BAKU, Azerbaijan, Jun. 4
By Nargiz Sadikhova - Trend:
Economic and financial consequences of the coronavirus pandemic, decreased oil prices, and capital markets' volatility will test Kazakhstan insurers' resilience over the next 12-24 months, Trend reports with reference to the report of S&P Global Ratings.
The S&P said that it has revised down its base-case GDP growth forecast for Kazakhstan for 2020, and now expects the economy will contract, reflecting the hit to both external and domestic demand from containment measures.
“This followed our downward revision of our assumptions for the average Brent oil price in 2020 to $30 per barrel from $60 previously, as well as our expectation for a global recession in 2020. It is still too early to assess the full financial impact that COVID-19 and a weakening macroeconomic environment will have on the insurance sector in Kazakhstan, given that the situation is still rapidly evolving. We acknowledge a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak,” the report said.
The report said that some government authorities estimate the pandemic will peak about midyear, and S&P is using this assumption in assessing the economic and credit implications.
“We believe the measures adopted to contain COVID-19 have pushed the global economy into recession. As the situation evolves, we will update our assumptions and estimates accordingly,” the report said.
The S&P said that in their view most insurers should be able to absorb claims related to COVID-19 and capital market volatility.
“Therefore, the outlooks on our rated Kazakhstan-based insurance companies remain stable, underpinned by their sufficient capitalization relative to the rating level. We expect growth prospects for Kazakhstan property/casual insurers to remain muted in 2020. We expect a rebound in 2021, which we think will largely depend on the macroeconomic environment, individuals regaining purchasing power, and business activity reviving. We still keep a positive view of the life sector's growth prospects in 2020-2021, expecting growth of close to 15 percent in 2020 supported by a number of regulatory initiatives,” S&P said.
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