Financial Markets Supervision Authority to Deal with Insurance Companies

This year there will be changes in the insurance legislation of Azerbaijan, said the head of the Board of Directors of the Financial Markets Supervision Authority (FIMSA) Rufat Aslanli.

Speaking at the launch of the second stage of the financial sector modernization project organized by FIMSA together with the Swiss State Secretariat for Economic Cooperation and the World Bank, Aslanli said that until now all the attention was paid to the banking sector, but this year there will be important initiatives in the insurance sector.

According to him, the main problem of insurance companies has been associated with the capitalization.

“On the one hand there was a problem getting the funds for insurance sold through intermediaries, and on the other hand most insurance companies sent the received funds to foreign partners for the purpose of re-insurance,” he said.

Aslanli said that, as a result, the primary function of insurance companies has become money transfer, and they had to pay for the insurance rather than reinsurance companies.

According to him, the Azerbaijani companies cannot see the demands of experienced foreign insurance companies, and therefore for them there was a problem getting insurance payments from them.

Aslanli said that to improve the situation the requirements for foreign insurance companies tightened, and some of them have been excluded from the Azerbaijani market and thus avoided the inefficient flow of funds of insurance companies abroad.

The FIMSA head said some outlines of the upcoming changes in insurance legislation.

So, insurance companies will be put forward some requirements when choosing a reinsurance company, controls will be strengthened over the domestic insurance market, payment for insured events will be conducted in electronic form, as well as new rules on investment policy of insurance companies will be developed.

Aslanli told about the method of the carousel between insurance companies and banks that have established them.

Insurance companies place their funds in banks that have established them. This is a kind of "carousel", as the bank allegedly invested in its own insurance company, and then the same again returned to the capital of the bank and then the funds were sent for lending.

“We have limited such steps. Now, in the legislative form we will point out the inadmissibility of this. Such a move will encourage insurance companies to diversify their investment policy. If an insurance company makes sure that it cannot direct the finance to its shareholders, it will seriously ponder and will have to place funds in different directions,” he said.   ----71D