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Section 4. Finance
Marenglena Hoxhaj, Fan S. Noli University E-mail: [email protected]
DEVELOPMENT AND PROBLEMS OF ALBANIAN INSURANCE INDUSTRY
Abstract: The insurance market is a very important part of the financial system. The insurance industry as a young age industry in the Albanian economy has made a lot of progress. The purpose of this paper is to present us with the problems associated with the insurance market in Albania. The beginnings of the challenges of the liberalization of the insurance market began in 1992, but only in 1996 the necessary legal infrastructure was created for the establishment and functioning of this market. Being a developing market, its performance has also grown steadily.There are currently 9 insurance companies licensed by the Insurance Supervision Authority (ISA), now the Financial Supervisory Authority (FSA). Albania has the smallest insurance market in the region (without stopping in Europe). During January - May 2017 the insurance market experienced an increase by 10.98% compared to January - May 2016 The number of insurance policies indicate an increase 17.63% compared to January - May 2016. The number of Non-Life insurance policies indicate an increase 9.36% more than January - May 2016. The development of the economy, the introduction of foreign investors, and the increase of citizens' awareness are considered as key factors in the further development of this market.
Keywords: Insurance market, ISA, FSA.
Introduction started in Europe and developed after the industrial
Security is a global concept that has worked as revolution. In America, the development of the in-long as human existence. The first written security surance industry was sluggish. The creation of in-policy came into effect in ancient times in an obelisk surance in America required more than 100 years monument of Babylon that had the code of King during which it was matured both in practice and in Hamurabi engraved in it. "Hamurabi Code" was one policies that developed during the same period in of the most important forms of written laws in the Europe [1]. The beginnings of the challenges of world. These ancient laws were extreme in nature the liberalization of the insurance market began in and in many respects, but presented basic security 1992, but only in 1996 the necessary legal infra-coverage in the sense that the debtor should not pay structure was created for the establishment and his loans if he experiences a great personal disaster functioning of this market.The insurance industry that makes it impossible, for example. invalidity, as a young age industry in the Albanian economy death, flood, etc. [1]. The main insurance business has made a lot of progress.
Overview of Albania
Albania is a country in Southern and Southeastern Europe. It spans 28,748 square kilometres (11,100 square miles) and had a total population of 3 million people as of 2016. Albania is a unitary parliamentary constitutional republic with the capital in Tirana, the country's most populous city and main economic and commercial centre, followed by Dur-res. The country's other major cities include Vlore, Sarande, Shkoder, Berat, Korge, Gjirokaster and Fier. Albania occupies the southwestern portion of the Balkan Peninsula, bordered by Montenegro to the northwest, Kosovo to the northeast, the Republic of Macedonia to the east, and Greece to the south and southeast. The country features notable diversity with the landscape ranging from the Albanian Alps in the north, Korab Mountains in the east, Ceraunian Mountains in the south and Skanderbeg Mountains in the center.It has a coastline on the northern shore of the Mediterranean Sea; the Adriatic Sea to the west and the Ionian Sea to the southwest, forming the Albanian Riviera.Albania is a democratic and developing country with an upper-middle income economy. The service sector dominates the country's economy, followed by the industrial and agriculture sector.Following the collapse of communism in 1990, Albania went through a process of transition from a centralized economy to a market-based economy.Al-bania has a high Human Development Index and is ranked thirty-seventh in the world for life expectancy. It provides universal health care and free primary and secondary education to its citizens.Albania is a member of the United Nations, World Bank, UNESCO, NATO, WTO, CoE, OSCE and OIC. It is also an official candidate for membership in the European Union.Furthermore, Albania is one of the founding members of the Energy Community, including the Organization of the Black Sea Economic Cooperation, and Union for the Mediterranean.
Literature review
Researchers around the world have attempted to define the insurance concept. [2; 3, 7016-7023]
defines insurance as an element designed to protect the financial well-being of an individual, company or other entity in the event of a sudden loss. According to him, some forms of insurance are required by law, while others are optional. [4]says that insurance is a complex issue that includes the economic and social aspect to address the risks to life and property. It is social because it represents the cooperation of different individuals for mutual benefits by working together to reduce the consequences of similar risks and is economical because it has direct connection to the financial well-being of the parties involved. Moreover, [3] and [5, 104-179.]consider insurance to refer to an economic institution that allows the transfer of financial risk from an individual to a group of individuals through a contract between the two participating parties. [6] argued that apart from insurance included transferring the risk from one individual to another, dividing losses on an equal basis among all members of the group. [7] defines insurance as a resource gathering activity together to pay compensation to the insured or to provide for the occurrence of a particular event in exchange for a periodic review known as a reward. An insurance contract is usually verified by a document called the insurance policy which is signed by the insurer and its agent. Insurance companies help buyers organize their risk. Moreover, insurance companies create value by accumulating and distributing different types of risk.
Summary about insurance industry in Albania
The beginnings of the challenges of the liberalization of the insurance market began in 1992, but only in 1996 the necessary legal infrastructure was created for the establishment and functioning of this market. The insurance industry as a young age industry in the Albanian economy has made a lot of progress.. Being a developing market, its performance has also grown steadily.There are currently 9 insurance companies licensed by the Insurance Supervision Authority (ISA), now the Financial Supervisory Authority (FSA).
Table 1. - Insurance company in Albania
Source: [8].
Insurance classes according to Albanian insurance legislation
1. Accident insurance includes industrial injury and occupational diseases.
2. Illness insurance covers fixed financial income from health disability as well as reimbursement of hospital treatment expenses.
3. The provision of ground vehicles (other than those that move on rails) covers damages or losses from motor ground vehicles and non-motorized land vehicles.
4. The provision of rolling stock on rails covers damages or losses from rolling stock on rails.
5. Aircraft insurance covers damages or losses incurred by aircraft.
6. Ship insurance covers damages or losses incurred by river and canal ships; lake ships; marine ships. 7. Insurance of goods in transport (including goods, luggage and all other types of items) covers all damages or loss ofgoods during transport or baggage, regardless of the mode of transport.
8. Fire and Forensic Protection covers damage to or loss of items other than those included in items 3-7 caused by: fires, explosions, storms, forces of nature, nuclear energy, landslides.
9. Provision of other property damage covers all damages or losses on property (other than those included in points 3-7) when the damage is caused
by hail or frost and any such events, such as theft, of various from those mentioned in point 8.
10. Ensuring civil liability for the use of vehicles covers all responsibilities arising from the use of vehicles on land (including carrier responsibilities).
11. Civil liability insurance from the use of aircraft covers all responsibilities arising from the use of aircraft (including carrier responsibilities).
12. Civil liability insurance for ships (seas, lakes, rivers, and canals) covers all responsibilities arising from the use of ships or boats (small vessels) that sail to seas, lakes, rivers and navigation channels (including carrier responsibilities).
13. General civil liability insurance covers all responsibilities other than those mentioned in points 10-12.
14. Credit insurance covers the risk of non-payment due to insolvency, export credits, installment loans, mortgage loans, agricultural loans.
15. The provision of guarantees covers both direct and indirect warranties16. The provision of various financial losses covers financial losses incurred as a result of: employment risk, inadequacy of income, bad weather, loss of income, unforeseen general expenses, unforeseen trading expenses, loss of value in market, lease or income loss, loss from trading, other financial losses.
17. The provision of legal protection covers the costs for legal and judicial services.
18. Assistance in providing assistance to persons with disabilities during travel or at other times of distance from the home or permanent residence.
19. Life insurance - death covers survival insurance up to a certain age, death insurance, survival insurance up to a certain age or premature death, life insurance with return of premiums.
20. Wedding-birth insurance covers the expenses associated with marriage or childbirth.
21. Life insurance linked to investment funds covers life insurance linked to shares in investment funds where the insured assumes the risk of invest-
SIGAL-LIFE Uniqa Group Austria SiCRED
SIGMA INTERALBANIAN Vienna Insurance Group
SIGAL Uniqa Group Austria ATLANTIK
INTERSIG Vienna Insurance Group
ALBSIG
EUROSIG
ANSIG
INSIG
ing in relation to the value of the shares or other securities of value.
22. Provision of collective fund management covers the provision of unified individuals for the purposes of capitalization of their contributions and the distribution of assets in relation to the accumulated funds between persons who have reached a certain age or between insurance beneficiaries, in case of death of certain persons.
23. The provision of payment funds covers life insurance based on actuarial calculations, in which, in exchange for a single or periodically agreed payment, the insured is indemnified for the specified period and the respective amount.
Main developments in insurance industry
During January - May 2017 the insurance market experienced an increase by 10.98% compared to January - May 2016. Gross insurance premiums amount to ALL 6,093,468 thousand, increasing by ALL 602,896 thousand.
The number of insurance policies reached 455,791 which indicate an increase 17.63% compared to January - May 2016.
Gross insurance premiums in Non-Life insurance business reached the value of ALL 5,634,936 thousand, which indicate an increase by 11.04% compared with January - May 2016.
The number of Non-Life insurance policies reached 378,264 which are 9.36% more than January - May 2016.
Gross insurance premiums in Life insurance business reached the value of ALL 456,976 thousand, which indicate a increase 15.34% compared to January - May 2016.
The number of Life insurance policies reached 77,523 which indicate an increase by 86.41% compared to January - May 2016.
During January - May 2017, the paid claims are in the amount of2,353,637 thousand, or 59.76% more than January - May 2016.
In January - May 2017, there is a increase of 8,120 in the number of paid claims, which reached the number of 21,481 paid claims. The Non-Life insurers paid 20,711 claims and Life insurers paid 770 claims.
The development of the economy, the introduction of foreign investors, and the increase of citizens' awareness are considered as key factors in the further development of this market.
Conclusion
• Insurance is a complex issue that includes the economic and social aspect to address the risks to life and property.
• The beginnings of the challenges of the liberalization of the insurance market began in 1992, but only in 1996 the necessary legal infrastructure was created for the establishment and functioning of this market.
• The insurance industry as a young age industry in the Albanian economy has made a lot of progress.
• There are currently 9 insurance companies licensed by the Insurance Supervision Authority (ISA), now the Financial Supervisory Authority (FSA).
• There are twentythree insurance classes according to Albanian insurance legislation
• During January - May 2017 the insurance market experienced an increase by 10.98% compared to January - May 2016.
• During January - May 2017, the paid claims are in the amount of2,353,637 thousand, or 59.76% more than January - May 2016.
References:
1.
Investopedia. US, a division of IAC. - 2014. URL: http://www.investopedia.com/articles/08/history-ofinsurance.asp. (Accessed 2014/04/07). 2. Dickson PGM. The Sun Insurance Office: The History of Two and a half centuries of British Insurance. London: - 1 (40). - 1960.
3. Oke M.O. Insurance Sector Development and Economic Growth in Nigeria. African J. Business Management. - 2012. - 6 (23): 7016-7023.
4. Agbaje A. R. Accounting for Specialized Transactions: First Edition, Akins Prints, Mokola, Ibadan - 2005. ISBN: 978-040602-2
5. Shittu A. I. Financial International and Economic Growth in Nigeria. British J. Arts and Social Sciences. -2012. - 4 (2): 104-179.
6. Marijuana C., Sandra L., Lime P. "Insurance Sector development and Economic growth in Transition countries". International Resources Journal of Finance and Economics - 2009. Issue 34.
7. Adebisi W. Principles and Practice of Insurance: First Edition, Akure, Ondo: Adefemi Publisher - 2006. ISBN: 978-068-721-1
8. Financial Supervisory Authority (FSA) - 2017.
