3. The greatest challenges in the coming year (internal and external)

Implementation of life strategy in low interest rate environment

A constant decline in the interest rate curve has been observed since 2009. This effect has had a particularly severe impact on life insurance. Depending on the investment strategy adopted, these persistently low interest rates may lead to a situation where the income generated is not sufficient to finance policyholders’ guarantees. The issue of low interest rates is currently affecting the entire European insurance industry, which is resulting in scrutiny and possibly a reassessment of the current life product landscape. A central topic of the discussion is options and guarantees that customers receive. For the insurance industry this raises the question of sustainable financing for these options and guarantees. As a significant measure in the context of the defined life strategy, the UNIQA Group has begun to focus on implementing the ALM approach including stringent management rules (e.g. management of profit participation) and on aligning the new business strategy regarding personal insurance accompanied by continual portfolio management.

CEE economy

The strained economic situation in Europe and especially the euro zone as a result of the financial crisis is currently picking up, which is having a corresponding positive effect on the economic development of the countries in Central and Eastern Europe. This trend is reflected in the good growth rates in the countries of this region, which are above those of Western Europe. As many trading partners based in the euro zone have overcome the financial crisis and regained their former strength, Central and Eastern European countries are reporting very good export performance. This is making a significant contribution to their economic upturn. Not every country, however, successfully escaped recession this year. But due to the much higher forecast GDP growth rates for the entire CEE region in 2014, a positive trend has been identified for these countries too.

A similar development is expected in the CEE insurance market. In 2013, only moderate premium growth was recorded in this region. Premiums fell in the region as a whole, especially in life insurance, which is attributable to a substantial downturn in single premiums in Poland. After this disagreeable development last year, expectations for a higher premium volume in 2014 remain dampened. In contrast, the non-life segment looked back at a growing market, but failed to meet expectations in terms of growth rates. One reason for this development is the fierce price competition dominating the motor vehicle and property sectors in many countries. This meant that less income was generated from premiums. For 2014, price pressure will remain a challenge for the UNIQA Group.

Solvency II

The rollout and implementation of the interim guidelines on Solvency II is one of the greatest operational challenges in 2014. The new regime affects insurance companies, supervisory authorities, customers and other stakeholders. How to deal with the new standards will have to be trained intensively over the next few years in order to prevent any misinterpretations or impetus to mismanagement. Communication of the major KPIs to specific target groups and a transparent explanation of their interrelationships is a major success factor.

© UNIQA Group 2014