The Ukrainian market

The Ukrainian insurance market grew rapidly in 2013. The gross written premiums on the non-life insurance market in 2013 was UAH 26.2 bn, or, in other words, it was 32.9% higher than in previous year. This growth was primarily due to the increase in sales of voluntary non-life insurance (38.4% premium growth), including financial risk insurance (70.5%) and voluntary TPL liability insurance (73.7%). In the case of motor insurance, the increase in the premium collected was relatively small and amounted to 6.7% (6.7% for motor own damage insurance, 4.2% for TPL motor insurance and 23.3% for the Green Card insurance). As a result of these trends, motor insurance premiums accounted for 25.47% of the value of the premium actually obtained by insurers in 2013 (i.e. 6.27 p.p. less than in the previous year). The decline in the growth of the written premium in motor insurance compared with previous years arose from the expiry of loan agreements on the purchase of cars concluded in 2007 and the lower sales of new car loans and new cars.

The growth in the non-life insurance market was driven mainly by an almost a 5.8-fold increase in inward reinsurance premium obtained from resident companies; without this premium, the market growth was 3.3%.

Life insurance companies collected UAH 2.5 bn gross written premiums in 2013, which was 36.9% more than in 2012. Approximately 98% of the written premium was obtained through the bancassurance channel and the brokerage sales channel.

Substantial growth (64%) in premiums for endowment policies was recorded in 2013, which were concluded for a term of 10 years as a result of the expiry of this portfolio. 

The Ukrainian insurance market is fragmented. As at 31 December 2013, 407 insurance companies were operating on the market (of which 62 were providing life insurance), of which 94 are companies with foreign capital.

In 2013, the insurance market in Ukraine was primarily characterized by the application by some companies of price dumping, a high level of costs related to the sale of insurance products, liquidity problems of some insurance companies, low growth on the classical insurance market, the use of insurance operations for tax evasion, as well as the continued low level of popularity of insurance services among the public and a moderate level of confidence in the effectiveness of insurance.

On the Ukrainian market, the PZU Group conducts its insurance business through two companies: PZU Ukraine (in terms of non-life insurance) – “PZU Ukraine” and PrJSC IC PZU Ukraine Life (life insurance) – “PZU Ukraine Life”. In addition, LLC SOS Services Ukraine performs assistance functions.

In 2013, the total gross value of the PZU Group’s gross written premiums in non-life insurance in the Ukraine amounted to UAH 404.2 m, i.e. it was 13.7% higher than in the previous year. This increase arose from both the increase in the premium obtained through external entities (i.e. banks, travel agencies, etc.), as well as through its own distribution channels. Travel insurance, Green Cards, corporate non-life insurance and motor insurance played a particularly important role in the growth in written premiums.

In 2013, PZU Ukraine had obtained approx. 3.5% of the gross written premium on the Ukrainian classic non-life insurance sector, which gave it tenth place on the market. However, the leader had a 6.6% share of the market.

The written premium collected by PZU Ukraine Life in 2013 amounted to UAH 119.9 m and was 23.9% higher than in 2012. This growth was achieved as a result of cooperation with external entities (banks, brokers, etc.) and a proprietary agency network in sales of all product lines.

On the life insurance market, PZU Ukraine Life held seventh place with a market share of 4.8% (the leader’s share was 22.5%) at the end of 2013.

Because of the relatively low market penetration, as well as the number of inhabitants, Ukraine’s insurance market has a huge growth potential and is of interest to foreign investors. The amendments to the legal regulations introduced in 2013 should also favorably affect its functioning.

Moreover, in order to adapt the regulations to the recommendations of the Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) the work on the "Insurance Act" was also conducted.

Also in 2013, draft regulations appeared providing for, in particular, an obligation to disclose information on activities of financial institutions, certain requirements in terms of organization and operation of the insurer's risk management system, approving the requirements for regular stress-testing of insurers, disclosure of information on key risks and stress-testing results and creation of a guaranteed payment fund for life insurance contracts.