STUDY SEES CONTINUING GAINS FOR INSURERS IN EASTERN EUROPE PREMIUM VOLUME JUMPED 15 PERCENT IN '94

STUDY SEES CONTINUING GAINS FOR INSURERS IN EASTERN EUROPE PREMIUM VOLUME JUMPED 15 PERCENT IN '94

Insurance markets in reforming Eastern European nations posted a 15 percent increase in premium volume last year, bringing the total to more than $8 billion.

And growth looks set to continue. A recent study by Swiss Re of Zurich, the world's second-largest reinsurance company, pointed to rising incomes in the region and a pressing demand for insurance that has yet to be met.In Poland, Slovakia, Slovenia, the Czech Republic and Hungary, the report expects the industry to benefit from the turnaround to sustained economic growth. In Bulgaria, Romania and countries of the former Soviet Union, growth is likely to be more volatile, it added.

For nations in Central and Eastern Europe, except the Czech Republic and Slovakia, premium growth has been stronger in the life sector than in the nonlife sector.

Swiss Re said life insurance in the reforming economies is "particularly underdeveloped," accounting for only a 25 percent share of premium volume - much less than the 50 percent share the life sector holds in the countries of the European Union.

Tax incentives for private pensions, and increasing prosperity spurred by new investment opportunities, should see the life sector report strong growth in the years ahead, the survey said.

It also said foreign insurers are focusing their strategies more on the life sector and gaining market share with new products adapted to the area's particular changing needs. Growth in the nonlife sector has been dominated by increases in compulsory vehicle insurance and a thriving marine-insurance sector.

Vehicle insurance is likely to continue dominating the nonlife sector, with its share remaining in the 40 percent-50 percent range, Swiss Re said.

But other nonlife areas, such as general third-party liability and health and personal accident insurance, also are showing strong growth.

Privatization and clearly defined property rights "are of utmost importance" for the insurance industry in the reforming countries, the report said.

The regulatory framework is also an important factor in the development of a free-market insurance industry, it said, adding that the nations that have been strongly influenced by the EU's directives in this process - Poland, Slovakia, Slovenia, the Czech Republic and Hungary - are faring much better than are Bulgaria, Romania, and Russia and other former Soviet republics.

"Tighter regulation - that is to say, the closing of legal loopholes, greater legal certainty and more effective implementation of existing legal provisions - is essential in these markets if the insurance industry is to be restructured," the report said.

Given the small sums spent on insurance and the underdeveloped nature of the industry in the region, Swiss Re said it believes the reforming economies have an enormous potential for catching up.

But it also expects price and product competition to intensify as the industry expands.