Insurance System in Transition; A Case of Azerbaijan

Insurance System in Transition; A Case of Azerbaijan

The Center for Economic and Social Development (CESD), with the financial support of the Open Society Institute-Assistance Foundation (“OSIAF”), Azerbaijan, is implementing the following project: “The Multiplying Effect of the Insurance System on Economic and Social Development in Azerbaijan.”  The Center reports that the development of the insurance sector in Azerbaijan, its problems, the application of compulsory insurance, the share of insurance companies in private sector, as well as the variety and quality of offered services, were investigated. The local insurance market was compared with the insurance markets of developed countries, as well as those in the regional countries of Turkey, Russia and Georgia.

The research shows that there is a discrepancy between the level of development of the insurance market and the dynamics of accelerated economic development. The insurance sector in Azerbaijan is less developed not only in comparison with Russia and Turkey, but also with Georgia.  The volume of insurance premiums, as well as the number of insurance products, were investigated. Research showed that in developing countries the insurance system’s share in General Domestic Product ( GDP) ranges between 15 and 20 percent. However in Azerbaijan this indicator is 0,4 percent, and insurance premiums per capita constitute 18-19 AZN. In the past few years, only a 3 percent increase has been observed in the insurance market of the country.

Different trends of international insurance experience have been applied in the insurance market of Azerbaijan. In many other countries, life insurance is used for the improvement of its citizens’ financial condition. However, in Azerbaijan revenues on this type of insurance have decreased annually. During research, compulsory insurance premiums and payments were compared with other types of insurance, and the revenues on these types of insurance were found to not be satisfactory. It was noted that there are gaps in the application of compulsory insurance. During the investigation of the market it was found that the majority of insurance companies depend on banks for capital. These companies balance their own budgets, at the expense of the banks, rather than with car insurance revenues. CESD reports that within the framework of the project, a policy paper and a package of proposals for the insurance system will be prepared.

 

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