Recent years have seen Myanmar’s insurance sector take significant steps forwards, with liberalisation giving rise to a number of foreign insurance companies entering the market. At the same time, the country’s financial sector governance has been strengthened, while the economy has continued to grow. These developments bode well for the industry, with rising per capita incomes expected to lift premium volumes and improved regulations set to stimulate investment. Indeed, with penetration rates for both life and nonlife coverage comparatively very low, and a population of 53.6m as of FY 2018/19, the sector presents significant potential for expansion. Furthermore, the ongoing opening up of the country’s economy and adoption of international best practices is expected to support increased activity and competition.
Structure & Oversight
Myanmar’s insurance sector has been in a state of transition since 2012, when the first local private companies received their licences. Until then, the market had been entirely dominated by the state-owned Myanma Insurance (MI), following the nationalisation of the industry in 1964. However, MI is still the major provider in the sector, and continues to operate under the remit of the Ministry of Planning, Finance and Industry (MPFI). The MPFI was headed by U Soe Win as of December 2019. The foundations for the industry were laid out in 1996, when the country enacted the Insurance Business Law (IBL), enabling private companies to apply for an insurance licence in the country, and established the Insurance Business Regulatory Board (IBRB). Progress was slow, however; the first 12 private insurers were issued licences to operate in 2012.
The institution responsible for licensing is the Insurance Regulation and Supervision Division (IRSD), a subdivision of the Financial Regulatory Department (FRD). The FRD – which was established in its current form in 2014 and is responsible to the MPFI – is charged under the 2015 amendment to the IBL with overseeing the liberalisation of the sector and was instrumental in the establishment of the Myanmar Insurance Association (MIA). Launched in 2017, the MIA is tasked with strengthening cooperation between the public and private sectors, encouraging the development of the insurance market, and attracting domestic and international investment.
According to the most recent figures from the Myanmar Statistical Information Service (MMSIS), the country had 11 privately owned domestic insurance firms, in addition to the state-owned MI, in 2018. There were also 29 foreign insurers and brokerage firms that were present in the country through representative offices. Of this figure, three Japan-based firms, namely Tokio Marine Nichido, Sompo Japan Nipponkoa Insurance and Mitsui Sumitomo Insurance, were allowed to conduct business directly, although their operations were limited to the Thilawa Special Economic Zone (SEZ), a joint project by Myanmar and Japan located south of Yangon.
As of October 2018 the minimum capital requirement was MMK6bn ($3.9m) for a life insurance company and MMK40bn ($26.1m) for a general insurance company, while a composite firm was required to have a minimum of MMK46bn ($30m) to establish operations. Meanwhile, foreign insurers in the Thilawa SEZ were required to have paid-up capital of at least $1bn to start business. In addition, these firms were obliged to purchase government Treasury bonds worth up to 30% of their paid-up capital. However, MI is allowed to invest in shares, securities and other instruments in addition to its core insurance activity.
As a result of the ongoing liberalisation of the insurance sector, five foreign companies were granted licences to issue life insurance policies through wholly owned subsidiaries in November 2019. These companies were Prudential Hong Kong, a subsidiary of the UK’s Prudential; US firm Chubb Tempest Re; Canada’s Manufacturers Life Insurance Company; 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.
Meanwhile, other foreign insurers in both the life and non-life segments can only apply to operate as joint ventures with a domestic firm, with six such arrangements approved in November 2019. Under these, the foreign partner can buy up to 35% of the local company through the purchase of newly issued shares, thereby boosting the capital of their domestic partners. Non-life insurance joint ventures were drawn up between the three Japan-headquartered companies operating in the Thilawa SEZ and domestic providers AMI Insurance, Grand Guardian General and IKBZ Insurance. In the life insurance segment the MPFI approved three joint ventures with local players between Japan’s Nippon Life and Grand Guardian Life, Thai Life Insurance and Citizen Business Insurance, and Japan’s Taiyo Life and Capital Life.
Foreign participation in the sector is expected to rise further with the passing of the new IBL, which is set to fully open up the market to international insurance players. The law, which was drafted in mid-2018 by the IBRB in collaboration with the IRSD, the FRD, the US Agency for International Development and Japan International Cooperation Agency, was undergoing a public consultation as of November 2019. However, the new legislation has attracted some criticism from investors. In September 2019 local media reported that the new law would exempt insurers from the prospective Competition Law, which is currently being drafted by the government. The new Competition Law is designed to implement stricter rules for corporate governance and improve the openness of domestic markets. Further debate and amendments to the legislation are likely before implementation.
Other legal reforms are also expected. Existing regulations set a highly restrictive framework for the type and pricing of insurance products available to consumers, with private insurers only allowed to offer policies with the same premiums and limited coverage. This rule was first enacted in 2013 when private insurance firms had little experience in order to better monitor early sector activity. Under the liberalisation plan for the sector this is expected to change, however, with insurers set to be granted the ability to design and price their own products, though they will first have to submit plans to the IBRB for approval. This move is expected to lead to new product offerings that will more accurately suit the needs of Myanmar people, thus increasing insurance penetration. The FRD and the IBRB believe that opening up the market in this way will also drive further engagement of private companies.
The ongoing reform is also impacting distribution channels. Traditionally, insurance agents have played the leading role in the industry. Prior to the onset of liberalisation – when MI was the only firm operating in the field – agents sold only MI products; however, with the opening of the market to private insurance companies, agents were able to sell an array of products from different firms. Nevertheless, as the regulatory system ensures that companies only offer policies with the same premiums and commissions, competition was based on the relationship between the agent and the insurance company.
This system is now changing, however, with agents to be tied to particular companies in the future. Advocates of the reform suggest this will increase competition in terms of products and prices, thereby benefitting consumers. These changes will likely increase the share of gross written premium (GWP) taken by insurance agencies. In 2018 agents took 25% of GWP. However, this share is projected to rise to 45% by 2028, driven by the growth of the tied-agent model as a result of the increasing penetration of the market by foreign insurance firms, according to a report from professional services firm EY.
Another distribution channel that is expected to emerge as a major driver of sectoral growth is bancassurance. While banks are not currently permitted to sell insurance products in Myanmar, IKBZ and AMI were authorised to launch a bancassurance pilot project in August 2019, and new legislation is being developed to facilitate the development of the segment. A number of domestic insurers in the country are part of the same holding company as financial institutions, and there has been a recent expansion in the number and reach of physical bank branches. “When bancassurance receives full regulatory approval, it will become a game-changing distribution channel almost immediately,” U Thaung Han, managing director of CB Life, told OBG.
For reinsurance, the segment is handled solely by MI through contracts with locally present, foreign-owned reinsurance firms or directly with large reinsurers abroad; domestic private insurance companies are unable to provide direct reinsurance. Moreover, insurers can only accept a maximum insured sum of MMK500m ($326,000). If customers require a reinsurance policy in excess of this, a local insurer must spread the risk by co-insuring the excess with five other insurers – each of which must take 10%, leaving MI with the remaining 50%.
Size & Performance
With both GWP and penetration rates currently very low by international standards, the market has significant growth potential. According to EY, the combined value of GWP stood at $85m in 2018, with this projected to increase dramatically to $3.2bn by 2028. While Myanmar’s current GWP is on a par with that of neighbouring Laos, its population is over seven times larger, at 53.4m. Similarly, insurance penetration rates are very low in the country. EY estimated the penetration rate for general insurance at 0.1% of GDP in 2018 and life insurance at 0.03%, while the Ministry of Information put the overall penetration rate at 0.06%, with general insurance accounting for 0.05% and life insurance for 0.01%.
The Myanmar insurance market therefore presents considerable room for expansion. In comparison, Vietnam opened its insurance market to private sector activity in the early 2000s, with GWP growing to $5.7bn by 2018 and an overall penetration rate of 1.5%. With Myanmar having only opened its markets to private players and foreign investors in 2012, and with the liberalisation process gathering pace, industry players have expressed confidence that a similar trajectory lies ahead for Myanmar. The expansion of the sector is set to be supported by both the country’s high and sustained economic growth, and its demographic profile. Myanmar’s real GDP grew by 7% in FY 2015/16, 5.9% in FY 2016/17 and 6.8% in FY 2017/18, according to the IMF, and there is an expanding middle class. In terms of GWP breakdown, around 70% was general insurance and life accounted for 30% during FY 2016/17, with around 30 different types of insurance products being offered.
Prior to the approval of six joint ventures with international firms in November 2019, the nonlife market – with the exception of the Thilawa SEZ – was the preserve of MI and eight domestic private insurers, all of which were composite firms offering both life and general policies. MI offers the widest range of non-life insurance policies, with 20 in total as of November 2019, according to the MPFI. Private non-life insurers have a more limited range of policies, with eight generally on offer.
In terms of market share among private companies, the largest stakeholder in the non-life segment was IKBZ, accounting for 52% of GWP by private insurers in 2017, according to Yangon-based real estate advisory and research firm New Asia Property. Second was Grand Guardian General, with 17%, followed by AMI Insurance (11%); First National Insurance (9%); and Aung Thitsar Oo Insurance (8%). Notably, the larger players are those that have entered joint ventures with foreign insurers. These companies are also part of larger holding companies or financial institutions: IKBZ is owned by Kanbawza Group, Grand Guardian General by Shwe Taung Group, AMI Insurance by Max Myanmar Group, First National Insurance by the Htoo Group and Aung Thitsar Oo Insurance by the Union of Myanmar Economic Holdings – one of the country’s two main military-backed conglomerates.
Currently, the most significant and lucrative non-life product is property insurance, which accounted for 80% of total non-life income in FY 2017/18, according to the MIA. This category is expanding, with increased business activity supporting a rise in fire and property damage coverage. The banking sector has proven a particular boon to the segment, both directly through an increase in bank branches around the country and indirectly through the requirement of real estate insurance to use property as loan collateral. Indeed, in November 2019 MI launched a campaign to promote property insurance among bank branches, particularly in areas of the country that have experienced unrest.
Third-party liability (TPL) motor insurance is compulsory in Myanmar, with this law being enforced by the Road Transport Administration Department. This body also regulates the market: setting the rates, policy coverage and the maximum amount of compensation that can be claimed, with MI serving as the sole retailer. According to the most recent available figures from the MMSIS, some 2.25m TPL policies were issued by MI as of 2017.
Comprehensive motor insurance is also available, with private insurers active alongside MI in the market. Insurance rates are considerably higher for this coverage, however, at around 1% the price of the vehicle, and uptake has so far been low. However, the sale of auto insurance products is expected to rise further, with rates of car ownership increasing rapidly in recent years. Indeed, in 2018 some 18,000 new vehicles were sold in the country, over twice as many as in the previous year. “Awareness is growing quickly in the motor segment,” Daw Marlar Nyunt, managing director of Aung Thitsa Oo Insurance, told OBG. “With its practical and evident benefits, it has proven an easier conceptual barrier to overcome for the general population, and the coverage is also breaking ground for other less-tangible products.”
Another segment with considerable growth potential is crop insurance. With around 70% of the country’s labour force employed in agriculture, Myanmar is among the top-three countries most affected by weather-related events and is particularly vulnerable to the impact of climate change, according to a 2019 report from the UN Food and Agriculture Organisation. In 2018 domestic player Global World Insurance gained approval for a two-year pilot project for crop insurance, with the product being available to farmers in the Ayeyarwady, Mandalay and Yangon regions. However, the project – which is being rolled out in collaboration with the Myanmar Rice Federation – has highlighted the need for improved legislation to support the segment. Speaking to local press in April 2019 U Soe Win Thant, director of Global World Insurance, stated, “We are learning that there is a need for support mechanisms such as a national crop insurance committee, crop insurance laws and crop reinsurance”. Meanwhile, MI launched a oneyear pilot project in March 2019 in Pyay Township in Bago Region and Shwebo Township in Sagaing Region, offering coverage to farmers who have experienced losses due to weather-related events.
The life segment remains in the early stages of development in Myanmar. As a low-income country without a recent history of long-term savings, awareness and uptake of life insurance products remain low. MI is the dominant player in terms of life coverage, and handles the majority of policies for military and government personnel. According to the latest figures from the MMSIS, MI issued 255,373 policies in 2017 for MMK207.9bn ($135.5m). Nevertheless, there has been a steady increase in private sector activity in the life market, both from international firms and local players (see analysis). For example, IKBZ launched a new life insurance unit, IKBZ Life, in September 2019, allowing its joint venture with Mitsui Sumitomo Insurance to concentrate on the non-life segment.
In terms of market share, the top private life insurer in 2017 was Capital Life Insurance, which issued policies totalling MMK74.5bn ($48.6m). This was followed by IKBZ with MMK56.7bn ($37m), Grand Guardian Life with MMK39.6bn ($25.8m) and Aung Myint Moh Min Insurance with MMK35.8bn ($23.3m). As in the general segment, the top insurers in the life market are also part of larger holding companies. Capital Life Insurance is part of the Capital Diamond Star Group, while Aung Myint Moh Min Insurance is part of the country’s other large military-backed conglomerate, Myanmar Economic Corporation.
As per capita incomes grow and the liberalisation process gathers pace, the life insurance segment is expected to expand, with one advantage being that banking deposits have short time spans in Myanmar, while life insurance promises longer-term savings (see Banking chapter). The lack of a joint venture requirement for foreign life insurers also gives overseas investors much greater control over their investment once operations begin. However, for many insurers the main obstacle to growth remains a lack of public awareness and the generally low level of financial literacy. A common mindset is that life insurance is only for people with hazardous occupations, for example, and many citizens are not aware of the benefits of endowments or education savings vehicles.
Given that the sector is still in the early stages of development, and that the liberalisation of the market is ongoing, most insurance companies in Myanmar are taking a longer-term view of the market’s opportunities. For the immediate future, per capita incomes are set to rise, supported by high and sustained economic growth. However, noting the fact that it is starting from a low base, any real take-off of the sector will likely take longer. While the opening up of the market to private and foreign investors is stimulating activity in the industry, the liberalisation of prices and product differentiation – along with greater competition between private players and MI – is vital to sector development. In the meantime insurers are working on boosting awareness among consumers and expanding their product offering.
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