The insurance market in Kazakhstan showed a high degree of resilience to the challenging economic conditions brought on by the COVID-19 pandemic, according to analysts at AM Best.
In a new report, the rating agency also said that it expects the country’s industry to withstand economic uncertainty driven by the military conflict in Ukraine.
In 2021, Kazakhstan’s insurance market reported substantial growth with total gross written premium increasing by 43.4% to KZT 815 billion (USD 1.9 billion), underpinned by increased customer demand.
In addition, further developments in the segment’s regulatory and legislative environment facilitated the development of new products, prompted more efficient customer service, and had a positive impact on consumer trust through enhanced transparency.
AM Best reports that the market-wide nature of these drivers created positive momentum that resulted in a number of insurers achieving top-line growth.
In particular growth was driven by the life segment, which reported a 66.0% increase in premiums, helped by demand for alternative investment and pension solutions.
But demand for products including health, property and motor also increased and supported non-life segment growth of 28% to KZT 435 billion (USD 1.0 billion).
Looking at potential exposures to the conflict between Russia and Ukraine, AM Best notes that the investment portfolios of local Kazakhstan carriers do not contain significant holdings of Russian financial assets, so any valuation losses—or deterioration of the credit quality of such instruments—are not expected to have a material impact on their solvency and financial strength.
However, The National Bank of Kazakhstan increased the base interest rate to 14% in April 2022 (from 9.75% as at year-end 2021) in response to the growing inflation, additionally fueled by the conflict.
This led to a moderate devaluation of local fixed-income securities, which, coupled with the volatility in Kazakh equities, caused a reduction in the regulatory solvency margins of most insurance companies in the second quarter of 2022.
And AM Best also warns that sanctions imposed on Russia could potentially spill over to its closest economic allies, such as Kazakhstan, which could then lead to reduced access to international reinsurance capacity for Kazakh cedants, liquidity pressures and operational problems.
Additionally, the heightened geopolitical risk could also delay the progress of some region-wide initiatives announced in 2021, such as the incorporation of the Eurasian Reinsurance Company, which was expected to be capitalised by member states of the Eurasian Intergovernmental Council and international financial institutions.
