Earthquakes in Almaty once again prompted citizens to consider the safety of their property and insurance in particular. Changes are expected in the earthquake insurance segment in Kazakhstan, with discussions on making it mandatory for Kazakhstani citizens gaining traction. The topic resurfaced after a devastating earthquake in Turkey last year and became even more crucial following two powerful earthquakes in Almaty this year.
While insurance companies have long offered various property insurance products covering natural disasters, including earthquake risks, on a voluntary basis, the uptake remains low. For instance, in earthquake-prone Almaty, less than two percent of all real estate properties are voluntarily insured. The cost of insurance depends on factors like property value, year of construction, building materials, location, and the chosen deductible amount.
The low interest in property insurance stems from various reasons, including a reliance on the state in case of disasters and misconceptions about risk probability. However, with the current low penetration of insurance products, insurance companies may struggle to cover losses. If the population starts insuring their properties en masse, large insurance companies can utilize reinsurance mechanisms.
The discussion on implementing mandatory catastrophic risk insurance has been ongoing since the early 2000s. Recent developments indicate that the government and insurers are actively exploring the possibility. The creation of a state-level earthquake insurance model is being considered, with potential assistance from international financial institutions. By pooling resources and engaging foreign reinsurers, the cost of coverage can be reduced, making it more affordable for citizens.
Different countries have varying approaches to mandatory property insurance. For example, Mexico funds property insurance through taxes, while Turkey has a state-owned insurance company and mandates annual contributions from citizens. In the United States, there is no mandatory property insurance system, but over 60% of residential properties are insured, with federal subsidies in high-risk areas.
In Kazakhstan, the cost of even voluntary insurance is relatively low, allowing citizens to protect their property affordably. With ongoing efforts to enhance earthquake insurance mechanisms, the future looks promising for ensuring the safety and security of properties in the country.
