XPRIMM: In 2013 the Azeri insurance market recorded a growth rate of 18.44% in local currency. How do you comment on the market results?
Namik KHALILOV: In 2013 we saw a fresh trend, with voluntary insurance becoming the main driver of the Azeri insurance market, which went up by 26.0%. The life insurance market grew by 1.9% while the non-life insurance sector saw a 13.6% increase in GWP. At the same time, the mandatory insurance increased by only 5.6%. The market trends indicate high rates of public interest in the life insurance products, as well as the steadier growth of interest in other insurance products than in life insurance.

XPRIMM: Which were the most dynamic insurance lines and which were the factors favoring the growth of these market segments?
N. K.: The most dynamic insurance lines have become the mixed life insurance, with an increase of 2.16%, and life insurance, with an increase of 90%. The main impetus for higher interest in life insurance products is the growing awareness of the benefits from this type of insurance for the protection of the family property. Moreover, in Azerbaijan there are tax benefits, which bring additional benefits to those people who have concluded a mixed life insurance contract. In fact, it should be mentioned that last year there weren't any underperforming insurance lines.

XPRIMM: The higher capital requirements adopted last year have already determined some changes in the Azeri market structure. How do you comment on this?
N. K.: At the end of 2013, the Ministry of Finance of Azerbaijan has made certain changes in the requirements for the minimum capital level for life insurance companies and reinsurance companies. These changes have not affected the other insurance companies. The existing life insurance companies should increase their capital from AZN 5 million to AZN 10 million over the next three years. For the reinsurance companies the capital requirement also increased 2-fold - from 10 to 20 million manat. The reason for such decisions was the rapid growth of the life insurance and domestic reinsurance, which in the conditions of the still-unformed market generates significant risks that need to be addressed, including through higher capitalization of the companies.

XPRIMM: The State Insurance Supervisory Service has recently proposed the creation of a national rating agency to evaluate the insurers' risk profiles. Which are the arguments in favor of creating such an entity? At what stage are works on this issue?
N. K.: In fact, the State Insurance Supervisory Service did not address an initiative to create a local rating agency, as it should be a private initiative, but we expressed our opinion that the presence of such an agency would help solving a series of problems on the financial markets of the country. The point is that for a more adequate value of the insurance companies assets (investments, shares of reinsurers in reserves), we need appropriate tools and the most appropriate and convenient is the credit rating of the bank, the reinsurer, the issuer of securities, etc. The international rating agencies are not always able to help us in this respect, because their ratings are limited by the top bar of the sovereign rating of the country and they are not making possible the assignation of the full range of ratings that would allow a clearer distinction between the assets on reliability.

XPRIMM: Are any other legislative changes going to be adopted in 2014?
N. K.: In 2014 we plan to introduce amendments to the law "On mandatory types of insurance" that will allow Azerbaijan to join the "Green Card" international system.

XPRIMM: What are your expectations for the end of the year 2014?
N. K.: Our development forecast for 2014 is a 10 -15% increase in the market. This year, as well as in 2013, we expect the life insurance line to develop at a higher pace. In the case of CASCO motor insurance we expect a decline in the market by 20-25% due to the new regulations imposed by the Central Bank of Azerbaijan, which tighten the requirements for granting loans.