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LAW OF THE AZERBAIJAN REPUBLIC

of December 25, 2007 No. 519-IIIQ

About insurance activity

(as amended on 27-05-2021)

This Law determines the main directions and the principles of development of system of insurance, activities of professional participants of the insurance market, including insurers, overcautious persons, insurance intermediaries, and also legal and economic basis of regulation and control in insurance field.

This Law does not extend to the relations of social insurance.

Chapter 1. General provisions

Article 1. Basic concepts

1.1. In this Law the following basic concepts are used:

1.1.1. insurance - the system of the relations which is based on transfer or distribution of risks in the sphere of protection of the valuable interests connected with property, life, health, the civil responsibility, and also the activities, including business activity of the insurer which are not forbidden by the law or insured;

1.1.2. reinsurance - the system of the relations which is based on transfer or distribution in general or regarding the risks insured by the insurer according to the insurance contract according to the agreement signed with the overcautious person;

1.1.2-1. joint insurance - the system of the relations based on payment of insurance premiums for the account of means of joint insurance fund, distribution of risks, including the income and losses suffered by fund;

1.1.2-2. fund of joint insurance - the amount of the means paid by physical persons and legal entities for the purpose of insurance of valuable interests of these persons on the basis of joint insurance and also allocated for this purpose from the government budget;

1.1.3. the insurer - the local legal entity, the corresponding license for the implementation of insurance activity which is the agreement party of insurance and having based on this Law on which in case of the loss occurrence provided in the insurance contract the obligation on payment of insurance indemnity according to the procedure, the provided laws on compulsory insurance or the agreement lies;

1.1.3-1. the co-insurer - the insurer having only the license for activities on the basis of joint insurance;

1.1.4. the insurer - the insurance agreement party which is paying insurance premium and having insurance interest in zastrakhovaniye of object of insurance;

1.1.5. insured - person whose valuable interests are insured based on the insurance contract;

1.1.6. the beneficiary - person to whom the insurance indemnity according to the laws on compulsory insurance or the insurance contract shall be issued;

1.1.7. the overcautious person - the party reassuring (accepting to reinsurance) risks, insured (reassured) based on the insurance contracts or reinsurance concluded with primary insurer or primary overcautious person having the license for reinsurance activities;

1.1.8. the reinsurer - the insurer or the overcautious person reassuring (transferring to reinsurance) the risks insured or reassured by it based on the agreement of reinsurance;

1.1.9. supervision body behind the financial markets - the structure created by relevant organ of the executive authority for the purpose of implementation of regulation and control in the financial markets;

1.1.10. the insurance contract - the agreement in which conditions of acceptance by the insurer on themselves obligations of payment based on approach of certain case of compensation or the approved sum of money for the caused damage, losses in connection with risks to which object of insurance, instead of payment of the corresponding insurance premium by the insurer can undergo are enshrined;

1.1.11. the insurance policy - the document issued by the insurer to the insurer and (or) insured and the confirmatory fact of the conclusion of the insurance contract;

1.1.12. the document accepted by the insurer, or body (organization) established by relevant organ of the executive authority according to article 16.6 of this Law, supervision body behind the financial markets according to article 16.5 of this Law, taking into account requirements of the Civil code of the Azerbaijan Republic and this Law, establishing rules and conditions on this type of insurance on which the type of voluntary insurance performed by the insurer is proved;

1.1.13. object of insurance - any valuable interest of the insurer which is not contradicting the law, or insured;

1.1.14. insurance premium - the sum of money paid to the insurer from the insurer instead of acceptance or distribution of risks according to the insurance contract in case of voluntary insurance and to the laws on compulsory insurance in case of the compulsory insurance, according to the procedure, provided by the insurance contract;

1.1.15. insurance sum - the final limit of the obligation of the insurer on insured risks expressed in the amount of, the established laws on compulsory insurance on compulsory insurance, by the insurance contract on voluntary insurance;

1.1.16. the redemption amount - the sum of money paid by the insurer to the insurer in case of early termination of the agreement on accumulative life insurance;

1.1.17. insurance subject - physical person, property or circumstance to which the valuable interests insured according to the insurance contract belong;

1.1.18. insurance risk or risk - possibility of approach of case or emergence of the circumstance which is origin of losses or damage in connection with object of insurance and also the obligation undertaken by the insurer against the present possibility;

1.1.19. insured event - case or the circumstance which came or arose during the term of the agreement insurance and on compulsory insurance - according to the laws on compulsory insurance, on voluntary insurance - according to the insurance contract being the basis for payment of insurance indemnity to the insurer, insured or other beneficiary;

1.1.20. the insurance claim - the appeal of insurer, insured or the beneficiary, sent to the insurer concerning execution of its obligations in case of loss occurrence according to the Civil code of the Azerbaijan Republic, this Law, the laws on compulsory insurance and the insurance contract; this concept of the attitude of the corresponding appeal of reinsurer towards the overcautious person under agreements of reinsurance is used as "the reinsurance claim";

1.1.21. insurance indemnity - the financial compensation paid by the insurer in case of loss occurrence according to the laws on compulsory insurance or the insurance contract;

1.1.22. own deduction - part of insurance risk which according to the insurance contract or reinsurance remains on the insurer liabilities (overcautious person);

1.1.23. joint insurance - the mechanism of the legal and economic relations arising from the agreement signed between several insurers of rather joint risks insurance, established by the insurance contract and distributions of obligations on insurance indemnity;

1.1.24. accumulative life insurance - the form of carrying out life insurance providing accumulating at the insurer of the insurance premiums which are regularly paid by the insurer as urgent accumulative means;

1.1.25. the actuary - the specialist determining bases of calculation of insurance premiums by carrying out economic-mathematical calculations according to this Law, and also counting insurance reserves;

1.1.26. the license - the official document permitting to the insurer to perform insurance activity, to the overcautious person - reinsurance activities, to insurance broker - activities of insurance broker, to insurance agent - activities of insurance agent;

1.1.27. the required capital - the amount expressing the means which are required to the insurer for accomplishment in full of the financial liabilities;

1.1.28. own means of the insurer - means, free from obligations of the insurer which amount is estimated according to the rules established by supervision body behind the financial markets;

1.1.29. the aggregate capital - the cash amount of the means necessary for ensuring financial stability and solvency of the insurer;

1.1.30. person - physical person or legal entity;

1.1.31. the local legal entity - any legal entity created within the Azerbaijan Republic;

1.1.32. the foreign physical person - the physical person who is not the citizen of the Azerbaijan Republic whose place of permanent residence is not the territory the Azerbaijan Republic;

1.1.33. the foreign legal entity - legal entities to whom the concept of the local legal entity does not extend;

1.1.34. the foreign insurer - the foreign legal entity having rights of implementation of insurance activity according to the laws of the country;

1.1.35. the foreign overcautious person - the foreign legal entity having rights of implementation of reinsurance activities according to the laws of the country;

1.1.36. subsidiary - for the purpose of this Law the legal entity in whose management the main founder (shareholder) has majority control;

1.1.37. dependent societies - legal entities, one of whom is under majority control of another, or each of which is under majority control same the third party (persons);

1.1.38. especially important agreement - for the purpose of this Law, the agreement representing to any person irrespective of possession of it of shares of the legal entity, power for significant effect on this legal entity in decision making;

1.1.39. majority control - for the purpose of this Law, possession of 50 or more percent of the placed ordinary shares of the legal entity, or possibility of significant effect on decision making by the legal entity from any person based on especially important agreement;

1.1.40. the prevailing share - direct or indirect possession of 20 or more percent of the shares placed in the authorized capital; person is considered the indirect owner of the prevailing share in the legal entity if it exercises majority control over other legal entity owning the prevailing share in this legal entity;

1.1.41. civil faultlessness - for persons provided in this Law:

1.1.41.1. lack of criminal record for intentional crime;

1.1.41.2. lack of criminal record for making of heavy or especially serious crimes against property and in the sphere of economic activity;

1.1.41.3. lack of the ban on occupation of the corresponding position or on occupation imposed by the judgment professional activity;

1.1.42. close relatives - for the purpose of this Law, the husband, the wife, parents, children, adoptive parents, sisters, brothers, parents, sisters, brothers of the husband or the wife;

1.1.43. the financial sphere - for the purpose of this Law banking sector, the sector of insurance, securities and the pension funds.

1.2. In the following cases certain concepts the insurer and the foreign insurer extend respectively and to the overcautious person or the foreign overcautious person:

1.2.1. if in the relevant provision there is no special differentiation;

1.2.2. if the content applied only concerning the insurer or the foreign insurer is not stated;

1.2.3. if in the identical offer the concept, both the insurer, and the overcautious person, or both the foreign insurer, and the foreign insurer is not used;

1.2.4. if in provision in which the concept of the insurer or foreign insurer is used other case which extends only to the overcautious person or the foreign overcautious person is not established.

Article 2. Insurance legislation

2.1. The insurance legislation of the Azerbaijan Republic consists of the Constitution to the Azerbaijan Republic, the Civil code of the Azerbaijan Republic, this Law and regulatory legal acts adopted on its basis, the laws on compulsory insurance, other regulatory legal acts and interstate international treaties in which the Azerbaijan Republic acts as the party.

2.2. The supervision body behind the financial markets has powers on adoption of acts of normative nature on regulation of the insurance market in the cases provided by the Civil code of the Azerbaijan Republic, this Law and the laws on compulsory insurance and also on establishment of standard rates for insurers and insurance intermediaries.

2.3. Except as specified, when the laws on compulsory insurance provide excellent provisions, the relations following from implementation of types of compulsory insurance are regulated by this Law and the Civil code of the Azerbaijan Republic.

2.4. The relations in the sphere of insurance activity in the Alyatsky free economic zone are governed according to requirements of the Law of the Azerbaijan Republic "About the Alyatsky free economic zone".

2.5. The relations covered by system of agrarian insurance are regulated by the Civil code, this Law and the Law of the Azerbaijan Republic "About agrarian insurance".

Article 3. Compulsory and voluntary insurance

3.1. Agreements of compulsory and voluntary insurance can be signed only by the insurer who got from supervision body behind the financial markets permission to carrying out the corresponding type of insurance.

3.2. Types, rules and conditions of carrying out compulsory insurance are established by the Civil code of the Azerbaijan Republic, this Law and the laws on compulsory insurance.

3.3. Types of voluntary insurance and the corresponding rules of insurance are established by the insurer taking into account article 16.5 of this Law.

3.4. The insurer having permission to carrying out type of the compulsory insurance having no right to refuse the conclusion of the relevant agreement of compulsory insurance.

Article 4. Prohibition on use of the certain words connected with insurance activity in names of other persons

4.1. Use in the name of the words "insurance" and "reinsurance", words, derivative of them, and also their translation in other languages (except cases when in clear form the fact that this word does not belong respectively to activities for insurance, reinsurance or insurance mediation follows from the text in which they are used), and the words "insurance broker" and "insurance agent", and also their translation in other languages - in any cases, persons who are not engaged in noted types of activity as core activity is forbidden.

4.2. The legal entity at whom the license on activities of the insurance intermediary is cancelled or to which it is refused issue of any kind of the licenses provided by this Law shall provide the requirement of article 4.1 of this Law within 2 months from the moment of adoption of the relevant decision of supervision body behind the financial markets or to be liquidated in voluntary procedure.

4.3. If the legal entity does not observe the term, the stipulated in Article 4.2 presents of the Law, it can be liquidated without fail by the judgment based on the claim of supervision body behind the financial markets.

Article 5. System of insurance and participants of the insurance market

5.1. The system of insurance consists of participants of the insurance market and supervision body behind the financial markets.

5.2. Professional participants of the insurance market are the insurers, overcautious persons, insurance intermediaries, actuaries, independent auditors, independent experts and legal entities performing auxiliary activities in the sphere of insurance.

5.3. Other participants of the insurance market are insurers, insured and beneficiaries.

Article 6. Insurance secret

6.1. The following data are considered as insurance secret:

6.1.1. name, address and other personal data of the insurer, insured or beneficiary;

6.1.2. insurance sum or redemption amount of any insurance contract;

6.1.3. paid, or unpaid insurance premium according to any insurance contract;

6.1.4. trade or business secret of the insurer who is the legal entity, insured or the beneficiary;

6.1.5. the data connected with private and family life of the insurer, insured or the beneficiary including concerning their health and property.

6.2. Professional participants of the insurance market shall protect the data received as a result of professional activity which are considered as insurance secret, not to disclose these data to other persons, except for the following cases:

6.2.1. based on written consent of person to which the insurance secret belongs;

6.2.2. to other agreement party of reinsurance or joint insurance, and also the insurance broker mediating in the conclusion of the agreement of reinsurance for the purpose of the conclusion of the agreement of reinsurance or joint insurance;

6.2.3. on the criminal cases which are in production of body of pretrial investigation - to this body based on the resolution of authority;

6.2.4. on the cases which are in production of court - to this court based on its resolution;

6.2.5. on the questions connected with accomplishment of the regulating and controlling functions in system of insurance, - to supervision body behind the financial markets based on the written requirement of this body, and also to the corresponding controllers during the term of conducting exit check by supervision body behind the financial markets;

6.2.6. on any necessary questions of assessment of insurance risks, studying of insured event and (or) regulation of damage, - to persons involved in insurance transactions taking into account the requirement of article 10.10 of this Law who render auxiliary activities in the sphere of insurance to independent experts;

6.2.7. Bureau of compulsory insurance on the types of insurance provided by the Law of the Azerbaijan Republic "About compulsory insurance" and the Law of the Azerbaijan Republic "About compulsory insurance from loss of professional working capacity as a result of labor accidents and occupational diseases";

6.2.8. to the following persons - in case of death of the insurer who is physical person, insured or the beneficiary:

6.2.8.1. based on the statements certified in notarial procedure - to heirs;

6.2.8.2. based on the court decree - to court in which production are connected with the corresponding died person of case on inheritance;

6.2.8.3. based on the written request of the corresponding notary with application of a copy of the death certificate of person - to the notary considering the questions of inheritance connected with the died person;

6.2.8.4. based on the written request of consular establishments of foreign countries - to these organizations in which production are connected with the died person of case on inheritance;

6.2.9. in body of financial monitoring in the cases provided by the Law of the Azerbaijan Republic "About fight against legalization of money or other property received in the criminal way, and terrorism financing";

6.2.10. according to the international treaties, the Azerbaijan Republic providing exchange of tax and financial data, data on the financial transactions performed by legal entities and physical persons of these states in the territory of the Azerbaijan Republic, to authorities of these foreign states by means of relevant organ of the executive authority in the limits and procedure established by relevant organ of the executive authority.

6.3. All persons who got in the legal way access to insurance secret bear responsibility for its distribution and disclosure to other persons in the cases provided by the Criminal code of the Azerbaijan Republic and the Code of the Azerbaijan Republic about administrative offenses.

Article 6-1. Calculations

Payments for the calculations established by this Law are performed only via bank transfer.

Chapter 2. Bases of activities of the insurer

Article 7. Legal position of the insurer

7.1. For implementation of activities for insurance and reinsurance in the territory of the Azerbaijan Republic it is necessary to obtain the corresponding license according to the procedure, provided by this Law.

7.2. For carrying out any type of insurance in the territory of the Azerbaijan Republic the insurer shall get the corresponding permission from supervision body behind the financial markets.

7.3. No. 806-IVQD is excluded according to the Law of the Azerbaijan Republic of 29.10.2013

7.4. Persons who are not observing articles 7.1 and 7.2 of this Law bear responsibility in the cases provided by the Criminal code of the Azerbaijan Republic and the Code of the Azerbaijan Republic about administrative offenses.

7.5. The insurer - the commercial organization which is structure of social significance, performing the activities according to this Law, another normative and legal to both acts of normative nature of the Azerbaijan Republic and the charter.

7.6. The insurer, being legal entity, being the commercial organization, can perform the activities only in form of business of open joint stock company.

Article 8. Securities of the insurer

8.1. Securities, including stocks of the insurer can be owned only to category of personalized securities.

8.2. The shares constituting the authorized capital of the insurer can be only in the form of ordinary shares.

Article 9. Name of the insurer

9.1. The name of the insurer shall be established in Azerbaijani.

9.2. Use by the insurer of the names consisting of senseless words, including names consisting of combinations of letters is forbidden.

9.3. The insurer shall use the full and abbreviated name established by its charter on signs, forms, seals and all other office supplies of official nature, in advertizing and announcements in which its name is reflected.

9.4. At full name of the insurer there shall be word "insurance".

9.5. Full name of the insurer performing activities only in the sphere of life insurance shall contain the word "life".

9.6. Full name of the overcautious person who is engaged in exclusively reinsurance activities shall contain the word "reinsurance".

9.7. Use of the words "Azerbaijani", "state", "national", "central", "budget" and "republican" in the name of the insurer in which the state has no majority control is forbidden.

9.8. The use by the insurer in the name of the words or phrases similar to names of earlier created and acting insurers, and also foreign insurers, or similar with each other to extent of mixture is forbidden.

9.9. Requirements of articles 9.1 and 9.8 of this Law do not extend to the insurers using the name of the non-resident shareholder which possesses fifty or more percent of its shares in the name.

9.10. Before representation to authority of the relevant documents connected with modification of the name for inclusion in the state register of legal entities the insurer shall approve this change with supervision body behind the financial markets.

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