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2019 Country Focus – Poland

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Macro overview

Due to a rapid GDP growth by 5,1% in 2018. Poland moved up to 23rd place in the ranking of largest economies in the World. Polish GDP touches 2,000 bn PLN (c.a. 470 bn EUR, current prices).

Unemployment rate is at a 25-year low at 5.8% and still dropping which rapidly drives labor costs upwards.

The driver of such a situation are mostly internal. Exports increased by 8.2% y/y, but it is not uncommon. A similar growth was observed in the last 5 years.

Hot topic: Construction sector

A rapid economic growth is especially visible in construction sector. Large road and infrastructure projects started in 2015-2017 are still ongoing. Housing is booming, plot prices increased by 45% in last 2 years. In the last 5 years, 53% of all flats and houses constructed in Central and Eastern Europe were built in Poland. This trend seems to continue since Poland had a 20% increase in new housing projects in the last 24 months.

Such a situation, although good for GDP, drives severe risks. Long-term construction projects were signed on fixed prices or with just a small indexing clause. Margins for high-profile projects were extremely low, often just 1-3%. With average construction costs increase reaching 20% despite a stable consumer price index, this makes financial standing of construction companies extremely volatile. Currently, over 50% of receivables in construction sector are overdue. The number of companies having payment backlogs increased by 23% y/y.

The market is rapidly working on solutions to improve sector stability. Indexed pricing is becoming more popular in both private and public sector.

Bonding – New challenges

Securing performance of the construction project by providing bonds amounting to 5-10% of the project value has become a market standard. Upon completion, this amount is reduced to 1.5-3% of the contract value and stays in force for the next 5-7 years to cover potential warranty issues. With the construction sector booming, the capacities insurance market can provide can easily be exhausted. Insurance bonding market increased by more than 1/3 y/y in 2017 and surpassed trade credit insurance market in terms of written premium. In 2018 this trend continued.

Due to increased risk of default in construction sector, insurers became reluctant to sign large bonds and aim to reduce their exposure. Alongside with market capacity issues, this puts significant pressure on brokers to produce solutions. As a result, we observe an increase of co-insurance bonds to distribute the risk more evenly and a bigger involvement of foreign insurers, mostly from Switzerland and Great Britain.

EIB International Trade Credit & Bonding Team

EIB is one of the strongest insurance brokers in Poland. Our position was built based on solid know-how, client service focus and responsibility.

After 25 years of constant development, we employ over 100 licensed brokers and handle over 350 mln PLN of corporate premium per year.

We are seated in Torun with branches in Warsaw, Cracow, Katowice, Wroclaw, Rzeszow, Gdynia, Bydgoszcz and Wloclawek.

International presence through Astreos Credit and Eos Risq is one of key drivers for our growth.

EIB International Division is headed by Lukasz Zon, with EIB since 1995. Trade credit & bonding is coordinated by Mateusz Kita, Ewelina Szulc and Bartosz Tokarski.

All the written material is the property of EIB, and this article has been written by  Mateusz Kita.