International Business Council Demands Cancellation of National Reinsurer Project

The International Business Council (IBC) of Kyrgyzstan has criticized the draft government resolution on the establishment of a national reinsurance operator. It is proposed that the State Insurance Organization (GSO) will become the sole national reinsurer.

According to the draft published by the government:

The GSO will be appointed as the national reinsurance operator;
insurance companies will be required to cede at least 10% of their risks to the GSO for reinsurance, with the share increasing to 50% in subsequent years;
all risks intended for transfer to the Eurasian Reinsurance Company (ERC) will be directed exclusively through the GSO;
a new regulation on the national reinsurance operator is proposed, defining its legal and organizational aspects.

According to the data provided in the justification note, in 2024, insurance companies ceded 85% of risks abroad, amounting to 1.27 billion soms. The State Financial Supervision Agency held a discussion on this issue, where stakeholders expressed their opinions.

In its official statement, the IBC warns that the draft creates quasi-monopolistic conditions with a mandatory "right of first refusal," centralized underwriting, and administrative control.

"This undermines market mechanisms for risk management, increases regulatory risks, and makes the entire insurance market dependent on a single state operator," the council emphasizes.

Main complaints of the IBC:

Goals are not achieved

The proposed draft does not address the issue of premium outflow abroad; the national operator will merely act as an intermediary for placing risks in international markets. Private insurers already have the opportunity to work directly with foreign reinsurers.

Systemic risks

Compliance with all reinsurance operations by a single entity makes the market vulnerable to failures of the national operator. Delays or refusals could severely damage insurance protection in sectors such as energy, transport, mining, aviation, and foreign trade, jeopardizing the economic security of the country.

Conflict of interest

The GSO simultaneously conducts direct insurance and reinsurance, giving it access to the trade secrets of competitors (such as rates and portfolios), violating the principles of fair competition.

Quasi-regulatory powers

The national operator gains the right to request any documents and receive detailed reports monthly, effectively becoming a supervisory body, which violates equal conditions for all market participants.

Threat to fronting and obligatory contracts

The obligation to offer risks to the national operator makes it impossible to fulfill international fronting contracts and existing obligatory agreements with foreign reinsurers.

Unrealistic timelines

Five working days for risk review is five to ten times longer than in international practice. This could block major projects and deter investors.

The IBC emphasizes that the proposed model is copied from sanctioned countries (such as Russia and Belarus), where access to international markets is restricted. Kyrgyzstan does not have such restrictions, so the project is seen as excessive and potentially harmful.

"The project does not achieve its stated goals, creates systemic risks, undermines competition and diversification, and threatens economic security. The council proposes to cease discussions on this document and reconsider the presidential decree to ensure that the concept meets the real needs of the insurance market. Developing national reinsurance capacity can only be achieved by maintaining market mechanisms, a competitive environment, trust among participants, and predictable regulation, which are necessary conditions for the sustainable development of the insurance market and the economy of Kyrgyzstan as a whole," concluded the IBC.

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