Romanian Insurance Market Overview

Aprilie 2009

CODRUŢ PASCU - Managing Partner IOANA LEAUA - Consultant ROLAND BERGER STRATEGY CONSULTANTS S.R.L.

Compared to Western Europe or to emerging CEE, the Romanian insurance market is still underdeveloped. Looking at the low level of insurance penetration and the intensification of competition in the last few years, it is clear that the market has significant room for growth. In the current crisis context however, the projected growth rates have to be adjusted, along with the competitors’ expectations.

 

Market development

Insurance gross written premiums increased by 13.8% in the first nine months of 2008, compared to the similar period of 2007. For comparison, in the period 2002-2007, the average growth pace was 29% per year, and the growth rate 2006-2007 was 32%. The penetration rate (total insurance gross written premiums as percentage of gross domestic product) at the end of September reached 2%, up from 1.8% of GDP at the end of 2007.

Gross written premiums reached EUR 1.8 bn at the end of the third quarter of 2008, an increase of EUR 222 mn as compared to the same period of 2007. The market is clearly dominated by the non-life segment, which accounted for more than 80% of total premiums (EUR 1.5 bn); the nonlife segment increased by merely 13.5%, compared to the period between 2002 and 2007, when it registered a CAGR (compounded annual growth rate) of 30%.

Evolution of insurance premiums volume and penetration rate, 2002–2008Q3

The life insurance segment also slowed down in the first nine months of 2008 – life premiums grew by 14.9% compared to September 2007, up to EUR 361 mn. In 2007, the life segment increased by 34%.

The insurance penetration rate (share of gross written premiums in GDP) of 2% at the end of the third quarter of 2008 and the insurance density (premiums per capita) of EUR 85 are considerably below the level of other CEE countries. Insurance premiums per capita in Romania, for instance, are merely one third of the value in Slovakia or Hungary.

These discrepancies reveal a solid growth potential for the local insurance market.

 

Product portfolio and distribution

The market is dominated by non-life insurance, with life insurance generating less than 20% of total premium volume. The life insurance segment however benefited from the introduction of the private pensions system in 2007, in spite of earlier cannibalization fears, as many insurance companies managed to raise general awareness for life insurance through their pension campaigns.

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