Download Poland - A.M. Best

AMB Country Risk Report
August 24, 2016
Our Insight, Your Advantage.
Country Risk Tier
CRT-2
Poland
• The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three
categories of risk: Economic, Political and Financial System Risk.
• Poland, a CRT-2 country, has low levels of economic, political and
financial system risk. Gross domestic product (GDP) growth is
expected at 3.6% in 2016, with medium term economic growth in
the range of between 3.0% and 3.5%.
Very
High
Very
High
Very
High
• Inflation rates in Poland have been deflationary since 2014, with
the current rate in 2016 at -0.2%. Poland is expected to return
to positive inflation levels in 2017, with inflation for next year
forecasted at 1.3%.
• The majority of countries pictured below are categorized as CRT-1
and CRT-2. Notable exceptions are the Eastern European countries
of Bosnia and Herzegovina, Belarus and the Ukraine.
High
High
High
Moderate
Moderate
Moderate
Low
Low
Low
Finland
Iceland
Sweden
Very
Low
Very
Low
Very
Low
Finland
Sweden
Norway
Norway
Estonia
Economic
Risk
Political
Risk
Financial
System
Risk
Isle of Man
Isle of Man
Ireland
Country Risk Tier 5 (CRT-5)
Very High Level of Country Risk
United
Germany
Kingdom
Belgium
Liechtenstein
Guernsey
Luxembourg
Jersey
Switzerland
France
San Marino
Croatia
France
Andorra
Switzerland
Romania
Montenegro
Azores
Monaco
Morocco
Malta
Tunisia
Bulgaria
Macedonia
Turkey
Greece
Cyprus
Malta
Georgia
Armenia
Albania
Monaco
Tunisia
Gibraltar
Montenegro
Greece
Spain
Portugal
Gibraltar
Bosnia & Serbia
Herzegovina
Italy
Albania
Republic of
Moldova
Romania
Croatia
Bulgaria
Macedonia
Ukraine
Hungary
Slovenia
Bosnia & Serbia
Herzegovina San Marino
Italy
Spain
Czech
Ukraine
Republic
Slovakia
Republic of
Moldova
Austria
Hungary
Slovenia
Belarus
Poland
Germany
CzechBelgium
Republic
Slovakia
Liechtenstein
Russia
Lithuania
Poland
Netherlands
Andorra
Portugal
Latvia
Lithuania
Luxembourg
Austria
Jersey
Country Risk Tier 3 (CRT-3)
Moderate Level of Country Risk
Country Risk Tier 1 (CRT-1)
Very Low Level of Country Risk
Denmark
Estonia
Belarus
Netherlands
Guernsey
Country Risk Tier 4 (CRT-4)
High Level of Country Risk
Country Risk Tier 2 (CRT-2)
Low Level of Country Risk
Latvia
Denmark
Ireland
United
Kingdom
Russia
Syria
Lebanon
Israel
Copyright © 2016 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No part of this report or document
may be distributed in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of
A.M. Best. For additional details, refer to our Terms of Use available at A.M. Best website: www.ambest.com/terms.
AMB Country Risk Report
Poland
Regional Summary: Eastern Europe
Vital Statistics 2015
Nominal GDP
Population
GDP Per Capita
Real GDP Growth
Inflation Rate
Literacy Rate
Urbanization
Dependency Ratio
Life Expectancy
Median Age
USD bn
mil
USD
%
%
%
%
%
Years
Years
474.89
38.0
12,495
3.6
-0.9
99.8
60.5
43.8
77.4
39.9
Insurance Statistics
Polish Financial Supervision
Authority
Insurance Regulator
Premiums Written (Life)
Premiums Written (Non-Life)
Premiums Growth (2014 - 2015)
USD mil
USD mil
%
5,857
8,287
-0.9
Regional Comparison
Country Risk Tier
CRT-2
CRT-1
CRT-5
CRT-4
CRT-2
CRT-5
Poland
Austria
Belarus
Romania
Slovenia
Ukraine
Economic Risk: Low
• Poland is the largest economy in Eastern
Europe and benefits from strong trade
and financial linkages with the Eurozone.
The private sector accounts for over twothirds of GDP and continues to increase its
competitiveness and productivity due to
investment and technological transfers.
Economic Growth
8
CPI Inflation
7
• Economic growth will be driven by the low
inflation rates, low interest rates, increased
consumer confidence and a stronger labor
market. These conditions will continue
to increase domestic demand. The newly
appointed Labor and Justice Party plans to
improve local business, rather than solely
focus on foreign investment.
6
5
4
%
• Downside risks for the region include lower
growth projections for the euro area and
the United States, tighter global financial
conditions and continued weakness in
many emerging market economies. Russia’s
continued economic weakness due to
persistent lower commodity prices and
sanctions are also a major headwind for the
Eastern European region.
• Many Eastern European countries are
classified as emerging or frontier market
countries. Despite this classification,
steady growth, low inflation and the
implementation of market based reforms
have increased economic stability and
regional political power.
Source: IMF, Axco, Swiss Re and A.M. Best
Real GDP
• Eastern European countries are at various stages
of transition as some attempt to bring their
legal, economic and political frameworks more
in line with European Union standards. While
the region shows a great deal of potential with
further integration into global markets through
the European Union, all countries would
ultimately benefit from a more transparent and
less cumbersome regulatory environment.
3
2
1
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-1
-2
Source: IMF World Economic Outlook and A.M. Best
2
2020
2021
• The country has an educated, relatively
inexpensive labor force that is attractive to
foreign direct investors. Poland has used EU
funds to invest in infrastructure to improve
roads and railways.
AMB Country Risk Report
Poland
Political Risk Summary
Political Risk: Low
Score 1 (best) to 5 (worst)
Poland
World Average
• The current president of Poland is Andrzej
Duda of the Law and justice Party. The next
presidential elections are scheduled to be
held in May 2020.
International Transactions
Policy
5
4
Legal System
Monetary Policy
• Currently Poland is heavily influenced by
its right wing parties. The Law and Justice
Party won a majority in the October 2015
legislative elections. The party advocates a
larger role of the state in the economy. This
will likely lead to increased public spending
and a more nationalist policy stance.
3
2
1
Regional Stability
Fiscal Policy
0
Social Stability
• Opposition from other political parties
remains common in Parliament, leading to
potential division and instability.
Business Environment
Government Stability
Labor Flexibility
• Poland continues to revamp it pension
system. The government announced plans
to dismantle its state owned pension
fund worth an estimated 35 billion USD.
Approximately 25% of the funds will
continue to be managed by the government,
but the remainder of the funds will be
transferred to individual retirement accounts.
Additional details are expected to be released
in 2017 as the plan moves forward.
Source: A.M. Best
Financial System Risk: Low
• The insurance industry is regulated by the
Polish Financial Supervision Authority.
GDP Per Capita and Population
for Selected Countries
Population
45
40,000
40
35,000
35
30,000
30
USD
45,000
25,000
25
20,000
20
15,000
15
10,000
10
5,000
5
Poland
Austria
Belarus
Romania
Slovenia
Ukraine
Source: IMF and A.M. Best
3
0
Millions
GDP Per Capita
0
• External liquidity is adequate due to the
country’s high levels of foreign reserves
and its access to the International Monetary
Fund’s flexible credit line, that was
reaffirmed in January 2016.
50
50,000
• The financial sector is well-capitalized, and
liquid. However banks are experiencing
weakening profitability due to a prolonged
period of low interest rates and higher
regulatory costs. The percentage of nonperforming has decreased in recent years,
to 4.3% in 2015.
• The most recent government has vowed to
reduce the retirement age, which will put a
further strain on the pension system.
AMB Country Risk Report
Poland
GUIDE TO BEST’S COUnTry rISk TIErS
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is
evaluated and factored into all Best’s Credit Ratings. Countries are placed into one of five tiers, ranging from “CRT-1” (Country Risk Tier 1), denoting
a stable environment with the least amount of risk, to “CRT-5” (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest
challenge to an insurer’s financial stability, strength and performance.
A.M. Best’s Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.
Country risk Tiers
Country risk Tier
Definition
CRT-1
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
system regulation with deep capital markets; mature insurance industry framework.
CRT-2
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
regulation; mature insurance industry framework.
CRT-3
Developing legal environment, legal system and business environment with developing capital markets; developing
insurance regulatory structure.
CRT-4
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
markets; partially to fully inadequate regulatory structure.
CRT-5
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
human development and social instability; nascent insurance industry.
Country risk reports
A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a country’s Country
Risk Tier assignment. It is not intended to summarize A.M. Best’s opinion on any particular insurance market or the prospects for that market.
Categories of risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High
and (5) Very High.
Category of risk
Definition
Economic Risk
The likelihood that fundamental weaknesses in a country’s economy will cause adverse developments for an insurer.
A.M. Best’s assessment of economic risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability.
Political Risk
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
government and society, the effectiveness of international diplomatic relationships, the reliability and integrity
of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the
appropriateness and effectiveness of the government’s economic policies.
Financial System Risk
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial
volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor
regulatory structure. In addition, it includes an evaluation of whether the insurance industry’s level of development and
public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will
contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least
amount of risk and five being the highest amount of risk.
Category
Definition
International Transactions
Policy
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy
Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy
Measures the ability of a country to effectively implement fiscal policy.
Business Environment
Measures the overall quality of the business environment and ease of doing business.
Labor Flexibility
Measures the flexibility of the labor market, including the company’s ability to hire and fire employees.
Government Stability
Measures the degree of stability in a government.
Social Stability
Measures the degree of social stability, including human development and political rights.
Regional Stability
Measures the degree of stability in the region.
Legal System
Measures the transparency and level of corruption in the legal system.
Country risk Tier Disclosure
A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Best’s Credit Rating Methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Version 091714
Copyright © 2016 by A.M. Best Company, Inc.
Copyright © 2016 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No part of this report or document
may be distributed in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of
A.M. Best. For additional details, refer to our Terms of Use available at A.M. Best website: www.ambest.com/terms.
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