How large-scale floods affected the insurance market
The Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (hereinafter – the Agency), together with government agencies and international experts, is working on the mechanism of interaction between the state and insurance organizations in case of emergency events and determines the procedure for compensation for damage.
The reason for the introduction of insurance against catastrophic risks is the increased intensity of natural disasters, including large-scale floods in Kazakhstan.
Currently, compensation for damage from natural disasters is mainly paid by the State at the expense of budgetary funds. Insurance coverage covers a small part of citizens and entrepreneurs who have taken measures in advance to insure their own property against the risks of natural disasters.
Insurance of catastrophic risks in our country is voluntary. In 2023, 366 thousand voluntary insurance contracts were concluded, an increase of 11.6% compared to 2022, and 114% over the past 5 years.
Meanwhile, the coverage of residential premises by insurance against natural disasters is 3.2% on average in the country and 7.7% in the city of Almaty. This is a low indicator by international standards, taking into account the geographical and climatic features of our region.
"The best model is to create a protection mechanism based on the principle of public-private partnership. International practice shows that insurance companies are not able to fully cover the damage from major natural disasters. In most countries whose territories are regularly exposed to natural disaster risks, catastrophic risk insurance is mandatory, including in Turkey, Romania, France, Spain, Morocco, the United States and Kyrgyzstan," said Madina Abylkasymova, Chairman of the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan.
Currently, Kazakhstan is also considering the introduction of compulsory or imputed housing insurance. All residential buildings registered in the republic can be covered by insurance. Compulsory insurance payments will be a fixed amount. Citizens who, in addition to compulsory insurance, will also conclude a voluntary insurance contract will be able to receive more damage coverage.
Today, no country in the world can independently cover the damage from disasters occurring on its territory, international reinsurance organizations should participate in reinsurance of major risks along with domestic insurance organizations.
To determine the amount of insurance premiums and minimum insurance payments, full-fledged statistics on real estate objects subject to insurance are needed, including their characteristics by type of structure, year of construction, level of earthquake protection and other parameters.
It is also important to have access to historical information on insured events in the context of the regions of the country and the amount of damage compensation depending on the degree of destruction of real estate.
The introduction of insurance against catastrophic risks will require actuarial calculations and the development of appropriate legislative amendments. If a decision is made to introduce compulsory housing insurance, it will require the adoption of a separate legislative act.
The Agency's External Communications Division:
+7 (727) 237-10-89, e-mail: press@finreg.kz