XPRIMM: Considering the results of the Kazakh insurance market in 2015, what are the main trends and possible forecast for 2016?
Boris UMANOV: In our opinion, 2016 will be worse than the ended 2015 for insurers, and it does not herald anything significantly positive in terms of growth. The market is going to plunge into recession, where many companies will not be able to generate profit. At the same time, large companies will find themselves in a much better situation than the overall market, from the point of view of financial stability.

Voluntary health insurance market dynamics is going to slow down. However, it has demonstrated symbolic growth in recent years anyway. Of course, it will be affected by policyholders' refusal to purchase motor hull insurance coverage at increased rates caused by the increase in the cost of spare parts due to depreciation of tenge. Increasingly, car-owners will be forced to abandon the purchase of insurance policy for reasons of economy, plus market growth will bestunted by reduced car sales and reduction in auto loans growth rate.

The most notable slowdown will also occur in the segments of accident and illness insurance and property insurance of legal entities. In these circumstances the main objective of the insurers will not be to increase market share, but to retain profitability of their equity - reduction of policy administration costs and abandoning insurance of loss-making customers.

Another expected market trend in 2016 will be further increase of insurance premiums. As of April 1, 2016 increase in payments rose by 13.3% (18.5 billion tenge (USD56 million)), which indicates an increase in the scope of insurance liability.

In the current conditions it would be difficult to give comforting predictions about the prospects of the insurance market. Most likely, we are going to see further decline or slowdown in fees in all major segments of insurance, as well as loss development, especially in the retail types.

In case of upward trend, growth rate will amount to a maximum of 5-8% at the end of 2016, and even lower in 2017, if not negative. Strong, professional market players will create additional reserves to meet their obligations to customers and partners, and for a customer one of the main factors when selecting an insurer will be indemnity guarantee rather than a dumping price of the product.

XPRIMM: Some international rating agencies have forecasted a negative growth of the insurance market in 2016, with a possible downgrade in ratings. In your opinion, what will be the consequences for the insurers and especially for EURASIA, which has 2 international ratings assigned?
Boris UMANOV: We would like to say that there are lots of rating agencies in the world; there are good agencies in Japan, in Europe and in other countries. But four rating agencies - Standard & Poor's, Fitch Rating's, Moody's and AM Best - are familiar to everybody. To us, a rating from such an agency is a "pass" into the world of international insurance and reinsurance, which allows us to work in all countries from Kazakhstan. These agencies employ highly skilled professionals who understand the situation both in the world economy and in the economy of Kazakhstan.

Although right now we have two ratings - from S&P and AM Best, we do not forget to build contacts with others as well. Generally speaking, basically, no one in the world is forcing anyone to get ratings or to accept them. Rating is a kind of "currency". Moreover, this currency is issued by one or another rating agency. At the same time no one is forcing our customer, whether an insurer in Kazakhstan or an international reinsurance company, to accept these ratings. It is a matter of trust.

Kazakh insurance market began to actively explore the rating "space" when supervisory agency began to actively introduce a new concept of taking the standards for our financial institutions to the international level. Today we are extremely pleased that many Kazakh insurance companies have international ratings. How will we benefit from another rating? Today we work with about 170-180 international brokers and about 300 assignors. We believe that this number will increase. I am sure that obtaining ratings from the world's most reputable agencies is the reason why 10% to 30% of the insurance business begins to come from new markets. This is an excellent investment.

XPRIMM: Do you estimate a future decrease of the number of insurers on the local market?
Boris UMANOV: As for insurers, it is long past time for them to reflect on the effectiveness of their operations, the quality and cost of sales channels, risk management capabilities, and their regional networks. The need for this has long been apparent, but because of crisis and decline in growth rate of the market, the effectiveness issues have now come to the fore. This is the main factor in the survival of insurers in 2016. They should also address the significant problem of activation of fraud that affects the increase of insurance benefits and insurer's costs. At the same time, we must understand that crises in any system, including in the insurance market are the time of "self-cleaning", restructuring and identifying weaknesses.

There is likely to be a reduction. However, it is not going to happen next year, as devaluation took place not so long ago, but in 2017 the number of players may be reduced. After the devaluation, prices for car maintenance services have increased, the cost of health insurance grew because the prices for medicines for some items have increased by 100%. As a result, insurance becomes unprofitable. Against the background of the deepening problems in the economy, a mega-regulator, represented by the National Bank, for 3-5 years will continue cleansing of the insurance market from the companies whose financial stability is very questionable. Thus, the regulator'sactions cannot be considered to be an alarming or a negative trend as market regulator clears the market from the companies that really should have left a long time ago.

XPRIMM: What is EURASIA's strategy for the domestic market in 2016, considering the economical situation and the currency depreciation? Are there any businesses lines that you intend to focus on?
Boris UMANOV: With regard to "Eurasia" insurance company, despite rather pessimistic expectations of many experts, we have ended the year 2015 as the insurance market leaders for all financial indicators. The number of new insurance contracts that we have signed this year indicates that we have kept the most important resource, which will determine our future prospects - the trust of our policyholders. The company is stable in its operations with financial flows monitored and regulated carefully. The fact that after difficult trials we have retained the structure, the network and performance of the company and that we pay out insurance benefits has become the most important result of the past year and the beginning year for us. Based on our estimates, this will allow us to maintain this year's best financial result in the insurance market. Our main priority is the balance in the company and its readiness to a relatively deflationary scenario of economic development. Today we have something to be happy about, but we also have a rather challenging ahead.

XPRIMM: What are the expectations from the supervisory authority in terms of market regulation?
Boris UMANOV: It is important to note that, despite the efforts made by the market players to overcome the crisis, addressing the problems of the insurance market without the help of the regulator is impossible, since we believe that the National Bank is working simultaneously in two directions: not only to improve transparency and reliability of the insurance companies, but also to develop the market, which we have always lacked. The crisis will eventually come to an end, and insurers, tempered by severe conditions, having improved their structure and working methods, will renew the scope of premiums income.

XPRIMM: Nowadays, EURASIA has become an important reinsurance player. What are the main objectives in this direction and on what markets do you intend to focus on? Does Russian Federation remain a strategic partner?
Boris UMANOV: The answer to your question is very brief - more than 90% of the total volume of incoming reinsurance from abroad in Kazakhstan is accounted for by "Eurasia" Insurance Company"JSC, and market volume (if such a term can be applied to this situation) correlates to the capital of Eurasia. For "Eurasia" Insurance Company"JSC incoming reinsurance is more than just a source of income, but is also a tool to diversify its business. This is especially important for us today. By reinsuring risks from abroad, Eurasia receives foreign currency revenue. At the same time, the devaluation of the tenge has reduced the company's current costsfor labor expenses, maintenance of infrastructure, and so on. Of course, denominated in currency. Thus, the expenditure part of this business line has declined while revenues continue to grow.

Over the past years, "Eurasia" IC has paid out a number of large insurance benefits, such as: $2.5 million for the explosion at gas processing plant in the United States, owned by Williams Companies; "The Great East Japan Earthquake - Tohoku" in 2011, where Eurasia paid insurance indemnities amounting to 500 million tenge. Currently, payments continue. More than 1 billion tenge were paid for the flood in north-east Thailand in 2011; a series of explosions on the island of Cyprus at "Evangelos Florakis" Navy Basde, where the payout amount to USD572 thousand; 1.4 billion tenge were paid for the loss of "Telecom-3" and "Express-MD2" spacecrafts; 742 million tenge for the loss of Europe's largest "Express-AM4"communications satellite, and 500 million tenge for the total loss of "Phobos-Grunt" Russian spacecraft that burnt down in the dense layers of the Earth's atmosphere. It is worth to mention a powerful explosion that rocked northern China in the port city of Tianjin on August 12. To date, our company still estimates damages for that man-made disaster.

The main regions, whose risks were reinsured by Eurasia, are Europe, the United States and the Asian region, primarily represented by India and China. By the way, these regions are the most fast growing insurance markets, which also adds to Eurasia's optimism in the development of incoming reinsurance. We are in a constant search for new markets, but we enter them in a highly conservative manner, following the company's mantra, which is "Profit is more important than market share!"

XPRIMM: How do you appreciate the company's results in 2015, on the domestic market? At the same time, from the reinsurance point of view, what is the share of thepremiums accepted from abroad in the total reinsurance premiums accepted by the company?
Boris UMANOV: For the first time in the history of the insurance market of the Republic of Kazakhstan profit of "Eurasia" Insurance Company"JSC in a calendar year was more than USD100 million. Despite the crisis, increment of insurance premiums of Eurasia last year was 10.1% compared to the year 2014, which in absolute figures amounts to a record of 36.7 billion tenge. Another expected trend in the Kazakh insurance market in the past year was continued growth in insurance indemnities payouts. In terms of indemnities payouts TOP-5 of the insurance market leaders account for 61.3% of total insurance benefits paid by Kazakh insurers in 2015. As in the previous year, first place in this ranking was taken by "Eurasia" IC that paid out 19.5 billion tenge of insurance benefits over the past year (an increment of 110%).

"Eurasia" Insurance Company" JSC traditionally occupies a leading position, and in terms of other financial indicators - on January 1,2016 "Eurasia"IC has the largest in Kazakhstan paid-up authorized capital, which amounted to 56.5 billion tenge. Eurasia's equity reached 96.7 billion tenge; its assets amount to 175 400 000 000 tenge. Insurance reserves increased to 74.4 billion tenge. As on 01.01.2016, 56.17% of the total incoming reinsurance fall on the share of "Eurasia" IC.

XPRIMM: EURASIA is traditionally organizing one of the most important international event on Risk Management in Kazakhstan - what are the main conclusions of this year's edition?
Boris UMANOV: While earlier at the conference, we discussed the problem of risk management in an acute and, as it seemedat the time, short-term financial crisis, after the conference it became clear that this is not just another crisis, but is a new reality, in which we are going to have to work.

Nevertheless, we are optimistic and we believe that the theory of probability and mathematical statistics can dramatically change the definition of risk - it ceases to be a possible loss and is transformed into a forthcoming earning. Today the agenda of topical issues includes the issues related to risk management, appropriate changes in corporate structures and risk models, and introduction of actual procedures for the identification, measurement and management ofrisks.

After this conference we, being practical people, are required to set the minimum task of surviving in the changed economic conditions, and ideally to reinforce the position of our business.

It is risk management that allows us to avoid many mistakes, which resulted in disasters in the past. But we hope that at the next conference we are going to discuss not only survival, but also recovery and growth.