International operations

Lithuanian market

According to the Bank of Lithuania’s data, gross written premium collected by non-life insurance companies in 2019 totaled EUR 675 million, representing a y/y increase by 7.1%.

The market growth rate was largely generated by health insurance and property insurance whose sales rose by 25.3% and 8.2%, respectively. The rate of written premium growth in motor insurance (61.5% of the market) slowed down due to the competitive environment. Eventually, in 2019, written premium in third party liability and motor own damage insurance increased 3.8% and 4.8%, respectively.

At the end of 2019, there were 12 companies operating in the non-life insurance sector (including 8 branches of insurance companies established in other EU member states).

Lietuvos Draudimas continues to be the largest insurance company in Lithuania in terms of total gross written premium in non-life insurance. The company’s market share at the end of 2019 was 30.2%. Considering the recent acquisition transactions, the shares of top four players in the non-life insurance market totaled 83.2%.

Gross premium written by Lithuanian life insurance companies was EUR 270 million in 2019, up 8.9% y/y. The increase in gross written premium was driven by the continuous and stable increase in regular premium (10.6%), which outweighed the 12.7% decrease in single premium market. The rate of growth of the single premium market is hindered by restrictions on tax credits. At the beginning of 2017, the tax credit was reduced to EUR 2,000. Then, in January 2019, the tax credit was cut again – to EUR 1,500 per year.

In H1 2019, due to the pension reform, the volume of life insurance agreements doubled. The participants had to decide whether they would remain in the pension funds or return to the state-run system (SODRA) and start to accumulate capital voluntarily under a life insurance agreement.

In the life insurance structure, unit-linked insurance represented the largest share at 62.9% of the portfolio value. Traditional life insurance accounted for 15.7% of written premium.

At the end of 2019, there were 8 companies operating in the life insurance sector. The Lithuanian life insurance market is highly concentrated. The share held by the four largest life insurance undertakings in total gross written premium was 77.4%.

Latvian market

The Latvian non-life insurance market recorded a gross written premium of EUR 303 million in the first three quarters of 2019. This was nearly EUR 23 million (i.e. 8.1%) more than in the same period of the previous year.

The motor insurance business had the largest share in the non-life insurance market measured by gross written premium. Motor TPL insurance accounted for 25.5% of the market while motor own damage accounted for 23.1%. Also health insurance (18.9% market share) and property insurance (18.5% market share) had an important position in the product mix.

In 2019, there were 11 insurance companies operating in the Latvian non-life insurance market and 71.8% of the market was in the hands of the biggest 4 insurers.

Estonian market

In 2019, non-life insurance companies operating in Estonia recorded a decrease in gross written premium by 12.9%, compared to a 35.9% increase in 2018¹. In total, gross written premium was EUR 398 million, of which EUR 114 million, i.e. 28.6%, was collected by foreign insurance undertakings operating in Estonia.

The structure of non-life insurance in 2019 was dominated by motor insurance, which accounted for 57.4%, including MOD insurance accounting for 31.6%. 27.4% of the gross written premium in the market was collected on property insurance.

At the end of 2019, there were 13 companies operating in the non-life insurance sector (including 5 branches of foreign insurance companies) among which the top 4 held a combined 69.0% market share.

Activity of PZU companies in the Baltic states

As of November 2014, the PZU Group has been operating in the Lithuanian non-life insurance market through Lietuvos Draudimas, which, as of May 2015, is the owner of the PZU Estonia branch.

Lietuvos Draudimas is the leader of the non-life insurance market in Lithuania with a share of 30.2% in 2019, with gross written premium of EUR 204 million (5.6% growth y/y).

Life insurance operations in Lithuania are conducted through UAB PZU Lietuva Gyvybës Draudimas – “PZU Lithuania Life”. Collected written premium was EUR 17 million, representing an increase by 11.1% compared to the previous year. The share held by PZU Lithuania Life in the life insurance market in 2019 was 6.4% (compared to 6.2% in 2018).

In Latvia the PZU Group conducts operations through AAS Balta, which became part of the Group in June 2014, and then (in May 2015) the branch took over the PZU Lithuania branch operating in the Latvian market since 2012. At the end of Q3 2019, the total share of the non-life insurance market reached 28.7% and gross written premium was EUR 114 million (compared with EUR 105 million in 2018).

Since May 2015 the entity conducting operations in Estonia is a branch of Lietuvos Draudimas and was established as a result of merger of two entities – branch of the Lithuanian PZU company registered in 2012 and the Estonian branch acquired in 2014, which conducted operations under the Codan brand. The company’s share in the Estonian non-life insurance market in 2019 was 15.8%. Accumulated gross written premium was EUR 63 million².     

Ukrainian market

The Ukrainian insurance market after Q3 2019 posted 16.3% growth in gross written premium reaching UAH 41 billion. The premium written for non-life insurance was UAH 37 billion, signifying 16.0% growth compared to the corresponding period of 2018. Motor insurance (25.7% of the market) recorded a 31.0% increase in gross written premium.

After Q3 2019, life insurance companies collected gross written premium of UAH 3 billion, signifying 20.2% growth compared to the corresponding period of 2018.

The Ukrainian insurance market is highly fragmented – as at the end of September 2019, there were 234 insurance companies operating in the country, 23 of which offered life insurance. Despite the number of insurers that continues to be enormous, the top 100 non-life insurance undertakings generated 98% of gross written premium, while the top 20 life insurance undertakings generated nearly 100% of written premium.

On the Ukrainian market, the PZU Group operates insurance business via two companies: PrJSC IC PZU Ukraine (a non-life insurance company), referred to as “PZU Ukraine”, and PrJSC IC PZU Ukraine Life (a life insurance company), referred to as “PZU Ukraine Life”. In addition, LLC SOS Services Ukraine performs assistance functions.

In 2019, gross written premium collected by PZU Ukraine was UAH 1,709 million, up 12.7% from the previous year. In turn, gross written premium collected by PZU Ukraine Life in 2019 was UAH 524 million, up 26.8% compared to 2018.

In the first three quarters of 2019, PZU Ukraine collected 3.5% (up 0.1 percentage points compared to the first three quarters of 2018) of total gross written premium of the whole Ukrainian non-life insurance sector, whereas in the life insurance market PZU Ukraine Life gained an 11.3% market share (up 0.3 percentage points compared to the previous year), which gave these companies the 6th and 4th place on the non-life and life insurance markets, respectively³.

Factors, including threats and risks, that may affect the insurance business in the area of foreign companies in 2020

• slowdown of economic growth in the Baltic states;
• resumption of price pressure in motor insurance caused by improved portfolio profitability in recent years (in the Baltic states);
• case law concerning the amounts of general damages paid in cash for the suffering sustained (legislative amendments in Lithuania) under the TPL insurance held by the owners of motor vehicles to the closest family members of persons who have died;
• changes in trends and client behavior toward customization of proposals and an electronic, swift and paperless method of purchasing and handling insurance, forcing insurance undertakings to adapt to these expectations rapidly;
• coming into force of new regulations or financial burdens on insurance undertakings.

¹ As of 1 January 2018, IF P&C Insurance AC (the leader on the Estonian non-life insurance market) started to report total gross written premium, altering the approach taken to date, based on installments and in that manner it significantly distorted market data. The other market participants adopted the same approach to reporting on a non-recurring basis in December 2018. 
² As of 1 January 2018, IF P&C Insurance AC (the leader on the Estonian non-life insurance market) started to report total gross written premium, altering the approach taken to date, based on installments and in that manner it significantly distorted market data. The other market participants adopted the same approach to reporting on a non-recurring basis in December 2018.
³ Insurance TOP, Ukrainian insurance quarterly, #4(68)2019