Dassalyanov D.

PhD Student in

“Public Administration”

Narxoz University

Analysis of the current state of the insurance market of Kazakhstan

During the years of independence Kazakhstan's insurance market has developed rapidly and significantly strengthened its position in the country's macroeconomic indicators. The number of insurance companies on 1 January 2014 was 34, the number of activists - 72, the number of insurance brokers - 14, the number of reinsurance companies - 30. International experience shows that the volumes of insurance markets are growing in proportion to the economy. In this regard, Kazakhstan in modern conditions of the insurance market has great opportunities for the development of traditional types of personal insurance services and the expansion of their new species.

The insurance sector has come to play an increasingly important role in the national economy. Figure 1 shows the macroeconomic indicators of Kazakhstan's insurance sector on January 1 in the period 2003-2014. That is for 10 years. During this period, the value in the ratio of premiums to GDP increased from 0.6% to 0.74% of Kazakhstan's GDP. In the mid-90s, the figure was less than 0.2%.

In the republic in 2003, the ratio of insurance premiums per capita amounted to 1523 tenge per person. On 1st January 2014 it amounted to 14877.4 tenge, thus it increased by almost 10 times.

Figure 1 - Macroeconomic indicators of the insurance sector of Kazakhstan on January 1, for the period 2003-2014

In the same period, total equity of insurance companies increased by almost 8.8 times to 28.8 billion. Tenge in 2003 to 254.6 billion tenge as of January 1 th, 2014. As can be seen, according to Figure 2, for the last 6 years I have seen moderate growth in equity of the insurance sector.

Figure 1 - Dynamics of assets, insurance reserves and own capital in the period 2008-2013, bln.

During this period, higher growth rates shows the assets of the insurance sector. In 2008, he was equal to 268.8 billion tenge, in 2013 increased to 523.4 bln., Thus increased by almost 2-fold.

In 2013, Kazakhstan's insurance market has shown stable growth trend. The increase in assets is observed, mainly due to the increase of placed deposits - by 12.5%, securities - by 9.6% and reinsurance assets - by 16.0%. In the structure of insurance assets the largest share fell on securities - 48.9% of the total volume of the deposits placed in second-tier banks - 22.9% of reinsurance assets - 9.8%, etc. In the same period the amount of liabilities of insurers amounted to 268.8 billion tenge, which is 32.4% more than it was in 2012.

The volume of insurance reserves of insurance companies in 2013 amounted to 240.3 billion tenge, which is 37.9% more than the amount of reserves that period in 2012.

The volume of insurance premiums taken under direct insurance contracts, as of January 1, 2014 amounted to 253 072.6 million. Tenge, which is 19.6% more than on 1 January 2013.

The major share of premiums takes voluntary property insurance (107 842 100 000. Tenge or 42.6% of total insurance premiums). The continuing trend of increasing voluntary property insurance during 2014. On voluntary personal insurance collected 92 111.9 million KZT, or 36.4% of total insurance premiums on compulsory insurance -. 53 118.6 million KZT, or 21.0%.

Table 1 - Receipt of the insurance premiums for the insurance industry in 2011-2013.

	2011		2012		2013
	mln.tenge	%	mln.tenge	%	mln.tenge	%
Total insurance industry	175 528,7	100,0	211 671,3	100,0	253 072,6	100,0
Life insurance	30 478,8	17,4	52 437,9	24,8	56 575,8	22,4
General insurance	145 049,9	82,6	159 233,5	75,2	196 496,8	77,6

The net profit of the insurance sector in Kazakhstan in 2013 amounted to 29.5 billion tenge, which is 8.2% less than the same date last year. The income from insurance activities amounted to 193.5 billion. Tenge in 2013, and increased in comparison with 2012 by 16.1%. The decrease in net profit was due to an increase of 15.3% of spending in 2013.

During July 2013 the volume of insurance premiums taken under direct insurance contracts increased by 16.0% and as of 01.08.2013 totaled 160.4 billion tenge. At the same time, the percentage of insurance premiums takes voluntary property insurance - 41.7% of total insurance premiums. A month earlier, as of 01.07.2013, at a major share of premiums took voluntary personal insurance - 43.1%.

As at 08.01.2013, the volume of insurance premiums collected in "life insurance", amounted to 41.6 billion tenge, which is 50.4% more than the same date last year. The share of insurance premiums collected in "life insurance" in total premiums, as of reporting date was 25.9%, against 23.6% at 08.01.2013, the volume of insurance premiums collected for 7 months of 2013 to the sector "general insurance "amounted to 118.8 billion tenge, which is 33.0% more than in the same period of 2012. The volume of insurance premiums ceded to reinsurance amounted to 45.8 billion tenge. At the same time for reinsurance to non-residents of Kazakhstan transferred 24.1% of total insurance premiums. The total amount of insurance premiums received under reinsurance contracts is KZT 15.8 billion, of which 9.3 billion tenge received for reinsurance from non-residents of Kazakhstan.

The total amount of insurance premiums (net of insurance payments made under contracts accepted in reinsurance), produced in January-July 2013 amounted to 30.1 billion tenge, which is 12.3% less than the same date last year. Of this amount, insurance premiums largest share of payments for voluntary personal insurance - 46.8% on compulsory insurance - 36.6%, and on voluntary property insurance - 16.6%.

In general, as indicated by the FSC, in 2013 the insurance market of Kazakhstan, the increase in the level of concentration is observed on insurance premiums and insurance payments. In particular, the share of five largest insurance companies in the republic accounted 38.2% of total insurance premiums and 31,5% of insurance payments. The share of five largest insurance companies in total assets of the insurance market amounted to 49.1%.

Table 2 - The concentration of insurance market 2012-2013,%

	2012	2013
Insurance premiums of five largest insurance companies	32,5	37,7
Insurance premiums ten largest insurance companies	52,1	56,6
Insurance payments five major insurance companies	24,	35,0
Insurance payments ten largest insurance companies	50,5	56,2
The assets of the five largest insurance companies	49,5	49,1
Shareholders' equity of five major insurance companies	60,8	62,8

In the structure of revenue insurance payments annuity insurance covers 18% of the total, property insurance - 19%, insurance against financial losses - 5%, MTPL vehicles - 14%, life insurance - 6%, health insurance - 10%, voluntary insurance of civil liability - 5%, accident insurance - 9%, MTPL employee against accidents while fulfilling his job duties - 4%, voluntary auto insurance - 3%, cargo insurance - 2%, other types of voluntary property insurance - 3% MTPL carrier - 1%, MTPL in crop - 0.3%, environmental insurance - 0.3%, other MTPL - 0.4.

Institutional dynamics of the insurance market in the context of the economic crisis of 2008-2009. and post-crisis years, indicates the absence of significant structural changes, the growth segment of reinsurance (increase in the number of insurance brokers 17%) and a stable increase in the stability of the companies (through the participation in the Fund guarantee insurance payments). Despite significant losses due to the financial crisis of the formation of the modern insurance market continued in Kazakhstan. 

Table 3 - Changes in the institutional structure of the insurance market of Kazakhstan in 2011-2014.

The subjects of the insurance market	The amount as of:
	01.01.2011	01.01.2012	01.01.2013	01.01.2014
The insurance organizations:	40	38	35	34
• Life Insurance	7	7	7	7
• Organizations-members of the Fund guarantee insurance payments	27	33	31	30
• Companies with foreign capital	10	8	8	8
Insurance brokers	13	14	13	14
Actuaries	70	85	82	72

The impact of the global financial crisis of 2007-2008. the state of the domestic financial sector and the economy as a whole has been very painful. The dramatic decline in lending activity of banks, the reduction in commodity prices - the main items of Kazakhstan's exports - and their effect on the dynamics of economic growth, strengthening of internal risks and significant limitation of traditional funding sources have demanded rapid, coordinated and more fundamental incentives in the framework of economic policy in order to maintain confidence the financial system and ensure financial stability in the country.

The insurance sector of Kazakhstan is developing rapidly, 2004-2007, in 2008 also showed a slowdown in its development. But it should be noted that the insurance market was less vulnerable to the effects of the global financial crisis than other sectors of the financial market. One reason for the greater sustainability of the sector is the main source of income of insurance companies - income from insurance activities, and much less influenced by the decrease in stock quotes. The most sensitive to a decrease in investment income are accumulative types of insurance that are currently not well developed in our country.

These measures allowed to maintain the financial stability of the insurance market in the period. The process of recovery and strong growth began in 2010-2011. In 2011, total premiums written increased by 25.4% to $ 175.5 billion. Kazakhstani tenge (KZT) ($ 1,2 Bln.) [43]. A large part of these risks transferred to regional and international reinsurers, with Kazakhstan's insurance companies act as insurers of the frontier. In addition, some insurance companies actually operate as captive insurance companies to their parent companies, leaving himself only a small part of the risk.

In 2012, the insurance market continued to grow, as evidenced by the data of the Committee on Regulation and Supervision of Financial Market and Financial Organizations of the National Bank of Kazakhstan. The total amount of insurance premiums in 2012 by 1 July reached 99.5 billion tenge, which corresponds to 12.5% growth compared to the first half of 2011.

Life insurance sector in the first half of 2012 grew at the fastest rate. Voluntary personal insurance (life, accident and sickness, as well as annuities) reached the amount of 43.1 billion. Tenge, equivalent to 43.3% of total premiums. In the first half of 2012, the life insurance segment grew by 75% over the previous year. This is partly due to changes in regulation. So, from January 2012 to conclude the employers’ liability insurance is allowed only to companies engaged in life insurance. This led to the fact that premiums are moving from companies operating in the insurance sector "non-life", to affiliated companies or companies specializing in life insurance.

However, senior director of analytics CarlosWong-Fupuy notes that “insurers face a number of challenges, including changing the order of work, statements of owners of vehicles, the risk of potential losses due to natural disasters, as well as political uncertainty. Insurers are holders of debt securities lowest investment grade, issued by the local Kazakh market, which makes them vulnerable in the light of the increased risk due to political and financial of the country systems. in addition, insurers are to a certain extent passed to reinsurers risks of unreliable rating or no rating”.

It may be noted that, despite the positive dynamics of development of insurance companies at the time the data indicate a lack of effectiveness of measures taken to improve financial stability, expansion of species and improve the quality of insurance services.

The problem of low activity of the population in insurance because insurance companies pay little attention to issues of public awareness about the results of its activities, providing the necessary information on existing and new types of insurance, preparation of qualitative and meaningful advertising. Not enough study and is working on the formation of consumer demand for insurance services, a broad explanation of the mass media of the fundamental rights of consumers of insurance services.

Another factor to take into account the insurance companies - the probability of the risk of decline in effective demand for insurance services in anticipation of a new wave of crisis. Today it is the largest risks for insurance market, because the level of income of the population and companies is not stable and the cost of insurance services are subject to a reduction in the first place in the case of the pessimistic expectations. There are several key factors in reducing the amount of premium income:

- A reduction in the costs of insurance companies, second-tier banks in the deterioration of the financial situation as a result of reducing the volume of sales of goods and services;

- Reduction in real incomes;

- Reduction of public confidence in financial services, including insurance services, in the new wave of financial crisis. For example, reduce credibility in the event of liquidation of insurance companies or as a result of unjustified denial of insurance benefits.

Despite the fact that the system of regulation of the insurance market in the Republic of Kazakhstan demonstrates positive dynamics, the process is far from complete and it provides the greatest opportunity for further improvement of relations between the state and the future of the market participants, with the aim of improving the quality and reliability of insurance services, and, ultimately - increase the level of society as a whole.

Reference

1. The Committee on Regulation and Supervision of Financial Market and Financial Organizations of the National Bank of the Republic of Kazakhstan // www.afn.kz

2. Special Report A.M. Best: The insurance market of Kazakhstan is recovering, but the test being continued // www.ambest.com/press/092702kazakhstanspecialreport.pdfc

3. Ashirova A. The insurance market in the framework of the Customs Union will create by 2019, 2013.