1. CMTPL insurance market in Azerbaijan: current trends, bonus-malus system, problems, claims, expectations AIIF - 2013 Azerbaijan International Insurance Forum 1

2. CMTPL INSURANCE MARKET IN AZERBAIJAN  Compulsory Insurance Bureau (CIB) started to operate since December 2011 and CMTPL insurance under the new Law “On compulsory insurance” are issued effective from 16 December 2011.  It is required by the Law that an insurance company intending to operate under CMTPL insurance must be member of the CIB.  Currently, CIB has 12 members. 2

3. CURRENT CIB PARTICIPANTS 1.“ATESHGAH” 2.“STANDARD Insurance” 3. “ATASIGORTA” 4.“XALQ Sigorta” 5.“PASHA Sigorta” 6.“AXA MBASK” 7.“Azsigorta" 8.“ALFA Insurance” * 9.“AZERSIGORTA” 10."MEQA Sigorta" 11."İPEK YOLU Sigorta" 12."AZERBAIJAN Senaye" * Permission to issue a CMTPL has been withdrawn effective 03.07.2012 3

4. INSURANCE PREMIUM (ANNUAL) CMTPL INSURANCE PREMIUM (ANNUAL) Physical (AZN)Legal (AZN) CARS AND OTHER VEHICLES MADE ON THEIR BASE;min 50- max 250min 60- max 300 LORRIES AND OTHER VEHICLES MADE ON THEIR BASE; min 150 – max 250min 180 – max 240 MINIBUSES, BUSES AND OTHER VEHICLES MADE ON THEIR BASE; min 150 - max 200 min 180 – max 300 MOTORCYCLES AND MOTOR SCOOTERS;5060 TRACTORS, THE VEHICLES USED IN ROAD-BUILDING WORKS, WOOD AND RURAL FARMS 5060 TROLLEYBUSES AND TRAMS.100 AZN For vehicles registered abroad entering the Azerbaijani Republic for the purpose of transit (for one month) – coefficient 0.25 4

5. AMOUNTS OF COVERAGE UNDER CMTPL INSURANCE 5 000 AZN - for the damage caused to health of the individual -50.000 AZN - in total per case5 000 AZN - on a damage caused to property of the third parties 5

6. TOTAL AMOUNT OF CMTPL INSURANCE PREMIUMS – 72,134,846 AZN DECEMBER 2011- 2012: A TOTAL OF 917,622 CONTRACTS OF CMTPL INSURANCE POLICIES HAS BEEN ISSUED BY 12 PARTICIPANTS OF CIB INSURANCE STATISTICS CMTPL INSURANCE STATISTICS 6

7. NUMBER OF CMTPL INSURANCE CONTRACTS: COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013 NUMBER OF CMTPL INSURANCE CONTRACTS: COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013 385 517 370 718 3,9%3,9% January-May 2012 January-May 2013 7 Pursuant to the amendments to the Law “On Road traffic” effective from April 2013, the requirement for annual technical expertise of all auto vehicles was canceled and replaced by different regularity for different categories of vehicles. This can be shown as one of the reasons for the decrease in the number of CMTPL insurance policies for the 5 months of 2013

8. AMOUNT OF CMTPL INSURANCE CONTRACTS: COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013 AMOUNT OF CMTPL INSURANCE CONTRACTS: COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013 28,713,523 AZN 27,170,818 AZN 5,4%5,4% January February March April May 8 January-May 2012 January-May 2013

9. AVARAGE CMTPL PREMIUM: COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013 AVARAGE CMTPL PREMIUM: COMPARATIVE ANALYSYS FOR 5 MONTHS OF 2012 AND 2013 During the first 5 months of 2013 in comparison with the corresponding period of 2012 there have been an increase of 1,6% in average CMTPL insurance premium. The same indicator with respect to the insurance contracts concluded for a year was increased by 0.03% The increase in the number of CMTPL policies obtained by legal entities by 8.3% as well the increase by 7.1% in the number of trucks with higher premiums were the reason for the increase in the average CMTPL insurance premium for 5 months of 2013. January February March April May 9

10. BONUS-MALUS SYSTEM 10 Bonus-Malus system is applied on 15 January 2013. There are 17 BM classes. Class 6 is taken as the default. Classes 7-17 are Bonus, and Classes 1-5 are Malus. The BM class decreases only with respect to a small portion (0.4%) of policy holders. BM class is increased with respect to 14.6% of policy holders, and significant portion (85%) of policy holders maintains status quo. So in general, the CMTPL policies become cheaper – next year majority of customers will pay less for CMTPL policy.

11. INSURANCE STATISTICS CMTPL INSURANCE STATISTICS Number of vehicles registered abroad entering the Azerbaijan Republic during 2012 for the purpose of transit – 224 527 (total number of countries 115) 11

12. PAID CLAIMS UNDER CMTPL INSURANCE Damage to property Damage to vehicles Death of the person Damage to health TOTAL Quantity92406424 474227 Amount175,158 AZN6, 489,472 AZN120,000 AZN39,000 AZN6, 823, 630 AZN On the basis of official statistics, during 2012 there were 2892 road accidents in Azerbaijan resulting in 2997 damages to health, and 1168 death. In comparison with the number of road accidents and associated damages to health and cases of death, the number of paid claims thereunder is much more less. 2012 January - December 12

13. PAID CLAIMS UNDER CMTPL INSURANCE Damage to property Damage to vehicles Death of the person Damage to health TOTAL Quantity1816135361066458 Amount315,066 AZN8, 400,635 AZN180,000 AZN96,600 AZN8,992,301 AZN This is 52% more than total number of paid claims in 2012, and 31% more than the amount of paid claims. 90% of the paid claims are in respect to insurance contracts concluded in 2012, and 10% in respect to contracts concluded in 2013. 2013 January - May 13 There were 1148 road accidents in Azerbaijan during 2013 January – May resulting in 1247 damages to health (claims paid are only with respect to 8.5% of cases of damage to health), and 443 death (claims paid are only 8.1% of death cases) The number of road accidents has increased by 10%, number of dead persons by 41% and injured persons by 9%.

14. TERMS OF COMPENSATION of CIB Pursuant to the requirements of the Law “On compulsory insurance”, compensation shall be covered by CIB in the following cases: in case an insurer is not able to meet its obligations due to its insolvency; in case of a third person’s injury by an unknown motor vehicle; in case of a third person’s injury as a result of use of a vehicle operated by a person, who had no CMTPL insurance contracts for civil liability of owners of vehicles (provided that, despite a claim being put forward by a victim against the owner of the car to remedy the damage, this claim was not satisfied) 14

15. COMPENSATION BY CIB Damage to health Death of the person TOTAL Quantity011 Amount05,000 AZN 2012 January - December Damage to health Death of the person TOTAL Quantity6 410 Amount6,691 AZN20,000 AZN26,691 AZN 2013 January - May 15 Note: Rejected Claim – 3, Claims under consideration - 4 and Subrogation Opened Claims - 2

16. «CIB INFORMATION SYSTEM» CIB information system has been developed in accordance with the provisions of the Law “On compulsory Insurance” and has the following goals:  centralized system of CMTPL policy issue & registry  centralized depository of claim associated documentation  automatic system of bonus-malus calculation and associated premiums  centralized database of insured persons and vehicles  facilitate statistics and reporting information  SMS notification during every transaction While creation of infrastructure there was used the modern equipment and licensed software of world leading IT producers. The protection of intellectual property is one of the main directions of Bureau`s IT policy. The information system of CIB was subject to checking on foreign interventions and finding out the weak points by IT audit company. The safety of assessed information system was positively evaluated and at the moment the technical works continue in the field. 16

17. DEVELOPMENT PERSPECTIVES Integration of electronic information system with information systems of the Ministry of Internal Affairs, State Traffic Police, State Migration Service and the Ministry of Taxes. Integration will enable elimination of paper blanks Inclusion of other types of compulsory insurance into CIB information system Ensuring integration of electronic information system between participating insurance companies and the CIB Entry of the CIB into the “Green card” system Developing current claims registration system to the advanced claims management information system Implementation of high end systems and procedures for control over and fighting against uninsured auto vehicle owners 17

18. Thank You! AIIF - 2013 Azerbaijan International Insurance Forum 18