Approval of Regulatory Acts on Compulsory Insurance for Occupational Accidents and Diseases

MINISTRY OF FINANCE OF THE REPUBLIC OF AZERBAIJAN COLLEGIUM DECISION No. Q-10 Baku, December 21, 2012

On the Approval of Certain Regulatory Legal Acts Related to the Implementation of the Law of the Republic of Azerbaijan "On Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases"

To ensure the implementation of paragraph 2.3 of Order No. 289 dated July 2, 2010 "On the Implementation of the Law of the Republic of Azerbaijan 'On Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases'", the Collegium of the Ministry of Finance of the Republic of Azerbaijan DECIDES:

1. The following regulatory legal acts are approved in connection with the implementation of the Law of the Republic of Azerbaijan "On Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases":
   1.1. "Rules for Calculating the Amount of Annuity Premium Related to Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases" (Appendix No. 1);
   1.2. "Rules on the Content and Form, Conclusion, Amendment, and Termination of Annuity Contracts" (Appendix No. 2);
   1.3. "Rules for Determining the Insurance Amount under Compulsory Insurance Contracts in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases" (Appendix No. 3);
2. In connection with the entry into force of the regulatory legal acts approved by Part 1 of this Decision, Order No. I-211 dated December 15, 2010 of the Ministry of Finance of the Republic of Azerbaijan "On the Approval of Certain Regulatory Legal Acts Arising from the Law of the Republic of Azerbaijan 'On Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases'" is repealed.
3. The Department for Regulation of the Financial and Insurance Market and the State Insurance Supervision Service are tasked, together with the Legal Department, to ensure that this Decision is submitted to the Ministry of Justice of the Republic of Azerbaijan for inclusion in the State Registry of Legal Acts within 3 days.
4. Supervision over the execution of this Decision is entrusted to Deputy Minister Azər Bayramov.

Chairman of the Collegium,
Minister of Finance of the Republic of Azerbaijan Samir Sharifov

Approved by Decision No. Q-10 dated December 21, 2012 of the Collegium of the Ministry of Finance of the Republic of Azerbaijan
Appendix No. 1
Rules for Calculating the Amount of Annuity Premium Related to Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases R U L E S

1. General Provisions
   1.1. These Rules are prepared in accordance with Article 15 of the Law of the Republic of Azerbaijan "On Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases" and regulate the calculation methods for annuity premiums, as well as other matters provided by legislation in this regard.
   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 expected (probable) value of future amounts discounted to a single payment date, calculated taking into account the interest rate and the age (ages) of the beneficiary(ies);
   1.2.3. annuity – a mechanism providing for periodic payments over a certain period;
   1.2.4. annuity due – an annuity where payments are made at the beginning of each period.
2. Net Annuity Premium
   2.1. When calculating the net annuity premium, the insurer must use an annual interest rate equal to the forecasted level of profitability of the investment portfolio of assets accepted to ensure insurance reserves formed for the annuity insurance class.
   2.2. The net annuity premium for an annuity with equal payments is calculated using the following formula:
   2.2.1. for a term annuity
   XAH = m × P × ä_{m:x:t}
   Where:
   XAH – net annuity premium, x – age of the insured, P – amount of each payment to be received by the insured, m – number of annuity payments envisaged per year; ä_{m:x:t} – present expected value of an annuity due with m payments per year, each equal to 1/m, and term t, for a person aged x.
   2.2.2. for a perpetual annuity
   XAH = m × P × ä_x
   Where:
   XAH – net annuity premium, x – age of the insured, P – amount of each payment to be received by the insured, m – number of annuity payments envisaged per year; ä_x – present expected value of a perpetual annuity due with m payments per year, each equal to 1/m, for a person aged x.
   2.3. The net annuity premium for annuities with unequal payment schemes is calculated using actuarial principles.
3. Annuity Premium
   The annuity premium AH must be calculated satisfying the condition:
   AH × 90% ≤ XAH
   Where:
   AH – annuity premium,
   XAH – net annuity premium.
   Example:
   Insurer: ABC Insurance Company
   Insured Name: Elshad Ahmadov
   Age of Insured: 60
   Insurance Product: Series of insurance payments of 500 manat each, paid at the beginning of every month until death.
   Calculation of Annuity Premium:
   The net annuity premium for the given example is calculated using the following formula:
   XAH = m × P × ä_x
   Age of insured x = 60;
   Amount of each payment to be received by the insured P = 500; Number of annuity payments envisaged per year m = 12; Forecasted investment interest rate is taken as 12%.
   For a person aged 60, the present expected value of an annuity due with 12 payments per year, each equal to 1/12, and a perpetual term is calculated as ä_{12:60} = 6.8995.
   XAH = 12 × 500 × 6.8995 = 41,397 manat
   The annuity premium AH must be calculated satisfying 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 dated December 21, 2012 of the Collegium of the Ministry of Finance of the Republic of Azerbaijan
Appendix No. 2
Rules on the Content and Form, Conclusion, Amendment, and Termination of Annuity Contracts R U L E S

1. General Provisions
   1.1. These Rules are prepared based on Article 12.2 of the Law of the Republic of Azerbaijan "On Compulsory Insurance in Cases of Loss of Working Capacity due to Occupational Accidents and Diseases" (hereinafter the Law) and, in accordance with said Law, determine the content and form of an annuity contract between a beneficiary who has received a lump-sum insurance payment and the relevant insurer, as well as regulate the procedure for concluding, amending, and terminating the annuity contract.
   1.2. The following key terms are used in these Rules:
   1.2.1. annuity contract – an insurance contract concluded between an authorized insurer and a beneficiary in accordance with established legal procedures, providing for the periodic payment of insurance benefits to the benefit of said 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 premium 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 premium and payment procedure;
   2.2.4. validity period 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 written form between the insurer and the annuitant in accordance with the procedure established 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 for loss of working capacity due to occupational accidents and diseases decides to conclude an annuity contract, they freely select an authorized insurer 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 paragraph 3.1 of these Rules:
   3.2.1. a notarized copy of the document confirming the identity of the annuitant;
   3.2.2. an act prepared in the form established by legislation regarding the occupational accident, or a court decision confirming the occurrence of an occupational accident for the person entitled to conclude the compulsory insurance contract;
   3.2.