PERFORMANCES OF INSURANCE MARKET IN MONTENEGRO IN CONDITIONS OF FINANCIAL CRISIS

Abstract

Insurance market of Southeast European countries is characterized by significant changes due to uneven economic growth and
development. At markets of developed countries, life insurance premium has the leading position in total insurance premium. Due to
insufficient economic development of Montenegro, and inadequate awareness and distrust of citizens, compulsory insurances make the
biggest part in the total portfolio of the insurance market in Montenegro. The insurance industry was not fully exposed to crisis and drastic changes have not been expected within this type of industry. The global financial crisis did not have a direct negative
impact on the insurance market in Montenegro, but rather the indirect one that may be identified through the decline in purchasing
power of citizens, decrease in the lending activity of the banks, and through possible recession. Since the financial markets both in
Montenegro and in the region are not sufficiently developed, the insurance companies were not able to invest funds in sophisticated
securities and financial derivatives, while the Law on Insurance, on the other hand, limited the companies to invest available monetary
assets in risky securities, such as stocks. Insurance development trends primarily depend on economic growth, while strict rules
and other regulations dominantly affect the improvement and development of insurance market in every country. Therefore, the control
of business of insurance companies, licensed brokers and insurance agents, directing insurance companies to invest free funds into
nonrisky forms of property and adequate promotion of insurance activities can provide reduction in negative impacts of economic
events, i.e. affect insurance companies so that they realize the best possible business results in this and later period.