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Reorganization and prospective of Serbian insurance market

 Modernization, i.e. strengthening of the Serbian insurance market which has been necessary for a long time, was implemented by the Law on Insurance, May 2004 when insurance supervision has been transferred to the National Bank. Since then, most important progress was made in solvency, consumer protection and market strengthening. Influenced by the rigorous selection from 2004 until 2006, number of insurance companies dropped from 40 to 16. However, Serbian insurance industry did not suffer loss and competing ability grew further because of numerous, up-to-date organized foreign insurers which recently entered the market. If market share of the foreign companies in 2004 amounted 9% of the total premium, it reached 26% at the end 2006. In life insurance foreign insurers hold 85% market share.  Serbian insurance market in 2005/06 reached significant growth of 50%.

Yet, these achievements may not deflect attention from the fact it is necessary to harmonize insurance by-laws with the EU Directives. With gradual expansion of the Serbian economy complex combination of insurance which have international foundation, are necessary. Insurance of new types of risks at high sum insured and liability, which was unusual in Serbia so far, requires strong international reinsurance net. Although it is understandable focus of the newly structured Serbian insurers on portfolio growth, adequately planned management for risks must follow measures undertaken by responsible persons.

If the following conditions are met as soon as possible, Serbian economy shall faster benefit from insurance sector:


-          Setting up of a permanent consumer protection (quality control) in a sense of integrated insurance supervision which shall not emphasise drawbacks and issue injunctions only, but draw attention to improvements and alternative solutions (consultancy council made of eminent scholars and practitioners);

-          Reform of the current, to much nationally focused, expensive and complicated system of reinsurance in Serbia. Even smaller number o big losses occurring at the same time, may lead Serbian insurance market to the ruin limits;

-          Reform of the Serbian by-laws on capital investment that are too focused on the domestic market and less sufficient as insurance activities develop. Entry on the strong international financial markets is imminent for secure and overall profitable investment, whereas limiting investment exclusively to local markets prevents progress of own state.

-          Early concentration in life and health insurance should be made on demographic trends in decades to come. Market embracing older population (return of tenths of thousands of well-standing Serbs from abroad after their retirement) shall in Serbia have more opportunities for profit than it would pose a problem.

Wolfgang Rohrbach


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