Unit Link insurance product catches on in Latvia, finally

  • 2005-04-13
  • By TBT staff
RIGA - Insurance companies in Latvia are gearing up for a banner year, and the results are already showing. In the first two months of 2005, insurers have already boosted premium subscriptions by 7 percent year-aintroduction of a new European-inspired life-insurance product, this growth is set to continue.

Overall, insurance companies subscribed 26.4 million lats (37.6 million euros) in premiums during January and February, up 7 percent or 1.7 million lats from the same period last year, reported Latvia's Insurer Association.

Insurers paid 10.9 million lats in claims, up 31 percent.

Life insurers subscribed 4.34 million lats in premiums in the two months, up 92 percent year-on-year, and paid 859,000 lats in claims, down 36 percent. In comparison, during the same period in 2004, insurers subscribed 24.695 million lats in premiums and paid 8.283 million lats in claims.

According to Antra Duntava, head of finance and accounting for Sampo Dziviba life insurance, the most quickly growing company in the Baltics, such growth can also be anticipated in the future. It can be attributed to several factors, namely the introduction of a new product 's Unit link.

"Sampo Dziviba was the first company that started to sell the Unit Link product in Latvia, which allows clients to link insurance policies to investment funds, thus diversifying investments between bonds, fixed income, and stocks," Duntava explained. "We initiated this last year in May, and since then have seen much growth."

And Sampo's success has set an example for other Latvian companies to follow. Beginning in March, Baltikums Dziviba will launch a similar insurance product, Duntava added.

According to Kristine Lomanovska, Chairman of the Board of Sampo Dziviba, life insurance companies across Europe - including Estonia and Lithuania - have been successfully selling Unit Link for years. The first to initiate the idea in Latvia, Sampo is confident that Unit Link will help the country catch up with its European competition.

"In Estonia and Lithuania, the product has already been on sale for five years," Lomanovska said. "Here in Latvia we're catching up. The Unit Link share already makes up more than 30 percent of total life-insurance premiums in the Baltics, and it's growing."

The chairman added that, in Estonia, Unit Link's growth surpassed 200 percent for 2004, while in Lithuania the product grew by 25 percent.

"This is a well-known and popular product across the world, and Europe," Lomanovska explained. "Since EU membership and linking local currency with the euro, guaranteed interest rates in the local financial markets have gone down. Therefore, there's been a switch in our customers' minds from a 'guarantee' product to the new Unit Link product providing better profit opportunities. In addition, it is possible to use tax advantages along with long-term savings."

Looking at overall premium subscription, the share of non-life insurers amounted to 83.6 percent, while the respective figure was 16.4 percent for life insurance companies.

In Estonia, which far surpasses Latvia in reported premiums, life insurance companies collected 94.38 million kroons (6.03 million euros) in premiums during February, two times more than last year. Insurers paid 11.44 million kroons in claims and scheduled payments, 12 percent more than February 2004, according to Financial Supervision Authority data.

AS Hansa Elukindlustus (Hansa Life Insurance), the largest life insurer took in 44.5 million kroons (an increase of 1.2 times) and paid 6 million kroons (an increase of 43 percent).

Similar premium and claim numbers have been reported among Lithuanian companies as well.

"Our ultimate goal is to catch up with Estonia and Lithuania," she said. "The gap between our premiums and theirs is quite big 's annual investments [in Estonia and Lithuania] are approximately four and five times greater respectively. In that respect, we still have a long way to go."

At the end of February, Latvia had 12 non-life insurance companies and five life insurance companies. Sampo Dziviba established in 1998, is a subsidiary of Sampo Life Insurance Company in Finland belonging to Sampo Group.