Kazakhstan plans to introduce mandatory home insurance against natural disasters. The annual premium will range from 2,000 to 20,000 tenge, and the payout in the event of an insured incident will be 500 times the premium, reports infohub.kz.
Under the "Program for the Development of the Insurance Market until 2030," it is proposed to introduce mandatory insurance for registered residential property against earthquakes, floods, and forest fires. The relevant changes are contained in the draft program developed by the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan (ARDFM). The policy is designed to provide citizens with guaranteed financial support in the event of the most destructive natural disasters. For comparison, currently, the restoration of housing after major natural disasters is largely carried out at the expense of the budget or citizens' own funds. At the same time, catastrophic risks are characterized by their scale and high concentration of losses, thus requiring collective insurance and reinsurance.
"Taking into account international experience, including Turkey, Spain, and France, it is proposed to gradually introduce the system in regions most exposed to disaster risks. At the first stage, it will be launched in pilot mode in three regions, after which it is planned to extend it to 16 regions of the country," the ARDFM notes.
As noted in the source, the annual insurance premium is planned to be set at an affordable level for the population – approximately from 2,000 to 20,000 tenge per year, depending on the level of risk in a particular region. In the event of an insured incident, the payout will be 500 times the amount of the paid premium and will be made within five days after confirmation of the event. For example, with a premium of 2,000 tenge, the payout will be 1 million tenge, and with a premium of 20,000 tenge – 10 million tenge.
"At the first stage, the funds will be intended to cover the priority expenses of the victims. In the future, as funds accumulate, the possibility of transitioning to payments that allow restoring damaged housing or purchasing new housing is being considered. To ensure the sustainability of the system, a Mandatory Housing Insurance Fund will be created. It will collect mandatory contributions, form reserves, organize payments, and reinsure catastrophic risks," the ARDFM reports.
At the same time, it is proposed to include coverage of catastrophic risks in all voluntary property insurance contracts. Part of the insurance premium will be transferred by insurance organizations to the fund as part of reinsurance. As a result, a homeowner with a voluntary policy will also be able to receive a fixed payment from the fund in addition to compensation from their insurance organization.
"A three-year deferral period is envisaged, during which the fund will accumulate funds from share capital and reinsurance premiums. After its completion, homeowners will begin to pay mandatory insurance premiums annually, and in the event of damage to their homes from natural disasters, the fund will make insurance payments. The reform will create a sustainable system of financial protection of housing from natural disasters, accelerate assistance to victims, and reduce the burden on the state budget when eliminating the consequences of emergencies," the source notes.