1
Insurance System in Azerbaijan as a multiplier
effect on economic and social processes

• Center for Economic and Social Development
  (CESD), supported by
• Open Society Institute-Assistance
  Foundation(OSIAF), Presented on July, 20th ,
  2011, Azerbaijan

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Assessment of the real situation of the insurance
sector

• The share of the insurance sector in GDP is 0,4
  percent, and insurance premiums per capita
  constitute 18-19 AZN In Azerbaijan
• The average figure of the insurance premiums in
  the world exceeds 15 times the level of the
  premiums in Azerbaijan
• Non-life insurance leading in the amount
  of insurance products is a unique feature of the
  insurance sector
• The share of life insurance in general insurance
  contracts is no more than 5 percent

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• Life insurance contracts generally have
  short-term liabilities
• Contractors do not quite understand their rights
  and responsibilities listed in the contract
• There are discrepancies in the structure as well
  as quality of the investment tools in the local
  market
• Insurance rates are low compared not just to
  developed countries, but even neighboring
  countries

4
Analyses of Legislation Database

• Despite the numerous laws, legislative database
  in the insurance sector of Azerbaijan is not in
  the average level of development
• Serious gaps in the law On Insurance had also
  impact on slow development of the insurance
  sector in comparison with other sectors 

5
The problems of insurance companies

• There are 28 insurance companies, a reinsurance
  company, five broker companies ( four with the
  foreign capital) in the country
• Development level of this sector falls 25-30
  times behind in comparison with that of in
  foreign countries
• The companies with 1-2 million AZN total capital
  cannot conduct a professional insurance business
  with AXA, AIG, Groupama and other companies
• Most insurance companies depend on banks in terms
  of capital

6
Classification of insurance services in
Azerbaijan 

• In the country, insurance is generally divided
  into two fields
• Life and non-life insurance fields
• In the country beneficiaries of health insurance
  products are not individuals but companies
• Unlike some western countries (i.e. Germany)
  health services are not fully carried out
• Compulsory medical insurance system doesnt cover
  insurance of some social diseases
• One of the leading insurance types of the market
  is car insurance
• For voluntary insurance, Azerbaijan falls behind
  even other post-Soviet countries

7
Compulsory insurance in Azerbaijan

• In Azerbaijan only 20 percent of the total volume
  of insurance collections fall on the share of
  compulsory insurance types
• Issues on compulsory health insurance
  reimbursement for the unemployed havent been
  clearly indentified yet
• After the law On Compulsory types of insurance
  goes into effect, totally new trends are expected
  in the insurance market

8
Offers of insurance companies

• Service package of insurance companies includes
  about 40 insurance types
• Insurance services offered in Azerbaijan are
  fewer in number in comparison with the developed
  countries
• Establishing specialized life insurance companies
  has not developed the sector
• In 2003-2008, 240 percent increase has been
  observed in the amount of total capital of
  insurers 
• Over the last three years insurance fees and
  payments on the domestic annuity
  insurance, ability to work insurance, and
  insurance for incurable diseases have been 0, 00
  AZN
• In 2008, the insurance companies' total revenues 
  to GDP ratio has not even reached1percent 
• In the first two months of 2011, out of 27
  companies 25 have made payments

9
Latest changes and reforms in the insurance
sector 

• There is a discrepancy between the level of
  development of the insurance market and
  reforms in the country as well as accelerated
  dynamics of economic development
• The Ministry of Finance shows legislative initiati
  ves in introduction of application of compulsory
  insurance types

10
International Experience Comparison of the
insurance sector in Azerbaijan with the ones in
Russia and Turkey

• Azerbaijans insurance sector has developed not
  only less than that of in Russia and Turkey, but
  even Georgia
• 68 of GDP of CIS countries and approximately 90
  of premiums collected in the region belongs
  to Russia
• In comparison with other types of
  insurance, medical insurance in Georgia is
  developing more dynamically
• Foreign capital has a large share in the
  insurance sector in Turkey 

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Conclusion

• Not establishing National Reinsurance Company
  creates difficulties in establishing reinsurance
  in accordance with modern standards
• There is no necessary legal database for
  development of life insurance
• Companies do not have opportunities to direct
  their free resources to purchase shares and
  securities
• Application of health insurance hasnt been
  realized
• Foreign companies are not allowed in the market

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Suggestions

• Extension of the application of health insurance
• Development of life insurance
• Application of WTO standards/criteria
• Restoration of insurance culture of people
• Use experience of Russian insurance companies
• Serious reforms in the health sector
• Changes in legislative acts

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• Thank you for your attention!
• Vugar Bayramov
• Leyla Aliyeva
• www.cesd.az