S&P Does Not Forecast Considerable Tenge Weakening In 2017

Kazakhstan: Credit Rating

S&P Global Ratings does not forecast considerable weakening of tenge in 2017, reports the rating afency.

“We do not anticipate significant further tenge depreciation over 2017, in view of the stabilization of the oil price, and therefore we do not expect additional pressure on insurers’ underwriting performance. However, country risk is still high,” said the message.

S&P Global Ratings views industry and country risk for the property/casualty (P/C) insurance sector in Kazakhstan as moderate, as stated in its report published today, “Kazakhstan Property/Casualty Insurance Sector Carries A Moderate Industry And Country Risk Assessment.”

“We see moderate economic growth, with real GDP growth averaging 2.5% over 2017-2020, riding stronger investments, recovering private consumption, and higher export performance as the oil price outlook marginally improves alongside the likely acceleration in production at the giant Kashagan oil field,” said S&P Global Ratings associate director Ekaterina Tolstova.

“Future policy responses may be difficult to predict, given the highly centralized political environment, the country’s only moderate level of economic wealth, and limited monetary policy flexibility, added Ms. Tolstova. “We consider the payment culture and rule of law in Kazakhstan as a weakness, which makes the operating environment for insurance companies in Kazakhstan hard to predict.”

“We assess industry risk in Kazakhstan as intermediate, reflecting our view of the economic trends pressuring the domestic P/C insurance sector’s operating environment. The sector’s profitability is supported by sound underwriting performance on a five-year average basis. We have revised our assessment of market growth prospects to neutral because we expect that the market will show growth of 10% annually in nominal terms in the next two-three years, which is significantly above growth targets for developed Western European insurance markets and some emerging markets. At the same time, we consider that the market is dominated by a few insurers, which distorts statistics. Product risk, barriers to entry, and the institutional framework remain neutral factors in our assessment of the insurance industry in Kazakhstan,” said the agency.

According to the report, Kazakhstan’s P/C insurance industry and country risk as moderate is comparable with our assessments of such P/C markets as Poland, Italy, Morocco, and Turkey. The agency sees a limited likelihood that they would revise up their assessment over the next 12 months, given both country and industry risks in Kazakhstan.

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