Georgia’s insurance market (ABSTRACT)

Sofo Gogoladze

Last year was marked by growth of insurance market. The total profit of insurance companies was more than 45,5mln laris. To experts’ mind, establishment of new insurance companies and expansion of existing ones might continue this year.
A number of changes were made in insurance system last year. The ratio of obligatory insurance within the mentioned indicator is smaller in the range of 11% with the rest falling at the share of voluntary insurance.
From structural point of view, in accordance with class of insurance the first place is held by property insurance.
The second place of insurance structure is occupied by medical insurance that is a voluntary one.
Nowadays, products of medical insurance are much diverse in Georgian insurance companies. Afterward, there comes insurance of ground traffic that is voluntary, but not obligatory. The fourth place is held by obligatory fire safety insurance followed by other types of insurance.
There are also annual indicators of damage reparations on the market. The indicators grow year by year. Private pension insurance is the most actual issue. Alternative pension systems should be put into action in Georgia. First steps in this direction have already been observed in Georgia. In 2004, several companies applied for licenses in order to put private pension schemes into operation. Where before only GPI Holding and the Georgian National Bank had such a scheme, now Aldagi, Imedi-L, Britain-Caucasus and Europace have obtained the licenses.
Investors as well as international experts are very interested in Georgian insurance market.
According to the law passed in 2005, a branch of foreign insurance company may work directly in Georgia. At first, when the reform of 1997 started, a foreign company could not invest more than 49% in a Georgian insurance company. Later on, with Georgia’s admission to the WTO, the requirements of the World Trade Organization increased the share of ownership to 100%. According to the law of this year, a foreign insurance company may sell its products directly through a branch. Eventually, under the law a company should have an authorized capital stock (despite the fact that it is a branch) or other standards of solvency.
In spire of the fact that there are no branches of foreign companies in Georgia and all companies are local economic agents and Georgian legal entities, foreign capital is invested in some companies. There are also companies founded solely by means of local capital.
General prospects look impressive. Insurance market grows by 30-40% in average due to the growth of demand on insurance products. The culture for the purchase of insurance products is on its development way, and it is a normal process. Post-soviet countries and East Europe have passed the same way, but our insurance market is small compared to other developed or developing countries; the market is low against GDP.
Compared to Ukraine, Russia, Kazakhstan, Azerbaijan, and Byelorussia Georgian insurance market is much undeveloped, surpassing only Armenian one. Perhaps, imperfect insurance market is also caused by the government’s negligence. In other countries, governments promote the formation of insurance companies’ obligatory products; appropriate laws are passed, etc. The only obligatory product in our country is fire safety insurance. Nowadays, insurance sphere lacks the government’s encouragement.