Insurers increased sales in western regions of Ukraine, but that does not compensate for the losses they incurred in the east

Photo: David Hilowitz / Flickr

Crimea became the leader among the regions of Ukraine in terms of the losses of the insurance business. In January-September the insurers collected around UAH 28 mn in premiums, which is 85% less than over the same period in 2013, according to the Insurance TOP ranking.

Leader by mistake

The insurers completely folded sales in Crimea in the second half of 2014 after the regulator prohibited business operations on the peninsula. Even the leader of this region — the Ukrainian Security and Insurance Company (UOSK), which collected UAH 10 mn over January-September in Crimea — denies that it operated on the peninsula after the annexation and claims that the results of Insurance TOP are a technical error. «Our company does not have special subdivisions and subsidiaries. That is why distribution of all insurance premiums by regions is conditional in a percentage ratio,» explained General Director of UOSK Alla Saliy.

Besides the peninsula, a major decrease in the collection of premiums was observed in the Donetsk (30%) and Luhansk (31%) oblasts. «If you look at the dynamics of insurance over three quarters of 2014 you can observe a gradual decrease in volumes in the Donetsk and Luhansk oblasts after the beginning of the ATO. Meanwhile, insurers simply shut down their businesses in Crimea after it was annexed by Russia,» confirmed the press service of AXA Insurance.

Insurers continue to function in the Donetsk and Luhansk oblasts. «Outside the ATO zone the insurance policies of Ukrainian companies are valid, but it is impossible to re-insure the risks of major clients from the Donbas abroad, because re-insurers refuse to sign such agreements,» says Chairman of the Board of the Ukrainian Insurance Group Pavlo Nelha. Ukrainian insurance companies are also trying not to undertake major risks if they are unable to re-insure them.

Poltava’s pie

In other regions of the country the situation is not any brighter. For instance, in the Rivne, Odesa, Kirovohrad, Lviv, Kherson and Dnipropetrovsk oblasts insurance premiums received by insurers dropped 11-15% compared with the same period in 2013. In the Zhytomyr oblast this figure was 16%, in Kharkiv — 20% and in Khmelnytskiy — 21%. «The decrease in the volumes of premiums in these regions can be explained by the overall financial and economic situation in the country and the declining demand for insurance, particularly in those oblasts bordering with the Donbas region and Crimea,» believes Chair of the Insurance Commission of the Ukrainian Society of Financial Analysts Vyacheslav Chernyakhovskiy.

Meanwhile, experts are finding it difficult to explain the 35% decline in sales of insurance premiums in Kyiv and the Kyiv oblast and the 40% decline in the Poltava oblast. «Most likely, subsidiaries of disreputable companies who stopped paying indemnities to their clients actively operated in these oblasts. This had a negative impact on the image of insurance companies,» noted Chair of the Supervisory Council of Salamandra-Ukraine insurance company Yuriy Yavtushenko. Agrarian business is traditionally strong in the Poltava oblast. «It is quite likely that without the government support the interest of agrarians in insurance decreased this year,» Nelha presumes. Large international clients and companies with subsidiaries all around Ukraine took out insurance policies in Kyiv and the Kyiv oblast. The decline in sales of premiums this year indicates that such clients are folding their businesses, believes Chernyakhovskiy.

The window to the west

In seven regions of Ukraine the volumes of insurance premiums this year slightly increased. For example, in the Ternopil oblast insurance premiums increased by 9%, in Vinnytsya — 11% and in Chernivtsi — 17%. Nelha believes that in this case the increase is due to the nearly doubled price of Green Card policies for vehicle owners travelling abroad. Such insurance policies are actively sold in the border zone. «This growth does not point to business development,» assures Nelha.

Meanwhile, the insurers predict that in 2015 their business will intensify in the central and western oblasts, while the eastern and southern regions of the country that were traditionally popular in the past will continue to show a decline in the volume of premiums. According to Nelha’s forecasts, the insurance business in the Donbas will shrink by 50% based on the results of the year and in 2015 — by another 20-30% compared to 2014.