The central Asian republic of Uzbekistan last month opened its state-run insurance industry to entice Western investors into this former Soviet state.

Through its newly enacted Law on Foreign Investment, the government now allows the establishment of wholly owned foreign insurance agencies to compete against its own three-year-old National Insurance Co.By opening the market, the government wants to provide potential foreign investors with multiple sources of vital political risk insurance. Corporations buy this type of insurance as protection against expropriation - or the taking of property - war or civil unrest, interference by local authorities with the use of profits and restricting the free exchange of currency.

American investors can also buy the coverage through the Overseas Private Investment Corp., a U.S. government agency. The European Bank for Reconstruction and Development and the U.S. Small Business Administration is also insuring businesses and investments, according to a report on the region by Tatyana Geller and Scott Horton for the New York law firm of Patterson, Belknapp, Webb & Tyler.

Uzbekistan, which became independent in 1991, is abundant in gold, silver, uranium and lead, but not investors, the report said.

One of the largest investors in Uzbekistan, is Denver-based Newmont Gold Co. which in April opened Zarafshan-Newmont, a 50-50 joint venture with two entities of the Republic of Uzbekistan - the State Committee for Geology and Mineral Resources and Navoi Mining & Metallurgical Combine.

The Muruntau mine, insured for political risk by OPIC, is one of the largest open-pit mines in the world and is located in the Kyzylkum desert, 250 miles southwest of the Uzbek capital of Tashkent.

"It seems popular today to dump on Uzbekistan as an authoritarian state," the report says. However, as the government begins privatizing such key industries as mining, cotton, machine tooling and chemicals, contact with foreign investors "will certainly contribute to creating a mature, pragmatic and democratic society in Uzbekistan."

Several foreign insurance companies also see growing interest in the country and are setting up subsidiaries to service that business.

Just last month, American International Group, Inc. in New York, became the first licensed insurer in Uzbekistan when its Uzbek American Insurance Co., joint venture with the National Bank for Foreign Economic Activity became registered with the Registrar of Companies. UZ AIG is owned 51 percent by AIG and 49 percent by the National Bank with initial capitalization of $2 million.

"Over time, foreign investment opportunities in Uzbekistan will increase," Maurice R. Greenberg, AIG's chairman, said in a statement, "and AIG expects to provide both insurance and financial services to assist in fulfilling the country's development goals."

Tokio Marine and Fire Insurance Co. , Japan's largest casualty insurer, also has signed an agreement with the NIF to form a joint venture, in anticipation of a flow of Japanese investments, the report said.