The first year of war became a peculiar test of endurance for the insurance market. It can't be said that insurers passed this test with flying colours. However, the industry held its ground, and that's the main thing.
Mind presents a new rating of insurance companies based on the financial and operational reports of 2022, as well as taking into account the results of the first quarter of 2023.
Just like in other sectors of the economy, the first and second quarters of 2022 proved to be the most challenging for insurance companies. The market experienced a 20% decline from January to March 2022, and from January to June 2022, the insurance market contracted by nearly 30% (year-on-year data).
However, towards the end of 2022, a gradual recovery of the insurance sector began. Overall, the decline reached 20% for the year, with insurers collecting nearly 40 billion UAH in gross premiums. The war pushed the market back approximately five years, to the level of 2017. But it could have been worse. Meanwhile, net insurance premiums for 2022 decreased by 16% to 38.6 billion UAH. Gross insurance payouts in 2022 amounted to 13 billion UAH, with net payouts at 12.8 billion UAH. This represents a 27% decrease (for both indicators) compared to 2021.
How did insurance companies come out of martial 2022? According to the National Bank's analytical review, the assets of insurers specialising in risk insurance grew by 6% in 2022, while the assets of life insurance companies increased by 18%. 27 companies left the market during the year, reducing the total number to 128.
When it comes to analysing the dynamics of individual insurance segments, it was heterogeneous. For instance, hull insurance volumes decreased by 21%, medical insurance by 24%, the motor third-party liability market only contracted by 1%, while the Green Card international insurance segment actually grew by more than double.
Insurers benefited from the Green Card as refugees who left Ukraine with their own vehicles had to purchase it in order to travel freely within the territory of the European Union. Premiums from property insurance and financial risk insurance also significantly declined, by two or more times.
The volume of gross premiums transferred to reinsurance decreased by more than half in 2022, and payouts decreased by 60%. Another important aspect is that loss reserves (claims filed but not yet reimbursed) increased by 36% in both voluntary and mandatory types of insurance.
Overall, both risk insurers and life insurance companies ended 2022 with a net profit. Furthermore, the return on capital as of year-end 2022 was 15% for risk insurers and 13% for life insurers (a normal value being no less than 10-12%).
And what happened in 2023? With onset 2023, the situation in the market began to improve. According to the National Bank of Ukraine (NBU), Ukrainian insurers increased their gross premiums by 4% in the first quarter, reaching 10.1 billion UAH. Net premiums grew by 6% to 9.9 billion UAH. The total amount of gross insurance payouts in the first quarter of 2023 was 3.8 billion UAH, with net payouts at 3.7 billion UAH. Both figures were 19% higher than the same period in 2022.
There was also a tendency towards a slowdown in the decline of premiums for key types of insurance, with some segments experiencing growth, and significant growth at that. For example, gross premiums for voluntary motor insurance contracts in the first quarter (year-on-year) increased by 25.4%, premiums for MTPL (Motor Third-Party Liability) insurance increased by 31%, and for Green Card insurance, it increased by 80%. The volume of payments for private health insurance continued to decline but decreased by only 17%, which is significantly less than in the entire year of 2022.
Furthermore, the NBU emphasised that the restoration of the ability to make reinsurance payments abroad brought the volume of premiums transferred to non-resident reinsurance companies back to pre-war levels. In the first quarter, non-resident insurers received 1.2 billion UAH from Ukrainian insurance companies (compared to 970 million UAH in the first quarter of 2022). However, internal reinsurance activities have almost ceased.
How is the landscape of the market changing, and which insurers are the most reliable? The balance of power in the insurance market remains generally unchanged. Foreign-owned companies, which have a long history of operation and large client portfolios, continue to dominate. According to the National Bank of Ukraine (NBU) data, the top 10 insurers that collected the largest volume of premiums account for a 50% share of the market. These companies (as of April 1, 2023) include UNIQA, ARX, TAS Insurance Group, INGO, VUSO, Arsenal IÑ, Universalna, PZU Ukraine, and Oranta.
However, if one analyses the performance of insurers not only based on specific indicators but comprehensively, as Mind does, taking into account financial stability and business activity, there are noticeable rearrangements among insurance companies.
The war could not help but impact the operations of insurance companies. In some insurers, especially those dependent on banks (through their loan portfolios), car dealerships, and large corporate clients, business volumes have decreased, if not by multiples, then by significant percentages.
As a result, companies such as Allianz Ukraine, Naftogazstrakh, ETI (European Travel Insurance), Alliance, Asko DS, and Megapolis have dropped from the rankings. However, there are also opposite situations. For example, companies like Salamandra and Ultra Alliance have significantly strengthened their positions, benefiting from MTPL insurance and the Green Card.
What is even more important is that the insurance sector has lost several significant players in recent months. This happened due to the NBU measures, which revoked licences from almost a dozen insurance companies. Omega, Providna, Ingosstrakh, Tekom, Prosto-Strakhuvannia, and Alpha Insurance (for the latter, licences are currently suspended rather than revoked) were affected. Many insurers were 'shown the door' due to ownership structure issues. Some companies voluntarily surrendered their licences. Additionally, the long-standing player Aska exited the market, as VUSO Insurance acquired it.
In the previous ranking, the top 10 strongest insurers included ARX, Colonnade Ukraine, Kniazha, UNIQA, Ukrainian Insurance Group, Krayina, Express-Insurance, Providna, Alpha Insurance, and Universalna.
As of the beginning of 2023, the situation has changed, and the current top 10 in our ranking looks as follows: Ukrainian Insurance Group, Colonnade Ukraine, and Universalna Insurance Company have received the highest rating of 4 stars. ARX, UNIQA, INGO, PZU Ukraine, and Kniazha have been given a high rating of 3.5 stars. Completing the top 10 most reliable insurers are Krayina and VUSO.
Insurance companies with Ukrainian capital, although they have survived, logically do not have a high financial cushion to maintain their performance at a high level. Common problems include a high debt burden and low liquidity.
The gradual reduction in the number of market players is a trend that will continue to gain momentum. The leadership of the National Bank has explicitly stated that the stability and transparency of insurance companies are among the main goals of the NBU in the near future. Unfortunately, those who do not meet these criteria will not find a place in the market.
On the one hand, competition will intensify, and insurers will push each other. On the other hand, clients will benefit from this, as it will be easier for them to choose a reliable company that conscientiously fulfils its obligations and does not risk going bankrupt in a matter of days.
Mind's Insurance Company Rating Methodology
Insurance Company Rating is an informational project aimed at a comprehensive evaluation of insurance companies with the largest premium volumes in Ukraine. The rating considers the most important factors of financial stability and business activity of insurance companies, which can be calculated based on publicly available information.
Rating Object: Insurance companies whose gross premium income for 2022 exceeds or equals UAH 150 million (or 0.5% of the total volume) and engage in traditional insurance activities.
Rating Subject: The stability of insurance companies for owners of movable and immovable property, quantitatively determined as the total score of stability factors ranging from 1 to 4, weighted by the importance of each factor, a coefficient ranging from 0 to 1.
The qualitative stability of insurance companies is expressed by the "star rating" of the insurance company, ranging from 0.5 to 5 stars, depending on the total score. The "star rating" of the insurance company is of primary importance, rather than its ordinal number in the table.
Rating Frequency: Annually, after the publication of annual financial reports and insurance statistics by the companies, in the Top Insurance Journal.
Data Sources: Individual indicators of financial reports of insurance companies, reflected in the financial reporting forms (F) in the YouControl information system, financial reports of participating insurance companies in the rating, as well as information from the forinsurer.com website.
To determine the Level of Foreign Support factor, official information from the National Bank of Ukraine (NBU) regarding significant owners of insurance companies is used, along with data from YouControl and Mind, as well as official information from the companies themselves.
Rationale for the selection of factors determining the customer attractiveness of insurance companies
When preparing the rating methodology, the following factors determining the attractiveness of insurance companies from the customer perspective were taken into account:
- Debt burden.
- Liquidity (financial stability) of the insurance company.
- Level of payouts.
- Growth of insurance premiums.
- Growth of the insurance company's equity capital.
- Inclusion of the insurance company in an international financial group (international insurance company).
- MTIBU’s (Motor (Transport) Insurance Bureau of Ukraine) 'Traffic Lights' for the factors of Risk Regulation Quality and Level of Customer Complaints.
- Scale effect of the insurance company.
- Financial stability coefficient.
Mind has determined the level of importance of each of the proposed factors by assigning weight multipliers, the sum of which equals one.
Given the current level of transparency in the insurance market, the methodology presented below for calculating the factors accurately reflects the comprehensive attractiveness of insurance companies for clients.
Calculation factors and formulas
Calculation of rating factors values
|1||Debt burden||Obligations to capital ratio||(Obligations/CAP) *100%||
0% – 75% 4 p.
75% – 150% 3 p.
150% – 250% 2 p.
>250% 1 p.
|2||Liquidity (financial stability)||
Ratio of highly liquid assets to net written premiums
|(Highly Liquid Assets/NWP)*100%||
>50% 4 p.
35% – 50% 3 p.
20% – 35% 2 p.
<20% 1 p.
|3||Level of payouts||
Ratio of claims in the reporting period to the average gross premiums of the previous and current periods
Motor hull insurance claims
Voluntary medical insurance claims
45% – 60% 4 p.
30% – 45% or 60% -- 70% 3 p.
20% – 30% or 70% – 80% 2 p.
5% – 20% or 80% – 90% 1 p.
<5% or >90% 0 p.
|4||Growth of insurance premiums||
Ratio of premium growth in the reporting period to premiums of the previous period
Increase in hull insurance
Increase in VHI
|((P – P (t-1)) / P (t-1))*100%||
>0% 4 p.
0% – (-5%) 3 p.
(-5%) – (-15%) 2 p.
< (-15%) 1 p.
Equity capital growth
The ratio of capital gains in the reporting period to the capital of the previous period
|((CAP – CAP (t-1)) / CAP (t-1))*100%||
>20% 4 p.
10% – 20% 3 p.
0 – 10% 2 p.
< (0%) 1 p.
|6||Inclusion to the international financial group||
Owners: foreign corporate structure; non-resident individual; residents of Ukraine
– part of an international financial group, headquartered in a developed country, foreign owners hold a controlling stake 4 p.
– part of an international financial group, foreign owners hold a minority stake 3 p.
– part of an international financial group, headquartered in a developing country 2 p.
– has no foreign owners 1 p.
Level of financial stability (autonomy)
|Ratio of funds and current financial investments to net insurance claims||Funds(t)+Financial investments(t) / P) *100%||
>80% 4 p.
50% – 80% 3 p.
30% – 50% 2 p.
< 30% 1 p.
Meaning of the 'traffic lights'
Risk Regulation Quality and Level of Customer Complaints
3 green – 4 p.
1 yellow – 3 p.
2 yellow – 2 p.
3 yellow, or is not a member of MTIBU – 1 p.
any red – 0 p
Volume of premiums collected
less than UAH 200 million – 1 p.
up to UAH 500 million – 2 p.
up to UAH 1 billion – 3 p.
over UAH 1 billion – 4 p.
|Total Score||Sum of factor scores weighted by the respective weights||Total Score =||1,00|
* – conditional symbols, used in formulas, signify:
Obligations – the sum of current and long-term obligations of the insurance company;
CAP – a total of asset balances excluding the company's book value and liabilities;
CAP (t-1) – a total of asset balances excluding the company's book value and liabilities for the previous reporting period;
NWP – Net Written Premiums;
Highly Liquid Assets – cash, deposits, securities, and their equivalents;
Claims (t) – insurance claims of the company for the reporting period;
P (t-1) – collected insurance premiums for the previous pre-reporting period;
P – collected insurance premiums for the reporting period;
ReIns (t) – the proportion of premiums transferred to reinsurance for the reporting period;
Equity Capital – company's equity capital;
Liabilities – a total of the company's liability balances.
Each factor is assigned a point from 1 to 4 before being weighted according to its importance. The points depend on the range in which the value of the factor falls.
If the Liquidity factor exceeds 70%, for example, the insurance company is assigned the highest point of 4 for this factor.
If it falls within the range of 50 to 70%, it receives three points.
If the indicator value falls within the range of 30 to 50%, it receives two points.
If the level of the indicator is below 30%, the insurance company receives one point.
Later, the obtained point is multiplied by the weight of the factor. For the Liquidity (financial stability) factor, for example, the weight is 0.15.
The total score for each insurance company is calculated by adding the numbers obtained from multiplying the points by the weight of each factor. The higher the total score, the more attractive the insurance company is to clients.
Defining Rating Category
The rating table is constructed by ranking insurance companies participating in the rating in descending order of their overall score, referred to as the Total Score.
Subsequently, depending on the range in which each insurance company falls, it is assigned a star rating ranging from 0.5 to 5 stars.
Criteria for assigning rating categories
|The value of the amount of the total score – Total Score||"Star rating"||Category Content|
|3,4 to 4,00||5||High level of customer attractiveness|
|2,8 to 3,39||4||Stable level of customer attractiveness|
|2,2 to 2,79||3||Satisfactory level of customer attractiveness|
|1,6 to 2,19||2||Low level of customer attractiveness|
|1,59||1||Catastrophic level of customer attractiveness|
The rating methodology may be partially altered in the future in terms of calculation or supplemented with new factors, taking into account the dynamics of performance indicators of the insurance market, as well as the increased level of financial information disclosure by Ukrainian insurance companies. Therefore, each new rating should be accompanied by a critical review of the methodology for rating car insurers, which should be appropriately adjusted if any discrepancies are identified in relation to new realities.
The star rating of an insurance company ranging from 0.5 to 5 holds primary significance, rather than its ordinal position in the table. The editorial office and the authors of the rating are not responsible for decisions made by third parties based solely on this rating.
The rating serves purely informational purposes. It only reflects the opinion of the editorial office regarding the level of attractiveness of insurance companies based on financial reporting. The rating should not be considered as the sole recommendation for selecting insurance products.
Methodology and calculations: Yevhen Shpytko
Text: Pavlo Kharlamov
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