The current state of the insurance market in Kazakhstan and the analysis of its features

Түйін. Мақалада Қазақстандағы сақтандыру нарығының қазіргі жағдайына талдау жасалып, оның даму бағыттары бойынша ұсыныстар келтірілген.

Резюме. В данной статье анализируется текущее состояние страхового рынка Казахстана, приведены рекомендации по развитию страхового рынка.

In a market economy insurance activity is the main method of effective risk management. He was all business entities and provides for reimbursement of expenses to members of the public, that is, by a natural or legal person who takes charge of the allocation of costs among the costs will be reflected as a method of payment.

Currently, the insurance market is one of the best methods of economic management to ensure social and economic stability in a country. Feature of the insurance mechanism is not only to protect the property of citizens and companies, it also plays an important role in solving macro-economic problems of the country. Therefore, insurance activity is the strategic sector of the economy to solve social and economic problems in the developed countries. The role of insurance is increasing with the development of the privatization, but the amount of domestic insurance is still narrow, ineffective.

Despite the stable development of the insurance companies in the market, the development dynamic of the national insurance system is still low. In 2015 the proportion of insurance premiums in national GDP was only 0.49%. In developed countries, the percentage of this indicator is about 8-12%. The government spends significant expenditures to disaster prevention, social support for the population. The current socio-economic situation in the country requires the creation of a single insurance system in accordance with the standards, which will provide the insurance development. For this reason, it is important to improve the mechanisms for the establishment of describing the trends and future research in the insurance market.

Through the analysis of the current state we can observe the insurance market’s dynamics. The following table shows the structure of the insurance market.

Table 1.

The structure of the insurance market of the Republic of Kazakhstan

№	The structures of the insurance sector	01.01.2013 y.	01.01.2014 y.	01.01.2015 y.	01.09.2015 y.
1.	The number of insurance companies	35	34	34	33
2.	Life insurance companies	7	7	7	7
3.	The number of insurance brokers	13	14	15	15
4.	The number of actuaries	82	72	71	62
5.	The number of non-resident insurance companies	-	3	3	3
Note – generated by the author on the basis of the data of the National Bank’s Financial Supervision Committee in the Republic of Kazakhstan.

Firstly, we look at the insurance companies, which are operating in the country, on the 1^st of January, 2015, there were 34 insurance companies and 33 companies on September, 1. The number of actuaries in the country has plummeted. Within 9 months of the beginning of the 2015 their number decreased from 71 to 62 or 12.7%.

Table 2.

The structure of the total assets of the insurance sector

№	Assets	01.01.2014		01.01.2015		Change, %
		million.tenge	% of total	million.tenge	% of total
1.	Cash	19 579	3,7	17 589	2,9	-10,2
2.	Insurance contributions	128 279	24,5	150 008	24,5	16,9
3.	Stocks	269 004	51,4	294 085	48,0	9,3
4.	"Reverse repo" transactions	10 902	2,1	14 704	2,4	34,9
5.	Insurance premiums	18 303	3,5	23 910	3,9	30,6
6.	Basic funds	9 179	1,8	10765	1,8	17,3
7.	Reinsurance assets	46 531	8,9	74 529	12,2	60,2
8.	Other receivables	12 720	2,4	12 632	2,1	-0,7
9.	Other assets	8 844	1,7	14 631	2,4	65,4
10.	Total assets	523 342	100,0	612 854	100,0	17,1
Note – generated by the author on the basis of the data of the National Bank’s Financial Supervision Committee in the Republic of Kazakhstan.

In the Table 2 the amount of the total assets of insurance companies is shown as of January 1, 2015. It is 612 854 million tenge and has an increase of 17.1% compared to January 1, 2014. The increase was in total assets because of the growth in stocks (9.3%), in the insurance contributions (16.9%) and in the reinsurance assets (60.2%) (Table 2).

Table 3.

Analysis of insurance premiums and payments

№	Indicators	01.01.2014		01.01.2015		Change%	Change,%
		Insurance premiums, million tenge	Insurance payments, million tenge	Insurance premiums, million tenge	Insurance payments, million tenge
1	Total, including:	279 235	51 964	266 121	62 303	-4,7	19,9
2	Compulsory insurance	61 293	19 988	66 176	26 556	8,0	32,9
3	Voluntary personal insurance	94 692	22 805	81 304	25 681	-14,1	12,6
4	Voluntary property insurance	123 251	9 172	118 641	10 065	-3,7	9,7
Note –generated by the author on the basis of the data of the National Bank’s Financial Supervision Committee in the Republic of Kazakhstan.

According to Table 3, there is the main contribution to the voluntary property insurance premiums in 2015, which is 44.5% of total insurance premiums. Voluntary personal insurance constitutes 30.6% of total insurance premiums, and compulsory insurance, which is 24.9% of total premiums. The total volume of premiums in the insurance market in 2015, compared to 2014 declined by 13 114 million tenge or 4.7%.

The total amount of insurance payments on January 1, 2015 with the exception of reinsurance payments in 2015 is 19.9% more than the previous year’s payments. The percentage of each insurance payments: compulsory insurance payments - 42.6%, voluntary personal payments – 41.2%; and voluntary property insurance payments – 16.2%. In 2015, the volume of insurance payments on compulsory insurance increased by 32.9%, voluntary personal insurance - 12.6%, on voluntary property insurance has increased by 9.7% due to growth.

Figure 1 - The dynamics of insurance payments

As shown in Figure 1, the mandatory insurance payments only increased in the years 2012-2015. Voluntary personal insurance payments growed sharply in 2013, but it has reducted in 2014 by 17186.7 million tenge.

Incompleteness of the insurance market and its institutional problems are still staying actual things for the government, and developed insurance market can influence to the economy of the country.

The main source of income for the insurance company is investment activities. The main purpose of insurance is social services, and the investment objective is to earn income, but they are in close contact. On the one hand, the source of funding for the investment can be insurance reserves, on the other hand, the investment income from the activity will be funded by the insurance operations. Here, the most important direction of the insurance activities is the management of the investment portfolio. The insurance company's investment portfolio should be in accordance with the prudential standards of the FSC National Bank, the Republic of Kazakhstan, the international rating agencies (Standard & Poors, Moody's Investors Service and Fitch).

Western companies often increases the insurance premiums, put them to financial markets, will convert the profitability of its investment portfolio and contribute to the development of other industries. The insurance market has not been developed yet, and there are some objective reasons: the lack of knowledge of the financial market, the lack of attractive financial instruments. There are some unresolved issues in the development of insurance services in Kazakhstan: a) in order to develop the insurance market we need to organize growing of indicators in the insurance services, the number of insurance contracts; b) insurance activities require the use of tax incentives. The type of life insurance in the United States and the EU funded more than 50% of premiums on insurance premiums.

Insurance services should be developed in accordance with the following directions:

First of all, compared with the industrial insurance system our insurance system was developed later. This gap has increased during the years 1918-1988. We need to take steps to overcome this backwardness of the domestic insurance market in the country through the concrete mechanisms.

Secondly, when the current period of insurance, which can not develop individually and it should participate in the reinsurance risk through international distribution channels. For example, there is the risk of the mining industry, it requires a large increase in the volume of reinsurance risks, therefore, have to participate in the process of re-distribution of global risks.

Thirdly, it is necessary to use foreign experience in the organization of the insurance business in Kazakhstan.

Insurance activity in the financial market is important, but little-studied area. The implementation of the prepared recommendations, related to the development of insurance services, will promote the development of domestic insurance companies with a common goal of socio-economic development of the country's economy in the process of joining the 30 most competitive countries of the world.