The S&P Global Ratings agency analysts believe that the growth prospects for life insurance companies remain favorable amid moderate economic welfare measured by per capita GDP. “We expect the return on equity (ROE) to be over 20% for life insurance companies in 2020. This index is lower the average number for the last 3 years of about 30%, but it is still higher than the indicators of European life insurance companies (ROE below 10%). According to our estimates, return on assets (ROA) this year will be about 6%, which is also higher than indices of insurance companies in developed markets,” says Yekaterina Tolstova, Deputy Director of Ratings of Financial Institutions and Insurance Companies Unit, S&P Global Ratings.
The interviewee believes that the life insurance market is in its infancy demonstrating growth from a very low base. In this regard, there are opportunities for the growth of insurance companies in the coming years. Growth areas are in universal life insurance and retirement annuities. “There are major players with recognizable brands in life insurance. New market participants appear that will need time to promote their brand and market recognition. We believe that large companies will play a leading role in promoting new insurance products and offering them to consumers, as well as setting the tone for interaction of insurance community with regulator and policyholders,” says Yekaterina Tolstova.
The speaker notes that problems associated with a low level of payment culture and financial literacy are impeding development of insurance in Kazakhstan, the life insurance sector in particular. However, the agency representatives expect the regulatory measures to stimulate the life insurance sector development in the medium term. It includes tax benefits for policyholders, regulator’s initiatives on introduction of insurance products with an investment component (unit-linked) and possible transfer of some pension management functions to life insurance companies, as well as implementation of government education support programs. A further population growth and increased life expectancy are good prospects for life insurance development.