Insurance in Eastern European Countries

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Insurance in Eastern European Countries
Until the end of the 19
80s, insurance in state-planned economies was part of the
state administration. In fonner USSR, social insurance was guaranteed on the
seventh day of the Great October Revolution in 1917 to every citizen to the
account of the State. All workers, employees and members of collective farms
were subject to compulsory social and state economic benefits.
In 1918 the private insurance companies were nationalized and all kinds
and branches of domestic insurance became a state monopoly known as
Gosstrakh. Business as a rule was divided into the insurance of domestic risks in
local currency and the insurance of risks in foreign currency, including
reinsurance carried out by the insurance company of the USSR known as
Ingosstrakh. The two markets were strictly segregated and were operated by
separate state companies. Risks in foreign currencies, mainly marine and
aviation, were reinsured in the international market.
The structure of the insurance industry in other eastern European countries
has been largely following the soviet model. In Poland there was PZU and
Warter, and in Bulgaria, DSI and Bulstrad. Czechoslovakia also had two state
companies, each writing domestic risks but each officially with a monopoly in
its own republic: Ceska Statni Pojistovna in the Czech region and Slovenska
Statna Poistovna in Slovakia.
Until the mid-1980s, Hungary had only one state insurer, the Allami
Biztosito (AB), but in 1986 the AB portfolio was split between AB and a new
company, Hungaria. In turn, Hungaria and the National Savings Bank set up
Garantia. The [rrst sign of competition developed only after Allianz acquired a
51 % shareholding in Biztosito. In 1992, foreign insurers dominate the market
with 65 % of the combined capital share of the 14 existing insurers.
A Polish law of 1984 had allowed private sector competition, although it
was not until 1988 that the first cooperative emerged, the Wester in Lodz. At the
beginning of 1990 there were four licensed companies in Poland.
In Romania, the original monopoly ADAS was split into two companies,
Asirom and Astra, still state owned operations. In 1992 more than 20 companies
are operating in the market.
The discrepancies between the countries are substantial. This situation in
former Czechoslovakia for example, can partially be explained by the long
history of a well developed insurance market in this country before the second
world war. Reforms are currently being undertaken in these countries but it is
premature to predict what will be the extend and effect of these reforms towards
more competition and privatization.i Part of the problem for the infonnaI
integration of central European insurance with western partnership remains the
ambiguity of the law in many countries. Insurance brokers and agents, almost
unknown before, are also gaining ground.

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