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LIGHTS FROM WESTERN EUROPE to Almaty, Kazakhstan, land before dawn. Even for a planeload of seasoned travelers, it's somewhat discomforting to be told to "brace for landing." The runways in Almaty are potholed and pitted.

However, behind the facade of the 1960s, Soviet-era terminal (now being renovated) lies an opportunity for businesses willing to take a risk for potentially large gains in the future.

Kazakhstan has an abundance of oil, gold and infrastructure projects, yet it still is frustrating for international investors, even those accustomed to the old Soviet-era bureaucracy. There aren't many places on earth where contradictions are more extreme: The government boasts of oceans of oil and mountains of gold, yet the average monthly wage for a Kazakh worker is about $50.

Although Kazakhstan has problems with crime-as does the rest of the former Soviet Union-its levels are relatively low compared with Moscow and St. Petersburg, which are far more prosperous than Almaty. When a professor at a local university was asked to explain this discrepancy, he said the Kazakhs are gentle by nature and learned to be patient under the iron rule of the Soviet Union. For many international executives, this friendly attitude is a welcome contrast to the fast-paced lifestyles evident in the Russian Federation.

And while Almaty may be considered backwater by Moscow standards, it's a showplace in the former Soviet Union, where the Tien Shan mountains are visibly snow-peaked throughout the summer and lush green trees line the centrally planned streets.

Despite the tranquillity, there's an undercurrent in the foreign community akin to that of Moscow in 1992 and 1993: The country is ready to boom, and Western expatriates stationed there are laying the groundwork to reap rewards of early investment in this developing nation.

The first businesses to enter Kazakhstan were oil companies that, with patience and abundant monetary resources, have been able to establish a foothold in the Caspian Sea region. Chevron Corp., for example, began exporting oil profitably from Kazakhstan in 1996 and reportedly expects to build on its profitability in the foreseeable future.

Nonetheless, most companies investing in Kazakhstan are infrastructure companies seeking to participate in the renovation of Almaty and the change of the country's governmental capital city from Almaty to Akmola. This initiative is expected to involve a multiyear process believed scheduled to begin in 1998.

Funding sources for all this work remain a mystery. Some Kazakh government officials have suggested that Parliament might ultimately pass a "relocation tax" to apply to businesses in general and operations owned by non-Kazakh businesses in particular.

Meanwhile in Almaty, representative offices, warehouses, distribution centers and a few assembly lines are sprouting up as international businesses strive to build an infrastructure to begin marketing their goods and services throughout the region. As these companies hire staff and contribute to the rising living standards, consumer goods companies-such as soft drink manufacturers, confectioners and fast-food chains-all are gaining a foothold in anticipation of the region's oil boom.

As businesses prioritize tasks to establish a presence and hire and train a sales force, insurance and risk management issues tend to fall to the bottom of managers' to-do lists.

Kazakhstan has but a handful of licensed insurers, compared with 3,500 in Russia. Even so, it lacks an insurer with the stature of Russia's Ingosstrakh or Rossiya Insurance Co. that stands well above the others in terms of capital and reserves. Local Kazakh companies are notoriously under-capitalized, and their experience lies in "fronting a risk" rather than "rating and insuring" risks. There's a clear need for reinsurance in this market; a third-party motor or physical damage loss of $200,000 could bankrupt just about any Kazakh insurance company. Technical support from joint-venture partners is virtually non-existent; most international insurers either are approaching this market cautiously or waiting for changes in local legislation that would allow a foreign joint-venture partner to own 51% of a local insurance company and exercise management control.

In the meantime, it's up to the broker to establish basic standards for the Kazakh insurers and to train them in everything from policy issuance and claims handling to facultative and treaty reinsurance. In terms of insurance, nothing can be assumed or taken for granted in Kazakhstan.

For example, a few Western companies insured locally and suffered an "insured" loss only to be informed it wasn't the insurance company's intention to pay this "particular type of claim," despite policy statements to the contrary. Yet successful programs have been implemented in Kazakhstan with the help of local brokers and international reinsurance. A recent example of this is a Canadian mining company. After implementation of an international property/casualty and motor program, an accident occurred, claiming the lives of several local workers and resulting in a judgment in excess of $300,000. Clearly, no local Kazakh insurer would be able to support such a claim.

Fortunately, this company worked closely with its local broker and the London reinsurer to ensure that proper payment was made in Kazakhstan. Local requirements were met, and goodwill for the Canadian company was ensured by meeting its obligations locally, not to mention balance sheet protection against this unforeseen loss.

What type of insurance program should a company consider? Start-up companies or joint ventures in Kazakh should buy these coverages:

Property. This coverage is usually required under the terms of the lease when an international company leases office space locally. Because of the scarcity of office space, consider purchasing an element of extra expense insurance in addition to physical damage insurance. International reinsurers are usually eager to participate on property visits.

Motor. A new law pertaining to motor insurance requires the owner of a vehicle to purchase at least $5,000 of third-party liability insurance locally. This insurance is relatively expensive and must be purchased through certain approved local insurers. Seventy percent of the funds collected go into a reserve account for paying claims. Virtually all international companies purchase excess third-party liability cover; it's possible to purchase $1 million locally. Due to the high propensity of collision and theft, physical damage insurance should be considered, and it would be prudent to reinsure this if a Western reinsurer can be found.

General liability. Although instances of high third-party liability claims are currently uncommon, Kazakhstan has many expatriates residing in the country. It's important to have adequate limits (at least $1 million) and to structure programs so reinsurers can participate in the transaction.

Marine. Goods traveling into or through Kazakhstan require evidence of local insurance. This generally must be purchased within the country. Local insurers are happy to front for international companies and will usually retain 5% to 10% of the risk.

Oil and gas. There was some speculation in 1996 as to whether a new insurance law would be passed requiring multinational insurers to purchase insurance cover starting from the first dollar or above a small deductible.

The law was designed to generate income for the local insurance industry, because many international oil and gas companies forgo purchasing local insurance in light of the large excess coverages they typically carry. The proposed insurance law has yet to be implemented, and the government has not yet identified the insurers that would be licensed to issue such policies. In addition, the Kazakh government is considering a law to govern pollution and environmental liability that is expected to be enacted later this year.

Personal accident. Kazakhstan's health care system is similar to those throughout Eastern Europe. Technically, Kazakhs are entitled to receive medical treatment. However, it is difficult to access adequate medical coverage without hard currency. Personal accident insurance provides Kazakh employees with the confidence that if they're injured on the job, funds would be available to them.

Medical. This cover generally includes both illnesses and injuries on and off the job, unless specifically excluded. Coverage is expensive, although it seems to be embraced as a "perk" by most senior Kazakh employees.

Life. This benefit is just becoming popular among Kazakhs working for international companies. Group life policies are available but, as with every other insurance coverage, it's advisable to reinsure 95% of the risk to a Western reinsurer.

A well-placed program should be structured as follows: A local broker places a policy with a local Kazakh insurer, which retains 5% of the risk and receives a fronting fee of at least 10% for issuing the local policy. The remaining 95% of the risk can be reinsured outside Kazakhstan, but the Central Bank applies a 5% reinsurance tax on the 95% ceded. Despite the extra costs for the fronting fee and reinsurance tax, it's important for international policyholders or joint-venture partners to insist on an international reinsurance program. Without reinsurance, most Kazakh insurers will not pay large claims.

The future of the Kazakh insurance industry remains open. The local market was prudent enough to opt for an open and free market and ignore suggestions from one broker to create a monopoly state insurance company or, alternatively, a local pool led by a state insurance company.

This decision has had a direct impact on multinationals establishing operations in Kazakhstan, giving them the freedom to structure insurance programs with selected insurers in a way that best suits their needs and is consistent with their corporate philosophies. As tax legislation is rationalized to allow foreign companies to keep or repatriate a large share of profits, the country's development will begin picking up momentum. A few international brokers are meeting with the largest global insurers to encourage mergers between the insurers and local Kazakh insurers to bring technical expertise and capitalization to the marketplace.

As has been the case in Russia, insurers brave enough to risk setting up operations in Kazakhstan now are likely to reap rewards in the future that include a significant share of this dynamic market. In addition, the first to invest in Kazakhstan may benefit further down the road as it becomes a regional hub for Central Asian operations.