OREANDA-NEWS. August 26, 2010. The results of activity of insurance companies in January-June 2010, published by the National Commission of Financial Market (NCFM), indicate that the insurance market, “sunk” under the influence of crisis during the last year, is “on the mend.”

The Director of Insurance Supervision Department under the NCFM Vladimir Stirbu assesses the results of half a year positively in the context of growth dynamics of the volume of premiums, taking into account difficult 2009 for the insurance sector. While in January-June 2009 the Moldavian insurance companies attracted 381 million leis (by 11% less than collected funds volume in January-June 2008), in January-June 2010 the volume of insurance premiums amounted to 438,84 million leis or by 15,1% more as compared to the same period of 2009.

Traditionally the largest part of insurance premiums collected is provided by auto insurance: in January-June 2010 the share of CASCO and OSAGO was 66% of all insurance premiums. In spite of the share of this segment in the total structure of premiums didn’t change considerably as compared to the same period of 2009, the volume of attracted funds to auto insurance during January-June 2010 increased by 5% - on CASCO (81,07 million leis) and by 21% - on liability car insurance (208 million leis), as compared to January-June 2009. The internal liability car insurance earned to insurers 112 million leis (+22,5%), the Green Card premiums amounted to 86,5 million leis (+13,4%).

The insurance payments in January-June 2010 amounted to 155 million leis, reducing as compared to the same period of 2009 by 20,1%. The majority of compensations were paid on auto insurance: CASCO - 67,04 million leis, internal obligatory insurance – 43,1 million leis, Green Card – 20,9 million leis. The share of auto insurance in total accounted for 84% of total amount of insurance compensations, paid by insurance companies in January-June 2010.

The leaders in terms of insurance premiums collected in January-June 2010 were: Moldasig – 123,7 million leis (28,2% of all premiums), Asito – 101,8 million leis (23,2%), Grawe Carat Asigurari – 51,8 million leis (11,8%), Donaris-Group – 29,4 million leis (6,7%). The same companies became the leaders in terms of insurance reimbursements: Moldasig – 44,78 million leis (28,8% of all reimbursements), Asito – 35,2 million leis (22,7%), Donaris-Group – 13,2 million leis (8,5%), Grawe Carat Asigurari – 9,9 million leis (6,4%).

Auto insurance – is the main “support”, and at the same time, the significant shortcoming of the insurance market of Moldova, - the experts admit. It especially refers to the companies the share of auto insurance of which makes up the main part of insurance portfolio.

According to General Director of the company Moldasig Vitalie Bodea, this year the all-time index of surface transport insurance unprofitability (CASCO) “let down” the insurers a lot, and the volumes of reimbursements on liability car insurance were gross. “In the field of auto insurance we are in strong arrears of neighbor countries, where the rates are not only higher but formed differentially, taking into account many coefficients, including drivers’ age, sex, driving experience and others,” - Vitalie Bodea says.

According to Vitalie Bodea, the knavery cases became more frequent recently, and with difficult schemes in which the police officers are involved as well. It’s a profitable business – someone issues the fake insurance policies, someone makes a profit on their discovery. And the “competent authorities” react to this phenomenon quite lukewarm.

At the same time, the “competent authorities” represented by the NCFM are creating a special information system in order to eradicate the cases of knavish and forgery of auto insurance policies. According to Vladimir Stirbu, already in October 2010 the pilot project of info-system will be launched in order to implement it for good and all by the beginning of 2011.

Everything isn’t so smoothly with rates for auto insurance. According to Vladimir Stirbu, the NCFM studies thoroughly the correspondence of rates on OSAGO with real payments, and if the level of payments is lower than amount, determined in the structure of tariff rate, it’s not ruled out that the NCFM will resort to reduction of rates.

The market participants, in their turn, support the increase of rates, especially regarding the growing expenses on insurance reimbursements. The insurers are also outraged by completely uncontrolled dumping on the insurance market. The companies, accentuating the dumping and striving for collection of maximum number of insurance premium, forget that, ultimately, the quantity will influence the quality and the level of their own solvency, what may result in deplorable consequences in crisis conditions – both for certain companies and for all market as well.

“More than 30% of insurance premiums on auto insurance fell short because of discounts and unfair competition. Because some companies, in spite of rates established by the legislation, provide the discounts to the amount of 30-50% from established cost of insurance policy. In the NCFM it’s quite easy to be traced, but apparently, it’s convenient for someone, - says Director of the company Artas Eugenia Gohberg. – It seems to me that decency on the insurance market means the collapse of the company in fact.”

Concentration on a single segment makes the insurance market of Moldova quite vulnerable. Both Moldavian and foreign specialists agree that the insurance market needs the diversification. But the insurers themselves take a skeptical view of such initiatives, - the serious changes aren’t worth to be expected in the near future: we have neither cultural, nor financial preconditions.

For example, as before, the population doesn’t give much attention to health and life insurance that take altogether not more than 10% of total premiums volume, in spite of increase of health insurance premiums by 29% (from 16,1 million leis in January-June 2009 up to 20,76 million leis – for the same period of 2010). The insurance from fires and other disasters increased considerably – by more than 2 times as compared to January-June 2009, accounting for 39,26 million leis in January-June 2010.

At the same time the volume of premiums on agricultural structures insurance increased almost three time as much – up to 19,8 million leis, premiums on building and construction insurance increased by 10%. Since the beginning of this year the amount of funds, attracted by the insurers in accident insurance reduced by 40% - up to 9,47 million leis. The amount on reimbursements on life insurance in January-June 2010 accounted for 7,18 million leis (4,6% of all payments), on health insurance – 4,13 million leis, on accident insurance – 3,4 million leis.

The sea vessels and railway transport insurance isn’t in use in Moldova yet. But the aircraft insurance grows slowly – the volume of premiums in January-June 2010 amounted to 15,2 million leis, increasing by 28% as compared to the same period of 2009. The cargo insurance, underestimated by the cargo carriers and cargo owners, since the beginning of the year brought premiums to the amount of 1,98 million leis or by about 22% less than in January-June 2009. However, don’t forget that the insurance – is a subbranch that reacts to changes in other sectors of economy in chain reaction.

And in the last case the (cargo) insurance, most probably, reflects the slump in cargo transportation that in January-June 2010 reduced by 6% as compared to the same period of 2009. The insurance of loans, legal defense, guarantees, pensions, insurance against financial losses also grow slowly. The marriage and birth insurance as well as other types of insurance are completely absent.

This year the NCFM is intended to implement a range of measures to enlarge the insurance’s fields. At present the issue on suitability of implementation of obligatory insurance of buildings and constructions is in discussion. According to Vladimir Stirbu, the NCFM conducts a research on this item with the support of international donors. However, according to him, the implementation of system of obligatory insurance of buildings and constructions is possible only in case of popularization of voluntary insurance among population; otherwise any initiatives in this field won’t bring the desirable result.

The insurance payments-premium ratio reduced this year. While in I quarter of 2010 it made up 40%, and in 2009 – 44,24%, in January-June 2010 it reduced up to 35,4%. According to Vladimir Stirbu, in economically developed countries this index reaches 60%. At the same time, in order to analyze the market profitability and the state of market stability it’s necessary to analyze all indices in total, including the index of insurance reserves and the index of reinsurance.

The total volume of premiums, transferred to reinsurance in January-June 2010 amounted to 112,2 million leis or by 14,2% more against the same period of 2009. It made up 25,6% in the total volume of gross-premiums accrued in January-June 2010. At the same time the index of insurance reserves important for insurance companies increased by 15,1% as compared to January-June 2009, accounting for 533,9 million leis.

According to Director of Moldasig Vitalie Bodea, the volume of funds, channeled for reinsurance depends on policy of every company separately. “In our company the reinsurance policy is described clearly, we pay special attention to property types of reinsurance – aviation risks on CASCO, agricultural risks,” – Vitalie Bodea says.

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 leis, and net assets – by 40,6%, accounting for 984,8 million leis. The return of Moldavian insurance companies in January-June 2010 amounted to 67,5 million leis, increasing by 22,2% as compared to the same period of 2009.

The process of capitalization of insurance companies continued this year. According to the Law on Insurance, came into force in April 2007, in 2010 the charter capital of insurance companies must amount to not less than 9 million leis. Vladimir Stirbu communicated out of 24 companies, operated on the market in 2010, the amount of charter capital of two companies didn’t correspond to required standards – Garant and Edict. He explained that Garant, the controlling block of stock of which belongs to Exim-Asint, asked for deferment from the NCFM to solve some fiscal problems and Edict submitted the mistaken data on financial accounting.

In order to not to detain the market these data were published, however the NCFM issued to Edict two orders on change of financial accounting. In total, the charter capital of insurance companies increased by 10,3% as compared to the same period of 2009, accounting for 406,3 million leis. The leader on this index is Moldasig with charter capital of 60 million leis, Asito – 46 million leis, Grawe Carat Asigurari – 42 million leis.

In total, the insurance market didn’t change. According to the insurers, since the beginning of this year “nothing happened”. The old problems remained unsolved and the future difficulties for most of them are growing as far as approaching the year 2012, when the provisions of the Law on Insurance of 2007 will come into force finally. It seems that new mergerings and integrations aren’t planned. Though no one makes the long-term prognoses – along with existing problems the competition becomes tougher. The “nothing happens” assessment on the insurance market is quite tensely.