AZERBAIJAN: Central Bank's market improvement plan may lead to the closure of several companies

27 May 2020 —
The regulator's plan to improve the market situation may result in closure of several insurance companies. The Central Bank recently announced the cancellation of the license of Standard Insurance company, while several other insurers may be closed as well, based on the regulator's improvement plan, Trend informed.

Among the reasons sitting at the foundation of this plan, Azerbaijani expert in the field of insurance, Khayal MAMMADKHANLI, notes companies' institutional problems, mismatch of capital with the established requirements, assets liquidity problems and others, making insurers' activity difficult while also affecting customer service, and thus the confidence in the insurance industry.

MAMMADKHANLI emphasized that many companies used to focus on compulsory insurance (like compulsory liability insurance of motor vehicle owners), especially during the period of its rapid development based on digitalization. However, the loss ratio of this insurance type began to grow rapidly due to the increase in number of accidents and increasing spare parts prices, thus, at the end of 2019 reaching 67%. Insurers began to refuse active sales, which led to a decline in premium collection, while paid claims under previously concluded contracts continued to grow, the expert noted. This trend heavily affected quality of portfolios of many of the mentioned companies.

"If major steps are not taken soon to improve the situation in this sphere, 2-3 more insurance companies having problems with both capital and the quality of the insurance portfolio may be closed", MAMMADKHANLI said.