Private Insurance Market Survey

Private Insurance Market Survey

With the aim to provide information to insurance companies and their management regarding the qualitative study of the private insurance industry in Greece, KPMG has proceeded for another year in the issuance of the Annual Report for 2015 that includes the research on the Financial Position of insurance companies for the year ended 31 December 2014.

Picture of Philippos Kassos

Partner, Audit

KPMG in Greece


This year, the Report includes sections of high interest to insurers, such as information on the implementation impact of the Solvency II Directive (Solvency II), taxation issues for Insurers’ and recent developments in the Accounting for insurance contracts and financial instruments.

The research:

For the fifth consecutive year, KPMG carried out an analysis of the financial statements in selected sample of twenty (20) private insurance companies for the year ended 31 December 2014. The analysis includes the calculation of a series of key ratios relating to the insurance market, to help understanding of the Financial Position of Insurance Companies of Greece.

The key points of the current year Research refer to:

  • Significant further improvement in the capitalization and liquidity of the companies with a total increase of about EUR 2 billion in the last four years. This improvement contributed to the significant ongoing profitability of the motor sector through the retention of earnings in most of cases.
  • Increased overall profitability with PBT to Equity ratio at 22% due to the profitability of the motor sector, better control over cost and investment income coming from the increase in capitalization.
  • Significant reduction of loss ratio in MTPL by 12 points in 2014 compared to the previous year with a total reduction of 23 points in a four-year period. These observations are confirmed by the statistics from Greek Police showing a 14% reduction in all accidents and 26% in fatal ones in the last three years.
  • Partial increase in acquisition costs mainly caused by the improvement in loss ratio in MTPL as well as to increased competition.
  • Sharp reduction in the level of receivables by 50% while a fall in the average collectability ratio by 14 days compared to previous year. Receivables from insurance premiums cover now only 4% of total assets with further declining trend due to the implementation of the new Directive for the collection of premiums. However, the decline observed in motor sector does not seem to be the same for other classes for which a grace period still offered.
  • Continuing gradual increase in insurance reserves in MTPL that reached 230% over the production compared to 150% in 2011, which is however the result of many other factors, such as reduced production, increased supervision and profit improvement.

According to Mr. Philippos Kassos, Partner of Audit, Insurance, KPMG:

"The implementation of Solvency II is expected to impact significantly the entire insurance market although the implementation problems are still here. The "preparatory phase" is expected to continue during the first stage of implementation. Among others, the problems referred to the fact that the legislative enforcement until the beginning of 2016 is still pending although the effective date has typically passed, the capital adequacy for a number of companies falls short the level imposed by the directive, while it has not clearly defined the matter and the way companies operate under freedom of Service.

The implementation of the new directive will have implications on all functions of a business and will bring tactical impacts on the day-to-day operations but also strategic implications to medium long term period. Both tactical and strategic effects require difficult decisions to take that sometimes will 'disrupt' the normal operation of the company with a view to a different approach to business including customer approach.

Management and shareholders of the companies with an aim to transform these challenges into expected impacts for immediate decisions will have competitive advantage over those who simply have to face the consequences of these impacts.

To redesign the structure and functions of the company, to re-evaluate the products and market penetration, to create the new strategic alliances with experienced partners and innovation are all points that should form the agenda of all Companies for immediate decisions on the basis of the new operational style.

With respect to Receivables, the reduction of the level of premiums should not relax markets but lead to the final resolution of the issue by changing the operating style with full prepayment of premiums before coverage in all sectors, without exceptions. The impact of such change would be beneficial to all stakeholders, improving the level of customer confidence, because in many cases the way of payment monopolize the relationship between consumer and company – intermediaries.

New technologies for improving customer experience is also expected to help significantly towards customer relationships with insurers and consequently new partnerships with technologically advanced companies or start ups in this sector (Fin Tech), are expected.

In contrast, increased transparency and solvency in the operation and supervision of Private Insurance affects consumers and policy holders acceptance on the key role the private sector should play in Health and Pension System.

Strengthening the proactive scrutiny for all insurance companies seem to be more responsive to current market needs in relation to suppressive control, where in case of problems, the impact could be often uncontrollable.

Finally, the sector's outlook for the next period, and after the relaxation of the capital controls, include the expected increase in products linked with investments for strengthening and protecting consumers' income and the gradual decline in the number of companies which is expected to continue in the coming period and during the first years of implementation of the new directive.

We believe that the ongoing discussions on the restructuring and sustainability of the Social Security and Pensions will lead sooner or later to the Public Private Partnership model (PPPs) in the Private insurance industry, which is significantly delayed in Greece. The development of this type of partnerships and initiatives should be in the focus of discussions for the social security issue because it is a part of the solution changing the approach to date on it. However a change in the way of thinking is needed by all stakeholders, along with the development of new business models, ideas and relationships between state and private companies. A honest win-win agreement will benefit all parties involved including of course policy holders. The progressive involvement of private insurance firstly in the health sector and at a second stage to pensions system could help absorbing shocking reactions, given the Greek mentality and culture”.

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