Marina SHIPOVALOVA: As of January 1, 2022, the number of insurance companies in Kazakhstan was 28 (9 life, 19 non-life), a year earlier we had 29 companies on the market (9 life, 20 non-life). That means the pandemic did not actually reduce the number of insurers. There was also an increase in the share of the insurance market in GDP, which grew from 0.72% in 2020 to 0.90% in 2021. In general, compared to the pandemic year of 2020, when total GWP increased by only 12%, the past year 2021 had quite good dynamics, GWP growth amounted to 43% reaching KZT 814.8 billion. Moreover, the life insurance industry saw an increase of 66%, while the non-life had an increase of 28%. The share of life insurance is steadily growing in the market portfolio. If in 2020 it amounted to 40.3% in the market of Kazakhstan, in 2021 it reached 46.6%.

In terms of profit for 2021, the market overall remained at the same level - KZT 114.2 billion, but segment-wise the picture was completely different: life insurance companies increased their profit in 2021 by 27%, while non-life companies, on the contrary, reduced their profit by 11%. Moreover, speaking about the paid claims' ratio (share of paid claims in premiums) for both segments, 2021 was more favorable than the pandemic year 2020. Non-life companies reduced their paid claims' ratio from 36.2% in 2020 to 21.9% in 2021, while life insurance companies had the paid claims' ratio of 11.9% in 2020 and 9.3% in 2021.

All the above data indicates that the pandemic "passed by" for the Kazakhstani insurance market and even, on the contrary, had a favorable effect on the paid claims' ratio due to put-up demand for the main "portfolio-forming" lines of the Kazakhstani insurance business.

Underdevelopment of insurance products in Kazakhstan, which in international practice came under pressure due to the pandemic, such as business interruption insurance, was a positive factor for the performance of the insurance market in Kazakhstan during the pandemic.

Marina SHIPOVALOVA: GWP growth led to a natural increase in all financial indicators, except for profit. The asset structure for 2021 did not change dramatically, but there were some interesting trends that characterize existing preferences of industries in the formation of the asset portfolio.

The assets of the Kazakhstani insurance market in 2021 increased by 23%, but contribution of industries to the total growth of assets was not equal: life insurance industry - 29.1%, non-life industry - 18.9%. At the same time, the share of non-life companies in the total market assets is 57.4% and is decreasing every year.

The asset structure of the Kazakhstani insurance market is dominated by securities, the share of which in 2021 was 72.1%, and over the last year their share increased by 27.7%.

The second significant element in assets is deposits, which account for 9.1%. Over the past year, the share of deposits in assets decreased by 12.5%, which was mainly due to the initiative of non-life companies, which reduced deposits in their asset portfolio by 16.3%.

Another interesting element in the portfolio of insurers is money, which accounts for only 1.8%, but it is noteworthy that over the past year, insurers have increased the amount of money in assets by 35.3%, with the life insurance industry increasing the share of money in their portfolios by 95%.

One more element in the asset portfolio is insurance premiums receivable from policyholders and intermediaries, which is 3.2%, but its growth over the past year was 63.7%, mainly supported by non-life insurance companies - their volume of receivables increased by 69.9%!

As for the structure of insurers' incomes - income from insurance activities prevails - 83.1%, which grew by 43.9% over the year. Income from investment activities has been declining for the second year in a row and is 16.2% with an annual growth rate of only 0.6%. Such a feature of the income structure is explained by the conservative investment policy for insurers, which is established by law and does not allow insurers increase investment income, which is a negative factor for life insurance companies that are trying to compete to some extent in savings products with bank deposits.

Marina SHIPOVALOVA: The main GWP growth driver in 2021 was personal insurance, which supported life insurance companies. Of the top five insurance classes in the market portfolio that generate 73.3% of all premiums, 42.9% are provided by personal insurance.

There were no noticeable changes in the structure of the life insurance premium portfolio in 2021 compared to 2020. As before, key "growth locomotives" in the life industry are two insurance classes - voluntary life insurance (46.7%) and pension annuity (34.2%), whose share in the structure of life insurance portfolio is 80.9%. These classes recorded similar impressive growth rate of 81% in 2021.

Such a rapid "take-off" of life insurance was due to several factors. Firstly, it is lowering of the threshold for sufficiency of pension savings for purchase of a pension annuity, which stimulated growth in the number of pension annuity agreements. Secondly, tax incentives, which improved attractiveness of accumulative life insurance programs compared to bank deposits. Thirdly, development of a wider range of products, including specialized savings programs, in particular for the purpose of paying for higher education with state support. Fourth, possibility of early withdrawal of pension savings above the established threshold for certain purposes, which seriously stimulated growth of mortgages and, thus, growth of life insurance for borrowers.

It should also be noted that life insurance companies have become more active in entering insurance classes that were previously considered traditional for general insurance companies. Life insurers began to actively develop voluntary health insurance (its share in the portfolio is only 0.6%, but the growth in 2021 was 91%), as well as accident insurance (the share in the portfolio is 5.6%, the growth in 2021 was at 61%).

As for the non-life business, in the top five classes-leaders in GWP collection there is a class of voluntary property insurance, whose share in the portfolio is somehow diluted due to the rapid growth of personal insurance, but still makes up a significant 18%. Over the past year, property insurance increased by 24%, mainly due to development of bancassurance, when a borrower's collateral is subject to insurance at the request of the creditor. Although it is a voluntary product, it can be called imputed insurance, which is purchased on demand.

Moreover, since 2020, the collateral property insurance scheme has changed. If earlier creditors obliged borrowers to insure collateral property independently, which required additional control on the part of creditors, in 2021 in the structure of property insurance the number of retail contracts with individuals decreased by 1.4 times, but the number of contracts with legal entities increased by as much as 7.5 times! Now creditors themselves insure collaterals, embedding the cost of collateralized property insurance in the cost of loans.

Unfortunately, voluntary purchase of property insurance by retail insurers has not become widespread, as for most households and small businesses, cost of property insurance is not a priority. At the same time, property insurance products are poorly individualized and are offered in the form of "boxed solutions", while solutions with individual underwriting and at the request of a client are quite expensive.

The second class in the top five non-life leading classes in terms of GWP is compulsory insurance of vehicle owners with a 12.4% share in the premium portfolio. This class recorded an annual increase of 24% last year, supported by rising cost of insurance due to binding of tariffs to the minimum calculated indicator, which, among other things, considers inflation, and by a 12% increase in the number of contracts concluded mainly by individuals.

Voluntary motor hull insurance also deserves attention, which is not among the top five classes, but occupies the 6th place with a market portfolio share of 4.5%. Motor Hull increased by 30% in 2021, the number of Motor Hull contracts concluded with legal entities increased by 13.7% and amounted to 18.2 thousand units, and the number of Motor Hull contracts with individuals increased by 32.7% amounting to 232 thousand units.

Growth in the number of Motor Hull contracts with individuals was supported by the active car loan market and government lending programs for purchase of domestically produced cars on preferential terms. In addition, companies that sell used cars on a commission basis or through trade-in programs of official dealers began to work quite actively in Kazakhstan after the pandemic. Buying a used car from such companies usually includes voluntary motor hull insurance, which is another source of motor retail income and, accordingly, ensures an increase in the Motor Hull GWP collection.

The 9th position of the premium portfolio ranking is occupied by another non-life class, which is experiencing a "renaissance" in the post-pandemic year - voluntary civil liability insurance with a share in the portfolio of only 4%, but a GWP increase in 2021 at the level of 93%. After introduction in 2019 of the legislative changes related to shares of non-resident reinsurers in reserves for certain classes (civil liability, other financial losses), GWP growth in civil liability insurance began to significantly decrease and more than halved in 2 years. But in 2021, even though the legislative requirements have not changed, that decline was replaced by a significant increase. Apparently, insurers have found an opportunity to get volumes of civil liability insurance bypassing foreign reinsurers or have organized pool capacities to support this class. It should be noted that against the background of the GWP growth in voluntary civil liability, insurance of other financial losses continues its downward trend.

Marina SHIPOVALOVA: As already mentioned, the pandemic restrictions have seriously affected reduction in paid claims, but this reduction to a greater extent happened not in 2020, when we had lockdowns, but was reflected in paid claims in 2021. I think that this year paid claims will not decrease but will grow simultaneously with the GWP growth. 

Marina SHIPOVALOVA: Currently, the top five market leaders include three non-life companies and two life insurance companies, and speaking about the entire market, it turns out that these 5 companies accounted for 61.1% of premium collections in 2020, and 62.7% in 2021. It seems that there is a slight increase in concentration, but it is not so significant. I'd be more accurate to view concentration segment-wise.

The top-5 non-life insurance companies in terms of GWP accounted for 72.8% in 2020, and 76.6% in 2021. Then if we look at the 3 largest companies, their share in the non-life portfolio slightly increased from 61.4% in 2020 to 62.1% in 2021.

In life insurance the picture is different. In 2020, 5 leading companies in terms of GWP accounted for 87.6%, and in 2021 - 87.0%. If we look at the first 3 companies, in 2020 they collected 71.8% of premiums, and in 2021 also 71.8%.

Thus, segment-based analysis shows that market concentration in the non-life insurance is quite high and tends to grow, while in the life insurance industry, concentration is even higher than in non-life, but it is practically not growing.

Marina SHIPOVALOVA: As for the prospects and potential, they have always been great in the Kazakhstani insurance market, but the question has always been in realizing this potential.

As for the problems, now the retail insurance market remains poorly developed, and insurers are making efforts to automate business processes, including interaction with customers, to reduce acquisition costs and improve the service component of insurance products. Agency networks remain a big problem in retail as the main sales channel. "Huge appetite" of agents in terms of remuneration for compulsory insurance classes with low qualifications and unwillingness, and most often inability to sell voluntary insurance, is the main obstacle in development of retail insurance.

In addition, there are practically no innovative insurance products on the market, which are already quite widespread in other markets, as well as entire sectors of the economy, such as agriculture, remain undeveloped in terms of local supply.

These are exactly the tasks that Kazakhstani insurers must solve to ensure progressive development of their business and further growth.

As for the insurance market regulation, new approaches to solvency regulation considering elements of Solvency II and transition of Kazakhstani insurers to IFRS 17 are on the agenda. The regulator at the legislative level consolidates transition of the loss settlement for compulsory motor insurance online and expansion of a single insurance database, which will positively affect the quality of service for insurers and accumulation of high-quality insurance market statistics for further improvement and development.

For this year, we can only predict progressive market growth and improvement of its quality.

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