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SESSION 12. Historical development of insurance markets in the countries of Central and Eastern Europe

12. Historical development of insurance markets in the countries of Central and Eastern Europe.

Jacek Lisowski (Poznań University of Economics and Business)
jacek.lisowski@ue.poznan.pl
Piotr Manikowski (Poznań University of Economics and Business)
Ryszard Pukała (The Bronisław Markiewicz State Higher School of Technology and Economics).

ABSTRACT

The main objective of the session will be to present the specifics of the development of insurance markets in the countries of Central and Eastern Europe (including Poland, Russia, Lithuania, Belarus, Ukraine, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria). The markets of these countries are currently at various stages of development, which largely depends on historical and economic conditions (including the country’s membership in the EU). In some countries, such as the Czech Republic, Poland or Slovakia, insurance markets are more developed but in the others (e.g. Russia, Ukraine, Bulgaria) they are at very early stage of the development. Differences can be observed not only in the level of macroeconomic indicators (i.e. density and penetration), but also in the market structure (number of insurers, organizational and legal form of insurance companies, number and structure of products, demand for insurance [insurance awareness of customers and their protection], role and importance of insurance intermediation, the nature and importance of the supervisory authority and guarantee funds).

Main objectives of the session. It is expected to find answers, among others, for the questions connected with:

  • common features in the development of CEE insurance markets,
  • differences in the development of CEE insurance markets,
  • reasons for these differences,
  • directions in the development of CEE insurance markets,
  • description of the factors in the development of CEE insurance markets (including economic, financial, social, legal and technological factors).

 


Paper 1

The Development of the Motor Third Party Liability Insurance in the Czech Republic and Slovak Republic.

Svatopluk Nečas (Masaryk University, Czech Republic)
Svatopluk.Necas@econ.muni.cz

The motor third party liability insurance is one of the most important insurance products within each insurance market. Its aim is to protect a damaged party of the road accidents as well as those who cause these damages (from the other point of view). The share of this product in the overall insurance market largely determines a level of this market. Both in the Czech and Slovak insurance market, this insurance has a long history too, a substantial part of which it existed in the form of mandatory insurance. More than 15 years ago, both insurance markets have already transformed this product into a compulsory insurance ending a long period of the monopoly of one insurer. The aim of this paper is to characterize the historical development of this insurance on the above mentioned territory, to analyze the development of the Czech and Slovak market of the third party liability insurance and to compare their level, based on selected indicators. The methods of description, analysis and comparison will be used in the paper.

 


Paper 2

Specifics of the Development of the Czech Insurance Market.

Eva Vávrová (Masaryk University, Czech Republic)
Eva.Vavrova@econ.muni.cz
Svatopluk Nečas (Masaryk University, Czech Republic)
Svatopluk.Necas@econ.muni.cz

In 2019, thirty years will lapse from the beginning of a transformation from centrally planned to market economy in the Czech Republic. Although the transformation of the insurance industry started two years later, it seems to be appropriate after certain period to consider the level of the Czech insurance market, its strengths, weaknesses, opportunities and threats. The aim of this paper is to recapitulate the recent development of the insurance market in the Czech Republic (since 1991), to highlight its milestones and the main events that accompanied the development and to assess its level in terms of the level of macroeconomic indicators and the market structure, based on selected indicators specifically used to describe the insurance industry. The methods of description, analysis and comparison will be used.

 


Paper 3

The development of insurance markets in the field of competitiveness of selected countries.

Elena Širá (University of Prešov)
Martina Marchevská
 (University of Prešov)
elena.sira1@gmail.com

The aim of the article is to analyse the development of insurance market in V4 countries (Poland, Hungary, the Czech Republic and the Slovak Republic). We compare the selected indicators typically for insurance market, such as written premiums, number of insurance companies, concentration ratio, written premium in life insurance compared to non-life insurance, etc. and try to show, which country from the analysed, is the best. We try to identify the common features and differences in development in selected countries. We analysed the period of minimum 10 years.
An important indicator, which shows the performance of economy and, of course, insurance market, is competitiveness ranking. World Economic Forum publish every year the Global Competitiveness Report. This report contains from 12 pillars, in which, the 8th pillar is dedicated to Financial market development. So the question is, What role in this competitiveness is played by insurance market? For finding the answer to this questions, we choose some insurance market indicators. Finally, we set up the final position of analysed insurance markets according to the results from the multi-criteria method of evaluation.

Keywords: insurance market, written premium, concentration ratio, V4 countries.

 


Paper 4

The analysis of the main indicators of the development and capitalization of the insurance market in Ukraine.

Nataliya Vnukova (Simon Kuznets Kharkov National University of Economics, Ukraine)
Svitlana Achkasova (Simon Kuznets Kharkov National University of Economics, Ukraine)
svet_achk@meta.ua

The current state of the insurance market in Ukraine during 2006-2017 was analyzed and its development tendencies were revealed by the following indicators: macroeconomic (the share of gross insurance premiums in GDP, the share of gross premiums (non-life) in GDP, the share of gross insurance premiums (life) in GDP, amount of gross premiums per capita, the amount of gross premiums per capita (non-life), the amount of gross premiums per capita (life)); the market concentration (monopolization) of the insurance market; the amount of gross insurance premiums; the total amount of gross insurance indemnities (payments). It is determined that the level of capitalization of the insurance market is an important indicator for assessing its condition, the introduction of which monitoring will facilitate the implementation of tools for diagnostic monitoring of systemic risks and prudential supervision in the insurance market.

The main indicators of the level of capitalization of the insurance market in Ukraine for 2006-2017 are analyzed. It has been established that for insurance companies, the question of finding sources of capital increase is particularly pressing, therefore their management should focus on maintaining stability, reliability and sufficient equity. It is established that for the insurance market in Ukraine, the positive practice will be an increase in the share of authorized capital in the structure of own capital, which is a positive development factor. It has been determined that the rational use of information, namely, the importance of the capitalization of the Ukrainian insurance market (equity stake in assets, share of paid-in share capital in assets), may be conditional upon its transformation into a form suitable for further analysis aimed at decision-making by the heads of insurance companies, Regulator and consumers of insurance services.

According to the results of calculations of the capitalization of insurance market in Ukraine during 2006-2017, it was established: these indicators are not distributed by the Gauss law, which indicates the asymmetry of their division, that is, there is a mismatch between the values of the mode, the median and the average value. For this purpose, their scale measurement was carried out according to the rule of “three sigma’s”, taking into account the correction coefficient for the right- sided and left-sided asymmetry of the distribution of the values of the indicators, since the methods of constructing interval scales are based on the axiom of normality. Scales (intervals) and criteria for indicators of capitalization of the Ukrainian insurance market, in particular, “Share of equity in assets” and “Share of paid-in share capital in assets”, were developed for the insurance market of Ukraine in general and for non-life and life sectors. They characterize the level of capitalization of the insurance market at: very low, low, medium, high and very high levels, and improve the methodological support for assessing the development of the insurance market.
The obtained scientific results have a scientific and practical value and can be used by state regulatory bodies to improve regulatory policy and diagnostic tools.

 


Paper 5

Evolution of development of insurance in the territory of Republic of Belarus.

T. Verezubova (Belarusian State Economic University)
M. Knop (Belarusian State Economic University)
verezubova@mail.ru

The present stage of social development directed to innovative raising of the world community is weighed by political and technological shocks. The system of insurance allows to soften threats of losses, to regulatefinancial flows between participants of reproduction processesmore rationalfor assistance to growth of the economic and social sphere of the concrete country.

The modern insurance market of Republic of Belarus is small and considerably lags behind in the quality indicators of the developed countries. In 2017 insurance premiums of 17 operating insurance companies have made 550 millionU.S. dollars, in 2010 – 450 million U.S. dollars. In spite of the fact that growth of receipts of insurance premiums, the relations of the national insurance sector to GDP of the republic are low: in 2017 1,02%, whereas the average world indicator is 6,23%, the Central European is 6,89%. А size of an insurance premium per its inhabitantis also small: in 2017 the 58th U.S. dollars when the average world similar indicator is 638,3 U.S. dollars, Central European is 1620,0 U.S. dollars.

The reasons of lag of the Belarusian insurance market from world indicators are in many respects connected with his historical roots. Disintegration of the Soviet Union and emergence of the crisis phenomena, inflationary processes, decline in income of the population and financial difficulties at many Belarusian enterprises have undermined base of insurance. In such a difficult situation the state looked for ways to reform the insurance sector. Measures to its demonopolization by means of permission of insurance companies activity of different forms of ownership have been taken and legal bases of insurance and state supervision of its participants activity are defined.

The current legislation regulating the insurance market of Republic of Belarus is rigid. It finds a reflection in a considerable regulation of rules for creation of insurance companies, questions of formation of their financial capital, reserve funds, the sizes of the directed financial resources on the operating and investment expenditure, regulations of solvency. Measures for creation of equal operating conditions of insurers of different forms of ownership are declared in republican programs of development of the insurance sector, however primary conditions of managing for the state insurance companies which occupy 80% of the insurance market are created so far.

Despite the evolution of insurance business and negative tendencies of private insurers leaving from the Belarusian market, public need for institute of insurance existencedoesn’t change asits key appointment is always remains the protection of natural and legal entities against different losses.

 


Paper 6

The historical aspect of crop insurance in Kazakhstan.

A.M. Mukhitbekova (Kazakh agrotechnical University)
asmu-87@mail.ru

Insurance as a legal institution of civil law has ancient roots, certain socio-economic relations, the essence of which is to compensate for damage from natural disasters and other emergencies on the basis of a joint distribution of it among all stakeholders. Insurance began to form already in the period of decomposition of the primitive community system, when the emergence of social division of labor, natural exchange, private property, the development of commodity – money relations gave rise to the fear of “fear” of property owners for its safety, for the possibility of destruction or loss due to natural disasters, fires, looting and other unforeseen dangers.

The destruction of the insurance system and its restoration in the 20s. The revolutionary events of 1917 dramatically changed the whole system of insurance protection of the population. In 1918-1920, an attempt was made to completely eliminate the insurance system. In 1918, insurance in all its forms was declared a state monopoly. All private insurance companies, including societies on reciprocity, were subject to transfer to the state in the person of all-Union national economy with all their property and funds. Only for cooperative organizations had retained the right of conducting mutual insurance of the property.

Organization of the state insurance system. The decree of the USSR people’s Commissar (Kazakhstan was part of the USSR) of November 11, 1924 secured the monopoly of the state insurance on insurance operations, no other bodies of the USSR and the Union republics — both Central and local — were allowed to engage in insurance. The attempts of agencies to create their own insurance funds were resolutely stopped.

Further development of insurance in the USSR is characterized by frequent and radical organizational changes. For cooperatives was left the right to self-organization of own property insurance is obligatory state insurance. This form of insurance in the USSR was carried out by three large cooperative organizations: the insurance section of the Central Union, which served consumer cooperation; All-Russian cooperative insurance Union (co-insurance Union), which was engaged in agricultural, commercial, housing and other types of cooperation throughout the Union.
From 1967 to 1991, the state insurance system was based on the Union-Republican principle. One of the most important problems of the state insurance system from the first years of its existence was the compulsory insurance of property. Already at the end of 1921, mandatory salary insurance of buildings, livestock and crops in rural areas was restored, replacing the former «Zemstvo» insurance. It remained almost unchanged until 1940, when the law “on compulsory salary insurance” was adopted and new rules and instructions on the procedure for determining and paying damages for each type of salary insurance were approved.

In 1929 the CEC and SNK of the USSR “on compulsory insurance of the property of the socialized sector of the national economy” was adopted. Since 1956, compulsory insurance of collective farms ‘ property, introduced in the 1930s instead of cooperative insurance, has been maintained and developed. In 1968, its volume was significantly expanded by introducing universal compulsory insurance of crops in case of crop failure, any natural disasters, including drought. With 1974, this kind of compulsory insurance extended to state farms with the objective of strengthening the financial sustainability of agriculture.

After the collapse of the Soviet Union in 1991, the development of the insurance institution began coinciding with the acquisition of independence of the Republic of Kazakhstan. The formation of the insurance market took place in the conditions of economic transition. Such macroeconomic phenomena as decline in production, insolvency of enterprises, inflation, unemployment, bankruptcy of unprofitable enterprises directly affected his condition.

Kazakhstan’s legislation has undergone significant changes and changes over the twenty-five years of development. The basic regulations on insurance have been changed several times. These were some laws, new rules on the insurance contract in the Special part of the Civil code of the Republic of Kazakhstan in 1999, the formation of modern legislation on insurance. In Kazakhstan, compulsory insurance in crop production is regulated by The law of the Republic of Kazakhstan No. 533 “on compulsory insurance in crop production”, adopted on 10 March 2004. As well as the Law of the Republic of Kazakhstan №163 “on mutual insurance”, adopted on July 5, 2006. The main purpose of this law is to protect the property interests of agricultural producers who grow certain types of grain and oilseeds, as well as cotton and sugar beet from the effects of adverse environmental conditions defined by the law.

Key words: stages of insurance development, insurance in the Soviet Union, property insurance, crop insurance.

 


Paper 7

Historical development of insurance market in the Slovak Republic.

Tomáš Ondruška (University of Economics in Bratislava)
Erika Pastoráková (University of Economics in Bratislava)
erika.pastorakova@euba.sk

The insurance market in the Slovak Republic is nowadays classified as an advanced insurance market. The development to the present form was significantly determined by the initial conditions as well as the factors of the socio-economic conditions in specific development periods. Insurance in the territory of today’s Slovak Republic has developed at a slow pace due to its focus on agriculture, mining of raw materials with the absence of industry and the low standard of living of the population. At the time when modern forms of insurance were offered in the insurance markets of developed countries, in the Slovak Republic were still dominating mutual types of insurance or very early forms of commercial insurance products. Even the life insurance has developed only at a very slow pace, which is the reason for the current state of the market, which determinants of the insurance market development differs from the determinants characteristic for the developed market countries. The contribution focuses on presenting the specificities influencing the development of the insurance market in the Slovak Republic to the present form and determining the determinants of this development. In the contribution, the authors also point out the specific economic, social, economic and demographic circumstances of development in selected periods of insurance market development in the territory of today’s Slovak Republic.

 


Paper 8

Trade credit insurance market history and development - from the developing market to the developed market - the case of Poland.

Prof. Jacek Lisowski, PhD (Poznań University of Economics and Business, Poland)
jacek.lisowski@ue.poznan.pl
jlisowski1970@gmail.com

The paper aims to present history and development of trade credit insurance market in Poland. The trade credit insurance offer is limited due to the key and specific nature of commercial and political risk. Although trade credit insurance is commonly included in the area of insurance, it differs significantly from it. By nature it is much closer to banking products rather than to classic insurance products. Trade credit insurance considers disparate sources of risks and uses contrasting underwriting techniques, which makes it similar to a bank’s examining a client’s credit rating. The role of the trade credit insurer is not limited to the traditional notion of insurance by simple financial protection in the event of a bad debt. Trade credit insurance includes a large package of services, such as continuous monitoring of the credit-worthiness of the insured’s customers, servicing the account receivables and debt collection.

The development of trade credit insurance market is described from the very beginning form of insurance to present times. Nowadays Polish trade credit insurance market is the biggest among all markets in transition countries (CEE) and one of the biggest among EU countries. The market went through a few milestones. From the very beginning when the insurance products were offered based on internal, domestic idea through centrally planned economy up to developed commercial market with the presence of the biggest world’s players (e.g. Euler Hermes, Atradius, Coface) and public support (export credit agencies). The paper ends with the conclusions concern further development of trade credit insurance market in Poland and CEE countries.

Keywords: Insurance history, trade credit insurance, market development
JEL classification: D24, G22, G33

 


Paper 9

Life insurance market history and development - the case of Poland.

Prof. Adam Sliwinski, PhD (Warsaw School of Economics, Poland)

The paper aims to present history of life insurance market in Poland. The development of life insurance market is described from the very beginning form of insurance to present times. Nowadays Polish life insurance market is one of the biggest among all markets in transition countries. The market went through a few milestones. From the very beginning when the insurance products were offered based on mutual idea through centrally planned economy up to developed free, commercial market with the presence of the biggest world’s players. The impact of the market on the economy of CEE region is also described. The basic data are presented and analyzed include the following: gross written premium, claims ratio, profitability ratios and some macroeconomics indicators like penetration and density of life insurance. Macroeconomics indicators are presented in comparison to main EU markets ratios. The paper ends with the conclusions concern further development of life insurance market in Poland.

Keywords: Insurance history, life insurance, market development
JEL classification: D02, G22

 


Paper 10

Historical Development of the Polish Motor Insurance Market after 1990.

Prof. Piotr Manikowski, PhD (Poznan University of Economics and Business, Poland)

The Polish insurance market after the system transformation is developing quite well. The most important part of the non-life insurance market is motor insurance. Both obligatory and voluntary auto insurance generates over a half of the non-life insurance income.

The goal of this paper is to describe changes and history of the Polish insurance market. We provide statistics from the period covering years 1990-2018. We will discuss the most important milestones in the development of this market. We are going to put a special emphasis to factors affecting this market.

Keywords: Polish Insurance Market, motor insurance.


Paper 11

Transformation of insurance markets in European countries of the post-Soviet space as seen from the perspective of the past 25 years.

Ryszard Pukała, PhD (The Bronisław Markiewicz State Higher School of Technology and Economics in Jarosław, Poland)

The study aims at analysing transformations that took place on insurance markets in European post-Soviet countries in the last 25 years of their operation. The early 1990s marked the beginning of a process of peaceful systemic transformation from the centrally planned economy to the market one. Changes occurred in every market segment. They also affected the insurance sector. Each country chose its separate path of development, looking for optimal solutions based on tradition, culture, a level of economic development and a structure of political power. Moreover, building the insurance markets in newly established sovereign states took place under harsh conditions of high inflation, loss of social faith in financial institutions and aggravated social problems. Twenty five years of shaping the insurance markets in European post-Soviet countries has brought about very different effects for each of them. Every country chose a different development path. Undoubtedly though, in the entire period they experienced intense quantitative and qualitative changes. The picture of today’s insurance market in those countries derives on the one hand from state intervention in shaping the market and mandatory insurance imposed by the legislator, and on the other hand, from insurers adapting to the rules of the free market economy and using insurance to suit vested interests of various investors.

 


Paper 12

State regulation of insurance services markets in Ukraine: retrospective analysis.

Bacho Robert – PhD in Economics, аssociate professor, Head of the Economic department (Ferenc Rákóczi II Transcarpathian Hungarian Institute, Beregovo, Ukraine)

A retrospective assessment of the state regulation of insurance services market of Ukraine has been made in the period of absence of a central regulator in this market. Also a comparison has been made of the specific legislation and public authorities that regulated the insurance services market. It is concluded that the regulatory system of the investigated market was fragmentary and was on the stage of its formation, which led to significant financial losses of the consumers these services.

Keywords: state regulation, non-banking financial services, insurance market, financial activities, insurance companies, consumers of financial services.


Paper 13

The history of creation of insurance companies associations.

Vremenko L.V. PhD, assistant professor, Kharkiv National University of Construction and Architecture, Ukraine

The development of the insurance market during the transition to a market economy required the solution of many urgent issues through the association of insurers. In 1992, the League of Insurance Organizations of Ukraine (LIOU) was created as a voluntary association of insurers. At the regional level – the Kharkiv Union of Insurers was founded in 1993, the main purpose of which is the formation and development of insurance services market in the Kharkiv region, coordination of insurance activities in the region, protection of the interests of its members and the implementation of joint programs.

In 1994, a specialized association of insurers, who carry out compulsory insurance of civil liability of vehicle owners, is created and is a guarantor of the solvency of its members in respect of insurance obligations for this type of insurance – the Motor (Transport) Insurance Bureau of Ukraine (MTIBU).

In 1996, within insurance industry was created the Nuclear Insurance Pool (NIP). This is an agreement between the insurers on taking on nuclear risks. In 1999, the Association “Ukrainian Medical Insurance Bureau” (UMIB) was founded. In 1998, according to the Resolution of the Cabinet of Ministers of Ukraine “On the Procedure for the Establishment and State Registration of the Aviation Insurance Bureau and the Marine Insurance Bureau” of April 27, 1998, No.561 was created in accordance with the Air Code of Ukraine – the Aviation Insurance Bureau (AIBU) and, respectively, due to the Code of Merchant Shipping of Ukraine, the Marine Insurance Bureau of Ukraine (MIBU).

The most influential and massive association of domestic insurers is the League of Insurance Organizations of Ukraine as a non-profit association of participants, which operates on the principles of legality, transparency, independence, including independence from state structures, equality of members of the League, trust and mutual assistance in relations between members of the League . The purpose of LIOU is to promote the development of insurance business. In order to effectively carry out its tasks, the League cooperates with state authorities and management in developing directions for improving insurance activities.

 


Paper 14

Insurance in Russian Federation: trends and problems.

Prof., D.Sc. Nadezda V. Kirillova (Financial University under the Government of the Russian Federation)
nvk_66@mail.ru

The subject of the study is the main trends and problems of the Russian insurance market: OSAGO; the current state and the main development challenges in 2018-2020; regional insurance policy; directions of perfection and implementation innovations to the insurance policy; the financial and economic problems of the functioning of the Russian economy. The work reviews financial and economic relations in the context of implementing economic policy and management decisions in the development of the insurance market of the Russian Federation. The purpose of the work is to identify the main financial and economic problems that hamper the process of development of insurance markets, justify the need to introduce special measures to support the insurance market development. Particular attention is paid to the need to identify the basic requirements for insurers and the development of insurance programs, taking into account current specifics.

Keywords: Russian insurance market; insurance programs; insurance coverage of economic development; requirements for the financial condition of insurance companies
JEL codes: K22, K38, K18

 

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