Kaktus.media provides the full text of the appeal:
“Dear Sadyr Nurgoyevich!
On behalf of the business community, we express our sincere gratitude for your attention and openness to dialogue, as well as for your support in developing the investment climate. We hope for further cooperation.
Considering the appeals from our members, we present our request for assistance on the following issue.
Currently, a public discussion is being held on the draft resolution of the Cabinet of Ministers of the Kyrgyz Republic “On the designation of the State Insurance Organization as the national operator for reinsurance,” which, although it aims to develop internal reinsurance capacity and reduce the outflow of insurance premiums abroad, raises serious concerns regarding the stability of the insurance market and the business climate, as well as the economic security of the Kyrgyz Republic.
The proposed model effectively creates a quasi-monopoly reinsurance institution, where elements of mandatory "right of first refusal" and administrative control over reinsurance may replace market mechanisms for risk management, which in turn increases regulatory risks and strengthens the insurance market's dependence on a single state participant.
1. The necessity of compliance with stated goals
The key task of the national operator for reinsurance, as indicated in the draft, is to reduce the dependence of the insurance market in Kyrgyzstan on external reinsurance markets and to enhance its financial stability. However, these goals are not supported by the mechanisms proposed in the draft.Thus, point 10 of subparagraph 12 states that the national operator must interact with the Eurasian Reinsurance Company and other international reinsurers, which means that the transfer of risks to external markets is not eliminated but, on the contrary, institutionalizes it, turning the national operator into an intermediary between local insurers and foreign reinsurers.
Under current conditions, private insurance companies already have access to international markets, and the mandatory inclusion of the national operator in the reinsurance process seems impractical.
2. Threats of institutional dependence
The model proposed in the draft creates a narrow "bottleneck" for the entire insurance market, requiring all reinsurance operations to be carried out through a single state operator.This leads to the dependence of all insurance organizations on the decisions of the national operator, including the timing and conditions for reviewing risks.Thus, the functioning of the insurance market becomes dependent on the administrative decisions of a single participant, creating a systemic risk: delays or failures in the operation of the national operator can negatively affect all insurance companies, as well as the interests of policyholders and investors.
The concentration of reinsurance decisions in the hands of one operator can affect not only the insurance market but also important sectors of the economy, such as energy and transport, which may halt the operations of key enterprises.
3. Problems of risk concentration
There are also concerns regarding the project's goal of ensuring reinsurance capacity for all insurance companies through the concentration of risks in one operator. Transferring significant volumes of risks to one company increases systemic risks for all participants.Risk diversification is a fundamental principle of insurance, and concentration within a single operator contradicts this principle, making the market vulnerable to negative events.In the case of major insurance claims, the entire market will become dependent on one operator, which can lead to delays and a loss of trust in the insurance system.
4. Conflict of interest in the GSO
It should be noted that the national operator for reinsurance also performs the functions of a direct insurer. This combination of functions leads to a conflict of interest and creates unequal conditions for competition.5. Supervisory functions of the economic entity
The draft also grants the national operator powers that are typically inherent to supervisory authorities, undermining the principles of fair competition.6. Risks for obligatory contracts
Mandatory redistribution of risks through the national operator creates serious problems for fronting projects and can lead to a loss of clients.7. Risk review timelines
The timelines for risk review established by the draft raise concerns, as they significantly exceed international standards.8. Improper borrowing of experience
The draft mechanically borrows practices from countries under sanctions, which does not correspond to the real situation in the Kyrgyz Republic.9. Conclusion
In light of the above, the business community believes that the draft resolution on the national operator for reinsurance does not achieve its goals and creates significant risks for the insurance market in Kyrgyzstan.The proposed model leads to excessive concentration of functions and risks, undermines the principles of competitiveness, and poses threats to the economic security of the Republic.The development of reinsurance capacity is only possible in a competitive environment and with the trust of market participants.
Sincerely,
- The National Alliance of Business Associations (NABA);
- The International Business Council;
- The Union of Entrepreneurs of Kyrgyzstan;
- The Association of Markets, Trade Enterprises, and Services of the Kyrgyz Republic.
