2008 Reinsurance Market Position
Little catastrophe reinsurance is purchased locally in Slovakia, with non-life premium in 2007 at USD1.3 billion. Larger international programs bought outside Slovakia protect the top seven non-life companies. But, reinsurers pricing exposures within group programs tend to view catastrophe business from Slovakia favorably. While reinsurers are aware of the heavy flood exposure, past losses have been modest and sometimes surprisingly low. This has kept pricing competitive and capacity plentiful.
Floods in Slovakia are normally caused by heavy rainfall and snowmelt. Traditionally, Slovakia was considered a greater flood risk than the Czech Republic, but after disastrous floods in 1964, a system of dams and dykes was built along the Danube River in an effort to prevent a recurrence. After the severe floods of August 2002, losses in Slovakia were significantly lower than those in neighboring Czech Republic and Austria, suggesting that the system is effective.
The insurance market in Slovakia is relatively developed, having been strongly influenced by the Czech Republic and Austrian and Czech company subsidiaries operating in the country. Insurance penetration is quite high, with non-life spend per capita of USD164.
Earthquake risk exists in Slovakia, but demand for cover is not particularly high. The market tends to lack consensus on coverage for natural perils. As a result, some policies cover full value, others sub-limit and some exclude certain perils completely. The larger risks tend to be sub-limited, and some policies state that they will only pay for earthquake events exceeding magnitude 5 or 6. Similar to earthquake, storm is sometimes covered for full values, sometimes with sub-limits.
Flood coverage is provided in most household policies and is optional for commercial and industrial buyers. The biggest flood in Slovak history, which occurred in August 2002, accelerated the introduction of sub-limits in the market, but some insurers continue to give full cover.
While the August 2002 flood event was far less significant in Slovakia than it was elsewhere, a state of emergency was declared in Bratislava, and the insurance market incurred an estimated loss of around USD72 million.
Guy Carpenter has recently launched a new, fully probabilistic, flood model for Slovakia, as part of its wider CEE flood model project. The model covers all major river networks in the country and operates on the G-CAT platform. Following its launch in March 2008, it is already being used by a number of Slovakian insurers.