Basler Osiguranja, a member of Baloise Holding AG (BALN), Switzerland’s third-largest insurer, says growth of premiums may outpace Serbia’s economic growth after 2014 and probably reach 1 billion euros ($1.27 billion) in 2018.
Gross written premiums in the Balkan country had an average 2.3 percent annual increase over the past three years and reached 57.3 billion dinars ($639 million) in 2011, Chief Executive Officer Vladimir Medan said in Belgrade today. Premium growth may remain weak this year and next, before picking up on an estimated economic expansion of at least four percent by the end of 2014, he said.
“Even such modest growth of economic activity will have a multiplying effect on the growth of premiums” as it will create more disposable income for life insurances and greater demand by business that will want to insure their assets, Medan said in an interview. “Considering the low base and the generally underdeveloped market, there is good potential.”
The International Monetary Fund forecast Serbian economic growth at 0.5 percent this year and 3 percent next year. The economy contracted 1.3 percent in the first quarter amid a frozen agreement with the IMF and weak demand for Serbian exports in the European Union because of the sovereign-debt crisis. Gross written premiums rose 1.4 percent in 2011, compared with a 1.6 percent economic growth rate.
Serbia’s insurance market is dominated by three insurers including Dunav Osiguranje AD (DNOS), DDOR Novi Sad AD (DDNS) and Delta Osiguranje AD (DEOS), a unit of Assicurazioni Generali SpA (G), which control more than half of the market.
Penetration is now low “even by regional standards” as all premiums equal just 1.8 percent of Serbia’s gross domestic product, he said. “We see that as an opportunity to increase our share of the market.”
Basler started its Serbian operation as a greenfield investment in 2009 and has invested 15 million euros since then. It now has a market share of less than 1 percent.
“Property insurance and life policies are the two segments that will have the strongest growth” over the next six years, during which the insurer plans to control as much as 5 percent of the market, he said. Life policies accounted for 17.4 percent of all premiums in Serbia last year, from 16.5 percent in 2010.
Life policies combined with long-term saving plans for individuals may also benefit from growing awareness that Serbia’s dominant, state-run pension fund may no longer be the safe bet it once was, Medan said.
The Serbian budget currently helps cover the cost of almost half of all pensions the state fund pays to some 1.68 million retirees, while just over 1.7 million people in the country of 7.12 million have formal employment and make the mandatory contributions to the pay-as-you-go fund, Medan said.
With the median age being above 40 years, “the demographic picture is not promising, so more people realize they themselves need to take care of their financial safety,” he said.
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