Azerbaijan may reduce number of insurance companies

Business Materials 10 March 2010 17:14 (UTC +04:00)

Azerbaijan, Baku, March 10 / Trend U.Ismayilova /  

The number of insurance companies may be reduced on the backdrop of expected  quantitative changes in the Azerbaijani banking market of Azerbaijan may also reduce, deputy head of the State Insurance Supervision Service under the Azerbaijani Finance Ministry Mahir Abdullayev said.

"If the banks that are stakeholder of the insurers withdrawn from the country's banking system, then the number of the insurers may be reduced," he said.

Although he believes that the current number of insurance companies (28) is not enough for the Azerbaijani economy. "Given that nearly all the movable and immovable property, and even human life is the subject of insurance, 28 companies - it's not much or even a little in case of a real demand for insurance services in the country," he said.  

Speaking about a possible merger of companies, Abdullayev said that under the insurance laws insurance companies may be merged or sold to both individuals and legal entities.

He said that in fact the number of insurance companies regulated by the market, since in the early 90-ies there were 80 insurance companies in Azerbaijan.

"I think that the number of insurance companies is not an indication, most importantly, is demand for their services," the official said.

There are 28 insurance companies, 12 of which are established by banks and one reinsurance company in Azerbaijan. There are 46 banking institutions in the country.

15-20 banks are enough for the economy of Azerbaijan, Alim Guliyev, First Deputy Chairman of the Board of the Central Bank of Azerbaijan (CBA) said earlier.

"Currently, there are 46 banks operational in the country, and we believe that this is an extreme number for such country as Azerbaijan. Therefore, one of the principal tasks of the Central Bank in 2010 will be to work out a strategy of consolidation and optimization of the banking system," Guliyev said.

There are currently a lot of banks whose main financial indicators do not form the banking system, he added.

"Therefore, we believe that the number of 15-20 is the most optimal one for Azerbaijan. In this connection, the Central Bank will be optimizing the banking system in 2010, and this process may take longer than a year," Guliyev underscored

According to Guliyev, the Central Bank will begin to pursue a strategy of consolidating banks this year. At the moment, the strategy is being concretized and specified; however, realization of the strategy will take a long period of time.

"Banks will have the following three ways: banks, which do not form the system in terms of their assets and accounts, will have either to unite through a merger of healthy assets into one large bank or be transformed into non-bank credit organizations, while weak banks will be liquidated", Guliyev said.

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