Estonia: Non-Life (P&C)
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Country Map Map of the Area Market Developments Key Facts General Country Information Politics and the Economy Supervision and Control Taxation Legal System Insurance Market Overview Reinsurance Distribution Channels Multinationals, Captives, ART and Risk Management Insurance Policies Natural Hazards Property Construction and Machinery Breakdown Motor Workers' Compensation and Employers' Liability Liability Surety, Bonds and Credit Marine, Aviation and Transit Personal Accident and Travel Appendix No 1 - Market Statistics Appendix No 2 - Company Statistics Appendix No 3 - Directory INSURANCE MARKET REPORT ESTONIA: NON-LIFE (P&C) © AXCO 2014 NON-LIFE (P&C) Contents Page Country Map 1 Map of the Area 2 Market Developments 3 Key Facts 4 General Country Information 6 Country Indicators 6 History 6 Geographic Description 8 Population and Demographic Trends 9 Largest Cities 13 Politics and the Economy 14 Government Structure 14 Current Political Situation 14 Economy 16 Currency and Exchange Control 24 Supervision and Control 26 Legislation 26 Compulsory Insurances 27 Changes in Legislation 31 Supervision 32 Non-Admitted Insurance Regulatory Position 34 Fronting 39 Company Registration and Operating Requirements 39 Taxation 45 Legal System 46 Insurance Market Overview 51 Historical Development 51 The Market Today 51 Market Participants 56 Reinsurance 62 Local Reinsurance Market 62 Local Reinsurance Arrangements 62 Distribution Channels 67 Multinationals, Captives, ART and Risk Management 75 Multinationals 75 Captives 75 A.R.T. & Risk Management 76 Insurance Policies 77 Estonia - Non-Life (P&C) Report © Axco 2014 Contents Page Natural Hazards 80 Earthquake and Other Geological Hazards 80 Windstorm 81 Flood 84 Bushfire 87 Subsidence 87 Hail 87 Property 88 Construction and Prevention 89 Social Hazards 90 Householder/Homeowner 92 Industrial and Commercial 96 Agriculture 103 Construction and Machinery Breakdown 104 Construction and Erection all Risks 104 Machinery Breakdown 107 Motor 109 Workers' Compensation and Employers' Liability 122 Liability 126 General Third Party 126 Product Liability 130 Professional Indemnity 133 Directors' and Officers' Liability 137 Pollution and Environmental Liability 139 Financial and Professional Risks 141 Surety, Bonds and Credit 142 Marine, Aviation and Transit 144 Marine Hull 144 Marine Cargo 146 Marine Liability 149 Energy 150 Aviation 150 Personal Accident and Travel 152 Personal Accident 152 Travel 154 Appendix No 1 - Market Statistics 157 Insurance Supervisor's Report 157 Non-Life Market Totals 157 Non-Life Insurance 158 Personal Accident 162 Estonia - Non-Life (P&C) Report © Axco 2014 Contents Page Appendix No 2 - Company Statistics 165 Appendix No 3 - Directory 167 Industry Organisations 167 Insurance Companies 167 Reinsurance Companies 169 Captive Managers 169 Intermediaries 169 Loss Adjusters 170 Others 170 Estonia - Non-Life (P&C) Report © Axco 2014 Country Map Estonia - Non-Life (P&C) Country Visited: Apr 2014 1 © AXCO 2014 Map of the Area Estonia - Non-Life (P&C) Country Visited: Apr 2014 2 © AXCO 2014 Market Developments • Regulations to implement the EU's Solvency II directive have been introduced in the latest version of the Insurance Activities Act, in force from 1 January 2014. • A new, fully revised version of the insurance law is being drafted for introduction from 1 January 2016 and will incorporate changes required by the EU's new Insurance Mediation Directive (IMD2). • A draft of a new law on motor third party liability is under consideration in Estonia's parliament. • The effects of the economic downturn on the Estonian insurance market are continuing to recede. Insurance market premium income in 2012 was up almost 6.5%. • The MTPL market remains very competitive in 2014 but poor figures reported by insurers for MTPL in 2013 have led observers to suggest that the market should now stabilise and perhaps edge up. • To satisfy EU requirements with regard to patients' rights, Estonia is looking to introduce medical malpractice cover. Although draft legislation has been prepared, the government has decided to slow the process and re-think the proposals. In January 2014 no firm timetable was in place for its introduction. • In early 2014 some observers declared that there was increasing pressure for compulsory workers' compensation insurance to be introduced and that it was merely a matter of time. No material progress is, however, expected before the next general election in 2015. • Polish insurer PZU has entered the market as a branch operation and in the near future Austrian insurer Compensa is looking to join it. The Future The economy will continue as the major factor influencing the insurance market and with recovery underway, corporate property and motor business will continue to grow but ongoing competition will keep rates depressed, absent any major claims. Estonia - Non-Life (P&C) Country Visited: Apr 2014 3 © AXCO 2014 Key Facts Growth in the non-life, life, and PA and healthcare markets is shown below. New statistical information may have been included in the appendices. • The rate of exchange used in this report is EUR 0.74 : USD 1, EUR 1 : USD 1.35. For previous years the average annual rate for the year in question has been used. Further details are provided within the Currency and Exchange Control subsection in the Politics and the Economy section of this report. • Estonia has a land area of 17,452 square miles (45,200 square kilometres) and is the smallest and most northerly of the three Baltic states. Its population was 1.28 million in January 2013, of which approximately two-thirds are Estonian and around a quarter native Russian. The population is declining, having peaked at 1.57 million in 1990. • The land is mostly flat with a maximum elevation of 1,038 feet (316 metres). Around 40% of the terrain is forested and there are numerous lakes, of which Lake Peipsi is the largest. There are no major rivers but one-fifth of the land area is marsh or bog. • For most of its history Estonia has been controlled by foreign powers including Denmark, Sweden and Russia. During a brief period of independence which began in 1919, Estonia achieved similar living standards to those of Scandinavian countries: nevertheless in the aftermath of World War 2 the country came under foreign control once again, as it was absorbed into the Soviet Union. Independence was declared in 1991 following the break-up of the Soviet Union and in 2004 Estonia became a member of both the European Union (EU) and of Nato. • General elections were held in March 2011, granting another term in government to the centre-right coalition led by the pro-business Reform Party with the Pro Patria and Res Publica Union, and headed by the prime minister. The coalition is expected to continue its orthodox economic policies for the duration of the next term. Estonia - Non-Life (P&C) Country Visited: Apr 2014 4 © AXCO 2014 Key Facts • Following independence in 1991 Estonia embraced market reforms and adopted orthodox neoliberal policies in its transition to a market economy. The economy later registered impressive growth rates, peaking at 10% in 2006 and earning the country its "Baltic Tiger" epithet. The economy was expected to expand by an average of 3.1% through 2015 due to higher public sector employment, rising minimum wages and productivity gains in the private sector. Inflation was expected to average between 3.2% and 3.8% over 2014 and 2015, reflecting greater access to credit and low interest rates. • Premium written by non-life insurers in 2012 totalled EUR 230.27mn (USD 295.86mn), up almost 6.5% on 2012. Figures for three quarters of 2013 suggest the full year will show further growth of a similar amount. These figures undervalue the size of the market, however, as some risks are placed abroad on a direct basis or through brokers. • In January 2014 there were 12 non-life insurers. Most companies are branches, are foreign-owned or have a significant foreign shareholding (mostly Nordic), and often form part of pan-Baltic and pan-Nordic insurance groups. The leading non-life companies are If Eesti, ERGO, Codan (RSA), Swedbank Vara, Seesam and Salva. • Non-admitted insurance is permitted; the local supervisory body recognises that clients seeking insurance cover outside Estonia on their own initiative are free to do so, but do so at their own risk. • There are no barriers to foreign insurers establishing a company in Estonia and foreign-owned companies now dominate the market. • There are no statutory tariffs in force in Estonia. • Distribution is largely carried out by tied agents but a number of brokers have taken an important share of the major industrial/commercial and motor/householders' accounts. • Estonia is not particularly exposed to natural perils, however, the most severe storms in 40 years (Hurricane Erwin) battered Estonia in January 2005 causing flooding and damage to property. The total loss is put at EEK 200mn (USD 15.89mn) but with only 20% of this attributed to wind damage; 80% was caused by stormflood. • Motor third party liability insurance was made compulsory in 1992. Other compulsory classes include aviation liability and professional liability for a range of professions. • A law on compulsory workers' compensation insurance was expected to come into force in 2003 but has been postponed, partly due to political difficulties over responsibility for prior industrial diseases exposure; no date has yet been set for its introduction. Estonia - Non-Life (P&C) Country Visited: Apr 2014 5 © AXCO 2014 General Country Information Country Indicators Demographic and economic data are shown below, with projections for the final two years. Indicator 2011 2012 2013 2014 2015 Total population 1.29 1.29 1.30 1.30 1.30 (mn) Total GDP (USD 22,542.96 22,041.84 24,044.05 24,745.22 26,144.30 mn) Real GDP growth 9.54 2.94 1.10 3.20 3.10 (%) Inflation (%) 4.98 3.93 2.90 3.20 3.80 Unemployment (%) 12.50 10.14 10.90 10.70 10.50 Source: IMF and EIU History Early History 1154 The oldest written record of Estonia was made by the geographer al-Idrisi.