The Ukrainian economy fell into stagnation in 2013. The difficult situation arose from both the unstable political situation contributing to fading investments and the still poor climate on foreign markets, including the continuously deteriorating access to the Russian market.
According to the Central Statistics Office of Ukraine, the gross domestic product in 2013 increased by 0%, compared to 0.2% in the previous year, while in Q4 growth of 3.7% was recorded (decline of 1.1% in Q1, decline of 1.3% in Q2 and Q3). This was related to a low level of production (a 4.7% decrease vs. 2012) and export (a 7.6% decrease). On the other hand, high growth of retail sales (a 9.5% turnover increase vs. 2012) and an increase in agricultural production (by 13.7%) had a positive effect on the business activity.
Ukraine's currency remained stable throughout 2013. In particular, inflation was maintained at a low level. In 2013, the CPI index was 0.5% December/December (compared to -0.2% in 2012) and -0.3% year/year (compared to 0.6 in 2012).
Despite these adverse conditions, in 2013, the insurance sector in Ukraine was developing rapidly. 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 the corresponding period of the previous year. Additionally, life insurance companies collected UAH 2.5 bn gross written premiums in 2013, which was 36.9% more than in the corresponding period of 2012.
Numerous legal regulations entered into force in 2013, which had the objective of stabilizing the Ukrainian insurance market. The most important of these include:
- Changes in the fiscal code. In the fiscal code in force since 1 January 2013, the Ukrainian Parliament gave insurance companies primarily the right to pay 3% tax on the gross written premium, without the need to transfer to the overall tax system.
- Introduction of a green card. In order to stabilize the Ukrainian Green Card market and confirm Ukraine’s status as a full member of the International Green Card Insurance System, on 1 January 2013, the Ukrainian insurers, which are members of Ukraine’s Motor Insurance Bureau (MTSBU), introduced a plan for administering the Green Card.
The new mechanism anticipates that the full members of the MTSBU transfer from 45% to 55% of the insurance premiums under the Green Card agreements to the insurance guarantee fund, while the MTSBU ensures the punctual and qualitative settlement of insurance claims on the basis of these agreements. Together with the introduction of the new mechanism, for 6 months of 2013, the average period in which the payment of settled claims was made declined threefold (from 60 to 20 days).
- Amendments to the Act “On obligatory third party liability insurance of owners of land transport.”
A new mechanism was introduced for calculating claims with regard to damage to the health and lives of victims. The injured party can receive no less than 1/30 of the amount of the minimum monthly salary per day of treatment (but no more than for 120 days) according to the value on the date of the accident (as at 30 June 2013, the minimum monthly salary was 1,147 hryvni).
- Changes in the principles of registering insurance agents. In accordance with Regulation approved on 18 April 2013 “On the approval of the order of registering insurance agents conducting business with regard to obligatory TPL insurance on land transport,” insurance agents (natural or legal persons) have the right to conduct business as an intermediary in TPL motor insurance, provided they register with the MTSBU. The Regulation became effective on 7 December 2013.
Amendments to the Act “On insurance” entered into force on 16 May 2013. The changes applied to:
- enabling Ukrainian insurance brokers to conclude basic all-risks insurance contracts for Ukrainian customers with foreign insurance companies. Before this change it was only possible to take out insurance directly with foreign insurance companies for specified risks;
- the level of the share capital required when setting up life insurance companies in Ukraine – the required capital was increased from EUR 1.5 m to EUR 10 m (the equivalent in hryvni), whereby this requirement will not apply to existing insurance companies.