Slovakia 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 insurance sector business environment in a particular country to be compared with the business environment for any other BMI-monitored industry in that country. The IBER also allows an objective and meaningful comparison of the insurance sector business environment between countries.

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.

Slovakia's IBER is 61.3. Slovakia's insurance market is critically limited by the small population of just 5.4mn and the consequently limited potential economic size. It is, nonetheless, attractive in most structural senses. The economy and the insurance sector are both growing solidly and the political environment is stable. The limit of potential returns from a small market that is already fairly well developed have, however, held back the IBER.

Slovakia is ranked 7th in terms of the number of cross-border firms, with 14 cross-border firms competing in its non-life sector, of the 62 countries for which BMI has collected data. There are 15 crossborder firms competing in the smaller life segment. On this measure Slovakia is ranked 5th among the 62 countries for which BMI has collected data. These are remarkably high rankings for such a small market, especially so when you consider that there are also a number of local firms competing in that market. It suggests that some form of rationalisation would seem to be necessary and inevitable over the medium term.

We anticipate that non-life premiums will grow by 17% annually in local currency terms and by 18% in US$ terms over the forecast period. Life premiums are expected to increase by 13% annually in local currency terms and by 15% in US$ terms. An anticipated rise in nominal GDP from around US$72 to US$114 and an expected increase in non-life penetration from 1.9%GDP to 2.8% are expected to be the key drivers of growth in the non-life segment in 2007-2012. A rise in life density from US$199 per capita in 2007 to US$400 per capita in 2012 is expected to be the key driver of growth in the life segment.

Slovakia presently has zero population growth.