Azerbaijan insurance sector set to grow

Business Materials 25 October 2011 16:05 (UTC +04:00)

Azerbaijan, Baku, Oct. 25 / Trend A. Akhundov /

Azerbaijan will continue implementing measures to improve economic indices in the insurance sector in 2012-2015, the draft state budget for 2012 and the next three years showed when being presented to parliament.

The report said that during this period, measures will be implemented to improve economic indices in the insurance sector and in particular the share of total insurance premiums in GDP and the increase in insurance premiums per capita

According to the document, the main goal of state policy in this area is to develop an effective national insurance system providing efficient and stable activity of the market economy, protecting entrepreneurs from potential risks and creating long-term investment sources for economic development.

The major issues being focused on are:

- Improvement of legal base as a prerequisite for the development of the insurance system and its transformation into an important factor of economic growth.

- Strengthening financial stability and solvency of insurers.

- Ensuring the use of compulsory medical insurance of employees by employers.

- Improving the efficiency of state supervision over the insurance activity.
- Development of population's deposit transformation into long-term investment by using insurance mechanisms.

- Continued integration of the national insurance system in the world insurance system.

- Improving the registration procedures in case of the insured event and other issues.

The Azerbaijani Ministry of Finance aims to bring the share of insurance in GDP up to one per cent, Deputy Finance Minister Azer Bayramov told Trend earlier. This figure hit 0.48 per cent as of Jan.-Sept. 2011.

Mr. Bayramov said: "Over the past seven years, Azerbaijan's GDP grew three times, the amount of insurance premiums of all companies - 3.7 times."

He said that given the slowdown in the GDP growth, increasing the share of the insurance market in Azerbaijan's GDP to two to three per cent in the medium term is quite realistic.
He went on: "It would be desirable to achieve this level for two or three years, but I think the market will reach this level in the medium term."

According to the draft of Azerbaijan's long-term economic development strategy from 2011-2025, prepared by the Economic Development Ministry, the share of insurance fees in the country's GDP will be increased from 0.5 per cent in 2009 to at least three per cent in 2025. In 2010, this figure fell to 0.37 per cent of GDP.

The strategy draft shows the turnover of the insurance market in 2009 totaled $215 million and by 2025 is expected to reach $3.108 billion.

The State Insurance Supervision Service under the Finance Ministry of Azerbaijan, said that the total amount of premiums in 2010 amounted to 155.59 million manat ($195 million at the exchange rate as of the end of last year, taking 0.7979 AZN to 1 USD).

According to government forecasts, the insurance market will grow 16 times by 2025. To achieve this the Ministry considers it necessary to increase the level of capitalisation of insurance companies, expand the range of products and services (reinsurance, life insurance, etc.), as well as create a special fund for insurance in the agricultural sector, etc.