Bulgarian General Insurance Companies from Solvency II Perspective

Abstract

By nature insurance is an activity involving a wide range of risks and uncertainty is generally seen as one of its fundamental and most important characteristics. The tangible exposure to risks and the extremely significant social function of insurance can be outlined as the main contributors for the constantly increasing importance of the insurance companies’ solvency used as leading indicator for their financial health. With regard to the insurance companies’ solvency three key categories of uncertainty can be identified – uncertainty connected with the liabilities’ amount and characteristics, uncertainty connected with the assets and with their sufficiency for covering the continuously emerging volume of payables on their maturity date and uncertainty, arising from the profitability of the future premiums. These three key aspects of the uncertainty as integral characteristics of the insurance business are strongly envisaged in the new European legislation, concerning the solvency of the insurance companies – Solvency II directive. According to the result of the fifth quantitative impact study (QIS 5, performed by EIOPA), based on financial data for the Bulgarian General insurance market for 2009, some of the insurance companies on the market were able to ensure less than 75% coverage of the solvency capital requirement. A comparison between the values of key indicators respectively in 2009 and in 2013 shows that the basic tendencies have not changed. From this perspective there is no ground for stating that today the Bulgarian insurance market has the capacity to fulfill to greater extent Solvency II requirements. It should be also taken into consideration that the time for preparation and adaptation to the new legislation is shrinking. In such a dynamic environment the Bulgarian insurance market is subject to an intensive process of consolidation and relocation of market shares.