BAKU, Azerbaijan, May 21
By Yusif Aghayev – Trend:
Several insurance companies may be closed in Azerbaijan, Azerbaijani expert in the field of insurance Khayal Mammadkhanli told Trend.
“The cancellation of the license of Azerbaijan’s Standard Insurance company, which has been recently announced by the Central Bank of Azerbaijan, testifies that the insurance market regulator has quickly launched a fairly radical plan to improve the situation on the market,” Mammadkhanli said.
“Some insurance companies’ institutional problems, mismatch of capital with the established regulatory requirements, problems with liquidity of assets and many other shortcomings began to create difficulties in their activity and first of all, customer service and public confidence in insurance in general,” the expert added.
“On the other hand, many companies gave priority to the compulsory types of insurance, in particular, compulsory liability insurance of motor vehicle owners, especially during the period when this type was in the process of rapid development while introducing the digitalization mechanisms in the process of drawing up insurance contracts,” Mammadkhanli said.
“However, the loss ratio on this type of insurance began to grow rapidly in the subsequent period,” the expert said. “This was stipulated, on the one hand, by an increase in the number of accidents and appeals in connection with the insurance cases within this type of insurance, and, on the other hand, by an increase in the cost of spare parts and consumables due to several waves of devaluation. The loss ratio on this type of insurance reached 67 percent in late 2019.”
“As a result, many companies began to refuse from active sales within this type and accordingly the collection of insurance premiums decreased, while payments of insurance claims upon the previously concluded contracts continued to grow,” Mammadkhanli said. “All this has greatly affected the quality of the portfolio of many insurance companies.”
“If major steps are not taken soon to improve the situation in this sphere, 2-3 more insurance companies having problems with both capital and the quality of the insurance portfolio may be closed,” the expert added.
In accordance with Article 4, 109.1.2, 118.1.1 and 118.1.2 of the Law on Insurance Activity of the Republic of Azerbaijan upon the decision of the Board of the Central Bank of the Republic of Azerbaijan dated May 19, 2020, Standard Insurance company’s license on activity was canceled, a temporary administrator was appointed in the company and a statement was sent to the court to initiate the company’s bankruptcy proceedings.
Today, 21 insurance companies and one reinsurance company operate in Azerbaijan.