Kyrgyzstan introduces compulsory real estate and vehicles insurance

BISHKEK (TCA) — As Kyrgyzstan faces state budget deficit the Government is trying to raise budget revenues at the expense of the citizens. In February 2016, compulsory insurance of residential real estate and motor transport will be introduced in Kyrgyzstan.

Kyrgyzstan’s public debt was 58.5 percent of GDP as of the end of 2015, the country’s Finance Ministry said. The debt has increased to $3.69 billion, of which the external debt is more than $3.49 billion. By Kyrgyz law, if the debt exceeds 60 percent of GDP, the state will not be able to borrow further.

The exchange rate of the US dollar to Kyrgyz som has increased by 31.78 percent compared to end-November 2014. To reduce its dependence on the dollar growth, Kyrgyzstan needs to reduce its foreign trade imbalance. Kyrgyzstan’s foreign trade has decreased by 21.3 percent with imports decreased by 25.5 percent in 11 months of 2015. Exports to the CIS countries have decreased by 23.4 percent. Kyrgyzstan has reduced trade with Russia almost twofold.

According to the Government, a newly formed State Insurance Organization JSC will compensate for damages or destruction of housing as a result of fires and natural disasters.

The Fund for State Property Management will be the founder of the JSC, whose authorized capital of 50 million soms will be formed by the issue of 500,000 shares.
On February 7, the law on compulsory property insurance will come into force and all homes should be insured on a mandatory basis, Prime Minister of Kyrgyzstan Temir Sariyev said.

If a home is not insured, but damaged or destroyed in a disaster, the state will not grant funds for its restoration. If a dwelling is located in the village, the person shall pay 600 soms per year to the insurance company. In case of destruction, a homeowner will get a 500 thousand soms insurance, and this amount will be enough to restore the property, said Sariyev.

According to PM, the urban housing is more expensive than in rural areas, and compulsory property insurance in cities will be twice as much – 1.2 thousand soms.

More than 50 percent of Kyrgyzstan’s population lives in rural areas, and in most cases, their homes are most susceptible to destruction in natural disasters. Previously, the state granted loans of 200 thousand soms to those whose homes were destroyed by natural disasters. This amount is not enough to restore a home. Moreover, the allocated funds should be returned, though interest-free. In this regard, the Law “On mandatory property insurance” has been adopted, concluded Sariyev.

Kyrgyzstan citizens must insure their motor vehicles within two and a half months and houses within four months. If a person does not buy a car insurance policy, he will pay a penalty of 10 calculation indices (one thousand soms), which will be imposed by the road police.

If a person carries out a legal real estate deal, he will have to submit an insurance policy, otherwise the transaction will not take place, and he will have to pay a fine. The amount of the fine has not yet been determined by the Government.

More than ten private companies will be engaged in the vehicle insurance while only one company, the State Insurance Organization, will ensure housing. The Association of Insurers of the Kyrgyz Republic, which has a compulsory payments fund, will be a guarantor of the insurance companies.

According to Chairman of the State Service for Regulation and Supervision of the Financial Market, Sanjar Mukanbetov, the state-owned insurance company has already opened branches in the regions.

In case the insured event occurs, payout to villagers will be 500 thousand soms and to city residents one million soms. If homeowners evaluate their homes higher, they can voluntarily insure their property for a larger amount.