Gross premiums written in Kazakhstan's insurance sector up significantly

Finance Materials 6 November 2019 16:25 (UTC +04:00)

BAKU, Azerbaijan, Nov.6

By Nargiz Sadikhova - Trend:

Kazakhstan’s insurance market is the most developed in the Central Asia with insurance penetration and density at 0.65 percent and $61,1 in 2018 respectively, though penetration has been decreasing over the last two years, Trend reports with reference to the report of the RAEX-Europe rating agency.

According to the report, gross written premiums (GWPs) increased by a third since 2015 and stood at 384 billion tenge ($984 million) in 2018 (including reinsurance premiums).

“After a moderate pace of growth averaging 3.8 percent per annum in 2017-2018, total GWPs are surging in 2019, mainly due to life insurance products and for nine months of 2019, the GWP growth already reached 32 percent year-on-year,” the report said.

In agency’s opinion, the Kazakh insurance market is rather diversified by type of insurance.

The highest share belongs to property insurance with 20.1 percent, followed by compulsory Motor Third Party Liability insurance (MTPL) with 15.8 percent and life insurance with 14.2 percent of the whole market. Whereas the structure of general insurances is expected to remain stable in the short-run, the life sector will expand further its share.

According to the report, the market is dominated by companies belonging to local financial and industrial groups and associated with banks. However, the number of insurance companies continued to shrink and, as of September 2019, there were 27 insurance companies, compared to 33 at the end of 2015.

“One of the main reasons is that companies have left the Kazakh market as a result of tightening regulatory conditions, inspections, and penalties from the Kazakhstan’s National Bank, after introducing in 2018 a number of supervisory changes aiming to improve transparency and reduce the risks of reinsurance, the activities of insurance brokers, as well as increased capital requirements,” the report said.

The structure of insurance investments is largely dictated by the requirements of the regulator and the limitations of the domestic capital market, the report said.

“Traditionally, the investment portfolio comprises classical liquid financial instruments, such as bonds, deposits, and cash. As of August 2019, investment in securities accounted for more than 73 percent of investments, with a large presence of domestic government and non-government bonds owing to their availability and relatively high credit rating. Bank deposits and cash amount 25.5 percent of investments, however, their share is gradually decreasing over the last two years, while securities’ stake is rising,” the report said.

According to the agency, the profitability of the insurance companies remains high, with average Return-on-Assets (ROA) and Return on Equity (ROE) of 7.4 percent and 16.3 percent in 2016-2018, respectively.

“Net profit in 2018 increased by 42.2 percent compared to 2017. The main driver and component of the financial result is income from investment activities, which in 2018 increased by 46 percent largely as a result of the revaluation of foreign currency. At the end of 2019, the profitability is expected to be less than in 2018 amidst moderate investment results,” the report said.

The capital of insurance companies increased by 13.7 percent in 2018 driven by an increase in retained earnings, whereas in 2019 the main growth factor was additional capitalization from shareholders, which resulted in 25.4 percent rise in the charter capital of insurance companies during the first eight months of 2019.


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