Austrian insurance industry returns to growth

Having fallen for two years in succession, the premium volume in the Austrian insurance market achieved a turnaround in 2013. Total premiums increased by 2.0 per cent to € 16.6 billion. Similar growth is forecast for 2014, with the market again set to grow by around 1.9 per cent.

The fact that the Austrian insurance market is not enjoying even stronger growth is due to the sustained downturn in life insurance premiums, which fell by a further 0.3 per cent in 2013. This development was driven in particular by lower income from single premiums, which contracted by 1.0 per cent, while recurring premiums stagnated. The continued low interest rate environment means that forecasts for life insurance remain muted. One factor that could have a positive impact is the restructuring of subsidised-premium retirement provision. Due to the positive development of the single premium business, the growth forecast for life insurance for 2014 was recently upwardly revised to 1.5 per cent.

By contrast, property and casualty insurance saw further substantial premium growth of 3.4 per cent in 2013, thereby exceeding the strong performance recorded in the previous year. There was stagnation in the motor vehicle liability insurance segment, with portfolio growth accompanied by a reduction in average premiums. On the other hand, comprehensive motor vehicle insurance made a strong contribution to premium growth, while legal expenses insurance and technical and transport insurance also enjoyed dynamic development. Meanwhile, total premiums in the health insurance segment again rose substantially, with the growth rate increasing as against the previous year to 3.8 per cent.

With economic growth remaining extremely weak on the whole, the level of insurance penetration is set to decline further. The figure for 2014 is forecast at around 5.1 per cent (compared with 6 per cent in 2009).

Muted growth in CEE in 2013, positive outlook for 2014

The nations of Central and Eastern Europe are expected to benefit from the fact that the overall economic situation in Europe, and particularly in the euro zone, is slowly easing and the financial crisis looks to have been largely overcome. Generally speaking, most of the countries in the region are enjoying good growth rates in excess of those recorded in Western Europe, driven by extremely healthy export performance that has picked up again now that many trading partners in the euro zone have regained their financial strength. Although not all of the countries in the region emerged from recession in the year under review, significantly higher GDP growth rates are forecast for the entire CEE region in 2014.

The CEE insurance market is expected to see similar development. In 2013, premium growth in the region was still muted, while the life insurance sector in particular saw falling premiums throughout the region as a whole on the back of a substantial downturn in single premiums in Poland. The performance of the non-life segment was positive overall, but growth rates also failed to meet expectations in most cases. There are two reasons for this: the macroeconomic situation remains sluggish, leading to restrained spending on insurance, while price competition in many countries is extremely pronounced – particularly in the motor vehicle and property sectors – resulting in a lower level of premiums earned.

The improved economic situation is not expected to have an impact on private consumption and capital expenditure in particular prior to 2014. The insurance market will benefit from this development, with the premium volume increasing to a greater extent as a result. Non-life insurance is expected to see higher growth rates in 2014 and 2015 on the back of the stronger economic performance in the rest of Europe, as the nations of Central and Eastern Europe are extremely export-oriented and hence are reliant on the development of their trading partners in the West of the continent. However, there are signs that price competition will remain intensive, which could prevent strong premium growth. Life insurance in the CEE region will also return to positive development in 2014.

In spite of its muted development at present, CEE remains a growth region with significant potential thanks to its levels of insurance penetration and density, both of which still offer considerable room for improvement, and the fact that the regulatory situation is improving. As such, UNIQA is confident that, in the longer term, the CEE region will see increased growth rates that are well in excess of those achievable in the saturated insurance markets.

© UNIQA Group 2014