Pandemic interrupts the catch-up process in Eastern Europe, return to growth expected in 2021 and 2022
Covid-19 resulted in a noticeable decline in economic output of over 4 per cent in the markets of Central and Eastern Europe last year, but experts expect the CEE markets to return to significant economic growth of around 3 to 4 per cent for 2021 and 2022. Based on the positive economic forecasts, the growth advantage currently enjoyed by the CEE markets compared with western European markets should also be established again following the coronavirus pandemic.
The consequences of the pandemic also had an impact on the insurance markets in CEE, with strong premium growth in recent years no longer achieved in the previous year. However, the extent to which the pandemic is affecting the individual countries in the region varies. There are also significant differences in the restrictive measures imposed by local governments to prevent the spread of the virus. However, according to the data currently available, most insurance markets in Central and Eastern Europe show generally stable revenue performance overall, despite the difficult economic conditions in 2020.
Demand for insurance products was higher in the previous year in particular in some segments of property insurance, such as fire insurance, general liability insurance and motor insurance. In contrast, the segment of life insurance saw a marked fall in premiums, following a slight increase here in 2019. In addition to the persistently low interest rate environment, the main reason for this was the decline in new business via bank branches. Many of the financial institutions’ offices were closed during the lockdowns and various other restrictions, meaning that the consultation-intensive pensions business could not take place as usual. However, demand for life insurance is generally expected to recover in CEE over the next few years, as there is still a need for private pension provision outside of the state pension systems. Many insurers have also responded to the persistently low interest rates by launching new provision solutions.
CEE remains a region with high growth potential for UNIQA even though the growth of the insurance markets was interrupted over the past year due to the coronavirus. UNIQA has been active in Central and Eastern Europe for more than 20 years. UNIQA significantly strengthened its market position in this growth region once again with the purchase of the AXA companies in Poland, the Czech Republic and Slovakia at the beginning of 2020. The positive economic performance expected in CEE after the end of the pandemic is expected to contribute towards higher income levels and household consumer spending in the coming years. Increasing prosperity and growing purchasing power go hand in hand with higher demand for insurance solutions.
Premiums per capita (insurance density) as well as the share of the insurance industry in gross domestic product (insurance penetration) in CEE remain well below the average for western European markets, thus clearly demonstrating the very high potential for these insurance markets to catch up.