UNDP jointly with the Agency for Insurance Market Development under the Ministry of Finance of the Republic of Uzbekistan presented and discussed the results of a Diagnostic Study on Insurance and Risk Financing in Uzbekistan.
Uzbekistan is prone to natural disasters that can have devastating consequences for the economy and population. The recent strong winds in the Bukhara region and the breakthrough of the Sardoba dam are vivid examples of disasters that have caused significant damage to the population. Due to the underdeveloped insurance market and the lack of inclusive insurance and risk financing instruments, the government, businesses and households suffer financial losses amounting to millions of dollars.
At the 2019 UN Climate Action Summit, a Tripartite Agreement was signed between UNDP, the Insurance Development Forum (IDF), and the German Federal Ministry for Economic Cooperation and Development (BMZ), in which the parties committed to work closely to find solutions in 20 countries around the world and contribute to the achievement of the G20 goal: insuring 500 million people in vulnerable countries against damage caused by climate change by 2025.
To transform this vision into reality, UNDP has established an Insurance and Risk Financing Facility (IRFF) to provide technical assistance to participating countries, including Uzbekistan, in developing inclusive insurance, financing sovereign risks, as well as the integration of insurance into the country’s development planning and financing processes.
To move forward with this initiative, a complete diagnostic study of the insurance industry in the country was conducted. The results of the study and expert recommendations on development of this sector were discussed during the workshop.
During the event, it was noted that the insurance penetration rate in Uzbekistan was very low; insurance premiums account for only 0.36% of GDP (2020). At the same time, there is a real need for development of inclusive insurance in Uzbekistan due to the poverty rate in the country, which, at the beginning of 2020, was 12-15% of the total population. With this in mind, inclusive insurance offers significant opportunities: for governments to protect vulnerable groups, for insurers to expand their businesses, and for the poorest to improve their livelihoods.
As UNDP expert Mr. Sardor Koshnazarov noted in his presentation, the risk financing is another underdeveloped segment of the insurance market in Uzbekistan. So far, the risks of natural disasters have not been insured to a greater extent, and the financial losses incurred from them are mainly compensated from government funding. Therefore, there is an urgent need to develop new, modern insurance products related to financing risks, which in turn, will reduce the financial burden on the government, business and households.
Mr. Sardor Koshnazarov concluded his talk by listing recommendations aimed at further increasing the inclusiveness of insurance and protecting the property of enterprises and households from natural disasters. The recommendations included proposals for improving legislation in this area, capacity building of representatives of respective ministries and departments, insurance industry and private sector, as well as raising public awareness about inclusive insurance and risk financing opportunities.
Representatives of the Agency for Insurance Market Development emphasized the importance of the study in the context of ongoing reforms in the insurance market in Uzbekistan.
During the discussion session, the workshop participants including the representatives of relevant ministries and agencies, representatives of the private sector and international partner organizations, discussed further steps towards the development of insurance industry in Uzbekistan.