BAKU, Azerbaijan, Nov. 16
By Nargiz Sadikhova - Trend:
Kazakhstan's insurance sector is proving resilient to the effects of the coronavirus pandemic, with premiums largely recovering in 3Q2020 after a steep decline in 2Q2020, Trend reports citing a new report of Fitch Ratings.
The report said that the country's first COVID-related lockdown from March to mid-May, which included restrictions on business and travel, had a pronounced impact on insurers, with premium volumes dropping 21 percent year-on-year in 2Q2020. It affected all lines of insurance, including non-life (minus 17 percent), life (minus 30 percent), and personal (minus 14 percent).
However, the report said, premiums largely recovered in 3Q2020 - despite a second set of less-stringent restrictions from July to mid-August to counter a resurgence of the virus.
“Non-life premiums benefited from a catch-up in motor third-party liability (MTPL) policy renewals, while the life premium recovery was driven by US dollar-denominated hybrid products. These regained their popularity, helped by the depreciation of the Kazakh tenge, and low yields on bank deposits. Personal insurance premiums, however, continued to fall in 3Q2020 due to cost-cutting by commercial policyholders and to cross-border travel restrictions leading to a collapse in travel insurance premiums,” the report said.
Two leading diversified insurance groups, Eurasia Insurance Company JSC and Halyk Insurance Company JSC, increased their MTPL segment share to 50 percent in 3Q2020 from 37 percent in 2019, at the expense of several medium-sized traditional motor insurers.
“They achieved this through their access to bancassurance sales channels and by offering higher commission rates,” the report said.
Fitch expects market competition to intensify in 2021, with insurers increasing their commission rates in an attempt to bolster their MTPL market positions, given the limited growth opportunities in other segments.
“Profitability could weaken in the short term for those insurers that lose their MTPL market share as they have high and inflexible expense levels,” the report said.
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