Armenian insurance market started to reduce compensation

ArmInfo.  Since 2025, the situation in the insurance market has started to change: premiums have increased, while compensation has decreased,  leading to a significant rise in profits. This is evidenced by data from the Financial Rating of Insurance Companies of Armenia as of 31.03.2025, prepared by ArmInfo IC based on published financial reports and  missing indicators requested from the insurance companies. In the first quarter of 2025, there was a notable slowdown in in the annual  decline of insurance premiums to 7%, exceeding 20.9 billion drams (over $ 53.4 million). Compensations also saw a shift in dynamics, with a slight 0.2% decrease, amounting to 10.3 billion drams ($ 26.2 million).  As a result, net profit experienced a significant turnaround, going from a 73% decline to an 82.3% growth, reaching 807.2 million drams ($ 2.1 million). The most impressive profit growth was provided by LIGA Insurance (3 times) and the new IC Efes (9 times). Both companies were able to eliminate losses and achieve a  substantial positive level, contributing to an overall increase   market profits. For comparison, in the first quarter of 2024,  premiums and compensations had opposite trends - a 19% decline in the former was accompanied by a 43% growth in the latter, as a result of which net profit fell by 73%.

The first quarter is the season for concluding contracts and  collecting premiumsIn the insurance market of Armenia, the first quarter is the season for renewing and concluding new contracts, resulting in increased premiums for the most preferred classes, especially for the mandatory  type - OSAGO.

The highest share of premiums is for OSAGO - 37.3% and medical insurance - 29.6%. Property insurance follows with 16.5%,  CASCO - 7.5%, accident insurance - 3.1%, cargo insurance - 2%, general liability insurance - 1.7%, and travel insurance - 0.9%.

In terms of compensation, the leading shares are also MTPL - 54.7% and medical insurance - 35.6%, followed by CASCO - 6.6%, property insurance - 1%, cargo insurance - 0.9%, travel insurance - 0.6%, and accident insurance - 0.4%. For dominant classes, like MTPL, there is an acceleration in premium growth, while for medical insurance premiums are declining. There is also a strong slowdown in the growth of compensation for both classes. Thus, for MTPL, the acceleration of premium growth from 1% to 14% was accompanied by a slowdown in the  growth of compensation from 34% to 4%. For medical insurance, the acceleration of the decline in premiums from 12.5% to 27.1% was accompanied by a slowdown in the growth of compensation from 31.3% to 4.3%.

In property insurance, premiums decreased from 20.2% to 11.5%, while the dynamics of compensation deteriorated from significant growth to an 86.2% decline. It is important to note that this class is represented by two types - property insurance for fires/natural disasters and property insurance for other damages. Premiums for the first type decreased by 12.3%, while for the second one increased by 60.2%.  However, since the volume of premiums for the first type  is much higher than the volume of premiums of the second type, the overall premiums dynamics for this class are declining.

For CASCO, the acceleration of premium growth from 9% to 25% was accompanied by a sharp increase in the growth of compensation from 15.5% to 99.6%. In Armenia, this type of insurance is voluntary and is practiced along with mandatory OSAGO when obtaining car loans or occasionally at the request of the car owner. In accident insurance, the premium trend shifted from a 37.7% decrease to a 10.1% growth,  while the reimbursement trend reversed - from an 80% increase to a 44% decline. For cargo insurance, both premium and reimbursement dynamics worsened. Moving from a 21.5% growth to a 33.2% decline in premiums, and from an 81.1% increase to a 43% decline in reimbursements. In general liability insurance, premiums slightly accelerated their decline from 28.7% to 29.7%, while the decrease in reimbursements slowed down significantly from 50% to 15.4%. For travel insurance, the premium trend reversed from a 6.2% growth to a  10.5% decline, while reimbursements went from a 19.4% decline to a significant 3-fold growth. In aviation insurance (including liability for the use of air transport, including cargo), the dynamics of premiums has improved, turning towards growth several times, and compensations remained at zero.

In agricultural risk insurance, premiums and compensations have been reset to zero since 2024 (compared to a 19.1% increase in premiums and a 2-fold increase in compensations in 2023). However, according to explanations from insurance companies, it is important to clarify that premiums and compensations for this class in the reports of insurance companies may be included in the property insurance  category for other damages. Nevertheless, a separate line for  agricultural risk insurance  has been reporting zero collections and payments for over a year. 

Recall that the agricultural risk insurance program, which began in Armenia in pilot mode in September 2019, with policy sales starting in 2020, continued until 2024. However, issues arose with inadequate control over compensations that exceeded the amount of the assessed damage. As a result, the government will take over reinsurance from the previous partners in this program,  Swiss Re and the German bank KfW.  According to the draft law,  the government will reimburse 70-80% of the insurance premium (versus the previous 50-60%), and if  the damage exceeds 200%, then this part will also be reimbursed to insurance companies. Moreover, in 2025, under this program, it will be possible to insure all agricultural crops against all types of risks without restrictions. 

The immediate plans include choosing another foreign reinsurance company as a partner for this program in 2026, negotiations for which are already actively underway. In total, LIGA Insurance is the leader in the number of contracts valid on the reporting date for all types of insurance - about 177 thousand, Nairi Insurance is in second place - almost 167 thousand, and REGO Insurance is in third place - over  162 thousand. But in the OSAGO class, Armenia Insurance is the leader in contracts valid on the reporting date, LIGA Insurance is in second place - over 125 thousand, and Nairi Insurance is in third place - almost 116 thousand. All insurance companies operating in Armenia, with the exception of Efes, have the lion's share of contracts. The lion's share of contracts falls under the OSAGO class, and the rest falls mainly on accident insurance, property insurance, CASCO, travel  insurance, medical insurance, cargo insurance and general liability insurance.

Assets did not experience significant growth, but liabilities emerged from recession

In the assets of insurance companies, the annual dynamics of  short-term accounts receivable went from a 52% decline to a 17% growth. The trend of cash reversed - from 49% growth to a 52% decline. At the same time, current financial investments stalled in growth (dropping from 25% to 6%). In liabilities, current accounts payable lingered in decline, only slowing down in pace from 37% to 20%. The dynamics of both liabilities under insurance contracts improved from a 17% decline to a 12% growth and insurance reserves also saw improvement from an 8% decline to a 14% growth. Against this background, the growth of borrowed funds slowed significantly - from  76% to 9%. This trend  did not particularly accelerate the growth of current assets (from 5.4% to 5.9%), but it did improved the trend of current liabilities (from a 0.5% decline to a 7.3% growth).

As a result, current liabilities are dominated by liabilities under  insurance contracts - 38.9% (against 37.5% a year ago). A slightly smaller share belongs to borrowed funds - 32.6% (against 32.2% a year ago) and insurance reserves - 20.2% (against 18.2% a year ago). There was a decrease in the share  noted for current accounts payable, dropping from 10.8% to 7.5%.

In current assets, the dominant position remains with current  financial investments (securities, government bonds pledged under repo agreements, deposits and loans in banks) - 85.3% (against 85.4% a year ago).  This is followed by short-term accounts receivable (including assets under insurance and reinsurance contracts) - 12.9% (against 11.7% a year ago), with a very small amount located to cash - 1.3% (against 2.8% a year ago). Moreover, SK Efes and REGO Insurance have shown significant growth in the dominant items of current assets and liabilities - current financial investments and  liabilities under insurance contracts, respectively. SK Efes  increased financial investments by 92.3%, while REGO Insurance doubled its liabilities under insurance contracts.

Equity continues to lose in growth

The growth of equity capital in insurance companies slowed from 12.6% to 3.2%, while this rate was supported by  a 4% growth in the authorized capital and an 18% growth in reserve capital, with a slight 0.3% growth in accumulated profit. Moreover, the latter remains at a negative level for three insurance companies (with an annual decline of 40-75% for two and growth of 26% for one) and at a positive level for four (with an annual growth of 1.3-8.3% for two and a decline of 20% for one).

The lack of growth in accumulated profit and replenishment of  authorized capital has a negative impact on the equity capital trend, but the situation could have been worse without the growth of  total authorized capital. Particularly, in annual terms, only two insurance companies increased their authorized capital - Efes (by 25% - up to $6.4 million) and Nairi Insurance (by 12% - up to $5.1 million). LIGA Insurance holds the lead in equity and authorized capital ($19 million and $11.4 million, respectively), occupying 1st position in accumulated profit ($7.5 million). INGO occupies the second position  in equity and accumulated profit ($14.6 million and $6.7 million), and REGO Insurance occupies the second position in authorized capital ($7.7 million). Nairi Insurance ranks third in equity and accumulated profit ($11.3 million and $6.4 million), and Sil Insurance occupies the third position in authorized capital ($7.2 million).  The top three companies in terms of current assets are INGO, LIGA Insurance  and Nairi Insurance, in terms of current liabilities - INGO, Efes and LIGA Insurance, in terms of insurance premiums - Efes, LIGA Insurance and Nairi Insurance, and in terms of compensation - Nairi Insurance, LIGA Insurance and Efes.

The growth rate of both premiums and compensations recorded by Efes Insurance Company is explained by the increasing activity in the first year of operation (due to low base effect), as well as the fact that the portfolio of this company is comprised of clients spun-off  from INGO Insurance Company.

It should be noted that there are currently 7 companies operating in the insurance market of Armenia.  Among these companies, some of their  parent structures were included in Western sanctions lists in 2022, leading to a reorganization process  in the market. In particular, the former companies RESO and Rosgosstrakh Armenia underwent rebranding and change in their share capital structure, re-registering as REGO Insurance and LIGA Insurance. The Armenian subsidiary of the Russian company Ingosstrakh - SK "INGO" (previously  called INGO Armenia), from which the insurance company "Efes" "grew", followed a slightly different path of reorganization with the spin-off of the client base. ArmInfo analysts noted that these two affiliated companies, mainly divided the segment of insurance for banking products (INGO) and medical insurance (Efes) between themselves. According to the results of the first quarter of 2025,  surpassed INGO not only in health insurance premiums - respectively 1.8 billion against 453.4 million drams, but also took the lead in property insurance, CASCO, travel insurance, and general liability insurance.

 As ArmInfo analysts note, the transition of insurance companies' financial statements to a new format each time conceals more and more important indicators, making it difficult to conduct a detailed analysis of the market situation. It is worth noting that, unlike the previous reporting format, the new version lacks a unified approach to disclosing financial statements,  allowing insurance companies to selectively reveal certain balance sheet indicators. This is why ArmInfo IC is requesting the missing important data  from insurance companies in the new format, as it has become challenging for them to analyze the market situation.

Let us recall that 18 out of the 20 existing insurance classes are active in the Armenian insurance market, excluding liability  insurance for railway transport and  legal and extra-judicial  expenses insurance. In the agricultural risk insurance class, 3  companies are involved in the program - LIGA Insurance, INGO and Sil Insurance. Only Armenia Insurance holds a license for railway insurance. INGO and Armenia Insurance have licenses for the largest number of classes - 16, while LIGA Insurance - 15. (The settlement rate of the dram to the dollar on 31.03.25 was AMD 391.57/$1).