10 November 2022 — Daniela GHETU
XPRIMM: How would you comment on your company's overall performance in 2021? Would you say that your company managed to successfully navigate the challenges of the Covid-19 crisis?

Giorgi BARATASHVILI: The COVID-19 pandemic caused severe disruptions for businesses, including in the insurance industry. However, it can safely be said now that the major effects of the outbreak have gradually faded. From the early onset of the pandemic, our company took proactive steps, which helped us overcome the crisis successfully. Our primary objective was to ensure a safe working environment for our employees while continuing to meet our customers' needs. In the beginning of 2020, we were able to fully digitize our services and products and launched a digital insurance application, which is a novelty for the Georgian market. We invested in MSME segment recovery as a move to ensure the continuous functioning of micro, small, and medium enterprises. These decisions set our company on a path towards stable development in 2020-2021. Several segments suffered significant losses; however, our diversified portfolio allowed us to not only maintain our financial sustainability but also to give some backing to small and medium partners. The insurance industry saw no growth in 2020, but in 2021, it rebounded to a 15% annual average rate. It currently faces a myriad of challenges, including economic ones: inflation, increased prices, and access to the reinsurance market. But at Aldagi, we have used our experience and expertise to tackle these challenges and we will continue to adapt ourselves to the current market trends.

XPRIMM: The war in Ukraine caused a new wave of economic volatility, and many economies around the world are currently experiencing high inflation rates. Social inflation and the rising costs of medical services are also global trends that may have a strong impact on the health insurance business. How have these factors affected your business in 2022?

G.B.: The war in Ukraine, coupled with the COVID-19 pandemic, has put additional pressure on businesses, particularly in our region. Many Georgian insurance companies depended on Russian companies for reinsurance. In the case of Aldagi, however, only up to 2% of risks were transferred to Russian reinsurers, which were immediately replaced at the onset of the war. With a 33-year track record in business, Aldagi is a partner with major players in the reinsurance market like Hannover Re, Chubb, Trans Re, Polish Re, Swiss Re, Lloyds, HDI, IGI, and others. Higher inflation and increasing reinsurance costs have had a marked impact on the entire insurance industry, including Aldagi. There are, however, some positive trends as well. With retail insurance showing years of continual, stable growth and the insurance portfolio for micro, small, and medium enterprises increasing threefold, we are setting our sights on invigorating these segments even further.

XPRIMM: How would you comment on the overall Georgian insurance market's performance in 2021 and 2022? In your opinion, what where the main trends witnessed throughout the period?

G.B.: In 2021, Georgia's insurance market bounced back to pre-pandemic levels, which resulted in annual growth of 16%. The top trend we currently see shaping the insurance market is greater concentration on individual tariffs. Aldagi proved to be the first company in Georgia to incorporate segment and data-based approaches into its tariff policy. This means that, based on actuarial opinions, an insurance policy can be tailor-made to suit the specific needs of each individual and corporate customer. As I have mentioned above, we see the potential of growth in the retail market, given customers' increasing awareness of the necessity of insurance and financial security. There is also growing potential for the agricultural insurance market, where we hold 72%, according to 2Q22 results.

XPRIMM: There is increasing talk within the reinsurance environment about a probable hardening of the market, particularly for NatCat risks. Would such a trend have an impact on your business?

G.B.: Reinsurance rates are continuing to rise across the globe. Hence, companies are increasingly struggling to find stable partners to reinsure particularly high-risk projects. Apart from being able, due to its history and experience, to maintain close partner relations with the world's largest reinsurers, our company is also interested in providing reinsurance services to its regional partners. We have already taken the first steps to offer other insurance companies to have their risks reinsured in Aldagi. We see a real opportunity to go beyond Georgia and extend the range of our activities in the region.

XPRIMM: There are several important regulatory changes occurring in the Georgian market, among them the transition to the Solvency II regime and the introduction of mandatory Motor Third Party Liability (MTPL) insurance being the most important. Is your company prepared for these changes? What difficulties do you foresee?

G.B.: The draft law that makes MTPL insurance mandatory is already on the table. For our part, we are making institutional arrangements for the implementation of MTPL and believe that this will significantly contribute to greater development of the industry. Georgia is the only country in Eastern Europe where MTPL is not mandatory. The launch of mandatory MTPL will be one of the prerequisites for giving the retail market the boost it needs. Less than 10% of cars registered in Georgia are currently covered by auto insurance, which indicates that the rate of insurance penetration is low and the potential for development is significant.

XPRIMM: What are your expectations for the rest of the year - both for your company and the entire market?

G.B.: We have positive expectations about the development of the retail market. We will continue to focus on the micro, small, and medium business segment, as well as on the corporate segment. In 2020, Aldagi won Global Compact Georgia's Award for innovation. Based on our digital strategy, we are planning to further invest in digital services and products that will help us meet our customers' needs and interests. The task before us is to let as many people as possible enjoy the comfort and safety provided by insurance. This can be achieved by offering comprehensive insurance services that are tailored to suit individuals' requirements.

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