Focus: Insurance

Getting to Grips

Getting to Grips

May. 5, 2013

Following the introduction of mandatory lines in late 2011, the insurance sector is entering a period of growth.

Moving into 2013, growth of between 15% and 20% is expected over the year as the population continues to get to grips with the new, compulsory lines, according to a statement made by Namig Khalilov, Chief of State Insurance Supervision Service. Auto insurance will continue to represent a significant part of the sector as the number of automobile owners continues to grow, while there is still much room for growth in the real estate insurance segment, which currently only represents 10% of its potential volume. Life insurance also continued its expansion over 2012, mainly driven by compulsory insurance against industrial accidents.

The year started well, with Azerbaijani insurance firms collecting AZN53.9 million in premiums in January 2013, up 45.7% compared to the same period in 2012, according to the State Insurance Supervision Service. AZN7.4 million worth of payments were also made in the first month of the year, an increase of 59% over the same period in 2012. Of the AZN53.9 million collected in premiums over the month, compulsory insurance accounted for AZN48.6 million, while payments worth AZN4.5 million of the total AZN7.4 million in payments were carried out under compulsory policies.


The Azerbaijani insurance sector has consolidated substantially over recent years. The industry's top 10 companies represented 81% of all premiums collected over January and February 2013, up from 75.1% in the same period of 2012. Additionally, the top five accounted for 69.5% of total premiums over the same period, up from 52.6% in 2012. Pasha Insurance is the market leader, with a 29.7% market share in 2013, up from 13.6% in 2012. It collected premiums worth AZN46.7 million in 2012, ahead of AzSigorta (AZN39.8 million) and Atesgah Sigorta (AZN37.8 million). Approximately two-thirds of Pasha Insurance's premiums were collected through voluntary health insurance in 2012, largely due to the company's deal to provide 70,000 State Oil Company of Azerbaijan Republic (SOCAR) employees with medical insurance.

Pasha Insurance collected AZN23.8 million in premiums over the first two months of 2013, followed by Atesgah Heyat (AZN8 million), Ipek Yolu Sigorta (AZN 6.3 million), AzSigorta (AZN5.2 million), Pasha Heyat (AZN4.67 million), Atesgah Sigorta (AZN 4.38 million), Azersigorta (AZN4.35 million), International Insurance Company (AZN2.9 million), AXA MBASK (AZN2.3 million), and Standard Insurance (AZN2.23 million). The top payers over the same period were Pasha Insurance, with AZN3.4 million, Atesgah Sigorta (AZN2.3 million), and Azersigorta (AZN2 million).


Though the auto insurance sector will continue to represent the largest share of total premiums, life and property insurance are also worth looking out for moving into 2013. Of the AZN53.9 million in premiums collected in January 2013, life insurance represented AZN7.9 million. According to data released by the State Insurance Supervision Service, this was a 2.4 fold increase over the same period in 2012, while payments also grew 2.57 fold. In the same month, fees collected by life insurers totaled AZN3.2 million, bolstered by compulsory insurance against industrial accidents. Out of the total AZN342.5 million premiums collected in 2012, life insurance represented AZN36.8 million, while payments represented AZN4.2 million of the total AZN93.86 million. This represents an increase in premiums collected by 1.63 times over 2011 and an increase in payments of 9 times.

“The life insurance market is still in its infancy, as it has only been developing since 2011," said Niyaz Ismayilov, COO of Pasha Life. “The increased activity was partly influenced by the Law on Compulsory Insurance, which was issued in 2010," he added. Pasha Life is the top ranked company in the life insurance segment by return on capital (ROC), at more than 18%.

The introduction of mandatory real estate insurance and liability insurance for the exploitation of real estate has yet to have a significant impact on growth in the real estate insurance segment, although premiums are expected to grow in 2013. Real estate insurance covers 10% of the potential volume, a number that must increase if the segment is to make a real impact on overall premiums. In 2012, 149,101 properties were insured, according to the Compulsory Insurers Bureau (CIB). Real estate insurance accounted for 8.9% of total compulsory insurance premiums and 3.42% of total premiums in 2012. In 2012, 4,020 businesses and 27,887 individuals insured buildings under construction or in non-residential areas, while 117,194 apartments and houses were insured. Premiums totaled AZN11.34 million in the same year, while payments totaled AZN910,280. At only 8% of premiums, the low rate of payment has put off many potential customers as the benefits remain unclear.

As consumers adapt to new compulsory lines, growth is expected to continue over the coming few years boosted by continued growth in personal auto insurance as growing average incomes drive vehicle sales. While last year's growth was exceptional, the sector can look forward to solid growth rates going forward.