According to the annual report of the Financial Supervision Commission (FSC), at the end of 2018 the total number of licensed (re)insurers headquartered in the Republic of Bulgaria was 37. Of these, 25 were general insurers, 11 were life insurers, and 1 was a reinsurer, licensed to conduct both general and life reinsurance. Out of the total, 32 companies applied the Solvency II regime and had the right to access the EU/EEA single market, while the remaining 5 insurers operated without such access rights.
At the end of the fourth quarter of 2018, gross written premium (GWP) reached BGN 2,470 million, marking an annual increase of 14 percent. The Bulgarian insurance market, combining general and life insurance, was distributed in a ratio of 84 percent to 16 percent in favor of general insurance. Insurance penetration, measured as GWP as a share of GDP, stood at 2.29 percent compared to 2.19 percent in 2017. Within this, general insurance penetration was 1.9 percent, while life insurance penetration was 0.36 percent, down from 0.40 percent a year earlier. Insurance density, expressed as GWP per capita, increased to BGN 353 compared to BGN 306 in 2017. Density in general insurance amounted to BGN 298 per capita, up from BGN 250, while density in life insurance was BGN 55 per capita, compared to BGN 56 in 2017.
Gross written premium generated by general insurers with access to the single market amounted to BGN 2,050 million, including BGN 2,026 million from direct business and BGN 23 million from active reinsurance. On an annual basis, GWP grew by 19 percent, with growth largely driven by higher premiums from compulsory Motor Third Party Liability (MTPL) insurance.
Motor insurance dominated the portfolio structure of general insurers, accounting for 75 percent of the total, of which MTPL represented 45 percent and Motor Hull (Casco) 30 percent. Premium income from MTPL increased by 42 percent year-on-year, or BGN 272 million in absolute terms, reaching BGN 917 million. This sharp growth was mainly due to the FSC’s requirement for increased reserves in this line of business as a result of systemic losses, as well as a ruling of the Supreme Court of Cassation which expanded the category of relatives entitled to compensation for “pain and suffering” in the event of the death of a close family member in a road accident. Premium income from Motor Hull insurance amounted to BGN 615 million, an increase of 8 percent compared to 2017.
Property insurance against fire and other perils accounted for 14 percent of gross written premium at the end of 2018, down from 17 percent in 2017. Premium income from this business line reached BGN 293 million, representing an annual growth of 1 percent. Insurance related to medical expenses, income protection, and workers’ compensation made up 4 percent of general insurance premium, totaling BGN 75.3 million compared to BGN 68.0 million a year earlier.
Premiums ceded to reinsurers in 2018 amounted to BGN 653 million, or 32 percent of GWP, resulting in a retention ratio of 0.68. Claims incurred in general insurance reached BGN 1,147 million, an increase of 23 percent year-on-year. The claims structure mirrored premium income, with motor insurance accounting for 85 percent of the total and property insurance 8 percent. The largest annual increase was observed in MTPL, where claims grew by BGN 234 million due both to an increase in the average claim size and to a higher number of claims filed. A trend toward faster reporting of claims was also noted. The gross loss ratio for the market rose to 0.61 compared to 0.57 in 2017.
Technical expenses of general insurers increased by 5 percent year-on-year to BGN 563 million, representing 27 percent of GWP. The gross expense ratio declined to 0.30 from 0.33 a year earlier. At the end of 2018, the highest gross combined ratio, above 1, was recorded in MTPL insurance.
The total assets of general insurers stood at BGN 3,119 million at year-end, up 15 percent compared to 2017. Their investments grew by 4 percent to BGN 1,484 million, representing 48 percent of total assets. Government securities dominated the aggregated investment portfolio with a share of 54 percent, followed by real estate with 12 percent. The share of real estate investments remained unchanged from 2017. Equity holdings in related entities decreased slightly, while other equity investments rose by 2 percentage points. The share of bond investments increased by 2 percentage points, reaching 63 percent, mainly at the expense of bank deposits, whose share dropped significantly to 4 percent by the end of 2018.
The total liabilities of general insurers amounted to BGN 2,229 million, an increase of 22 percent compared to the previous year. Gross technical provisions represented 87 percent of liabilities, rising by 24 percent to BGN 1,944 million. The increase was influenced by Interpretative Decision No. 1/2016 of the Supreme Court of Cassation, which expanded the circle of beneficiaries under compulsory MTPL insurance. Excess of assets over liabilities in general insurance was BGN 890 million at the end of 2018, compared to BGN 836 million a year earlier. Eligible own funds to cover the Solvency Capital Requirement (SCR) amounted to BGN 914 million, against an SCR of BGN 573 million, providing a coverage ratio of 159 percent. Tier 1 unrestricted own funds represented 94 percent of total eligible funds. Eligible own funds to cover the Minimum Capital Requirement (MCR) amounted to BGN 887 million, compared to an MCR of BGN 257 million, resulting in coverage of 346 percent at year-end 2018.
Gross written premium by life insurers totaled BGN 407 million, a decrease of 5 percent year-on-year, including BGN 404 million from direct business and BGN 3 million from active reinsurance. The portfolio structure remained largely unchanged compared to previous years, with participating life insurance (37 percent), health-related insurance (18 percent), and other life insurance (18 percent) accounting for the largest shares. Notable increases were observed in health-related insurance, which rose from 13 percent in 2017 to 18 percent in 2018, and in income protection insurance, which grew from 7 percent to 13 percent.
Premium growth was recorded in health-related, income protection, and workers’ compensation insurance, while all other life classes reported declines. Gross claims incurred in life insurance amounted to BGN 152 million, a decrease of 11 percent compared to 2017. The claims structure was dominated by participating life insurance (62 percent), followed by health-related insurance (15 percent) and other life insurance (13 percent).
Operating expenses of life insurers increased by 5 percent year-on-year to BGN 115 million, representing 28 percent of GWP. Total assets in the life insurance sector rose by 3 percent to BGN 1,541 million. Investments, including unit-linked and index-linked contracts, reached BGN 1,406 million, representing 91 percent of assets, though showing a slight annual decline of 1 percent. Investments excluding unit-linked and index-linked contracts amounted to BGN 1,197 million, dominated by bonds (62 percent), equity holdings in related entities (10 percent), and collective investment schemes (8 percent). Equity in related entities increased by BGN 10.6 million, and corporate bonds by BGN 8.3 million.
Deposits (other than cash equivalents) continued to decrease, falling by BGN 40 million to BGN 23 million, reflecting the persistent low interest rate environment. Unit-linked and index-linked assets increased by 25 percent to BGN 210 million, representing 15 percent of total life sector investments. Gross technical provisions (excluding unit-linked/index-linked) rose by 10 percent to BGN 865 million, while provisions for unit-linked/index-linked contracts grew by 27 percent to BGN 203 million.
Excess of assets over liabilities in life insurance was BGN 413 million at the end of 2018, down from BGN 464 million a year earlier. Eligible own funds to cover the SCR were BGN 399 million against an SCR of BGN 147 million, resulting in coverage of 271 percent. Eligible own funds to cover the MCR were BGN 396 million against an MCR of BGN 104 million, giving coverage of 380 percent. Compared to 2017, eligible own funds and excess of assets over liabilities decreased, mainly due to the merger of OBB-Life Insurance EAD into DZI-Life Insurance EAD.
In 2018, active reinsurance was carried out by seven general insurers, two life insurers, and one reinsurer. Their total premium income amounted to BGN 1,755 million compared to BGN 1,546 million in 2017. The main lines of active reinsurance were MTPL insurance and property insurance against fire and other perils. Compensation paid to cedents totaled BGN 927 million, with property insurance against fire and other perils accounting for the largest share.
