The Market Today

Market Trends

The Austrian Insurance Association (Versicherungsverband Österreich – VVO) expects claims to the insurance market from business interruption for the self-employed and freelancers to reach about EUR 100mn (USD 108.97mn) but other observers feel this is somewhat optimistic and reckon on perhaps twice that amount.

While investment income has been badly impacted for 2020, Austrian insurance companies remain resilient and will be easily able to bear the insured losses related to COVID-19. Absent any major individual claims or natural perils events, technical results for the full year are expected to be good for the market.

According to figures from the Financial Market Authority (FMA), in 2019 the Austrian non-life insurance market (including healthcare) produced gross written premiums of EUR 12.14bn (USD 13.59bn), an increase of about 4% over the previous year. Overall results were up significantly on 2018 with loss ratios at satisfactory levels and business continuing to be profitable.

Premium income for industrial/commercial property grew by just over 10% in 2019, reflecting harder market conditions for the larger risks and these have persisted into 2020. With the major multinational insurers reducing capacity, major commercial risks have also seen higher prices in some casualty classes, particularly some specialist lines. In contrast, premium rates in 2020 for SME business, where domestic Austrian insurers predominate, were said to be stable in both property and casualty.

Other Developments

Severe weather in November 2019 caused landslides and flooding in several areas, but with Carinthia worst hit. The total insured loss is put at around EUR 100mn (USD 111.94mn).

Other Developments

It was reported in January 2022 that Bahamas First General Insurance Company (BGF) now offer the option to purchase insurance policies online. BFG confirmed that they had been researching and developing the system since 2018, known as First Online, when it became an essential tool during the covid-19 pandemic, they launched the platform in 2021. At present it is limited to personal motor and residential property cover. Policyholders are able to not only buy insurance cover on the platform but also obtain quotations, pay their premiums, and notify the insurer of any claims.

Legislation and Regulation

Finanstilsynet, the financial services supervisory authority, has published a new draft law entitled the Insurance Business Act (Lov om forsikringsvirksomhed) which proposes to separate legislation on insurance from the current Financial Business Act (Lov om finansiel virksomhed). The latter of which governs all financial institutions. Although it is now a separate law, the new legislation contains the current provisions relating to insurance without material changes. The draft law is expected to be submitted to the Danish parliament in November 2022 with a proposed effective date of 1 July 2023.

Legislation and Regulation

The UK government has begun the process of replacing EU laws relating to financial services with the introduction of the Financial Services and Markets Bill to parliament in July 2022. The aim of the bill is to grow and improve the competitiveness of the financial services sector. One of the key changes for the insurance sector will be the expected reform of the current Solvency II regime.

Other Developments

Cyclone Gombe, a Category 3 cyclone, struck Mozambique on 11 March 2022 and severely affected the provinces of Nampula and Zambezia, as well as Sofala, Beira, Tete and Niassa provinces although to a lesser extent. The cyclone led to the deaths of 61 people and damage to over 41,000 houses, 69 health centres, infrastructure and crops. More than 23,000 people were also displaced. The level of insurance loss arising from the cyclone is currently unknown.

In response to the cyclone, it was reported that Mozambique’s prime minister, Mr Adriane Maleiane, had proposed establishing a sovereign natural disaster insurance scheme for Mozambique to respond to future flood and also drought losses. Subsequently, in September 2022, it was reported that the government was seeking insurance companies to tender for the provision of natural disaster insurance, in accordance with the national Procurement Law. Initially the cover would provide against damage caused by tropical cyclones during the next three rainy seasons. The project is being funded by the World Bank. 

Market Participants

At the end of June 2022, it was reported that La Marocaine Vie (one of the leading life insurers) had launched its wholly-owned takaful subsidiary, named Al Maghribia Takaful.  It will be offering sharia-compliant life and disability cover initially, to be followed by multi-risk buildings insurance and eventually investment-linked savings takaful.

Market Trends

While premium growth has been a challenge in recent years, there was a welcome return to positive growth of 7.6% in 2021. In the motor sector, loss ratios were significantly better than in the preceding years owing to reduced road traffic, even taking into accounts substantial discounts given by market insurers to motor policyholders. By 2022, however, the effects of growing inflation on such items as spare parts was having a negative impact and leading to rate increases by many insurers. 

There was an absence of natural perils and major losses in property insurance. Companies faced increased reinsurance costs from 2022 as a feature of international rather than local markets. Although there was some concern at street protests during the first half of that year, which had a negative impact on the economy, these had not caused significant insured losses to that point. By August 2022 there had been little sign of local rating increases, with the property market generally remaining soft.

Market Participants

In June 2022 Mercantil Bank in Panama announced its acquisition of Capital Bank and its subsidiaries. This may be expected at some point to lead to synergies between Mercantil's local insurance and reinsurance companies and Optima, ranked 11 in the non-life market in 2021 and part of the Capital Bank financial group.

Market Trends

The Resolution of the Board of the National Bank of Tajikistan No 74 dated 21 June 2022 Methodological requirements for the calculation of insurance rates sets out requirements to be followed by (re)insurers in Tajikistan for calculating insurance rates for voluntary classes of insurance business and the various factors and methodologies that are permissible. In addition, for life insurance business there is a requirement that mortality tables are used.  Insurance rates are to be calculated by (re)insurers and, where these are available, to be certified by actuaries. Insurance rates are subject to the approval by the insurance supervisory authority. (Re)insurers are required to publish information on the rates they use in Tajik on their websites. Where rates are revised (re)insurers are required to publish these within five working days on their website following approval by the insurance supervisory authority. 

Other Developments

So far, the economic impact of the Russian invasion of Ukraine on the Tajik economy has been less than expected with growth expected at 4.3% in 2022. Remittances received from Tajik workers in Russia in 2021 were approximately USD 2.3bn or around 30% of GDP and these have remained resilient. International sanctions on the Russian economy and its banking sector are expected to reduce some of these inflows during the latter part of 2022 and into 2023.   It is not yet clear how the insurance sector will be affected by the war in Ukraine. Travel insurance volumes are likely to reduce due to the fall in the numbers of people from Tajikistan travelling to Russia for work. The economic impact of the war may also put pressure on the volumes of some other business lines.

Market Trends

According to official statistics for 2021 non-life premium totalled TRY 74.74bn up by just over 30%. While the increase in premium looks impressive, in real terms, after the effects of inflation and declining exchange rates, there was actually a contraction estimated by market participants to be over 5%. The market in 2022 continued to be heavily affected by inflation, with premium income up over 97% at TRY 74.07bn after six months.

In 2022 industrial and commercial property rates are reportedly rising by 5% to 10% for accounts affected by claims, but are unchanged for better risks, tending to the level of the compulsory earthquake tariff but covering all types of peril. Deductibles are also being increased, where possible. Recent changes to the earthquake tariff system, however, placed some risks in a higher risk zone and therefore some commercial insureds are paying higher premiums than previously. Loss experience has generally been good as regards major individual claims.  

Participation insurance grew by over 28% in 2021 to TRY 5.47bn, of which TRY 5.06bn was non-life. In 2022 it was reported that two new participation insurers were in the process of being established.

According to a 2022 report by rating agency Fitch, the insurance market is going through one of its most challenging periods in recent times, with questions being raised about its long-term financial sustainability. Investment returns have become insufficient to compensate for poor underwriting experience, especially in motor third party liability (MTPL) insurance, and insurers' capital strength is being eroded. It is thought many companies may leave the market in the near future.

Market Participants

In 2022 Oman Insurance completed the sale of its Turkish operations, Dubai Sigorta, to VHV Reasurans, part of Germany's VHV Group.

Legislation and Regulation

As well as earthquake, Turkiye can be susceptible to hailstorm and flash flooding events caused by thunderstorms. Prompted by 2021's flood events in the Black Sea region (which cost over USD 100mn), the Insurance and Private Pension Regulation and Supervision Authority (SEDDK) has started work on extending the scope of TCIP to provide coverage for natural disasters (floods, landslides, storm, hail, frost and forest fire).  Studies are being undertaken and extended cover should be introduced in April 2023.

Insurers say that in the prevailing high inflation environment, MTPL premiums are still not sufficient to cover their costs, especially with rises in the minimum wage and the doubling of MTPL limits from 1 July. The SEDDK has been particularly concerned at the chronic problems in MTPL and in September 2022 it announced that it was working to develop sustainable, structural solutions and would set out its roadmap later in the year.

Other Developments

Before the recent economic difficulties began to be felt, the Turkish insurance market had been seen as having considerable potential over the long-term and attracted the major foreign insurance groups: foreign capital accounted for around 58% of non-life premium in 2021, but this figure has been declining in recent years. Insurers say that in the prevailing high inflation environment, motor third party liability (MTPL) premiums are still not sufficient to cover their costs, especially with rises in the minimum wage and the doubling of MTPL limits from 1 July 2022.

Until mid-2018, Turkiye had been used to good economic growth but since then it has suffered from extremely high levels of inflation, a weak currency, recession and most recently COVID-19. Inflation surged in autumn 2021 following a cut in interest rates and further fuelled by increases in energy costs resulting from Russia's war on Ukraine; in August 2022 it reached levels not seen for over 20 years, at over 80%. The full-year inflation forecast is 65%, slowing optimistically to about 25% in 2023. Little or no decisive action is expected until after the national elections in June 2023.

Before the recent economic difficulties began to be felt, the Turkish insurance market had been seen as having considerable potential over the long-term and attracted the major foreign insurance groups: foreign capital accounted for around 58% of non-life premium in 2021, but this figure has been declining in recent years.

Market Trends

In 2021 the Vietnamese non-life insurance market (including PA and healthcare) grew by 4.32% in local currency. This was the lowest growth rate recorded in the five years up to and including 2021, largely due to the ongoing impact of the COVID-19 pandemic. Growth is generally expected to increase in pace in 2022 as the country progressively recovers from the economic effects of the pandemic.

In 2021 it is reported that premium rates for property and energy risks which required international facultative reinsurance support increased in a harder global market. The percentage of increase in this respect was very variable in individual cases, dependent upon risk quality and claims experience (including catastrophe losses) in each particular case, but in general in such cases rating increases varied between 10% and 50%. In these circumstances reinsurance overseas became more difficult to place and there was a reported increase in the volume of locally placed coverage.

In the property market gross premium volume grew by 14.25% in 2021, the main growth drivers being a major renewable power project, rate increases for the larger risks and increasing demand for coverage. Decree No 97/2021/ND-CP issued on 8 November 2021 amended Decree No 23/2018/ND-CP dated 23 February 2018 regulating compulsory fire and explosion insurance and is expected to have a positive growth effect on the market in 2022. In other lines of business such as construction and engineering growth is reported to have been sluggish in 2021.

Gross premium volume in the large motor account reduced by 6.10% in 2021 for the first time in five years principally due to the inhibiting effects of the COVID-19 pandemic and successive lockdowns. It should be noted that most locally owned Vietnamese companies (with only very few large company exceptions) reinsure a portion of their motor business on a quota share basis in order to support capital adequacy and solvency margins. Subsidiaries in Vietnam of foreign companies do not generally seek quota share insurance in respect of the motor account. Branches of foreign companies in Vietnam are able to use the reinsurance facilities of the parent company which in most cases would also not involve motor quota share arrangements.

Legislation and Regulation

The Law on Insurance Business (amended) No 08/2022/QH15 was passed by Parliament on 16 June 2022 and will take effect as from 1 January 2023. It is confirmed that the law contained inter alia provisions for the introduction of risk-based capital adequacy regulations which are to be further elaborated in due time.  At the time of preparation of this report the English text of the amended law had not been published.  The amended law provides a grace period of five years as from 1 January 2023 for insurers and reinsurers to comply with risk-based capital adequacy regulations.  

Other Developments

Real GDP growth in 2021 was 2.57%, it is forecast to be 5.96% in 2022 and 7.13% in 2023. Inflation was 1.83% in 2021 and is forecast to be 3.89% in 2022 and 4.11% in 2023.

Some business interruption losses related to manuscript worded IAR policies have been reported to have occurred in 2021 arising from the COVID-19 pandemic but generally these were subject to sub-limits of circa USD 500,000 and were comparatively modest in size. Otherwise basic local policies require a covered material damage event to have taken place in order for a valid business interruption claim to be made.