Current CMTPL Market in Azerbaijan and expectations for the next years AIIF 2015 - VI Azerbaijan International Insurance Forum Compulsory Insurance Bureau of Azerbaijan

GENERAL INFORMATION Republic of Azerbaijan Capital: Baku Territory: 86,000 square kilometers Neighbor Countries: Turkey, Russia, Iran, Georgia, Armenia and Turkmenistan over Caspian sea Population: 9,5 million people * Roadways: 59 thousand kilometers Total number of registered motor vehicles: 1,245,000 ** Total number of road traffic accidents: 2,846 ** Total number of road traffic death: 1,164** Total number of road traffic injuries : 2,948** * According to the statistics of 2014 ** According to the statistics of 2013 The State Statistical Committee of the Republic of Azerbaijan CIB

BRIEF INFORMATION ABOUT CIB According to the applicable legislation of Azerbaijan, with respect to CMTPL, CIB is a: MOTOR BUREAU COMPENSATION BODY GUARANTEE FUND INFORMATION SYSTEM GREEN CARD BUREAU CIB has been accepted to the Green Card System as a Transitional Member effective January 1st 2016. Currently, CIB consists of 15 participant insurers, 11 of which are eligible to run CMTPL. CIB

Average CMTPL premium: 75.88 AZN Average CMTPL premium: 76.06 AZN COMPARATIVE STATISTICS ON CMTPL AND CASCO DURING 2013 AND 2014 Type of insurance Number of CMTPL insurance policies Comparison Amount of CMTPL insurance premiums 2013 2014 CMTPL 911,909 931,464 2.1% up 69,367,582 70,687,551 1,9% up CASCO   56,859,150 37,837,615 33% down 2014 Average CMTPL premium: 75.88 AZN 2015 Average CMTPL premium: 76.06 AZN CIB

Average CMTPL premium: 67.85 AZN Average CMTPL premium: 75.78 AZN COMPARATIVE STATISTICS ON CMTPL AND CASCO DURING 5 MONTHS OF 2014 AND 2015 Type of insurance Number of CMTPL insurance policies Comparison Amount of CMTPL insurance premiums Comarison 2014 2015 CMTPL 370,215 397,210 7,2% Up 25,122,016 30,103,231 19,8% Up Casco   14,351,447 12,923,652 9,9% Down 2014 Average CMTPL premium: 67.85 AZN 2015 Average CMTPL premium: 75.78 AZN CIB

THE PROBABLE REASONS OF DECREASE IN CASCO Devaluation of AZN – On 21st February 2015 the value of AZN against USD has devaluated about 34%. The new rate of AZN/USD has been set at 1 AZN = 1,05 USD Bank loans – Starting 2014, restrictions in bank loans were observed which affected decrease in the volume of Casco sales. Reduction of motor vehicles sales via Banking loans resulted in the overall reduction of Casco sale volume in 2014 onwards. Implementation of Euro 4 standards – Since 1st April 2014 - new Euro 4 environmental standards regarding emission of noxious substances were applied. As a result of this regulatory change – the volumes of motor vehicles imported into Azerbaijan went down by nearly 50%. CIB

Type of uninsured persons THE PROBABLE REASONS OF INCREASE IN CMTPL Amendments made to the Administrative Code of Azerbaijan Republic in 2014 Type of uninsured persons Before Now Physical person 10 AZN 50 AZN Entrepreneur 60 AZN 100 AZN Legal person 150 AZN 300 AZN The practice of some countries on penalties for uninsured driving: The United Kingdom: up to 5000 GBP France: 3750 EURO Kazakhstan: 200 USD Turkey: 5% of insurance premium per each month CIB Compulsory Insurance Bureau of Azerbaijan

COVERAGE DEGREE OF CMTPL IN 2014 Despite the increase in the volume of CMTPL, only 55% of total number of vehicles registered in Azerbaijan were covered by CMTPL in 2014 Such percentage rate intensifies risks such as increasing volume of payments made through Guarantee Fund and has an immediate effect on participant insurers’ profitability. Total number of registered motor vehicles in Azerbaijan as of 2014: 1,245,000 Total number insured vehicles registered in Azerbaijan: 700,658 Unfortunately, CIB has no information on percentage of vehicles that are currently in use as opposed to those, permanently out-of-use CIB

Compulsory Insurance Bureau of Azerbaijan THE REASONS OF SMALL COVERAGE DEGREE IN CMTPL The small coverage percentage in CMTPL is affected by the following: Unawareness of motor vehicle owners Low lever of public trust towards insurance companies Negligence of motor vehicle owners Relatively smaller fine rates for uninsured driving CIB Compulsory Insurance Bureau of Azerbaijan

2014 2013 COMPARATIVE STATISTICS ON INSURANCE PAYMENTS CLAIM STATISTICS - 2014 Vehicle damages Property damages Health injury Death of a person TOTAL Number of claims 19,284 560 625 280 20,749 Payments (AZN) 23,910,000 779,000 787,000 1,357,000 26,833,000 Compared to 2013, the number of insurance claims has increased by 12.5% and there has been 5.9% increase in insurance claim payments. IN COMPARISON to 2013 26,833,000 AZN 2014 5.9 % 25,330,180 AZN 2013 CIB

COMPARATIVE STATISTICS ON INSURANCE PAYMENTS January - May 2015 Caused to the motor vehicles Caused to the properties Caused to the health Death Total Number Amount (AZN) 7,543 8,500,808 225 333,030 238 294,000 108 540,000 8,114 9,667,838 January - May 2014 Caused to the motor vehicles Caused to the properties Caused to the health Death Total Number Amount (AZN) 7,884 9,740,935 274 362,283 297 369,500 136 646,288 8,591 11,119,006 CIB

COMPARATIVE STATISTICS ON COMPENSATION PAYMENTS MADE BY CIB

THE INFORMATION SYSTEM OF CIB Centralized CMTPL Policy Issue & Registry System Automatic issue and registry of CMTPL policies SMS notification system Automatic system of Bonus-Malus calculation and associated premiums Centralized database of insured persons and vehicles Centralized Claim Handling System The system enforces workflows and procedures claim manager must comply with according to the law of claim handling process; Each stage of claim handling and settlement process is registered in centralized CIB database for claims which ensures proper tracking history in case dispute requires escalation to court case for further investigation; At each stage of the claim handling process all the parties involved receive either SMS or e-mail notification regarding the update on the claim status. Centralized system is a critical tool as Bureau provides useful statistics to insurance companies, CIB and Ministry of Finance; The system is also integrated with localized mapping system where exact geolocation of the accident can be determined. CIB

THE RECENT AMANDMENTS MADE TO THE CMTPL LEGISLATION The following amendments to the Law of Azerbaijan Republic “On compulsory insurances” Have been applied on 28 November 2014: acceptance of Azerbaijan to the Green Card System and relevant requirements; Subdivision of general CMTPL into more specific standard insurance, border insurance and Green card; Reduction of insurance payments respective to the third party’s guilt degree; Compensation payment made for insurance accident caused by a stolen motor vehicle. CIB

ACCEPTANCE OF AZERBAIJAN TO THE GREEN CARD SYSTEM The acceptance of Azerbaijan Republic to the Green Card system was approved on 28 May 2015 by the General Assembly of the Council of Bureaux which was held in Sopot, Poland. The Bureau of Azerbaijan was accepted as a Transitional Member with effect from January 1st 2016. CIB

ACCEPTANCE OF AZERBAIJAN TO THE GREEN CARD SYSTEM Number of vehicles registered in Green Card member countries that have received Azerbaijan border insurance in 2014 IN COMPARISON to 2013 1 % up 8 % down CIB

THE NEXT 2 YEARS - EXPECTATIONS AND TASKS Building trust and promoting awareness of CMTPL insurance business in Azerbaijan Implementation of online CMTPL sales avoiding printing paper policies; Implementation of damage assessment software - Audatex Implementation of Direct Claim Handling System and development of “Clearing settlement System”; Developing & Introducing proposals for amendment to the legislation regarding insurance fraud detection; Implementation of e-signature or Asan Imza integration to the Information System of CIB; Integration of the CIB Information System to the State Motor Registry; Changes to the CMTPL legislation regarding uninsured driving and increase of CMTPL coverage market penetration; Implementation of damage assessment standards and CMTPL Loss-Assessor Certifications system; Implementation of Telematics; Insured amount limits increase; CMTPL Mobile Application development CIB

MOBILE APPLICATION FOR CMTPL MARKET CIB

Thank You AIIF 2015 - VI Azerbaijan International Insurance Forum