ECONOMY

The insurance sector attempts a recovery

The Greek insurance industry is going through hard times, attempting to regroup in order to reverse the negative developments of last year. Despite the frequent references to the positive prospects of the sector due to its still low contribution to the country’s GDP, 2001, far from being a year of growth, led the sector one step backward. According to initial results for the first quarter of 2002, the value of portfolios continued to fall. In addition to operating losses and write-downs in value, the industry as a whole has had to cope with a reduction in turnover, as shown in the adjacent table. The initial results from 73 Greek insurance firms and 11 subsidiaries of foreign companies in the country, show that the life sector shrunk significantly last year in relation to 2000. Total premiums and assurance revenue fell from 418 billion drachmas (1.22 billion euros) in 2000 to 385.6 billion drachmas (1.13 billion euros). A short breather came from a rise in revenue from group policies which confirmed a trend of positive prospects in this particular branch, expected to receive a boost from tax breaks under consideration. The general insurance sector premiums grew 9 percent last year but this alone does not allow for particular optimism if account is taken of the fact that over half of the sector’s premium revenue comes from the problematic area of car insurance which showed the biggest losses. Of the 527-billion-drachma (1.55 billion euros) total revenue of the general insurance sector, 273 billion (801.17 million euros) is accounted for by car insurance. There is consensus in the industry that any big moves will come from the large groups and will not involve acquisitions of small and unviable concerns, but will take the form of either hostile takeover bids or internal restructuring. Subsidiaries of banking groups seem to have already chosen the latter option. Initiatives that are seen as emerging from the need to rationalize the sector and reduce costs will be complemented by moves to enrich the range of products, making them more responsive to real requirements rather than promising unrealistic returns. Senior executives say that the car insurance branch is of particular concern as chronic problems have grown into insoluble situations. The view held in the past, that the current pressing situation will lead to a new round of mergers among small companies, particularly in general insurance, now appears outdated as the big groups appear reluctant to absorb small portfolios. For a long time, the problematic small operators managed to stay in business by booking losses against reserves. The closure of such companies by the State – which contributed to the present situation by tolerating it – is seen as perhaps the only natural course. It may be effected through the compulsory increase in the minimum required guarantee capital that is deposited, for the companies that are already in the red; that is, if the government again decides not to exhaust the deadlines set by Community directives. The argument for a government initiative is a strong one, as it is the consumer who will ultimately pay for its unwillingness to intervene; a steep hike in premiums is considered a given by industry officials. Iraq, the United Arab Emirates and Saudi Arabia covered most of the estimated 230 million dollars it cost to build the library, said library media adviser Khaled Azab. France, Italy, Norway, Greece, Japan and China contributed materials.