Insurance Market Shifts in Belarus: Beyond KASKO, DMS, and Hurricanes in 2024

Fresh Take on the Belarusian Insurance Revolution

It's time to talk about the explosive growth in the Belarusian insurance market. At the edge of smashing the $1 billion mark, are we looking at a historical triumph this year? Irina Merzlyakova, the head of the Association of Insurers of Belarus, spills the beans to Myfin.by, sharing her insight on the industry's best year ever in 2024, the obstacles insurance companies face, and the game changers that could push the sector to new heights.

- Hey Irina, you've been touting some record-breaking insurance collections for 2024. Let's break it down, how did the Belarusian insurance market surge in dollars last year?

Typically, our goal is to hit a billion in insurance collections. Countries similar to us, size-wise, have achieved this feat. For Belarusian insurers, the billion-dollar mark is a big deal. By the end of 2024, the market soared by 18% to $810 million, an all-time high. Insurance premiums per person amounted to $88.5, and the insurance-to-GDP ratio hit 1.06%.

I'd toss in a fun fact: KASKO was a star performer, thanks to easy monetary and credit policies and a consumer loan boom. Leasing services for new cars, powered by car imports, were also a significant driver. While voluntary medical insurance, popular with 740,000 citizens and often found in corporate packages, is on the rise, becoming a cool trend.

Now, compare this with the Russian market, where life insurance fuels growth, recording an exceptional 62% jump last year. The industry there attributes this surge to a shift in focus from quantity to quality, coupled with tax incentives that boosted insurance.

Still lagging in life insurance, eh? Seems like it's time we figured out what's blocking our progress.

Long story short, Russia and Belarus have different legal frameworks for life insurance.

- How do you size up the financial results of the Belarusian insurance market last year?

The results were tremendous. Markets usually exhibit a wave pattern: up, then down. When it's "down", it's losses. A company's financial result relies heavily on how accurately premiums are calculated. If claims payments are more than collected premiums, it results in no profit.

Surprisingly, despite the hurricane, the year was a win for insurers. The portfolio expansion compensated for the hurricane losses, and the loss ratio was low across all types of insurance. Insurers paid out $1.28 million a day in claims, totaling 1.5 billion rubles—with life insurance taking a 234.5 million ruble slice of that.

This indicates that domestic insurers play a prominent social role today. The market remains stable: insurance reserves grew by 18% to 4.228 billion rubles, while insurers' assets swelled by 12% to 7.574 billion, and their own capital expanded by 6.2% to 2.2 billion rubles. So, no major financial shock.

- What were the major challenges that affected the insurance sector's financial performance last year?

In 2024, things were calm. To put it in perspective, the not-so-great 2022 had risks like a potential steep decline in auto sales and post-COVID syndromes—everyone rushed to get health checked, causing unpredictable jump in loss ratios. In that situation, risks had a significant impact on the sector.

2024, however, was different—inflation was low, GDP growth was healthy, car sales were on the rise, and there was no pandemic. A hurricane was the only substantial risk that hit, but insurers had the financial muscle to cover all losses without significant impact on their financial results. So, 2024 was a golden year for the industry in terms of financial performance. Another year like 2025 might be challenging to achieve.

The 1st quarter report by the Belarusian Automobile Association and the Association of Lessors suggests that related markets are on a downturn, which could affect insurers. After all, insurance acts as a barometer for the economy.

Where did insurance companies stash their reserves?

We only have data for 2023, and it's quite conservative. The Ministry of Finance doesn't publish these reports. We request them when we prepare our annual collection in October-November.

Reserves are primarily parked in government bonds and bank deposits. Investments in real estate are minimal.

The strict supervision of reserve use is because they are policyholders' funds. They must be invested in low-risk instruments, which the Ministry of Finance oversees. Flexibility isn't on the menu here.

Should anything change here?

For life insurance companies, a more flexible reserve placement regime might be necessary. However, the limited format of our stock market complicates matters.

What throws the most cash into insurance companies?

Unlike income, insurance companies only get premiums. It's a complex system involving earned and unearned premiums, mathematical reserves, and profit.

Back in the day, stunning deposit rates of 52% or even 20% per annum made insurance companies quite rich from investment income. Nowadays, thanks to lower bank rates, passive income from investments is not as enticing—so, all eyes are on collecting premiums.

What's on the horizon for the insurance market this year, and how do you see the sector coping with these challenges, in your opinion?

According to analysts from the "financial troika" (banks, insurance, leasing), we might not see the impressive outcomes of 2024. Additionally, experts predict a shakeup in sales on these markets due to new regulations for financial intermediaries, which have taken a bite out of their markup. This will affect not only insurance agents and brokers but the entire financial market.

This is the 713th decree for the financial market, with one crucial difference: while the 713th decree limited maximum markup to 30%, the new regulations only permit a markup of 5% or even 1.5%.

This has already set off a transformation in the financial market—it's tough to predict how it will all end.

- Irina, are you anticipating a slowdown in the growth of insurance portfolios this year?

- Predicting the influx of insurance premiums is tricky. I've heard analysts suggest that in the best-case scenario, we might maintain the volume of 2024, or perhaps see a slight dip. However, a substantial increase is unlikely.

Hitting the psychologically important billion-dollar milestone within the next three years is feasible if life insurance drives the industry, as it does in Russia. This sector needs maximum freedom to flourish.

Interview by Oksana Kuznetsova, Journalist

In 2025, the Belarusian insurance market could face challenges due to new regulations for financial intermediaries, potentially affecting the increase in insurance premiums.
Despite the growth in Belarusian insurance market in 2024, the results for 2025 might be challenging to achieve due to economic factors and new regulations.
In order for life insurance to drive the growth of the Belarusian insurance market and hit the billion-dollar milestone within the next three years, maximum freedom is needed for the sector.
As the Belarusian insurance market continues to grow, the industry should focus on digital transformation, particularly adopting AI, improving digital infrastructure, and integrating personalized IoT services to stay competitive.