Decision No. Q-01 and Q-03 on Approval and Repeal of Normative Acts for Mandatory Insurance Implementation

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MINISTRY OF FINANCE OF THE REPUBLIC OF AZERBAIJAN Q Ə R A R No. Q-01 City of Baku, December 6, 2011

On the approval of certain normative legal acts and the repeal of certain normative legal acts in connection with the implementation of the Law "On Mandatory Insurance" of the Republic of Azerbaijan

In order to ensure the implementation of paragraph 1.3, as well as sub-paragraphs 3.1.1, 3.1.2, and 3.1.5 through 3.1.11 of Presidential Decree No. 500 dated September 15, 2011, on the implementation of Law No. 165-IVQ dated June 24, 2011 "On Mandatory Insurance" of the Republic of Azerbaijan, the Ministry of Finance of the Republic of Azerbaijan DECIDES:

1. In accordance with the Law "On Mandatory Insurance" of the Republic of Azerbaijan, the following normative legal acts shall be approved:
   1.1. "Rules for Forming Insurance Reserves for Life and Non-Life Insurance" (added);
   1.2. "Additional Requirements for Licensing the Provision of Mandatory Insurance Types" (added);
   1.3. "Rules for the Form, Printing, and Completion of the Insurance Certificate for Mandatory Insurance of Real Estate" (added);
   1.4. "Rules for the Form, Printing, and Completion of the Insurance Certificate for Mandatory Insurance of Civil Liability Related to the Operation of Real Estate" (added);
   1.5. "Rules for the Form, Printing, and Completion of the Insurance Certificate for Mandatory Insurance of Civil Liability of Vehicle Owners" (added);
   1.6. "Rules for the Form, Printing, and Completion of the Insurance Certificate for Mandatory Individual Accident Insurance of Passengers" (added);
   1.7. "Rules for Forming Conditional Obligations Reserves by Insurers who are Participants of the Mandatory Insurance Bureau" (added);
   1.8. "Rules for Determining Insurance Tariffs for Mandatory Insurance of Real Estate" (added);
   1.9. "Rules for Calculating the Amount of Insurance Premiums for Mandatory Insurance of Civil Liability Related to the Operation of Real Estate" (added);
   1.10. "Rules for Calculating Insurance Premium Amounts for Mandatory Insurance of Civil Liability of Vehicle Owners" (added);
   1.11. "Rules for the Form and Completion of the Protocol Prepared by Road Traffic Accident Participants for Mandatory Insurance of Civil Liability of Vehicle Owners" (added);
   1.12. Repealed by Decision No. Q-03 of the Ministry of Finance of the Republic of Azerbaijan dated December 8, 2011;
   1.13. "Rules for Calculating the Amount of Insurance Premiums for Mandatory Individual Accident Insurance of Passengers" (added).

2. The following normative legal acts of the Ministry of Finance of the Republic of Azerbaijan shall be repealed:
   2.1. "Guidelines on Mandatory Insurance of Civil Liability of Vehicle Owners in the Republic of Azerbaijan" approved by Order No. İ-136 dated September 9, 2003;
   2.2. "Rules on the Activity of Insurance Agents in the Republic of Azerbaijan" approved by Order No. İ-53 dated May 4, 2005;
   2.3. "Rules for Creating Insurance Reserves and Calculating Provisions for Non-Life Insurance Types" approved by Order No. İ-53 dated May 4, 2005;
   2.4. "Rules for Forming Insurance Reserves for Life and Non-Life Insurance" approved by Order No. İ-110 dated November 14, 2008.

3. The Head of the Financial and Insurance Market Regulation Department (Z. Allahverdiyev) and the Chairman of the State Insurance Supervision Service (N. Xəlilov) are tasked, together with the Head of the Legal Department (X. Rəhmanov), to ensure that this Decision is submitted to the Ministry of Justice of the Republic of Azerbaijan for state registration in the State Register of Legal Acts within 3 days.

4. Supervision over the execution of this Decision is assigned to Deputy Minister A. Bayramova.
   Minister S. Şərifov

MINISTRY OF FINANCE OF THE REPUBLIC OF AZERBAIJAN Q Ə R A R No. Q-03 City of Baku, December 8, 2011

On the repeal of the form of the certificate confirming the occurrence of an event considered an insurance case for mandatory insurance of civil liability of vehicle owners

The Ministry of Finance of the Republic of Azerbaijan, taking into account the necessity to amend the "Form of the Certificate Confirming the Occurrence of an Event Considered an Insurance Case for Mandatory Insurance of Civil Liability of Vehicle Owners" approved by Decision No. Q-01 dated December 6, 2011 "On the approval of certain normative legal acts and the repeal of certain normative legal acts in connection with the implementation of the Law 'On Mandatory Insurance'", DECIDES:

1. Paragraph 1.12 of Decision No. Q-01 dated December 6, 2011 "On the approval of certain normative legal acts and the repeal of certain normative legal acts in connection with the implementation of the Law 'On Mandatory Insurance'", which provides for the approval of the "Form of the Certificate Confirming the Occurrence of an Event Considered an Insurance Case for Mandatory Insurance of Civil Liability of Vehicle Owners", shall be repealed.
2. The Head of the Financial and Insurance Market Regulation Department (Z. Allahverdiyev) and the Chairman of the State Insurance Supervision Service (N. Xəlilov) are tasked to ensure that necessary amendments are made to the "Form of the Certificate Confirming the Occurrence of an Event Considered an Insurance Case for Mandatory Insurance of Civil Liability of Vehicle Owners" and that it is coordinated with the relevant state bodies in accordance with Article 46.1 of the Constitutional Law "On Normative Legal Acts" of the Republic of Azerbaijan.
3. Supervision over the execution of this Decision is assigned to Deputy Minister A. Bayramova.
   First Deputy Minister İ. Fəti-zadə

Approved by Decision No. Q-01 of the Ministry of Finance of the Republic of Azerbaijan dated December 6, 2011.
Həyat sığortası və qeyri-həyat sığortası üzrə sığorta ehtiyatlarının formalaşdırılması Q A Y D A L A R I Baku 2011

1. General Provisions
   1.1. These Rules are prepared in accordance with Article 81.8 of the Law "On Insurance Activity" of the Republic of Azerbaijan and regulate the composition, formation, and calculation of reinsurance shares in insurance reserves, taking into account diversification level, reliability, investment orientation, profitability, liquidity, composition, and other quality criteria of assets securing insurance reserves.
   1.2. Insurance reserves for mandatory insurance types are calculated in accordance with these Rules, taking into account the requirements of mandatory insurance laws.
   1.3. The term "insurer" used in these Rules also covers reinsurers, as defined in Article 1.2 of the Law "On Insurance Activity" of the Republic of Azerbaijan.
   1.4. For the purposes of these Rules, the following terms are used:
   1.4.1. actuarial methods - economic-mathematical calculation methods applied by actuaries when calculating insurance reserves;
   1.4.2. reporting date - the date on which the insurer's corresponding report is prepared;
   1.4.3. reporting period - the 12 months preceding the reporting date;
   1.4.4. insurance (reinsurance) contracts - insurance contracts and reinsurance contracts for risks accepted in reinsurance;
   1.4.5. base insurance premium - the amount remaining after deducting the brokerage commission for intermediary services provided upon conclusion of the insurance contract (not exceeding 15% of the calculated insurance premium);
   1.4.6. base reinsurance premium - the amount remaining after deducting the calculated commission for intermediary services and/or to the reinsured (not exceeding 15% of the calculated reinsurance premium for contracts involving accepted risks);
   1.4.7. unearned insurance premium - the portion of the insurance premium corresponding to the period after the calculation date during which the insurance coverage remains in force;
   1.4.8. unearned reinsurance premium - the portion of the reinsurance premium corresponding to the period after the calculation date during which the reinsurance coverage remains in force;
   1.4.9. earned total insurance premiums - the amount remaining after subtracting the base portion of the unearned insurance premium reserve at the end of the reporting period from the sum of the base portions of unearned insurance premium reserves for all insurance (reinsurance) contracts concluded during the reporting period;
   1.4.10. minimum deposit reinsurance premium - the initial reinsurance premium paid at the beginning of the contract year, determined in accordance with the expected insurance portfolio for non-proportional reinsurance contracts concluded in obligatory form;
   1.4.11. unsettled claim - an insurance or reinsurance claim reported to the insurer for payment, corresponding to an insurance or reinsurance contract, where the insurance payment has not been made or has not been paid in full;
   1.4.12. discounted expected value - the expected (probable) value of insurance premiums or payments, or costs, calculated taking into account interest rates and the time interval between the reporting date and the payment dates of insurance premiums or payments;
   1.4.13. reported but unsettled claims reserve - the insurer's liability for making insurance payments related to insurance events that have been reported to the insurer by the reporting date in accordance with law or contract, but for which insurance payments have not been made or have not been paid in full;
   1.4.14. long-term liabilities reserve (mathematical reserves) - the insurer's (reinsurer's) liability for making insurance payments related to possible future insurance events that have not yet occurred by the reporting date but may occur during the term of the insurance (reinsurance) contract;
   1.4.15. incurred but not reported claims reserve - the insurer's (reinsurer's) liability for making insurance payments related to insurance events that have occurred but not been reported to the insurer by the reporting date in accordance with law or contract;
   1.4.15–1. stabilizing reserve - a reserve created when the loss ratio (excluding reinsurance share) for any insurance class exceeds 100 percent; 1.4.15–2. conditional obligations reserve - a reserve created by the insurer to ensure additional premium payments when the compensation payment reserve is insufficient, in accordance with the Law "On Mandatory Insurance" of the Republic of Azerbaijan;
   1.4.16. non-savings life insurance - life insurance classes not classified as savings life insurance;
   1.4.17. net insurance reserves - the amount remaining after deducting the reinsurance share from insurance reserves.

2. Composition of Insurance Reserves
   2.1. The insurer shall form insurance reserves with the following composition:
   2.1.1. unearned insurance premium reserve (hereinafter referred to as UIER) - formed by the insurer for non-life insurance regarding insurance (reinsurance) contracts in force as of the reporting date;
   2.1.2. long-term liabilities reserve (mathematical reserves) (hereinafter referred to as LTR) - created by the insurer for life insurance regarding insurance (reinsurance) contracts in force as of the reporting date;
   2.1.3. claims reserve:

• incurred but not reported claims reserve (hereinafter referred to as IBNR);
• reported but unsettled claims reserve (hereinafter referred to as RBNS).
  2.1.3-1. stabilizing reserve;
  2.1.3-2. conditional obligations reserve;
  2.1.4. additional reserves required by the insurance supervision authority for non-life insurance.
  2.2. The amount of insurance reserves calculated in accordance with these Rules is their minimum amount. The insurer may form insurance reserves at an amount higher than the calculated minimum.
  2.3. The reinsurance share for amounts exceeding the calculated minimum and for additional reserves is considered equal to zero.

3. General Requirements Related to the Calculation of Insurance Reserves
   3.1. To ensure the fulfillment of accepted obligations under valid insurance (reinsurance) contracts, the insurer must have insurance reserves formed at an amount not less than that calculated according to these Rules.
   3.2. Insurance reserves are formed separately for each class of insurance by the insurer.
   3.3. The calculation of insurance reserves is carried out taking into account accepted obligations under all insurance (reinsurance) contracts concluded by the insurer, regardless of subsequent reinsurance.
   3.4. When calculating insurance reserves, the reinsurance share in each type (as specified in paragraph 2.1 of these Rules) is determined in accordance with Section 6 of these Rules.
   3.5. If the term of insurance coverage under a mandatory insurance (reinsurance) contract or by law is not precisely defined, the term of validity of the insurance (reinsurance) contract is used for calculating insurance reserves.
   3.6. If the reinsurance share in a specific type of insurance reserve for a certain insurance class is greater than the insurance reserve itself, the reinsurance share is taken as equal to the insurance reserve.
   3.7. The insurer must keep documents reflecting necessary information for calculating insurance reserves (insurance and reinsurance contracts, applications received for early termination of contracts or occurrence of insurance events, documents reflecting the estimated initial amount of reported claims, calculated brokerage commissions, accounting documents for premium payments, calculated insurance payments, payment and return of premiums) for at least 5 years from the date when obligations under insurance (reinsurance) contracts are fully fulfilled.
   3.8. The insurer must separately record in journals (paper and electronic carriers) the necessary information for calculating insurance reserves for life and non-life insurance:
   3.8.1. Journal of Insurance (Reinsurance) Contracts;
   3.8.2. Journal of Claims.
   3.9. The forms for the "Journal of Insurance (Reinsurance) Contracts" and "Journal of Claims" related to reserve calculation are shown in Appendices No