Abstract
Despite the notable lack of progress in political and democratic reforms,
Kazakhstan’s relative stability
and booming energy sector, continue
to mark it as an ongoing prospect for cross border insurers. Of
particular
interest will be the expected absolute growth in non-life premiums, relative
to other countries in
the region, over the next five years. This should be
quite large, and is an outcome which does not require
spectacular GDP
growth or a massive rise in the non-life penetration.
Such growth is off a
very low base however. The weaknesses of the Kazakh insurance sector are clear
and
in particular, the almost non-existent life insurance segment, which
accounts for just 4.1% of total
premiums. This is compounded by the
apparent lack of faith the Kazakhs have for making long-term
savings
through local financial institutions. The low level of assets of accumulative
pension funds and
their apparent growth of virtually zero highlight
this.
Kazakhstan’s insurance sector should be noted as varying from
those of other nations in the region and
globally on a number of counts, a
point highlighted by the relative unimportance of Compulsory Third
Party
Motor Liability insurance, which is normally the first line to develop in an
emerging insurance
market. In the non-life segment — which is
dominated by a small number of local firms which are
nonetheless tiny by
international standards — property insurance accounts for the
overwhelming majority
of premiums.
Multi-national insurers are thin on
the ground in Kazakhstan, which is evidence that the business
environment
and the regulatory regime represent a significant barrier to entry. This is in
contrast to the
Ukraine, another former soviet state, or the Baltic
States. A case in point is the Global giant AIG which,
despite an ongoing
presence for a number of years, remains a mid-rank player. Other firms
with
aspirations in the region — such as the large French groups,
Scandinavian financial services
conglomerates, Germany’s ERGO and
the major Austrian firms — are absent. So too are the enormous
insurers that are based in the Asia Pacific region countries which are, over
the long-term, potential buyers
of Kazakh energy (and especially
China).
It appears likely to remain the case that most of the larger
players in Kazakhstan will continue doing
business with the energy sector
and, in some cases, remain in effect captive insurers. A lot of the risk
in
this market is being laid off with reinsurers. Some of the smallest
Kazakh firms may face problems but,
collectively, their share of non-life
premiums is small.
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