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What will happen to the life insurance market?

The development of the life insurance market was discussed at the forum, which was dedicated to the 20th anniversary of the Insurance Payments Guarantee Fund. The event was opened by Madina Abylkasymova, Chairman of the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan (ARDFM). She informed the audience that new socially oriented products such as endowment life insurance within the framework of the State Education Savings System and a joint retirement annuity were introduced to develop savings insurance in our country.
What will happen to the life insurance market?

Since the year beginning, 5 life insurance companies have received a license to carry out activities in the field of SESS; 274 contracts have been concluded for a total amount of more than 58 million tenge.

“Today, Kazakhstanis have access to a wide range of insurance products in the field of retirement annuity insurance, including deferred retirement annuity contracts and joint retirement annuities. The number of existing retirement annuity contracts is 67.5 thousand for a total amount of 345 billion tenge,” Madina Abylkasymova noted.

In the 1st HY 2023, all key figures of the life insurance market showed growth against the backdrop of continued interest in LIC products. For example, LIC assets increased by 11.9% to 1.03 trillion tenge and formed 43.6% of the total assets of the entire insurance market. Our concentration in this sector is quite high, because the three largest companies occupy 72% of the market.

“In the 1st HY 2023, the life insurance sector showed a noticeable growth in profitability due to an increase in return from insurance activities, remuneration on securities, as well as optimization of administrative expenses,” said Yelena Bakhmutova, the Financial Institutions’ Association of Kazakhstan (FIAK).

According to her, the annual expenses of Kazakhstanis on life insurance are gradually increasing ($42 in 2022 versus $29 in 2020) also remaining below comparable insurance markets (about $100 in Colombia and Poland, about $200 in the Czech Republic and Uruguay).

“Thus, we expect that the active development of new and existing company products, digitalization of services and work carried out by the ARDFM to improve regulation will continue to positively influence the dynamics of sector indicators and contribute to the further unlocking of LIC potential. The interest in LIC products can also be supported by the extension of guarantees by the Insurance Payments Guarantee Fund,” the head of FIAK clarified.

 

Insurance Payments Guarantee Fund

The Insurance Payments Guarantee Fund (IPGF) plays an important role in the insurance market of Kazakhstan. It was founded in August 2003, i.e. exactly 20 years ago. “In accordance with best practice, as of 2008, the fund shareholders are insurance organizations, and the entire management system of the fund is built on the principles of mutual responsibility, transparency and cooperation. The fund’s board of directors includes representatives of insurance organizations, the regulator and independent directors, including representatives of the Financial Institutions’ Association of Kazakhstan, of which the fund became a member in 2020,” reminded Yelena Bakhmutova.

To ensure its functions, the fund creates reserves from mandatory contributions from participants in the guarantee system and investment return from asset management. Over the past five years, the fund's assets have grown by 45%. “Since the law recently extended the fund’s guarantees to 10 classes of insurance, including all mandatory classes, as well as life insurance within the framework of the state educational savings system and retirement annuity insurance,” Madina Abylkasymova clarified.

In addition to the main function of settling payments, the Insurance Payments Guarantee Fund is also actively involved in the development of the insurance market, including registration issues and online settlement of insurance claims.

Forecast

The main positive factors for insurance market participants are good sustainability, strong operating performance, high-quality management systems and a proactive approach by the regulator. “The development of endowment life insurance products will allow life insurance companies to intensify their activities in the stock market as large institutional investors and attract additional capital to the market,” concluded the ARDFM executive.

Photos are from open sources.

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