XPRIMM: How do you evaluate the development of the Armenian insurance market in the 1H2015? What types of insurance have been showed the positive or negative development tendency in the reporting period?
Vaagn AGHAVELYAN: Dynamics of development of voluntary insurance, corporate and retail, was relatively stable. At the moment, the volume of retail insurance business is relatively insignificant, but it is growing rapidly, and after about two years, will be comparable to the volume of corporate and MTPL insurance.

The corporate insurance, particularly, property insurance of the legal entities, general liability insurance and health insurance of employees, and complex banks' insurance are steadily developing, although at the end of the first six month of current year a slight annual decline was recorded, mainly due to reduction of the corporate sales and the difficult economy' state.

As for MTPL insurance, according to the Motor Insurers' Bureau of Armenia, in the first half of 2015 have been recorded an annual decrease in the number of insured vehicles, mainly due to the increase of the number of the unused cars, while the number of insured events with the participation of the vehicle remained in fact unchanged.

XPRIMM: What percentage of Armenian companies involved in corporate insurance?
Vaagn AGHAVELYAN: In this regard don't exist any statistic data because in our country no structure engaged in the collection or processing of this type of figures.

For example, the duty of keeping statistics on MTPL insurance is assigned to the Motor Insurers' Bureau of Armenia, so that insurers have such figures as the number of insured vehicle, the insurance cases, and the volume of premiums in motor insurance compensations, etc.

At the same time we do not have base line data on the number of companies operating in Armenia, since it is no secret that many businesses operate "in the shadow", and many others exist only on paper. In general, this uncertainty does not prevent insurers to further development of corporate insurance sector, since we have got used to certain constant number of "players" and clearly know potential customers, for which insurance companies compete with each other.

XPRIMM: How much the devaluation of the national currency has influenced the prices of insurance products? What types did become more expensive (e.g. health insurance or Motor Hull). How much it has reflected on the investment portfolio of companies?
Vaagn AGHAVELYAN: Mostly prices have increased for the products where the settled tariffs depending on the cost of property or limit. The main explanation is this fact that in Armenia, the value of property (build) is evaluated in USD, respectively, due to devaluation of the national currency (AMD) against USD, the GWP and claims have been increased for these types of insurance calculated in AMD.

For example, Motor Hull premium is calculated as 3% of the value of vehicle. These 3% have not changed, but changed their AMD cost. The growth of compensation was due to the fact that spare parts are purchased abroad and the values are estimated in USD. The same can be said about health insurance which became more expensive because of the AMD cost increase of imported medicines. The prices of other products did not change significantly.

XPRIMM: In the CIS countries, the motor insurance line hold a significant share in the insurer's portfolio. On the one hand, MTPL insurance has become a kind of development impulse; on the other hand, there is an increase of loss ratio of this type of insurance. What measures insurers can do for effective settlement of payments and to reduce cases of fraud?
Vaagn AGHAVELYAN: I would not say that the number of frauds has increase, but rather was improved the mechanism of detection of this crime. International experience shows that the activity of the insurance fraudster is activated in proportion to the development of insurance, and Armenia cannot avoid it.

However, once with growth of the number of economic crimes on the insurance market, there is a development of methods to fight against them, and in our country it is developing one step ahead, as evidenced can service the small share of loss on the market caused by insurance fraud.

At the same time, I cannot say how effective we are in this fight, and what is the level of detectability, but insurers over the years have acquired a great experience and now we have much better understanding of where they can be hidden than a few years ago, and also to carry out preventive measures.

XPRIMM: At what stage is the work about the establishment of concept of agricultural insurance?
Vaagn AGHAVELYAN: The Government program for the implementation of agricultural insurance institution in the country is still under development stage, and Armenian insurance companies are involved in this process but it is early to talk about offer of any product. In order to involve insurance companies in agro-insurance there is a need to create a certain infrastructure and to appoint a regulator like as Motor Insurers' Bureau.

At the same time, the government must determine the role which will play in the agricultural insurance system, in particular to develop mechanisms of state support. Also, for the complete functional of the market it is important to be involved all participants of the insurance system of Armenia.

I would say that the agro-insurance sector must be legally regulated and to be established specific rules. There is an active work in this regard is being done and insurers periodically monitor it.

However, this process requires a lot of time and effort because Agricultural industry in Armenia is declared as priority export industry for the development of agricultural insurance which has a crucial role, especially now, when, due to the sanctions in Russia has increased demand for Armenian agricultural products. At the same time agricultural insurance should be developed comprehensively in all areas: as for the insurance of crops and so that for animals.

XPRIMM: What forecasts shall we expect in the light of negative expectations for the economic development not only in Armenia but also in the whole the Eurasian Economic Union region?
Vaagn AGHAVELYAN: If the current economic situation will be protracted, it is expected the reduction of the number of insured persons, as well as the decline in premiums, reduction the size of the risks that are associated with the desire of businesses and individuals to cut costs.

XPRIMM: Regarding the Eurasian Economic Union is planned the creation of a single insurance market. What will it give to the insurance system of Armenia, and whether it shall be expected an increase of price of insurance products?
Vaagn AGHAVELYAN: Insurance system in Armenia comparing with the systems of other countries-participants EAEC is less developed. Considering such background, I am assuming that there will be growth. First of all will be increased the number of compulsory insurance, for example in Russia there are several type of compulsory insurance, but in Armenia has just one type - MTPL insurance.

Moreover, will be introduced mandatory health insurance.

As for the cost of insurance products, I think that will be developed the coefficients for calculating, similar to those applied in Russia for calculating tariffs for MTPL insurance. Taking into account the interests of consumers gradually will be increased the limits, both as for premium and for compensation, because in other countries of EAEC they are higher than in Armenia.

Generally, speaking about a single insurance market, I think will be formed not earlier than in 5 years when will be set a unique rules and will be completed the process of legislation harmonization.

Note: The realization of this interview has been possible with the support provided by the ArmInfo News Agency.