CEO of IRAO: Georgian Insurance Market is Slowly Growing, Demand for Insurance still Remains

CEO of IRAO: Georgian Insurance Market is Slowly Growing, Demand for Insurance still Remains

The FINANCIAL -- Despite the fact that 2016 was quite a challenging year for the whole insurance industry, Dekanosidze considers the year to have been quite successful for the company. The market share of IRAO equals 8% according to the results of the first three quarters and is forecasted to increase up to 8.5% with the final results of the year 2016.

During the year 2016 the company reimbursed one of the largest claims in property and business interruption in the history of the Georgian insurance market, equal to USD 5.1 MIO, to Energy LTD, which operates a hydro electro energy station in Kazbegi and was heavily damaged as a result of heavy rain and mudflow during the summer period.

“In general, property claims are compensated systematically. Still, this claim was outstanding by its nature and volume and has once again proved the stability, reliability and special approach of our company towards clients. We strongly believe that insurance means responsibility,” Vakhtang Dekanosidze, General Director of IRAO, said to The FINANCIAL.

Dekanosidze states that the market has great potential for development, but it still needs further reinforcement together with proper regulations.

Q. We are now at the end of 2016, so how would you evaluate the year for the insurance business as well as for your company? Have the results met your expectations?

A. The year 2016 was quite a tough year for our company. We are facing slow market growth conditions, therefore there is only a slight increase in comparison to the year 2015. The competition on the market is becoming more tense. Despite the challenging year, tough competition, and the size of the market - our company has done very well and managed to meet all the parameters of the budget. 

Q. The country is experiencing high devaluation of the local currency; fluctuations in exchange rate have affected different businesses. What was the impact of the process on IRAO? Did it change sales rates?

A. Currency fluctuation is not a good factor for the country’s economic environment as it causes uncertainty and decreases spending among the population. This environment definitely makes customers more careful and cautious about expenditures. But, on the other hand, if we take the optimistic position of the Government of Georgia and macroeconomic indexes of our country into consideration, we can suppose that this is a very temporary situation and we do very much hope it will be stabilized soon.

Q. Several types of regulations were introduced for insurance companies in 2015. How did the company deal with the changes and what have been the effects of the restrictions which you have seen this year?

A. First of all, I would say that we are glad that the new regulations were implemented in the Georgian insurance industry. They were mainly initiated by the current government and are completely in line with the EU Association Agreement. When regulations become tougher, the whole market, becomes more transparent, stable and robust. There are several phases of the new regulations, mostly I would underline the new solvency requirements - increase of capital and the new methodology for solvency ratio calculations.

It is also worth mentioning that a change in the organizational form of companies from LTD to JSC, obliged local insurers to implement numerous tools of the corporate governance. All the implemented measures are preconditions for a transparent and economically stable insurance industry. Besides, we do believe that these regulations will be extremely important, when compulsory lines of insurance - Motor Third Party Liability (MTPL) insurance, will be implemented in Georgia.

Q. Can you reveal the exact amount of paid claims that the company has provided this year and which are the spheres with the largest loss rate?

A. According to the figures of the last 11 months, the amount of total claims paid by IRAO is GEL 26 MIO. Where the vast part of claims comes from health insurance, which is following our portfolio structure.

But if we speak about stand alone claims, there is the big claim of our client - LTD Energy, which runs a hydro electro power station, located in Kazbegi. 

In June 2016 the hydro station was seriously damaged by heavy rains and mudflow and as a result our company has reimbursed all the costs of the claim in total amount of USD 5.1 MIO. Which became one of the largest claims paid by our company, and definitely one of the biggest paid within the Georgian insurance history.

Q. IRAO is a member of Vienna Insurance Group, can you share what the crucial differences are between IRAO as an independent company and IRAO as a member of VIG, from the viewpoint of the customer?

A. VIG is one of the largest and most powerful insurance groups, with around 200 years of institutional culture and corporate history. The Group, headquartered in Vienna, owns around 50 insurance companies in 25 countries in the CEE, with approximately 23,000 employees. The accumulated competence, knowledge and corporate culture with nearly two centuries history of our sole shareholder is constantly being transferred to our company, together with our adherence to the corporate values of VIG. Consequently, being a part of the VIG family ensures our customers have the high standards of business performance and financial reliability.

Q. VIG is actively involved in the Georgian market. Are there any significant investments that the company has made in 2016, or plans to in 2017?

A. Since 2011, VIG has been 100% shareholder of IRAO. In 2016, VIG has injected EUR 3 MIO to our company, which made our financial position more stable. VIG is very much optimistic regarding insurance market development in our country. In the future, they will not refrain from investing in Georgia, if needed.

Q. What type of insurance is most popular with the customers of IRAO, and what is the structure of your portfolio?

A. Actually, we can say without hesitation that the insurance market in Georgia is still in a stage of infancy. That’s why companies cannot afford to separately concentrate on certain lines of business and as a result most of the companies have mixed portfolios. IRAO is no exception in this regard. Health insurance still remains the main driver of the market, then comes property and casualties, motor insurance and others. After the implementation of the compulsory insurance system in Georgia, which we are very hopeful will be launched soon, MTPL insurance has the potential to become one of the leading drivers. As MTPL is one of the most classical lines of insurance.

Q. Corporate social responsibility is the topic which IRAO always highlights as one of its main priorities. Can you provide us with information about your projects within CSR?

A. Corporate Social Responsibility is an essential part of our corporate culture. If you look at the history of VIG, the very first social activities were already launched at the beginning of the XX century when VIG took responsibility for the most vulnerable segment of Vienna’s citizens, providing them with pension insurance. As a member of VIG we are fully adhering to the values and corporate culture of the Group, its CSR strategy is also essential for us. Starting from 2012, we have been very active in this direction. In 2015, we got the prize for Social Conscience within the frames of the Social Active Day (SAD) Project, initiated by the Chairman of the Supervisory Board of VIG, Dr. Günter Geyer. In the frames of the SAD project, we were awarded EUR 30,000 and we have fully granted the money to the Monk Andrew’s Foundation for building a Rehabilitation Centre for children struggling with serious forms of cancer.

We strongly believe that there are two most vulnerable groups in our society: children and disabled people. Within the frames of our CSR policy, IRAO is focused on children with serious diseases, particularly cancer, and people with special needs. This year we supported the Vardzia Rehabilitation Project, organized by the Agency of Cultural Heritage of Georgia, besides that we had signed a memorandum with the Agency over further cooperation in the frames of this project - to enable people with specific needs to visit and explore the monuments of our cultural heritage.

Q. What are the main goals for 2017? How do you see growth of the company, what are the most important topics and spheres you are going to concentrate on?

A. Despite the fact that the upcoming year also seems to be very challenging, we plan to grow. Besides that, we are going to significantly improve the quality of the service provided to our customers.

At the beginning of 2017, we are planning to officially open our new branch in Batumi, which is much larger, more convenient and modern than it was before. In addition, we are entering the New Year with a renovated brand - our logo type has become more dynamic, modified - it symbolizes our everyday lifestyle in the contemporary world.

Author: Nikoloz Charkviani