FinRating ArmInfo: Travel insurance fees have grown, while  reimbursements remained in decline

ArmInfo.In Armenia, fees on travel insurance reached a significant 70% growth in the first half of 2021 (from a significant 46.4% decline a year earlier), reaching a  volume of 235.9 million drams ($ 475.8 thousand). Such growth,  associated with some activation of outbound tourism, allowed not only  to approach the volume of two years ago, but also to return the 1%  share of travel insurance in the total portfolio of premiums.

This is evidenced by the Financial Rating of Insurance Companies of Armenia,  prepared by ArmInfo IC on the basis of the reports of IC portfolios  according to the standards of the Central Bank of Armenia.

At the same time, premiums on health insurance in the first half of  2021 lingered in moderate growth with a modest acceleration of annual  rates from 5.6% to 6.8%, to a volume of 9.75 billion drams ($ 19.7  million). This moderate growth somewhat reduced the share of medical  insurance in the total portfolio of premiums - from 37.6% to 36.7%,  nevertheless, retaining the second position for this class (after  CTPML), which dominates in premiums.

According to analysts of the national rating agency AmRating: "Now,  in the wake of the formidable delta strain of the coronavirus, with  too slow vaccination, the likelihood of a resumption of the lockdown  is not excluded if the applied restrictive measures turn out to be  ineffective. As a result, the tourism industry may again be  negatively affected. Even medical insurance is unlikely to take an  advantageous position in such a situation, like the one that did not  work in 2020 due to a number of unforeseen factors of the relevance  of this class. A change for the better is possible only with a full  economic recovery, which is expected at best in 2023, but judging by  the current low growth rates, slower vaccination and rapid mutation  of the virus, it will most likely be possible to return to the  previous rates of economic growth no earlier than 2025. " 

Meanwhile, the dynamics of reimbursements for these two classes is  multidirectional. Thus, payments for travel insurance lingered in the  decline, accelerating the pace from 45.4% to 79.3%, and for medical  insurance, they accelerated growth from 1.2% to 12%, amounting to 6.1  million drams and 4.1 billion drams in the first half of 2021,  respectively. As a result, the share of travel insurance in the total  volume of indemnities decreased in y-o-y terms from 0.3% to 0.04%,  and the share of medical insurance, even having decreased from 32.5%  to 30.3%, retained its 2nd position (following dominant CTPML).

Against this background, the growth of reinsurance transfers on  medical insurance has noticeably narrowed - from 31% to 15.7%,  amounting to 494.3 million drams, and on travel insurance came out of  the 29.4% decline by 3.5-fold growth- to 110.1 million drams.

According to the FinRating of ArmInfo, the high demand for medical  insurance is evidenced by the held 3rd position in terms of the  number of acting agreements, which by July 1 of this year totaled  66.6 thousand, of which only 4.3 thousand were concluded in Q2. And  y-o-y dynamics of these indicators are multidirectional: the decline  in existing contracts by 0.3% is accompanied by an increase in the  quarterly concluded by 23.8%.

And for travel insurance, the number of existing contracts is still  in decline, with an acceleration of y-o-y rates from 29% to 58.9%,  i.e. decreased from 13.3 thousand to 5.5 thousand. At the same time,  the quarterly concluded contracts reversed the y-o-y dynamics from  87.7% decline to growth by 4-fold, i.e. grew from 2.4 thousand to 9.7  thousand. 

To answer the question when international tourism will fully recover,  UN WTO experts conducted a survey in 2021, based on the results of  which they concluded that it would take from 2.5 to 4 years to reach  the 2019 levels. Among the obstacles to the recovery of the industry,  they name - the slow containment of the coronavirus, the lack of  coordination between countries in the introduction of restrictions to  combat the pandemic, as well as the deteriorating economic situation.  "2020 was the worst year in the history of international tourism -  the decline in activity was 74%, or more than 1 billion tourists  compared to 2019. In monetary terms, the industry lost $ 1.3  trillion. The pandemic also called into question the existence of  more than 100 million jobs in the tourism industry, since the  majority of employers in tourism are small businesses that do not  have a margin of safety and are not ready for significant costs.

In early 2021, due to the increase in the number of diseases, many  countries began to introduce repeated restrictions, including  mandatory testing, quarantines for entry and even complete closure of  borders. On the other hand, the gradual spread of vaccination against  COVID-19 restores confidence among consumers and market participants  in the imminent relaxation of bans and the restoration of  international tourism, "the UN WTO experts say.

The tourist flow in Armenia is also far from the pre- COVID level.  According to statistics, in the first half of 2021, 239,263 tourists  visited Armenia, which is 22.2% less than a year ago. The flow of  domestic tourism also decreased - by 28.4% per annum to 59,497  people. The number of people who left Armenia for the purpose of  tourism decreased even more - by 42.1% per annum to 115,546 people.  As a comparison, we note that in the first half of 2019, 770,055  tourists visited Armenia, and 684,808 people left for tourism, and  the annual growth in both cases turned out to be almost the same -  12.3% and 12.1%, respectively. "And judging by the resumption of  quarantine measures and slowly proceeding vaccination, which will  become mandatory only from October of this year, but only for state  agencies and economic entities, no rapid changes in the tourism  industry towards improvement should be expected, which means that  travel insurance will not soon restore its former volumes ",   AmRating analysts believe.

The first two positions in premiums in the segments of medical  insurance and travel insurance are held by INGO Armenia IC and  Rosgosstrakh Armenia IC. Their combined share in the total volumes of  medical insurance and travel insurance in the market is 61.4% and  74.1%, respectively. Moreover, the same companies take the lead in  terms of the number of existing contracts: Rosgosstrakh Armenia - in  medical insurance (37.8 thousand or 56.8% of the total number on the  market), and INGO Armenia - in travel insurance (1.8 thousand or 32,  7% of the total on the market).

According to the FinRating of ArmInfo, 6 insurance companies  operating in Armenia in total collected premiums in the amount of  26.6 billion drams ($ 53.6 million) in the first half of 2021, with  the annual dynamics of the 7.9% decline by 9.4% growth. The total  volume of insurance claims amounted to 13.6 billion drams ($ 27.4  million), with the output of the annual dynamics from the 4.7%  decline to 20.1% growth. The volume of premiums transferred for  reinsurance reversed the annual dynamics from 23% decline to 36.8th  growth, exceeding AMD 4.2 billion ($ 8.6 million). In premiums,  indemnities and reinsurance transfers, medical insurance takes the  second position.  Rosgosstrakh Armenia IC is the leader in terms of  total premiums and indemnities - AMD 7.6 billion and AMD 4.3 billion,  respectively, and in terms of reinsurance transfers, INGO Armenia IC-  2.2 billion AMD.