According to Fitch Ratings, rapid growth in Uzbekistan's insurance sector is being driven by business lines with significant underwriting risk, which could lead to volatility in insurers' financial performance.
Financial risk insurance with high exposure relative to capital, as well as inward reinsurance with largely untested underwriting policies supported rising gross written premiums (GWP) in 2024, Fitch noted.
Total GWP grew by 21% in 2024 to UZS9.8tn ($756m), as non-life business, which dominates the market, continued to grow rapidly, Fitch said.
The company noted that the sector’s business mix has shifted significantly in recent years and is increasingly weighted towards financial risk insurance and property insurance, bolstered by increasing volumes of inward reinsurance. On the other hand, life insurance GWP fell sharply after the removal of tax incentives in 2023 and accounted for just 2% of GWP in 2024 compared with approximately 25% in 2022.
Financial risk insurance GWP more than trebled from 2021 to 2024, outpacing overall GWP. According to Fitch, this product is designed to protect banks and non-bank financial institutions from borrower default.
The growth could lead to claims volatility and capital erosion, particularly in a macroeconomic stress scenario, as the exposure often substantially exceeds insurers’ capital, Fitch noted. The claims/premiums ratio was 44% in 2024, which was higher than for other business lines, and it may increase in 2025, which is when Fitch expects impaired loans to peak.
Inward reinsurance GWP increased by 30% in 2024 to UZS2.7tn, representing around 28% of the total premiums collected and 92% of the sector’s total authorised capital, Fitch said.
This business is mainly sourced through international brokers, often participating with limited shares in property reinsurance pools. The exposure is geographically diversified but skewed towards US property risks, including a high share of non-proportional reinsurance. Fitch noted that the risks and underwriting policies associated with inward reinsurance are largely untested, which could lead to volatile underwriting results.
Fitch views the investment and asset risk of Uzbekistan’s insurers as high, mainly due to limited diversification. Investment portfolios are heavily skewed towards fixed-income instruments, which are mainly deposits with local banks that Fitch rates as ‘B’ and ‘BB’. This exposes insurers to the credit and market risks inherent in Uzbekistan’s banking system. Additionally, the country’s underdeveloped bond market restricts diversification opportunities.
Regulatory pressures are also mounting, with new legislation mandating increased capital requirements. Insurers engaged in reinsurance will need to have minimum capital of up to UZS120bn by October 2029, a significant increase from the UZS80bn required by October 2025.
Fitch assessed the capital position of all rated insurers in Uzbekistan as ‘Weak’ in its Global Prism model at end-2023, and many insurers will need capital injections from shareholders to meet the higher regulatory minimum capital requirements.