The first 9 months of 2020 were full of challenges not only for the people but also for businesses. Each entity was forced to reevaluate their entire routines, and develop a system that would satisfy today’s shifted needs and requirements. Most of the 2020’s issues came from the spread of Covid-19 and the imposed quarantine. While protecting individuals’ health is the ultimate priority, the economic landscape also plays a detrimental role in the latter’s lives. So far, exhaustive and comprehensive assessment of Covid-19’s impact is not yet possible, but a few evident trends are already observable.

Starting from March, Armenia’s economic activity levels decreased compare to the same period is 20191. Though the degree of consequences varies industry by industry, almost all of them were affected by these changes. Financial sector was one of the relatively less influenced industries in Armenia, however, insurance market still had its internal shifts.

2020 Highlights

During the first 3 quarters of 2020, the gross written insurance premiums of insurance market were 32.53 bln AMD, whereas in 2019 premiums were 35.08 bln AMD. The 7.27 % or 2.55 bln AMD decrease is most probably attributable to customers’ less willingness to pay. With scarce monetary resources, individuals and corporate entities were forced to prioritize among their expenses. Unfortunately, cut costs had also included insurance payments, which, most probably, will yield higher risks and payouts in the long-run.

The inflow from investing activities was 3.65 bln AMD drams, that is the increase of 37.50% from 2019’s 2.28 bln AMD. More investing income was possible to achieve through buying more financial instruments, as the average deposit rate decreased by around 15% compared to last year.2

Despite the economic difficulties, the overall market recorded positive profits that were even exceeding previous year’s results. Though not all insurance categories experienced growth in the past year, the net income more than doubled and was almost 730 mln AMD (361 mln AMD in 2019) in the 3rd quarter alone.

Gross Premium Composition

Gross Written Premiums ('000 AMD)20202019DifferenceChange
Accident1,173,0421,354,466-181,424-13.39%
Health10,199,5029,516,754682,7487.17%
Motor1,557,7661,678,759-120,993-7.21%
Aircrafts310,471343,469-32,998-9.61%
Cargo576,406802,464-226,058-28.17%
Property2,000,2403,025,210-1,024,970-33.88%
VMTPL86,11081,8174,2935.25%
General Liability446,915699,332-252,417-36.09%
Financial Losses596,963471,150125,81326.70%
Travel148,248468,066-319,818-68.33%
CMTPL15,412,72116,640,425-1,227,704-7.38%
Other26,1802,72523,455860.73%

As mentioned, gross written premiums for some insurance types have grown in 2020. This change was mainly due increased health and financial losses insurance premiums. The 683 mln AMD increase in health insurance was a result of shifting consumer preferences of valuing the former more. In other words, the social package or mandatory health insurance of state employees had no significant changes, the voluntary insurance increased.

The increase in insurance of financial losses was attributable to the increased insurance rates. Previously, this sector experiences considerable losses, which Armenian insurance firms ceded to their reinsurance partners. Upon that, the latter has predicted major financial losses in the region and increased their rates accordingly that local insurance firms adopted in their pricing strategy.

Most of the negative changes were the result of Covid-19 and less disposable income in the whole economy. Especially travel insurance was one the most affected sectors from the quarantine and closed borders.

Less, yet considerable influence experienced motor, cargo and other insurance categories. Armenia’s foreign trade has decreased almost 10% by the end of August 2020 compared to the same period of last year3. This can be seen in the decrease of insurance premiums of cargo insurance. Additionally, some of the decrease in the latter can be traceable to RA’s large investment in energetics of 2019 being a one-off arrangement. The construction of a power plant inflated insurance premiums of 2019. More than 1 bln decrease in property insurance from fire and other risks, 252 mln decrease in general liability insurance and 181 mln decrease in personal accident insurance were mainly due to the abovementioned contract.

CMTPL’s 1.23 bln decrease was only partly due to coronavirus and people abstaining from getting their insurance due to not leaving the house. By the end of 2019, the majority of vehicles imported during the grace period of Armenia’s membership to EAEU were moved out of the country, hence their CMTPL insurance was not renewed.

Gross Incurred Claims Composition

Gross Incurred Claims ('000 AMD)20202019DifferenceChange
Accident103,35287,28916,06318.40%
Health5,290,0636,294,779-1,004,716-15.96%
Motor823,975838,682-14,707-1.75%
Aircrafts-186,725-186,725-100.00%
Cargo14,314170,943-156,629-91.63%
Property691,1342,796,185-2,105,051-75.28%
VMTPL3,6075,435-1,828-33.63%
General Liability143,14871,62171,52799.87%
Financial Losses195,979143,71752,26236.36%
CMTPL27,304111,235-83,931-75․45%
Travel9,089,50911,456,334 2,366,825-20.66%
Other138,4362,725135,7114980․22%

Naturally, lower premiums yield lower claims. When adding people’s limited movements due to lockdown, and associated lowered risk exposure, the cut claims by more than a quarter becomes somewhat comprehensible. The overall incurred claims were 16.52 bln AMD in 2020 in place of 2019’s 22.16 bln AMD.

The gross loss ratio of the first 9 months of 2020 was 56.05% in the place of 2019’s 63.94%. The 7.27% decrease in premiums and 25.46% decrease of claims rendered improvement of gross loss ratio by 7.89 percentage points. The chart below better illustrates the insurance firm’s discussed relationship.

The most insurance premiums and claims recorded Rosgosstrakh Armenia: 10,1 bln and 6.0 bln AMD respectively. Then came Ingo Armenia (7.7 bln and 3.4 bln), Nairi Insurance (5.6 bln and 2.9 bln), Sil Insurance (3.9 bln and 2.5 bln), Reso (2.7 bln and 0.7 bln) and Armenia Insurance (2.6 bln and 1.1 bln).

Almost all insurance firms became more profitable in 2020. For the first 9 months of 2019 the average profitability was 4.17%, whereas in 2020 the same average ratio became 15.13%. This applies also to the profits in absolute terms. The net income almost quadrupled, having: it became 4.01 bln AMD from 1.12 bln AMD.

In absolute terms the most profitable insurance firm so far is Nairi Insurance that generated 1.18 bln net income. Next in line is Ingo Armenia with 1.15 bln AMD, and Armenia Insurance with 1.12 bln AMD. However, as can be anticipated the most profitable ratio wise insurance firm is Armenia Insurance, who recorded 42.46% return on revenue.

As seen, the insurance market had its difficulties brought by Covid-19. However, the overall influence was double-sided. While, the gross written premiums decreased, the net claims changed in line with it, leaving the entities with higher profits than in previous years.

Though, the first 3 quarters of 2020 were rather favorable for insurance firms in Armenia, the last quarter of 2020 bears its fair share of uncertainties. During the last days of September, a full-scale war has commenced at the borders of Artsakh that is yet continuing. A month has already passed, but the aggregate impact of it is still not quantifiable. The war’s comprehensive influence on insurance market would be possible to determine only after its ending.  

  • About the author

    Underwriting Assistant, Ingo Armenia ICJSC
    Master of Science in Economics (AUA), Bachelor of Arts in Business (AUA)
    Experience in Insurance – since 2020