Information regarding the regulatory resolution of the Constitutional Court
(No. 68 dated February 27, 2025)
The Constitutional Court reviewed a request to verify the compliance of Part 2, Paragraph 1, Article 818 of the Civil Code of the Republic of Kazakhstan (Special Part) dated July 1, 1999 (hereinafter referred to as the Civil Code (Special Part)) with the Constitution of the Republic of Kazakhstan.
According to this provision, insurance premiums received by the insurer from the policyholder become the property of the insurer, except for the portion of premiums received for investment purposes and the income (or expenses) derived from such investments under insurance contracts that provide for the policyholder’s participation in investments.
On December 24, 2019, the insurer and the policyholder concluded a pension annuity contract, under which the policyholder transferred a lump-sum insurance premium to the insurer, while the insurer undertook to pay lifetime insurance benefits to the policyholder.
On January 22, 2022, the policyholder passed away. Until her death, the insurer had been making monthly insurance payments to her as agreed. After her passing, the payments were made to the beneficiary. However, when the policyholder’s heirs (applicants in the case) requested a lump-sum payout of the remaining insurance premium, the insurer denied their request. The insurer explained that pension savings transferred as an insurance premium do not form part of the inheritance and, under Part 2, Paragraph 1, Article 818 of the Civil Code (Special Part), belong to the insurer as its property.
The applicants argued that pension savings transferred to the insurer should be subject to inheritance in the event of the policyholder’s death. In their view, the disputed provision violates their constitutional right to private property protection by depriving them of the funds without a court decision.
Findings of the Constitutional Court
The Constitutional Court ruled that insurance premiums serve as a payment from the policyholder to the insurer for insurance coverage, with insurance payouts acting as their financial equivalent. This establishes the compensatory nature of the pension annuity contract.
Thus, the funds received by the insurer as an insurance premium are considered the insurer’s income, which it may dispose of at its discretion. The insurer is not obligated to return the insurance premium but only to make insurance payments. Under such conditions, forced expropriation of the policyholder’s property does not occur, and therefore, the Constitutional Court did not find the contested provision unconstitutional.
At the same time, the Constitutional Court emphasized that, given the specific nature of pension annuities, legislative mechanisms should be developed to ensure the fulfillment of the policyholder’s lifetime intentions and determine the transfer of their rights to other persons upon their death, considering the amount of the transferred insurance premium and other relevant factors.
Additionally, the general rule regarding the insurer’s ownership of insurance premiums, as established in Part 2, Paragraph 1, Article 818 of the Civil Code (Special Part), is inconsistent with the Social Code. The Social Code grants policyholders the right to manage a portion of these funds, allowing them to transfer the buyout amount to another insurance organization upon annuity contract termination or return the funds to the Unified Pension Savings Fund (ENPF) in case of contract modifications that reduce insurance payouts or for other reasons.
Recommendation
In light of this, the Constitutional Court recommended that the Government consider improving legislation to ensure harmonization between interrelated legal norms from different legal fields, taking into account the social nature of pension annuities as an institution.