The Latvian insurance industry has had a tough time in the past five years in the aftermath of the global economic crash.
Like many other countries in Europe, financial institutions encountered testing times and the sector actually recorded negative growth in both 2009 and 2010. This was primarily due to a fall in the non-life segment as people and businesses no longer viewed some policies as necessary or financially viable.
The sharp economic reduction led to intense competition and price reductions, which obviously affected the bottom line for insurers. But there have been signs of growth since 2011, with Lloyd’s pointing out that gross underwritten premiums recorded a total increase of 13 per cent year-on-year in 2012 to reach $581 million (£370 million). This figure includes the gross premiums underwritten by foreign insurers operating in Latvia, and this group accounted for $120 million.
The market now seems to be on the right track and this pattern of growth is expected to continue in the next few years. A particularly good sign is the improvements seen in the health insurance market, as this has started to recover due to demand from the public sector. When compared with other European nations, the Latvian insurance sector is quite concentrated. Only 19 insurance companies operate in the sector (12 non-life and 7 life), and this includes branches of foreign insurers.
According to the latest statistics from the Latvian Insurers Association, gross premiums written and claims paid by life insurance companies in 2013 totalled 62.7 million Latvian lats (£71.3 million). The vast majority of this went on life insurance claims (47.7 million Latvian lats), with the remainder made up of accident (1.4 million Latvian lats) and health (13.5 Latvian lats).
For the industry as a whole, premiums worth 220 million Latvian lats were written across the year, with 129 million Latvian lats paid out. In terms of market share by premiums, life (21 per cent) was the biggest, followed by motor insurance (19 per cent) and health (17 per cent).
Despite being smaller than the non-life segment, the life segment is outperforming it and making light of the low affordability challenges it is facing, Business Monitor reports. Part of the reason for this is that it will benefit from Latvia’s introduction into the euro. This, in turn, will see the non-life segment lose some of its share in the insurance market - it will decline from 88.1 per cent currently to 86 per cent by 2018.
Currently, there are more than 100 insurance broker companies in Latvia. Nearly half (45) of these are members of the Latvian Insurance Brokers Association. This body was set up in 2000 to develop the insurance brokers market, raise the quality of insurance services and represent the common interests of its members. The other organisation is the Latvian Professional Brokers Association, which has six members. Many of the brokers in Latvia are represented by MAI Central Eastern Europe, the largest independent network of insurance and reinsurance brokers within Central and Eastern Europe.
The group handles every type of risk and was established in response to “the increasing need for insurance programmes which comply with international law for both international and local companies operating within the region”.