Insurance in Azerbaijan has one and a half century history. The formation of insurance business is closely linked to the beginning of development of capitalist production activities in the XIX century, emerging oil industry and intensification of entrepreneurship. In the end of the XIX century, the development of oil industry of Azerbaijan triggers the development of national economy by making the business circle to establish first oil and shipping companies. At that period of time, Azerbaijan starts to form its own insurance business. Mutual commercial and personal insurance, goods and maritime vessels insurance are used often times in the country. Branch offices of the famous Russian and foreign insurance companies open their doors to customers.

According to the data of 1912, there have been almost three dozens of insurance companies in Baku at that time.

This situation has changed radically with the establishment of the Soviet power in Azerbaijan. As known, there were only two insurance companies in the Soviet Union with its planned economy. They were called as following: Gosstrakh and Ingosstrakh. The total insurance infrastructure of Azerbaijan represented the ramified network of Gosstrakh branches scattered over the territory of the Republic in those years.

As we gained independence in the end of 1991, a new era of insurance development has started in Azerbaijan. The state insurance supervision has been established in the country for the first time. First private insurance companies have started to emerge within the country. Soon, their number has exceeded 40 by the end of year.

On 20 September 1994, the PSA on Deep Water Fields such as Azeri - Chirag - Guneshli located in the Azerbaijani sector of Caspian has been signed between the Government of Azerbaijan and the consortium of leading international oil companies in the difficult geopolitical conditions. The signature of this and subsequent oil and gas contracts have stimulated further development of insurance market of Azerbaijan. Large investments, Western management practices and standards, influx of a big number of subcontractors have triggered the drastic rise of demand in the field of insurance services.

Gradual implementation of the strategy to ramp up the economic development of the country approved by the President of the Republic of Azerbaijan Mr.Ilham Aliyev in 2003 have paved the way for the fast growth in our country in the course of last seven years. During this period of time, GDP has tripled in Azerbaijan. Average monthly salaries have increased by 4.2 times.

We would like to note in particular that the years of 2009 and 2010 will remain in the history as the years of financial and economic crisis. It has become also a testing time for our country. However, thanks to the reforms implemented in Azerbaijan and the right economic policy, the national economy has avoided the deep stagnation and continued to grow in those years. As a result of positive impact of economic growth on the lifestyle of our population, there was also an increase of demand for consumer products, vehicles and real estate. Fast paced growth has been observed also in the field of loans allocated for citizens as well as the development of small and medium enterprises. All these factors have given a stimulus to the expansion of the national insurance market.

For the time being, the share of private capital prevails at insurance market. Thus, only one out of 28 insurance companies is the state owned one. For instance, 52% of insurance premiums has been linked to the state owned insurance company in 1995 while the private sector had only 48% share. However, the outcomes of 2010 have revealed that already 86.5% of market share is ensured by the private companies while the voluntary types of insurance constitute 97.3% of insurance premiums.

During last five years, a big amount of work has been done in the Republic of Azerbaijan to develop insurance market and improve insurance legislation.

In 2006, the Ministry of Finance of the Republic of Azerbaijan has been the member of International Association of Insurance Supervisors. In March 2008, the Law on Insurance Activities elaborated on the Core Principles of this Association and the directives of the European Union has entered into force.

Besides the Law on Insurance Activities, a newly amended Chapter on Insurance of the Civil Code of the Republic of Azerbaijan has been enabled to regulate contractual obligations between insurers and the insured. In order to protect appropriately the interests of employed people and their inheritors, the Law of the Republic of Azerbaijan on Mandatory Insurance against Disability as a result of Professional Accident and Disease has been adopted in 2010. It has started to be enforced since the same year. In accordance with this law, all employers who are active in the Republic of Azerbaijan are liable to give insurance of all their employed people.

In June 2011, a new Law on Mandatory Insurance has been adopted in the country. This Law envisages the mandatory insurance of immovable property, civil liability related to the use of immovable property, insurance for passengers from accidents and motor third party liability insurance. This law envisages the creation of a system of compensation payments - the Bureau of Mandatory Insurance in Azerbaijan for the first time to protect more properly the interests of consumers in the field of insurance services.

I would like to note also that the main factors stimulating the insurance development in any country are linked to the public awareness level in the field of insurance, comprehension of benefits of insurance services as well as studying of rules of using insurance services. In order to improve the situation in this field and raise the public awareness, the Ministry of Finance of the Republic of Azerbaijan implements a special educational and awareness campaign starting from 2011. In the framework of this campaign, the special webpage has been created in the country. Various ads on insurance are prepared and broadcasted by TV channels. Video instructions are presented to raise the public awareness. This work will be continued in future in larger format.

In order to develop insurance business in the country, the Ministry of Finance of the Republic of Azerbaijan is planning to undertake a whole set of measures in future. These measures will include the creation of legal base enabling us to offer insurance services via electronic means and conclusion of insurance contracts by using electronic signature, harmonization of local legislation related to the protection of rights of insurance services consumers in line with legislation of the European Union in order to develop the actuary activities and activities of insurance mediators.

Today we feel an increasing interest of leading international insurance companies to enter the insurance market of Azerbaijan. There are the subsidiaries of such businesses as Chartis, Grupama and AXA. We know the relevant plans of a whole set of other international insurers.

We are optimistic about the future of insurance market of independent Azerbaijan and open for the larger collaboration with international partners.