Newspaper Insurer Press Issue no 20 (29 October–12 November 2008) with an accent put on the highlights, hot topics and comments

18 Ноември 2008 г.,

Newspaper Insurer Press Issue no 20 (29 October–12 November 2008) with an accent put on the highlights, hot topics and comments

Dear readers, in the overview of issue no 20 of the newspaper «Insurer Press» we put an accent on the highlights and hot topics news and events. We make you acquainted with the analyses and thoughts expressed by the leading insurers and also keep you informed about all that happened within the period between the last two issues of the newspaper.

Happy new returns and best wishes to all who celebrate their birthday! Let’s wish all lots of love, good health and happiness to our contributors, friends and well-wishers!

Under the regular heading «Between two issues» on page 2 a place is given to the news from the Financial Supervision Commission (FSC). The commission published Service procurement notice for provision of insurance services for 2009. Contracts shall be awarded into three lots: Accident insurance coverage for the members of the Commission and the administrative employees of FSC; insurance of the property of FSC, and Travel Insurance (Assistance) for Business Trips Abroad for the members of the commission and the FSC’s administrative employees.

The economically most advantageous offer shall be awarded a contract.

On the same page we communicate you that Bulgarian Euroins Insurance Group (EIG), the financial and industrial subsidiary of Eurohold Bulgaria, has raised its capital by BGN 28.8 million to BGN 268.3 million in order to finance its regional expansion plans. Eurohold Bulgaria has subscribed to all 28,799,991 ordinary registered shares with a par value of BGN 1 per share. The shareholders of Insurance Company Euroins should vote on November 28 on a capital raise by BGN 2.5 million to BGN 12.5 million. The announcement stated that, if voted, the new shares should be issued at BGN 4 each. The capital raise should be considered successful if 50% of the new shares are subscribed.

Majority owner Euroins Insurance Group said it would use out its rights to keep ownership on at least 70% of the company.

The capital move is in line with Euroins’s strategy to take over the re-insurance business of its majority holder’s other insurance units in 2009. In addition, the increase in the company’s premium income which has doubled over the last 3 years required larger reserves and own funds, the company said.

The extraordinary general meeting should also vote on a change the insurer’s statutes to authorize management board to take decision for further capital rises up to BGN 100m.

On the same page we also comment the autumn 2008  update of The European Growth and Jobs Monitor. This is a bi-annual performance ranking,  based on criteria derived from the so-called "Lisbon Agenda" This year, the ranking includes an assessment of Europe's economic performance in the wake of the financial crisis, along with forecasts for 2009 and key recommendations for policymakers. The publication is distributed by Allianz SE, one of Europe's leading financial service providers, and the Lisbon Council, a Brussels-based think tank. The report says that GDP in the Eurozone could grow 0.7% in 2009.

In this issue we pay special attention to the financial crisis which is the Topic A and covers the materials on pages 2, 4, 6, 8, 16. Yoanna Stephanova has eloquently named her publication “The price of greed”.

The stock markets are keeping the balance between the greed and the fear. Any time the greed outweighs, the quotes jump and vice versa – any time the fear prevails, the prices of the shares go down. For more than a year, since the beginning of the crisis with the American mortgage bond, the human race is a witness of effect of the uncontrolled greed. Finally it turned out that the big international investment banks and credit agency obviously were out of control. The music ended and the bailout of the financial system in global scale will cost an “injection” of about trillion US Dollars and billions euro– money that shall be provided by taxpayers from other countries.

Newspaper Insurer Press Issue no 20 (29 October–12 November 2008) with an accent put on the highlights, hot topics and commentsProf. Dr. Veleslav Gavriiski Foundation, assisted by the Higher Scholl of Insurance and Finance, organized an open discussion about the Global financial crisis and its impact on the development of the insurance and social security business in Bulgaria. Lecturers were Prof. Dr. Ec.Sc. Dimitar Ivanov – financial expert, analyst and consultant in the field of bank and investment business, working maimnly in London, Great Britain and Reader Dr. Plamen Patev – lecturer, Chair of Finance & Credit, D.A Tsenov Svishtov Economic Academy, and CEO of Standart Asset Management.


The forum was attended by Apostol Apostolov, Chair, Financial Supervision Commission , Nikola Abadjiev, Ph.D, Chairman, Bulgarian Association of Supplementary Pension Security Companies (BASPSC), Jenny Parpoulova, General Secretary, Bulgarian Insurers Association, and a number of authoritative insurers and people from the scientific society.

The two lecturers had greatly differing forecasts for the adverse repercussions of the crisis on Bulgaria, but also were at one with the conclusion that this time Bulgaria would not be unscathed.

According to Dr. Ec.Sc. Dimitar Ivanov, the Bulgarian credit balloon now is larger than the American one a little bit before the beginning of the crisis. There are two more indicators that bear a great resemblance to the situation in the U.States before the crisis – the mortgage credits’ growth and the prices of the properties.

However, some of the forecasts are not taking gloomy view of the things. Reader Dr. Plamen Patev thinks that the expected lower consumer lending in the country would bring to significant reduction of the trade deficit of our country and the drop of the mortgage lending а should help to cool the already overheated construction market. The situation with the business credits is a little bit different. A policy of restriction of funding for non-efficient activities is highly recommended, but only the banks could make this happen, emphasized Dr. Patev. According to him, there is nothing to be alarmed at the expected increase of the unemployment in Bulgarian the background of the shortage of labor at the present time.

What about the impact of the crisis on the insurance business in the country? It will mostly reflect on the Motor and Property insurances. Life Insurance products would have the chance to become mandatory “social-economic element for everyone” prof. Ivanov said.

The economist also forecasted that the consolidation in the insurance business would continue, since this process will be stimulated by the slow market growth and the comparatively small profit.

In the interview of Prof. Dr. Dimitar Ivanov for the newspaper Insurance Press, he emphasized that the first thing that shall be done is to stop the inflation through an antiinflation program. Imperative element of this anticrisis program shall be the sectors that first and foremost will be subject to the shock of the crisis. These are the Households Sector and the sector of Small and Medium Enterprises (SME). The bill will be paid by hundreds million taxpayers. The insurance industry ought to develop a pack of instruments to reflect the impact of the crisis. Moreover, it is obvious that the insurance business shall follow the way of consolidation, internationalization and globalization.

This hot topic is also the theme of the conversation with Bistra Ilkova, Chief Executive Officer, Bulgarian Stock Exchange (pages 6 and 8).

According to Mrs Ilkova, the regain of the confidence in the capital markets would mean regain of the confidence in the business. The fact that Bulgaria is a small and developing market might give us a chance to protect ourselves from some of the mistakes, made by the big markets. The listed companies were not decapitalized by the drop of their shares. We shall mobilize a think tank which is to develop a program for prevention of the crisis in the country. The economical growth of Bulgaria will be slowed in any case, since it is related with the business in Europe and USA.

On pages 7 and 9 , in the column Forum you can read materials from the Seventh National Conference with international participation: „Social Security and Insurance in Bulgaria under the conditions of eurointegration: challenges before the yet continuing adaptation”.

In some of the previous issues we published the lectures of Larissa Orlanuk-Malitskaya, Prof, Dr.EcS.,Head, Faculty of Insurance Business, Financial Academy under Government of Russian Federation and this of Reader Dr. Jordan Hristoskov, Governor of the National Social Security Institute (NSSI) , in this issue we carry the questions that the both lecturer were asked by the participants. Their answers made it quite clear whether the gypsies in Bulgaria are discriminated or discriminating from the point of view of social security system in Bulgaria, haw the pensions shall be adjusted in order to get over the difference between the average life expectancy for men and women? Shall we expect the removal of the pension threshold and ceiling, and how far in the future? What is the impact of the flat tax on the insurance business? What types of insurances are mandatory in Russia and how the state is helping to overcome the consequences of catastrophe events?

On page 9 you can get acquaint with the “Theoretical grounds for determination of the mandatory health insurance contribution” , a lecture, provided by the candidate for a doctor's degree Miroslava Hristova , D.A Tsenov Svishtov Economic Academy.

On page 10 you can find the analysis of the Insurance brokers’s activity for the first half of 2008. Brokers pocketed BGN 277,498 thousand, the bulk of them from general insurance, or almost 40% more than the figure for the year-ago period and 32.6% from the gross premium income. BGN 252,785 thousand are generated by the general insurance - insurance of road vehicles, rail vehicles excluded, fetched 60% of the premiums. The gross premium life insurance income reached reportedly BGN 24,713 thousand. The largest relative share have the insurance “Life “ and rent – 95,6%. All data are arranged in tables. / pages 10,11,14 and 15/

On pages 12 and 13 you can read the interview with Petrozar Petkov , currently General Director and Chair of the Board, Bul Ins AD, and Stoyan Prodanov, CEO and member of the Board of the company. According to them the news about the crisis have provoked a hot interest in the some of the products, offered by the company. Together with the motor insurance, where Bul Ins is a leader, the company will offer all professional liability products. Bul Ins has always been an innovative company, making investments focused on software and different information solutions. Since the beginning of 2007 the company is working with SmartClaiMS. Mr Petkov and Mr Prodanov expressed their common opinion about the bilateral protocols – they think that these protocols will oil the wheels of everybody in the business..

On pages 17 and 21 in the column In the world we publish the article of Matthew Twilly, leader of business group in Willis Re in London. The article is headed “New Catastrophe Risk schemes mushroomed”. Mr. Twilly examines the new catastrophe risk schemes of the government, the incidence of the existing schemes over the world, as well as the new Catastrophe pools.

We are finishing the overview of issue 20 of the newspaper Insurance Press with some more news from the world. (page 19)

At the global summit of the European Parliament (EP) called on 24 September this year to address the credit crisis in the US, the EP decided to draw up an own-initiative report calling for tighter regulation. Although the crisis was not determined by hedge and private funds, some believe they may have made it worse.

The insurance giant American International Group (AIG) Inc, bailed out of a cash-flow crisis last month by a USD 85 billion loan that temporarily made the US government its majority shareholder, said that it would stop lobbying and organize corporate events.

On the same page you can read also that the American insurers will lose USD 4,5 billion, as also about Argentina's incendiary new plan to nationalize billions of dollars in private pension funds.

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