Azerbaijan, Baku, Jan. 7 / Trend A. Akhundov /
The adoption of the new law on compulsory types of insurance in Azerbaijan, and as a consequence, the establishment of a bureau on compulsory insurance pose a threat to the existence of relatively weak insurance companies, Gunay Sıgorta company's board chairman Ilham Amiraslanov told Trend on Friday.
The law regulates four types of compulsory insurance - real estate, liability of owners of vehicles, passenger insurance and real estate liability. Insurance companies have been using the law since December 16, 2011.
"Each company needs joining the bureau," he said. "However, if the company collects 20,000-25,000 manat on mandatory types during the year, how it should pay 200,000 manat for the participation in the bureau and 200,000 manat for the permission on at least one kind. Even if the company can pay the money, they will be deducted from total capital. Afterwards, the capital level will fall below the level set by the requirements of the Finance Ministry. Therefore, the license of the company will be suspended."
According to the minimum requirement of the Azerbaijani Finance Ministry, the capital of insurance companies as of January 1, 2011 must hit 3 million manat, and as of early 2012 - 4 million manat.
The membership fee to the bureau on compulsory insurance was set at 200,000 manat.
Amiraslanov said that by stopping working on compulsory types, the company faces material losses and loses the opportunity to propose its products on voluntary insurance.
"The companies, included in the bureau, will be interested in selling insurance policies for voluntary insurance while giving the policies on compulsory insurance," he said. "Thus, they will have more opportunities to attract new customers. The activity launched by the bureau will affect the fees on voluntary insurance against fire and voluntary car insurance of the companies that are not included in the bureau. It will be hard for the companies to attract new customers on these kinds."
Pasa Sıgorta, Atesgah Sıgorta, Ata Sıgorta, AXA MBASK, Xalq Sıgorta and Standard Insurance are the founders of the bureau. AzSıgorta joined the bureau later.
All this creates additional difficulties for small companies while bringing the capital to the required minimum.
"There are 5-6 companies, which fees do not exceed 500,000 manat per year," he said.
"They work more with physical entities. They do not get state orders. They do not work with big corporate clients. It will be harder to meet the requirements of the legislation on financial stability this year. Naturally, the establishment of the bureau has a threat to the existence of these companies."
The number of participants in the compulsory insurance office established in Azerbaijan may increase to 15, State Service for Insurance Supervision official Namig Khalilov said earlier.
"About 10-15 companies have the capability to meet the requirements for entry and the list can further expand with increasing ability of firms in the future" Mr Khalilov said earlier. He noted that the number of firms in the bureau could increase to 10 in early 2012.
There are 29 insurance and one reinsurance companies in Azerbaijan. At the same time the licence of Fidan Sıgorta Gunay Sıgorta Company was suspended.
The official exchange rate is 0,7864 AZN/USD.