The insurance market of Ukraine grew by 17% in the 4th quarter of 2023
The volume of assets of risk insurers in the IV quarter of 2023 remained unchanged, and for the whole of 2023 it increased by only 1%. Assets of life insurers grew by 4% for the quarter and by 17% for the year. This is stated in the NBU’s quarterly Review of the non-banking financial sector.
Assets of other financial institutions and basic financial services decreased during the quarter. In particular, compared to the III quarter, gross risk insurance premiums decreased, while insurance payouts increased. The coefficients of unprofitability and efficiency of risk insurers’ activities have worsened. However, thanks to investment income, insurers were profitable. The volume of assets of credit unions remained almost unchanged, but the volume of the loan portfolio and operational efficiency decreased. They managed to make a profit by reducing the volume of reserves for credit losses.
Gross risk insurance premiums during the last quarter of 2023 decreased by 2% compared to the third quarter, but increased by 17% compared to the corresponding quarter a year ago. Life insurance premiums rose significantly both quarter-over-quarter and year-over-year, up 22% and 19%, respectively.
The leadership in terms of the volume of insurance premiums among other risk types was retained by automobile insurance (CASCO, OSCPV, “Green Card”). Property and fire gross premiums are up 40% year-on-year, while the product has yet to recover from a slump in 2022.
Risk insurers were operationally profitable in 2023: their profit amounted to UAH 1.9 billion, which ensured a return on capital of 10%. This is almost one and a half times lower than in 2022, but twice as high as in 2021. Life insurers ended the year with a profit of UAH 500 million thanks to investment income. Their return on capital is 19%.
The amount of insurers’ assets and their number, UAH billion
The structure of eligible assets to cover insurers’ reserves, billion UAH
Life insurance premiums rose significantly both quarter-over-quarter and year-over-year, up 22% and 19%, respectively. At the same time, the volume of payments also increased significantly: by 19% q/q and by 41% y/y. The level of annualized payments continued to grow: in the IV quarter of 2023 it was a third higher than at the end of 2022.
Automobile types of insurance (CASCO, OSCPV, “Green Card”) retained the leadership in the volume of insurance premiums among other types of risk. Compared to the same period last year, auto insurance premiums increased by 15%. However, in the last quarter of 2023, the volume of gross auto insurance premiums decreased slightly (by 3%), primarily due to lower premiums for the Green Card product.
The peak of the popularity of this product due to the forced emigration of Ukrainians has probably already passed, while the volume of payments is increasing: more than twofold in the last year, which has more than doubled the level of payments. Gross property and fire insurance premiums increased by 40% over the year, while gross payouts decreased by a quarter. Despite the rapid growth, this product has still not recovered from the drop in 2022.
Asset structure of life insurers
Asset structure of risk insurers
The retention rate remained constant throughout 2023. Although the volume of insurance premiums transferred to reinsurance decreased in the IV quarter, it was commensurate with the decrease in the gross volume of insurance premiums.
Reserves for losses under voluntary types of insurance decreased by 2% compared to the III quarter. The annualized premium coverage ratio decreased for the third quarter in a row to 85% in the 4th quarter. In contrast, the similar ratio for compulsory types of insurance increased slightly during the last half-year due to the faster growth of loss reserves compared to the growth of net premiums.
In the IV quarter of 2023, the volumes of life insurance services and lending by financial companies increased significantly. Assets of other financial institutions and core financial services decreased during the quarter, while financial companies remained profitable.
In the IV quarter, the unprofitability ratios of mandatory and voluntary insurance worsened to 51% and 38%, respectively. The reason for this was the faster growth of payouts compared to earned bonuses at the end of the year. For voluntary insurance, this deterioration is the first after four quarters of a decrease in the indicator.
The combined ratio increased (deteriorated) by 3% in the IV quarter. n. up to 95%. In addition to higher profitability ratios, this was significantly influenced by a significant increase in the volume of operating expenses.
The level of payments by type of insurance
In the IV quarter, income from OVDP continued to grow, while income from deposits decreased. With almost unchanged investment income, the efficiency ratio of insurers increased (deteriorated) by 2%. p., showing the deterioration of the combined ratio.
At the end of 2023, the number of insurers that violated at least one of the standards (solvency and capital adequacy, asset quality, riskiness of operations) decreased to five companies. However, the share of violators in the assets increased slightly – up to 8%. At the end of 2023, the number of insurers that violated regulations decreased to 5 companies, but their share in insurers’ assets increased to 8%.
Insurers will begin the year with a “pilot project” of asset quality assessment – an additional audit report must be submitted by June 30, 2024.
The transition period for market participants to bring their activities to the requirements of the updated legislation for non-bank financial institutions continues. The National Bank has already approved the relevant legal acts. Their observance is a guarantee of stability and further development of the market.