The Results of the Insurance Market in Iceland 2008


The Financial Supervisory Authority of Iceland (FME) has published tables containing the
annual accounts of insurance companies with a licence in Iceland and the result of insurance
classes in 2008

Non-life insurance market

The total loss of non-life companies in 2008 was 49.6 bn. ISK, compared to profit of 20.3 bn.
ISK in 2007. The loss is mainly due to loss in their investments, in recent years, investments
operations have been the main source of profit.

The total loss in insurance operations was 3.8 bn. ISK. However this loss is mainly due to an
earthquake in the southern part of Iceland, which is covered by Viðlagatrygging, a specialised
state owned catastrophe insurance company. The results of Viðlagatrygging are not used in the
following discussion. Other non-life insurance operations had a profit of 863 million ISK,
compared to 2.7 bn. ISK in 2007. Most of the profit came from compulsory motor vehicle
liability (2.4 bn.), but the largest loss was in other motor insurance (1 bn.). Earned premiums in
non-life insurance amounted to 37.3 bn. ISK in 2008, thereof were 18.8 bn. ISK in motor

The assets of insurance companies were reduced by 33 bn. ISK, amounting to 25.1%. The total
assets at year end 2008 were 97.9 bn. ISK, compared with 130.6 bn. ISK at year end 2007. The
equity capital amounted to 5.5 bn. ISK and reduced by 88.1%. Due to the collapse of the
Icelandic financial and stock markets there was a considerable change in the asset mix. The
holding in equities went down from 16.5 bn. ISK to 5.8 bn. ISK, whereas the holding in bonds
increased from 7.4 bn. ISK to 13.9 bn. ISK. Most notable was the decrease of investment in
subsidiaries and affiliated companies, from 59.8 bn. ISK to 40.2 bn. ISK.

At year end 2008 two companies, Sjóvá-Almennar tryggingar hf. and Vörður tryggingar hf. did
not hold enough capital to meet the minimum guarantee fund (defined in the Icelandic law as
255 million ISK) and have been operating according to a short term plan to re-establish financial
strength. The FME consider the plans of both companies to be realistic and has therefore not
taken any measure to interfere with their daily operations.

Life insurance market

The life insurance companies operated with a profit of 1.5 bn. ISK in 2008. The technical result
of the life insurance operations was 1.3 bn. ISK profit, compared with 1.4 bn. ISK profit in
2007, but the profit from investments amounted to 300 million ISK, compared to 30 million in
2007. A large increase was in reserves and bank deposits, from 500 million ISK to 2.7 bn. ISK,
whereas equity investments decreased by 51% and bond investments decreased by 33%. It
therefore seems that life insurance companies have managed to avoid the impact of the
financial market collapse.

Unit-linked investments reduced by 21.3% in 2008, probably both due fall in market prices and
lapses of contracts. In total, assets of life insurance companies decreased by 11.4 %, from 13.8
bn. ISK to 12.2 bn. ISK.  Equity capital amounted to 4.7 bn. ISK and decreased by 7.5%.

At year end 2008 one company, Vörður líftryggingar hf. did not hold enough capital to meet the
minimum guarantee fund (defined in the Icelandic law as 255 million ISK) and has been
operating according to a plan to re-establish financial strength.

The life insurance companies are all subsidiaries of other companies. Two are owned by non-
life insurance companies, two are owned by banks and one by a holding company.




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