The Ukrainian insurance market in 2022 decreased by 16% in terms of payments, and by 28% in terms of payments // The insurance market hopes for growth in 2023.
Insurance companies are digesting the effects of 2022 and hope that the insurance industry will grow by 20% in 2023. Meanwhile, the NBU intends to strengthen market supervision and strictly monitor the ownership structure of insurers, writes business.
The National Bank published the final results of the insurance market. As the insurers predicted, the miracle did not happen: the insurance industry lost in volume in 2022.
The amount of net payments (excluding reinsurance payments) received by insurers during 2022 decreased by more than 16% compared to 2021. The volume of net payments (excluding reinsurance payments) fell by almost 28%. Thus, the insurance market rolled back somewhere to the level of 2019. In addition, the number of insurance companies has decreased: in 2022 there were 27 fewer of them. Moreover, the departure of insurers is not associated with war and crisis. Most of the companies were forcibly withdrawn by the National Bank for violations.
In 2023, the insurance market will be more positive and even growth is expected. At the same time, the NBU will continue to clean up and apply sanctions to those insurers that ignore the implementation of standards.
Everyone fell, but retained profitability
For key types of insurance, the largest drop in net premiums (up to 23%) in 2022 compared to 2021 was recorded for VHI, CASCO, accident insurance and life insurance contracts. At the same time, the volume of payments for compulsory motor third party liability insurance increased insignificantly, but increased. Net payments also fell by 20% or more in almost all of the above areas, except for life insurance – for this type, the amount of payments increased by 7%.
One of the important trends that the National Bank draws attention to is the growth in the share of auto insurance premiums by 10 p.p. in 2022. up to 49%. This is CASCO, “autocitizen” and “Green Card”. Moreover, the segment of international OSAGO (“Green Card”) during 2022 more than doubled compared to the previous year, and payments under such agreements increased by almost a third. This situation is connected with the mass departure of Ukrainian refugees to European countries, which provoked a surge in demand for this type of insurance. At the same time, the NBU states that premiums for property insurance and financial risk insurance have halved, and payments have decreased by 62%.
The loss ratio of compulsory types of insurance in 2022 remained at the level of 45%: the negative impact from the growth of loss reserves was leveled by an increase in the volume of premiums earned. The same indicator for voluntary types of insurance decreased (improved) to 42%, which was associated with a reduction in the volume of reserves for compulsory types of insurance.
In general, the reserves formed by insurers for 2022 grew by 12.3% to UAH 41.1 billion. The balance sheet assets of insurance companies increased by 9.5% to UAH 70.3 billion.
Both risk insurers and life insurance companies ended Q4 2022 with a loss. But, according to the NBU, for the whole of 2022, both groups of insurers remained “in the black”. Return on equity of risk insurers was 15%, life insurers – 13%.
insurance market 2022
Insurance market. Hope for recovery and growth
Insurance companies are looking at 2023 with slight optimism. According to the expectations of insurers, there will be no fall.
The market in hryvnia equivalent (amount of premiums – ed.) will grow by about 20% compared to 2022. This will be both inflationary growth and the revival of the insurance industry as a whole.
Sergey Avdeev
Chairman of the Board of the insurance company “Arsenal Insurance”
He argues his forecast by the fact that the economy is gradually adapting (albeit forcedly) to the realities of wartime. Companies and enterprises are restoring their activities. This, in particular, is evidenced by the results of a business sentiment survey for March, which published by the NBU. The National Bank states that enterprises of all sectors of the economy participating in the study look to the future more confidently. In particular, the Business Expectations Index rose by 4.5 points in March and amounted to 49.5 points.
Improving the situation in related markets will have a positive impact on the insurance sector. Therefore, most likely the first to show growth car insurance (CASCO and OSAGO) and, possibly, medical insurance, since not all companies have decided to abandon the medical protection of their employees. Growth in demand for property insurance on the part of business clients is not ruled out. After all, if lending starts to revive, then borrowers will definitely need collateral insurance.
The National Bank, for its part, notes that by the end of 2022, there has been a trend towards market recovery. And this is good news. As part of the meeting with insurers, which the NBU spent March 30the first deputy head of the National Bank, Ekaterina Rozhkova, said that even in such a difficult year, the market showed good results.
In the second half of 2022, insurance companies were able to reformat their work and increase the volume of premiums in the life and non-life segments compared to the first months of the war.
Ekaterina Rozhkova
First Deputy Head of the National Bank
Supervision of insurers returns
However, it will definitely not become easier for insurers to work on the market. This is especially true for those companies that do not want to comply with the regulations and requirements of the NBU. The National Bank has repeatedly warned that it will resume full-fledged supervision of the market. And in 2023 it will definitely happen.
In its report on the non-banking financial sector, the NBU said that despite some wartime relaxations, the National Bank would apply measures, up to the annulment of licenses. Insurers must put their capital, assets and ownership structure in order, as well as be sensitive to consumer complaints and enforce anti-money laundering and anti-terrorist financing laws.
For example, by the end of June 2023, insurance companies are required to audit those assets that cover insurance reserves. If these are incorrectly valued (overpriced) land or real estate, insurers will be forced to do something with them. Otherwise there will be sanctions.
“The National Bank has given enough time to put things in order in its assets, so there will be no more concessions. And everything goes to the fact that various circuit companies will simply leave the market. There are 50 really working companies, among which there will be a redistribution of payments,” Sergey Avdeev believes.
Insurance market. “Bad” shareholders have no place in the market
Another aspect that the NBU will pay attention to (or rather, is already paying attention to) is the owners of insurers. In February and March, the National Bank withdrew licenses due to an opaque ownership structure from three rather large insurance companies at once – these are Omega, Ingosstrakh andProvidna“.
The NBU had the right to revoke a license based on an inappropriate ownership structure back in 2019, when amendments were made to the Law “On Financial Services”. After that, the insurers submitted information about their beneficiaries to the National Bank. But now, in connection with the war and the intensified struggle with representatives of Russian business in Ukraine, the NBU has raised this issue again.
The National Bank presents various claims to insurance companies. The insurer may be among the owners of a legal entity that ended up in the occupied territory of Ukraine in 2014 and did not re-register in the controlled territory. Or there are Russian citizens among the shareholders, even those who are not under sanctions.
The problem is that the insurer cannot influence such situations in any way, and the NBU understands this very well, but prefers to withdraw from the market a company that works and fulfills its obligations to customers. They created a mechanism for resolving similar problems for banks, but not for the rest of the non-banking market.
Vyacheslav Chernyakhovsky
Head of the Association “Insurance Business”
Moreover, judging by the rhetoric of the representatives of the National Bank, the regulator will be especially meticulous about the structure of owners of insurance companies. The head of the NBU, Andriy Pyshny, called the transparency of the insurance market “no alternative”.
At the same time, not all representatives of the industry agree that the National Bank in such situations should indiscriminately apply punitive measures and immediately deprive the insurer of licenses.
“For six months, the licenses of companies that provided 10% of salaries and tax revenues of the entire insurance market were revoked or stopped. This is about UAH 500 million, of which half is taxes and fees to the state budget. Therefore, even if the owners of the company have Russian or Belarusian “roots”, we will offer a solution so that in this case a mechanism for blocking the influence of such an owner on the business is developed and applied, and the company would have the opportunity to continue working for the benefit of Ukraine“, – says Vyacheslav Chernyakhovsky.
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