Kyrgyzstan is demonstrating impressive economic growth rates, and the insurance sector has tripled in the last two years. We discussed the importance of insurance as a foundation for stability with Baktygul Abdyjaliev, Deputy Chairman of the Board of the State Insurance Organization JSC.
- Mr. Baktygul, is it worth talking about the necessity of insurance at all? What is the current situation in the country?
- Development without insurance is extremely difficult. Over the past three years, we have observed a stable GDP growth rate of 10% per year. These are record figures, thanks to which Kyrgyzstan ranks third in the world and first in the CIS. Ten years ago, we could only dream of such success, and now we believe in a bright future for the country.
Insurance plays a key role in this process. Many countries have achieved significant success precisely due to insurance instruments. In developed countries, the ratio of the insurance market to GDP reaches 16.5% in Japan and 13% in the USA, where citizens actively use insurance in their daily lives. In Kyrgyzstan, unfortunately, companies often face bankruptcy because they did not insure their risks.
The decree on the development of the insurance market, issued by our president, has become an important step in changing the situation. On March 20, we will celebrate two years since its signing, and during this period, the market has increased from 3 to 10 billion soms.
- How does this affect the average citizen?
- Insurance provides financial protection. Since its inception, we have paid out about 400 million soms, which has helped support businesses and people in difficult situations. Since the beginning of this year, 82 million soms have been paid out, mainly under two mandatory laws: OSAGO (compulsory motor third-party liability insurance) and housing insurance against fires and natural disasters.
In Soviet times, there was "Gosstrakh," which had assets worth half a trillion dollars by today's standards. After its collapse, until 2015, insurance in Kyrgyzstan was fragmented, and only in the last two years have we managed to increase coverage to 30% — that is, 350,000 insured homes out of 1,250,000.
- What about cars?
- The introduction of fines for OSAGO in October last year generated significant interest, and now over 1,100,000 cars out of 1,750,000 are insured in the republic. The State Insurance Organization has insured over 320,000 vehicles, which accounts for 20% of the total and 35% of all insured. This means we control one-third of the OSAGO market.
Currently, citizens trust the government more, observing economic growth and improvements in infrastructure. Our organization, with 100% of its shares owned by the Cabinet of Ministers, ensures strict control and the possibility of implementing social programs. Mandatory housing insurance is one such initiative, offering a policy for 600 soms in rural areas and 1200 in cities, with payouts of up to 500 and 1 million soms, respectively. For Kyrgyzstan, where natural disasters frequently occur, this is a very advantageous offer.
- Are homes insured against fire and natural disasters?
- Yes, this is provided for by one law that covers both man-made and natural risks. Currently, we are reviewing the thresholds.
- Can you elaborate on the project that concerns lowering the threshold for earthquakes to 5 points?
- This is an important change in the mandatory housing insurance system, based on the analysis of seismic activity. Previously, only earthquakes above 6 points were considered insurance cases, which is too high for Kyrgyzstan, given our seismic activity. Now we will lower the threshold to 5 points to provide citizens with real protection.
The insurance pool we are creating will serve as a financial reserve to cover damage from mass natural disasters. This will give citizens confidence that insurance payouts will be made regardless of the scale of the damage.
In the past, we had cases of earthquakes up to 5.5 points, but we could not compensate for the damage as it was not considered an insurance case. Now we are developing new mechanisms to increase the level of trust among citizens.
Additionally, we are lowering the wind threshold from 25 to 20 meters per second, as this can also lead to damage.
Since the beginning of the year, there have been 54 cases related to housing, of which 51 are fires. For OSAGO, there have been 500 cases, mainly in Bishkek.
- What do you say about bureaucracy and impound lots for OSAGO?
- Bureaucracy exists, and we cannot deny it. We need official confirmation of guilt to make compensation payments. We are working on simplifying the process and have created round-the-clock emergency commissioner services.
However, the law requires adherence to certain procedures. We strive to implement a system of European protocols, where drivers can exchange data without police involvement, but for this, it is necessary to ensure a high level of OSAGO coverage.
- Insurance for loans and export-import supplies is planned in Kyrgyzstan. What is the essence of this?
- The State Insurance Organization actively supports small and medium-sized businesses, as well as the development of export potential. Insurance allows us to protect our entrepreneurs in international markets, compensating up to 90% of the transaction amount in case of partner insolvency.
Separately, we are engaged in insuring export credits, which minimizes the risks of non-repayment. It is also important to understand that damage to cargo during transportation requires separate insurance.
The State Insurance Organization is becoming the National Reinsurance Operator. What is the goal of this step?
- This status, established by the Presidential Decree, will allow us to retain financial resources within the country. Reinsurance is insurance for insurance companies themselves, and the creation of a national operator will enhance the reliability of the entire system.
Our strategic goal is to build a system that reliably protects the interests of citizens and contributes to economic development.
