Caucasus: huge growth potential, rapid developing and well educated professionals

5 July 2012 —
Caucasus: huge growth potential, rapid developing and well educated professionals
aiif20122"Caucasus represents a new insurance market, with big growth opportunities, the well educated professionals, speaking at least 3 languages, representing one of its main streghts", concluded yesterday his speech at AIIF 2012 Chingiz MEHDIYEV, Chairman of the Management Board of AZ Re Reinsurance Company. He also has enumerated among the main drivers of the rapid development of the insurance markets in the Caucasus region the big energy and infrastructure projects, the recent adoption of the compulsory insurance laws and of relevant tax discounts for life insurance, as well as VAT exemption in place of insurance services.

In addition, a good loss ratio, the gradual increase of capitalization and the legislative acts update are some of the characteristics which favor a further ascending trend and make the Caucasus markets, mainly the Azerbaijan one, very interesting for foreign investors.

The bad history of former USSR insurance system and political instability in the region, as well as some issues specific for most young markets - narrow spectrum of services, lack of modern sales technology or sophisticated IT platforms, low self retention capacity of insurers -, were mentioned by MEHDIYEV as the main weaknesses of the regional insurance market. High exposure to CAT risks, as well as the absence of CAT coverage are also some of the sensitive subjects in the region, while the highly price sensitive market puts a significant pressure on the insurers' profitability and financial soundness.

Both in terms of dimensions, demographic characteristics and macroeconomic indicators, Azerbaijan is the leading economy in the Caucasus region. The regional insurance market replicates this situation, with the Azeri market holding a 52% share in terms of GWP, 60% of the assets and 82% of the paid capital. The Azerbaijan insurance market presents also the most balanced insurance portfolio, while the Georgian and Armenian markets are largely dominated by one class of insurance products (health and MTPL respectivelly).

Download the full presentation held by Chingiz MEHDIYEV, Chairman of the Management Board of AZ Re Reinsurance Company at AIIF 2012 here.



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