NINETY YEARS OF CONFIDENCE

Growing and developing from year to year, the insurance market of independent Azerbaijan, like all other sectors of the economy, marks its 20th anniversary this year. Over this period, one of the main segments of the financial sector has travelled a difficult path to establish itself, having gone through swings in the country's economic figures, the global economic crisis, phoney companies, etc. Government control and the growing interest in this field have helped to achieve good results in such a short period of time - today we can confidently say that the insurance sector in Azerbaijan, overcoming problems and errors, is on a confident path of development. And throughout these 20 years, the State Insurance Company of Azerbaijan, which celebrates its 90th anniversary this year, was, and still is, the locomotive of the market and the undisputed leader in the rankings.

Legislative foundation

The path of the development of the insurance sector in Azerbaijan during the years of independence can be quite clearly seen when you compare the situation in this sector in the early 1990s and now. Then there was not even an elementary legal framework, and for almost two years, the insurance business was based on the rules and regulations adopted in the USSR. On 5 January 1993, parliament finally adopted the first law of the Azerbaijan Republic "On insurance". This law made it possible to drastically reconfigure the insurance business in the country based on market principles and gave a signal for the formation of the insurance market and its promotion among the population. Then a variety of legal documents were prepared, which increased the amount of insurance services and strengthened financial stability in these organizations. Control over this area has been provided since 1992 by the State Insurance Supervision Department, which was established by the Cabinet of Ministers, but later was placed under the jurisdiction of the Ministry of Finance.

After all these activities, the development of insurance in Azerbaijan gained momentum. The laws "On the compulsory insurance of civil liability of vehicle owners", "On the state compulsory personal insurance of servicemen," "On the state compulsory personal insurance of judicial and law-enforcement bodies", "On the compulsory insurance of public servants", "On the stimulation of insurance in agriculture", etc. were passed one after another.

Summarizing, we would like to note that overall Azerbaijan has adopted over 25 laws, decrees and decisions since independence and carried out work to improve the existing documents (in particular, the law "On insurance" was finalized and adopted as a law "On insurance activity") in order to develop the insurance market and bring it into line with international standards.

All this eventually contributed to the growth of the insurance market and brought the volume of insurance premiums to 148 million manats in 2007, 174.2 million - in 2008, 163.3 million - in 2009 and 155.6 million - in 2010. The reasons for the fall in premiums in the past two years have been discussed and reported a lot - the global economic crisis and the adaptation of the insurance market to new legislation made their negative contribution to the activity of Azerbaijani insurers. But this year, the market perked up considerably, as demonstrated by the figures for eight months of 2011: the total premiums of all companies operating in the country during this period amounted to 134.437 million manats (annual growth of 29.73 per cent), while pay-outs stood at 36.318 million manats (growth of 17.46 per cent).

As in previous rankings, the top best insurers in Azerbaijan are once again led by the State Insurance Company of the Azerbaijan Republic, which has demonstrated growth rates in insurance premiums.

Guaranteed leadership

The leadership of the State Insurance Company on the market is not surprising - the experience gained in nine decades of insurance work, the extensive branch network, the wide range of services, reliability and efficiency enabled the company not only to retain but also increase its customer base after the collapse of the Soviet Union and at times of economic crises. It was precisely Azarsigorta which was the operator of the insurance services on the "Contract of the Century" and actively collaborated with the companies that held shares in the project, taking and distributing insurance risks associated with drilling, production and transportation of oil. The right to this business is regulated by the above contract and is valid until the end of its term. In addition, the state-owned company had long been entrusted with the insurance of transit goods on the territory of Azerbaijan within the framework of the TRACECA project, the insurance of aircraft belonging to Azerbaijan Airlines (AZAL), ships of the Caspian Shipping Company sailing in the Caspian basin and involvement in other major projects.

To provide a full guarantee for the risks, the State Insurance Company cooperated with reinsurance companies of developed countries, including Willis Faber, a member of Britain's Lloyd's insurance corporation, Germany's Munich Re, Japan's Tokyo Marine, Russia's Ingosstrakh, Turkey's Merkez Sigorta and Yapi Kredi Sigorta, Iran's Asiya, as well as the world's largest insurance brokers Marsh and Sedgwick.

The State Insurance Company has received the international quality certificate ISO-2008 for the quality of services.

As a result of measures taken by the State Insurance Company, 21.8 million manats of insurance premiums were raised in 2008, 26.5 million in 2009 and 24.2 million in 2010. For the past three years, the Nasimi, Yasamal and Qaradag branches in Baku, together with the Xacmaz, Ismayilli, Tovuz, Agstafa, Sabirabad, Lankaran, Gadabay and Calilabad rural district branches, have achieved their goal successfully and overfulfilled objectives set by the company management.

In an interview with Region+, the chairman of the board of the State Insurance Company of the Azerbaijan Republic, Mammad Mammadov, said that today the company continues to strive to develop and expand its customer base and improve the quality of services.

- What is the level of the population's interest in insurance?

- At present, our company offers the population more than 30 types of insurance services. The company has opened its own branches and representative offices in all regions of the country, and in order to create insurance coverage, has provided these offices with highly qualified staff.

In addition, in order to fulfil its obligations to its customers, the state-owned company cooperates with both local and foreign reinsurance companies.

With regard to the interest, as you know, insurance in Azerbaijan is divided into mandatory and voluntary forms, and each of these groups has its own favourites. For example, among the types of compulsory insurance, third party liability insurance for vehicle owners and insurance against fire are very popular. Among voluntary forms, the most common type is insurance of vehicles, buildings, insurance against accidents (private accidents), medical insurance, etc.

I would like to note that in recent years, many measures have been taken to increase public interest in insurance and to development this sector as a whole, which will certainly have an impact on this year's market performance.

- Do you mean the improvement of legislation?

- Yes, this factor had a major role in the revitalization of the market. I should note that our company, using the favourable situation and in order to develop the insurance market in the country's economy, is developing new rules for insurance through the improvement of existing ones, which will make it possible to pay legal entities and individuals for insurance claims in a timely fashion.

At the same time, as you know, over the past couple of years, important documents have been adopted, contributing to the development of insurance in Azerbaijan and stimulating growth in premiums. Among them, I would mention two important laws - "On compulsory insurance against loss of occupational ability as a result of industrial accidents and occupational disease" and "On mandatory types of insurance". They became a good continuation in the improvement of the legislative base in the insurance industry.

- What is the degree of the insurance coverage in the regions of the country?

- I have already said that we have branches in all districts and cities, and through them, we provide the full range of services offered by the company. As you know, most of the regions are engaged in the agricultural sector, which is the focus of the law "On the stimulation of insurance in agriculture", according to which 50 per cent of insurance payments to the farming industry are undertaken by the state. This is fairly strong support for rural entrepreneurs who want to insure their crops. Annually, the state budget allocates a considerable sum for that purpose, but, unfortunately, it is almost never used 100 per cent. Despite the obvious advantage, neither farmers nor insurers appreciate this type of insurance. It is true that agents of our company manage to sign contracts with about 400 farmers annually, but this is only a small fraction of the available potential. Our company employees also collect premiums for the insurance of buildings, household property, vehicles, liability insurance and insurance of health against accidents.

- What measures are required to promote insurance among the population?

- First of all, it's propaganda and information. Unfortunately, in our country, if property is damaged due to natural disasters, fire, etc., people immediately visit local government authorities. Meanwhile, the population in developed countries funnels 10-15 per cent of their annual expenditure, into insurance premiums. In our country, this figure is very low.

The problems in this area were clearly identified as a result of the damage caused to homes in several regions of Azerbaijan by floods on the river Kura and Araz over the past year. Then, in one of his speeches, even President Ilham Aliyev said that since none of the residents had insured their buildings, the state had allocated a huge sum from the state budget to aid the population.

- The State Insurance Company of Azerbaijan has been the leader on the Azerbaijani insurance market for 20 years. What is being done to continue this positive trend?

- I think the key factor here is the trust of our clients earned in the 90 years of hard work. And we will continue to work to improve service levels, increasing the package of services offered. In a word, we will continue to evolve and develop insurance in Azerbaijan.

P.S. In May 2011, by the decree of the country's president, the chairman of the State Insurance Company, Mammadov, was awarded the Order of Glory (Sohrat) for his contribution to the economy.