Expert: Small Azerbaijani insurance companies should merge

Business Materials 30 August 2017 19:29 (UTC +04:00)

Baku, Azerbaijan, Aug. 30

By Anvar Mammadov – Trend:

Small Azerbaijani insurance companies should think about a merger, in order to remain in the market, Khayal Mammadkhanli, president of the training and consulting center “Consultant”, insurance expert, told Trend, Aug. 30.

The dominance of 10-15 companies in the whole insurance market of Azerbaijan is not accepted positively, he said.

“At present, 53 percent of the market accounts for two companies, this is while 80 percent of the market accounts for five insurance companies,” the expert said. “This is not a very positive fact. However, it should be noted that big companies don’t resort to any leverage, to dominate the market. More likely, this happens due to idleness of other companies, which raises the question of the efficient operation of the remaining 16-17 companies. In such a situation, the question arises, whether the remaining companies need to join their forces.”

There are 22 insurance companies operating in Azerbaijan.

Last year, two companies, Gunay Insurance and Buta Insurance, merged into one insurance company. The new company also received portfolios of the liquidated Azerqarant Insurance and the International Insurance Company. As a result, in the first half of 2017, Gunay Insurance collected 4.91 million manats of premiums, while in the same period last year the insurance company collected only 1.35 million manats. The company increased its premiums by 3.6 times, but it wasn’t sufficient enough for it to enter the top 10 list of the premiums collected companies.

Mammadkhanli noted that, this merger will bear fruit, but it will require time. At the same time, in the near future, merger may become necessary and even inevitable, since, currently, Azerbaijan’s insurance market is quite oversaturated and 15 insurance companies will be enough for the market, the expert said.

At the same time, the merger is not the only necessary step - companies should prepare their strategy, at least for five years ahead, develop new interesting and necessary products for customers, Mammadkhanli noted. According to the expert, small insurance companies may also think about specialization in one particular segment of the insurance market.

“Specialization of small insurance companies in certain kinds of insurance and products would positively affect the development of market trends,” he added. “For example, today in Azerbaijan, the companies that carry out activity in the field of liability insurance are in high demand. This includes several insurance products that are very promising. Moreover, there is a necessity in insurance companies engaged in the field of agricultural and transportation insurance.”

“Such an approach will allow insurers to strengthen their professional qualities, find their place in the market, and will also make it possible to lower the financial requirements to them,” he said. “However, our insurance companies, for some reason, want to engage in all kinds of insurance, simultaneously.”