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?
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?
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?
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.
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?
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
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