XPRIMM: What were the possible reasons for the 20.5% growth in property insurance premiums at the end of 1H2020? Are Macedonians more interested in these products lately? How many of them are protected in front of NatCat risks?
KS: An especially interesting fact is the one that there was an increase of 20.5% in property insurance. The trend is not universal, i.e. several insurance companies show an increase, while a few have a decline in GWP. When analyzing the statistics thoroughly, we notice that the increase is due to different categories, in different insurance companies, with household insurance, insurance of buildings and facilities and agricultural insurance being dominant. This leads us to the conclusion that the increase in 1H2020 is due to the synergy of the increased interest in property insurance and the good sales strategies of several insurance companies.
However, despite this positive trend of growth of property insurance in the scope of risks, there is no movement in terms of catastrophic risks. The coverage of catastrophic risks is still at a very low level within the concluded property insurance policies, and, additionally, the scope of property insurance is generally unsatisfactory. I believe that it is necessary to build a broader state strategy in order to increase the penetration of property insurance covering the main catastrophic risks (earthquake and flood), because we face an expressed systemic risk at this level.
XPRIMM: What changes determined by the Covid crisis in your market do you think will survive the crisis?
KS: Insurance companies and insurance intermediaries affected by the Coronavirus crisis have faced the fact that a successful reorganization depends mostly on the development of information technologies. Unfortunately, in our country, online sales are still marginally present. Only part of the insurance products are available to consumers online by a small number of insurers.
I think the lesson learned will be that there shouldn`t exist a delay in following and adapting to new trends and changes, which means that market participants will have to change and adapt their business models, adopt new technologies, apply digital tools and encourage a culture of change in its operations, not only in the conclusion of insurance contracts, but also in the receipt and claims processing procedures.
XPRIMM: Did the Macedonian market recently experience some relevant structural changes? (M&As, new entries on the market, exits etc.)
KS: 2019 was marked by changes in the capital structure of two non-life insurance companies. The non-life insurance company Nova Osiguruvanje AD Skopje was taken over by Halk Banka AD Skopje, part of the Turkish Financial Group that owns an insurance company in its portfolio, and operates under the new name Halk Insurance AD Skopje. The second acquisition was of the non-life insurance company Eurosig AD Skopje, by the Austrian Insurance Group GRAWE. We consider both acquisitions a recognition of the existence of a functional insurance market and, at the same time, as a positive trend, given that the domestic market is attracted by insurance groups with a long tradition, which means better insurance services for both the citizens and the economy.
XPRIMM: What are the current challenges of the Macedonian insurance market and how is the Insurance Supervision Agency tackling them?
KS: As a result of the Coronavirus crisis, the Insurance Supervision Agency (ISA) undertook a series of measures and activities in order to reduce the negative effects of the new situation on the functioning of the market. At the very beginning of the health crisis, measures were identified and taken, which included amendments to several rulebooks regarding the prudential rules and financial reporting of insurance companies, the on-site supervisions were also postponed, as well as the initiated misdemeanor proceedings, in order to enable entities to more easily deal with the crisis and maintain continuity in operations.
XPRIMM:What are your prospects about the short-term and medium-term evolution of the local insurance market?
KS: The accelerated technological development, the growth and development of the domestic insurance market, as well as the changes in the international markets and insurance standards, on the one hand, and the limited resources for conducting supervision, on the other hand, undoubtedly will require changes, both in the regulation and in the daily organization of the work of the supervisory body. The changes will most probably be in terms of establishing risk-based insurance supervision, that will anticipate the risks, will improve the focus of the supervision and will enable timely intervention in the insurance market, in order to neutralize or reduce the negative unwanted effects, and maintain the financial stability of the insurance companies, even in cases of crises and disasters.
ISA will use all legal powers, and will propose changes in the existing laws, in order to fundamentally change the course of insurance supervision, and to set it on new paths in terms of anticipating risks in the insurance sector and dealing with them in a timely manner.
Within its competencies, ISA will ensure full transparency of positive corporate practices and public recognition when the satisfaction of the insured, from the use of insurance service, is indisputable and without disturbing the financial situation and solvency. It will stimulate competition between market participants to better meet the interests of policyholders, and add value to the corporate image, through public recognition of their business policies. However, the ISA will do the same if it identifies the development of negative corporate practices, that disrupt the financial stability of the sector, provide incorrect and incomplete information about insurance services and affect the deterioration of the reputation of insurance services.
ISA will establish a new dialogue with all market participants. The idea is simple, you cannot develop the insurance market without the active involvement of all entities in it. In other words, the measures that the regulator will take will be strongly correlated with the business concepts and needs of all stakeholders. In certain segments, to a certain extent, some of the entities may be affected in the short term. But, the final outcome is important, in the long run, everyone gets what they want, the insured will benefit of a range of insurance instruments at the optimal price and quality service of the policy, and the insurance companies, brokerage companies and agents will enjoy increased revenues and profits. Only in this way can we expect an increase in the penetration of the insurance market in the total financial system, from the current 3.5%.