The evolution of financial services in transition economies: An overview of the insurance sector

This article examines the evolution of the third pillar of the financial services sector insurance - within the countries of Central and Eastern Europe (CEE) and the former Soviet Union (FSU) during 1990 - 2001. In doing so, special attention is also given to those eight countries ( Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia) within the CEE and FSU groupings that on 1 May 2004 became member states of the European Union (EU). The purpose of this article is to redress a number of concerns, including the shortage of available research on the subject, problems with data accuracy evident in previous studies, and issues related to 'insurance culture' that have a direct effect upon the evolution of the insurance sector within the region. Accordingly, various sources of data are utilised to examine the development of the insurance market in CEE and the FSU with respect to both life and non-life coverage. Hierarchical cluster analysis is employed to assess the development of individual country markets with regard to both insurance density and penetration rates. The findings from the study show that despite some concerted efforts, only a few countries have been able to transform their insurance markets successfully in accord with international standards.