journal N3 2025

Expanded Summary 

This paper explores the transformation of the Georgian insurance industry in the context of ongoing regulatory reforms, economic developments, and alignment with international standards. In recent years, Georgia’s insurance sector has demonstrated notable growth, reaching a record-breaking milestone in 2023 when the total value of gross written premiums surpassed 1 billion GEL for the first time. Despite this achievement, the market remains relatively underdeveloped, with insurance penetration still at a modest 1.33% of GDP—far below the average levels observed across the Eurozone. This gap highlights the untapped potential and the need for systemic improvements in the sector\'s structure, regulatory framework, and consumer engagement.

The primary focus of this study is to evaluate the regulatory evolution of Georgia’s insurance market, particularly in relation to the implementation of Solvency II directives and other European standards. While some progress has been made in harmonizing national legislation with EU norms, the full integration of these directives requires further institutional capacity-building, financial investments, and strategic oversight. The Insurance State Supervision Service of Georgia (ISSSG) has played a critical role in initiating reforms aimed at improving market transparency, enhancing consumer protection, and fostering a more competitive and sustainable insurance environment. The introduction of capital adequacy requirements, the promotion of independent directorship in supervisory boards, and the development of risk-based supervision are among the key developments discussed in this research.

The study employs a data-driven and policy-oriented methodology, combining descriptive statistics with legislative analysis and international comparison. By analyzing recent financial data, including premium volumes, claims ratios, underwriting profits, and solvency margins, the paper presents an empirical portrait of market performance. In parallel, the research outlines the legislative instruments regulating the sector, such as the “Law on Insurance,” “Law on Non-State Pension Insurance,” and specific laws related to mandatory vehicle insurance. These instruments collectively define licensing requirements, capital thresholds (7.2 million GEL for life and reinsurance, 4.8 million GEL for non-life), and procedural conditions for market entry. 

In terms of market structure, the research reveals that health insurance occupies the largest share (42%) of the total market volume, mainly through corporate insurance packages. This is followed by motor insurance (19%), property insurance (12%), liability insurance (7%), and life insurance (8%). These figures suggest a strong concentration of demand in a limited number of insurance products, underlining the need for product diversification and financial innovation. Additionally, the number of active insurance companies and brokers remains relatively low, though interest in brokerage services is growing, as reflected by the increasing number of new registrations.

International experiences, especially from EU member states, provide useful benchmarks for evaluating Georgia’s progress. As discussed, the adoption of Solvency II and the Insurance Distribution Directive (IDD) in Europe has significantly improved the resilience and accountability of insurance companies. These frameworks are designed to prevent insolvency crises and ensure timely claim settlements by enforcing optimal risk assessment and capital allocation standards. Georgia’s gradual transition toward these standards is promising, but it requires continued technical assistance, policy refinement, and capacity development to reach full effectiveness.

Despite the structural improvements and regulatory tightening, several challenges persist. Public awareness and trust in insurance services remain limited, especially outside large urban centers. Many citizens are unaware of the benefits of coverage, and a significant portion of the population still perceives insurance as a luxury rather than a necessity. Moreover, some critical types of insurance, such as third-party motor liability, are not yet mandatory, further constraining market expansion. These limitations point to the need for both public education campaigns and legal reforms to stimulate demand and build a risk-aware society.

From a financial perspective, the insurance market in Georgia maintains a relatively stable solvency ratio—reported at 179% in the latest assessment—suggesting that insurers currently hold surplus capital above the minimum regulatory requirements. However, this stability is partially reliant on regulatory interventions, including mandatory capital injections and asset portfolio adjustments. It is essential for regulators and policymakers to evaluate whether such stability translates into long-term financial growth and improved operational efficiency for market participants. 

In conclusion, the Georgian insurance sector is on a path of cautious but steady transformation, fueled by regulatory alignment with the EU, modest market growth, and increasing institutional maturity. The combination of legislative harmonization, improved governance practices, and sectoral digitization provides a foundation for future resilience and competitiveness. However, realizing the full potential of the industry will require a multi-dimensional approach involving legal reforms, financial education, technological modernization, and strategic investments. The findings of this study contribute to the broader academic and policy dialogue on insurance market development in emerging economies and call for further empirical investigations into the causal links between regulation, financial performance, and public welfare.