It is worth noting that local life insurers prefer reliability over high profitability, therefore structures never show excess profits but guarantee stable incomes to their clients. All accumulative insurance products of Kazakhstani LICs include a mechanism of 100% capital security.
“The foreign currency funds were invested exclusively in bonds of the US corporate sector, Eurobonds of Kazakhstani and foreign issuers, i.e. denominated in US dollars. All securities of foreign issuers of investment grade with a S&P rating of at least BBB-, which implies acceptable credit risks and no currency risks (since the company’s assets and liabilities are in US dollars),” explained Madi Shalgimbayev, the Deputy Board Chairman of LIC Nomad Life.
Thus, falling Tenge only increases the value of life insurance companies’ assets. “Stock market fluctuations are not reflected in the value of Nomad Life assets, since asset accounting of the investment portfolio is kept before the issuers pay off their obligations, and not for trading,” the speaker clarified.
The financial expert is confident that the fall of stock markets is a normal process; that is why risk hedging is important. “Our Tenge portfolio is mostly formed with government securities of the Republic of Kazakhstan and the Central Bank of quasi-sector. The company pays a great attention to the credit risks of issuers, which may worsen the financial condition of issuers and their ability to fulfill their obligations to investors. Therefore, Nomad Life's strategy is aimed at acquiring investment-grade securities with low credit risks,” said the Deputy Chairman of LIC Nomad Life.
While analysts and brokers are making new forecasts, Halyk-Life prefers not to play with such volatility, since it is impossible to predict what will be with the market tomorrow, and panic usually leads to losses. “The National Bank of the Republic of Kazakhstan almost immediately responded to the stock market fall by increasing the base rate from 10.25% to 12%. The Halyk-Life’s investment strategy will not change significantly, since the company sticks to a conservative strategy, and the share of financial instruments of foreign issuers is not large, for which we, nevertheless, expect recovery,” said the head of marketing and development of JSC LIC Halyk-Life Natalya Ananyeva.
Freedom Finance Life is confident that the best time to sell funded products has come. “First of all, our products provide protection against devaluation. For example, unlike bank deposits the universal life insurance provides not only accumulation but also insurance coverage of life and health for the entire contract term. Such a policy can be concluded for a long period of time (from 3 years or more),” noted Azamat Yerdessov, the Board Chairman of JSC LIC Freedom Finance Life.
Some insurance products include indexation of payments tied to the US dollar. “Upon the contract expiry the client would receive much more than he paid if, before the devaluation, he had a contract with the insurer,” the speaker noted.
All insurers gave up making forecasts for the market development this year, since there is no universal answer to the question of how long the state of emergency will last in Kazakhstan and worldwide. However, the insurers agreed on one thing: the clients should be confident in their investments, as Kazakhstani LICs prefer conservative investments in government securities.