Market participant: insurance investments in Azerbaijan remain undeveloped

Business Materials 4 March 2010 21:01 (UTC +04:00)

Azerbaijan, Baku, March 2, Trend , U. Ismailova

Deposits to banks currently are the most profitable investment for Azerbaijani insurers, said Shukur Huseynov, Board Deputy Chairman of insurance company Azergarant. 

'Deposit accounts in banks are most liquid for our insurers, and that's why insurers invest their money in banks intensively', Huseynov believes.

According to him, Azerbaijani insurers also invest in state equities, which are less liquid and less profitable.

In 2010, profitability of state T-bills issued by the Ministry of Finance with a period of circulation of less than one year at cut price increased by 0.68 percent from 0.73 percent to 1.41 percent and so did on weighted average price. Following the results of the 2010 auctions, the profitability at cut price has already increased by 0.73 percent and so has on weighted average price. In 2008-2010, the profitability has decreased by 7.64 percent and 6.51 percent, respectively, yet.

As to the issue with a period of circulation of one year, profitability at cut price has remained equivalent to 2.99 percent and so has on weighted average price. At the 2009 auctions, the profitability of T-bills decreased by 3.63 percent and 3.53 percent on cut price and weighted average price, correspondingly. In 2008-2010, there was observed a decrease of 8.43 percent and 8.71 percent, respectively.

According to the existing Law 'On Insurance Operation', according to Huseynov, insurers can also invest in real estates, capitals of private companies and other fields; however, they do not do it because investing in bank deposits is the most profitable thing.

Interest rate of deposits in manats and of deposits in hard currency to Azerbaijani banks, as of February 1, 2010, averaged 11.27 percent and 11.02 percent, respectively. Under this, interest rate of legal entities' deposits in manats and of legal entities' deposits in hard currency averaged 5.57 percent and 5.97 percent, respectively.

'Either the very insurance companies or sides concerned should take comprehensive part in solution of this matter in order to diversify insurers' investments', Huseynov said.

Under the existing legal provisions, Azerbaijani insurers can invest deposits to banks in the amount not exceeding 60 percent of their respective combined capital and not more than 30 percent of their combined capital to one bank.

There are 28 insurance companies and one reinsurance company operational in Azerbaijan. Following the results of 2009, the combined premiums of the insurers were equivalent to AZN 163.51 million with AZN 53.07 million as payments. In the year, the premiums and the payments decreased by 8.7 percent and increased by 6.5 percent, respectively.