Azerbaijan, Baku, Feb. 10 / Trend I. Khalilova/
The Azerbaijani Finance Ministry amended the guidelines to diversify the investments of insurance companies.
Based on the changes and additions to the rules on the investment operations of insurers, 80 percent of insurance reserves can be invested in bank deposits compared to the previously provided 60 percent. The rate for investments in one bank, as before, cannot exceed 30 percent.
Other standards for the investment of insurance reserves also remained unchanged. Insurance companies can invest in real estate up to 20 percent of insurance reserves if the volume of investments in one subject does not exceed 10 percent. Companies can invest up to 15 percent of insurance reserves in corporate securities and up to 100 percent in government securities.
Investments in fixed assets of other entities may take up to 80 percent.
The changes also reflect the insurance and reinsurance fees, which should be in accordance with treaties. The share of insurance and reinsurance premiums (except premiums for state compulsory insurance services) for the report period, the payments on which did not lag or which did not lag up to 90 days, shall be 30 percent of insurance reserves, whereas, previously the standard was 20 percent.
Reinsurers' shares in insurance reserves, as before, must not exceed 50 percent. The amount of funds available in debt for insurers and insureds in life insurance can be up to 50 percent of the mathematical reserves (that is the net of reinsurances' share).
At present, the most profitable investments for Azerbaijani insurers are bank deposits, in connection with which there is a need to revise the diversification standard and increase it to 80 percent
Azerbaijani insurers also are investing in government securities, but they are still less profitable.
Under the current law on insurance activities, insurers may also invest in real estate and private equity companies, as well as in other areas, but do not do that because of favorable conditions for investments in bank deposits. The average rate on deposits in manat on Jan. 1 amounted to 11.11 percent, and foreign currency - 9.85 percent, while yields on government securities do not exceed three percent per annum.
There are 27 insurance and one reinsurance company in Azerbaijan. Premiums for 2010 amounted to 155.59 million manat, with payments of 53.83 million manat. The insurance premiums decreased by 4.73 percent (163.31 million manat) and payments grew by 1.43 percent (53.07 million manat) over a year.