Interview of “Cascade Insurance” Company Director Garnik Tonoyan to Mediamax Agency and Banks.am portal

- Should one expect changes in “Cascade Insurance” operations after merger of “Cascade Bank” with “Ameriabank”?

- This event did not have direct influence on the activity of our company. Of course, after the merger of “Cascade Bank” with “Ameriabank”, certain changes took place in “Cascade Capital Holdings”. “Cascade Bank” is no longer a part of the financial holding and this fact, naturally, has led to a change in the holding strategy.

Today we have a different reality and this, in its turn, will lead to a change in “Cascade Insurance” strategy to the degree the strategy of the entire holding changes.

I should repeat that our company is not directly involved in the merger deal, and in this context, one should take into account the fact that besides “Cascade Capital Holdings” (65%), European Bank for Reconstruction and Development (35%) is also our shareholder.

- At the end of 2009, shareholders of “Cascade Insurance” replenished the authorized capital stock of the company. What was the volume of authorized capital stock replenishment and what goals will it aim to achieve?

- The authorized capital stock of the company was increased for about 600mln AMD and made 1bln 187mln AMD. Initially, the replenishment of the authorized capital stock was related to the legislative requirements, according to which the capital of an Armenian insurance company should make no less than 1bln AMD starting from January 1, 2010.

The replenished means, first of all, provide for the chance to revise the strategy of own deduction and reinsurance. This will have its positive effect on investment activity of the company, since the larger the volume of own deduction, the larger the reserves of the company. Saying deduction, we imply the part of risk, which is managed by the company and is not passed to reinsurance.

As it is known, there are two main directions in insurance business: pure insurance and investment activity. The replenished capital, first of all, will be directed at investment tools – governmental or corporate bonds, bank deposits, etc. In fact, along with the increase of the capital, there are additional resources created, which will have indirect effect on revival of the economy sector in general. 

Besides, the attracted means will be used in the process of preparing for compulsory insurance. These are investments into infrastructures, human capital, etc.

- What are the results of implementing the pilot program on introducing a micro insurance model in Kotayk marz? Do you plan to continue this program in other marzes of the country?

- The pilot program, as a novelty in insurance market of the country, proceeded in a quite interesting way. However, certain freezing in realization of this program took place in the sense that micro financing provides for presence of certain perquisites and, among them, provision of an efficient channel for sale of insurance policies and their further maintenance. In this direction we have developed quite successful cooperation with “Aregak” UCO, however after analysis of the pilot program, it became clear for us and our partners that we speed up the process a bit and some time is needed for the market to be ready for such an insurance product.

In the process of program realization, we faced two problems: first of all - lack of insurance culture and secondly – stereotypes concerning insurance companies. In this context, there was a decision made to freeze project implementation at that stage, but we continue analyzing the situation to understand what changes are necessary both concerning the product itself and the channels for sale and maintenance. We undoubtedly plan to continue this program, at the same time realizing that simultaneously with implementation of compulsory insurance we will face certain tasks on providing for the necessary resource. If the insurance market manages to secure a competent start for compulsory insurance, this will become a kind of locomotive for developing micro insurance. We positively assess the prospect of micro insurance in medium-term and long-term prospect.  

- Special role is attached to medical insurance among the services of the company. Some time ago you even put a “hot line” into operation for medical insurance. What part of the attracted insurance payments and paid compensations falls on the share of medical insurance?

- Attaching an important role to medial insurance, our company, nevertheless, carries out diversified activity and the share of medical insurance is comparable to car insurance and property insurance.

Since 2005, we have successfully implemented and expanded the range of medical insurance services, including accident insurance. Following the results of 2009, we are the leaders in this sphere and, possessing a big customer base, our infrastructures can be considered the most developed. I would like to highlight the fact that the company provides the customers with quite wide opportunities to choose from alternative medical establishments, thus ruling out the possibility of working with affiliated medical organizations.

Besides, we have introduced a system of direct payments, due to which the customer is relieved of making payments and dealing with paperwork after choosing a particular medical establishment. “Cascade Insurance” takes fulfillment of this function upon itself. Due to such innovations, we already cooperate with 50 corporate customers. 

- What are “Cascade Insurance” Company’s expectations concerning the planned introduction of compulsory insurance of civil liability for motor vehicle owners in the country?

- We are quite optimistically geared up and we consider that with introduction of compulsory insurance of civil liability of motor vehicle owners, the potential volume of the insurance market will approximately double. As to preliminary calculations, the matter here is additional turnover at the volume of 8-10bln AMD. This fact is a good stimulus for the volumes of Armenian insurance market to near analogous indices of CIS countries.

The main task the insurance companies of the country face is the responsible approach to introduction of compulsory insurance of civil liability of motor vehicle owners, otherwise, quite a risky zone may be formed, where, because of a large wave of discontent from the part of insurers, the attitude towards the entire insurance market may suffer and this may slow down its development process. 

“Cascade Insurance” carries out preparatory work, which is the detailed planning at this stage. We have a strategy, elaborated beforehand and coordinated with our shareholders. The task is to secure adequacy of planned investments into this sphere both to the financial and the time aspects. We also take into account the fact that compulsory insurance of civil liability of motor vehicle owners, as the first product in the sphere of compulsory insurance, may have certain stress scenarios. 

We attentively watch the legislative process, carry out consultations with the Central Bank and with representatives of legislative and executive powers if necessary.

- “Cascade Insurance”, along with other insurance companies of the country, has taken part in setting up “Insurance” Education-Methodology Chair. What is the mission of this Chair and what role does your company play in its activity?

- Our main goal is to render technical assistance to the Education-Methodology Chair, set up in Yerevan State University of Economics. In particular, we strive to create an environment, where students will be provided practical materials if the insurance market participants. 

For the initial stage, our activity is limited to thematic presentations for students. We hope to expand our assistance to the center in order to produce competent insurance specialists.

- Can you, please, present the results of the company’s activity for the I quarter of 2010?

- The consequences of the crisis are yet felt and despite the fact that economic growth has been registered in Armenia following the results of the first quarter, 2010, both corporate customers and individuals are quite careful as to their expenses. This, of course, cannot but influence the expenses for insurance.

I should note that despite the crisis year of 2009, the company managed to provide for growth at the volume of 2.1%. Our expectations for 2010 are quite modest. We forecast growth within the limit of 10%, excluding the compulsory insurance.

In the first quarter, 2010, the volume of earned premium made 107.7mln AMD. Growth made 3%, as compared to the analogous period of 2009, and the insurance payments made 85.6mln AMD (increase – 12%). The company concluded the first quarter, 2009, with losses, however this year “Cascade Insurance” already operates with profit.