Financial Crisis May Increase Insurance Tariffs 25% in Azerbaijan

Business Materials 27 September 2008 13:46 (UTC +04:00)

Azerbaijan, Baku, 27 September / Trend corr. U.Ismayilova/ Financial crisis and suspension of consumer lending by several Azerbaijani banks will case 10% reduction of country's insurance market growth rate, Jamil Malikov, Azerbaijan Insurance Companies Association Chairman of the Board, head of MBASK insurance company, said on 27 September.

"Consumer lending restrictions will lead to 5% fall of insurance companies' business," said Malikov.

Mortgage lending rate also dropped in Azerbaijan, and several banks even suspended operations in this connection until long-term loans are drawn in. However, the National Bank of Azerbaijan (NBA) did not officially order Azerbaijani banks to suspend mortgage lending. The banks cut lending first of all due to the crisis in the world financial markets. The situation makes the banks be more prudent and apply strict selection during client lending, which is a part of the corporate governance.

According to Malikov, the situation in the banking market negatively affects the insurance market, for 50% of Azerbaijani insurance companies' activities are directly linked with banks.

"Reduction of insurance business in the country will cause average 25% rise in insurance tariffs," Malikov said.

The Association of Insurance Companies of Azerbaijan, uniting country's 30 insurance companies, was established in December 2006.

MBASK, operating since 1992, renders 29 insurances services, with 4 of them compulsory. The authorized capital of the company has totalled AZN 2mln. The European Bank for Reconstruction and Development (EBRD) purchased 30% of MBASK in 2005.

The correspondent can be contacted at [email protected]