APDROŠINĀŠANAS TIRGUS LATVIJĀ 2001
INSURANCE MARKET DEVELOPMENT
GENERAL INFORMATION
Market participants
By the end of 2006, there were 16 insurance companies operating in Latvia – five life insurance companies and 11 non-life insurance companies (incl. one mutual non-life insurance cooperative society), as well as three branches of foreign insurers. Upon a request of the IJSC Nordens AS, the company’s insurance operating licence was withdrawn on 15 December 2006.
Three life insurance companies and five non-life insurance companies operated as subsidiaries of foreign insurers at the end of 2006.
In the period from 1 May 2004 to 31 December 2006, 266 notifications from 22 insurance supervisory authorities of European Economic Area countries were received regarding the intent expressed by insurers licensed in said countries to exercise the freedom to provide services in Latvia, including five notifications regarding the intent to exercise the freedom to provide services by opening a branch (three of them have already started operation).
On 31 December 2006, there were 45 insurance brokerage companies operating in the Latvian market.
Premiums written and claims paid
In 2006, a total of gross insurance premiums written on the insurance market accounted for 204.1 million lats, or by 31% more than in 2005, and total gross claims paid reached 95.2 million lats, or by 41% up from 2005 (see Figure 1).
Gross premiums written by branches of foreign insurance companies were 955 thousand lats, and gross claims paid amounted to 298 thousand lats.
The share of direct life insurance in the total of gross premiums written by insurance companies in 2006 accounted for 7.8%.
In 2006, the volume of written gross premiums spent, on average, on the purchase of insurance services[1] by each Latvian resident had grown by 31% compared to 2005 and totalled 89.4 lats.
Figure 1
GROSS PREMIUMS WRITTEN AND GROSS CLAIMS PAID
(during period; in millions of lats)
[pic]
LIFE INSURANCE COMPANIES
Performance indicators
In 2006, gross premiums written by life insurance companies rose by 42% compared to 2005 and totalled 23.3 million lats (see Figure 2). Gross claims paid compared to 2005 grew by 25% and made up 7.1 million lats.
Figure 2
GROSS PREMIUMS WRITTEN AND GROSS CLAIMS PAID BY LIFE INSURANCE COMPANIES
(during period; in millions of lats)
[pic]
In 2006, gross premiums written for life insurance and health insurance constituted major part of gross premium portfolio of life insurance companies, 68% and 29%, respectively (see Figure 3).
Figure 3
GROSS PREMIUMS WRITTEN AND GROSS CLAIMS PAID BY LIFE INSURANCE COMPANIES, BROKEN DOWN BY CLASS OF INSURANCE
(as a percentage)
The amount of gross premiums written for life insurance grew by 46%, and compared to 2005 reached 15.9 million lats. The amount of gross premiums written for health insurance rose by 30%, totalling 6.8 million lats.
Compared to 2005, the amount of gross claims paid for life insurance grew by par 7%, totalling 2.8 million lats. The amount of gross claims paid for health insurance rose by 41% and reached 4.2 million lats.
The largest amount of gross claims incurred for life insurance in 2006 accounted for 70 thousand lats.
The solvency margin for life insurance companies at the end of 2006 was 113.6%.
Investments
On 31 December 2006, total investments made by life insurance companies reached 47 million lats. For the most part, investments were still made in debt securities and other fixed-income securities, 18.1 million lats or 38% of total investments made by life insurance companies (see Figure 4). Whereas amount of investments made in time deposits with credit institutions reached 10.7 million lats, or 23% of total investments made by life insurance companies. Investments in favour of the insured for life insurance who assume investment risk grew almost threefold since the beginning of the year and totalled 8.8 million lats, or 19% of total investments made by life insurance companies. The amount of investments in shares and other variable-yield securities at the end of 2006 totalled 3.7 million lats, or 8% of total investments made by life insurance companies.
Figure 4
INVESTMENT STRUCTURE OF LIFE INSURANCE COMPANIES
(as a percentage)
* Investments in favour of the insured for life insurance who assume investment risk.
The share of investments made by life insurance companies as regards their geographical placement continued increasing in foreign countries (compared to 31 December 2005 when 75% of total investments were placed in Latvia), on 31 December 2006 the share of investments in Latvia constituted 62%, while 19% were placed in Finland, 6% – in Estonia, and the remaining 13% – in 16 other countries. 99% of total investments made in foreign countries were placed in the European Union states.
In 2006, return on investments[2] of the average value of the investments by life insurance companies was 4.1%.
NON-LIFE INSURANCE COMPANIES
Performance indicators
In 2006, gross premiums written by non-life insurance companies accounted for 180.8 million lats, or by 30% up from 2005 (see Figure 5).
The amount of gross claims paid rose by 43% compared to 2005, totalling 88.1 million lats.
Figure 5
GROSS PREMIUMS WRITTEN AND GROSS CLAIMS PAID BY NON-LIFE INSURANCE COMPANIES
(during period; in millions of lats)
[pic]
In the reporting period, upon a growth in car retail through leasing (the number of insured transport vehicles compared to 2005 rose by 51% and in 2006 totalled 146.7 thousand) the greatest part of the portfolio of gross premiums or 38% of gross premiums written by non-life insurance companies comprised premiums written for land vehicle insurance, 19% – for compulsory third party liability insurance for inland motor vehicle owners, 16% – for property insurance, 14% – for health insurance (see Figure 6).
Figure 6
GROSS PREMIUMS WRITTEN BY NON-LIFE INSURANCE COMPANIES, BROKEN DOWN BY CLASS OF INSURANCE
(as a percentage)
[3]
In 2006, claims paid on land vehicle insurance still retained the largest share, 37% of total gross claims, as well as claims paid on motor vehicle third party liability compulsory insurance, 23%, and health insurance, 17% (see Figure 7).
Figure 7
GROSS CLAIMS PAID BY NON-LIFE INSURANCE COMPANIES, BROKEN DOWN BY CLASS OF INSURANCE
(as a percentage)
[pic]
In terms of volume, the largest claim in 2006, i.e. 1.1 million lats, was incurred by insurance of various financial losses.
In the reporting period, non-life insurance companies reported a profit of 0.5 million lats. In 2006, the combined ratio[4], which characterises performance results for non-life insurance companies, was 104.5%. Operating ratio[5], characterising the overall operations of insurance companies, taking into account the efficiency of the investment policy implemented by insurance companies, in the reporting period was 100.1%.
The solvency margin for non-life insurance companies at the end of 2006 was 127.5%.
Investments
On 31 December 2006, total investments by non-life insurance companies accounted for 135.4 million lats. The amount of investments in debt securities and other fixed-income securities amounted to 46 million lats, or 34% of total investments by non-life insurance companies, and the amount of investments in time deposits with credit institutions reached 39.8 million lats, or 29% of total investments (see Figure 8).
Figure 8
INVESTMENT STRUCUTRE OF NON-LIFE INSURANCE COMPANIES
(as a percentage)
On 31 December 2006, of investments made by non-life insurance companies, 84% were placed in Latvia, 3% of total investments were invested in Portugal as well as in Germany, but the rest 10% in 20 other countries. Of total investments abroad, 93% were invested in the European Union states.
In 2006, the return on investments[6] for non-life insurance companies accounted for 4.4%.
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[1] According to data published in the Internet home page of the Central Statistical Bureau of the Republic of Latvia at csb.lv.
[2] Return on investments = net income from investments/average amount of investments in the reporting period.
[3] MVTPLCI – Motor vehicle third party liability compulsory insurance.
[4] Combined ratio = loss ratio (incurred net demand claims/net earned premiums) + expense ratio ((net operating expenses + other net technical expenses)/net earned premiums).
[5] Operating ratio = combined ratio – return on investments.
[6] Return on investments = net income from investments/average amount of investments in the reporting period, expressed as an annual percentage.
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