TIRANA, Jan. 30 – Albania’s insurance market registered modest growth rates for the second year in a row in 2018 when the dominant non-life sector heavily reliant on compulsory motor insurance gained further market share.
A report by Albania’s Financial Supervisory Authority shows growth in the insurance market slowed down to around 4.5 percent in 2018 when insurance premiums reached 16.92 billion lek (€135 mln) to account for only around 1 percent of the country’s GDP.
The 2018 performance marks a slowdown for the fourth year in a row after growth slowed down to 5.4 percent in 2017 following double-digit hikes of around 25 percent annually from 2014 to 2016 and a moderate contraction in 2013 when insurers suffered the first blow following the 2008 global financial crisis.
The market continued remaining heavily reliant on the compulsory motor insurance whose share in the total market income increased by 1.4 percentage points to 68.2 percent.
Albania has some 421,000 motor vehicles that undergo the compulsory technical control, with the average annual insurance rate for five-seaters at €130.
The current compulsory motor insurance system applies almost identical fees and fails to offers incentives for drivers with a clean record despite several legal changes introduced last year to also make it compulsory for insurers to take into account drivers’ regular geographical area in addition to the vehicles’ age and the engine capacity as well as apply penalties for drivers causing road accidents.
While Albania’s vehicle insurance rates are one of region’s lowest, oil prices in the country are at one of Europe’s highest, making owning a car unaffordable to most Albanians at a time when the per capita income is at third of the EU average and about half of new EU member states, in slightly lower levels compared to other EU aspirant Western Balkan countries.
Paid claims in the insurance market, the overwhelming majority of which belongs to vehicle insurance, continued their upward trend, increasing by around a quarter to 7 billion lek (€55.6 mln), to account for around 40 percent of total market revenue.
Insurance market operators relying at a modest per capita insurance rate of about €35 million see the potential introduction of compulsory natural disaster insurance or channeling a portion of the mandatory social security contributions to the country’s nascent private pension funds as a golden opportunity to boost their income considering about 1 million home and businesses and more than 700,000 contributors to the pension system.
Some nine companies operate in the country’s insurance system, including former state-run Insig insurer, privatized in early 2016 for 2.2 billion lek (€17.5 mln).
