Annex 7. Fact Sheet Estonia
1. Generalities:
Some history of the agricultural risk and crisis management policies, programs and tools.
Population: 1, 36 million inhabitants
• 45% male population, 55% female population • 7% aged under 20, 22% over 60;
GDP 2004 9,4 billion Euro;
• Change (2004 to 2005) in current prices: +6,2% Inflation (2004 to 2005): 4, 1%;
Insurance premium income: 168 million Euro (2004);
Ratio to GDP: 2,3 % (2004)
In 2004, the Gross Domestic Product of Estonia was 9,4 billion Euro and the average population 1.36 million inhabitants. The economic growth of Estonia amounted to 6.2%, and the change in consumer price index was 3%. The relation between domestic saving and GDP improved a little. The current account deficit in relation with GDP was 12.6%.
In 2004, insurers’ direct insurance gross premiums made up 2.3% of GDP, referring to the growing importance of insurance. Market growth was based on the rapidly growing popularity of life insurance, mainly unit-linked life insurance products. Again, the intense loan and leasing market promoted insurance activities, because often when housing or a vehicle is leased a property or land vehicle insurance contract shall be concluded respectively. More and more life insurance contracts are being concluded for securing the payment of a long-term loan. After the 1999 the share of non-life premiums slowly increasing (Figure 1.1)
Figure 1.1 Dynamics of insurance premiums and main economic indicators 1994-2003
-10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Growth of life premiums Growth of non-life premiums Average growth of premiums Change in GDP (current prices) Change in consumer prices Change in the number of insurance contracts
Climate conditions for Estonian agriculture quite stable and risks for natural disasters are low.
Therefore insurance activities on field of crops and animals rather modest.
Starting at the beginning of independence (1991) lot of changes is taking place. Mainly: • Movements from the state hold insurance system to the private insurance system; • Development of voluntary based insurance systems;
• Harmonization of Estonian and European Union insurance laws.
2. General Framework:
• Definitions of disaster (for the application of article 92.2 of the Treaty of Rome1 ) No definitions about the disasters are presented in Estonian Insurance Law.
• General Law framework
Estonia is a member of European Union and therefore all our laws, including the Insurance Law are harmonized with EU laws. Estonian Insurance Law based on the following EU regulations:
− 73/239 24. July 1973 (basic text);
− 88/357 22. June 1988 (amendments and supplements); − 92/491 18. June 1992 (amendments and supplements).
Two organizations have a leading role in the creation process of Estonian Insurance Law:
Estonian Insurance Law
1
The following shall be compatible with the common market: o (a) ……
o (b) aid to make good the damage caused by natural disasters or other exceptional occurrences; Estonian Insurance
Association
Estonian
Insurant
Association
The Estonian Insurance Association unites insurance companies operating in Estonia. The association was founded on February 15, 1993. The objectives of the organization are to represent the general interests of its member companies in the development of the insurance sector as well as in the social and economic environments.
Estonian Insurant Association was created in 1995 by the main companies of policy holders. The main objective of association to protect his member’s interests agents the dictates of insurance companies.
In 1995 the Estonian Parliament accepted Estonian Insurance Law.
• Objectives of the existing policies/programs
No special state programs at present time in Estonia. Private insurance companies have his own development programs in agriculture
• Law barriers: does the law forbid that ad-hoc measures or disaster funds compensate damages that could have been insured?
No law barriers in Estonia.
3. Market conditions
• Competition on prices or on quality of services. Is there an independent body that fixes tariffs?
• Competition on quality of services
In 2004, based on gross premiums, the insurance market grew 20.4%. In 2004, insurers collected a total of 205 million Euro in gross premiums, of which 74.1% were gross premiums of non-life insurance, 25.2% gross premiums of life insurance and 0.7% gross premiums of accepted reinsurance. Considering the consumer price index the real annual growth rate of the direct insurance premium volume in 2004 was 16.9%, being less than the 20.2% of gross premiums real growth in 2003. In 2004, the real growth of life insurance was 35% and the real growth of non-life insurance 18.1%.
Compared to the 166 million Euro of 2003, 205 million Euro in direct insurance gross premiums were collected in 2004. Claims were paid in the amount of 83 million Euro compared to 70 million Euro in 2003. The volume of life insurance gross premiums grew 39.1% in the year and the volume of non-life insurance premiums grew 15.1%. In 2004, the division of the market between non-life insurance and life insurance changed 3.4 percent in favour of life insurance. More than a quarter of all gross premiums collected in the Estonian insurance market were comprised of land vehicle insurance premiums and the other quarter was comprised mostly of motor TPL insurance. Property insurance and capital insurance continued to be popular as well. In 2004, the volume of direct insurance gross premiums per
capita in Estonia made up 150 Euro compared to 124 Euro in 2003. The gross monthly salary in 2004 was 728 Euro per month.
INSURERS
In 2004, seven non-life insurers and five life insurers operated in Estonia; in addition, the Estonian Traffic Insurance Foundation was operating as an insurer in cross-border insurance and reinsurance.
Zürich Kindlustuse Eesti AS, which has not been concluding new insurance contracts since 2003, terminated insurance operations at the end of 2004 and transferred the insurance portfolio to If Eesti Kindlustus. The public Estonian Traffic Insurance Foundation also terminated its operations and transferred its assets and liabilities to its legal successor – the private non-profit association Estonian Traffic Insurance Foundation.
By the end of the year, the Financial Supervision Authority had registered 82 non-life insurers and 12 life insurers as providers of cross-border insurance service.
Based on gross premiums of the Estonian insurance companies, in 2004 more than a half of the insurance market belonged to two larger companies, whereas the insurance market concentration was higher in life insurance than in non-life insurance. If Eesti Kindlustus, ERGO Kindlustus and Hansa Elukindlustus have a remarkable market position.
The stabilization of the insurance market has brought along an increase in the net profits of companies. In 2004, the total audited net profit of life insurance companies was 7,3 million euro and the total net profit of non-life insurance companies was 21,2 million euro. In 2004, the profit margin of enterprises in the insurance sector was 13.6%, cost benefit of equity capital 34.5% and cost benefit of assets 10.3%.
• Market players: Is there a dominant company?
Life insurance companies 1998-2006
1998 8 1999 7 2000 6 2001 6 2002 5 2003 5 2004 5 2005 5 2006 5
Figure 3.1 Market shares of life insurance companies in 2004 Ühispanga Elukindlustuse AS 25% Seesam Elukindlustuse AS 13% AS Sampo Elukindlustus 7% ERGO Elukindlustuse AS 10% Hansapanga Kindlustuse AS 44%
Non-life insurance companies 1998-2006 1998 13 1999 10 2000 8 2001 8 2002 8 2003 8 2004 8 2005 8 2006 8
Figure 3.2 Market shares of non life insurance companies in 2004
Change in market shares compared to 2002; Non-life insurance
Ergo Kindlustuse AS: +2pp
Salva Kindlustuse AS: +2pp
AS If Eesti Kindlustus: +2pp
AS Inges Kindlustus: 0
Eesti Liikluskindlustuse Fond: 0
Nordea Kindlustuse Eesti AS*: -1pp
Zürich Kindlustuse Eesti AS: -1pp
Seesam Rahvusvaheline Kindlustuse AS: -3pp
Insurance activities in agriculture
Taking into account the low market demand for insurance products the share of gross premiums of insurance companies in agriculture extremely low (Annex 1).
In 2004 the insurance companies share of gross premiums in agriculture about 1% of total premiums (min 0,47% - max 1,47%)
Division of gross premiums by the main products in 2004)
ERGO Kindlustuse AS 27% Eesti Liiklus-kindlustuse Fond 1% Zürich Kindlustuse
Eesti AS 3% Seesam Rahvus-vaheline Kindlustuse AS 13% Salva Kindlustuse AS 11% AS If Eesti Kindlustus 38% Nordea Kindlustuse Eesti AS 4% AS Inges Kindlustus 4%
Agricultural machinery 660 394 Euro Equipments 434 893 Euro Buildings 402 679 Euro Animals 112 750 Euro Yields 0 Income 0
Total gross premiums 1 610 716 Euro
Agric.machinery 41% Equipments 27% Buildings 25% Animals 7%
Figure 3.3 Distribution of gross premiums of insurance companies by agricultural products in 2004
The biggest company is “IF Eesti Kindlustus” operating with 765 608 euros gross premiums in 2004.
Distribution of gross premiums by insurance companies in agriculture (2004)
IF Eesti Kindlustus 765 608 euro
ERGO 379 863 euros
SALVA 237 506 euro
Seesam 151 917 euro
Others 75 822 euro
Total 1 610 716 euro
“IF Eesti Kindlustus” have highest market share 47,5%, which is close to the dominant position on the insurance market (Figure 3.4).
IF Eesti 47% ERGO 24% SALVA 15% Seesam 9% Others 5%
Figure 3.4 Market shares of insurance companies on the field of agricultural products in 2004
4. General features
Indications of most frequent characteristics. To be detailed in the next paragraph and the technical form of products
• Compulsoriness for the farmer
Compulsoriness of insurances arising in cases when farmers are leasing agricultural machinery or equipments from the different leasing companies. Then the insurance is obligatory.
• Public subsidies and cost for the farmers.
No public subsidies for insurance system in Estonia.
• Franchise (%). Is it computed on the total of the farm or per crop?
No franchise used in Estonian agricultural insurance system.
• Existence and importance of index-based insurances
• Most usual method for determination of losses
Usually determination of damages in agriculture implemented by professional treat mentors of losses.
• Delay in paying indemnity after event or harvest.
Usually certain delay exist, but this is not the problem for the farmers. • Is there a bonus-malus system?
Yes
• Is there an income insurance?
Not yet in Estonian agriculture
• Is there a (significant) market of MPCI? (multi-peril crop insurances)
No
• Are there insurances on prices?
No
5. Insurance products available
Description of all the available programs per crops per groups of crops (as probably defined by the insurances) and per type of animals.
The main insurance objects in Estonian agriculture are:
• Agricultural machinery;
• Equipments • Buildings
• Animal (mainly dairy cows)
• Number of farms covered
At the end of 2005 1745 signed insurance contract in agriculture. Taking into account the number of operated farms (27 747) the share of coverage is 6.3%
At the end of 2005 7136 dairy cows and breeding bulls were covered by insurance contracts. The share of coverage is 6.2% of all dairy cows
The crops and farm income isn’t the insurance object yet.
• Coverage in value of production
Insured property in agriculture is increasing year by year. The value of insured agricultural object was 9,4 million euro, which is 2,7% of agricultural GDP in 2005.
The information in this paragraph is extended in the technical form in annex. It will refer to the most recent year available.
6. Coverage in the last years.
This paragraph summarises of the information given in the tables by type of product and describes the evolution in the last years. The information is partly redundant with paragraph 5, but this paragraph focuses on the time trend. If possible figures should be given year by year over a period of 5 years. Alternatively data for one date around 5 years before the last available. For data on compensation payments, multi-annual averages are welcome.
• Number and % of farms covered
During the last 5 years the farm number significantly decreasing and farm size accordingly increasing in Estonia. Therefore, in spite of decreasing insurance contracts in 2001-2005 the share of farms with insurance contracts are increasing (Table 6.1)
Table 6.1 Insurance coverage of farms in Estonia 2001-2005
2001 2003 2005
Number of farms covered* 55 748 36 859 27 747
Farms with insurance contracts** 2136 2007 1745
(%) 3,8 5,4 6,3
Sources:* Estonian Statistical Office. Agricultural holdings 2001-2005; ** Accounted data of insurance companies
• Total area insured by group of crops and %
Last five years no contracts on the field of cultivated crops.
• Total number of animals covered by type of animal and %
Table 6.2
2001 2003 2005
Number of cows* 127969 119805 115230
Number of insured cows** 6543 7411 7136
(%) 5,1 6,2 6,2
Sources: * Estonian Statistical Office. Agricultural holdings 2001-2005; **Accounted data of insurance companies
• Production value covered and %
At second year (2005) of EU membership the agricultural GDP significantly increasing in Estonia (Table 6.3). Same time in spite of increasing insured property the share had reached the lowest level.
Table 6.3 Insurance coverage and GDP dynamic in 2001-2005
2001 2003 2005
GDP in agriculture* (mio euro) 271,5 260,1 344,3
Insured property** (mil. Euro) 7,9 8,4 9,4
(%) 2,9 3,2 2,7
Sources: * Estonian Statistical Office. Electronic database;
** Accounted data of insurance companies/ Annual reports 2001,2003,2005
• Total amount of premiums
At 2001-2005 the total amount of premiums are quite stable and varied between 1,5-1,8 million Euro per year (Table 6.4)
Table 6.4
2001 2003 2005 Total amount of gross premiums (Euro) 127 726 000 138 459 000 149 591 663 Total amount of gross premiums in agriculture (Euro) 1 524 000 1 812 000 1 610 716
(%) 1,19 1,31 1,08
Source: Estonian Insurance Association; Accounts, Annual reports 2001, 2003, 2005
Relatively highest share in 2003 explained with implementation of SAPARD program. Obligatory insurance activities quite active on the field of agricultural machinery, equipment and building.
Compensation of payments related to gross premiums of insurance companies in agriculture varied from18-20 % (Table 6.5)
Table 6.5 Relation between gross premiums and compensation payments 2001-2005 2001 2003 2005 Total amount of gross premiums in agriculture ( Euro) 1 524 000 1 812 000 1 610 716
Compensation payment to farmers (Euro) 287313 323145 310827
(%) 18,9 17,8 19,3
Sources: Estonian Insurance Association; Accounts, Annual reports 2001,2003,2005
7. Reinsurance
See Annex 1.
• Private or public
Not yet in Estonia
• Main re-insurers
Not yet in Estonia
• Reinsurance rates
Not yet in Estonia
8. Alternative risk management tools
• Ad-hoc measures (extraordinary disasters): average expenditure in the last 10 years, delay to pay.
No ad-hoc expenditures during the last 10 years
• Calamity funds regularly fed. average expenditure in the last 10 years, delay to pay.
No calamity funds in Estonia
No needs for mutual funds in Estonia
• Non monetary tools
No non monetary tools for risks management in Estonia
9. Changes undergoing the system.
No changes at the moment.
In future:
• If the farmers income due to the CAP will rise the share of insurance activities accordingly increasing;
• Obligatory insurances due to the applying the finances from EU structural funds will increase.
• In longer perspective, taking into account continuing climate changes, which will be expand the disasters area the new instruments are needed.
• Due to the competition on the field of insurance market the number of insurance companies diminishing. Same time the state interest to avoid monopolistic (domination trends) trends on the insurance market;
10. Technical Form (detail of paragraph 5)
Product covered (crop type, livestock, income):
Peril/damage covered (or Multi-peril). Is it a insurance on yield? Is there a list of specific perils covered? No
Technicalities:
Index-based? (computed on meteo data, satellite images, etc….) No Can a farmer insure only part of the fields? No Loss estimation per field or per farm? Per animal
Triggers: which is the minimum loss above which the farmer is compensated? Different. Depends of company rules.
Method to calculate the reimbursement Main by professional treatmentors of losses Compulsory for the farmer? Yes
Is there a bonus-malus system? Yes
Time from the harvest/damage until payment of indemnity (specify if it is maximum or average) No crop compensations in Estonia. Average time of payout of animal compensation is one month
Geographic detail used by companies to determine tariffs. No Franchise (%). Does it coincide with the trigger? No franchise
Public involvement (subsidies to premiums, re-insurance, regulations) No
Coverage in area, number of farms or value (specify and give all values if possible) Tables 6.1, 6.2 and 6.3
Sources:
• Estonian Statistical Office/ Electronic database/ Agricultural holdings
2001-2005/ GDP calculations/
• Estonian Insurance Association/ Accounts/ Annual reports/Databases.
2001,2003,2005;
• Estonian Insurant Association/Database
• ERGO Kindlustus /Annual reports 2001,2003,2005/ • IF Kindlustus / Annual reports 2001,2003,2005/ • SALVA Kindlustus/ Annual reports 2001,2003,2005/ • Ignes Kindlustus/ Annual reports 2001,2003,2005 • Nordicum Kindlustus/ Annual reports 2001,2003,2005/ • Seesam Kindlustus/ Annual reports 2001,2003,2005/ • Estonian Insurance Brokers Association/ Documents
ERGO If Eesti Inges Nordicum Salva Seesam
Private insurance
companies Kindlustus Kindlustus Kindlustus Kindlustus Eesti Kindlustus Rahvusvaheline Kind. Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net
premiums premiums premiums premiums premiums premiums premiums premiums premiums premiums premiums premiums
Motor TPL insurance 9 527 658 8 922 814 16 521 343 16 299 905 4 214 650 632 200 3 779 608 2 098 675 6 882 168 1 610 661 1 456 477 245 077 Short-term health insurance 1 661 825 1 552 959 2 064 576 2 056 694 626 745 626 745 115 249 85 471 915 010 691 326 1 146 647 1 087 884 Land vehicles insurance 16 016 303 15 095 803 22 021 648 21 923 252 69 244 42 711 733 459 369 364 5 588 503 1 697 564 12 699 528 3 269 381 Other vehicles insurance 233 800 55 247 92 179 91 750 - - - - 460 366 51 674 15 683 - Goods in transit insurance 751 896 237 155 512 934 434 979 38 739 29 680 - - 27 683 2 820 187 341 161 550 Property insurance 8 745 066 6 751 908 18 013 405 17 075 760 4 026 3 048 123 743 53 404 2 062 813 665 454 4 803 960 1 198 824 Vehicle liability insurance 827 585 311 419 31 550 31 550 766 306 766 306 - - 31 128 11 465 2 768 - General liability insurance 923 445 423 749 2 199 255 1 427 113 - - - - 59 730 13 655 554 368 236 749 Insurance for pecuniary loss 473 508 222 621 787 642 661 243 3 723 3 723 156 883 69 903 129 438 76 633 530 057 7 252 DIRECT INSURANCE 39 161 085 33 573 676 62 244 533 60 002 247 5 723 434 2 104 415 4 908 942 2 676 818 16 156 839 4 821 254 21 396 830 6 206 717 REINSURANCE - - - TOTAL 39 161 085 33 573 676 62 244 533 60 002 247 5 723 434 2 104 415 4 908 942 2 676 818 16 156 839 4 821 254 21 396 830 6 206 717 incl obligatory insurance 9 707 890 8 971 477 16 597 850 16 376 413 4 214 650 632 200 3 779 608 2 098 675 6 885 306 1 611 289 1 456 477 245 077 Agriculture from total 379 863 295 448 765 608 636 024 32 624 27 472 43 199 28 943 237 506 179 341 151 917 132 660 % 0,97 0,88 1,23 1,06 0,57 0,48 0,88 0,67 1,47 1,11 0,71 0,62
ANNEX 2: Examples
ERGO INSURANCE SERVICE
Cattle insurance
By offering cattle insurance, ERGO wishes to be your reliable partner and alleviate your financial problems whenever anything unexpected or unforeseen happen to your cattle.
A cattle insurance contract may be signed by the owner, lessee or any other legal
possessor of the animals.
Cattle insurance offers a possibility to insure appropriately vaccinated animals that have
been declared to be healthy by a veterinarian: bovine animals, sheep, pigs and other animals as agreed upon.
Cattle insurance compensates for damage arising from:
• fire and natural disaster • accident
• theft
• diseases, including communicable diseases.
In addition you may choose additional insurance cover in case of which you will be compensated for the treatment of the animal, including operation costs.
The signing of the contract is subject to the condition that all animals have to be appropriately identified and entered into the register of the Agricultural Registers and Information Board.
Additionally two which are important on the field of Estonian insurance market. These ones are:
• Forestry • Fishery
Forest insurance contract may be signed by the owner, possessor, caretaker of the forest
Forest insurance offers a possibility to insure a forest growing on land that has been
determined on the basis of land readjustment and entered into the land register; it is also possible to insure the timber obtained from the forest.
The insured place is the location of the forest and timber specified in the insurance contract pursuant to the forest management plan.
Forest insurance compensates for damage arising from:
• forest fire • storms • snow • hail • cold damage • forest pests • diseases and game.
ANNEX 3: Farmer’s questionnaire results
Q1. Nomination of most important restriction to insurance activities in agriculture
1. Low income in agriculture 47%
2. Low risk area 35%
3. High prices of insurance services 18%
Q2. Insured objects priorities
• Machinery and equipments 51%
• Building 28%
• Animals 11%
• Yield 8%
• Income 2%
Q3. Your opinion to create the producers fund against the natural disasters
Yes 67%
No 24%
