Economic Update

The latest step in the liberalisation of Myanmar’s financial services sector has seen the Ministry of Planning and Finance (MoPF) give five foreign insurance providers the provisional right to launch wholly owned life insurance businesses in the country.

On April 5, 2019 the ministry identified Prudential Hong Kong, a subsidiary of the UK’s Prudential; the US’ Chubb Tempest Re; Canada’s Manufacturers Life Insurance Company (Manulife); Japan’s Dai-ichi Life Insurance Company; and Hong Kong’s AIA Company, which operates as a subsidiary of the pan-Asian firm AIA Group, as preferred applicants for foreign life insurance licences.

This follows the MoPF’s announcement in January 2019 that foreign companies would be allowed to enter the market to sell life and non-life insurance products.

Prior to this, foreign firms were prevented from selling insurance in the domestic market, although in 2015 three Japanese insurers were granted provisional licences to operate within the confines of the Thilawa Special Economic Zone, 25 km south-east of the commercial capital, Yangon.

See also: The Report – Myanmar 2019

Pre-licensing conditions and next moves

To be able to launch their operations, the preferred applicants will need to meet a set of pre-licensing conditions, some of which were stipulated by the MoPF in January during the application process.

Each insurance provider will need to prove it is incorporated as a 100% wholly owned foreign life insurance subsidiary under the new Myanmar Companies Law, supply the minimum capital required under the Myanmar Insurance Business Law, be approved by the Insurance Business Regulatory Board and provide an auditor’s certificate stating the company’s net assets.

Insurance providers that did not make the list but had a representative office in Myanmar as of December 31, 2018 can attempt to enter the market by submitting a joint venture (JV) expression of interest with an eligible local insurer. This opportunity is expected to be offered in at least two phases; the first deadline ended on May 3.

According to the JV model, the overseas partner may hold up to a 35% interest in the partnership. These rules also apply to non-life insurers.

For some observers, including U Myo Min Thu, managing director of Yangon-based AMI Insurance, this JV activity could have a pronounced greater short-term impact on local market dynamics. “Just as interesting as those who received the standalone life licences is which overseas and local firms will pair up in JVs,” U Myo Min Thu told OBG.

“A JV can leverage a historical brand and distribution network – something that can take years to perfect as a new entrant in a market. In any case, we expect the life segment as a whole to grow exponentially.”

The granting of five life insurance licences, rather than the expected three, means competition will likely be stronger than the market had anticipated, which could increase the attractiveness of JVs.

Foreign expertise expected to boost quality

It is widely hoped that foreign entrants will bring much-needed skills and technical knowledge to an industry with low penetration, thereby improving product quality and distribution, in line with the Myanmar Insurance Sector Liberalisation Roadmap released by the government in January 2019.

“New firms are expected to bring advanced data-collection and analysis techniques with them, improving all aspects of business,” Robert Easson, CEO of Chartered Insurance Institute Myanmar, told OBG.

However, Easson pointed out that commensurate gains will need to be made in training local talent to support industry expansion. “In this time of overhaul, the clearest problem facing the insurance sector from a delivery point of view is the need for skilled insurance professionals. The agent system is the crux of distribution and tens of thousands will need to be trained to satisfy the need in the market for professional, ethical and trusted sales people.”

U Yan Paing, managing director of locally based Capital Life Insurance, underscored that collaborating with foreign companies in JVs is the best way to modernise the sector. “You can buy technology, but the soft skills to utilise it properly are in short supply. Foreign partners are bringing in a corporate culture and mindset that will help improve that gap,” he told OBG.