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Azerbaijan’s insurance company reveals priority areas for investment

Finance Materials 14 November 2018 11:25

Baku, Azerbaijan, Nov. 14

By Taleh Mursagulov - Trend:

Azerbaijan’s insurance company AtaInsurance has priority areas for investment, First Deputy Chairman of the Board of Azerbaijan’s company AtaInsurance Orkhan Mammadov told Trend.

He said that these are mainly bank deposits and short-term government bonds, as well as a small amount of investment in corporate bonds.

Mammadov noted that insurance companies have no restrictions on participation in the capital market of Azerbaijan, but there are rules for calculating total capital.

He added that in accordance with the requirement of the law, total capital of an insurance company should be at least 5 million manats.

That is, if an insurance company wants to conduct activities on reinsurance as well and obtain a license in this area, there should be at least another five million manats in the company’s total capital, he said.

“If a company conducts its activities both in insurance and reinsurance, its minimum total capital shouldn’t be less than ten million manats,” he added. “During the settlements, certain coefficients are applied there. For example, if an insurance company places a certain amount in the bank, only 80 percent of this amount is considered when calculating the total capital. When buying out government bonds, all 100 percent of the amount is included in the total capital. In this case, there are no risk factors. An insurance company can place 100 percent of its capital in the banks as well, but it will affect the calculation of its total capital.”

In addition, Mammadov noted that earlier, there were low interest rates on government bonds. Therefore, insurance companies mainly placed their funds in banks because of high interest rates, he said. After interest rates on manat deposits decreased in banks, the interest of insurance companies in government bonds increased, he added.

“Interest rates on government bonds have already started to create competition,” he said. “At the moment, the interest rates are almost the same [compared to bank deposits] and are about 8-10 percent. However, companies are investing their money both in government bonds and banks.”

AtaInsurance has been operating in Azerbaijan since 2004.

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