1. CAUCASUS INSURANCE MARKET AIIF 2012 Chingiz Mekhtiyev 1

2. 2 CAUCASUS REGION

3. General Information AzerbaijanGeorgiaArmenia Independence18 October 199131 March 199121 September 1991 Official Language:AzerbaijanianGeorgianArmenian Area86.6 ths. sq. km.69.7 ths. sq. km.29.7 ths. sq. km. Population9,2 million4,5 million3,3 million CapitalBakuTbilisiYerevan CurrencyManatLariDram 3 Source: The State Statistical Committee of the Republic of Azerbaijan, National Statistics Office of Georgia, Statistical Service of Republic of Armenia

4. Macroeconomic figures (in USD) Source: Azerbaijan Export and Import Promotion Foundation, www.indexmundi.com, World Bank, Central banks of respective countrieswww.indexmundi.com 2011AzerbaijanGeorgiaArmenia GDP63.4 bln14.4 bln10.2 bln GDP per capita7,0033,2153,022 Inflation (as of 2010) 5.1 %5.7 %6.9 % Unemployment rate7.6 %15.1 %6.2 % Poverty level5.4 %9.2 %35.8% (2010 statistics) Average monthly salary 460412299 4

5. GDP in South Coucasus (bln USD) 5 The State Statistical Committee of the Republic of Azerbaijan, World Bank

6. GDP Share in South Caucasus (%) 6 The State Statistical Committee of the Republic of Azerbaijan, World Bank

7. GDP per Capita (in USD) 7 The State Statistical Committee of the Republic of Azerbaijan, World Bank

8. Country ratings AzerbaijanGeorgiaArmenia RatingBBB-B+BB- OutlookPositiveStable AzerbaijanGeorgiaArmenia RatingBBB-BB-Not rated OutlookPositiveStable- Fitch Rating Standard&Poors Rating Moody’s Investors Service AzerbaijanGeorgiaArmenia RatingBaa3Ba3Ba2 OutlookStable Negative 8

9. Country ratings RatingAzerbaijanGeorgiaArmenia World558892 CIS countries156 WEF Global Competitiveness Report 2011 RatingAzerbaijanGeorgiaArmenia UNDP Human Development report 677476 Human Development Report 2010 9

10. Market Players AzerbaijanGeorgiaArmenia Non – life IC2525148 Life IC300 Reinsuarance Companies1-- Brokers6124 10

11. Total Assets of Insurance companies (mln. USD) 11 Source: Ministry of Finance of Azerbaijan Republic, National Bank of Georgia, Central bank of Armenia

12. Paid-up capital (mln USD) 62% 12 Source: Ministry of Finance of Azerbaijan Republic, National Bank of Georgia, Central bank of Armenia

13. Gross Written Premium 2011 (mln USD) - 7% 13 Source: Ministry of Finance of Azerbaijan Republic, National Bank of Georgia,, XPRIMM

14. 2012 (1st Quarter) Premiums (mln USD) 14 Source: Ministry of Finance of Azerbaijan Republic, National Bank of Georgia 67% 57%

15. GWP per capita and GWP to GDP 15

16. GWP in Caucasus 2011 (mln USD) 16

17. Loss ratio (2011) 17 Source: XPRIMM, Ministry of Finance of Azerbaijan Republic

18. GWP Structure(2011) Azerbaijan 18 Source: XPRIMM, Ministry of Finance of Azerbaijan Republic

19. Summary GDP 72%Azerbaijan Assets 60%Azerbaijan Capital 82% Azerbaijan GWP 52%Azerbaijan 19

20. Weaknesses Very young market Bad history of former USSR insurance system Narrow spectrum of services Lack of modern sales technology Lack of sophisticated IT platforms Lack of corporate governance Territory geographically is prone to CAT risks / Lack of CAT cover Price sensitive market Low self retention (capacity) of Insurers Political instability in the region 20

21. Strength New market with big growth opportunity Well educated professionals speaking at least 3 languages Big energy and infrastructure projects Adoption of compulsory insurance laws Tax discounts for life insurance No VAT applied for insurance services Good loss ratio Gradual increase of capitalization Update of legislative acts 21

22. Challenges and Opportunities Low market penetration Huge growth potential Investment in Internet sales Investment in information recourses Investment in skilful management Investment in core systems Development of predictive modeling and advance analytics Anticipate regulatory changes Working on reshaping products and services and distribution channels 22

23. THANK YOU !!! 23