NatCat Risks in Central Asia: Insurance Protection is Urgently Needed

The recent earthquakes in Kazakhstan have made bare the lack of protection its citizens face against natural catastrophe (NatCat) risks and prompted the government to rethink its strategy against such risks.

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Kazakhstan’s largest commercial city, Almaty, has experienced a series of strong earthquakes since the beginning of the year. In January, it recorded an earthquake of 7.0 magnitude with the epicenter 300 km from the city. Shortly after, in March, Almaty was shocked again by another earthquake (of 5.0 magnitude), with the epicenter only 30km away this time. As the last devastating earthquake that almost destroyed the whole city was over 100 years ago (in 1911), neither the city government nor the residents have prepared to face such grave risks, even though the country is located in a seismically active zone.

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The possibility of such extreme events has prompted the insurance regulator to introduce insurance against natural disasters by working with the World Bank to potentially launch NatCat bonds this year to transfer the risk from its people/ government to the (re)insurance and capital markets. While there is still a long way to go for the country, given the likely limited NatCat risk premium pool as a result of low insurance protection awareness, the development showcases a symbolic milestone for its insurance market becoming more market-oriented.

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Kazakhstan is the first country where the land route of the One Belt One Road (OBOR) initiative begins after China. Sandwiched between Russia and China, the new “Great Game” is being played nakedly in Central Asia and Kazakhstan as superpowers compete to gain an advantage over the others and seek to tilt the center of political gravity in the region.

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As a matter of fact, President Xi first announced his vision of OBOR in the capital of Kazakhstan in 2013. Kazakhstan was also the first country President Xi visited after COVID-19 in 2022. Both incidents demonstrated the political and economic significance Kazakhstan holds to China.

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Before COVID-19, most Chinese companies and investments in Kazakhstan centered around the country’s natural resources, such as oil fields, natural gas, mines, etc., primarily dominated by the SOEs. Over the past 2-3 years, however, a new wave of investments has been driven by private companies and enterprises, focusing more on retail and consumer goods as they try to fill the gap/void in the market left out by Russia due to various western sanctions.

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The prime example is Chinese cars, especially electric vehicles. Before the war, the automobile market in Kazakhstan was dominated by Japanese and Korean vehicles (manufactured in plants in Russia). Now, the streets in Kazakhstan are filled with Chinese cars, which offer great value for money and quality. The second example is the logistics sector, as Chinese products become increasingly popular in the region.

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Sinoasia is, so far, the only Chinese company that has acquired/invested in a local insurance company (as early as 2017) in Kazakhstan. Given this and our partnership with Huatai, coupled with the team’s expertise in insurance and efforts in the region, we are best poised to tap into the insurance needs arising from the increasing Chinese investments and interests in Central Asia.