Paul Johannes Spittau, Head of Group Carrier Relations & Insurance Mediation at GrECo International and Ákos Pál, General Manager at GrECo Hungary delve into the myriad challenges and developments confronting businesses in Hungary amid a backdrop of political, economic, and ecological uncertainties. They shed light on the evolving corporate risk landscape and the insurance industry’s role in helping companies navigate these turbulent times.
Current Developments and Challenges
Spittau: The world is in flux, and we live in a time of global poly-crisis. What are the specific developments and challenges facing your clients today and in the next five years?
Pál: In Hungary, like many other countries in CEE, politics, economic uncertainty and climate change are all giving our clients cause for concern. Geopolitically, tensions, such as the ongoing war in Ukraine and tensions within the EU, are creating uncertainties for businesses. Meanwhile, our political landscape at home is characterised by a focus on national sovereignty and resistance to foreign influence. Economically things are unstable thanks to inflation, currency fluctuations, and external demand pressures. The country is recovering from a recession, with growth driven by wage increases, government initiatives, and increased investment. Ecologically, Hungary is facing challenges related to climate change and resource scarcity impacting various sectors. On top of these things, rapid advancements in technology and cybersecurity threats are also putting pressure on clients to continually adapt and invest.
Impact on Hungary’s Corporate Risk Landscape
Spittau: How are these things shaping Hungary’s corporate risk landscape, and what implications do these changes have for the insurance industry as a risk carrier for companies
Pál: Where there is change there are always new risks and opportunities for businesses. As a result, the corporate risk landscape is currently evolving rapidly. For the insurance industry, these changes imply a need for innovative solutions to manage emerging risks and support companies in navigating uncertainties.
Emerging Economic Sectors and Investments
Spittau: Which economic sectors or industries are expected to receive more investments in the coming years?
Pál: Emerging industries such as electromobility and semiconductor production are receiving increased investments. Plus, major multinational corporations, including BMW and CATL, are set to open factories in Hungary, which will create significant economic opportunities. The government is also focusing on strategic investments to bolster GDP growth.
Regulatory Challenges and Adaptations
Spittau: What regulatory challenges are companies facing?
Pál: There have been quite a few regulatory changes recently. Key ones are significant changes to immigration and employment laws, including stricter regulations for migrant workers, and changes to taxes and the minimum wage to support economic growth and stability. The knock-on-effect requires companies to adapt their operations and compliance strategies to navigate the evolving landscape.
Spittau: How have these regulatory changes, particularly in the insurance sector, impacted businesses in Hungary? Any lessons learnt?
Pál: In 2024, Hungary faced significant challenges due to the “extra profit tax” introduced in 2022, which increased to 14% for major insurers. This tax has had a substantial impact on the insurance market, distorting its functioning and creating financial pressures for companies. As a result, the country has learnt the importance of regulatory stability and the need for fair taxation policies to protect businesses and the economy from such major disruptions in the future.
Focus Areas for the Insurance Industry
Spittau: Final question, what do you think the insurance industry needs to do to support Hungarian businesses in overcoming the hurdels and challenges they currently face?
Pál: I think there are three key focus areas for the insurance industry.
Insurance companies can support innovation and growth by offering policies that encourage investment in new technologies and business expansion. This includes coverage for cyber threats, executive risks, and other emerging challenges.
Insurers should also be adapting to the changing risk landscape at the same speed as businesses especially in the face of technological advancement. Insurers should be leveraging technology to enhance their services.
Maintaining trust and transparency with customers is essential. Insurance companies should focus on clear communication, fair practices, and innovative solutions that meet the evolving needs of businesses. This helps build goodwill and ensures that businesses feel supported and confident in their insurance choices.
And lastly, there’s room for a change in mindset. The extra profit tax is a complex and an often difficult-to-understand topic. This tax leads to higher insurance premiums, which can be a burden for many customers. Changing this system could significantly boost international competition and offer customers an ever-increasing number of interesting insurance options.
Paul Johannes Spittau
Head of Group Carrier Relations & Insurance Mediation
T +43 664 537 17 42
Ákos Pál
General Manager
GrECo Hungary
T +36 70 314 5536
