TALLINN – At the beginning of 1998, the Estonian insurance market was extensively reorganized. Two companies, Leks Insurance and ETAS merged, forming the second largest insurance company at the time. Today, the joint company has taken over the leading position on the market.
Currently there are 14 local insurance companies, including both life and non-life insurance.
"In the future, four competing companies or groups would be the optimal number of competitors, which could survive in the relatively small Estonian market," stated Meelis Kubits, director of the Kubits & Hamburg PR-bureau, which runs the public affairs for AB Insurance Group in Estonia.
Some mergers have already taken place, but more are likely to come.
"There has been talk about extension into the neighboring markets with alliances to be formed for example with Latvian and Lithuanian counterparts," the specialists say: "And the merger expenditure is substantially smaller now than it would be tomorrow, the only obstacle to overcome is the present bank crisis."
The holding company AB Insurance Group predicts the forthcoming years on the Estonian insurance market to be years of constant growth.
"The setback of the financial markets is not considered influential, as the stock market low point hasn't quite affected any other sector of economy except banks and investment groups," said Sergei Netsajev, director of ASA Insurance.
"Since the insurance market was established at the start of the '90s, it has been developing consistently and the regular fluctuations in the banking sector have never had any lasting effect on the insurance companies' operations, despite the financial sector being a unified system," said Netsajev.
According to Netsajev, the investment portfolios of professionally managed insurance companies contain little stocks that are quoted on the Tallinn Stock Exchange. Instruments with fixed profitability, like deposits and bonds make up the majority of these portfolios.
As the analysts of AB Insurance Group state, the increase in the insurance market turnover will stabilize during the next few years, but will still be ahead of the general economic growth due to its great development potential.
The main arguments supporting these statements are the enactment of the pension reform, Estonia's possible EU accession and the resulting obligatory types of insurance.
The indicators for the Estonian life insurance market in terms of the annual turnover have been rising since 1993 with an actual boost in 1997, when the whole market nearly doubled.
In 1996, the market turnover was 64.4 million kroons ($4.4 million) with growth of 51 percent. In 1997, the same indicators were already 127.6 million and 98 percent. The prognosis for this year sets the market turnover up to 182.2 million kroons and a 43 percent growth.