Resolution on Approving Normative Legal Acts for Implementing the Law on Insurance Activities

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COLLEGIUM OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF AZERBAIJAN RESOLUTION No. Q-11 Baku, December 21, 2012 On the Approval of Certain Normative Legal Acts Related to the Implementation of the Law "On Insurance Activities"

To ensure the implementation of Item 3.1 of Order No. 735 dated March 13, 2008, "On the Implementation of the Law 'On Insurance Activities' of the Republic of Azerbaijan dated December 25, 2007 (No. 519-IIIQ)", the Collegium of the Ministry of Finance of the Republic of Azerbaijan RESOLVES:

1. The following normative legal acts are approved in connection with the implementation of the Law "On Insurance Activities" of the Republic of Azerbaijan:
   1.1. "Rules for Determining the Insolvency Ratio of Insurance Companies" (Appendix No. 1);
   1.2. "Rules for the Organization and Conduct of Certification for Candidates to Senior Management Positions of Insurance Companies, Persons Seeking Licenses for Relevant Insurance Intermediation Activities, and Physical Persons Wishing to Obtain an Actuarial Certificate for Actuarial Activities" (Appendix No. 2);
   1.3. "Rules for Determining and Calculating the Final Limit of Foreign Capital Share in the Total Charter Capital of All Insurance Companies Operating in the Republic of Azerbaijan" (Appendix No. 3);
   1.4. "Rules for Internal Audit in Insurance Companies" (Appendix No. 4);
   1.5. "Minimum Requirements for External Audit in Insurance Companies" (Appendix No. 5);
   1.6. "Rules for the Form and Completion of Licenses for Insurance, Reinsurance, Insurance Brokerage, and Insurance Agency Activities" (Appendix No. 6);
   1.7. "Rules for Maintaining the Registry of Professional Participants in the Insurance Market" (Appendix No. 7);
   1.8. "Rules for Investment Operations of Insurance Companies" (Appendix No. 8);
   1.9. "Insurance Rules for Comprehensive Insurance of Passenger Vehicles Owned by Physical Persons" (Appendix No. 9).

2. In connection with the entry into force of the normative legal acts approved by Part 1 of this Resolution, the following normative legal acts of the Ministry of Finance of the Republic of Azerbaijan shall be repealed:
   2.1. Order No. I-110 dated November 14, 2008 "On the Approval of Certain Normative Legal Acts Related to the Implementation of the Law 'On Insurance Activities' and on Deeming Certain Normative Legal Acts Invalid" (except for the second part);
   2.2. Order No. I-189 dated November 23, 2010 "On the Approval of Insurance Rules for Comprehensive Insurance of Passenger Vehicles Owned by Physical Persons";
   2.3. Order No. I-09 dated January 21, 2011 "On Amendments and Changes to Certain Normative Legal Acts of the Ministry of Finance of the Republic of Azerbaijan".

3. The Department for Regulation of Finance and Insurance Market, together with the State Insurance Supervision Service, is tasked to ensure that the Department of Law submits this Resolution for state registration in the State Registry of Legal Acts of the Republic of Azerbaijan within 3 days.

4. Supervision over the execution of this Resolution is assigned to Deputy Minister Azər Bayramov.

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

Approved by Resolution No. Q-11 of the Collegium of the Ministry of Finance of the Republic of Azerbaijan dated December 21, 2012.

Appendix No. 1
Rules for Determining the Insolvency Ratio of Insurance Companies

1. General Provisions
1.1. These Rules are prepared in accordance with Article 15.2 of the Law "On Insurance Activities" and Item 3.1 of Order No. 735 dated March 13, 2008, "On the Implementation of the Law 'On Insurance Activities' dated December 25, 2007 (No. 519-IIIQ)", and define the calculation methods for an insurance company's insolvency ratio, as well as other legislative matters related thereto.
1.2. The term "insurance company" used in these Rules includes reinsurance companies, in accordance with Article 1.2 of the Law "On Insurance Activities".
1.3. The following terms are used for the purposes of these Rules:
1.3.1. reporting date – the date on which the respective report of the insurance company is prepared;
1.3.2. reporting period – the 12 months preceding the reporting date;
1.3.3. insurance (reinsurance) contracts – insurance contracts concluded and risks accepted for reinsurance during the reporting period;
1.3.4. earned gross premiums – the amount remaining after subtracting the base portion of unearned premium reserves at the end of the reporting period from the sum of calculated gross premiums for insurance (reinsurance) contracts concluded during the reporting period and the base portion of unearned premium reserves at the beginning of the reporting period;
1.3.5. expenses – mandatory deductions calculated from premiums and costs of operations;
1.3.6. total losses – the sum of total insurance payments for the accident year, adjustment costs, and loss reserves at the end of the reporting period for the accident year;
1.3.7. adjustment costs – the total additional expenses of the insurance company for obtaining organizational, technical, legal, and valuation services related to the payment of insurance claims, excluding the amount of insurance payments;
1.3.8. net insurance payments for the accident year – the amount remaining after subtracting the reinsurance companies' share from total insurance payments for the accident year;
1.3.9. accident year – taken with respect to all insurance events that occurred during the four quarters preceding the reporting date (in this case, total insurance payments and the reinsurance companies' share in these payments are calculated only for events occurring within those four quarters);
1.3.10. reported but unsettled loss reserves for the accident year – the insurance company's (reinsurance company's) liability related to the payment of insurance claims for events reported within the four quarters preceding the reporting date according to law or contract, but not yet paid in full (sum of limits for the last 4 quarters in the final column of Form No. 8-3, and for reinsurance companies' share in insurance reserves, Form No. 8-11);
1.3.11. incurred but not reported (IBNR) loss reserves for the accident year – the insurance company's (reinsurance company's) liability related to the payment of insurance claims for events occurring but not reported within the four quarters preceding the reporting date (product of 1.03 and the sum of limits for the last four quarters in the final column of Form No. 8-8, and for reinsurance companies' share, Form No. 8-12);
1.3.12. total loss reserves at the end of the reporting period for the accident year – the sum of reported but unsettled loss reserves and incurred but not reported (IBNR) loss reserves for the accident year.
1.4. All indicators used in calculations under these Rules must relate to the same reporting period.

2. Insolvency Ratio
2.1. The insolvency ratio characterizes the overall efficiency of insurance activities across individual insurance classes, as well as the financial status of the insurance company.
2.2. The insolvency ratio equals the sum of the loss ratio and the expense ratio.
2.3. For the purposes of Article 15.2 of the Law "On Insurance Activities", the upper limit of the insolvency ratio, calculated excluding the reinsurance companies' share, is set at 90 percent.

3. Calculation of the Loss Ratio
3.1. The loss ratio is calculated both with and without the reinsurance companies' share.
3.2. The loss ratio, calculated without the reinsurance companies' share, for each insurance class or the entire portfolio separately, equals the ratio of total losses to earned gross premiums:
T = (M/Q) x 100% where:
T – loss ratio calculated without the reinsurance companies' share; M – total losses; Q – earned gross premiums.
3.3. The loss ratio, calculated with the reinsurance companies' share, for each insurance class or the entire portfolio separately, equals the ratio of total losses (excluding reinsurance companies' share) to earned net premiums:
Tn = (Mn/Qn) x 100% where:
Tn – loss ratio calculated with the reinsurance companies' share; Mn – total losses calculated excluding the reinsurance companies' share; Qn – earned net premiums.
3.4. Earned net premiums are calculated by the following formula:
Qn = A – B + C – E + Ə – (F – K) where:
Qn – earned net premiums;
A – base portion of unearned premium reserves at the beginning of the reporting period; B – reinsurance companies' share in unearned premium reserves at the beginning of the reporting period; C – calculated gross premiums for insurance (reinsurance) contracts concluded during the reporting period; E – calculated reinsurance premiums for risks ceded to reinsurance during the reporting period; Ə – calculated commissions for risks ceded to reinsurance during the reporting period; F – base portion of unearned premium reserves at the end of the reporting period; K – reinsurance companies' share in unearned premium reserves at the end of the reporting period.

4. Calculation of the Expense Ratio
4.1. The expense ratio equals the ratio of expenses to earned gross premiums for the entire insurance portfolio:
E = (X/Q) x 100% where:
E – expense ratio;
X – expenses for the entire insurance portfolio; Q – earned gross premiums for the entire insurance portfolio.

5. Calculation of the Insolvency Ratio
5.1. The insolvency ratio is calculated for each insurance class or the entire portfolio, both with and without the reinsurance companies' share.
5.2. The insolvency ratio calculated without the reinsurance companies' share equals the sum of the loss ratio (without reinsurance share) and the expense ratio:
Z = T + E where:
Z – insolvency ratio calculated without the reinsurance companies' share; T – loss ratio calculated without the reinsurance companies' share; E – expense ratio.
5.3. The insolvency ratio calculated with the reinsurance companies' share equals the sum of the loss ratio (with reinsurance share) and the expense ratio:
Zn = Tn + E where:
Zn – insolvency ratio calculated with the reinsurance companies' share; Tn – loss ratio calculated with the reinsurance companies' share; E – expense ratio.

6. Reporting on the Insolvency Ratio
6.1. Reports on the insolvency ratio must be prepared quarterly by insurance companies in the form specified in Appendix No. 1 of these Rules, adhering to the following requirements, and submitted within 20 days after each calendar quarter ends, both in paper and electronic form to the Ministry of Finance of the Republic of Azerbaijan:
6.1.1. required indicators in the report must be fully and accurately reflected according to the respective reporting form;
6.1.2. the report must be signed by the Chairman of the Management Board (or acting person) and the Chief Accountant, and stamped with the insurance company's seal;
6.1.3. amounts in the report must be expressed in manat;
6.1.4. amounts below 50 qapiks must be recorded as zero, and amounts equal to or greater than 50 qapiks must be recorded as one manat;
6.1.5. no corrections, defects, or missing/partially unreadable information are permitted in the report.
6.2. Reports that do not comply with the requirements specified in Item 6.1 are returned without analysis.

Form No. 10
Appendix to the Rules for Determining the Insolvency Ratio of Insurance Companies
No. 1
Report on Determining the Insolvency Ratio for Non-Life Insurance __________________________________________ (Name of insurance company) «____»__________20 c _ il tarixə

I	II	III	IV	V	VI	VII	VIII	IX	X	XI	XII	XIII	XIV	XV	XVI	XVII	XVIII	XIX	XX
1. By Insurance Classes
Sıra sayı	Sığortanın sinfi	Hesablanmış məcmu sığorta haqları	Hesabat dövrü ərzində qaytarılmış sığorta (təkrarsığorta) haqları	Hesabat dövrünün əvvəlinə qazanılmamış sığorta haqları ehtiyatının baza hissəsi	Hesabat dövrünün sonuna qazanılmamış sığorta haqları ehtiyatının baza hissəsi	Qazanılmış məcmu sığorta haqları («III»+«V»-«VI")	Təkrarsığortaya verilmiş risklər üzrə hesablanmış təkrarsığorta haqları	Hesabat dövrünün əvvəlinə qazanılmamış sığorta haqları ehtiyatında təkrarsığortaçıların payı	Hesabat dövrünün sonuna qazanılmamış sığorta haqları ehtiyatında təkrarsığortaçıların payı	Təkrarsığortaya verilmiş risklər üzrə hesablanmış komisyon muzdu	Qazanılmış xalis sığorta haqları («V»-«IX»+«III"-«VIII»+«XI"-(«VI"-«X"))	Sığorta hadisələri ili üzrə məcmu sığorta ödənişləri	Sığorta hadisələri ili üzrə məcmu sığorta ödənişlərində təkrarsığortaçıların payı	Sığorta hadisələri ili üzrə xalis sığorta ödənişləri("XIII"-"XIV")	Sığorta hadisələri ili üzrə hesabat dövrünün sonuna zərərlər ehtiyatı	Sığorta hadisələri ili üzrə zərərlər ehtiyatında təkrarsığortaçıların payı çıxılmaqla hesabat dövrünün sonuna zərərlər ehtiyatı	Tənzimləmə xərcləri	Təkrarsığortaçıların payı çıxılmamaqla zərər əmsalı, % («XIII»+«XVI"+«XVIII") /(«VII"-«IV")	Təkrarsığortaçıların payı çıxılmaqla zərər əmsalı, % («XV»+«XVII"+«XVIII") /(«XII"-«IV")
A1	1	fərdi qəza və xəstəlik sığortası
A2	2	tibbi sığorta
A3	3	əmlakın yanğından və digər risklərdən sığortası
A4	4	avtonəqliyyat vasitələrinin sığortası
A5	5	dəmiryol nəqliyyatı vasitələrinin sığortası
A6	6	hava nəqliyyatı vasitələrinin sığortası
A7	7	su nəqliyyatı vasitələrinin sığortası
A8	8	yüklərin (nəqliyyat) sığortası
A9	9	kənd təsərrüfatı bitkiləri məhsullarının sığortası
A10	10	kənd təsərrüfatı heyvanlarının sığortası
A11	11	işçilərin dələduzluğu sığortası
A12	12	pul və pul sənədlərinin saxtalaşdırmasından sığorta
A13	13	avtonəqliyyat vasitələri sahiblərinin mülki məsuliyyətinin sığortası
A14	14	dəmiryol nəqliyyatı vasitələri sahiblərinin mülki məsuliyyətinin sığortası
A15	15	hava nəqliyyatı vasitələri sahiblərinin mülki məsuliyyətinin sığortası
A16	16	su nəqliyyatı vasitələri sahiblərinin mülki məsuliyyətinin sığortası
A17	17	yük daşıyanın mülki məsuliyyətinin sığortası
A18	18	mülki-hüquqi müqavilə üzrə mülki məsuliyyətin sığortası
A19	19	peşə məsuliyyətinin sığortası
A20	20	işəgötürənin məsuliyyət sığortası
A21	21	ümumi mülki məsuliyyətin sığortası
A22	22	kreditlərin sığortası
A23	23	ipoteka sığortası
A24	24	əmlakın bazar dəyərinin düşməsi riskindən sığorta
A25	25	işin dayanması ilə bağlı risklərdən sığorta
A26	26	nəqliyyat vasitəsi sahiblərinin mülki məsuliyyətinin icbari sığortası
A27	27	sərnişinlərin icbari sığortası
A28	28	icbari ekoloji sığortası
A29	29	yanğından icbari sığorta
A30	30	Milli Məclis deputatlarının icbari şəxsi sığortası
A31	31	tibbi personalın AIDS-dən sığortası
A32	32	hərbi qulluqçuların dövlət icbari şəxsi sığortası
A33	33	məhkəmə və hüquq-mühafizə orqanları işçilərinin dövlət icbari şəxsi sığortası
A34	34	dövlət qulluqçularının icbari sığortası
A35	35	diplomatik nümayəndələrin icbari sığortası
A36	36	auditorların peşə məsuliyyətinin icbari sığortası
A37	37	daşınmaz əmlakın icbari sığortası
A38	38	daşınmaz əmlakın istismarı ilə bağlı mülki məsuliyyətin icbari sığortası
A39	39	avtonəqliyyat vasitəsi sahiblərinin mülki məsuliyyətinin icbari sığortası
A40	40	sərnişinlərin icbari fərdi qəza sığortası

2. For the Entire Insurance Portfolio

I	II	III	IV	V	VI	VII	VIII	IX	X	XI	XII	XIII	XIV	XV	XVI	XVII	XVIII	XIX	XX	XXI	XXII
Hesablanmış məcmu sığorta haqları	Hesabat dövrü ərzində qaytarılmış sığorta (təkrarsığorta) haqları	Hesabat dövrünün əvvəlinə qazanılmamış sığorta haqları ehtiyatının baza hissəsi	Hesabat dövrünün sonuna qazanılmamış sığorta haqları ehtiyatının baza hissəsi	Qazanılmış məcmu sığorta haqları («I»+«III"-«IV")	Təkrarsığortaya verilmiş risklər üzrə hesablanmış təkrarsığorta haqları	Hesabat dövrünün əvvəlinə qazanılmamış sığorta haqları ehtiyatında təkrarsığortaçıların payı	Hesabat dövrünün sonuna qazanılmamış sığorta haqları ehtiyatında təkrarsığortaçıların payı	Təkrarsığ