AZE.US
Azerbaijan is preparing to introduce a new type of insurance that could cover loan payments when borrowers lose their jobs and are unable to meet their monthly obligations.
The mechanism is reportedly in the final stages of development. The Central Bank of Azerbaijan is expected to disclose detailed eligibility requirements and coverage terms in the near future.
Member of Parliament Vugar Bayramov said credit risk insurance is already widely used in many countries.
Azerbaijan currently relies primarily on life insurance linked to loans. Under this arrangement, an insurance company may repay the outstanding debt if the insured borrower dies or, in certain cases, becomes unable to work.
The proposed system would cover a broader range of circumstances. If a borrower loses their job or cannot make payments for reasons beyond their control, the insurer could assume the loan payments under the terms of the policy.
However, the additional protection would come at a cost. Borrowers would be required to pay an insurance premium, potentially increasing both their monthly payments and the total cost of the loan.
Bayramov said the mechanism could reduce financial risks for borrowers and lending institutions. Its actual value to consumers, however, will depend on the premiums, coverage period, exclusions and other conditions to be announced by the Central Bank.
AZE.US