The essentials of insurance in Slovakia

How do the current political developments and economic conditions in Slovakia influence the insurance industry and clients’ risks?

BOROT: When the Velvet Revolution in 1989 started, Slovakia changed from an agricultural country to a more and more industrialized one.

– On the 1st of January 1993 Czechoslovakia split into Slovakia and Czech Republic.
– Slovakia has been a member of European Union already since 1st of May 2004.
– In December 2007 Slovakia joined the Schengen zone.
– In November 2009 the Euro has been introduced as our currency.

All these developments led to a strongly export focused economy with close ties to Western Europe. One good example is the automotive industry. Slovakia is the biggest producer of cars in the world related to produced car per one habitant. The biggest automotive suppliers and car producers are present in Slovakia: Volkswagen from Germany, Kia from South Korea, PSA Peugeot Citroen from France and Jaguar Land Rover from UK. In 2020 Slovakia will produce 1,350 000 cars.

What are the biggest risks foreign companies doing business in Slovakia need to consider?

BOROT: Political stability and political risks: The recent election will change things, but it is very difficult to foresee the effects. Slovakia will still strongly participate in EU & NATO. The industry is very export focused and therefore the free market is vital for Slovak development. The newly elected prime minister promised to crack down on corruption in his campaign. This sounds very promising.

There is also the issue of economic stability: The looming recession will have a strong effect on Slovakia, due to its export focus (France, Germany, Italy). Also foreign investments play a strong role in the Slovak economy.

How do Slovakian risks differ from those in other countries?

BOROT: The risks are quite similar to those in Central and Western European countries. In terms of natural hazards it can be said that they are generally low and only floods can be observed (even though the dams are constantly expanded). Terror risks are not observed – coverage is available via the insurance market.

What are the main facts of the insurance market in Slovakia?

BOROT: Due to the Soviet history Slovakia has a couple of big heavy industry firms, big car producing factories. These risks are written abroad. The amount/share of mid-sized companies is much lower than in Czech Republic or Austria compared to GDP. Therefore, the non-life GWP (Gross Written Premium) is 3 times lower than in Czech Republic (even though GDP is 106 million EUR compared to 245 million EUR).

Another effect for this industry structure is the large market share of agents active in retail and SME business. There are only a few local brokers that focus on pure corporate business.

What specifics differ from those in other countries?

BOROT: The biggest difference from the Western European insurance market is the strong position of the agencies. This also effects insurance legislation. Insurance legislation does not know the word “Broker” – only agent or consultant. This manifests the strong position of individual agents. Only couple of intermediaries are employees in larger firms. Additionally, there are certain tax issues and other special requirements for brokers, such as required processes for certain lines.

The insurance tax of 8% applies for on all non-life lines except MTPL and there are insurance pools for energy and nuclear risk. The mandatory lines are MTLP, Professional Indemnity (e.g. medical, auditor, architects) and via social security: employers liability and workers compensation on state basis Regulatory challenges are Solvency II. This effects our clients in many ways, for example, high claims ratios in MTPL/Casco can no longer be compensated by other lines of business. Therefore this forced the insurers to increase the premiums

Brokers account for about 80% of all corporate insurance sales. Is the share the same in life business? How does your approach differ when it comes to Employee Benefits?

BOROT: The social security coverage in Slovakia is rather strong and toughly regulated. Nevertheless, the insurers have discovered this as an area of strong potential due to the labor shortage in Slovakia. Companies use EB to attract new employees. Agencies and brokers are in a consultancy role when setting up these programs. The share is similar or even higher when considering Employee Benefits.

Can international insurance programs be implemented?

GAŠPAR: There are no problems in implementing international programs – insurance regulation is based on the EU regulation. The main lines are Property & Business Interruption – sometimes also via Freedom of Services. In this case we also service the client and provide assistance in case of a claim. In liability we always recommend a local cover to include local regulation and also to have a Slovak court to decide in case of a claim.

How is this done at GrECo Slovakia? How do you coordinate with the controlling broker?

GAŠPAR: We provide reports and policy summaries to the controlling broker on regular basis. Additionally, we are always available via phone or mail. In-person meetings with our partners are also conducted on a regular basis.

We regularly meet the referred clients and treat them as we would with our local clients. Proper servicing is our first goal. Our risk-based approach encompasses an analysis of the clients risk. Based on this, we not only handle the international lines, but also, with the controlling brokers permission, include local lines.

Please describe your incoming business servicing capabilities?

GAŠPAR: We have a strong team designated to service international clients. The six colleagues speak German, English, Czech and Slovak fluently. Both Account Managers have more than 20 years of experience in servicing international clients, both on the insurer and broker side. In all this time they have been in daily contact with our international partners.

Can you tell us about your most complicated case when dealing with international clients?

GAŠPAR: In 2010 one of our client had a major flood incident. This flood caused one of the biggest damages in the history of insurance in SK. The coverage for our clients was structured via an international program. Our team had do handle two claims of more than 1 million EUR each and coordinate between the different parties. In the end the claims were paid by the foreign insurance firm.