BAKU, Azerbaijan, May 17
By Yusif Aghayev – Trend:
The spread of the coronavirus pandemic, which had a negative impact on the global economy, also covered the insurance sector.
In accordance with the forecasts of Lloyd’s, the biggest world insurance and reinsurance market, the loss of insurance companies due to the coronavirus pandemic will reach $203 billion this year, of which about $107 billion will account for the payments of insurance claims due to a forced interruption in the activity, the canceled events and other similar payments.
About $93 billion will account for investment losses due to a decrease in asset value. Lloyd’s estimates its own losses from $3 billion to $4.3 billion, stressing that more payments can be made if the lockdown lasts longer than the end of the second quarter.
The economy of Azerbaijan, being an integral part of the global economy, was also affected by the consequences of the pandemic, and only timely measures taken by the country's leadership to prevent the impact of COVID-19 on the economic sector allowed to maintain stability and render support for the affected spheres.
The decline in economic activity also affected the insurance sector. Of course, the activity of many enterprises and commercial facilities were suspended, the movement of citizens was limited within the special quarantine regime introduced in Azerbaijan to prevent the epidemic. While facing this situation, business entities experienced certain difficulties associated with the payment of insurance premiums.
Presently, it is difficult to assess the exact damage the pandemic caused to the country's insurance market, it is necessary to wait for data on the activity of insurance companies for April 2020 when a special quarantine regime was introduced in the country.
The insurance market greatly increased in the first quarter of 2020 thanks to the important economic reforms carried out in the country recently, however, the experts say that the situation changed in April.
“Moreover, there are certain institutional problems in the insurance sector that have accumulated lately,” chairman of the board of the Central Bank of Azerbaijan, the regulator of the country's insurance market, Elman Rustamov said.
A phased exit plan from the quarantine regime gives reason to expect a revival of economic activity. There is a need for insurance community first of all to make big adjustments to its activity.
Moreover, this applies not only to the insurance companies themselves, but also to all professional participants, as well as the regulator of the country's insurance market.
Among the main spheres that should be emphasized is the strengthening of state control in the field of compulsory types of insurance and especially compulsory property insurance.
“This must be carried out as soon as possible,” Chairman of the Supervisory Board of the Azerbaijan Insurers Association (ASA) Azer Aliyev said.
“On the other hand, the issue of increasing the level of administration and the effectiveness of management in the insurance companies is of great importance,” the chairman said. “In this aspect, it is necessary to take into account and adopt the best international experience in this field.”
While speaking about the product line of domestic insurers, Aliyev stressed that, in principle, it is quite adequate and corresponds to the modern market realities, moreover, professional insurers respond quite quickly to the changing market conditions by introducing new insurance products and solutions.
The issue of introducing new digital solutions that allow rendering more online services to customers is also important. Of course, there is a certain specificity associated with specific types of insurance, but, nevertheless, if before the spread of the pandemic, penetration of such products and services accounted for no more than 6-7 percent of the total share, then it will greatly grow in the post-pandemic period.
Another important task is to strengthen the oversight functions of the regulator of the insurance market with respect to the compliance with prudential norms by insurance companies, as well as adequate changes in investment norms.
To improve the insurance sales sector, it is extremely important to streamline the procedure related to the fees. On the other hand, it is necessary in general to take important steps towards improving sales technologies.
In general, the faster the professional participants of the insurance market will be able to adapt in a post-pandemic environment, flexibly and efficiently restructure their activity, focusing primarily on meeting customers’ needs, the more successfully they will be able to overcome the consequences caused by the coronavirus pandemic.
In 1Q2020, Azerbaijani insurance companies collected insurance premiums in the amount of 240.7 million manat ($141.6 million), which is 39.5 million manat ($23.2 million), or 20 percent more compared to 1Q2019.
During the reporting period of this year, Azerbaijani insurance companies paid 77.06 million manat ($45.3 million) of insurance claims, which is 30.8 million manat or $18.1 million (a growth of 66.6 percent) more than in the same period of 2019.
Today, 21 insurance companies and one reinsurance company operate in Azerbaijan.
(1 USD = 1.7 AZN on May 17)