Insurance market: positive results for 2019 will help deal with COVID-19 challenges
This year, the development of Lithuania’s insurance market will depend on the impact of the coronavirus (COVID-19) outbreak on transport, health and unit linked life assurance. While the country’s insurance market grew by almost 8% in 2019, this year its growth is expected to moderate.
“Looking at the previous year, it should be noted that the entire insurance sector sustainably complied with solvency requirements, and its profits and capital increased. This is particularly important in view of the current situation as we need all our strength to meet the challenges brought by COVID-19. For its part, the Bank of Lithuania will seek to support market participants by reducing the administrative burden and providing recommendations, as well as will closely monitor protection of consumer interests,” said Jekaterina Govina, Director of the Supervision Service of the Bank of Lithuania.
According to Ms Govina, the uncertainty of the current situation makes it difficult to predict the actual development of the insurance market, yet it can be stated that the volume of health insurance premiums in the non-life insurance market will decrease and, in the event of a prolonged quarantine period, the volume of transport insurance premiums that comprise the main bulk of the market may also significantly decline. The development of the life assurance market has in recent years been mostly affected by unit-linked life assurance (in 2019, it saw a 12.6% increase in premiums), while its volume is particularly sensitive to changes in household income and significant market fluctuations.
The Bank of Lithuania and the European Insurance and Occupational Pensions Authority (EIOPA) invite insurers and insurance intermediaries to provide consumers with clear and timely information on contractual rights, applicable exceptions, continuity of services and other issues and to take due and flexible account of consumer interests, if they are justified and can be implemented in practice.
Insurer assets, capital and profits followed an upward trend in 2019. Last year, the value of assets managed by insurance undertakings exceeded €1.4 billion, a year-on-year increase of 12.2%. Own capital of insurance undertakings grew by more than 16% and reached €313 million.
In 2019, all insurance undertakings operated at a profit and earned €45.4 million (up by 24.5% compared to 2018): the profits of life assurance undertakings stood at €16.6 million, while non-life insurance undertakings earned €28.9 million (an increase of 21% and 26.5% respectively). Activities of insurance brokerage firms, despite a year-on-year decrease of 14.7%, were profitable as well, earning them €3.4 million.
All undertakings complied with their compulsory solvency capital requirements in a disciplined manner.
A major structural change occurred in 2019, with the reorganisation of the SEB life assurance undertakings operating independently in the Baltic States. In Lithuania, these services are currently provided by a branch established by a Latvian company.
One-tenth more claims were paid. Last year, insurance premiums under signed agreements amounted to €946 million (7.7% more compared to 2018). Growth of the life assurance market, with a 8.9% increase in premiums (to €270.4 million), outpaced growth of the non-life insurance market, where premiums went up by 7.2% (to €675.4 million).
In 2019, €500 million in claims were paid over the first half-year, comprising an increase of 10.3% year on year. However, the trends varied: non-life insurance claims increased by almost 14% (up to €369 million), while life assurance claims – by 1.1% (up to €130 million).
Non-life insurance claims accounted for 73.9% of total claims paid. The main bulk of non-life insurance claims were related to insured vehicles, comprising 68.5% (€252.7 million) of total non-life insurance claims. The amounts paid for compulsory motor third party liability insurance increased by 14.8%, to almost €147 million, with premiums amounting to 3.8%.
In 2019, insurance services in the country's market were provided by 20 insurers registered in Lithuania: 8 undertakings and 12 branches of undertakings registered in other EU Member States. 8 insurers were engaged in life assurance and 12 – non-life insurance activity; 96 insurance brokerage firms operated in the country.