Tougher regulatory requirements stimulate insurance. By the results of the first half-year the insurance sector collected 18.2% more insurance premiums, but insurance payments also grew by 48.7%, which led about a quarter of insurers to losses. Nevertheless, experts, looking at the positive dynamics of premium collection, now forecast not 12–15% growth of the insurance market by the end of the year but as much as 20%. By the results of the first half of 2011, insurers collected insurance premiums totalling 88.5 billion tenge, which is 18.2% more than in the same period of 2010, the Financial Supervision Committee of the National Bank reported.
Of this, the volume of insurance premiums for compulsory insurance was 19 billion tenge (an increase of 20.3%), for voluntary personal insurance 24.6 billion tenge (an increase of 50%), and for voluntary property insurance 44.9 billion tenge (an increase of 5.2%).
The volume of insurance premiums in the "life insurance" sector rose by 29.5% and amounted to 11.4 billion tenge as of 1 July 2011, with the share of life insurance in total insurance premiums reaching 12.9% (as of 1 July 2010, 10.1%). According to Arman Zhakhin, deputy general director of the RA "Expert Kazakhstan" rating agency, the volume of insurance premiums collected in the first half of 2011 exceeded the figures of the first half of 2007, when the market collected the largest amount of insurance premiums, by 22%, and compared with the first half of last year the excess was 31%. "We associate this growth with the general improvement of the economic situation in the country and the growth of incomes of enterprises and the population," says A. Zhakhin. "If we look at the classes of insurance, then in recent years growth in premium volumes has become traditional for annuity insurance, MTPL insurance and insurance of an employee against accidents in the course of performing their work duties. Insurance against other financial losses has also grown." At the same time, according to Mr Zhakhin, further growth is observed in the life insurance sector owing to receipts from annuity insurance, primarily pension annuities. "The reasons here are quite clear," says A. Zhakhin, "future pensioners are attracted by such advantages as earlier retirement dates and the possibility of receiving larger payments when buying an annuity.
The volume of insurance premiums on the insurance market for the first half-year grew by 22.2% compared with the same indicator in 2010, including voluntary personal insurance by 48.9%, compulsory insurance by 36.2% and voluntary property insurance by 8.7%. In compulsory insurance, significant premium growth is seen in MTPL, by 24.8%, and in compulsory employee accident insurance, by 85.2%. Premiums in voluntary personal insurance also grew significantly, including life insurance, 85.3%, annuity insurance, 45%, accident insurance, 77.3%, and health insurance, 36.6%. Despite significant premium growth in voluntary cargo insurance, 43.8%, voluntary motor insurance, 12.9%, and voluntary insurance against financial losses, 78.6%, overall growth in voluntary property insurance is insignificant, only 8.7%, which is due to a 40% fall in voluntary liability insurance.
"The insurance market has revived because rates for compulsory classes of insurance are currently quite high. This is connected with the introduction this year of a single policy for compulsory MTPL insurance, and also with the fact that over the last six months people have tried to acquire cars because of the change in customs duties. The growth in voluntary property insurance is connected with the revival of banking activity and the resumption of lending to the population by banks." According to the insurance company "Alliance-Polis", the lion's share of the growth in indicators occurred in the sector of compulsory insurance of an employee against accidents in the course of performing their employment (official) duties, where growth across the market was 85% compared with the same period of 2010. Indicators are also growing in the voluntary medical insurance (VMI) sector, where the result for the first half of 2011 is 36.6% higher than in the same period of 2010. Voluntary motor insurance shows an increase of almost 13% over the period. "One of the main factors that influenced the insurance market was the strengthening of control by the supervisory body over the work of insurers in terms of tougher requirements for the capitalisation of insurance companies. From 2011, legislative requirements came into force under which a vehicle owner's insurance policy contains a unique identification number, assigned from a unified database, which confirms the legitimacy of the insurance policy."
These measures have begun to discipline sales processes in insurance companies, all the more so since this year requirements have been placed on insurers for certification of agents' activity and for maintaining a register of them. This measure will exclude unscrupulous workers from the ranks of agents and put their activity in order. In addition, the ban on agents accepting cash in payment of insurance premiums from 2012 may give an impetus to the development of internet sales, and the best of the agents will be taken onto the staff. Besides this, among the legislative changes one should note the transition of insurance companies to the general tax regime from 2012 and the removal of banking restrictions on the borrower in choosing an insurance organisation.
In conditions of tougher competition on the market, insurance companies are expected to come up with new service offerings. Payments, however…
Meanwhile, as the financial regulator notes, the volume of insurance payments made under direct insurance contracts in Kazakhstan in January–June was 17.4 billion tenge, which is 48.7% more than in January–June 2010. Of this, payments under compulsory insurance amounted to 5.6 billion tenge (24.4% more, respectively), under voluntary personal insurance 9.1 billion tenge (59.6% more), and under voluntary property insurance 2.7 billion tenge (68.8% more).
The significant increase in insurance payments in the first half of this year became one of the causes of losses at insurance companies.
Thus, 10 of the 38 insurance companies in Kazakhstan, according to the Financial Control Committee, recorded an uncovered loss as of 1 July this year.
Of course, the reasons for losses may vary from company to company. For example, at the insurance company "Alliance-Polis" they told "Kommersant Kazakhstan" that the loss was caused by the fact that in the first half of 2011 the loss ratio on insurance contracts rose, that is, the number of payments increased across the company as a whole.
It is still too early to speak of the insurance market emerging from the crisis: "Today it is not so much a matter of collecting premiums as of qualitative growth, that is, we need to take the consumer's side."
"As for the possibility of the exit or consolidation of some insurance companies," the expert continued, "for some of them such a need may well arise. This is because the regulator has tightened the requirements for companies' own capital. A situation may arise in which some insurers will be unable to meet the requirements set for the solvency margin and other prudential standards. This measure will rule out the appearance on the market of unscrupulous insurance companies that bank on aggressive sales." Reinsurance with a false bottom
According to information from the Financial Supervision Committee, the amount of insurance premiums ceded to reinsurance was 40.1 billion tenge as of 1 July 2011, or 45.3% of total insurance premiums. Of this, 36% of total insurance premiums were ceded to non-resident reinsurers (as of 1 July 2010 the latter indicator was 49.1%).
A. Zhakhin believes the reinsurance situation is ambiguous: "On the one hand, our insurance companies are in principle not very well capitalised, and when they accept large risks they cannot answer for them on their own," says the expert. "So it is quite natural that they cede them to reinsurance. On the other hand, some companies use reinsurance to take funds out of the country."
"We welcome the regulator's efforts aimed at increasing the retention of risks within Kazakhstan, including through the capitalisation of insurance companies. Nevertheless, I believe that reinsurance should become more qualitative, with the main quasi-sovereign risks connected with oil operations having to be ceded to reinsurers among the large international companies with the highest financial strength ratings, without jeopardising the domestic insurance market. The further development of the insurance market will depend to a great extent on how insurers find the optimal balance between retaining risks and ceding them to reinsurance." There will be growth!
As for forecasts for the second half of the current year, 2011, experts of the insurance company "Alliance-Polis" believe that the insurance market will continue to develop steadily, with positive growth overall for the year; the increase will be noticeable and may amount to 18–20% relative to 2010. The main driver of the market for now is the compulsory classes of insurance, and life insurance continues to develop actively and show growth. Among voluntary classes, voluntary property insurance of legal entities certainly remains the flagship.
"If at the beginning of the year we were more cautious in assessing the market's development prospects and assumed growth of no more than 12–15%," says Arman Zhakhin in turn, "then now, given the current dynamics, growth of 20% is quite possible."
The positive trends in the growth of insurance premiums will continue until the end of the year at the level of 15–20%. "The main locomotive of the market will remain compulsory insurance, but it should be noted that today the emphasis is shifting towards voluntary classes, in particular medical insurance," says the expert. Market leaders
The five largest insurance companies of Kazakhstan account for 39.8% of total insurance premiums and 30.7% of insurance payments. The share of the five largest insurance companies in the total assets of the insurance market was 52.8%. Assets
According to Financial Supervision Committee data, the total assets of insurance organisations for January–June increased by 6.3%, reaching 364.8 billion tenge as of 1 July; total equity grew by 3.8% to 216.7 billion tenge. The amount of insurance reserves on that date was 126.5 billion tenge.