NOTES TO BOSNA RE Co. Ltd. ANNUAL REPORT FOR 2007

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NOTES TO BOSNA RE Co. Ltd. ANNUAL REPORT FOR 2007

ANNUAL REPORT 2007SOCIO - ECONOMIC ENVIRONMENT IN WHICH BOSNA RERESULTS WERE ACHIEVEDA 2007 year cannot be considered a year of prosperity for Bosnia and Herzegovina. Still, despite unstablepolitical situation in the country, its economy recorded better trends. Of course, this reflected to BH insuranceindustry. Unfortunately, there are no adequately updated data on insurance premium tendency in BHfor 2007. The last data published by two entities’ agencies show the growth of insurance premium in F BiHof 11,90% compared to the same period of 2006 and the growth of 10,74% in R Srpska. This suggests that2007 recorded higher increase of insurance premium than it had in previous years.Table 1 shows the tendencies of insurance premium participation in gross domestic product (GDP) and insurancepremium per capita.Table 1 INSURANCE PREMIUM IN RELATION TO GDP AND INSURANCE PREMIUM PER CAPITAPROGNOSISPLANYear 2003 2004 2005 2006 2007 2008GDP in KM mio 14.505,00 15.786,00 16.928,00 19.106,00 20.061,30 21.264,98Insurance Premium in KM 263.866.897 295.804.289 336.729.509 360.711.802 402.391.892 475.841.430Premium in % of GDP 1,82% 1,87% 1,99% 1,89% 2,01% 2,24%Premium per capita (in KM) 68,32 76,97 87,60 93,86 104,71 123,76GDP in EUR mio 7.416,29 8.071,25 8.655,15 9.768,74 10.257,18 10.873Insurance Premium in EUR 134.913.002 151.242.331 172.167.064 184.429.016 205.739.707 243.293.860Premium in % of GDP 1,82% 1,87% 1,99% 1,89% 2,01% 2,24%Premium per capita (in EUR) 34,93 39,36 44,79 47,99 53,54 63,28Population in thousand 3.862 3.843 3.844 3.843 3.843 3.845Average Exchange Rate of EUR 1,95583 1,95583 1,95583 1,95583 1,95583 1,95583Note: Projection for 2007 is based on data for 6 months of 2007These data illustrate slow changes in participation of insurance premium in GDP but also announce a possibilityof its increase if projection for 2007 fulfils. The premium per capita is in increase which is not a result onlyof the increase of insurance premium but partially a result of population stagnation. On the other side, theparticipation of insurance premium in GDP had not recorded any increase in the last four years (2003 - 2006).When we compare data from surrounding countries or some other European countries, we get devastatingtruth that BH citizens spend minimum amount for insurance in comparison to the rest of Europe.These trends, as a result, positively influenced realization of reinsurance premium in Bosna RE. However, itmust be noted that, as for the BH market, there are still two statements that negatively influence reinsuranceas an insurance category.First of all, the insurance is in BiH considered an expenditure that should be avoided or decreased tominimum no matter the volume of exposure to certain risks. This is proved by the fact that major partof BH property is not insured no matter whether it is private or public.The competition within insurance companies shifted from the field of MTPL insurance to Voluntaryinsurance. The law on public purchases and compulsory tenders stimulated competition even more.14

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