MTPL overview for Non-EU markets including the transition from statutory to liberalised motor tariffs - the case of Western Balkan countries - Klime Poposki Insurance Supervision Agency Republic of Macedonia Moldova Insurance Conference Threats and opportunities for the MTPL market, 2 October 2018, Chisinau
Lessons learned Regulated tariff Liberalization of the MTPL tariff EU entering Continuous harmonization with MI Directives Peter Braumüller FMA, Austria
Structure MTPL Market data of Western Balkan countries Supervisory processes and activities of ISA World Bank, FIRST Initiative funding project for MTPL Liberalization What we have done Future challenges
Insurance market overview 2017 SR BiH MK AL KS ME Insurance penetration (total) 2.12% 2.16% 1.44% 1.04% 1.34% 2.15% Insurance penetration (MTPL) 0.72% 1.09% 0.64% 0.80% 0.70% 0.83% Insurance density (MTPL) 38.00 49.91 30.45 26.05 25.16 55.90 No. of insurance comp. 9 25 11 8 12 5 Population (millions) 7.02 3,85 2.07 2.89 1.78 0.62 Vehicles per 1000 citizens 320 246 219 194 178 333 MTPL share 34% 50% 44% 62% 51% 43% Serbia Bosnia and Herzegovina Macedonia Albania Kosovo Montenegro
Regulatory environment MK ME SR BiH AL KS MTPL liberalization? no YES no no YES no In force: aug.2017 aug.2011 Plan for MTPL liberalization? YES YES YES YES YES Bonus-Malus system for the MTPL? YES YES YES YES no YES Centralized system for MTPL insurance policies and claims? YES YES YES no YES YES Harmonization with min Sum Insured (MID)? no no no no no no Green card - single premium? YES no no no YES YES Regulated commission fees? no YES YES YES no YES Online sale of MTPL policies? YES no no no YES no
Premium and claims - MTPL Average annual GWP growth 2011-2017: 3,7% 2,5% 18,7% 2,8% 7,1% 6,3%
Number of contracts and claims - MTPL Average annual No. of contracts growth 2011-2017: 4,2% 2,3% 6,1% 5,0% 2012-2017: 4,3% 3,3%
Average GWP & GCP - MTPL Average GWP Average GCP Average GWP Average GCP
Gross claims paid - MTPL 2017
Ratios - MTPL Claim ratio Expense ratio 2015 2016 2017 2015 2016 2017 MK 46% 45% 46% MK 48% 48% 48% ME 48% 42% 36% ME 34% 34% 43% SR 41% 41% 39% SR 26% 25% 26% FBiH 40% 40% 48% FBiH 46% 48% 43% RS 33% 33% 31% RS 39% 38% 38% AL 30% 34% 27% AL 62% 67% 65% KS 55% 92% 41% KS 51% 61% 54% Combined ratio 2015 2016 2017 MK 95% 94% 95% ME 82% 76% 79% SR 67% 66% 65% FBiH 85% 88% 82% RS 73% 71% 68% AL 92% 101% 92% KS 106% 153% 95%
Distribution channels - MTPL 2017
Supervisory processes and activities of ISA World Bank, FIRST Initiative funding project for MTPL Liberalization Conducted in 2012 Findings Recommendations What we have done Technical provision Reinsurance Premiums Future challenges Risk based supervision Liberalization of MTPL tariffs
MTPL Project Findings Companies with large share of MTPL business in their portfolio pay and reserve less claims Companies with lower share of MTPL business pay and/or reserve more claims
MTPL Project Findings, cont. Preliminary field work points to formidable challenges faced by the market today. Inter alia, these include: High competition & high MTPL reliance High commissions & premium discounts On top of that: Policyholder s lost trust & reduced sales Reducing necessary financial resources Lack of proper regulatory requirements to reinsurance of unlimited green card liabilities Insufficient & inaccurate industry data High level of uninsured vehicles Undermining paying capacity Improper technical reserves Lack of standardized approach by courts to bodily injury claims awards
What we have done Technical provisions Reinsurance Premiums
Technical provisions In the period 1.1.2012 to 31.12.2017: - the total gross claims reserves for MTPL, for the total market, increased by 49% or over 15 million euros. - run off result for 31.12.2011 is -7.3 million euros or -24% in relative terms - run off result for 31.12.2011 for the 6 companies with highest MTPL share in their portfolio is -5.5 millions euros or -53% in relative terms Ca
Reinsurance New Bylaw on the adequacy of the reinsurance coverage, the method of calculation of the maximum coverage and method of calculation of the maximum possible loss The NIBM bought an unlimited reinsurance coverage for green card claims caused by unregistered and unknown vehicles. Orders for elimination of irregularities are issued due to inadequate reinsurance coverage for domestic MTPL policies
Premiums Starting from 1.1.2013, ISA issued many settlements for payments of fines, orders for elimination of irregularities and settlement for elimination of the consequences, are issued due to breach of the MTPL tariff; The National Insurance bureau of Macedonia, started the process of improving the software for collecting data on MTPL; ISA through the regular on-site supervisions constantly influence on the quality of the data from the companies; New Bylaw on the manner and procedures for collection and transfer of premium by insurance brokerage companies
Future challenges Risk based supervision Liberalization of MTPL market
Risk based supervision Although part of Solvency 1 regime - focused on rule based supervision, the ISA undertook following steps towards more prudential supervision: When preparing the Annual on-site supervisory plan 19 quantitative indicators are analyzed per company, in comparison with the average of the industry and the historical trends in order to identify the risky area per company Sensitive analyses for major risks of the company by the external auditors are carefully analyzed Targeted (partial) supervisions are planned Companies are challenged about risks identified by supervisors Risks are tabulated and companies are requested to self assess the risk identified by supervisors and to propose measures to cope with them Using the results in evaluating the Corporate government of companies
Liberalization of MTPL market Step 1: Ensuring proper calculation of technical provision Step 2: Ensuring quality data bases for proper pricing through the centralized information system of the national insurance bureau of Macedonia Step 3: Ensuring the financial capacity and the fit and proper of the key functions in the companies by usage of risk based techniques
Thank you Klime Poposki Email: klime.poposki@aso.mk www.aso.mk