Slovenia Insurance Report Q2 2012

The financial reports of insurance market leader Triglav – the listed, but still majority state-ownedcomposite and health insurer – in relation to calendar 2011 will provide insights into two recentdevelopments in Slovenia’s insurance sector. One is the downwards pressure in pricing the market forcompulsory motorists’ third party liability (CMTPL) cover, which – along with falling accident insurancepremiums – has recently constrained the growth of the overall non-life segment. The other question is theextent to which Slovenian households continued to invest in unit-linked products through 4Q11 in face ofvolatile financial markets. For the first three quarters of last year, life premiums were basically in linewith those of the previous corresponding period – but only because rising unit-linked premiums had offsetfalls elsewhere. The latest data available from the SZZ, the trade association, indicates that life premiumsactually dropped quite sharply through 2011 as a whole.

In general, though, this report continues to depict a strong and stable insurance sector, in which thevarious companies are focusing on cost cutting, new product development, niche opportunities orexpansion outside Slovenia in order to offset the stagnation (or worse) in premiums. The report alsohighlights the factors that set Slovenia’s insurance sector apart from the others in Central and EasternEurope that BMI monitors. Indigenous insurers – together with the KAD, the state agency that managesthat assets which underpin Slovenia’s social security system – dominate both major segments of theinsurance sector: multi-national insurers are present, but only hold minor market shares. Non-lifeinsurance premiums are boosted by health insurance. In the meantime, the life segment is larger than itwould otherwise be thanks to (mainly compulsory) contributions to the KAD and (mainly voluntary)pension-related contributions to the insurers. For the time being, it appears that challenging economicconditions have had less impact on the Slovenian insurers than on the indigenous players in other countryin the region.

Nevertheless, it remains to be seen what is the strategic response of the local companies to the lack ofgrowth in Slovenia’s insurance sector. There are no obvious catalysts for further development of the nonlifesegment. The low level of life premiums (given Slovenia’s overall per capita income levels) suggestthat households do not see life insurance as an important channel for their savings. On solution – reflectedin Triglav’s strategy – is to raise more capital (at a time that Solvency II is a key issue for insurers acrossthe entire European Union and beyond), seek new partners (the World Bank’s IFC in Triglav’s case) andexpand overseas. Triglav is building a network of insurers throughout the former Yugoslavia (and theCzech Republic). The challenge with this approach is that the selected markets are small and/or underdeveloped:meanwhile, other competitors in the region are multi-national giants – many of whom are anorder of magnitude larger than Triglav.