In 2020, GWPs recorded a slight decrease of 0.5% YoY. Of that Non-life observed an increase of 4.9%, while Life is down by 13.6%.

Croatian Insurance Bureau (HUO) published the GWP in 2020. Since the beginning of the year, GWP’s observed a slight decline of 0.5% YoY (or HRK 50.9m), indicating solid resilience by the sector in regard to the pandemic (in terms of written premiums).

The total amount of GWPs collected reached HRK 10.677bn (includes insurers located in Croatia and insurers operating in Croatia but based in another EU country). The aforementioned decrease came solely on the back of the life segment which observed a strong decline of 13.6% YoY (or HRK -425.2m) to HRK 2.69bn. Such a decrease could arguably be attributed to the maturing of policies which were underwritten coupled with lower savings through life insurance and early termination of these policies. Meanwhile, non-life segment which traditionally accounts for the biggest portion of total GWPs (75%), increased by as much as 4.9% YoY (or HRK 374.3m). Although this marks a slowdown in growth of the non-life segment, which has seen in the past two years double digit increases, by 11.45% (2019) and 10.11% (2018), this still marks an impressive result given the market situation.

Croatia’s largest insurer, Croatia Osiguranje accounted for 25.4% of the market, being slightly up (+0.1% YoY).

Top & Bottom Performing Insurance Segments (2020 vs 2019) (HRK m)

When observing GWPs by structure since the beginning of the year insurance against civil liability in respect of the use of motor vehicles (which accounts for 24.8% of GWPs) recorded a high increase of 12.94% YoY (or HRK 297.3m). Strong growth of this type of insurance can be explained by both, increase in number of policies issued (4.4%) and increase in average policy value (8.2% YoY).

The second biggest category in Non-life insurance is vehicle insurance (casco policy) which accounts for 12.5% of total GWPs, and it has recorded an increase of 3.89%. Health insurance observed also a solid performance of +4.67%.

One particularly interesting segment is Fire and elementary damage insurance is up by 6.81% YoY (or HRK 46.4m). The mentioned segment includes earthquake insurance which has been in the spotlight after two destructive earthquakes struck central Croatia in March & December. HUO does not give much detail on specifically the increase of earthquake insurance, however according to a recent statement by Croatian Chamber of Commerce (HGK), it is estimated that earthquake insurance increased by 28% in 2020, with GWPs amounting to HRK 110m. The entire segment of fire and elementary insurance accounts for less than 7% of total GWPs. We note that back in 2016, HUO expressed concern regarding the lack of insurance by people in this segment.   

On the flip side, Credit insurance observed a sharp decrease of 33.3% (or HRK 127.95m). This does not come as a surprise given the expected lower loan issuance activity in Croatia as a result of Covid-19 outbreak.

Croatian Bureau of Statistic has announced that the prices of goods and services for personal consumption, as measured by the consumer price index (CPI) increased by only 0.1% in 2020.

When breaking down the CPI by main groups by purpose of consumption, the prices of Alcoholic beverages and tobacco increased by 3.6%. Of that Alcoholic beverages increased by 2.4%, while Tobacco prices increased by 3.9%. Food and non-alcoholic beverages coupled with Miscellaneous goods and services follow, with each of the cathegories increasing by 1.9%.

On the flip side, 4 segments observed a decrease in prices, as visible from the graph below. Transport leads with a decrease of 4.4%. To be specific, Purchase of vehicles observed a decrease of 2%, while Operation of personal transport equipment witnessed a decrease of 6.1%.

CPI – Main Groups by Purpose of Consumption (2020)

When observing solely December the prices of goods and services for personal consumption, measured by the CPI, decreased by 0.6% MoM on average. As compared to YoY, they decreased by 0.7%. To put things into a perspective, according to Eurostat, Euro area annual inflation is expected to be -0.3% MoM in December 2020.

Viewed by main groups by purpose of consumption, in December 2020, the highest decrease was recorded in the prices of Clothing and footwear, by 9.5% MoM on average, in the prices of Food and non-alcoholic beverages as well as in the prices of Communication, by 0.7% (in each group) on average, in the prices of Furnishings, household equipment and routine household maintenance, by 0.3% on average, and in the prices of Alcoholic beverages and tobacco as well as in the prices of Restaurants and hotels, by 0.1% (in each group) on average.

Such a trend of low to no inflation has been present for some time in the Euro area and in the US as well. One thing that seems to be a consensus among analysts is the expectation of low to no inflation in the short run (at least next 2 years). It might seem counterintuitive that we are witnessing a trend of no inflation especially given the unprecedented monetary stimulus of central banks. One of the reasons behind the puzzle can be explained by the fact that the increased money supply has, in a sense, not reached the real economy, which can be seen by observing the velocity of M2 money. In other words, the expansion of the money supply has not led to the circulation of money in the real economy, which meant no inflation.