XPRIMM: How do you comment on the results recorded by your national insurance market in 1H2014? How do you assess the end year results for 2014, taking into consideration the midyear accomplishments?
Andres PIIRSALU: What concerns premium volumes, we have complete overview available for the whole market with the exception of FOS players, market share of which is estimated to be around 5%. Compared to the situation a year ago both life and non- life markets have shown good growth numbers: non- life growing 7% and life 16% respectively. The biggest growth is related to industrial/corporate property insurance (10%) in the non-life (not considering small niche lines which seem to be booming) and pensions (31%) in the life insurance. What concerns market shares and their development the overall picture is relatively stable and the fierce competition is in place especially in the area of motor insurance. As a result the market concentration gradually falls and the positions of individual players get more balanced. In such environment we have one new player, PZU, getting into the market in the form of branch. Due to the probable joining forces on a local level with the RSA/CODAN local branch their combined market share stands right now on the level of 14%.

When we talk about the bottom-line results, then unfortunately only the results of locally licensed companies (about 75% in non- life premium and 92% in life premium) containing also cross-border activities are available. Compared to the status mid- 2013 the performance of those companies has improved substantially. Overall profit grew two times during one year period. Improvements are coming from both life and non- life and non- life business is currently running on the net combined ratio level of 86.6 % compared to the level of 92.5% a year ago. It is worth adding that with the exception of few short periods during the years of economic crisis, insurance business has always been profitable in Estonia.

XPRIMM: What were the most challenging issues for the local insurers in the first part of the current year?
A.P.: One of the major challenges was definitely preparation for the new law on MTPL which will be partially in force from October 1st this year and fully in force from January 1st 2015. There are several changes coming due to the new law but the overall insurance exposure will not change remarkably due to this respective move. Main changes by my opinion concern customer service-own insurer/direct settlement will be introduced to the market-and the reviewed, more effective automatic insurance concept will be in place. According to the change mentioned last, all the vehicles registered will be automatically insured by us, LKF, in case the customer does not buy insurance from the market. In contrary to the current practice we must first of all try to finance our activities on the basis of the premium received from automatic insurance instead of membership fees paid currently by our members. As result, presumably the price of this cover becomes remarkably higher compared to the current situation. And last but not least- the obligation to pay for automatic insurance will be directly settled from the clients account without any delays, court proceedings etc. By this way we are of opinion that we can reduce the share of uninsured vehicles even further down although it is not high also right now (share of uninsured claims is about 0.2-0.3 % in total number of MTPL claims).

XPRIMM: What is currently the distribution structure on your market? How relevant is the role played by the insurance brokers?
A.P.: Brokers play important and gradually growing role in our non-life insurance market. According to the latest available statistics about 40% of the local non-life premiums are written through the broker mediation. Out of this about a half stems from motor insurance. If to look at the market split of broker market then about 50% is under control of one broking group whereas the rest of the market is shared by another 43 brokers. As you can see, there is very high market concentration in Estonian broking market at present day.

Life insurance is predominantly written through banks either as classical banc assurance or bank functioning as mediating agent for the independent insurer.

XPRIMM: Which are the most important insurable natural risks to which your country has a significant exposure? Which is the household insurance coverage degree?
A.P.: In terms of natural catastrophic exposures Estonia is rather boring place. The one and only remarkable natural exposure is related to major Atlantic storms flying over Scandinavia or Western Europe and floods caused by these storm events. The last major event took place in 2005, which by different opinions was the event of last 50 to 200 years.

Maybe it is here worth to add that we have begun with new innovative geographical information system (GIS) project which allows our members to assess the risks on the map.

Already since 2009 we have central GIS solution running which contains all the MTPL losses which took place in Estonia. This gives us enormous opportunities for analyses and to take part in the public debates about the traffic safety and last but not least- our word to the public and public authorities is taken seriously. It works at the same time as a powerful mean for improving traffic safety in the country and as a very effective PR tool for our industry. We have also free interface for interested parties on our website, where everybody can judge, how safe or dangerous are the street crossing nearby for instance etc.

Now we move on: with the GIS-based solution each and every (interested) insurer can do underwriting on individual insured object basis on the map. In addition it allows to fulfill adequately and efficiently the Solvency II requirements according to which insurers need to assess the insurance portfolio concentration risks (e.g. apartment house areas risk concentration etc.) and to produce overall aggregated risk overviews for the insurance company. At first stage the flood risk map solution developed in accordance with the specific needs of insurance industry is build up. At the later stage we consider adding other layers to it like speed of fire brigades, fire/explosion risk areas, storm risk etc. According to my understanding the solution we are currently developing is unique in Europe. We are pleased to share our experiences in case of interest.

XPRIMM: Is there in place a national risks mitigation programme in your country?
A.P.: Probably due to rather small natural catastrophic risk level this topic is not actual in Estonia.

XPRIMM: Please give us your comments on the agricultural insurance development in your country.
A.P.: Agricultural risks insurance is rather underdeveloped. Partially the reason stems from the inherited knowledge of our farmers from the times, when all the agricultural losses were compensated by the state. As there have not been any major and substantial losses there is a pretty limited interest towards such kind of products in between our farmers. Nevertheless some livestock and forest business is still written by couple of market players in Estonia.

XPRIMM: Is there any type of state subsidy for agricultural insurance?
A.P.: Yes. We were also involved in preparing a draft framework for this compensation scheme but up to my recent information this measure did not work properly.