Azerbaijan's insurance market takes 'new breath' from new law
Baku, Azerbaijan, Sept. 17 /Trend/
Ellada Khankishiyeva, head of Trend's analytical center
The growth of Azerbaijan's insurance market in short-term outlook is guaranteed. The indicator of the insurance market may increase to 2-3 percent of country's GDP from the current 0.4 percent. The reason is the Law on compulsory insurances, which is now in force in Azerbaijan.
The new law regulates the four types of compulsory insurance - real estate, liability of owners of motor vehicles, passenger insurance, and liability insurance for exploitation of real estate.
Unlike voluntary insurances, compulsory insurances are regulated by the state. Therefore, firstly attention will be paid to developing and improving legal framework in this type of insurance. The previous law governing the compulsory insurance had been adopted in 1996, respectively, there appeared a need to improve regulatory mechanisms within other legislation because of the incompatibilities.
The compulsory insurance of real estate will be distributed for all types of buildings, houses and apartments belonging to individuals, offices, legal entities and public property. In this case the insured event will be considered related to damage to this property as a result of fire, explosion, lightning, short circuit in the electrical system, an accident in the sewer or water system, natural disasters, etc.
Under the law, regardless of the housing cost the insurance sum is set at 25,000 manat for Baku, and the release amount at 250 manat. The figures are 20,000 manat and 200 manat, respectively, for Sumgait, Ganja and Nakhchivan and 15,000 manat and 150 manat for other regions.
Compulsory insurance of civil liability, associated with the operation of real estate, provides insurance protection for third parties from harm caused by using this property. This insurance will apply to legal entities and individuals engaged in entrepreneurial activities. The amount of reimbursement for this type of insurance for damage to health will be 5,000 manat per person and 50,000 manat for property.
The law contains a differentiated approach in determining the insurance rate, depending on the type of vehicle. The fee for compulsory motor TPL insurance amounts to 5,000 manat (currently 1,000 manat) for property and 50,000 manat (presently 5,000 manat) for health.
Compulsory insurance for passengers will be applied to persons using the vehicles, regardless of form. The amount of the insurance coverage will be 5,000 manat per person. Until now, this type of insurance is regulated by a law adopted in 2003, but the acting form is unacceptable today and creates complications in obtaining compensation.
The new law is designed to raise level of premiums per capita in 2015 to 50 manat compared to current 13 manat, and in the medium term - up to 100 manat per year.
According to presidential order on the application of this law, signed on Sept. 15, the Finance Ministry was instructed to, within two months, determine the amount of participation fee and a deposit under the provision for insurers wishing to become members of the Compulsory Insurance Bureau. Ministry of Finance was also instructed to define the rules of forming a reserve of conditional liabilities of insurers that are members of the Bureau, and the amount of this reserve.
Within two months, the Ministry of Finance should determine the rules of calculating insurance rates for compulsory insurance of real estate and address other issues arising from the presidential order.
Official exchange rate on Sept. 17 is 0.7867 AZN/USD.