Greece Insurance Report Q2 2008

As was the case in Q108, the main focus of this report is BMI's proprietary Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI's Country Risk Rating (CRR). The IBER makes it easier for the business environment for the insurance sector in a particular country to be compared with the business environment for any other industry in that country that is surveyed by BMI. The IBER also allows an objective and meaningful comparison of the business environment for the insurance sector in one country with the business environment for insurance in another country.

Over the coming months, we will substantially change the format of the BMI insurance reports. In essence, we will focus to a much greater extent on the companies that are active in the non-life and life segments.

Greece's IBER is 64.7. Greece is quite an attractive insurance market for foreign insurers relative to other countries in Central and Eastern Europe. On the negative side, non-life and life penetration figures are very tame, which serves to lower Greece's overall rating. The underdevelopment of the life segment and GDP volatility have also held the IBER back, as have the legal framework and bureaucracy. Nonetheless, the economic outlook remains upbeat. Due to the re-election of the incumbent New Democracy (ND) party in September 2007, Government policies are likely to remain constant over the long term.

The government's reform agenda, which includes the privatisation of some state assets and educational reforms, looks set to continue. In all, the outlook looks good in terms of political continuity, creating a stable environment for operators in the insurance sector. By the same token, the reduced majority of the aforementioned re-elected ND party does however represent a key risk to this outlook. The level of bureaucracy and issues inherent in the tax system are also key issues for insurers. However, on the plus side, the financial infrastructure is solid and GDP looks healthy in the medium term.

The competitive landscape in both the non-life and the life segments is very open to foreign players. Both segments are open to participation by foreign groups, with eight cross-border firms operating in Greece's non-life market, and six within its life market. Motor vehicle insurance forms by far the largest portion of the non-life market in Greece. Property and fire insurance comprises the second most important subsector, followed by accident and health insurance.

We anticipate that non-life premiums will grow by 25% annually in euro terms and by 24% in US dollar terms over the forecast period. Life premiums are expected to increase by 12% annually in euro terms and by 11% in US dollar terms. An anticipated rise in nominal GDP from around US$343bn in 2007 to US$427bn in 2012 and an expected increase in non-life penetration from 1.15% of GDP to 2.70% are the key drivers of growth in the non-life segment in 2007-2012. Meanwhile, a near doubling in life density from US$294 per capita in 2007 to US$500 per capita in 2012 is envisaged to be the key driver of growth in the life segment. The total population of Greece is increasing, albeit slowly.