1asig.ro
 About us  Contact  Site Map   Login   


Search
HomeInsurance marketEventsPublicationsXPRIMM TV  
 










Interview of the week

Archive

Ramunas BARAVYKAS, Deputy Chairman, Lithuanian ISC


The insurance market reacted sensitively to the global financial crisis and the economic recession as it was mentioned previously. Life insurance market is dominated by unit-linked life insurance which fell significantly in volume because of turbulence in financial markets.

XPRIMM: How do you assess the evolution of the Lithuanian insurance market in 2010 compared to 2009?
Ramunas BARAVYKAS: Life insurance market was more responding to fluctuations in financial markets, after the largest decrease in 2008 (-32%) and the smaller fall in 2009 (-9%) already fully recovered in 2010 (+11%). Meanwhile, non-life insurance market development was closely linked with national economic trends. As well as in the Lithuanian economy, the largest decline in non-life insurance market was observed in 2009 (-30%). In 2010, although the economy recovered, the non-life insurance sector continued to decrease further (-5%). Finally it can be stated that the insurance market has stabilized in 2010. After two years of successive downturn the year 2010 was signed by a symbolic 0.6% growth.

XPRIMM: How did the financial crisis affect the Lithuanian insurance market?
R.B.: The insurance market reacted sensitively to the global financial crisis and the economic recession as it was mentioned previously. Life insurance market is dominated by unit-linked life insurance which fell significantly in volume because of turbulence in financial markets. The non-life insurance market has been more dependent on commercial sector. The growth of Lithuania's economy was closely related to the constructions and transport sectors - as the economy went down, the strong decrease in these sectors as well as weaker exports were the reasons that have led to the big fall in the commercial insurance segment. The total insurance market decreased not only due to the economic recession but also due to consumers' need to cut expenses by decreasing insurance coverage - along with a decrease in income, the financial possibilities to allocate funds for insurance have been reduced as well.

XPRIMM: How did the insurance companies cope with this challenging environment?
R.B.: First of all, I have to emphasize that the Lithuanian insurance market remained financially stable. Lithuania avoided the problems that the insurance markets in some other economically developed countries have encountered. Trying to adapt to the existing situation, insurers applied preventive measures aimed at reducing the number of contract cancellations. Some insurers offered new products that better meet the needs of the decreasing market; the others improved the existing products by adapting them to the current situation, facilitating payment schedules. Besides, the majority of insurers reduced operating costs and increased the work efficiency by improving the use of human resources as well as paid more attention to risk management.
Insurance undertakings registered in Lithuania pursue a rather conservative investment strategy - they target the major share of their investment portfolio to sovereign debt securities of developed Western Europe countries and corporate bonds with high credit ratings. During the market recession, such practice earned stable investment income to undertakings and, after the financial markets had regained confidence, investments restored their value in the most rapid way.

XPRIMM: What are the development perspectives for 2011?
R.B.: In case the country's economy will continue to grow and in the absence of turbulence in financial markets, Lithuanian insurance market would grow by 8-10% in 2011: life assurance market will increase by 5-6% and non-life insurance market will grow by 10-12%, according to the optimistic scenario.
In period of insurance market expansion there was not strong incentives for insurers to invest in insurance risk management system. Demand for such system rose in time of the crisis. One of the reasons was that investment income had decreased and did not cover losses due to tariff reduction. With the recovery of the market this demand will not go away and will further increase with the new solvency requirements. This will lead to harder market conditions.


Editor: Vlad BOLDIJAR | Published on 23.06.2011






















Copyright 2018 (c) 1asig.ro
powered by Media XPRIMM