New Insurance Law Accelerates Development of Azerbaijan’s Insurance Market – Interview with State Insurance Control’s Head
Azerbaijan, Baku, 30 March / Trend corr U. Ismayilova/ The insurance market is a dynamically developing one in Azerbaijan. Thus, the growth of the insurance market considering the amount of the premiums collected in 2007 comprised 66.64%. In order to develop the insurance market the Azerbaijani Parliament passed the new law on insurance in March.
Trend 's interview with Namig Khalilov, the head of the state insurance control department at the Azerbaijani Finance Ministry.
Question: In March the President of Azerbaijan approved of the new law on insurance. What drastic changes do you expect to occur in the insurance market of Azerbaijan?
Answer: The Law on Insurance which has recently taken effect was developed in accordance with the modern requirements on management and control over the insurance market. The experts of the World Bank in the person of the Canadian consulting company Lawrie Savage & Associates were involved into development of the project. The Basic Principles of the International Association of Insurance Control were referred to during the development work. The Basic Principles (28) were developed with consideration of the advanced experience of the countries with developed insurance markets and represent the universal frames of management and control over insurance market.
In accordance with the Basic Principles the Law on Insurance regulates all stages of creation, licensing and stopping of the activities of insurers and insurance brokers, sets requirements for corporative management of insurers, defines the power of the insurance control bodies, sets the requirements for fiscal stability and payment ability of insurers. The law distinguishes between the activities on life insurance and non-life insurance.
The insurers and insurance brokers should bring their activities in accordance with the new legislation. Drastic changes will occur in the market in several years. Our insurance market will become more financially strong, the corporative management of the companies will correspond with modern standards, the number of clients will increase and the level of satisfaction of insurers will improve.
Question: How do you assess the growth rate of the insurance market during operation of the previous law? What will be the dynamics of the market during application of the new law on insurance?
Answer: I cannot say that passing of the new law will immediately give an impetus to more rapid growth in the insurance market. But the trust of the population to insurance will grew, the range of insurance products will rise which will undoubtedly lead to increase in number the insurance clients and correspondently to acceleration of growth in insurance market.
Question: According to the new law, the limit of participation of foreign companies in the capital of Azerbaijan's insurance companies was removed. How will this change improve the investment attractiveness of Azerbaijan's insurance market? May the companies with foreign investments oust the companies owned by the Azerbaijani insurance investors?
Answer: Annihilation of the limit for participation of foreign companies in the capital of Azerbaijan's insurance companies will undoubtedly improve the investment attractiveness of Azerbaijan's insurance market. At the same time the law envisages restriction for the share of foreign capital in the joint authorized capital of all insurers taken together. Such approach enables observation of required balance.
Question: How much the requirements for the foreign investors who became part of the capital of insurance companies will differ from those for the domestic investors?
Answer: Only those foreign insurers or re-insurers who possess a certain credit rating or international financial institutes which Azerbaijan has joined can be foreign founders or shareholders of Azerbaijan insurance companies.
Question: What the schedule of rise in the authorized capital stock of companies is like according to the new law?
Answer: The law does not establish any schedule. It is up to the Ministry of Finance who will adopt a decision in this regard soon.
Question: According to new law, the companies will be divided into the companies on life insurance and other kinds of insurance. Why such a law was introduced and what do you expect from their division?
Answer: Such a division exists in all countries with developed insurance markets and aims at protecting insurance reserves on the long-term life insurance from the possibility of their no-purpose use.
Question: The insurance companies will be granted unlimited licenses after they get 5-year permission for the first time. It will contribute to the increasing number of 'redundant companies' that will work inefficiently won't it?
Answer: The insurers should follow the legislation requirements irrespective of the how long the license will last. The Ministry of Finance has enough power to withdraw the license of insurance mediator if necessary.
Question: The new law envisages licensing of the insurance mediators- agents and brokers, what this law aims at?
Answer: The previous law on Insurance also required the licensing of insurance brokers as well. Novelty of new law is that it requires agents to obtain a license. The development of insurance market of any company makes brokers and agents a driving force in the market. Accordingly, the population gets the large proportion of information from the insurance mediators. Furthermore, mediators obtain insurance premium on behalf of the insurers. Hence, 24th principle of the Basic Principles of the International Association of Insurance Watchdogs entitled Mediators requires insurance control bodies to demand mediators to have a license and to posses common, commercial and professional skills and good reputation as well.
Question: As known, today there are weak companies in the insurance companies which do not provide due insurance services. What difficulties will the more exigent new law on insurance present to them?
The Ministry of Finances will gradually require the insurers and insurer agents to bring their activities into conformity with the active laws. Otherwise, legal sanctions will be applied to them.
Question: What would you recommend the insurance companies so that they can keep up with the law and do not lag behind the development?
Firstly, I would recommend the insurer and insurer agents to attentively study the Law on Insurance, discover directions not meeting the requirements of the active legislation and take immediate measures to remove such unconformities.
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