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Before the crisis, there was no safer investment for the Greek insurance companies than in Greek securities and shares of companies traded on the Athens Stock Exchange. The developments in the country from 2010 onwards have forever changed the concept of safe investments. Greek politicians collapsed the confidence in bonds and the value of the shares on the Athens Stock Exchange melted as the snows of yester year. To insurance companies, negotiations on the PSI and the reduction of the face value of Greek bonds by 50% are resulting in direct losses of about 75% in absolute value. In the last two years, they have been gradually repaying the losses at the request of the association of insurance companies and under the strict supervision of the Bank of Greece.
    Some companies such as Interamerican managed to sell most of the Greek bonds they were holding. Others like Metlife Alico significantly increased their capitalization to cover the damages caused by the depreciation of the securities held. The third group of companies, which are subsidiaries of banking giants, recorded the damage at the expense of banks. The decision for the gradual repayment of damages in the past two years is particularly beneficial for small and large Greek insurance companies, the capital of which remains untouched. The insurance company of the National Bank of Greece Ethinki Afalistiki was particularly favoured by the decision. The same applies to a lesser extent to the agricultural insurance company ΑΤΕ Asfalistiki, which will probably need recapitalization.
    Experts estimate that a 50% haircut on the Greek debt during the PSI procedure will result in domestic insurance companies’ need of additional capital amounting to 1.8 to 2 billion euro. They do not expect mergers or consolidation of companies, as this requires additional capital. However, insurers have asked the Ministry of Finance and the Bank of Greece to reduce tax rates.
    Despite the deep recession in 2011, companies in the industry have managed surprisingly well. Metlife Alico already has 15% share of the insurance market in Greece. The volume of its insurances is 314 million euro, which is 2.5% higher than in 2010. Forecasts for 2012 are not optimistic. If the expectations for 5% recession are confirmed, the local insurance market will shrink by at least 5%, or even 10%.