POL I CY The Israeli Insurance, Pension & Finance Newspaper 8 Special edition 2022 National crises in the compulsory motor and business sectors, a rail crash in the motor property sector, the exit of reinsurers from the Israeli market – this is the picture of the situation drawn by Shlomo Insurance CEO Uri Omid. Despite record earnings in the insurance sector in 2021, Omid warns that the picture is a false one caused by unusual capital market profits, with already in the first quarter of 2022 the companies posting losses. But Omid is optimistic – the insurance sector is beginning to raise premiums and is receiving for this purpose backing from the Capital Market Authority, which also pave the way for the return of the reinsurers to the Israeli market. How do you regard the insurance companies’ 2021 results, which showed record earnings? Omid: This is a distortion. There has never been such a great gap between the underwriting results and the investment profits, at least in the elementary sector. Most of the companies showed an underwriting loss, despite the bottom line showing significant profits. The earnings came from a number of sources, including capital market profits, the illiquidity premium in life insurance and from other factors, but not one of them deriving from the insurance underwriting results, for example, the companies’ nostro portfolio did 10%, a result which in all probability will not be repeated. Thus, we will be paying the price this year. Economically, there can be no repetition of this. In 2022, the companies are expected to post losses, both on investments and in the underwriting area, which highlight even more the underwriting problem in the market as a whole. What is happening in compulsory motor insurance? Omid: There is a real national problem. The compulsory motor sector is unable to make a profit, for a number of reasons. First of all – the Pool’s losses (standing at 450 million shekels this year), growth in the average wage - a main component in the payment of compensation, and an additional factor – the high number of electric scooter and bicycle claims. These are relatively new claims in the sector, which are growing in extent and in the compensation paid in respect of them, but they are not being priced in and no additional premium is being collected in respect of them. Caution needs to be exercised in considering whether it is worth selling compulsory motor insurance at the existing prices in the market, or that the premium needs to be adjusted to the insurance risks currently being identified by us. In addition, consideration needs to be given to the Pool’s significant and unbelievable losses and the steps that need to be taken by the relevant parties in order bring them under control and reduce them. How can the Pool reduce its losses? It does not carry out underwriting? Omid: We are today the biggest compulsory insurance company in Israel. The Capital Market Authority needs to deal with the Pool tariff. I don’t know whether the Israeli public is aware that when purchasing compulsory motor insurance they are subsidizing motorcyclist one third of their price and mini-tractors a quarter of the price. In the end, it is the public which is bearing the cost. On an optimistic note – the focus is currently on the underwriting results in the general insurance sector, the Capital Market Commissioner is aware of the situation, is helping and permitting tariff adjustments in accordance with the needs of the market. The trend of profitability in THERE IS A NATIONAL PROBLEM IN COMPULSORY MOTOR INSURANCE – ELECTRIC SCOOTERS AND BICYCLES ARE INCREASING THE CLAIMSWITHOUT BRINGING IN PREMIUMS conversation with Shlomo Insurance CEO Uri Omid • The insurance sector is experiencing a rail crash – at the bottom of the turnover cycle, a 35% increase in claims • In business insurances we are seeing many areas in the country were protection is being paid • There is no factor in underwriting that knows how to estimate the cessation of payment of protection – this is a far from simple national problem, but we need to see the unique situation could be a huge opportunity for the reinsure will get to the market in 2023 we are in front of dramatic increasing in online of business POLICY Uri Omid
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