Kazakhstan’s catastrophic risks: insurance gaps and solutions

Economic and climate risks are now among the key factors shaping the resilience of states and financial systems.

Global Picture

According to Global Catastrophe Recap 1H 2025 (AON), global economic losses from natural disasters in the first half of 2025 reached $162 billion. Out of this, insurance companies covered $100 billion – the highest insured figure ever recorded.

For comparison: the 20-year average stands at $141 billion annually.

Major events included:

• ⁠ ⁠The earthquake in Myanmar (losses of $12 billion, more than 5,000 lives lost),
• ⁠ ⁠Massive wildfires in California,
• ⁠ ⁠Cyclone Alfred in Australia,
• ⁠ ⁠Glacier collapse in Switzerland.

Catastrophic risks have become a systemic factor in the global economy. The gap in insurance protection between developed and developing countries is widening: in the U.S., more than half of disaster losses are insured, while in Asia and Africa less than 10%are covered.

Kazakhstan: A Vulnerable Country Without Financial Protection

The World Bank (2023) and earlier research (2017) confirm that Kazakhstan is highly exposed to catastrophic risks.

Main Threats Identified:

1.⁠ ⁠Floods and mudflows – the most frequent risk for North Kazakhstan, East Kazakhstan, and Pavlodar regions. In spring 2024, the country faced its worst flooding in decades, affecting 10 regions. Yet only 166 insurance claims were filed (117 individuals, 49 businesses), showing just how limited insurance coverage is and how heavily the burden falls on the state budget.

2.⁠ ⁠Earthquakes – especially in Almaty and Zhetysu. A major quake (>7 magnitude) is considered highly likely. International practice (Turkey’s TCIP, California’s CEA, France’s CCR) proves such risks can only be managed with state-backed reinsurance or national pools.

3.⁠ ⁠Droughts and steppe fires – increasingly damaging agriculture due to climate change, highlighting the need for subsidized, index-based crop insurance.

4.⁠ ⁠Landslides – particularly in Zhambyl and Turkistan regions.

State of Kazakhstan’s Insurance Market

• ⁠ ⁠Property insurance penetration: 3.2% nationwide, and 7.7% in Almaty – among the lowest in the region.
• ⁠ ⁠Digital infrastructure for payouts under mandatory insurance (online claims, direct transfers) provides a technical base for catastrophic insurance.
• ⁠ ⁠Insurance reserves grew (+15.5% in H1 2025), but remain far below the potential losses of a “big earthquake.”

Key problem: no mandatory disaster insurance. Most insurers do not treat catastrophe risks separately – they are simply bundled into standard “property + fire” packages.

Economic and Social Impact

At the state level:

• ⁠ ⁠Potential losses from an Almaty earthquake could reach up to 5% of GDP.
• ⁠ ⁠Rising disaster-related spending risks pushing up public debt.
• ⁠ ⁠Higher construction and housing costs would fuel inflation.

At the household and business level:

• ⁠ ⁠Loss of homes and property without compensation drives poverty.
• ⁠ ⁠Many SMEs never recover after disasters.
• ⁠ ⁠Weak insurance culture amplifies social discontent.

Global Experience: The State and Insurers Together

• ⁠ ⁠U.S. – more than 90% of catastrophic losses are insured.
• ⁠ ⁠Switzerland – catastrophe risks are built into standard policies (>90% coverage).
• ⁠ ⁠France – hybrid model with mandatory home insurance plus government compensation.
• ⁠ ⁠Australia – a government-backed Cyclone Reinsurance Pool lowers reinsurance costs.
• ⁠ ⁠Africa – regional risk pools supported by the World Bank (ARC).

What Kazakhstan Should Do

1.⁠ ⁠Introduce mandatory disaster insurance for housing and SMEs, starting with Almaty and flood-prone regions.

2.⁠ ⁠Establish a National Catastrophe Pool with joint participation of government and private insurers.

3.⁠ ⁠Develop regional cooperation – a Central Asian disaster fund via the EDB or World Bank.

4.⁠ ⁠Invest in preventive measures – earthquake-resistant buildings, flood defenses, digital early-warning systems.

5.⁠ ⁠Strengthen the Insurance Guarantee Fund – increase capitalization and separate catastrophe risk accounting.

6.⁠ ⁠Expand index-based crop insurance (drought, frost, etc.) with satellite monitoring.

7.⁠ ⁠Scale up online insurance and digital claims handling – fix ESBD failures and roll out mass e-insurance.

Catastrophic risks are a real economic security challenge for Kazakhstan. Without systemic solutions – mandatory insurance, public-private pools, and regional cooperation – a major earthquake or flood could set the economy back years. Global experience proves that the right mix of insurance, state funds, and regional partnerships can significantly reduce the damage.