A'D' Makedonija

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Insurance Inc. Skopje
INSURANCE MARKET REPORT ON MACEDONIA (1991-2005)
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OUTLINE

• Short introduction of the macroeconomic and
  political surrounding during the transition
  period
• Aim Overview of the recent insurance market
  developments
• Period from 1991 until 2002 (key facts)
• Period from 2002 until present (key facts and
  changes)
• Comparative analyses (differences and
  similarities)
• Detailed statistics of market size,
  concentration and structure
• Main challenges in the period to follow
• Conclusions and opportunities for development

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Basic facts and macroeconomic framework
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Period from 1991 until 2002

• Characteristics No real insurance market-only
  two companies Makedonija and Vardar until
  1994 huge concentration no company nor market
  reform low quality of services
• The state monopoly with 98 market share
• Soft credit provided to state companies due to
  political reasons
• 1994 formation of Makosped and Tabak as
  service to tobacco and transportation sectors no
  ambitions for market competition
• No appropriate insurance and supervision
  legislation
• In 2000 premium volume begins to fall (2.6 fall)
• In 2000 QBE buys Makedonija by share buy-out
  from state and employees and inherits the
  de-facto market monopoly
• Premium ceded increases from 5m EUR in 1999 to
  16m in 2002

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Period from 2002 until today

• Dynamic development and new market entrants
• Eurolink and Sigma formed in 2002 Insig
  and Sigal in 2004 all foreign investments
  with non-life license
• Dramatic change in market concentration and
  shares
• Due to real market pressure restructuring of
  existing companies
• Premium volume continues to shrink largest fall
  in 2002 (9)
• Numerous cancellations of policies due to
  non-payment
• Law on Insurance Supervision 2002 introduced
  legal framework in accordance to EU directives
  specified licensing procedures
• Appearance of insurance brokers 4 licensed
  domestic companies
• QBE put life insurance in run-off Vardar
  Croatia gets life insurance license very small
  life insurance sector (2)

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Key findings (differences and similarities)

• Market size consistently decreases while market
  participation increases in both periods 8
  non-life and 1 life insurance company
• Reasons for premium shrinkage cancellation of
  large non-paying industrial accounts company
  liquidation competitive rate softening low
  economic growth
• The insurance sector consistently shows profit
  (4m EUR in 2004)
• Current characteristics-changes in recent period
  lower market concentration increasing shares of
  small companies smaller but healthier market
  size stable market structure better service
• New distribution channels-Insurance brokers
  still low participation with 1m insurance and 2m
  reinsurance premium directed in 2003
  international brokers not present but used for
  reinsurance
• Trends in reinsurance increased importance of
  fronting

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Market participation and concentration
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Market Size and Structure
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Main challenges and Opportunities

• Birth of Life insurance to absorb the gap of
  supply to participate in the reformed pension
  system (third pillar)
• Most important challenge for insurance companies
  To adopt to the changes envisaged by the MTPL Law
  to be passed in 2005
• Characteristics of the new law significantly
  higher indemnity limits introduced (previous
  limit was 50,000EUR)while tariff remains fixed
  for the present
• Consequences Reinsurance demand will increase
  the challenge of creating market pools may be
  reactivated
• New taxes introduced 2 of MTPL and Casco
  premiums for Traffic Safety Commission financing
• Expected change of law, to allow direct insurance
  with companies abroad, will put large pressure on
  companies

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Future Challenges and Opportunities
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Conclusion

• Huge development in terms of market participation
  despite falling market size Restructuring and
  creation of an insurance market structure has
  been completed
• Real market environment achieved and foreign
  investment attracted (most companies, except
  Vardar, Tabak and Makosped, have foreign capital)
• Undeveloped and small market with one of the
  lowest premium volumes in the SEE large unused
  market potential uninsured companies and
  individuals low insurance consciousness
• Basic pre-conditions satisfied (insurance market
  structure and stable environment created) but a
  persistent economic growth and employment
  increase are crucial for growth in the insurance
  market
• Market size has potential to increase (country is
  similar to Slovenia which has a premium volume of
  1b EUR, 12 times larger)

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Insurance Inc. Skopje
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