Current trends in Azerbaijan Insurance Market 2015 Azerbaijan

Current trends in Azerbaijan Insurance Market 2015 Azerbaijan International Insurance Forum Orkhan Mammadov – Ata. Insurance Baku, 02 July 2015

Azerbaijan at a glance Area: 86. 6 ths. sq. km. Population: 9, 5 million Gross Domestic Product: $75. 20 billion (2014) Capital: Baku Currency: Manat (AZN)

Insurance Market (as of 2014) Non-life – 24 Insurance density – 45 Life - 3 AZN/capita Reinsurance -1 Insurance penetration Total – 28 -. 73 %

Motor Cargo Life Others Medical Aviation Property Liability 27% 28% 18% 2% 3% 14% 3% 4%

INSURANCE PREMIUMS 405, 672, 514 429, 181, 198 342, 519, 347 212, 981, 983 155, 586, 415 2010 2011 2012 2013 2014

Total Assets of Insurance Companies 800, 000 700, 000 600, 000 500, 000 400, 000 300, 000 200, 000 100, 000 0 2011 2012 2013 2014

… losses are also on the rise 157 129 290 122 804 276 93 860 882 53 829 273 2010 61 567 111 2012 2013 2014

LOSS RATIO 40. 00% 35. 00% 30. 00% 25. 00% 20. 00% 15. 00% 10. 00% 5. 00% 0. 00% 2010 2011 2012 2013 2014

Voluntary vs Compulsory Life vs Non-Life 76% 66% 34% Voluntary Compulsory 24% Non-life Life

Azerbaijan Insurance Market enjoys strong state support in recent years Ø Continuous efforts to liberalize the market and improve the competitive environment Ø Policy towards the increased capitalization of the local insurance and reinsurance companies Ø Consumer rights’ protection Ø Regular advancement of laws, Civil Code and other legislative acts Ø Life insurance segment focus Ø Large scale infrastructure development projects Ø Organization of international events and competitions

Plan for Development of Insurance Market in 2015 -2017 Ministry of Finance of Azerbaijan has prepared an "Action Plan for the development of the insurance market in 2015 -2017 The Action Plan includes ü further improvement of legislation to protect the rights of policyholders ü insurance education & propaganda ü development the professional skills of insurance sector employees ü introduction of new life and non-life insurance products

NEW BUSINESS PERSPECTIVES Given the socio-economic specifics of Azerbaijan Insurance Market following directions are considered as potential drivers of the growth: 1. Compulsory Medical Insurance 2. Agricultural insurance 3. Life insurance

Compulsory Medical Insurance Azerbaijan Government actively investigates the best applicable model for successful implementation of this important direction in the country. Several studies have been conducted by international experts learning foreign countries’ experiences. It’s been expected to cover at lease 3 mln population in the initial stage. Once launched compulsory medical insurance will hugely impact all regions of Azerbaijan and definitely increase the insurance knowledge and trust. Estimated premuims – above 1 bln AZN

Agricultural insurance The second direction which government is actively seeking to realize is agricultural insurance. Given the complex nature of this segment solid research and selective approach needed to be taken into account. Legislative aspect of the issue is also of utmost importance. Careful scenario analysis is required for positive penetrative effects. As clearly seen from Turkish TARSIM experience, the development of agricultural/rural insurance has a strong impact on the insurance density in the regions of the country.

Life insurance premiums are increasing in Azerbaijan 120000000 10000 80000000 60000000 40000000 20000000 0 2011 2012 2013 2014

Low penetration rate and density in the life insurance segment are expected to be overcome by growing income of population and increasing awareness. Economic environment and investment aspect of this particular direction and innovative approach of market players should postion life insurance as one of main growth driver of Azerbaijan Insurance Market. Clearly, bancassurance is going to be main distribution channel given the rising banked population. Insurers must design more simpler products and take consumer needs as priority like in many developed life markets. Last but not least, state tax and financial incentives should remain in force for further advancement.