Abstract
The most striking change since the last report has been the rapid development
of the now worldwide
credit crisis and the subsequent recession following
on from it. The Estonian general economy is already
experiencing markedly
negative year on year rates of growth. So, while the macroeconomic
imbalances
that developed in the preceding boom were less in Estonia than
those of the other Baltic states, it remains
an emerging market and Europe
in general faces a protracted period of negative and then low growth.
Nonetheless, the following features, which make Estonia attractive for its
stability, will also tend to
insulate it from the more severe effects of
this crisis.
At first glance, Estonia is an attractive long-term
proposition for those multinational insurers who are
looking to expand
their businesses in Central and Eastern Europe. The structure – and
apparent risks –
associated with the economy are relatively low.
Penetration and density levels are low, but are rising fast.
Both segments
should easily achieve double-digit growth over the five years to 2012. Unlike
many of the
formerly Communist-ruled countries in the region, neither the
non-life nor the life segment is dominated
by a former state-owned
monopoly.
However, there are two problems. The first is actual and
potential size. Unless it is a very rich offshore
financial centre (which
Estonia manifestly is not), any country with a static population of about
1.3mn
people is unlikely to represent a potential bonanza to ambitious
regional insurance companies. Indeed, the
small size of the market, both
now and in 2013, is the main reason why Estonia does not compare more
favourably with other markets in the region. It is worth noting, though, that
the new Insurance Business
Environment Rating BMI has calculated for
Estonia is higher than those of either Latvia or Lithuania.
The second
problem is that the dominant players are already established. In the non-life
segment, local
subsidiaries of Finland’s Sampo and Germany’s
ERGO have a combined market share of around 60%.
In life, the names are
Hansabank/Swedbank and SEB/Uhisbank, but the figures are about the same.
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