Insurance market in Azerbaijan may see rising insurance prices because of the war in Ukraine

31 March 2022 — Daniela GHETU
Azerbaijani insurance market may expect a rise in insurance prices in the near future, as a result of local insurers being forced to acquire more expensive reinsurance coverage on the European market, Ugur Ibrahimli, CEO at Mega Life Insurance noted in an article published on LinkedIn.

The sanctions imposed against Russian companies and banks may impact on the Azeri insurers' activity. First, they will most probably face difficulties with payments. "Given the cooperation of some insurance companies in Azerbaijan with the Russian insurance market, and the fact that the risks are reinsured in Russian insurance and reinsurance companies, it is inevitable that local companies will face certain problems in making payments." If the situation will last for a longer time, as it seems, than local insurers will probably need to switch to buying reinsurance coverage from the European reinsurers instead if their Russian current partners. This change may impact on the reinsurance rates and subsequently on the insurance prices. "The main reason for the cooperation of our local insurers with the Russian market (especially in the case of reinsurance of risks on property insurance) was given by the low reinsurance prices. Companies that are forced to turn to other markets will have to face higher prices (mainly in the European insurance market). As a result, the increase in reinsurance rates may lead to an increase in prices for insurance companies," Ibrahimli noted.

Other than the "price factor" resulted from changing the reinsurance coverage providers, the Ukrainian war's direct impact on the Azeri insurance market will be limited, but the predictable economic crisis will impact also on the insurers' result.

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