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PRIMM Issues No 4-5 / 2007


Country Profile - KAZAKHSTAN

> Until 1991, the economic system of the Kazakhstan Republic was dependant on the Soviet Union’s needs. The economic transformation process began after the independence, being faced with numerous barriers in the first years, the natural resources being the only supporting pillar. The insurance market followed the development of transformation, becoming an increasingly active sector. In the next paragraphs we shall introduce a material on the evolution of the insurance market in Kazakhstan, during 2005 and 2006.


conomic framework

Even though the social-economic environment of the Kazakhstan Repusblic followed positive trends and an improvement at general level, there are certain factors that might affect the country’s economic stability that, in its turn, shall have a negative impact on the competitive power of this state.

The economy of the Kazakhstan Republic is developing in a context of a strong flow of foreign currency, as well as international investments, which puts pressure on the economic situation and the value of the national currency, the economy of Kazakhstan being still a vulnerable one when confronted with the fluctuation in commodity prices.

For foreign investors, the Kazakhstan Republic represents a major interest. This is due to its natural resources, the capacity of the market, the geographical position, as well as the political stability.

As for the financial system, it is appreciated by the international experts as a progressive one, Kazakhstan being the first state in the CSI space that set up a National Guarantee Fund for the economic and social stability and development.

The evolution of the banking system followed an impressive track compared to other former Soviet countries. The Central Bank managed to control inflation through a rigorous monetary policy and also tried to supervise the activity of the commercial banks and adopt certain measures to stimulate small and medium size enterprises by encouraging micro-credits, credits for agriculture etc.

Recently, the state’s economic development strategy started to focus on an industrial policy based on economic diversity and aimed at reducing the over-dependency on the oil sector. This strategy is also trying to reduce the influence of foreign investments.

Last year saw pressure on the national currency caused by the flows of the exchange rate related to the price of oil. The strong economic growth caused by the revenues generated by the foreign currency flows will turn Kazakhstan into a regional financial center with a banking system comparable to the one in Central Europe.

The insurance market

Last year, the insurance market from Kazakhstan recorded the most spectacular growth among the countries from the former CSI space in terms of gross underwritten premiums.

For the moment, the active character of insurers in Kazakhstan is not clearly shaped, and an inhabitant in this country would spend EUR 60 on insurance. The reason for this amount, still low compared to the levels in the European Union, United States of America and even Russia, is the insurers’ fees. Even if these fees are a little lower than in Europe, we cannot say the same about the population’s income, where most of them cannot afford insurance policies. However, the local insurance market is developing.

According to the data from the Agency of the Kazakhstan Republic for the regulation and supervision of the market and the financial organizations (AFN), on the 1st of January 2007, 40 insurance companies were operating in this country, compared to 37 the previous year. The number of insurance brokers remained unchanged compared to the previous year, namely 12 companies, and the number of actuaries increased from 30 in 2006, to 33 in 2007.

Thus, in 2006, the insurance companies from the Kazakhstan Republic recorded gross underwritten premiums amounting to EUR 740.12 million, an increase of 79.1% compared to 2005, when underwriting reached a level of EUR 413.16 million. Compulsory insurance represents 14.9% in the structure of premiums, and the facultative ones represent 85.1%.

As for the market structure on insurance classes, on the 1st of January 2007, life insurance represented 3.1% of the total, on this segment the gross underwritten premiums amounting to EUR 22.79 million. Still, this line had the most dynamic growth compared to 2005, of approximately 160%, from EUR 8.82 million.

At the same time, in non-life insurance, companies in Kazakhstan wrote last year gross premiums of EUR 717.33 million, 77.4% more compared to 2005.

Similarly, the volume of premiums ceded for reinsurance represented EUR 281.28 million, of which EUR 239.75 million were ceded to foreign residents, and the premiums taken for reinsurance from foreign companies represented EUR 3.24 million. In the total amount of insurance premiums ceded to reinsurance, the highest weight goes for the property insurance 91.5%, the rest of 8.5% being split between facultative insurance for persons and compulsory insurance.

With regard to claims, in 2006, insurance companies paid claims amounting to EUR 86.74 million, an increase by 30.8% compared to the previous year.

Meanwhile, reinsurance claims amounted to EUR 10.41 million. If we analyze payments made per insurance classes, the compulsory insurance policies represent 35.3% of the total, meaning EUR 30.61 million, an increase by 49.5% compared to 2005. Of this, EUR 17.26 million go for the paid claims in MTPL insurance. In life insurance, insurance companies paid claims of EUR 960,000 last year.

The insurance companies’ assets represented, on 01.01.2007, approximately EUR 834 million, 84.7% more than the previous year.

In terms of percentage from GDP, gross underwritten premiums amounted to 1.38% in 2006, equity to 0.92%, and assets to 1.55% from the GDP.

Regarding the first quarter of this year, the insurance market in Kazakhstan followed the same positive trend, registering gross underwritten premiums of EUR 205.62 million, 38.3% more than in the first three months of 2006. Thus, life insurance had a EUR 6 million contribution to the total underwritten premiums, while non-life insurance reached EUR 199.62 million, an increase by 56.8%, respectively 37.8% compared to the same period of 2006. At the same time, claims paid by the insurers in Kazakhstan in the 1st quarter amounted to EUR 43.39 million, 2.6 times more than in the 1st quarter of 2006.

This overview of the insurance market of Kazakhstan shows an impressive dynamic in the development of the national relevant market, a phenomenon explained by the boom in the consumer loans segment, whose value doubles - at least - every year.

Regarding life insurance, until 1991, in the former Soviet Union, 78% of the Kazakhstan’s population had a life insurance policy. But after the ’90s, this insurance class recorded a dramatic drop. Its weight in the GDP is of maximum 0.05%. At the moment, with the increase in the population’s living standard, insurance stands a great chance of growth, people being now concerned more and more about their safety, the safety of their property, old age etc. In other words, the inhabitants of Kazakhstan show a positive attitude regarding the contact with the realities of the European insurance markets. As a conclusion, life insurance market in Kazakhstan has a high growth potential, but the development level is still very low.

Another aspect related to the development of the insurance market is the territorial coverage of the relevant companies. Insurance policies are sold, they are not bought, this is the basic principle local insurers need to consider. Thus, the distribution channels represent an essential element in market development. It is just a few years ago that insurance companies started to be concerned with this issue, investing in the spread of the territorial networks.

As for the concentration on the market, the first ten companies realized, in 2006, 77.4%, in European currency, from the insurance activity.

Top 10 insurance companies

EURASIA Insurance Company was founded in 1995 and became, after ten years of activity, the leader of the insurance market in Kazakhstan. The insurer has the practice license for almost all types of insurance provided for in the legislation of the Kazakhstan Republic, but also for reinsurance. In 2006, the company had gross underwritten premiums of EUR 85.9 million, with a market share of 11.6%. The registered capital of EURASIA represents EUR 1.23 million, and the company’s net profit in 2006 reached the value or EUR 23.1 million.

Almata International Insurance Group (AIIG) is the second ranking company in the Top 10 from Kazakhstan according to the volume of gross underwritten premiums in 2006, which represented EUR 80.5 million. The company’s registered capital is EUR 1.26 million.

KAZAHINSTRAKH, founded in 1995, occupies the third place in the insurers’ top in Kazakhstan. The company has a license for almost all types of facultative and compulsory insurance. The Popular Bank of the Kazakhstan Republic is one of its shareholders. According to the results from 2006, the insurer had gross underwritten premiums of EUR 70.6 million, with a market share of 9.6%. The insurance company develops its territorial network, having already all major cities in the country covered, with over 1,000 sales agents.

BTA Insurance is the fourth company in this ranking. The company was created in 1998 and has as main shareholder the largest bank in Kazakhstan, TuranAlem. Among the company’s reinsurance partners we can count HANNOVER Re and SWISS Re. Last year, BTA registered gross underwritten premiums of EUR 70.1 million. The company is the leader on the motor segment, with a market share of 15%.

ALLIANCE Policy was founded in 1993 under the initial name of TUMOR. The company operates in insurance and proportional reinsurance. The insurer’s territorial network covers 20 large cities in the country. In 2006, the company registered gross underwritten premiums of approximately EUR 55 million, ranking fifth among the top ten insurers in Kazakhstan.

AMANAT Insurance wrote, during 2006, gross premiums of EUR 50.8 million, with a market share of approximately 6.9%. The insurer’s registered capital is of EUR 1.29 million.

LONDON-ALMATY, insurance company with British and national capital, was founded in 1997 and specializes in working with legal entities. The insurer cedes all its contracts for reinsurance abroad. With a registered capital of EUR 9.19 million, the company wrote, last year, gross premiums of EUR 45.3 million, thus ranking seventh in the top ten insurance companies from Kazakhstan.

VICTORIA is the eight insurance company in this ranking, with gross underwritten premiums in 2006 of EUR 44.2 million and a registered capital of EUR 3.05 million. The market share of VICTORIA is 5.9%.

KAZKOMMERTS-POLICY was founded in 1996 and currently has a license for 26 types of insurance. The European Bank for Reconstruction and Development is one of the two company shareholders, together with another bank, from Kazakhstan. The territorial network of KAZKOMMERTS-POLICY consists of 13 subsidiaries and 4 agencies. Last year, the insurer reported gross underwritten premiums of EUR 37.7 million, an increase by approximately 10.8% compared to 2005. The company concluded long term agreements with well-known brokers, such as MARSH, the AON subsidiary in Kazakhstan, EOS RISQ Kazakhstan, MALAKUT from Russia etc.

ATF Policy was founded in 1992 by ATF Bank. The insurer’s territorial network is made up of at least 15 subsidiaries. In 2006, the company had gross underwritten premiums of EUR 32.9 million, with a market share of 4.4%. Among the reinsurance partners of ATF Policy we can count AIG, MUNICH Re, WILLIS, ROSNO, EOS Risk, MARSH s.a.

Source: www.wfin.kz - Kazakhstan Insurance Portal


> Area: 2,717,300 km2

> Length of borders:
12,012 km

> Neighboring countries
and length of borders
China - 1,533 km,
Kyrgyzstan - 1,051 km,
Russia - 6,846 km,
Turkmenistan - 370 km, Uzbekistan - 2,203 km

> Capital: Astana

> Administrative structure:
14 provinces

> Population:
15,284,929 inhabitants

> Nationalities:
53.4% Kazaks,
30% Russians,
3.7% Ukrainians,
2.5% Uzbeks,
2.4% Germans,
1.7% Tatars, 6.3%
other nationalities (in total,
over 30 nationalities)

> Currency: Tenge (KZT)

> Exchange rate:
1 euro = 162.29 KZT

> Gross Domestic Product (GDP): EUR 45,88 billion (2006)

> GDP per capita:
EUR 6,727.63

> Number of insurance companies: 40, of which 5 life insurance companies and 35 non-life insurance companies

> Gross underwritten premiums (01.01.2007): EUR 740.12 million, of which EUR 22.79 million for life insurance
and EUR 717.33 million for
non-life insurance

> The insurance supervisory
and regulatory body
(Agency of the Kazakhstan
Republic for the regulation
and supervision of the market and the financial organization)

Source: https://www.cia.gov/cia/


Table 1
Gross Written Premium dynamic 2006/2005

Table 2
TOP 10 Insurance Companies ranked by GWP and market shares in 2006


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