The insurance market in Uzbekistan. Results of 2021

From 2016 to 2019, the annual growth of insurance premiums averaged 50%.

In 2020, a decrease of 6% compared to 2019 was due to the introduction of quarantine regulations, the lack of remote work of some companies, and a decrease in the income of the population during the quarantine period. In 2021, the volume of collected insurance premiums increased by 68.6% compared to 2020, the figure exceeded 3.7 trillion soums.

Premiums in the life insurance segment more than doubled (from 334.4 to 717 billion) at the end of the year. Such a sharp increase is explained by the recovery of the market after the 2020 pandemic. If compared with 2019, the growth was 22.3%. In the total premium portfolio, this area occupies about 19%, and in terms of insurance payments, life insurance is leading with 616.3 billion. This is slightly more than half of the total amount of insurance claims paid in Uzbekistan. The development of this segment is mainly due to voluntary insurance. By the Decree of the President of the Republic of Uzbekistan No. PP-5265, the announced tax benefits in the life insurance industry, both terms of the income tax of the insurance company and as well as personal income tax, allow to accelerate the development of long-term life insurance and will be aimed at expanding the list of services.

Voluntary general insurance is in the second position in terms of the growth rate of premiums. The premium volume increased 64.7%. The segment took 68% of the market (premium portfolio – 2.5 trillion). It accounts for more than a third of insurance claims payments (433.7 billion). The aviation industry in this segment ranks first in terms of growth in relative terms. Aircraft Insurance (Aviation Hull) collected 9.66 billion in premiums. The growth was 470.4%. As part of the liability insurance of air carriers to individuals and legal entities premium reached 1.5 billion (+487.8%).

The main direction of voluntary general insurance is credit insurance. Its share is 23.7% of all premiums in this segment. Over the past year, more than 600 billion sums were collected, which is 83.4% higher than it was a year earlier. In second place in terms of volume is the vehicle insurance (307.4 billion), and in third place is the total civil liability (207 billion).

General compulsory insurance took 13% of the market. The volume of premiums collected amounted to 476.7 billion. Almost half of this amount is taken up by civil liability insurance of vehicle owners – 229.12 billion (+30.6%). This is followed by the civil liability of the employer – 165.6 billion. This is 62.3% more than a year earlier. The top three are closed by construction and installation risks – 42.11 billion (+63.6%), thanks to active construction, even during the pandemic, the number of premiums for compulsory insurance of CAR/EAR continued to grow.

The opening of new insurance companies in the general insurance industry (5 insurance organizations, including 1 with 100% foreign capital – Azimuth Insurance Company) also influenced the growth of insurance premiums.

Investment activity has tripled from 2016 to 2020. At the same time, the size of deposits increased by 4.6 times, real estate by – 6.2 times, and loans – by 5.8 times. In 2021, the total volume of investments amounted to 3746.66 billion souls (+10.8%). In the total volume of investments, deposits account for 58.9% and growth in 2021 is +21.4%. Securities are in second place with 29.3% and growth of +14.3%. This is followed by real estate at 6.6% and a reduction of -13.3%.

Nevertheless, the growth of assets and equity of the insurance market could show much better results and this is hindered by three main problems of the insurance market:

• High acquisition costs (commission fees) do not allow insurance companies to increase insurance reserves. From my point of view, this is due to the high corruption of the voluntary insurance market.
• Extremely high level of cross-border reinsurance for voluntary insurance classes. On the one hand, problems in the field of reinsurance are associated with the partially uncontrolled withdrawal of funds abroad. On the other hand, with the restriction of reinsurance, the insurance companies’ insufficient capitalization and their inability to hold large risks affect.
• Almost complete absence of competition in the insurance market in terms of banc assurance. Banks and financial and industrial groups have created subsidiary insurance companies, thereby excluding access to their clients by other insurance companies, pursuing exclusively their economic interests for the client to leave as much of his money as possible within their group. This is quite a sound and justified action if there is competition. When it is not there, it causes great harm to the qualitative development of the insurance sector.

The market is being influenced by the economic liberalization program. The reforms announced in August 2019 aim to strengthen the sector’s role in the economy and develop a new comprehensive regulatory framework. They also include measures to support premium growth, especially in retail segments and provide support or guarantee mechanisms in areas of strategic importance to the economy.

In particular, the development and implementation of a new version of the Law on Insurance Activities, the adoption of the Decree of the President of the Republic of Uzbekistan No. PP-5265 “On additional measures to digitalize the insurance market and the development of life insurance”, increased requirements for capitalization of insurance companies, significantly revised the principles of insurance mediation. We believe that all these measures will lead to long-term growth, reasonable concentration, and increased transparency of insurance companies as full-fledged players in the financial market of Uzbekistan.

The level of insurance penetration in Uzbekistan is much lower than in other countries.

The volume of insurance premiums in Uzbekistan relative to the country’s GDP is equal to 0.4% at the end of the year. The average global IPR is about 3%. However, this indicator is planned to increase in 2022 to 0.8%.

The loss ratio of general insurance is 31%. In world practice, this indicator averages 60-70%.