KAZAKHSTAN: the market has potential for further development of reinsurance

16 February 2023 —
According to the analytical center of the Association of Financiers of Kazakhstan (AFK), in 2022, the structure of the reinsurance market in Kazakhstan has undergone noticeable changes. The volume of the domestic and inward reinsurance market has grown significantly, Allinsurance.kz wrote.

The volume of insurance premiums reinsured domestically more than doubled from KZT 9 billion in 2021 to KZT 19 billion in 2022 (~EUR 38.45 million). At the same time, the volume of premiums ceded to reinsurance to non-residents decreased by 2%, while the volume of inward reinsurance increased by 20%. The assets of the insurance sector in 2022 increased by 13%, to KZT 2.1 trillion, capital grew by 5% to KZT 0.8 trillion.

"Accordingly, we can conclude that there is growing confidence in the Kazakh insurance market and an increase in its capacity," AFK representatives say. Experts of the Association believe that reinsurance capacity is growing following capitalization of the insurance companies, which in the future may have a positive impact on the willingness of Kazakhstani players to cover large risks. "The market has potential for further development of reinsurance. Thus, this year we can expect a moderate increase in inward reinsurance in Kazakhstan," AFK commented.

According to the director of Interconsult info, insurance consultant Marina SHIPOVALOVA, inward reinsurance is a very specific product, which is sold by a few insurance companies in the Kazakhstani insurance market, and the largest player occupies 70-80% of this segment. Other Kazakh companies, whose share is a small part of the reinsurance market, are just starting to work in this direction and mainly cooperate with large international brokers. "Perhaps, the Kazakh market is ready to develop in this direction, but, most likely, not too actively. Since most companies do not have much experience in taking large reinsurance risks, there is no significant capital that could cover these risks", Marina SHIPOVALOVA explained.

"Local insurers, even in the presence of large risks in Kazakhstan, try to reinsure most of these risks on the international market, which is quite reasonable, but again it indicates that possibilities of local capital are not as large as, perhaps, our market would like and would be useful", the expert said. "Most likely, inward reinsurance this year will be at the same level, or slightly higher. It will grow at a slow pace. This is because there is really a big problem with reinsurance capacity on international markets and our local market can participate. The question is how actively it will do that. Insurers themselves will look at how interested they are in this business, quality of risks and how unprofitable this business is for them", Marina SHIPOVALOVA believes.

The Association noted that in the concept of development of the financial sector of Kazakhstan until 2030, an additional mechanism was proposed to increase capacity of the insurance market, including to provide opportunities for insuring large and catastrophic losses. "This will make it possible to apply uniform conditions and tariffs, ensure a transparent and accessible insurance system, and also provide an effective system for redistributing risks, including in the reinsurance market", AFK experts added.

*EUR 1 = KZT 494.10 (31.12.2022)