Thursday, July 29 2010 17:35
Armenian insurance market may pass by world financial trends
ArmInfo. The Armenian insurance market may pass by the world financial trends. The analysts of ArmInfo stress that in June 2010 the Central Bank of Armenia adopted the normative "Basic standards regulating insurance companies' activity, their size, order of their formation and settlement, indices determining the reliability of reinsures". This decision directly affects the interests of Russian investors in Armenia, as the given normative envisages fixing minimal requirements for those insurance companies, where the reinsurance risks are placed.
Before introducing the latest amendments in the order, the minimal requirement for re-insurers was fixed at BBB- rating level under the Standard and Poors scale, a number of leading insurance companies of Russia comply with. Staring January 2011 the threshold value of rating is fixed at A- level, which actually deprives the Russian companies of the opportunity to participate in reinsuring Armenian risks. After the normative comes into force, the insurance companies of Armenia will have to place re-insuring in alternative markets. As a result of these normative amendments, Russia, the largest investor in both insurance market of Armenia and Armenian market in general, loses the opportunity to insure its own investments.
The ArmInfo analysts emphasize that in 2009 Russia's investments in Armenia's economy amounted to $502.9 mln, of them $384.8 mln being direct investments. As of 1 January 2010, the total number of enterprises and separate divisions with a Russian capital in Armenia was 1380, among them such companies as CJSC Rusal-Armenal, ArmRusgasprom, Hrazdan thermal power plant (power unit 5), South Caucasus Railway, Electric Networks of Armenia, VTB Bank (Armenia), Areximbank-Gazprombank Group, ArmenTel, K-Telecom, INGO Armenia, Rosgosstrakh OJSC, RESO Guarantee. It should also be noted that 4 out of 10 participants in Armenia's insurance market have 100% Russian capital.
The necessity to ensure financial stability of insurance companies of Armenia considering the latest trends of the global financial crisis is brought as justification of this decision, which is wide open for criticism. The recent developments have failed the forecasts based on the ratings of the lead international agencies. It is not a secret that a number of financial companies with high sustainability ratings have turned bankrupts. At the same time the largest Russian companies were not damaged by the crisis and retained their financial stability. Ratings by the top three international rating agencies are known to have raised harsh criticism by the leaders of the Federal Reserve System, the European Bank, the financial departments in European countries. They came out for tough regulation of the activity of those agencies. ArmInfo analysts say the Central Bank of Armenia either does not follow global trends or considers the conclusions and assessments by the financial regulators of the biggest countries in the world groundless.
"Ranking of Armenian Insurance Company" Bulletin published by ArmInfo says that the volume of premiums collected by local insurance companies in 2009 exceeded 8 billion drams and half of this amount was transferred for reinsurance.
Active consumer lending causes double-digit growth in bad loans 
Luys Foundation: Armenian government continues to face challenges in budget planning
Armenia`s brandy and winemaking industry in crisis - economist 
Even at embryonic stage, powerful impetus given to economic activity in energy sector - ENA acting manager 
Armenian NA OKs ENA nationalization 
China preparing to open new chapter of One Belt, One Road initiative with involvement of Armenia - diplomat 
The Merger between "Ardshinbank" CJSC and "Ardshininvestbank" CJSC Has Been Completed
Ticket packets 1.2% of total number of transport tickets in Yerevan