Tashkent, Uzbekistan (UzDaily.com) —  Last week, Moody’s Ratings published an analytical report on Uzbekistan’s insurance sector.

Moody’s anticipates that the growth of insurance premiums for Uzbek insurance companies will slow down over the next 12–18 months following a phase of rapid growth. This trend is attributed to capital constraints faced by most insurers, price competition in the market, and a decline in demand for auto insurance.

In the first half of 2024, Uzbek insurers recorded a 17% increase in premiums compared to the same period last year, significantly lower than the average growth rate of 60% over the previous three years. This slowdown is due to rapid premium growth outpacing capital increases, which limits the potential for sustained business expansion. The low profitability of most companies and limited opportunities for shareholders to make additional investments constrain the prospects for continued rapid growth in the sector. Additional pressures arise from market competition and reduced demand for auto insurance due to a decline in vehicle sales linked to stricter retail lending conditions. However, the sector receives partial support from rising premiums in credit risk insurance.

The agency notes that the slowdown in premium growth, increased insurance payouts, and operational expenses negatively impact the profitability of insurance activities.

Payouts for credit insurance, which rose by 90% in the first half of the year due to the deteriorating quality of Uzbek banks’ credit portfolios, are likely to continue increasing.

Some Uzbek insurers involved in international reinsurance may incur losses associated with hurricanes Helen and Milton, which caused significant destruction in Florida, USA, in late September to early October 2024.

Nevertheless, the sector benefits from high interest rates, which contribute to growth in investment income. Overall, Moody’s estimates that the net profit of the insurance sector increased by 43% over the first six months of 2024. However, financial results among companies remain uneven, as the five largest insurance companies account for 80% of total profits.

Moody’s expects that increased capital requirements will lead to consolidation in the sector between 2025 and 2029. These requirements are intended to strengthen the solvency and profitability of the insurance sector in the long term, but in the short term, they will heighten regulatory risks.

From 2025 to 2029, Uzbek insurers operating in the compulsory insurance market will be required to double their minimum charter capital to 100 billion soums, and Moody’s estimates that currently, only four out of 30 companies meet this level. This could prompt smaller companies to merge, exit the market, or sell to larger players, which would help strengthen market prices, improve profitability, and enhance solvency.

Moody’s also highlights increasing regulatory risks for Uzbek insurers, especially smaller firms, as capital requirements rise. Since September 2023, the regulator has revoked licenses from eight insurance companies, including life insurance firms, and temporarily suspended licenses for nine others.