BAKU, Azerbaijan, October
21.The role of reinsurance in sharing cyber
insurance risks is growing in Azerbaijan, Head of the Insurance
Intermediaries Supervision Department at the Central Bank of
Azerbaijan, Ramin Jafarov, said during a training titled "Role of
the insurance sector in financial stability” in Baku on Wednesday,
Trend’s
correspondent reports from the event.


According to him, in the traditional insurance model, risk
assessment is primarily based on general indicators, while the
processes of documentation and loss assessment following an insured
event are time-consuming.


"The application of modern technologies, insurtech solutions,
and artificial intelligence enables the acceleration of these
processes and allows for a more precise determination of customers'
risk profiles," he noted.


Jafarov pointed out that, through the use of analytical tools,
insurance companies can assess the risks of potential clients in
greater detail and develop personalized products tailored to their
specific needs. Furthermore, mobile applications and online
resources facilitate the sale of insurance products and expedite
the processes of claims handling and payouts.


The department head also emphasized that cyber risks have become
increasingly significant alongside the advancement of technology.
According to him, assessing damages resulting from cyberattacks can
be more complex than evaluating traditional insured events, often
requiring the involvement of information technology experts.


"Cyber risks possess characteristics such that a single incident
could significantly impact an insurance company's financial
position. Consequently, insurance companies do not retain the
entirety of such risks; instead, they distribute a portion of them
through reinsurance," he remarked.


According to Jafarov, the volume of risk that insurance
companies assume is limited by their financial capacity and
legislative requirements. He mentioned that there is a 10% limit
regarding the ratio of the risk retained by an insurer under a
single contract to its aggregate capital.







He explained this with an example.


"If an insurance company has an aggregate capital of 30 million
manat ($17.6 million) and enters into a contract involving a risk
of 10 million manat ($5.9 million), the amount of risk it retains
is determined within the scope of this limit, while the remainder
can be ceded through reinsurance," he clarified.


The department head added that insurance products in Azerbaijan
are categorized into two main groups: compulsory and voluntary.
Compulsory insurance products are defined by legislation and are
based on requirements applicable to all market participants. The
terms and conditions for voluntary insurance products are developed
by the insurance companies themselves.


He noted that, previously, because each company had its own
distinct rules for various types of voluntary insurance, customers
found it difficult to compare contract terms. Within the framework
of the financial sector development strategy, work was undertaken
to establish unified rules in this area, and a standardized
approach has now been introduced for CASCO insurance.


"The implementation of unified rules allows customers to compare
insurance terms more easily and fosters a consistent approach
across the market. Nevertheless, since each insurance company has
its own specific risk appetite and capacity to assume risks, a
certain degree of flexibility is maintained regarding the
determination of insurance premiums," Jafarov stressed.