Tough times for insurers in Greece

Big Greek industries face a big hurdle in getting insurance against all sorts of damage because local insurance companies have increased difficulties in insuring against damages. The problem stems from international reinsurers, which refuse to reinsure big damage insurance contracts in Greece, according to a local insurance executive. This reflects on the credibility of local companies but also results from much higher insurance premiums following the September 11 terrorist attacks in the USA and this year’s catastrophic floods in Europe. Moreover, big international insurance and reinsurance firms are feeling the pressure from the present climate in international stock markets, in which they have incurred great losses with their investments. Despite its problems, the Greek insurance market is opening up to competition, as more foreign firms enter the market and claim an increasing share. They focus on big contracts and, especially, infrastructure projects, such as Athens International Airport. This hurts Greek companies which only get a small portion of these contracts, and only as part of consortiums. On the other hand, cooperation with foreign insurers may help them modernize their operations. Time is ripe for such a modernization, industry executives say. They also believe conditions exist for a readjustment that would help improve the life insurance and the general insurance market, with the exception of car insurance. The latter has long been a problem, with a large number of barely surviving firms. It appears that the sector will remain problematic for some time. This is mainly due to the fact that the supervising authority – the Development Ministry – lacks the political will to deal with the problem forcefully. This attitude is not limited to the current leadership at the ministry but has been the trend with successive ministers. The current attitude, according to a ministry source, is, «Do not bother yourselves with (insolvent auto insurers) at least until the elections.» At least the problem with insolvent insurers is confined to that particular sector. But it is purely a matter of good luck that Mesogeios was the only auto insurer to go under. Even that bankruptcy did not have wider repercussions, as Ethniki Insurance undertook all the company liabilities. But this does not absolve the ministry of its failure to exercise its regulatory powers. In spite of double-digit growth in mortgage and consumer credit, the domestic market is still significantly below European averages.