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

MINISTRY OF FINANCE OF THE REPUBLIC OF AZERBAIJAN COLLEGIUM DECISION No. Q-10 City of 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 Occupational Disability Resulting from Industrial Accidents and Occupational 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 Occupational Disability Resulting from Industrial Accidents and Occupational 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 Occupational Disability Resulting from Industrial Accidents and Occupational Diseases:
   1.1. "Rules for Calculating the Amount of Annuity Premium Related to Compulsory Insurance in Cases of Occupational Disability Resulting from Industrial Accidents and Occupational Diseases" (Appendix No. 1);
   1.2. "Rules on the Content and Form, Conclusion, Amendment, and Termination of Annuity Agreements" (Appendix No. 2);
   1.3. "Rules for Determining the Insurance Amount under Compulsory Insurance Agreements in Cases of Occupational Disability Resulting from Industrial Accidents and Occupational 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Insurance in Cases of Occupational Disability Resulting from Industrial Accidents and Occupational Diseases" is repealed.
3. The Department for Regulation of the Financial and Insurance Market and the State Insurance Supervision Service are instructed, 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 Register 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 Occupational Disability Resulting from Industrial Accidents and Occupational 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 Occupational Disability Resulting from Industrial Accidents and Occupational Diseases (hereinafter the Law) and regulate the calculation methods for annuity premiums, as well as other matters stipulated in legislation related thereto.
   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 actuaries 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, taking into account the interest rate and the age(s) of the beneficiary(ies);
   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 Premium
   2.1. When calculating the net annuity premium, the insurer must use an annual interest rate equal to the projected return level of the investment portfolio of assets accepted to secure insurance reserves for the annuity insurance class.
   2.2. For annuities with equal payments, the net annuity premium is calculated using the following formula:
   2.2.1. for term annuities: XAH = m × P × (m) a¨_x:t|
   Here:
   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 planned per year; (m) a¨_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 non-term annuities: XAH = m × P × (m) a¨_x
   Here:
   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 planned per year; (m) a¨_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 premium is calculated using actuarial principles.
3. Annuity Premium
   The annuity premium AH must be calculated satisfying the condition: AH × 90% ≤ XAH Here:
   AH – annuity premium,
   XAH – net annuity premium.
   Example:
   Insurer: ABC Insurance Company
   Beneficiary Name: Ahmediyev Elshad
   Age of Insured: 60
   Insurance Product: Series of insurance payments made monthly in advance, each amounting to 500 manat.
   Calculation of Annuity Premium:
   The net annuity premium for the given example is calculated using the following formula:
   XAH = m × P × (m) a¨_x
   Age of insured x = 60;
   Amount of each payment P = 500;
   Number of annuity payments planned 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 (12) a¨_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 Agreements R U L E S

1. General Provisions
   1.1. These Rules are prepared in accordance with Article 12.2 of the Law of the Republic of Azerbaijan on Compulsory Insurance in Cases of Occupational Disability Resulting from Industrial Accidents and Occupational Diseases (hereinafter the Law) and determine the content and form of annuity agreements between beneficiaries who have received a single insurance payment and corresponding insurers, as well as regulate the procedure for concluding, amending, and terminating such agreements.
   1.2. The following basic terms are used in these Rules:
   1.2.1. annuity agreement – an insurance contract concluded between an insurer holding the appropriate license and a beneficiary in accordance with established legal procedures, 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 agreement.
2. Content and Form of Annuity Agreement
   2.1. The annuitant undertakes to pay the annuity premium established by the agreement in the manner specified therein, and the insurer undertakes to make periodic insurance payments to the annuitant in the manner agreed upon in the agreement.
   2.2. The following must be indicated in the annuity agreement:
   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 agreement;
   2.2.5. procedure for adding amendments and terminating the annuity agreement;
   2.2.6. risks covered under the annuity agreement;
   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 annuity agreement 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 agreement, as well as the insurer's seal.
   2.3. The annuity agreement is concluded in written form between the insurer and the annuitant in the manner specified in these Rules.
   2.4. The annuity agreement is prepared in two copies, one kept by the insurer and one by the annuitant.
3. Conclusion of Annuity Agreement
   3.1. When a beneficiary who has received a single insurance payment under the compulsory insurance agreement for occupational disability from industrial accidents and diseases decides to conclude an annuity agreement, they may freely choose an insurer licensed according to legal procedures 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 identity document confirming the annuitant's status;
   3.2.2. an act prepared in the form established by legislation regarding the industrial accident, or a court decision confirming the occurrence of the industrial accident for the person entitled to compulsory insurance;
   3.2.3. a decision confirming the degree of loss of occupational capacity due to industrial accident or occupational disease, or a death certificate;
   3.2.4. a document confirming the payment of the single insurance amount received by the beneficiary under the compulsory insurance agreement.
   3.3. Within 5 working days from the date of receiving the application, the insurer must conclude the annuity agreement or provide written information regarding grounds for refusal.
   3.4. Unless otherwise stipulated in the agreement, the annuity agreement enters into force at 24:00 on the date of its approval, based on the information indicated in the application.
4. Execution of Annuity Agreement
   4.1. Unless otherwise agreed, the annuity premium calculated in accordance with legal procedures is paid as a single lump sum to the insurer from the date the agreement enters into force, for the period specified therein.
   4.2. If any inaccuracy is discovered in the information indicated in the application affecting the calculation of the annuity premium and/or insurance payment, the annuity premium and/or insurance payment are recalculated based on correct information, and the difference arising from such inaccuracy is paid accordingly from the date the insurance contract enters into force.
   4.3. The annuitant's survival until the date scheduled for the start of periodic insurance payments under the agreement, and subsequently until the due date of each subsequent payment, is considered an insured event.
   4.4. During the validity period of the agreement, the insurer may at any time verify the annuitant's survival on paid grounds through information systems or, if not possible, by other measures not contrary to legislation, including requesting a notarized copy of the identity document, proof of the annuitant's presence at a specific location on a specific date, or a personal meeting with an authorized representative. Failure to timely fulfill these requests constitutes grounds for suspending insurance payments until the date of fulfillment.
   4.5. The parties to the annuity agreement possess rights and duties established by legislation, these Rules, and the annuity agreement.
   4.6. Disputes arising from the annuity agreement between parties are resolved through negotiations; if unresolved, they are settled in court according to legal procedures.
   4.7. If the annuitant considers their rights under the annuity agreement to be violated, they may apply to the insurance supervision authority. For this purpose, the address and relevant telephone numbers of the insurance supervision authority must be indicated in the annuity agreement prepared by the insurer.
5. Amendment and Termination of Annuity Agreement
   5.1. During the validity period, amendments and additions not contrary to legislation and these Rules may be made to the agreement based on mutual consent of the parties.
   5.2. Unless otherwise stipulated in the contract, insurance payments under the annuity agreement are suspended and the agreement is terminated on the date when the earlier of either the specified term expires or the annuitant dies.
   5.3. Matters related to early termination of the annuity agreement are regulated by the Civil Code of the Republic of Azerbaijan.

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. 3
Rules for Determining the Insurance Amount under Compulsory Insurance Agreements in Cases of Occupational Disability Resulting from Industrial Accidents and Occupational Diseases R U L E S

1. General Provisions
   1.1. These Rules are prepared in accordance with Article 14.4 of the Law of the Republic of Azerbaijan on Compulsory Insurance in Cases of Occupational Disability Resulting from Industrial Accidents and Occupational Diseases and regulate the calculation of the insurance amount under compulsory insurance agreements 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 actuaries when calculating insurance tariffs, reserves, and payments;
   1.2.2. present expected value – the expected (probable) value of future amounts discounted to the date of concluding the compulsory insurance agreement, taking into account the interest rate and the age of the insured;
   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 N insured persons under a concluded Compulsory Insurance Agreement, the insurance amount for the i-th insured is calculated using the following formula:
   SM_i = 1.15 × P_i × (12) a¨{x_i}
   Here:
   SM_i – insurance amount for the i-th insured; x_i – age of the i-th insured; P_i – annual wage fund calculated for the i-th insured in accordance with legal procedures. (12) a¨{x_i} – 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 agreement 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.
   Example:
   Insurer: ABC Insurance Company
   Beneficiary Organization: XYZ Organization
   Insured Persons:
   Index (i) | Name and Surname | Age (x_i) | Annual Wage Fund (P_i) | Present Expected Value of Prenumerando Monthly Annuity ((12) a¨{x_i}) 1 | 1st Insured | 35 | 2400 | 11.9136 2 | 2nd Insured | 45 | 3000 | 11.0151 3 | 3rd Insured | 55 | 3600 | 9.7003 For the 1st insured: SM_1 = 1.15 × 2400 × 11.9136 = 32,881.536 For the 2nd insured: SM_2 = 1.15 × 3000 × 11.0151 = 38,002.095 For the 3rd insured: SM_3 = 1.15 × 3600 × 9.7003 = 40,159.242 The total insurance amount under the compulsory insurance agreement 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 manat Thus, the insurance amount under the agreement is 112,042.873 manat.