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MTPL overview for Non-EU markets including the transition from statutory to liberalised motor tariffs
- the case of Western Balkan countries -
Klime Poposki
Insurance Supervision Agency
Republic of Macedonia
Moldova Insurance Conference – Threats and opportunities for the MTPL market,
2 October 2018, Chisinau
Lessons learned
Regulated tariff
Liberalization of the MTPL tariff
EU entering
Continuous harmonization with MI Directives
Peter Braumüller
FMA, Austria
Structure
• MTPL Market data of Western Balkan countries
• Supervisory processes and activities of ISA– World Bank, FIRST Initiative funding project for MTPL Liberalization
– What we have done
– Future challenges
• Serbia• Bosnia and Herzegovina
• Macedonia• Albania• Kosovo
• Montenegro
Insurance market overview
2017 SR BiH MK AL KS ME
Insurance penetration (total) 2.12% 2.16% 1.44% 1.04% 1.34% 2.15%
Insurance penetration (MTPL) 0.72% 1.09% 0.64% 0.80% 0.70% 0.83%
Insurance density (MTPL) 38.00 € 49.91 € 30.45 € 26.05 € 25.16 € 55.90 €
No. of insurance comp. 9 25 11 8 12 5
Population (millions) 7.02 3,85 2.07 2.89 1.78 0.62
Vehicles per 1000 citizens 320 246 219 194 178 333
MTPL share 34% 50% 44% 62% 51% 43%
Regulatory environment
MK ME SR BiH AL KS
MTPL liberalization? no YES no no YES no
In force: aug.2017 aug.2011
Plan for MTPL liberalization? YES YES YES YES YES
Bonus-Malus system for the MTPL? YES YES YES YES no YES
Centralized system for MTPL insurance policies and claims?
YES YES YES no YES YES
Harmonization with min Sum Insured (MID)? no no no no no no
Green card - single premium? YES no no no YES YES
Regulated commission fees? no YES YES YES no YES
Online sale of MTPL policies? YES no no no YES no
Premium and claims - MTPL
Average annual GWP growth 2011-2017:
3,7%
7,1%
2,5%
18,7%
6,3%
2,8%
Number of contracts and claims - MTPL
Average annual No. of contracts growth 2011-2017:
4,2% 2,3%
6,1%
4,3%
5,0%
3,3%2012-2017:
Average GWP & GCP - MTPL
Average GWP Average GCP Average GWP Average GCP
2017
Gross claims paid - MTPL
Ratios - MTPL
2015 2016 2017 2015 2016 2017
MK 46% 45% 46% MK 48% 48% 48%
ME 48% 42% 36% ME 34% 34% 43%
SR 41% 41% 39% SR 26% 25% 26%
FBiH 40% 40% 48% FBiH 46% 48% 43%
RS 33% 33% 31% RS 39% 38% 38%
AL 30% 34% 27% AL 62% 67% 65%
KS 55% 92% 41% KS 51% 61% 54%
2015 2016 2017
MK 95% 94% 95%
ME 82% 76% 79%
SR 67% 66% 65%
FBiH 85% 88% 82%
RS 73% 71% 68%
AL 92% 101% 92%
KS 106% 153% 95%
Claim ratio Expense ratio
Combined ratio
Distribution channels - MTPL
2017
Supervisory processes and activities of ISA
• World Bank, FIRST Initiative funding project for MTPL Liberalization
• Conducted in 2012
• Findings
• Recommendations
• What we have done
• Technical provision
• Reinsurance
• Premiums
• Future challenges
• Risk based supervision
• Liberalization of MTPL tariffs
MTPL Project Findings
Companies with lower share of MTPL business pay and/or reserve more
claims
Companies with large share of MTPL business in their portfolio
pay and reserve less claims
MTPL Project Findings, cont.
Preliminary field work points to formidable challenges faced by the market today. Inter alia, these include:
High commissions & premium discounts
Policyholder’s lost trust & reduced
sales
Undermining paying capacity
Reducing necessary financial
resources
Improper technical reserves
High competition & high MTPL
reliance
Lack of proper regulatory requirements to reinsurance of unlimited green card liabilities
Insufficient & inaccurate industry data
High level of uninsured vehicles
Lack of standardized approach by courts to bodily injury claims awards
On top of that:
Technical provisions
Reinsurance
Premiums
What we have done
Technical provisions
In the period 1.1.2012 to 31.12.2017:- the total gross claims reserves for MTPL, for the total market, increased by 49% or over 15 million
euros.- run off result for 31.12.2011 is -7.3 million euros or -24% in relative terms- run off result for 31.12.2011 for the 6 companies with highest MTPL share in their portfolio is -5.5
millions euros or -53% in relative terms
Ca
New Bylaw on the adequacy of the reinsurance coverage, the method of calculation of the maximum coverage and method of calculation of the maximum possible loss
The NIBM bought an unlimited reinsurance coverage for green card claims caused by unregistered and unknown vehicles.
Orders for elimination of irregularities are issued due to inadequate reinsurance coverage for domestic MTPL policies
Reinsurance
Starting from 1.1.2013, ISA issued many settlements for payments of fines, orders for elimination of irregularities and settlement for elimination of the consequences, are issued due to breach of the MTPL tariff;
The National Insurance bureau of Macedonia, started the process of improving the software for collecting data on MTPL;
ISA through the regular on-site supervisions constantly influence on the quality of the data from the companies;
New Bylaw on the manner and procedures for collection and transfer of premium by insurance brokerage companies
Premiums
Risk – based supervision
Liberalization of MTPL market
Future challenges
Risk based supervision
Although part of Solvency 1 regime - focused on rule based supervision, the ISA undertook following steps towards more prudential supervision:
➢ When preparing the Annual on-site supervisory plan ➢ 19 quantitative indicators are analyzed per company, in comparison with the average of the industry
and the historical trends in order to identify the risky area per company➢ Sensitive analyses for major risks of the company by the external auditors are carefully analyzed➢ Targeted (partial) supervisions are planned
➢ Companies are challenged about risks identified by supervisors
➢ Risks are tabulated and companies are requested to self assess the risk identified by supervisors and to propose measures to cope with them
➢ Using the results in evaluating the Corporate government of companies
Liberalization of MTPL market
Step 1: Ensuring proper calculation of technical provision
Step 2: Ensuring quality data bases for proper pricing through the centralized information system of the national insurance bureau of Macedonia
Step 3: Ensuring the financial capacity and the fit and proper of the key functions in the companies by usage of risk based techniques