Fitch Ratings: Growth in Azerbaijan's insurance sector depends on regulated tariffs

BAKU, Azerbaijan, July 4 By Eldar Janashvili – Trend: The non-life insurance sector of Azerbaijan grew by 7 percent in 2019, while 5.1 percent of growth was achieved in regulated compulsory insurance, including property insurance for homeowners and motor third-party liability, Trend reports citing the Fitch Ratings’ report. The Fitch Ratings believes that the further growth potential in the country’s non-life insurance sector is strongly dependent on tariffs, which are closely regulated by the government. “Accident and health insurance premiums increased by 11 percent in 2019, while property and accident insurance premiums decreased by 9 percent. The growth of the first insurance group was achieved by leading insurance companies in the country with powerful capabilities to cover losses in case of high risks. Fitch Ratings also expects that the growth will remain volatile as business volumes are heavily dependent on single major contracts. “Despite the fact that life insurance remains a small segment of insurance in Azerbaijan, from 2012 to 2018 it showed a strong average annual growth of 49 percent, which was due to tax benefits - premiums paid on three-year life insurance policies, previously taxed. However, premiums in the life insurance sector have since declined since the tax exemption was reduced to 50 percent of the premium paid on January 1, 2019. Nevertheless, life insurance continued to grow in 2019, despite the fact that out of a 7 percent growth in life insurance premiums recorded in the Azerbaijani life insurance sector in 2019, 5.1 percent was achieved in regulated compulsory insurance, including property insurance for homeowners and motor third-party liability,” Fitch said. Despite these tax changes, Fitch Ratings expects the Azerbaijani life insurance sector to grow in the medium term. Fitch Ratings also believes that the growth is likely to be due to bank insurance products. The Azerbaijani PASHA Insurance and PASHA Life Insurance companies strengthened their dominance in the country’s insurance market, which contributed to the increase in the total share of gross insurance premiums in this market from 37 percent in 2016 to 53 percent in 2019. At the same time, 17 of the 22 insurance companies of the country in 2019 had a market share of less than 5 percent each. --- Follow the author on Twitter: @eldarjanashvili