In Kyrgyzstan, it is now prohibited to take out voluntary home insurance without a compulsory policy

President Sadyr Zhaparov has signed a law amending the rules on home insurance against fire and natural disasters. The document is dated 24 July and will come into force six months after its official publication.

One of the key changes is that insurance companies will no longer be able to issue voluntary home insurance policies if the homeowner does not hold a compulsory insurance policy or a policy drawn up in accordance with the principles of Islamic insurance – takaful.

A voluntary policy may only be used as additional cover beyond the limit provided by compulsory insurance.

The law also permits the setting of an insurance excess of up to 10 per cent of the sum insured. This is the portion of the loss that the insurer does not reimburse to the homeowner. Its amount will depend on the class of the property and the quality of construction. The procedure for assessing these parameters must be approved by the Cabinet of Ministers.

In addition, the list of insured events has been clarified. Compensation will be provided for damage to a home resulting from:

• fire, exposure to smoke and high temperatures;
• water ingress during fire-fighting operations;
• an earthquake measuring five or more on the Richter scale;
• mudslides and flooding;
• landslides or rockfalls;
• winds of 18 metres per second or more;
• severe snowstorms;
• hail;
• a direct lightning strike.

The demolition of a home and the relocation of its owners to a safe area, following a decision by a state body, is also recognised as an insured event if a natural disaster has posed a threat of the home’s destruction.

Another change concerns the creation of a single insurance pool. It will be granted the status of a legal entity, and its funds will be formed from a portion of the insurance premiums paid by insurance organisations. The pool will be liable for obligations arising under compulsory home insurance.

All companies authorised to operate in this sector will be required to join the insurance pool. The sale of compulsory policies must be conducted through its unified information system. The pool will also include the establishment of an emergency fund.

The requirements for the pool’s operation, the procedure for managing its funds, the level of contributions from insurance companies and the terms of reinsurance will be determined by the Cabinet of Ministers. Supervision of its solvency and the fulfilment of its obligations to insured citizens will be entrusted to the authorised body responsible for regulating the insurance market.