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FOR IMMEDIATE RELEASE
LONDON - MAY 26, 2020 08:53 AM (EDT)
The Kazakhstan insurance market achieved rapid growth in 2019, driven by further development of the life segment, the introduction of new mandatory products and the roll out of electronic contracts for mandatory motor insurance. However, the market is yet to reach maturity, and now faces a new and unprecedented challenge in 2020.
Despite Kazakhstan’s efforts to diversify its economy, it continues to rely heavily on gas and oil sector revenues, meaning that its economy has felt the negative impact of faltering negotiations between members of the Organization of the Petroleum Exporting Countries (OPEC) and Russia, and the COVID-19-related reduced demand for oil. Consequently, AM Best expects demand for insurance products in Kazakhstan to be muted.
In a new Best’s Market Segment Report, “Kazakhstan’s Insurance Market Grapples with Uncertainties”, AM Best notes the similarities between Kazakhstan’s current situation and that experienced in 2015-2016, when energy prices plummeted and the government had to revise its budget several times to account for lower oil revenues.
Elena Abramova, financial analyst, said, “At the time, a number of insurers reported higher loss ratios on lines of business linked to inflation, and companies writing business denominated in foreign currencies had to significantly increase their technical provisions.”
At the time of writing, there is material uncertainty regarding the potential impact of the COVID-19 pandemic on Kazakhstan and the broader global economy. AM Best maintains a dialogue with the (re)insurers it rates in Kazakhstan, monitoring how these economic and operational issues are affecting their performance and balance sheet strength metrics. Valeria Ermakova, associate director, analytics, said, “AM Best’s focus is on how companies are managing asset price volatility and ensuring they have sufficient liquidity levels, as well as how they review the adequacy of claims reserves, given the potential for claims inflation in lines such as motor and medical insurance. From an operational point of view, AM Best expects insurers it rates to put in place safety measures and contingency plans to minimise COVID-19-related disruption to their businesses.”
To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=297483 .
On Wednesday, 27 May 2020, at 10 am (British Summer Time), a panel of AM Best analysts will examine the trends, challenges and country risk considerations of Kazakhstan insurance market in the context of this report. To register for this complimentary event, please go to www.ambest.com/webinars/kazakhstan .
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.