TBY talks to Ruslan Aliyev, President of Ateshgah Group of Companies, on the impact of compulsory lines and his company’s celebrity insurance activities.
TBY Ateshgah’s insurance premiums amounted to AZN18.5 million by January 2012. How has the company sought to position itself in the market?
RUSLAN ALIYEV Ateshgah Insurance Company was established in 1996, and in December 2011 we celebrated our 15th anniversary. Ateshgah initially functioned as a company totally focused on the corporate segment. New legislation that came into force demanded the separation of company activities into life and non-life lines by establishing separate life insurance companies. For this reason, in 2009 Ateshgah created the first specialized life insurance company in Azerbaijan: Ateshgah Life. In the same year we consolidated all of our insurance companies into the Ateshgah Insurance Group of Companies. Having more than 15 years of history in the Azerbaijani market, Ateshgah Insurance currently holds the leading position in the insurance industry and has licenses for more than 20 types of insurance activities. In 1998 there were only 15 employees at Ateshgah, but now there are almost 300 employees, including the staff in all the offices throughout the country. During 2011 we signed more than 72,000 new insurance contracts, which exceeded the previous year’s result by more than 60%. Our success, to a great extent, depends on our counterparts. That’s why we are very selective and maintain high standards for our reinsurance and brokerage partners. For example, our key partners include Hannover Re (Germany), SCOR (France), Swiss Re (Switzerland), Munich Re (Germany), and ROSNO (Russia).
How will recent changes in Azerbaijani insurance laws and the increase of compulsory product lines impact Ateshgah and the sector as a whole?
Due to the historical development curve of the insurance industry, we were behind other countries in the greater region. However, our growth rate has transformed into one of the highest in countries with transitional economies. There are two major indicators to assess the inclusion of insurance services in a country: gross written premiums over GDP, which is called insurance market penetration, and gross written premiums per capita. For example, our insurance market penetration lags behind Kazakhstan’s by 50%. Even in developed countries, the popularity of insurance products in modern society is due to the adoption of compulsory insurance laws. From an economic rationale, compulsory types of insurance guarantee citizens security from unusual events—the byproducts of substantial growth, which our economy currently experiences. The latest two compulsory insurance legislation acts, including one for industrial accidents, have accelerated the growth rate of the insurance industry. The law on compulsory types of insurance covers four types of insurance: immobile property, passenger, fire protection, and third-party motor liability. All of these compulsory insurance types have a huge impact on instilling a culture of using insurance products in our country. Ateshgah, among other leading insurance companies, put a lot of effort into the development of these legislative initiatives by actively participating in working groups and examining international experiences. When it comes to our market penetration, we believe we will be able to increase our share up to 15%.
Ateshgah insured the face of the winner of Eurovision 2011, Nigar Jamal, in the first instance of exclusive insurance in the industry. Its portfolio also includes the “Temple of Fire.” How are such high profile elements placed within your business strategy?
Our vision is to remain the leader in the financial services sector due to innovative business practices, while contributing to the preservation of Azerbaijan’s cultural heritage as well as a prosperous and environmentally clean future. The promotion of the country and preservation of our cultural heritage is a social responsibility for our company. We believe that the victory of our representatives in Eurovision is a good avenue for every Azerbaijani to promote this country. We decided to take this chance in order to promote our country and meanwhile increase our brand awareness. The “Temple of Fire” is a unique piece of Azerbaijani heritage, which is also part of our country’s branding activities. We decided to insure it for $3 million at our expense, and the Ministry of Tourism is the beneficiary of this deal.
What is your economic outlook for 2012? How do you see the size, nature, and direction of the Azerbaijan insurance market evolving in the upcoming years?
According to the projections of the Ministry of Finance, total written premiums in 2012 will reach around AZN280 million-AZN300 million. In 2011 this indicator was AZN213 million, increasing more than 37% over 2010. The primary source of growth will come from compulsory types of insurance. If we examine the development of insurance industries in the CIS region and Eastern European countries, we see that the implementation of compulsory insurance gave the sector a push, and 2012 promises to be a very interesting year for the insurance market in this respect. Also, interest from multinationals engaged in the insurance business will foster the institutional development of the local market. Insurance companies will start implementing best business practices and the latest technologies. The insurance industry will keep growing at an extremely high rate in the coming years.
What kind of business opportunities do you see for foreign investors in the Azerbaijani insurance market?
Our country generates almost 85% of the GDP of the Caucasus region. There is a consistent economic policy to decrease the oil dependence of the country. There are many opportunities for foreign investors in any field of our country’s economy, especially in industry. High real returns, which are possible in our economy, are an attractive element for foreign investors. Much has been invested in infrastructure, especially the development of roads and the redevelopment of urban and rural areas. These are only a few of the factors attracting foreign investors. Having said that, I believe we need to develop the equity markets through reforms in order to make our investment climate even friendlier to foreigners.
© The Business Year