By Nigar Orujova
Azerbaijan will continue to strengthen the legal and institutional framework for the development of the insurance sector, Finance Minister Samir Sharifov said at the fourth International Insurance Forum in Baku on June 20.
"The growth and development of the insurance sector is closely linked to the economic situation in the country. During the last 10 years, Azerbaijan's GDP tripled, the poverty rate declined six-fold and foreign reserves and investments in the economy seriously increased. Such a situation has beneficial effects and in particular on the development of the insurance sector," Sharifov said.
According to him, in the past two years, the insurance sector in Azerbaijan has doubled, the market volume reached 350 million manat in 2012 and the insurance premium per capita increased from seven manat to 47 manat.
"The market is growing at a good pace of about 20 percent a year," Sharifov said.
The insurance forum held in Baku is a good platform for the expansion of ties between insurers and reinsurers from different countries, he added.
"This forum is dedicated to not only the prospects of development of the insurance market of Azerbaijan, but at the same time is a good tool for establishing business relationships between insurance companies. Interest in the forum is growing from year to year," Sharifov said.
Azerbaijan's Finance Ministry will double the minimum requirement for the total capital of insurance and reinsurance companies, Sharifov said.
In the coming years, the Ministry plans to increase the capital requirement of insurance companies from 5 to 10 million manats (up to over $12,700). Accordingly, the capital requirement for reinsurers will be increased from the current 10 to 20 million manats (up to about $25,400).
The increase of the requirements will not cause serious problems for companies, according to Sharifov.
"The insurance sector is specific, as it relates to the wider population. From this point of view, we should pay special attention to the supervision in the sector. Financial capacity of market participants should be sufficient to provide quality services to the public, to ensure full and timely payments," he said.
However, according to Sharifov, in order to develop the market measures to toughening regulatory requirements will be undertaken gradually.
"The capitalization of the insurance market has grown by 16 times in ten years, and the income of insurance companies by 17.5 times. In 2002-2013 the minimum capital requirement for insurers increased from one to five million manat, resulting in strengthening of the sector's financial stability, the total capital of all the insurance companies in the country increased from 18.4 million manat to 300 million manat. Net profit of the companies increased to 48 million manat in the period," he said.
The chairman of the Parliamentary Committee on Economic Policy Ziyad Samadzadeh in his speech at the forum said the growth rate of the insurance sector in Azerbaijan has seriously exceeded the growth rate of the economy. The market has the potential to increase to one billion manat in 2020.
However, he said, there is still a need to work towards the improvement of mechanisms in the insurance market, its structure and in particular in the field of agricultural insurance.
The total capital of the insurance market made up 343.44 million manat last year, including paid-up share capital of the market, which was at 294.06 million manat, and other capital reserves were 49.39 million manat.
There are 28 insurance and one reinsurance company in Azerbaijan.