Tashkent, Uzbekistan (UzDaily.com) -- The growth in premiums of Uzbek insurance companies is likely to slow over the next 12-18 months due to the introduction of new regulatory restrictions on retail lending, the rating agency Moody’s said in a report.

The agency notes that the new regulatory restrictions on retail lending in Uzbekistan reduce the availability of car loans, which will impact the demand for car insurance and credit insurance.

Moody’s emphasizes that car insurance and credit insurance, usually sold alongside car loans in Uzbekistan, accounted for a combined 43% of the industry’s net written premiums in 2023, which is 37% higher than in 2022. The 90% increase in car loans in 2023 drove up premiums for car insurance and credit insurance by 100% and 80%, respectively, compared to 2022.

The increase in both car loans and associated insurance premiums is also linked to the rapid growth in average car prices, Moody’s experts note.

The high dependence of Uzbek insurers on car insurance and credit insurance, as well as the close correlation between these types of insurance and car loans, make the industry vulnerable to upcoming regulatory restrictions in the car loan sector, according to the agency’s report.

From 1 July 2024, the Central Bank of Uzbekistan will impose limits on the ratio of average monthly loan payments to average monthly income in an attempt to curb the rapid growth of retail lending, which has led to an increase in consumer debt and created risks for banks’ assets.

Moody’s expects the new measures to significantly reduce the annual growth of car loans to around 30% in 2024-2025. Growth in premiums for credit and car insurance is also expected to decrease to around 30-40% in the next 12-18 months.

Moody’s analysts also predict that Uzbek car insurers will face higher claims expenses in 2024-2025, due to high inflation as well as an increase in traffic accidents.

The reduced availability of car loans will also decrease the demand for cars after a year of rapid growth in 2022-2023. According to the Center for Economic Research and Reform in Uzbekistan, car sales volume in February 2024 decreased by 20% compared to January and nearly 6% compared to February 2023.

The post-pandemic economic recovery in Uzbekistan has boosted household consumption, leading to a 150% increase in car sales over the past two years and causing a rapid rise in prices for both new and used cars. This has made it difficult for many households to purchase cars without borrowing. At the same time, high interest rates on retail loans have incentivized banks to provide car loans, Moody’s notes.