Boston, MA -- (SBWIRE) -- 01/22/2013 -- Key Insights And Key Risks

At first glance, Ukraine's insurance sector appears to be one of the largest, and the fastest growing in Central and Eastern Europe (CEE). However, the weaknesses and threats continue to outweigh the strengths and opportunities. As of late 2012, it is not obvious that any material progress has been made in resolving the problems in the non-life segment, which accounts for almost all the sector's activity. These problems include non-use of insurance by over 80% of the population, widespread poverty, a volatile economic and political environment and the very small scale of the domestic insurance companies. In contrast to Russia for example, there is no large former state-owned (near) monopoly that has doubledigit market share thanks to absolute scale, brand and massive branch network. Also unlike Russia, is the non-life segment is not bolstered by substantial compulsory medical expenses insurance (CMEI). Ukraine is home to about 400 insurance companies and we believe most of these are effectively captives or investment companies.

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Notwithstanding that several multinationals have taken the view that Ukraine is not a market they need to be in, the number that remain is surprisingly large. However, in no case would the sudden closure of the Ukrainian subsidiary or affiliate have a significant impact on the multinational parent company. This reflects the weaknesses of the market. It may also be a contributing factor. Unlike in almost all other markets in CEE, there is no incentive for the major foreign insurance companies to assist with the development of the sector through channelling capital, encouragement of global best practice, product innovation and so on.

The life segment barely exists. Some - but not all - of the multinationals who are committed to building a regional business across CEE are present. However, in a country where the average person spends less than US$5 a year on life insurance, it is clear that the constraints and obstacles are huge.

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