The Deputy Director of Financial Institutions at S&P Global Ratings said that the economic situation in the country would determine the insurance industry development this year. “We still assess the growth prospects as positive in the life insurance sector in 2020-2021 predicting growth of almost 15% in 2020, which will be supported by a number of initiatives of the regulatory body. The situation for life insurance companies remains more favorable, for the last two years the sector has shown growth from a very low base,” said Yekaterina Tolstova, Deputy Director of Financial Institutions at S&P Global Ratings.
The analyst said that the Agency's initiatives to regulate and develop the financial market will stimulate the life insurance sector development in the medium term. Such initiatives include expected introduction of insurance products with an investment component, the state education support program and a possible decision by the regulator to transfer part of the functions of managing pension funds to life insurance companies. “An additional positive factor for life insurance companies may be the transfer of people’s assets to life insurance products, rather than bank deposits, due to a higher investment profitability of such instruments. This is especially true for insurance products nominated in US dollars,” said Yekaterina Tolstova.
The life insurance sector may come under pressure of the economic situation. “We believe the investment income will constitute the main share in the structure of the final results of all Kazakhstani insurance companies due to still high albeit declining interest rates and profits from the exchange rate amid the Tenge devaluation,” said the Deputy Director of Financial Institutions S&P Global Ratings.
The losses in the life insurance segment will be controlled, according to the agency representative. “The number of deaths by COVID-19 in Kazakhstan remains small so far, and medical expenses are financed mainly from the state budget,” the expert said.
S&P Global Ratings predicts that the average ROE in the life insurance sector will be about 20% per year in 2020, and return on assets (ROA) for the same period will be about 4% (previous forecasts - 25% and 6% respectively).
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