At present insurance is one of the actively developing sectors of Azerbaijani economy. In difference to previous years, new absolutely ambitious insurance companies appear in the market. They are keen no only to be present in the market, but also create normal mutual relationships with the clients, carry out active policy on expansion of their regional network.
There are 30 insurance companies in the country. Leading insurance companies have up to 10 strong and professional agents, who may have up to 30 clients to insure per month. Therefore, the largest insurance is with people who are insured from banks and on different insurances in vehicles and property. It goes without saying that the companies are becoming more professional year by year. Primarily, their professionalism is reflected in the quality of services they render at approaching insured accident.
According to the data provided by the Azerbaijan Finance Ministry, the aggregate capital of all 29 insurance companies operating on the territory of the country to January 1, 2007 had reached AZN 41,413,000.
Insurance is regarded as one of profitable types of business, which enables to collect some 400bln manats in insurance premiums a year. These funds are in their turn invested in the development of economy and directed at the progress of the country.
The development in this direction is a result of implementation of legislative and administrative measures carried out by the Finance Ministry, as well as increase of insurance company's interests in the development and relevance of their activities to international standards. Moreover, the Finance Ministry developed a special state program on the development of insurance in Azerbaijan in 2006-2008 At the same time, a draft law on Insurance has been developed in partnership with Canadian Lawrie Savage and submitted to the Cabinet of Ministers.
The first step to a more developed insurance market will become the reconsideration of the authorized capital of insurance companies operating in the country by January 1, 2010. Their authorized capital will be to be at least $3 mln., that give an impetus to the development and expansion of the professional market of insurance
By the order of the Azerbaijan Cabinet Minister, made on April 9, 2004, the authorized capital of the insurance companies is to increase as follows: AZN 500.000 by January 1, 2005, AZN 6000.000 - by January 1, 2006, and AZN 700.000 - by January 1, 2007.
With respect to achieve definite level in the development of local insurance companies, every year a requirement put by the State Insurance Control Office of the Ministry on their statutory capital. Every year it is increased by 500mln old manats. Increase of absolute size of statutory capital is first of all directed at expansion of insurers' opportunities in retaining risks, because the amount of contracts are directly related to the size of capital.
Increase of capital should be regarded as compulsory component of the development of insurance market. To maintain their presence here, the insurers should increase their turnovers, which can be done only through expansion of clientele and expand the services rendered in this market.
The program envisages implementation of measures after the adoption of instance legislation. They envisage the development of the insurance market of the country and target its protection. With this respect, the bill maintains the correlation of 49% quota to foreign investments in the statutory capital of insurance companies in the amount of 51%, despite the Foreign Ministry and the Ministry of Economic Development proposed liberalization.
It turns out impossible in current condition, though the World Trade Organization also required full liberalization. The issue related to liberalization has been numerously discussed at the insurance market by the US-Azerbaijan intergovernmental working group. The liberalization in the insurance market is possible after achievement of definite progress of the local insurance companies.
The legislation contains relevant rules to prevent outflow of capital which enter the insurance companies in the form of fees. Moreover, gradual rise of the statutory capital will provide necessary facilities for undertaking larger risks and maintenance of insurance risks. As to establishment of the National Re-Insurance Fund, the problems exiting in his sphere should be resolved in accordance with principles of the market economy and international experience.
The difference between the Azerbaijan insurance market and that of the West and other CIS countries lies in the fact that the western population treats insurance companies as organizations, which are vitally important for a secure and confident life. As for CIS countries, most of the population does not treat seriously. As for Azerbaijan, any insurance company operating in the country tries to involve potential clients and spark their interest to acquire insurance services. The answer is to involve as many people as possible into insurance. This should be carried out mainly through a network of efficient agents. This is the most sensible direction in the development of the insurance market.
An insurance company functions in Azerbaijan so that to get applied in the memories of potential consumers and their interests in the purchase of insurance services, or to be correct in mass attraction of physical persons to insurance. It should occur at the expense of establishment of able agent networks. This is the most prospective direction of the development of insurance market.
The Finance Ministry also expects to receive the World Bank's opinion on the bill. WB allocated the $323,000 to Azerbaijan for improvement of the insurance legislation.
The new law on Insurance will give impetus to local insurance companies to come closer to world standards and promote successful development of insurance market in the country. However, the development of insurance market is an importance element of the economic progress. The insurance market is intended to transform the accumulation of enterprises and population into long-term investments. Moreover, the developed insurance market ensures the population with peace and safety.