Tashkent, Uzbekistan (UzDaily.com) -- Uzbekistan’s substantial reform programme to modernize the local insurance sector is ambitious and is unlikely to achieve its targets swiftly, Fitch Ratings says in a newly published report.

However, the establishment of a new regulatory and supervisory body to coordinate multiple regulatory changes in the insurance sector, successful execution of the modernisation plan and the overhaul of the prudential framework will be credit-positive for Uzbek insurers in the long term.

The Uzbek government expects the insurance sector’s GDP contribution to grow to 0.8% by 2022 from 0.4% in 2018, and gross premiums written to increase to USD478 million (as per Fitch-forecast average annual exchange rate) from USD203 million, as a result of the reform. Fitch views the forecast growth as ambitious, even after accounting for its expectations of strong growth of Uzbek real GDP in 2020-2022.

The qualitative improvements in sector expertise, including full transfer to International Financial Reporting Standards (IFRS) by end-2021, and implementation of modern prudential regulations and in-house risks management practices, such as a strengthened role of actuaries, are the most challenging part of the reform.

As the government plans to retain capital within the sector through reinsurance protectionism, foreign insurers may have limited interest to apply for a license in the Uzbek primary insurance sector.