The year 2024 has been a period of dynamic growth for Kazakhstan’s insurance sector, despite significant economic challenges both domestically and globally.
The sector continues to expand, increasing premium volumes and assets, but at the same time, it faces several threats related to changes in financial markets and rising liabilities. As of August 1, 2024 24 insurance companies operate in Kazakhstan, with 9 specializing in life insurance. This article will explore the key changes, risks, and opportunities affecting the development of the insurance market.
Dynamics of Assets and Liabilities:
In July 2024 the assets of Kazakhstan’s insurance companies grew by 3.7%, reaching 2.721 trillion tenge. Since the beginning of the year, growth has amounted to 9.0%, reflecting a steady increase in assets driven by rising revenues from insurance activities and the strengthening of investment portfolios. The majority of assets – 73.9% or 2.010 trillion tenge – are held in securities, highlighting the sector’s dependence on stock markets.
Liabilities and Capital:
Liabilities in the insurance sector have also been increasing. As of August 1, 2024 they grew by 4.4%, reaching 1.867 trillion tenge. Insurance reserves make up the bulk of liabilities, accounting for 87.5% or 1.635 trillion tenge of total liabilities.
However, a concerning signal is the 5.6% decline in equity, which has fallen to 853 billion tenge. This decline may be due to increased insurance payouts and rising costs, which weaken the financial stability of the sector.
Financial Performance:
Despite the decline in equity, the net profit of insurance companies in July 2024 amounted to 15.4 billion tenge, reflecting profitable operations. Since the beginning of the year, total profit reached 112.5 billion tenge, indicating positive results for the insurance companies. However, the decline in profitability compared to the previous year points to growing pressure on profit margins caused by rising costs and increasing competition in the market.
Dynamics of Insurance Premiums and Payouts:
The total volume of insurance premiums in July 2024 amounted to 154.6 billion tenge, which is 12.5% higher than in July of the previous year. The main growth occurred in the segment of mandatory worker accident insurance, where premium volumes increased by 22.6%. There was also significant growth in the pension annuity insurance sector, which saw an increase of 3.1 times compared to last year.
Since the beginning of the year, the total volume of insurance premiums amounted to 823.9 billion tenge, which is 42.6% higher than the same period last year. This growth is driven by increased demand for insurance products and the expansion of mandatory insurance types.
Insurance payouts in July 2024 increased by 25.0%, reaching 31.1 billion tenge. The main growth in payouts was seen in the mandatory insurance and life insurance segments. However, payouts for voluntary property insurance decreased by 8.9%, indicating fewer claims in this segment.
Risks and Threats:
Although the sector shows steady growth, several significant threats to its further development remain. The first and most significant threat is the sector’s high dependence on the stock market. Over 73% of insurance companies’ assets are invested in securities, making the sector vulnerable to fluctuations in stock markets. Any deterioration in market conditions could lead to significant losses, putting pressure on the financial stability of these companies.
Additionally, the growth of liabilities, coupled with the decline in equity, creates liquidity risks. The 5.6% reduction in equity since the beginning of the year highlights risk management challenges and the need for improved reserving systems.
Another key risk factor is the growing pressure of competition and rising costs. Increased payouts in mandatory insurance types could reduce margins and negatively impact financial performance.
Growth Opportunities:
Despite these threats, Kazakhstan’s insurance sector has significant growth potential. Increased demand for mandatory insurance, particularly for workers and pension annuities, opens up new opportunities for insurance companies. These segments remain key growth drivers in 2024.
Moreover, the digitization of insurance products and the introduction of new technologies, such as online policy sales and automated claims processing, provide additional opportunities for improving operational efficiency. Companies that can integrate these innovations into their operations will strengthen their market positions and improve the customer experience.
Conclusion:
Kazakhstan’s insurance sector continues to demonstrate confident growth, but it faces significant challenges related to high dependence on stock markets and declining capital. To ensure future success, insurance companies must focus on improving risk management, diversifying assets, and implementing digital solutions. With the growing demand for mandatory insurance types and innovative insurance products, the sector has all the chances to continue its successful development and strengthen its position in Kazakhstan’s financial market.
Prepared by: Sultan Valikhanov
expert at Economy.kz portal
