Azerbaijan, Baku / Trend / Azerbaijan's insurance sector is on the threshold of serious changes related to adoption of two new laws - the Law on Insurance Activities and the Law on Obligatory Insurance Forms. With favourable outcomes of circumstances they will be adopted by the end of this year.
The new Law on Insurance will promote closing of non-professional insurance companies. All insurance companies will have to change their property form from closed joint-stock company to open joint-stock company, restrictions for investors will be removed, service quality will be increased, and more competitive tariffs will be introduced.
Moreover, the market will become more professional and will be managed more professionally, namely the conditions in the market will promote development of professional companies corresponding to international standards. The new law will dramatically impact the activities of the insurance companies. The presence of professional companies in the insurance market will uphold healthy competition. The new law distinctly defines the rights and obligations of the insurance inspectorate and the sanctions it can apply with respect to insurance companies and their administration.
Furthermore, it is planned to review the minimal requirements for the amount of authorized capital of active insurance companies. The index is expected to be gradually brought to AZN 3mln by 1 January 2010. The companies striving to endure and to retain potential clients, which will more and more apply to the companies with more funds and with more interesting insurance products, will work better. The more a company is capitalized, the more it is financially steady in light of unfavourable circumstances, the more it is reliable, and consequently the less it is disposed to bankruptcy. Naturally, companies with high capitalization are more trusted by potential clients.
The main purpose of the law is to provide for a situation where all factors positively affect the formation of trust and interest of the population in the insurance sector.
(Leyla Abdullayeva - expert of Trend analytical centre).