Annex 7. Fact Sheet Estonia

Transcription

1 Annex 7. Fact Sheet Estonia 1. Generalities: Some history of the agricultural risk and crisis management policies, programs and tools. Population: 1, 36 million inhabitants GDP ,4 billion Euro; Inflation (2004 to 2005): 4, 1%; 45% male population, 55% female population 7% aged under 20, 22% over 60; Change (2004 to 2005) in current prices: +6,2% Insurance premium income: 168 million Euro (2004); Ratio to GDP: 2,3 % (2004) In 2004, the Gross Domestic Product of Estonia was 9,4 billion Euro and the average population 1.36 million inhabitants. The economic growth of Estonia amounted to 6.2%, and the change in consumer price index was 3%. The relation between domestic saving and GDP improved a little. The current account deficit in relation with GDP was 12.6%. In 2004, insurers direct insurance gross premiums made up 2.3% of GDP, referring to the growing importance of insurance. Market growth was based on the rapidly growing popularity of life insurance, mainly unit-linked life insurance products. Again, the intense loan and leasing market promoted insurance activities, because often when housing or a vehicle is leased a property or land vehicle insurance contract shall be concluded respectively. More and more life insurance contracts are being concluded for securing the payment of a longterm loan. After the 1999 the share of non-life premiums slowly increasing (Figure 1.1) Figure 1.1 Dynamics of insurance premiums and main economic indicators Growth of life premiums 100% 90% Growth of non-life premiums 80% 70% 60% 50% 40% 30% 20% Average growth of premiums Change in GDP (current prices) Change in consumer prices Change in the number of insurance contracts 10% 0% -10%

2 Climate conditions for Estonian agriculture quite stable and risks for natural disasters are low. Therefore insurance activities on field of crops and animals rather modest. Starting at the beginning of independence (1991) lot of changes is taking place. Mainly: Movements from the state hold insurance system to the private insurance system; Development of voluntary based insurance systems; Harmonization of Estonian and European Union insurance laws. 2. General Framework: Definitions of disaster (for the application of article 92.2 of the Treaty of Rome 1 ) No definitions about the disasters are presented in Estonian Insurance Law. General Law framework Estonia is a member of European Union and therefore all our laws, including the Insurance Law are harmonized with EU laws. Estonian Insurance Law based on the following EU regulations: 73/ July 1973 (basic text); 88/ June 1988 (amendments and supplements); 92/ June 1992 (amendments and supplements). Two organizations have a leading role in the creation process of Estonian Insurance Law: Estonian Insurance Association Estonian Insurance Law Estonian Insurant Association 1 The following shall be compatible with the common market: o o (a) (b) aid to make good the damage caused by natural disasters or other exceptional occurrences; 346

3 The Estonian Insurance Association unites insurance companies operating in Estonia. The association was founded on February 15, The objectives of the organization are to represent the general interests of its member companies in the development of the insurance sector as well as in the social and economic environments. Estonian Insurant Association was created in 1995 by the main companies of policy holders. The main objective of association to protect his member s interests agents the dictates of insurance companies. In 1995 the Estonian Parliament accepted Estonian Insurance Law. Objectives of the existing policies/programs No special state programs at present time in Estonia. Private insurance companies have his own development programs in agriculture Law barriers: does the law forbid that ad-hoc measures or disaster funds compensate damages that could have been insured? No law barriers in Estonia. 3. Market conditions Competition on prices or on quality of services. Is there an independent body that fixes tariffs? Competition on quality of services In 2004, based on gross premiums, the insurance market grew 20.4%. In 2004, insurers collected a total of 205 million Euro in gross premiums, of which 74.1% were gross premiums of non-life insurance, 25.2% gross premiums of life insurance and 0.7% gross premiums of accepted reinsurance. Considering the consumer price index the real annual growth rate of the direct insurance premium volume in 2004 was 16.9%, being less than the 20.2% of gross premiums real growth in In 2004, the real growth of life insurance was 35% and the real growth of non-life insurance 18.1%. Compared to the 166 million Euro of 2003, 205 million Euro in direct insurance gross premiums were collected in Claims were paid in the amount of 83 million Euro compared to 70 million Euro in The volume of life insurance gross premiums grew 39.1% in the year and the volume of non-life insurance premiums grew 15.1%. In 2004, the division of the market between non-life insurance and life insurance changed 3.4 percent in favour of life insurance. More than a quarter of all gross premiums collected in the Estonian insurance market were comprised of land vehicle insurance premiums and the other quarter was comprised mostly of motor TPL insurance. Property insurance and capital insurance continued to be popular as well. In 2004, the volume of direct insurance gross premiums per 347

4 capita in Estonia made up 150 Euro compared to 124 Euro in The gross monthly salary in 2004 was 728 Euro per month. INSURERS In 2004, seven non-life insurers and five life insurers operated in Estonia; in addition, the Estonian Traffic Insurance Foundation was operating as an insurer in cross-border insurance and reinsurance. Zürich Kindlustuse Eesti AS, which has not been concluding new insurance contracts since 2003, terminated insurance operations at the end of 2004 and transferred the insurance portfolio to If Eesti Kindlustus. The public Estonian Traffic Insurance Foundation also terminated its operations and transferred its assets and liabilities to its legal successor the private non-profit association Estonian Traffic Insurance Foundation. By the end of the year, the Financial Supervision Authority had registered 82 non-life insurers and 12 life insurers as providers of cross-border insurance service. Based on gross premiums of the Estonian insurance companies, in 2004 more than a half of the insurance market belonged to two larger companies, whereas the insurance market concentration was higher in life insurance than in non-life insurance. If Eesti Kindlustus, ERGO Kindlustus and Hansa Elukindlustus have a remarkable market position. The stabilization of the insurance market has brought along an increase in the net profits of companies. In 2004, the total audited net profit of life insurance companies was 7,3 million euro and the total net profit of non-life insurance companies was 21,2 million euro. In 2004, the profit margin of enterprises in the insurance sector was 13.6%, cost benefit of equity capital 34.5% and cost benefit of assets 10.3%. Market players: Is there a dominant company? Life insurance companies Ühispanga Elukindlustuse AS 25% ERGO Elukindlustuse AS 10% Seesam Elukindlustuse AS 13% AS Sampo Elukindlustus 7% Hansapanga Kindlustuse AS 44% Figure 3.1 Market shares of life insurance companies in

5 Non-life insurance companies AS If Eesti Kindlustus 38% ERGO Kindlustuse AS 27% AS Inges Kindlustus 4% Eesti Liikluskindlustuse Fond 1% Zürich Kindlustuse Eesti AS 3% Seesam Rahvusvaheline Kindlustuse AS 13% Salva Kindlustuse AS 11% Nordea Kindlustuse Eesti AS 4% Figure 3.2 Market shares of non life insurance companies in 2004 Change in market shares compared to 2002; Non-life insurance Ergo Kindlustuse AS: +2pp Salva Kindlustuse AS: +2pp AS If Eesti Kindlustus: +2pp AS Inges Kindlustus: 0 Eesti Liikluskindlustuse Fond: 0 Nordea Kindlustuse Eesti AS*: -1pp Zürich Kindlustuse Eesti AS: -1pp Seesam Rahvusvaheline Kindlustuse AS: -3pp Insurance activities in agriculture Taking into account the low market demand for insurance products the share of gross premiums of insurance companies in agriculture extremely low (Annex 1). In 2004 the insurance companies share of gross premiums in agriculture about 1% of total premiums (min 0,47% - max 1,47%) Division of gross premiums by the main products in 2004) 349

6 Agricultural machinery Euro Equipments Euro Buildings Euro Animals Euro Yields 0 Income 0 Total gross premiums Euro Buildings 25% Animals 7% Agric.machinery 41% Equipments 27% Figure 3.3 Distribution of gross premiums of insurance companies by agricultural products in 2004 The biggest company is IF Eesti Kindlustus operating with euros gross premiums in Distribution of gross premiums by insurance companies in agriculture (2004) IF Eesti Kindlustus ERGO SALVA Seesam Others Total euro euros euro euro euro euro IF Eesti Kindlustus have highest market share 47,5%, which is close to the dominant position on the insurance market (Figure 3.4). 350

7 Seesam 9% Others 5% SALVA 15% IF Eesti 47% ERGO 24% Figure 3.4 Market shares of insurance companies on the field of agricultural products in General features Indications of most frequent characteristics. To be detailed in the next paragraph and the technical form of products Compulsoriness for the farmer Compulsoriness of insurances arising in cases when farmers are leasing agricultural machinery or equipments from the different leasing companies. Then the insurance is obligatory. Public subsidies and cost for the farmers. No public subsidies for insurance system in Estonia. Franchise (%). Is it computed on the total of the farm or per crop? No franchise used in Estonian agricultural insurance system. Existence and importance of index-based insurances Not in agriculture yet 351

8 Most usual method for determination of losses Usually determination of damages in agriculture implemented by professional treat mentors of losses. Delay in paying indemnity after event or harvest. Usually certain delay exist, but this is not the problem for the farmers. Is there a bonus-malus system? Yes Is there an income insurance? Not yet in Estonian agriculture Is there a (significant) market of MPCI? (multi-peril crop insurances) No Are there insurances on prices? No 5. Insurance products available Description of all the available programs per crops per groups of crops (as probably defined by the insurances) and per type of animals. The main insurance objects in Estonian agriculture are: Agricultural machinery; Equipments Buildings Animal (mainly dairy cows) Number of farms covered At the end of signed insurance contract in agriculture. Taking into account the number of operated farms (27 747) the share of coverage is 6.3% Covered areas (crops, livestock and revenue) and type of covered risk 352

9 At the end of dairy cows and breeding bulls were covered by insurance contracts. The share of coverage is 6.2% of all dairy cows The crops and farm income isn t the insurance object yet. Coverage in value of production Insured property in agriculture is increasing year by year. The value of insured agricultural object was 9,4 million euro, which is 2,7% of agricultural GDP in The information in this paragraph is extended in the technical form in annex. It will refer to the most recent year available. 6. Coverage in the last years. This paragraph summarises of the information given in the tables by type of product and describes the evolution in the last years. The information is partly redundant with paragraph 5, but this paragraph focuses on the time trend. If possible figures should be given year by year over a period of 5 years. Alternatively data for one date around 5 years before the last available. For data on compensation payments, multi-annual averages are welcome. Number and % of farms covered During the last 5 years the farm number significantly decreasing and farm size accordingly increasing in Estonia. Therefore, in spite of decreasing insurance contracts in the share of farms with insurance contracts are increasing (Table 6.1) Table 6.1 Insurance coverage of farms in Estonia Number of farms covered* Farms with insurance contracts** (%) 3,8 5,4 6,3 Sources:* Estonian Statistical Office. Agricultural holdings ; ** Accounted data of insurance companies Total area insured by group of crops and % Last five years no contracts on the field of cultivated crops. Total number of animals covered by type of animal and % In livestock sector most insured objects are the dairy cows. (Table 6.2) 353

10 Table Number of cows* Number of insured cows** (%) 5,1 6,2 6,2 Sources: * Estonian Statistical Office. Agricultural holdings ; **Accounted data of insurance companies Production value covered and % At second year (2005) of EU membership the agricultural GDP significantly increasing in Estonia (Table 6.3). Same time in spite of increasing insured property the share had reached the lowest level. Table 6.3 Insurance coverage and GDP dynamic in GDP in agriculture* (mio euro) 271,5 260,1 344,3 Insured property** (mil. Euro) 7,9 8,4 9,4 (%) 2,9 3,2 2,7 Sources: * Estonian Statistical Office. Electronic database; ** Accounted data of insurance companies/ Annual reports 2001,2003,2005 Total amount of premiums At the total amount of premiums are quite stable and varied between 1,5-1,8 million Euro per year (Table 6.4) Table Total amount of gross premiums (Euro) Total amount of gross premiums in agriculture (Euro) (%) 1,19 1,31 1,08 Source: Estonian Insurance Association; Accounts, Annual reports 2001, 2003, 2005 Relatively highest share in 2003 explained with implementation of SAPARD program. Obligatory insurance activities quite active on the field of agricultural machinery, equipment and building. Compensation payments to farmers (indemnities) 354

11 Compensation of payments related to gross premiums of insurance companies in agriculture varied from18-20 % (Table 6.5) Table 6.5 Relation between gross premiums and compensation payments Total amount of gross premiums in agriculture ( Euro) Compensation payment to farmers (Euro) (%) 18,9 17,8 19,3 Sources: Estonian Insurance Association; Accounts, Annual reports 2001,2003, Reinsurance See Annex 1. Private or public Not yet in Estonia Main re-insurers Not yet in Estonia Reinsurance rates Not yet in Estonia 8. Alternative risk management tools Ad-hoc measures (extraordinary disasters): average expenditure in the last 10 years, delay to pay. No ad-hoc expenditures during the last 10 years Calamity funds regularly fed. average expenditure in the last 10 years, delay to pay. No calamity funds in Estonia Mutual funds, 355

12 No needs for mutual funds in Estonia Non monetary tools No non monetary tools for risks management in Estonia 9. Changes undergoing the system. No changes at the moment. In future: If the farmers income due to the CAP will rise the share of insurance activities accordingly increasing; Obligatory insurances due to the applying the finances from EU structural funds will increase. In longer perspective, taking into account continuing climate changes, which will be expand the disasters area the new instruments are needed. Due to the competition on the field of insurance market the number of insurance companies diminishing. Same time the state interest to avoid monopolistic (domination trends) trends on the insurance market; 356

13 10. Technical Form (detail of paragraph 5) Product covered (crop type, livestock, income): Peril/damage covered (or Multi-peril). Is it a insurance on yield? Is there a list of specific perils covered? No Technicalities: Index-based? (computed on meteo data, satellite images, etc.) No Can a farmer insure only part of the fields? Loss estimation per field or per farm? No Per animal Triggers: which is the minimum loss above which the farmer is compensated? Different. Depends of company rules. Method to calculate the reimbursement Main by professional treatmentors of losses Compulsory for the farmer? Yes Is there a bonus-malus system? Yes Time from the harvest/damage until payment of indemnity (specify if it is maximum or average) No crop compensations in Estonia. Average time of payout of animal compensation is one month Geographic detail used by companies to determine tariffs. No Franchise (%). Does it coincide with the trigger? No franchise Public involvement (subsidies to premiums, re-insurance, regulations) No Coverage in area, number of farms or value (specify and give all values if possible) Tables 6.1, 6.2 and 6.3 Sources: Estonian Statistical Office/ Electronic database/ Agricultural holdings / GDP calculations/ Estonian Insurance Association/ Accounts/ Annual reports/databases. 2001,2003,2005; Estonian Insurant Association/Database ERGO Kindlustus /Annual reports 2001,2003,2005/ IF Kindlustus / Annual reports 2001,2003,2005/ SALVA Kindlustus/ Annual reports 2001,2003,2005/ Ignes Kindlustus/ Annual reports 2001,2003,2005 Nordicum Kindlustus/ Annual reports 2001,2003,2005/ Seesam Kindlustus/ Annual reports 2001,2003,2005/ Estonian Insurance Brokers Association/ Documents Materials from the phoned questionnaire of the insured farmers/ Annex 3/ 357

14 Annex 1. Gross and net premiums of insurance companies in Estonia (2005) Private insurance ERGO If Eesti Inges Nordicum Salva Seesam companies Kindlustus Kindlustus Kindlustus Kindlustus Eesti Kindlustus Rahvusvaheline Kind. Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net premiums premiums premiums premiums premiums premiums premiums premiums premiums premiums premiums premiums Motor TPL insurance Short-term health insurance Land vehicles insurance Other vehicles insurance Goods in transit insurance Property insurance Vehicle liability insurance General liability insurance Insurance for pecuniary loss DIRECT INSURANCE REINSURANCE TOTAL incl obligatory insurance Agriculture from total % 0,97 0,88 1,23 1,06 0,57 0,48 0,88 0,67 1,47 1,11 0,71 0,62 358

15 ANNEX 2: Examples ERGO INSURANCE SERVICE Cattle insurance By offering cattle insurance, ERGO wishes to be your reliable partner and alleviate your financial problems whenever anything unexpected or unforeseen happen to your cattle. A cattle insurance contract may be signed by the owner, lessee or any other legal possessor of the animals. Cattle insurance offers a possibility to insure appropriately vaccinated animals that have been declared to be healthy by a veterinarian: bovine animals, sheep, pigs and other animals as agreed upon. Cattle insurance compensates for damage arising from: fire and natural disaster accident theft diseases, including communicable diseases. In addition you may choose additional insurance cover in case of which you will be compensated for the treatment of the animal, including operation costs. The signing of the contract is subject to the condition that all animals have to be appropriately identified and entered into the register of the Agricultural Registers and Information Board. Additionally two which are important on the field of Estonian insurance market. These ones are: Forestry Fishery Forest insurance contract may be signed by the owner, possessor, caretaker of the forest or a person authorised to be the user of the forest. 359

16 Forest insurance offers a possibility to insure a forest growing on land that has been determined on the basis of land readjustment and entered into the land register; it is also possible to insure the timber obtained from the forest. The insured place is the location of the forest and timber specified in the insurance contract pursuant to the forest management plan. Forest insurance compensates for damage arising from: forest fire storms snow hail cold damage forest pests diseases and game. ANNEX 3: Farmer s questionnaire results Q1. Nomination of most important restriction to insurance activities in agriculture 1. Low income in agriculture 47% 2. Low risk area 35% 3. High prices of insurance services 18% Q2. Insured objects priorities Machinery and equipments 51% Building 28% Animals 11% Yield 8% Income 2% Q3. Your opinion to create the producers fund against the natural disasters Yes 67% No 24% Discredits 9% 360