Tuesday, August 23 2016 19:24
Karina Melikyan

Central Bank of Armenia forecasts a growth of the MTPL loss ratio from 50% to 55% within three years

Central Bank of Armenia forecasts a growth of the MTPL loss ratio  from 50% to 55% within three years

ArmInfo. Insurance premiums of  Armenia's insurance companies will grow 19.9% in 2016-2018 accounting  for 0.59% of GDP (in developing countries this indicator is 1.35%, in  developed countries - 3.51%). Insurance premiums per capita will  total 12.247drams by the end of 2017 ($26, versus $67 in developing  countries and $1577 in developed ones).   

According to the Armenian Central Bank's official forecast report  "Prospects of Development of the Insurance System for 2016-2018,"  motor third party liability insurance (MTPL) will be prevailing over  other insurance lines -55.7% of total. Medical insurance will account  for 15.9% of total, insurance against fire and natural calamities  will account for 9.4% of total, and CASCO - for 7.6% of total.   Indemnities will grow 7.8% annually in average within 2016-2018, with  the reinsurance payments to fall 4.4% annually in average accounting  for 4.6% of total indemnities (down from 6.6%). MTPL indemnities will  account for 62.9% of total (vs 68% in 2015), medical insurance  indemnities will account for 23.5% of total (vs 24% in 2015) and  CASCO indemnities to make up 7.6% of total (vs 7.9% in 2015).  The  loss ratio of MYPL will increase by 4 percentage points ranging  between 54%-55% in 2016-2018. The loss ratio of medical insurance  will increase by 3 percentage points to 70%, CASCO loss ratio will  fall by 1.5 percentage points to 43.9%, with the loss ratio of the  property insurance against fire and natural calamities to grow by 5  percentage points to 12%.  

Assets of insurance companies will grow by 6.3% annually in average,  with bank deposits to account for 35.8%-37.9% of total assets within  2016-2018. The share of investments in securities in total asserts  will fall insignificantly from 19% to 18.8%.  

Liabilities of insurance companies will grow by 4.2% annually in  average within 2016-2018, with technical reserves to account for 77%  of total versus 71% in 2015. The share of borrowings in total  liabilities will fall from 8.4% to 5.9%, with the share of  reinsurance premiums to growth from 4.8% to 5.4% within the three-  year period under review.  In absolute term, the reinsurance premiums  will grow by 1.4% annually in average accounting for 11.1% of total  insurance premiums (down 1.8 percentage points).  Total capital of  insurance companies will grow by 9.3% annually in average within  2016-2018, as retained profits will grow.  The statutory capital will  account for 66.6% of total capital (down from 87%), while profits  will accounts for 27.6% of total (up from 6%).  Insurance companies  will prefer capitalization to payment of dividends within the period  under review. The capital adequacy ratio will increased by 23.1  percentage points to 192.6% (versus required 100%), mainly as total  capital standard will be increased. In 2016-2018, insurance companies  of Armenia anticipate a doubling of profitability. Return of assets  (ROA) and return on equity (ROE) is expected to grow to 6% and 13%  versus 3.3% and 8.6% in 2015, respectively.  

According to ArmInfo's Ranking of Armenian Insurance Companies, by 1  July 2016, the aggregate amount of insurance premiums made up 15.8  bln AMD, with the amount of payouts exceeding 6.2 bln AMD (the  figures are taken from the insurance companies' reports according to  IFRS standards). In Jan-June 2016, the net profit of the insurance  system totaled 2.6 bln AMD (up 74% versus Jan-June 2015). According  to the insurance companies' reports by the Armenian Central Bank's  standards, the insurance premiums amounted to 16.1 bln AMD. In the  structure of insurance premiums, the share of motor third party  liability insurance (MTPL) was the biggest - 58.3%, or 9.4 bln AMD  (down 1.8% versus Jan-June 2015); the share of health insurance  (including the voluntary one) was 3.1 bln AMD, or 19.1% in the total  amount of insurance premiums (up 15.1% versus Jan-June 2015). In the  structure of indemnities, the share of MTPL insurance was the biggest  again- 57.98%. The share of health insurance was 25.22%. To note,  there are 6 companies in the insurance market of Armenia, which  operate in 17 classes (out of 19) of insurance. INGO Armenia (the  only company insuring water transport) is licensed to provide  services in 16 classes of insurance, and Rosgosstrakh Armenia (the  only company providing credit risk insurance) provides services in 15  classes of insurance (as of 30 June 2016, the AMD/USD exchange rate  was 476.68 AMD/$1).

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