Approval of Normative Legal Acts Related to the Application of the Law on Compulsory Insurance against Occupational Accidents and Diseases

AZERBAIJAN REPUBLIC MINISTRY OF FINANCE COLLEGIUM DECISION No. Q-10 Baku, December 21, 2012 On the Approval of Certain Normative Legal Acts Related to the Application of the Law of the Azerbaijan Republic "On Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity"

In order to ensure the implementation of point 2.3 of Presidential Decree No. 289 dated July 2, 2010 "On the Implementation of the Law of the Azerbaijan Republic 'On Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity'", the Collegium of the Ministry of Finance of the Azerbaijan Republic HAS DECIDED:

1. The following normative legal acts related to the application of the Law of the Azerbaijan Republic "On Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity" shall be approved:
   1.1. "Rules for Calculating the Amount of the Annuity Fee Related to Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity" (Appendix No. 1);
   1.2. "Rules for the Content and Form, Conclusion, Amendment, and Termination of an Annuity Contract" (Appendix No. 2);
   1.3. "Rules for Determining the Insurance Amount under the Compulsory Insurance Contract against Occupational Accidents and Diseases Resulting in Loss of Working Capacity" (Appendix No. 3);
2. In connection with the entry into force of the normative legal acts approved by Part 1 of this Decision, the Ministry of Finance of the Azerbaijan Republic Order No. I-211 dated December 15, 2010 "On the Approval of Certain Normative Legal Acts Arising from the Law 'On Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity'" shall be repealed.
3. The Financial and Insurance Market Regulation Department and the State Insurance Supervision Service are assigned, together with the Legal Department, to ensure that this Decision is submitted to the Ministry of Justice of the Azerbaijan Republic for state registration within three days.
4. Oversight of the execution of this Decision is assigned to Deputy Minister Azər Bayramov.

Signed: Chairman of the Collegium, Minister of Finance of the Azerbaijan Republic Samir Şərifov

Approved by Decision No. Q-10 of the Collegium of the Ministry of Finance of the Azerbaijan Republic dated December 21, 2012
APPENDIX No. 1 RULES FOR CALCULATING THE AMOUNT OF THE ANNUITY FEE RELATED TO COMPULSORY INSURANCE AGAINST OCCUPATIONAL ACCIDENTS AND DISEASES RESULTING IN LOSS OF WORKING CAPACITY

1. General Provisions
   1.1. These Rules are prepared in accordance with Article 15 of the Law of the Azerbaijan Republic "On Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity" and regulate the calculation methods for the annuity fee, as well as other legislative matters related to it.
   1.2. The following terms are used for the purposes of these Rules:
   1.2.1. actuarial principles – principles based on economic-mathematical calculation methods applied by the actuary when calculating insurance tariffs, reserves, and payments;
   1.2.2. present expected value – the discounted expected (probable) value of future amounts, calculated taking into account the interest rate and the age(s) of the beneficiary(ies), brought to a single lump-sum payment date;
   1.2.3. annuity – a mechanism providing for periodic payments over a specified period;
   1.2.4. prenumerando annuity – an annuity where payments are made at the beginning of each period.

2. Net Annuity Fee
   2.1. When calculating the net annuity fee, the insurer must use an annual interest rate equal to the projected level of return on the investment portfolio of assets accepted to ensure insurance reserves for the annuity insurance class.
   2.2. The net annuity fee for an annuity with equal payments is calculated using the following formula:
   2.2.1. for a term annuity: XAH = m × P × ä_(x:t)
   Here, XAH – net annuity fee; x – age of the insured; P – amount of each payment to be received by the insured; m – number of annuity payments provided per year; ä_(x:t) – present expected value of a prenumerando annuity with m payments per year, each equal to 1/m, and term t, for a person aged x.
   2.2.2. for a non-term (life) annuity: XAH = m × P × ä_x
   Here, XAH – net annuity fee; x – age of the insured; P – amount of each payment to be received by the insured; m – number of annuity payments provided per year; ä_x – present expected value of a non-term prenumerando annuity with m payments per year, each equal to 1/m, for a person aged x.
   2.3. For annuities with unequal payment schemes, the net annuity fee is calculated using actuarial principles.

3. Annuity Fee
   The annuity fee AH must be calculated subject to the condition: AH × 90% ≤ XAH Here, AH – annuity fee; XAH – net annuity fee.

Example:
Insurer: ABC Insurance Company
Insured Name: Elşad Əhmədov
Insured Age: 60
Insurance Product: Series of insurance payments of 500 AZN each, made at the beginning of every month until the end of life.
Calculation of Annuity Fee:
For this example, the net annuity fee is calculated using the following formula: XAH = m × P × ä_x Insured age x = 60; Amount of each payment P = 500; Number of annuity payments per year m = 12; Projected investment interest rate is taken as 12%. The present expected value of a non-term prenumerando annuity with 12 payments per year, each equal to 1/12, for a person aged 60 is calculated as ä_(60)^(12) = 6.8995. XAH = 12 × 500 × 6.8995 = 41,397 AZN The annuity fee AH must be calculated subject to the condition: AH × 90% ≤ XAH. This is determined within the following interval:
41,397.00 ≤ AH ≤ 45,996.66

Approved by Decision No. Q-10 of the Collegium of the Ministry of Finance of the Azerbaijan Republic dated December 21, 2012
APPENDIX No. 2 RULES FOR THE CONTENT AND FORM, CONCLUSION, AMENDMENT, AND TERMINATION OF AN ANNUITY CONTRACT

1. General Provisions
   1.1. These Rules are prepared based on Article 12.2 of the Law "On Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity" (hereinafter the Law) and determine, in accordance with the Law, the content and form of an annuity contract between a beneficiary who has received a lump-sum insurance payment and the corresponding insurer, as well as regulating the procedure for concluding, amending, and terminating the annuity contract.
   1.2. The following main terms are used in these Rules:
   1.2.1. annuity contract – an insurance contract concluded between an insurer holding the appropriate license and a beneficiary in accordance with established legislation, providing for periodic insurance payments to be made in favor of the beneficiary;
   1.2.2. annuitant – a natural person who is a party to the annuity contract.

2. Content and Form of Annuity Contract
   2.1. The annuitant undertakes to pay the annuity fee established by the contract to the insurer in the manner specified therein, and the insurer undertakes to make periodic insurance payments to the annuitant in the manner agreed upon in the contract.
   2.2. The following must be indicated in the annuity contract:
   2.2.1. name and address of the insurer;
   2.2.2. full name and address of the annuitant;
   2.2.3. amount of the annuity fee and payment method;
   2.2.4. duration of the annuity contract;
   2.2.5. procedure for adding and amending the annuity contract, as well as terminating it;
   2.2.6. risks covered under the annuity contract;
   2.2.7. procedure and grounds for making insurance payments;
   2.2.8. grounds for refusing to make insurance payments;
   2.2.9. liability of the parties for non-fulfillment or improper fulfillment of contract terms;
   2.2.10. dispute resolution procedure;
   2.2.11. other terms not contrary to legislation, determined by mutual agreement of the parties;
   2.2.12. signatures of the parties to the annuity contract, as well as the insurer's seal.
   2.3. The annuity contract is concluded in writing between the insurer and the annuitant in the manner specified by these Rules.
   2.4. The annuity contract is prepared in two copies, one kept by the insurer and one by the annuitant.

3. Conclusion of Annuity Contract
   3.1. When a beneficiary who has received a lump-sum insurance payment under the compulsory insurance contract against occupational accidents and diseases decides to conclude an annuity contract, they may freely choose an insurer licensed according to legislation and submit a written application to that insurer. The form of the application is determined by the insurer.
   3.2. The following documents must be attached to the application for insurance specified in clause 3.1:
   3.2.1. a notarized copy of the identity document confirming the annuitant's identity;
   3.2.2. an act prepared in the form established by legislation regarding the occupational accident, or a court decision confirming the occurrence of the occupational accident for the person entitled to compulsory insurance;
   3.2.3. a decision confirming the degree of loss of working capacity due to occupational accident or disease, or a death certificate;
   3.2.4. a document confirming the receipt of the lump-sum insurance payment under the compulsory insurance contract against occupational accidents and diseases.
   3.3. Within five working days from the date of receiving the application, the insurer must conclude the annuity contract or provide written information regarding the grounds for refusing to conclude it.
   3.4. Unless otherwise specified in the contract, the annuity contract enters into force at 24:00 on the date of its approval, based on the information indicated in the application.

4. Execution of Annuity Contract
   4.1. From the date the annuity contract enters into force, the annuity fee calculated in accordance with legislation is paid as a lump sum to the insurer within the period specified in the contract, unless otherwise agreed.
   4.2. If any errors are discovered in the information indicated in the application that affect the calculation of the annuity fee and/or insurance payment, the annuity fee and/or insurance payment are recalculated based on correct information, and the resulting difference is paid from the date the contract enters into force.
   4.3. The annuitant's survival until the date scheduled for the start of periodic insurance payments, and subsequently until each subsequent payment date, is considered an insured event.
   4.4. During the contract's validity period, the insurer may at any time verify the annuitant's survival on paid grounds through an information system for individual data, or if that is not possible, by other measures not contrary to legislation, including requesting a notarized copy of the identity document, proof of the annuitant's arrival at a specific location on a specific date, or a personal meeting with an authorized representative. Failure to timely fulfill these requests serves as grounds for suspending insurance payments until the date they are fulfilled.
   4.5. The parties to the annuity contract have rights and duties established by legislation, these Rules, and the contract.
   4.6. Disputes arising between the parties from the annuity contract are resolved through negotiations; if unresolved, they are settled in court according to established legislation.
   4.7. If the annuitant considers their rights under the contract to be violated, they may appeal to the insurance supervision authority. For this purpose, the address and relevant phone numbers of the insurance supervision authority must be indicated in the annuity contract prepared by the insurer.

5. Amendment and Termination of Annuity Contract
   5.1. During the validity period, amendments and additions not contrary to legislation and these Rules may be made to the contract based on mutual agreement of the parties.
   5.2. Unless otherwise specified in the contract, insurance payments under the annuity contract are suspended and the contract is terminated on the date of either the expiry of the specified period or the death of the annuitant, whichever occurs earlier.
   5.3. Matters related to early termination of the annuity contract are regulated by the Civil Code of the Azerbaijan Republic.

Approved by Decision No. Q-10 of the Collegium of the Ministry of Finance of the Azerbaijan Republic dated December 21, 2012
APPENDIX No. 3 RULES FOR DETERMINING THE INSURANCE AMOUNT UNDER THE COMPULSORY INSURANCE CONTRACT AGAINST OCCUPATIONAL ACCIDENTS AND DISEASES RESULTING IN LOSS OF WORKING CAPACITY

1. General Provisions
   1.1. These Rules are prepared based on Article 14.4 of the Law "On Compulsory Insurance against Occupational Accidents and Diseases Resulting in Loss of Working Capacity" and regulate the calculation of the insurance amount under the compulsory insurance contract for the purposes of said Law.
   1.2. The following terms are used for the purposes of these Rules:
   1.2.1. actuarial methods – economic-mathematical calculation methods applied by the actuary when calculating insurance tariffs, reserves, and payments;
   1.2.2. present expected value – the discounted expected (probable) value of future amounts, calculated taking into account the interest rate and the age of the insured person, brought to the date of concluding the compulsory insurance contract;
   1.2.3. prenumerando annuity – an annuity where payments are made at the beginning of each period.

2. Determination of Insurance Amount
   2.1. When calculating the insurance amount, the insurer must use an annual interest rate of 8%.
   2.2. For a compulsory insurance contract concluded for N insured persons, the insurance amount for the i-th insured person is calculated using the following formula:
   SM_i = 1.15 × P_i × ä_(x_i)^(12)
   Here: SM_i – insurance amount for the i-th insured person; x_i – age of the i-th insured person; P_i – one-year salary fund of the i-th insured person, calculated in accordance with legislation. ä_(x_i)^(12) – present expected value of a prenumerando monthly annuity with monthly payments equal to 1/12, for a person aged x_i.
   2.3. The total insurance amount under the compulsory insurance contract is calculated using the following formula:
   SM = Σ_{i=1}^{N} SM_i
   Here: SM – total insurance amount; N – number of insured persons; i – summation index; SM_i – insurance amount for the i-th insured person.

Example:
Insurer: ABC Insurance Company
Insured Entity: XYZ Organization
Insured Persons Table:

Index (i)	Name and Surname	Age (x_i)	Annual Salary Fund (P_i)	Present Expected Value of Prenumerando Monthly Annuity ä_(x_i)^(12)
1	1st Insured Person	35	2400	11.9136
2	2nd Insured Person	45	3000	11.0151
3	3rd Insured Person	55	3600	9.7003

For the 1st insured person: SM_1 = 1.15 × 2400 × 11.9136 = 32,881.536 For the 2nd insured person: SM_2 = 1.15 × 3000 × 11.0151 = 38,002.095 For the 3rd insured person: SM_3 = 1.15 × 3600 × 9.7003 = 40,159.242 The total insurance amount under the compulsory insurance contract is calculated using the following formula:
SM = Σ_{i=1}^{3} SM_i = 32,881.536 + 38,002.095 + 40,159.242 = 112,042.873 AZN Thus, the insurance amount under the contract is 112,042.873 AZN.