Kazakhstan’s insurance industry is beginning to show signs of maturity, as long awaited reforms begin to boost the scope of compulsory lines. For the size of the market, however, the country is covered by a relatively high number of insurance providers, with the National Bank of Kazakhstan (NBK) registering 36 companies in 1Q2012, slightly down from the 38 recorded at the end of 2011. Of these, seven work in the life insurance segment. This story of consolidation is likely to continue, as smaller networks merge with the larger players to strengthen the industry’s base. The market regulator, the concisely named Committee for the Control and Supervision of the Financial Market and Financial Organizations (CSFMFO), also lists three other companies under liquidation as of June 1, 2012: Altyn Policy, Premier Insurance, and Temir At Insurance.
Although 2011 was a solid showing for the industry, 2012 may well prove more trying, as insurance companies move to a general tax paying regime, cutting into profits. Despite the crisis years, the cumulative assets of the industry have maintained steady growth, and rose to KZT411.64 billion ($2.74 billion) in 1Q2012, some 6.2% up on the same figure at the start of the year, according to the NBK. Over 2011, the insurance industry collected a record amount of premiums, coming in at KZT175.53 billion ($1.17 billion), well above the figure for the previous record year of 2007 at KZT147.34 billion in nominal tenge terms. Following the onset of the global financial crisis, total premiums dropped to KZT133.49 billion in 2008 and KZT113.29 billion in 2009, before staging a comeback in 2010 and recording KZT139.96 billion. The total amount of premiums collected over 1Q2012 was KZT51.05 billion ($340 million), up a healthy 11.5% in year-on-year terms for 1Q2011. Over 1Q2012, premiums by type show the compulsory category making up 15.2% of the market, with voluntary personal on 40.4%, while voluntary property led the way on 44.4%. Claims payments over 2011 surged to KZT43.14 billion ($287.2 million), up 70.8% on the FY2010 figure, with the voluntary personal category being the main contributor, growing 75.9% to KZT22.89 billion. In growth terms, however, the voluntary property insurance category for claims payments nearly tripled in size, leaping from KZT2.91 billion in 2010 to KZT8.52 billion. The compulsory insurance segment also contributed to the growth in claims payments, though at KZT11.74 billion (25.74%) it was the slowest of the three core categories.
The leader in the non-life insurance segment over 2011 was HALYK-Kazakhinstrakh, a subsidiary of leading finance group Halyk Bank. HALYK-Kazakhinstrakh commanded a market share of 14.5% in the non-life segment over 2011, with gross written premiums coming in at KZT126.9 billion. Other leading players in the non-life segment include Eurasia, Nomad Insurance, and Kazkommerts Policy.
As for the life insurance market, the top player over 2011 was the Life Insurance Company State Annuity Company (LIC SAC), controlled by the Ministry of Labor and Social Protection. LIC SAC occupies 21.4% of the life segment according to CaspioNet, though its dominance is mainly in the field of annuities. In terms of life insurance policies, Generali Life, a subsidiary of the Italian insurance giant of the same name, wrote KZT3.42 billion in life premiums over 2011. Other top players in the life segment include BTA Life, Halyk Life, and Kazkommerts Life. Another player in the life field, state-owned GAK Insurance, has reported solid growth in its pension annuities product lines.
“One in every four contributors at the age of 55 signed a pension annuity contract with GAK,” Nurzhan Alimukhambetov, Chairman of the company informed TBY. “These figures are particularly revealing when one considers that at the very inception of pension annuities in 2007, only 29 contracts were signed.”
RISE IN COMPULSORY
The rise in the spread of compulsory insurance was given assistance by the market regulator in 2011, when third-party insurance was made mandatory for all motor owners. Rinat Akhmatynov, Chairman of Nomad Insurance, sees third-party liability for car owners, “leading in volume terms for insurance premiums,” and his company reported 80% growth in customer numbers over 2011, with some one in four cars on the road in Kazakhstan insured by his company. Third-party auto liability rose from KZT20.88 billion over 2010 to KZT25.58 billion in 2011, confirming the trend in compulsory growth. Another strong line in the compulsory segment was that for work-related accidents and compensation. Government moves to broaden the reach of such insurance policies have spurred the segment to grow from KZT11.30 billion in premiums in 2010 to KZT 16.74 billion at the end of 2011. The government and the CSFMFO have announced that the range of compulsory types of insurance will be extended in 2013, with the health sector possibly to be a key beneficiary.
The private healthcare system is now beginning to develop, recording KZT11.97 billion in premiums written over 2011, up on the KZT9.74 billion recorded over 2010. For Sergey Lavrentyev, Chairman of BTA Insurance, part of the BTA banking group, growth in the health insurance segment is coming from a surprising area. “Oddly enough, we have very high demand for our voluntary health insurance program, although not from individuals,” he told TBY in an interview. “In fact, it is companies that provide social benefits to their employees that request the program the most.” BTA Insurance has alone reported a trebling in the demand for health insurance products over 2011, with many corporates looking to lock in policies prior to the announcement of compulsory health coverage. Another area under consideration to be made compulsory is natural disaster insurance, something that may receive impetus as Almaty, the country’s commercial capital, is known to be in an active earthquake zone. The extension of further compulsory types of insurance for both corporates and individuals will prove a boon to the insurance industry, and a welcome shot in the arm following the introduction of the general taxation regime for market operators in 2012.
The reinsurance market in Kazakhstan also saw substantial regulatory changes over 2011, many aimed at ensuring the placement of reinsurance contracts abroad with only top-tier groups, while also stimulating the development of the local reinsurance sector. “Local insurance companies are to reinsure risks abroad in companies rated not less than ‘A’,” Yergali Begimbetov, Chairman and CEO of London-Almaty Insurance told TBY. Should sufficient interest not be raised among overseas reinsurers, “local players are to share the risk with the local market first,” Begimbatov said.
Other regulations dating back to the second half of 2010 have also had an effect on reinsurance players. “There was a regulation introduced in August 2010 that stated that the broker cannot be the direct broker and reinsurance broker on the same risk, which is the way a lot of us do business,” Simon Aubrey Jones, Director of Willis Ltd.’s representative office in Kazakhstan explained to TBY. “That has now been clarified to say that a broker handling the reinsurance and the insurance policy on the same risk can only earn a single fee from the direct client.” Although such regulations are seen as a positive to lift the level of market transparency, they can have the unintended consequence of actually increasing the cost of premiums, and thus reducing insurance market activity. While the rate of foreign reinsurance of the local market was 26.5% in 2010, it dropped to 12.6% over 2011. While local insurance companies laid off property risk to the reinsurance industry, foreign insurance companies active in Kazakhstan tended to lay off policies related to business interruption.
© The Business Year