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Turnover drop of insurance companies in 2010 is between 30%-40% compared with the results at the end of 2009, reported Imerisia citing experts from the sector. Some of the reasons for the insurance sector volume decrease this year are the reduction in Greek stocks and bonds in companies’ investment portfolios and higher costs as extraordinary taxation of profitable businesses.

Another reason that contributed to the dramatic decrease in turnover is snowballing withdrawal of life insurances in early 2010 following the deepening economic crisis and the emerging severe lack of liquidity of the market. Last but not least are the price raises in the health care which increased the costs of insurance companies. At the same time, the number of uninsured vehicles in Greece has increased which affects the revenues of private insurance companies.

The biggest insurer currently is the National Insurance Company which holds about 25% of the market of private insurance. The new company management has decided to maintain the positive economic growth of the company from previous years mainly by reducing operating costs and by keeping the high capital adequacy and solvency margins. The question is whether the company will decide to benefit from the decision of the Bank of Greece and will hold the shares and bonds to maturity to obtain acquisition cost.

Interamerican which is the second largest company in the sector registered growth of around 10% in two main insurance categories - life and general insurance. The company holds about 15% of the private insurance market but regardless of this year success its total turnover dropped because of the Greek stocks and bonds, which the group has in its portfolio. The solvency of Interamerican for 2010 is estimated at around 170% -180% of the capital.

Foreign companies on the Greek market as Allianz, Chartis (AIG), Alico, ΑΧΑ, Groupama, Victoria and Generali share the rest of the private insurance market and have not yet announced the official 2010 results. Experts estimate that the situation in these companies will not be pretty in addition to the reduced market movement and the companies’ bleeding following the mass termination of life insurances. Moreover, the next extraordinary taxation on the profits of Greek representations could be even fatal for some of them.

Insurance companies also try to join forces in time of crisis like the reform of the banking system, which is expected to lead to mergers and consolidations on the market. All companies under Article 6 of the Act for the operation of private insurance companies 400/70 from 2008 are currently seeking to actually increase their capital either through strategic investors, or through merging with more powerful companies. The well-known Article 6 stipulates that insurance companies in the red are allowed to make a second more favourable evaluation (30% more) of their assets and, in particular, of their property so as to cover capital adequacy levels. This law surely artificially prevents the companies from bankruptcy without solving the real problems of their liquidity and capital adequacy.

Liquidity problems and reduced turnover resulted in complaints about serious delays in the payment of amounts due under insurance policies and social insurance this year. The Ombudsman of Greece Evangelos Zervas announced that he has received hundreds of complaints about late or unpaid insurance amounts due. Then, the Bank of Greece together with the Association of Greek insurance companies have prepared a list of recommendations to which private companies should strictly adhere. The main points in this list are insurers to regularly inform their clients in detail about the account status and the amounts due, and to immediately pay the compensation by the date specified in the contract. Insurers will be subject to penalties in case of delay.