The European Bank for Reconstruction and Development (EBRD) is making its first investment in Azerbaijan’s developing insurance market by buying a 30% stake in MBASK Insurance Company. By increasing MBASK’s capital base, the investment will allow it to provide more non-life products to both commercial and private customers.

Azerbaijan’s insurance market is growing fast. Premium volume increased by 13.5% in 2004 alone. MBASK, one of the top five insurance companies by market share in a market of 29, offers insurance products focusing on clients outside the oil and gas sectors.

Among the major insurance companies in Azerbaijan, MBASK is one of the few not to have to have focused exclusively on the oil and gas industries and to have developed a full range of life and non-life insurance products. Jamil Melikov, CEO of MBASK Insurance Company, says: “The insurance market in Azerbaijan continues its fast development and it is important for MBASK to remain at the forefront of this development.”

MBASK intends to gradually build on its 7% market share. To ensure that it can write the higher level of business anticipated in 2005, the EBRD and existing shareholders will both subscribe to an increase in MBASK capital of Am7.7bn ( €
1.25mn). The bank expects to participate in further capital increases of MBASK to preserve its stake at 30%. “The bank is a major investor in the insurance sector throughout the region,” says Jonathan Woollett, the director responsible for non-bank financial institutions at the EBRD, “and will use this experience to help MBASK in the development of its insurance operations”.

The bank’s strategy is to support the development of financial institutions outside banking, especially in insurance, in countries where there are few strategic investors and where capital availability is limited. This is the bank’s second such investment in the insurance sector in a CIS country, following a 2003 deal in Kazakhstan in which the bank took a 35% equity stake in Kazkommerts Policy, alongside Kazkommerts Bank.

This project is part of the EBRD’s Early Transition Countries (ETC) initiative. This was launched in 2004 to stimulate market activity in the bank’s poorest countries of operations by using a streamlined approach to financing more and smaller projects.