As was the case in Q108, the main focus of this report is BMI’s proprietary Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI’s Country Risk Rating (CRR). The IBER makes it easier for the insurance sector business environment in a particular country to be compared with the business environment for any other BMI-monitored industry in that country. The IBER also allows an objective and meaningful comparison of the insurance sector business environment between countries.
Over the coming months, we will substantially change the format of the BMI insurance reports. In essence, we will focus to a much greater extent on the companies that are active in the non-life and life segments.
Slovenia’s IBER is 62.6, which is attractive for foreign insurers compared to other countries in Central and Eastern Europe (CEE). Within the region, Slovenia stands out for its country structure and regulatory framework. The economic outlook is positive, and government policies are likely to remain constant over the long term. However, the IBER is held back by the underdevelopment of the life segment and by the external risk and bureaucracy in Slovenia.
Non-life premiums are expected to grow by 8% annually in local currency terms and by 7% in US$ terms over the forecast period. Life premiums are expected to rise 15% annually in local currency terms and by14% in US$ terms. The key drivers of growth in the non-life segment in 2007-2012 are the anticipated rise in non-life density, from around US$855 to US$1, 193, and an expected increase in life penetration, from 1.49% of GDP to 2.19%. The envisaged rise in life density - from about US$314 to US$600 - is the key driver of growth in the life segment, and the population is slowly increasing.
Neither the life nor the non-life segment is particularly open to participation by foreign groups because they are both largely controlled by former state monopolies. The top five local firms claim 90% of the total market. There could be a realignment of interests within Austria’s financial services, which means that Grawe or UNIQA would rethink their commitment to non-life insurance in some of the smaller markets in the CEE region. Alternatively, there could be a piecemeal sale of individual operations across the region.
Slovenia has a very strong economy and is likely to grow further, compared with other Central European countries. It should also remain stable regardless of the upcoming elections in October, thanks to a broad political and economic consensus. While the market is not easily penetrated from the outside, Slovenian insurers are branching out and developing businesses off shore. There remain a large number of people with insufficient or indeed no insurance.
There are few players in the Slovenian market, however, and the top five companies hold 90% of the market. Rationalisation, therefore, is not as much of a factor here as in other Eastern European countries. Slovenia’s economy may also be adversely affected by a decrease in its export market, due to the slowing down of its main trading partners. The rate of inflation is also one of the highest in the EU.
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