Interview of the Deputy Director of “Sil-Insurance” Insurance Company, Acting Executive Director of the Armenian Association of Insurers Andranik Ohanjanyan to Mediamax Agency and Banks.am portal

- With implementation of compulsory car insurance, insurance companies take the path of implementing alternative marketing tools, using both their own capacities and the levers of affiliated organizations and partners. It is interesting to know how “Sil-Insurance” prepares for compulsory insurance of vehicle owners’ civil liability. Do you consider any joint steps with your affiliated structure – “Armeconombank”?

- Undoubtedly. We plan to start sale of insurance policies via the branch network of “Armeconombank”. The bank has already become the agent of “Sil-Insurance” and we will use its branches as sales points.

- According to approximate estimations, the vehicle fleet of Armenia consists of 400 thousand units, only a few thousands of which are insured. To what degree is the insurance market ready to service compulsory insurance of vehicle owners’ civil liability?

- I am sure that all insurance companies try to solve this task with dignity: expansion is in active process, they open new branches, attract new agents. Companies clearly understand the tasks we face. According to the legislation, the insurance companies, which want to deal with compulsory insurance, should have branches or agents in all marzes.

I should note that introduction of compulsory insurance of vehicle owners’ civil liability is a really historical opportunity for our insurance market. One should realize that the goal of approving the corresponding legislation is not the development of the insurance market, but the guaranteeing of compensation for people’s damage, which comes as a result of operating transport means. The law on compulsory car insurance is not meant to enrich insurance companies; moreover, most likely this type of insurance will not bring any profit to the insurers at all.

The state, as a supreme manager of the society, simply tries to hold back the threats we face. It is legislatively established that a transport means is a source of danger, and the damage, caused by it, is the responsibility of its owner. Today we have a situation, when about 400 thousand sources of danger drive in the streets, meanwhile, it is not established anyway how the right for compensation for the people, who may bear losses because of them, is guaranteed.

- You said that compulsory car insurance may not be profitable business. Can one make the conclusion that competition among insurers in this sphere will not be strong?

- Yes, this type of insurance itself is not profitable, but this does not mean that insurance companies are not interested in it. The practice of other countries proved that after introduction of compulsory insurance, the voluntary insurance stirs up as well. People forcedly communicate with insurance companies, see the benefit of that communication and start voluntarily insuring their risks.

Consequently, interest of the insurance market here is conditioned by expectations on future stirring up in voluntary insurance.

- Which are the primary goals of the Armenian Association of Insurers?

- The primary goal of the Association is to unite insurance companies around common tasks and suggest joint ways to solve them. By the way, in connection with introduction of compulsory instance, the number of such tasks has increased. Because of them, one can single out the issue of public information. At present we, jointly with the Central Bank (CB) and other interested structures, try to elaborate the corresponding program.

In general, the Association has been quite active recently: we constantly participate in elaboration of legal acts, regulating the sphere, we have set up a joint workgroup with the CB, which almost every week holds discussions around new projects.

The legislation is never perfect and we are consistently working over solving all the existing issues. Nevertheless, at present it seems that there are no serious legislative problems, which hinder development of the insurance market.

- In connection with implementation of the accumulative pension system, it is expected that insurance companies will also enter competition for management of pension assets of citizens, along with banks and pension funds. What are your expectations from reforms?

- Since introduction of the accumulative system is at the initial stage, there are no preparatory works carried out in insurance market. Pension insurance is one of the types of life insurance; nevertheless, today none of the Armenian insurance companies has a licence for life insurance.

The legislation bans one and the same company dealing with both life and non-life insurance, consequently, new insurance companies should be established, aiming at managing pension funds. I believe that they will appear in our market soon.

- It is interesting to know how the assets of Armenian insurance companies are managed and in particular the assets of “Sil-Insurance”.

- The assets of insurers are managed in accordance with particular criteria, set up by the normative acts of the CB. The assets of insurance companies are mainly invested in bank deposits and in governmental bonds of Armenia.

As long as the yield of assets in Armenia is quite high, insurers, as a rule, will not direct assets to international markets.

- What are the indices the company completed the first half of the year with?

- We completed the first half year with quite satisfactory indices. The insurance premiums increased approximately by 13%, as compared to the analogous period of last year. Assets increased by 43%, and the capital – by 57%, as compared to the same period.

The commitments of the insurance company mainly represent an insurance reserve, the periodical reduction and growth of which are a normal phenomenon.

- At the end of last year, an educational-methodical center on “Insurance” was set up in the State Economics University of Armenia. “Sil-Insurance” participated in its establishment. How does the activity of the center proceed?

- I assess the role of this center as very high and expect that the University of Economics, the students and the teaching staff will be more active in working with insurance companies. The latter present their mission and services at the center from time to time. Significant growth in the number of students has been registered recently.

- Since late 2009, consolidation has been observed in Armenian market of insurance. Do you believe this tendency will continue and, in particular, what changes are there to come for the conjuncture of the insurance market as a result of introduction of compulsory car insurance?

- I do not think that the number of instance companies will undergo significant changed in the nearest years. Future developments of the insurance market of Armenia in many respects depend on how the compulsory insurance will be put into operation.