In Armenia`s insurance market, loss ratio for CMPTL began to grow  slowly

ArmInfo.In the insurance market of Armenia, the loss ratio for Compulsory Motor Third Party  Liability (CMPTL) is slowly starting to increase year-on- year, from 63% to 65% by September 1, 2023, noticeably higher than the pre-Covid 69% in Jan-August 2019.

This trend was observed against the background of the tariff  liberalization of CMPTL from April of this year, under the conditions  of which, in Jan-August, a slight slowdown in the y-o-y double-digit  growth rate of the number of signed contracts was recorded, from  18.3% to 13.8%, and a more noticeable slowdown in the growth of  insurance premiums, from 17.7% to 3.7%, and the compensation trend  changed from 8.7% decline to 11.9% growth, according to the data of  the Motor Insurers' Bureau of Armenia.

Thus, according to the Motor Insurers' Bureau of Armenia, the number  of vehicles with a CMTPL policy increased in Jan-Aug 2023 more  modestly than in the pre-Covid comparable period, which greatly  slowed down the growth in the volume of insurance premiums not only  on a y-o-y terms, but also in comparison with the pre-Covid period.  In particular, the number of vehicles with a CMTPL policy in Jan-Aug  2023increased by 5.6% per annum, which was much more subdued not only  last year's pace (8.1% y/y), but also the pre- Covid upward trend of  13% in 2019. However, in quantitative terms, by September 2023 there  were already 635.057 thousand such vehicles, against 601.134 thousand  pcs in 2022 and 567.483 thousand pcs in pre-Covid 2019.

A slowdown in the growth rate compared to the pre-Covid upward pace  was also observed in the number of CMTPL agreements concluded. Thus,  during the reporting period, y-o-y growth slowed from 18.3% to 13.8%,  very much lower than the 33.5% pre-Covid growth in 2019. But in  quantitative terms, in Jan- Aug 2023, more CMPTL contracts were  signed than a year ago and even in the pre-Covid period - 853.295  thousand pcs, against 749.896 thousand pcs in 2022 and 721.821  thousand pcs in 2019. And the volume of insurance premiums collected  for them increased by 3.7% per annum alone, slowing down from 17.7%  in 2022 and from 25.2% in 2019, reaching 17 billion drams ($44  million). The average insurance premium per CMTPL contract amounted  to 37.913 drams during the reporting period, with the decline  accelerating from 0.5% to 3.3% (versus a 6.2% decline in 2019).

A slower growth was also observed for CMTPL contracts that came into  effect during the reporting period - by 13.3% (versus 17.6% in 2022  and 32.6% in 2019), amounting to 860.897 thousand pcs. Under these  contracts, the volume of insurance premiums exceeded 17.6 billion  drams ($45.7 million), with y-o-y growth slowing to 3.7% from 16.1%  in 2022 and 16.2% in 2019.

At the same time, the number of terminated CMTPL contracts began to  decrease - by 20.7% (after an increase of 87.3% in 2022), amounting  to 64.852 thousand pcs, thereby returning to the downward dynamics of  pre-Covid 2019 (25.3%) . And the same trend reversal was observed in  the volume of returned or refundable premiums - from an 80.6%  increase to a 19.4% decrease - to 792.9 million ($2.1 million).

Against this background, the activity of sales of E-policies for  CMPTL has noticeably decreased to 208.421 thousand pcs for Jan-Aug  2023, with a slowdown in y-o-y growth from 38.6% to 11.2%. Moreover,  in comparison with pre-Covid indicators of the comparable period  (Jan-Aug 2019), the growth rate slowed down even more significantly  (from 3.6-fold), but in quantitative terms a 6.4-fold increase was  recorded (from 32.761 thousand pcs.). As a result, the share of  E-policies in the total number of CMTPL contracts over the year  decreased from 25% to 24%, while significantly exceeding the meager  5% in pre-Covid 2019.  A significant slowdown in dynamics is likely  due to expectations from the CMPTL tariffs, which also provides for  more noticeable (than the previously existing 5%) discounts on  E-policies for compulsory motor liability insurance.

48,682 applications for insurance compensation were submitted in  Jan-Aug 2023, which is 2.5% more than a year ago (versus a 7% decline  in 2022 and a 17.7% increase in 2019) . And the volume of payments on  them exceeded 11.2 billion drams ($29.1 million), with the y-o-y  dynamics from an 8.7% decline to a double-digit 11.9% growth,  exceeding even the pre-Covid 8.8% growth in 2019 . Moreover, 14,569  of the applications were related to the cases of simplified  registration of road accidents (according to the European protocol),  with a slowdown in the y-o-y decline from 25.5% to 17.1% (versus 4.3%  growth in 2019). The volume of compensation paid under the European  protocol exceeded 1.2 billion drams with a slowdown in the y-o-y  decline from 26.3% to 10.4% (after the dynamics changed from 0.6%  decline to 46.2% growth in 2019-2021), and the average size of one  payment amounted to 83.806 thousand drams, with the y-o-y dynamics  from a 1% decline to 8.1% growth, which was observed at a higher rate  in 2019- 2021 - from a 4.7% decline to 10.3% growth. For general  insurance claims, the average size of one payment was 230,812  thousand drams, with the y-o-y trend from a 1.9% decline to a 9.2%  increase (against the slowdown in the decline from 7.6% to 1 .5% in  2019-2021).

In Jan-Aug 2023, compared to the same period in 2022, the number of  vehicles with a valid CMTPL agreement increased by 33.923 thousand.  In particular, 4 insurance companies recorded an increase in this  indicator by a total of 57.5 thousand pcs, and 2 insurance companies,  on the contrary, had a decline of 23.6 thousand pcs. At the same  time, REGO Insurance recorded the biggest decrease (former RESO) - by  21,046 thousand pcs, and LIGA Insurance recorded the greatest growth  - by 26,242 thousand pcs. And LIGA Insurance (formerly Rosgosstrakh  Armenia)  continues to be the leader in the number of vehicles with a  valid CMTPL policy - 194,740 thousand pcs (with an annual growth of  15.6%), the second position is held by Nairi Insurance - 159.418  thousand pcs (with a y-o-y growth of 3.1% or 4.8 thousand pcs), SIL  Insurance moved to third place - 94.324 thousand pcs (with a y-o-y  growth of 23.1% or 17.7 thousand pcs), displacing INGO Armenia to  fourth place - 82.546 thousand pcs (with a y-o-y decline of 3% or 2.6  thousand pcs), REGO Insurance ranks  fifth - 52.121 thousand pcs.  (with a y-o-y decline of 28.8%), and Armenia-Insurance as before  ranks sixth, - 51.908 thousand pcs(with a y-o-ygrowth of 20.4% or 8.8  thousand pcs).

Six Armenian insurance companies are operating 18 of 20 classes of   insurance, except for the Railway Third Party Liability Insurance and   legal and extra-judicial expenses insurance. INGO Armenia (the only   company providing water transport insurance) and Armenia Insurance   (the only company providing rail transport insurance) are the leaders   in the number of classes of insurance - 16.  Last December, RECO and  Rosgosstrakh companies implemented rebranding  projects: the RECO  company was renamed REGO, with new shareholders,  and the  Rosgosstrakh company was renamed LIGA Insurance.  As regards  INGO  Armenia, which is indirectly owned by the Russia-based  Ingosstrakh,  the company continues working in Armenia's market,  adapted to the  sanctions imposed on Ingosstrakh, under the  regulator's supervision.  (the AMD/USD exchange rate was 386.06/$1 on  June 30, 2023). (As of  August 31, 2023, the estimated exchange rate of  the dram against the  dollar is 385.78 AMD/$1).