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Feb 3 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings says in a new comment that profitability in the Ukrainian non-life insurance sector has recovered strongly in recent years and has considerable potential for long-term growth. However, standards of regulation and financial reporting, although improving, continue to act as a significant drag on ratings.
'€œThe non-life insurance market in Ukraine is still recovering from the effects of the global financial crisis,'€� says Clara Hughes, Senior Director in Fitch's Insurance team. 'While profits have rebounded strongly, driven by financial markets, economic weakness is likely to hinder growth in the near term. However, Ukraineâ€™s insurance penetration rate is in the bottom five in Europe, indicating that there is significant scope for premium growth in the long term.'€� The Ukrainian insurance market is highly fragmented with more than 350 insurers but only USD2.5bn of gross written premiums in 2012. Profits rebounded to USD740m in 2012 from an overall market loss of USD124m in 2009, despite the high level of competition. However, the low level of regulatory oversight and lack of transparency in financial reporting mean it is possible that profits are being materially overstated.
Foreign companies are taking an increasing interest in the region with around one-third of Ukrainian insurers having foreign shareholders. In total, foreign investments in Ukrainian insurance companies amount to more than USD600m. Foreign investors bring better business practices and expertise to a market that has a low level of transparency. In Fitchâ€™s view, the lack of transparency and the still weak profitability are the main factors limiting the creditworthiness of Ukrainian insurance groups.
The comment '€œUkrainian Non-Life Insurance: Recovery in Progress'€� is available at www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings' Report: Ukrainian Non-Life Insurance: Recovery in Progress