AZERBAIJAN: The insurance market will be completely opened to foreign investors by 2017

26 June 2014 — Daniela GHETU
azerbaidjan6The current cap set on the foreign capital's participation in the Azeri insurance companies will be completely removed by 2017, the Azerbaijani Finance Minister, Samir SHARIFOV, announced at AIIF 2014. "Our insurance companies have already gained enough experience and have qualified specialists and therefore they are able to compete with foreign companies on the domestic market," said the Minister.

According to the Azeri official, the rules concerning the accounting share and the determination of the maximum limit for the participation of foreign capital in the authorized capitals of the insurance companies in Azerbaijan will be soon amended, allowing the foreign players' participation to gradually increase from the current maximum limit of 30%, to 50% until January 1st, 2015, to 70% in 2015, to 85% starting January 1st, 2016 and finally, to 100% as of January 1st, 2017. The access to the market will be also permitted to foreign individuals and legal entities other than the insurance companies which already had this right.

It is not for the first time when the rules with regard to the foreign participation in the Azeri insurance market have been changed. Prior to 2008, the limit regarding the participation was set at 49% of the share capital of each company. Once the new Law "On insurance activity" was adopted in March 2008, it provided for a cap only on the foreign participation to the total capital of the market, allowing the establishment of fully foreign-owned companies.

As a result of this legal change, as well as of the encouraging economic development of the country, some major international players already made the first steps to enter the Azeri market.

Following the liberalization of the insurance market in the country after a five-year pause in 2010, the world's largest insurers went "on an active attack." Apparently, during this period foreign insurers only started on the Azerbaijani market. An incentive for joining Azerbaijan could also be the stable economic and political situation in the country, as well as the great potential for the development of the insurance business.

Presently, the share of the foreign capital in the Azerbaijani insurance market does not exceed 10% and the limit of the foreign capital participation in the total authorized capital of insurers is 30%. AIG Insurance (now Chartis), AXA, MIRACLE Insurance and Financial Group BASAK, GLENCARRON Group Ltd. are the largest international players already operating on the market, while other relevant entities - such as the Slovenian SAVA Re, the German group MUNICH Re or the Russians "ROSGOSTRAH" and "ROSNO", also showed their interest in the Azerbaijani market. However, only 10% of the insurance market's capital is currently controlled by foreign companies, leaving a significant space for new entrants.

AIIF 2014 - the fifth edition of the Azerbaijan International Insurance Forum, the most important event in the Caucasus Region, was held in Baku on June 19th-20th, 2014. The event was organized by the Azerbaijan Insurers Association, the Ministry of Finance of the Republic of Azerbaijan and Media XPRIMM (Romania).

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