Bancassurance: a bright future?

euro in black light

With all the turmoil across the Eurozone and with regulatory upheaval ahead, it seems it could be an interesting time for the bancassurance market, as Jakki May reports.

A recent survey in the UK suggested only one in 10 consumers bought insurance through their main bank provider, however, bancassurance as a concept has taken off across Europe as banks and insurers forge close ties in a bid to access an increased customer base.

However, the financial crisis, and even more recently, the Eurozone crisis has called into question the long-term viability of some of those relationships. It seems a divide has appeared between bancassurance relationships involving banks and subsidiary insurers, and those straight joint venture agreements between separately owned banks and insurers.

Generally speaking, bancassurance projects are alive and well with billions of Euros of business involved.  

Alive and well

Better news comes from a series of reports into the sector by Finaccord, based on a survey of nearly 1200 banking entities, at the end of 2011, which revealed that, generally speaking, bancassurance projects are alive and well with billions of Euros of business involved.

In its report on motor and household insurance across 20 European countries, for example, the study revealed 42.1% of those entities offer personal motor insurance and 53.9% household insurance and in total those combined markets were worth around €138.3bn in 2010.

In this area, Allianz emerged as the leading provider with a weighted share of bancassurance partnerships for personal motor and household insurance combined of 5.3%, followed by Axa, Aviva and Zurich. Germany was the largest market, although the most rapid growth is occurring in relatively young markets including Poland, Romania, Russia and Turkey.

Good growth

Moving to creditor insurance, Finaccord said the market was worth around €37.5bn in gross written premiums in the region in 2011, including coverage for life and permanent disability as well as the temporary disability and unemployment elements.

Separating out Northern, Central and Eastern Europe, the market was around €13.28bn in terms of GWP in 2011, with a forecast growth of 7.4% per annum predicted until 2015, when the market may be worth around €17.64bn.

Germany was the largest market, although the most rapid growth is occurring in relatively young markets including Poland, Romania, Russia and Turkey.

Offering products

Turkey, Russia and Poland are forecast to be the fastest growing markets between 2011 and 2015 and the major companies are Talanx, BNP Paribas, Allianz, Zurich and Genworth Financial.

The Finaccord survey found 48.6% of firms offer at least one form of investment-related life insurance or retirement savings product, and the aggregate market across the 20 countries was worth around €635.9bn in premiums in 2010.

On protection-related life insurance, 45.5% of firms offer at least one product and the market, excluding creditor cover, is worth around €41.6bn while 38.4% offer at least one accident and health insurance product and that market was worth around €167.5bn.

Busy with banks
And, despite the turmoil at the end of 2011, deals are still being done. Dual Italia, RSA and Aviva have all been busy. A spokesman at Aviva summed up its activity. "Aviva is a clear and undisputed leader in bancassurance," he claimed "with more than 50 agreements across Europe. Insurance sold though banks is the primary route to market across the region. We're also one of the world's largest bancassurance franchises with more than 100 partnerships worldwide."

It also boasts from longevity, celebrating the 10th anniversary of its deal with Spanish bank Unicaja early last year. At the time, it said the Spanish partnership had resulted in a business volume of €2.39m in 2010, as well as €13.97m in managed funds.

"Insurance sold though banks is the primary route to market across the region." Aviva

Trustworthy insurers

RSA remains equally confident. David Hills, sales director for Central & Eastern Europe, says: "We see no significant change in insurance distribution buying habits of customers. Customers still look for trustworthy reputable insurance companies, which provide products that are value for money."

He adds, if banks choose the right partner in an insurance company that develops a proposition for the customer, that is value for money, easy to buy and provides the right level of claims care and attention deserved then banks have proven to increases the level of insurance penetration into their customer bases.

Lithuania picture
However in Lithuania, the picture is a little different, following the bankruptcy of the fourth largest bank SNORAS in November. The bancassurance market has shrunk as a result, with partner insurers losing that market share. Swedbank has now launched a non-life insurance company in Lithuania, adding to the competition.

In some countries, such as Estonia and Lithuania, banking insurance products are mandatory, including property insurance when taking out a mortgage.Major banks in Estonia either choose an insurer to provide services, such as the co-operation between SEB and RSA, or offer their own insurance products, like Swedbank non-life insurance.


 "Customers still look for trustworthy reputable insurance companies." Hills

Rating action

Elsewhere, not everything is rosy in the garden either. The end of 2011 saw a number of rating agencies take action against European insurers. For example, Fitch Ratings downgraded the insurer financial strength ratings for Assicurazioni Generali, Fondiaria-SAI, Societa Reale Mutua di Assicurazioni and ITAS Mutua.

The effect has spread beyond Europe. AM Best, it said that, as a result of the continued negative developments regarding the eurozone sovereign debt crisis, it was taking rating actions on a number of European insurers including Allianz in Germany but it was also acting on some of the Mapfre and Axa subsidiaries in the US. It said: "These rating actions are in response to the continued negative developments among the eurozone economies and its potential effects on the ultimate parent."

Stress tests
Fitch said it had undertaken a series of stress tests in Italy and Spain and concluded some insurers' large investment concentrations in sovereign debt justify/require distinction relative to similarly rated peers.

Fitch's Marc-Phillippe Juilliard explains that in countries like Spain Portugal Italy, France and Belgium there tend to be strong ownership links between banks and insurers, particularly in life business where "a significant proportion" of life insurance is held by the banks.

"This could increase problems for insurers, but so far we have seen this in isolated cases and not across the market as a whole." Juilliard

Lower proportion

This varies from the Swiss and UK models where it is a much lower proportion held by the banks. This is often a reflection of the fact that life products in southern Europe tend to be unrelated to pensions - something that requires a more skilled expert to sell.

However, Juilliard believes the southern European model may come under threat in the face of changing regulation - particularly the Basel III rules for banks, which will require banks to move these life assets back onto the balance sheets.

Movement from banks
"The expectation," he says "is banks will want to move sales of these products in the future and so the prediction is sales of new life business will suffer in the future. Banks will continue to sell these products but it will be done differently."

For existing policies, Juilliard says there is a chance banks will take an aggressive stance, encouraging policyholders to cash in and then transfer to on-balance sheet products - particularly if there are liquidity issues. "This could increase problems for insurers," he says, "but so far we have seen this in isolated cases and not across the market as a whole."

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