Diplomatic efforts to reach a ceasefire agreement between Russia and Ukraine are ongoing. A potential ceasefire could have positive and negative long-term effects on insurers in the region. This FAQ focuses on the effects from a potential ceasefire on the insurance sectors in Kazakhstan and Uzbekistan.

S&P Global Ratings notes a high degree of uncertainty about the extent, outcome, and consequences of the Russia-Ukraine military conflict. The exact scope and/or timing of the possible ceasefire or any other solution to the conflict are difficult to estimate at this point. That said, we have outlined below the key credit factors that we will monitor as they evolve and our current assumptions under a hypothetical ceasefire scenario.

Frequently Asked Questions

How did the military conflict in Ukraine affect insurance markets in Kazakhstan and Uzbekistan?

The Russia-Ukraine conflict had multiple direct and indirect effects on the insurance markets in both countries.

Kazakhstani insurers' solvency declined significantly overnight in 2022.  Investments in distressed assets in Russia--including deposits, government debt, and corporate bonds--exposed some Kazakhstani insurers to solvency issues due to the withdrawal of several credit ratings and asset devaluation. Additionally, Kazakhstani insurers' reliance on Russian reinsurers increased pressure on solvency.

In response to solvency deficits, the regulator issued a waiver to loosen requirements for solvency capital calculations for insurers. According to the waiver, solvency deficits caused by the repricing of assets were not considered as a failure to comply with the solvency margin adequacy ratio in the period from Feb. 28, 2022, to Sept. 1, 2022. However, we revised outlooks on several insurers to negative from stable. After insurers had taken recovery measures to reduce the negative implications of asset devaluations and credit risk exposures to Russia, we revised the outlooks back to stable.

Dependency on Russian reinsurers reduced.  The conflict prompted Kazakhstani and Uzbekistani insurers to shift toward reinsurers that are based in Western Europe, the Gulf Cooperation Council region, and China, not least due to sanctions on Russian reinsurers. Additionally, it led them to focus on inward reinsurance, which was previously offered by Russia-based companies. Despite this shift, reinsurance utilization ratios in both markets remained stable at 24%-27% over 2022-2024.

The increase in inward reinsurance boosted the development of a new product line in the region, with inward reinsurance premiums rising 88% in Kazakhstan and 70% in Uzbekistan over 2022-2024 (see chart 1).

Chart 1

The digitalization of the insurance sector improved.  The arrival of migrants and visitors to Kazakhstan and Uzbekistan, along with business relocations, boosted sectors, such as information and communications technology (ICT), logistics, financial services, hospitality, and trade. For example, the number of Russian companies in Kazakhstan's ICT sector rose sevenfold compared with 2021. According to Halyk Finance, Russian companies accounted for 75% of the sector in 2024. In the case of a ceasefire, we expect many businesses would continue to operate abroad, given the likely prolonged geopolitical uncertainty and enduring political and economic ties between Russia and its immediate neighbors.

What would be the immediate effects of a ceasefire on insurance industries in Kazakhstan and Uzbekistan?

A ceasefire between Russia and Ukraine would not necessarily mean an end to the conflict. From a macroeconomic perspective, our current economic growth forecasts for Central Asia and the Caucasus already capture the normalization of growth from the highs of 2022. We expect real GDP growth in Kazakhstan and Uzbekistan will moderate over 2025-2027, relative to 2022-2024, as the temporary surge in trade, remittances, and capital inflows from Russia stabilizes (see chart 2).

Chart 2

Even if the potential ceasefire softened geopolitical risks over the short term, we would expect only a limited direct effect on Kazakhstani and Uzbekistani insurance sectors in 2025. This is because economic sanctions, political uncertainty, and the threat of another military escalation could prolong volatile conditions.

Thus, we would expect regional insurers and reinsurers to remain vigilant and monitor the situation for any potential resumption of hostilities that could affect growth, profitability, or capitalization and liquidity. Broader geopolitical risks, market sizes, and the emerging stage of the insurance sectors in Kazakhstan and Uzbekistan will continue to shape regional insurance industries over the medium to long term.

What would be the key risks for insurance markets in Kazakhstan and Uzbekistan after a potential ceasefire deal?

Geopolitical risks:  While a ceasefire might temporarily soften security and geopolitical risks in the region, the broader geopolitical uncertainty in Central Asia and the wider region will likely persist.

Economic challenges:  As emerging and frontier markets, Kazakhstan and Uzbekistan are exposed to structural issues, such as income inequality, underdeveloped financial infrastructure, and rural-urban disparities regarding access to insurance. These could impair the growth potential of the region's insurance sectors.

How does your credit rating analysis incorporate geopolitical risks in the region?

As per our insurers rating methodology, we capture the credit impact from geopolitical risks on an insurer at various stages of our insurance sector analysis, namely:

Industry and country risk assessment:  We capture geopolitical risks in our country risk assessment or when assessing the industry risk, as per our criteria (see chart 3). The insurance sector is usually highly correlated with economic developments, which, in turn, are affected by geopolitical risks.

Capital and earnings assessment, and risk exposure:  Our capital and earnings assessment is key for assessing an insurer's financial strength. If geopolitical conflicts arise, volatility on financial markets tends to increase, which can result in a devaluation of assets, particularly those that are in regions directly affected by the conflict. This could reduce investment returns from equities, bonds, and other financial instruments, and ultimately erode companies' capital base. As a result, our capital and earnings assessment, and subsequently the financial risk profile, could be affected.

Insurance companies also rely on reinsurance protection to mitigate risks. However, geopolitical tensions can lead to changes in reinsurance contracts and result in the addition of various inclusions or exclusions to terms and conditions. Reinsurers could also raise their premiums or reduce capacity in response to increased risks, which could make it more expensive or difficult for primary insurers to obtain reinsurance protection.

Liquidity:  If an insurer faces many claims or considerable asset devaluation, it could struggle to meet short-term liquidity needs. This is particularly concerning if the company relies heavily on investments in volatile regions or is exposed to the ripple effects from volatility in global capital markets, which could lead to a mismatch between unchanged liabilities and devaluated assets.

Chart 3

Related Criteria And Research

• A Hypothetical Russia-Ukraine Ceasefire Is Expected To Have A Limited Immediate Impact On Central Asia And Caucasus Banking Systems, March 10, 2025
• Criteria | Insurance | General: Insurers Rating Methodology, July 1, 2019