Belarusian insurance affairs didn’t make it to the top of our events-of-the-year poll yet charms of the local market are not lost on major international players.
Right before New Year’s Eve French-based Axa announced acquisition of 80% in B&B, second largest – and simply the largest private – insurer in Belarus. As the M&A tradition goes, Axa claims the Belarusian insurance industry has “a very significant potential for growth as less than 20% are covered with casco insurance and less than 15% of households benefit from home insurance”.
Judging by this description Belarus of tomorrow, with its ten million population, will be something like the Czech Republic today – small but successful. It just needs some help from experienced players.
However, according to Irina Merzlyakova, head of the Belarusian Association of Insurers (BAI), and some other local experts, penetration rates are by far not the only thing the market should work on. In their conversation with The Insurer (find the full version in the latest issue of our magazine), Belarusians named several key challenges of the country's insurance environment. Although head of BAI and her colleagues mainly described them in the context of the planned life market liberalisation – which, as we know now, didn’t happen in 2010 – some of the issues are rather relevant for non-life companies like B&B as well.
Thirdly, the legislative piece abolishes compulsory approval of policy wording, terms and conditions by the regulator. If the draft is adopted, Belarusian insurance players will be obliged simply to notify the regulator of any changes in policy wording, terms and conditions rather than seek their approval.
Even if the life insurance draft is indeed adopted, investors shouldn’t hope for an easy entry to the Belarusian market, other local experts believe. Some restrictions are here to stay, and general economic trends that limit the insurance industy development should also be taken into account.
Among the restrictions is the legal act, under which management costs of an insurer may not exceed 12% of the gross written premium. According to the experts, the Belarus
However, Merzlyakova believes, the overall Belarusian market development is rather positive. “In 2009, we registered premium growth in all popular classes from personal insurance to residential property and homeowners’ liability”. The growth dynamics of claims was lower than that of premiums, she added. The highest loss level, “around 90%”, was registered in the motor hull segment, according to BAI. State companies, on average, demostrated lower loss ratios than private players, Merzlyakova estimated.
The draft on life market opening is likely to contain several important changes: first of all, it will allow foreign-owned companies to operate in the Belarus life segment. Secondly, it will introduce tax reliefs for clients of private insurers. Currently, a company can book its insurance premium as costs only if the risks are covered with a state-owned insurer. As Merzlyakova opined, the tax rules are one of the reason for market domination of the state-owned companies.
The draft on life market opening is likely to contain several important changes. It will introduce tax reliefs for clients of private insurers. It is absolutely a good suggestion….Interesting…
ReplyDeleteMaine Tax Reliefs
Thanks for you comment Darwin. Tax reliefs are always a good way to support market development, especialy in the life insurance segment. I am surprised, though, Belarus had such restrictions for clients of private insurers in the first place. And I doubt the relief will indeed be introduced in 2011. I guess the country's president made such promises in the rage of an election campaign. Now that he's won the elections, there is no reason for him to liberalise the economy. I may be wrong, though. Axa has great hopes in Belarus, and the guys usually do their M&A homework.
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