HISTORY OF INSURANCE BUSINESS IN BULGARIA 1878-1946

We begin our review with a minimum requirement to understand the meaning of insurability. There is a straightforward example, which illustrates the advantages of insurance policy from a financial standpoint.

Table 1: Hypothetical data comparison between premium insurance vs. annuity banking.

If person deposits at age	Simple saving account, with 5 % discount rate (flat annuity deposit 20.25 lv.)	Insurance policy of 1000 lv., payable for premium deposit 20.25 lv. (1000 - bank rate)
22	21.26	978.74
23	43.59	956.41
24	67.03	932.97
25	91.64	908.36
26	117.49	882.51
27	144.63	855.37
---	---	---
44	880.72	119.08
45	946.22	53.78
46	1014.80	-

Comment: We see from Table 1 above, that for the same presentation an insured person gets a considerable sum of money in excess until his age of 46 years, given that the occurrence event is covered with liability.

On the factual side, the story of insurance business in Bulgaria remains untold — at least, from viewpoint of sources in the international literature. As a complicated matter and we consider this narrative in two parts - viz., First Part, which follows the genesis of insurance work in this country by the end of WWII, and Second Part, from the 1950s of the past century up-until now. As interesting as it is, we left the first part for another issues of our bulletin and transferred directly on state of affairs from some 50 years ago, when the "State Insurance Institution" was established /i.e., DZI with transliteration from bulgarian/. With minor fluctuations, this is the major player on the insurance market in Bulgaria and has remained the greatest shareholder even at the time when the country entered the precincts of the European Union. The simple arithmetic shows, that DZI with its affiliated firms has assets for more than 60 % of gross undertakings based on the National Statistics Institute and the Financial Supervision Commission statistics data. The only other investor with private off-shore capital is "Allianz Bulgaria Ltd.", which holds about 16 % of the insurance assets.

While our data on the topic is still incomplete and we present some excerpts on the historical aspects of insurance work in Bulgaria. The materials are from various sources and give a limited view on the real importance of the problem.

"With the establishment of the People’s Democratic Government the insurance companies were nationalized (1946) and the State Insurance Institution established in place of the private and co-operative insurance companies. Its activity develops along several lines: life insurance, fire insurance, insurance of crops, livestock and other farming activities, liability insurance, etc. It operates under the direct guidance of the Ministry of Finance and is an economic, self-financing organization. Fifty per cent of its annual profit goes into the State Budget. The financial and economic importance of this institution is very great; it renders all-round insurance protection of the people and the national economy, thus contributing to the maintenance of the continuity of the production process. It constantly and significantly decreases the cost of insurance coverage and accumulates money resources which can be used for financing socialist construction.

The insurance organization Bulstrad was founded in 1961 as a joint stock company with headquarters in Sofia. Bulstrad engages in insurance activities, transportation insurance, cargo insurance, serving foreign trade, insurance of vehicles and means of transportation — ships, aircraft, liability insurance in air transport, etc. Bulstrad is governed by a Board of Managers elected from among the shareholders. A part of its net annual profit goes into the State Budget. Bulstrad has a very good reputation on the international insurance and underwriters’ market. Its entire activity is based on solid financing and it is distinguished for remarkable financial stability ..."

"Until the mid-1980’s, the country had either a trade surplus or a manageable deficit primarily because its main import, Russian oil and gas, was heavily subsidized, so much so that Bulgaria had quantities left over for hard currency export. When the good times ended in 1990, the foreign debt ballooned to over $10 billion and Bulgaria announced a moratorium on debt repayment. Drawn-out negotiations with commercial creditors led to restructuring deals requiring the country to repay $1 billion annually, beginning in 1996 when the economy was expected to improve. However, delayed reforms and other economic woes put the timetable at least ten years behind schedule and Bulgaria has had trouble meeting its interest, let alone, principal payments.

The insurance market is in a consolidation phase and remains underdeveloped. Progress has been made bringing insurance legislation into line with the acquis and developing the administrative capacity for enforcement. The main prudential rules of the first-generation insurance directives have been adopted but further legislative work to align with the acquis communautaire is necessary. The supervisory system in the insurance consists of two authorities: the National Council on Insurance, established with the Council of Ministers chaired by the Minister of Finance; and the Insurance Supervision Directorate, a structure within the Ministry of Finance whose director is appointed by the prime-minister. The number of insurance companies operating in Bulgaria has decreased from about 120 in 1998 — to 26 at the end of 1999 as a result of the increased prudential requirement, the re-licensing process completed in 1998 and the consolidation of the sector. Although the most important insurance legislation seems to be in place, difficulties remain due to insufficient expertise of the personnel. Presently up for privatization is the state insurance company, DZI, one of the largest insurance companies in the country. Established in 1946 through the merger of 30 insurance companies, it is 100 % state owned, with 1,400 full time employees and some 3,000 sales agents ..."

Addendum: On the international arena there is scarcely anything of considerable interest in the field. The theoretical aspects of insurance science have suffered major developments lately, however, this is more in the domain of business administration rather than health policy, per se. Our literature search have found some worthy of note materials from CEA /Comite Europeen Des Assurances/, which reveal recent progress in European insurance policy and mainly from legislative point of view. More particularly, these are aspects of Private Medical Insurance /PDI/ with terms of distinction from social security schemes; also, distinctions are made between public and private insurance with particular emphasis on changing risks in society.