November 14 (SeeNews) - Twenty five years after the break-up of Yugoslavia, Slovenia and Croatia are the clear front-runners in terms of development of insurance markets among the republics of the former federation, S&P Global Ratings said on Monday.
"In most other former Yugoslav countries, insurance penetration has declined over the past 25 years, with markets that are fragmented and focused on mandatory products," S&P Global Ratings credit analyst, Jure Kimovec, said in a press release published by the ratings agency.
Meanwhile, Slovenian and Croatian insurance markets have evolved into markets with diverse mix of insurance coverage, resulting in insurance penetration on a par with some other EU member states, S&P judged.
Some 25 years ago, at the time of the break-up of Yugoslavia, market researchers argued that in many respects the country had the most sophisticated insurance system among the centrally planned economies in Central and Eastern Europe. Since then, however, most insurance markets in the ex-Yugoslav countries have fallen well behind.
"This is mostly due to weaker economic development and higher political risks for these countries, lower household incomes, and a lack of demand for insurance protection, as well as weaker institutional frameworks in these insurance markets, spanning from regulation and supervision to corporate governance and risk management capabilities", S&P noted.
The exceptions are Slovenia and, to some extent, Croatia, where over the past 25 years insurance markets have been able to overcome these issues and approach Western European levels of insurance protection with a more diverse mix of insurance coverage, the ratings agency added.
"In our view, insurance markets will grow only moderately, particularly relative to currently low penetration levels in parts of the region, at best at high-single-digits in the next few years," Kimovec said.
He added that insurers S&P rates are well prepared, compared with the rest of the market. "They have been able to build scale and have good diversification of premiums coming from their property and casualty and life insurance lines, which allows them to retain good profitability", S&P concluded.
In July, S&P affirmed Croatia at 'BB/B' with a negative outlook. Slovenia's ratings were raised to 'A/A-1' in June, on strengthening domestic demand and ongoing fiscal consolidation with a stable outlook.