PIU is an insurance industry representative organization

• PIU’s activity is regulated by Act on the Insurance Activity

• All insurance companies licensed for an insurance activity in Poland are members (compulsory membership)

• Currently 77 insurance companies belong to PIU

• 8 members are mutual insurance companies , their working body is PIU Mutual Companies Commettee

• Since 1998 PIU has been a full member of Insurance Europe (formerly CEA) - the European federation of the national insurance associations

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Regulatory framework (2)

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Regulatory framework (3)

2011 – ca. 70 national and international legislative drafts in consultation

• New insurance activity act (implementation of Solvency II)

• Amendment of compulsory insurance law

• Introduction of private health insurance

• Fulfillment of pension insurance reform

• Changes to insurance contract law (Civil Codex)

• Introduction of a state-aided system for catastrophic risks

• New supervision architecture of financial institutions

• New financial principles and risk management (Solvency II, Omnibus II, IAS, IFRS)

• Review of consumer rights, information and intermediation regulations (IMD2, MiFID2, PRIPs)

• Antidiscrimination regulations

• Data protection regulations Current major domestic projects:

Current major European projects:

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Regulatory framework (4)

• Simplification of regress procedures between MPTL insurers

• Standarisation of indemnities from personal injuries

• Introduction of first-party motor insurance

• Best practices in bancassurance

• Best practices in traditional group insurance

• Best practices in customer complains and ADR

• Standarisation of information exchange in fraud detection

• Data standarisation in IT systems of insurers

• Best practices in marketing of insurance services

• Best practices in cooperation between insurers and insurance intermediaries

• Business statistics data bases Current self-regulation projects:

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Polish Insurance Association

THANK YOU FOR YOUR ATTENTION

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