Establishment of nat'l reinsurance company postponed
The Azerbaijani Finance Ministry regards establishment of a national reinsurance company in the country after solution of indexation problem of insurance payments, collected by Azersyghorta State Insurance Company from life insurance in the soviet period, as expedient. It requires around $100m to form the capital of the company, as the amount of the risks, accepting by insurance companies comprises approximately 150bn manats, Beybala Khankishiyev, the head of the State Insurance Supervision Division of the Finance Ministry, told Trend. According to Khankishiyev, the government plans first to find funds for compensation of insurance payments, and then establish the reinsurance company. Besides, the Finance Ministry did not agree with insurers. They think that establishment of the insurance company will lead to forming of monopoly at this market.
One of the major reasons for delay is disagreement between insurers and the Ministry. It is related to the format of the company. If the government uses Turkish version of Milli Re Reinsurance Company, a part of risks are due to be transferred through the company in accordance with the Turkish legislation, but the Azerbaijani insurance companies unlike the Ministry are against such conservative approach to placement of risks. The financiers are interested in keeping of more risks in the country. The insurers are adhered to liberal policy. Therefore, they think that discussions in this regard will delay. Besides, it is unclear what base the company will be funded on, what amount of capital and detained risks will be.
Insurance companies propose to establish the reinsurance company with some package belonging to state in order to detain a part of risks in the country. It is possible to understand the Azerbaijani governments concern, if to look through the statistics. Over two thirds of the insurance market flow abroad. Insurance companies can keep 10% of the statutory capital and hand over the rest part to reinsurance. Therefore, companies are due to increase their capital. At best, local companies are able to be consolidated in pools to detain more risks in the country.