LLOYD’S GUEST OF "LONDON-YEREVAN" INSURANCE COMPANY

Karina Melikyan, ArmInfo, 14 June 2006

Lloyd’s Heritage Managing Agency Ltd. Syndicate 1200, specializing
in property insurance, is seriously interested in Armenia. The
syndicate’s representative has got an offer from London Gate
Group, 100% founder of "London-Yerevan" insurance Company, to pay a
fact-finding visit to Armenia. Few days ago, London representatives
arrived in Armenia and visited the Central Bank, the British Embassy
and met with the directors of HSBC Bank Armenia quite in a short
period of time. Representative of Heritage Managing Agency Ltd.
Syndicate 1200 Darren Warkcup and Chairman of London Gate Group Brian
Salmanpour shared their plans and the preliminary assessments of
Armenia’s insurance market with ArmInfo’s correspondent. In her turn,
"London-Yerevan" insurance Company director Sona Dalalyan presented
the achievements of the company.

How would you assess the activity of "London-Yerevan" insurance
company?

Brian Salmanpour: As the head of London Gate Group, I’ll say that
our broker KAY International has been reinsuring London-Yerevan’s
policies in the market of Lloyd’s for several years already. And I
think this partnership is quite successful.

Darren Warkcup: In my turn, I’d underline that London-Yerevan’s
high indices, quick growth rates and quite serious development plans
prove that the company is making serious achievements in Armenia’s
insurance market. In this light, Syndicate 1200 has decided to give
London-Yerevan a unique chance to asses risks and to sign documents
"with Lloyd’s pen."

Lloyd’s corporation is known to comprise several specialized
Syndicates. It is interesting why exactly the representative of
Syndicate 1200 specializing in property insurance arrived in Armenia
to get first hand view of the country’s insurance market?

Darren Warkcup: In the last years Armenia has shown growing activity
in construction and I wanted to see this in the place. I am especially
glad to know that Armenia is beginning to assess risks in construction
and I want to see what risks they deal with in Armenia and in what
amounts. It was exactly because of London-Yerevan’s growing activity
in risk reinsurance abroad that we decided to visit Armenia. I am
the first property underwriter representative to visit Armenia so
far and I can say that I am very much impressed by London-Yerevan’s
work, especially in property insurance, a sphere I supervise at
Lloyd’s. So, I am ready to do my best to help the Armenian company
to get competitive.

What is your conclusion, of course, if you could arrive at such during
your short-term visit to Armenia?

Brian Salmanpour: Armenia’s insurance market is developing very slowly
and in order to step up this process it is necessary to regulate the
market and the activities of insurance companies.

Sona Dalalyan: As a direct participants of the insurance market,
I’d like to note that today only 8-10 companies have life insurance
license. Having such a license, London-Yerevan is not very much active
in the sphere as it knows that the CB is planning legislative changes
to make insurance companies choose either they insure only life
or only other spheres. So, it is a question yet how many companies
will agree to insure only life as this type of insurance is not very
much popular in Armenia yet. Today insuring life in Armenia are only
companies with foreign capital or bank-related entities wishing to
insure their borrowers.

Regarding the supervisory body, what is the opinion "abroad" on the
role of the Central Bank as the megaregulator of the financial market,
including, as a body controlling over the activity of insurance
companies?

Darren Warkcup: Vache Gabrielyan, a member of the CB Council, informed
us of CB’s supervisory mechanisms. It is important that the powers
of megaregulator were laid on the Central Bank as the chief banker
tries to transfer the insurance market to an open field i.e.

to secure transparency of this business for potential clients. As
regards the CB’s aspiration to bring the law on insurance in the
line with international standards, it will help the market develop
and attract more foreign companies to Armenia. This, in its turn,
will develop competition and create more attractive conditions for
clients. In fact, only reliable insurance companies will maintain
their positions in the market.

And what about the compulsory insurance the introduction of which in
Armenia is not far away?

Brian Salmanpour: I think the compulsory insurance plays an important
role both for the economy, on the whole, and for development of
insurance market, in particular. It is, first of all, aimed at
protecting consumers’ interests as it will allow the market becoming
well-organized, and the public – more aware of their demands.

It is not a secret that there are no insurance companies especially
founded to protect the interests of large financial and industrial
groups in Armenia. Is it normal?

Darren Warkcup: It is very dangerous and may lead to double economy.

Quite recently Fitch rating agency gave Armenia a sovereign credit
rating "BB-," another rating is expected from another large foreign
agency within a month. It is interesting, if any steps are taken to
give ratings to insurance companies?

Sona Dalalyan: Armenia’s Central Bank has already signed a resolution
on compulsory rating of foreign insurance companies reinsuring
insurance policies of Armenian insurance companies, and submitted
it to the RA Justice Ministry for registration. This document, which
will come into effect in six months, provides for 5 leading foreign
rating agencies: Standard&Poor’s (U.S.) – "BBB", Moody’s (U.S.) –
"Baa2", A.M. Best (U.S.) – "B+", Duff and Phelps – "BBB", Weiss –
"B" è Fitch Ratings (U.S.) – "BBB".As you see, the minimal required
rank is "Â". One of Russian leading rating agencies was included in
the initial list, which, however, is not indicated in the final list
because of its minimal rating of "ÂÂ-" rank.

In the course of the visit, you met also with HSBC Bank Armenia
Executive Director Anthony Turner. What was the purpose of the
meeting? Do you negotiate or it was just a meeting of partners?

Brian Salmanpour: We had a desire to meet with one of the oldest and
most reliable clients of "London-Yerevan," HSBC Bank Armenia. We
discussed the details of partnership and the prospects of our
cooperation with the leadership of that bank.

Sona Dalalyan: Besides HSBC Bank Armenia, "London-Yerevan" cooperates
also with five leading banks in the country, which, apply to the
company mainly for insurance of bank risks, property and cars, for
medical insurance of employees and for insurance against careless
employees. As regards insurance of financial risks, "London-Yerevan"
is not engaged in this type of insurance.

As our talk touches upon the activity of "London-Yerevan" anyway,
would you present its achievements and plans in figures? What is the
company’s share in different types of insurance, insurance premiums
etc??

Sona Dalalyan: In 2005, the company’s share in total insurance
premiums in the market was 20% as against 16.9% in 2004. As to this
indicator, "London-Yerevan" is in the lead in the Ranking of the
leading insurance companies in Armenia 2005 prepared by the Agency of
Rating Marketing Information (ArmInfo). As to the payments of insurance
indemnity, the company is the second. The share of the company’s life
insurance premiums in the market made up 56%, however, the share of
this insurance type in the company’s insurance portfolio was only
1%. For instance, at European companies, the share of life insurance
is almost 40%. In 2005, "London-Yerevan" secured an impressive growth
of automobile insurance – 115%. Then goes property insurance – 56%,
cargo transportation insurance – 44%, accident insurance – 40%, and
responsibility insurance – 7.5%. In total, the company secured 17%
growth on all the insurance types in 2005.

Regarding plans, we intend to at least double the growth of property
insurance and to increase insurance premiums by 25%.

Brian Salmanpour: All the underwriters keep supporting "London-Yerevan"
in reinsurance of property, life, accident and cargo transportation
insurance risks it undertook.

In conclusion, it would be useful to know the opinion of authoritative
foreign insurers concerning the influence of stable economic growth
in Armenia on development of the country’s insurance market.

Darren Warkcup: The stable economic growth in Armenia will allow
insurance companies extending their activity, specifically,
capitalization is in question. Due to it, new services will be
provided to clients, the competition will be increased. In fact,
only specialized stable companies will remain in the market, others
will amalgamate. Of course, the share of reinsurance of Armenian
companies in the Lloyd’s market is so insignificant that it is
not worth mentioning. The annual turnover of Lloyd’s Corporation
considerably exceeds the budget of Armenia. Nevertheless, the
corporation’s underwriter noticed Armenia and other CIS countries
which were avoided by other foreign reinsurers.

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