BMI View: Long standing challenges such as lack of affordability and customer understanding continues torestrain the life insurance segment in Hungary, and will likely do so through the forecast period. Tax breaksfor pension products that have been available through 2014 have been positive - but not a game changer forthe life segment. The non-life segment will continue to be held back by overcapacity (with the consequentdownwards pressure on prices) and the slow real growth of the economy: these challenges will persistthrough 2015 and on to the end of the forecast period. While many of the players are successfully defendingprofit margins through control of costs and enhancements to operational efficiencies, we continue to believethat some will rethink their commitment to the Hungarian insurance sector.
As is the case for a number of national insurance markets in Central and Eastern Europe (CEE), the currentsituation and short-to-medium term prospects for the insurance sector of Hungary are uninspiring. In the lifesegment, one constraint appears to remain the general lack of understanding of the benefits of the productsthat are on offer. Also, we continue to believe that too many Hungarian households find life insuranceunaffordable. The tax breaks that were introduced at the beginning of 2014 have contributed to some growthin demand for pension products - but the increase does not appear to have been a game changer for most ofthe insurers, let alone the segment as a whole. This is at a time when investment earnings (and the returnsthat can be provided by unit-linked products) are held back by (very) low interest rates).