BAKU, Azerbaijan, October 21. The introduction of a risk-based tariff system for compulsory real estate insurance is planned in Azerbaijan, Head of the Insurance Intermediaries Supervision Department at the Central Bank of Azerbaijan (CBA), Ramin Jafarov, said during a training titled "Role of the insurance sector in financial stability” in Baku on Wednesday, Trend’s correspondent reports from the event.
Jafarov remarked that regulatory mechanisms are being improved in Azerbaijan with the aim of developing the insurance market, strengthening the financial stability of insurance companies, and protecting consumer rights. In this context, he mentioned ongoing efforts to implement a risk-based tariff system for compulsory real estate insurance, digitize insurance services, and expand unified rules across various types of voluntary insurance.
According to him, the law "On insurance activity" is the primary legal framework for the regulation of the insurance sector in Azerbaijan.
"The CBA's main objectives in this area are to ensure the financial stability of insurance companies and to protect the rights of insurance consumers," he explained.
Jafarov noted that the oversight of financial stability involves assessing the financial condition and reserves of insurance companies. The primary goal of this supervision is to ensure that, in the event of an insured incident, companies are able to fulfill their contractual obligations in a timely and complete manner.
He pointed out that the reforms being implemented to develop the insurance market are aimed both at improving the operations of market participants and at enhancing the stability of the sector.
According to the department head, within the framework of the Financial Sector Development Strategy covering the years 2024-2026, work is underway to develop and implement unified rules for voluntary types of insurance. He noted that, previously, each company had its own rules and terms for voluntary insurance types, such as CASCO.
"This made it difficult for customers to compare products from different companies. The implementation of unified rules establishes a common approach regarding individual clients. Nevertheless, insurance companies are granted a certain degree of flexibility in determining insurance premiums, taking into account their own risk appetite and capacity to accept risks," Jafarov said.
According to him, one of the key innovations implemented in the field of compulsory insurance is the digitalization of services.
"Currently, compulsory insurance contracts, including compulsory civil liability insurance for motor vehicle owners, are processed electronically, eliminating the need for paper forms.
Information regarding insurance contracts is stored in the Compulsory Insurance Bureau’s information system, allowing citizens to access details about their own insurance history," he shared.
The department head also noted that another mechanism introduced in the insurance sector is the ‘direct claims settlement’ system.
"Under certain conditions, this system allows a person who has suffered damages in a road traffic accident to seek compensation from their own insurance company, rather than from the insurer of the other party involved.
For this system to apply, the accident must involve two vehicles, the at-fault party must admit liability, there must be no personal injury (harm to human health), and both vehicles must be covered by compulsory insurance," he clarified.
Jafarov emphasized that if any of these conditions are not met, for instance, in the event of a multi-vehicle collision, the settlement of damages is handled according to standard procedures.
The department head highlighted that a risk-based mechanism for calculating premiums for compulsory motor insurance has been in place since 2022, and efforts to refine it are ongoing.
He added that projects are also being implemented to apply a similar approach to the compulsory insurance of real estate. This approach facilitates a more precise assessment of risks and allows insurance premiums to be determined based on risk indicators.
According to Jafarov, the assessment of risks related to earthquakes and other natural disasters is of particular importance in real estate insurance. Taking into account Azerbaijan's seismic characteristics, work is underway, with the participation of international experts, to develop seismic risk maps for the country.
He further emphasized the significance of the international motor insurance system. He noted that the Green Card system enables the coverage of civil liability for vehicle owners when Azerbaijani vehicles are driven in foreign countries that are members of this system.
"For example, when traveling to countries that are members of the Green Card system, such as Italy, in a vehicle registered in Azerbaijan, it may be required to have appropriate insurance coverage.
The CBA is also implementing projects aimed at developing the institution of insurance agents and brokers, as well as improving the legislative framework that regulates the activities of insurance intermediaries," he said.
According to him, these measures are directed toward enhancing the quality of services in the insurance market, protecting consumer rights, and strengthening the financial stability of the sector.