For most of the last half century Myanmar’s insurance sector was closed and monopolised, but it is now opening up to both domestic and international competition. The transformation has been rapid and across the board. A dozen domestic private insurers have been formed since 2013, while a raft of foreign companies have opened representative offices in the country in that time. Three international insurers have even been allowed to conduct business domestically, although they are limited to the Thilawa Special Economic Zone (SEZ). The market remains imbalanced and highly controlled, with state-owned Myanma Insurance the dominant player. True competition is not yet allowed, and foreign firms are being kept at a distance. But the first, crucial steps have been taken, and conditions are right for rapid development.
Insurance has been sold in Myanmar since the middle of the 19th century, but for the first 100 years the sector was controlled by foreign companies. At one point, an estimated 80-100 insurers were active in the market. With independence in 1948, the role of foreign firms started to decline quickly. In 1950 the Burma National Insurance Company was nationalised under the Union Insurance Board Act and eventually became Myanma Insurance. From there, foreign and private firms were slowly but steadily pushed out or shut down. Under the 1959 Life Prohibition Act, life insurers were forbidden from taking new business. In 1961 the Compulsory Reinsurance Act required a 30% cession of non-life business to the Union Insurance Board. Finally, in 1963 foreign insurers were nationalised – some 78 firms were active in the country at the time. The 1989 State-Owned Economic Enterprises Law made insurance officially a state monopoly.
The legislation underpinning the sector today is relatively light and somewhat dated. In 1963 third-party liability motor insurance became compulsory. The Myanmar Insurance Law of 1993 pertains to the state-owned insurer and outlines the coverage it can offer. This was followed by the Insurance Business Law of 1996 and the Insurance Business Rules of 1997. These regulations cover supervision, investment, accounting practices and consumer protection, in addition to other subjects related to the sector. Significantly, the 1996 law established the Insurance Business Supervisory Board (IBSB), a body under the Ministry of Finance and Revenue. Technically, foreign insurers can operate in Myanmar under the 1996 law, but no full licences have been granted in the 20 years since it was signed into law. Legal observers have considered the sector closed for all practical purposes. The laws are silent on non-admitted insurance.
Myanma Insurance has for many years operated as the monopoly provider of insurance, although at some times and in some ways foreign and private participation has been allowed.
For example, in 1997 Malaysia’s Jerneh Insurance established a joint venture with Myanmar International Insurance Corporation, which is related to the Myanmar Economic Corporation, and wrote local policies. It did so with some success, as its underwriting was quick and non-bureaucratic, but it later left the market in 2002. Foreign companies have been able to write policies offshore and have them fronted via Myanma Insurance for a 15% commission, or 7% in the case of aviation policies.
Myanma Insurance is somewhat of an oddity in the insurance world, operating more as an extension of the government than an insurer per se. Historically, all premiums have gone to the state and the state has paid all claims. Observers have long believed it has operated without technical reserves, though the company now publishes reserve figures. As a result of the direct connection to the state, the entity has the greatest financial strength possible in the country.
The market has opened quickly, with 12 insurers being licensed in 2012 and five beginning operations by 2013. Almost all were operating by 2015. The licensed firms included: First National Insurance, IKBZ Insurance, Young Insurance Global, Grand Guardian Insurance, Global World Insurance, Excellent Fortune Insurance, Aung Thitsar Oo Insurance, Pillar of Truth Insurance, Ayeyar Myanmar Insurance, Capital Life Insurance, Citizen Business Insurance Public and Aung Myint Moh Min Insurance.
Minimum capital requirements have been set for private companies. Life insurers must have MMK6bn ($5.4m) of paid up capital, non-life MMK40bn ($36m) and composite insurers MMK46bn ($41.4m). Of that, 10% must be deposited at Myanmar Economic Bank and 30% must be used to buy government securities. The companies may offer a number of products. On the non-life side, the list includes: motor, fire, cash in safe, cash in transit, fidelity insurance and travel insurance. In addition, companies can also sell term life, sportsman and snake bite insurance.
Despite being liberalised, the insurance sector is dominated by Myanma Insurance. Companies must cede premiums beyond a certain level to an insurance pool commanded by the state insurer. For fire, the level is anything beyond MMK500m ($450,000). The IBSB places significant restrictions on the sector and insurers have complained about the limitations under which they must operate. The regulator permits firms to cover certain risks and at predetermined prices, which underwriters say makes it difficult to compete and offer insurance. Premiums, they add, are calculated in ways that do not reflect the reality on the ground. Firms are also required to use government-mandated forms and these are often dated. “We have 12 insurance companies now, but they are very young so they cannot retain 100%,” U Sein Min, general manager of Myanma Insurance, told OBG. “If capacity is enough, they can retain 100%.”
Still, the sector is new and lacks experience. Other than Myanma Insurance, no firm has the ability or capacity to handle large risks. The country does not currently have actuaries. It therefore makes sense to keep business highly controlled, to avoid dumping and ensure players do not price coverage too low. “I think it is good that they restrict the premium amount. If they allowed us to set our own premium amounts, there would be a price war,” Daw Khin Saw Win, general manager of First National Insurance, told OBG.
Many players that left in the 1990s have been returning. Willis opened an office in March 2014, Jardine Lloyd Thompson in September 2015 and MetLife in June 2015. Other insurers establishing themselves in the country in recent years include Taiyo Life Insurance, Poe-Ma Insurance, American International Assurance, the Great Eastern Life Assurance, Prudential Holdings, ACE INA International Holdings, Pana Harrison (Asia) and Manulife Financial Life Insurance. In total, 14 foreign insurers are reported to have set up a presence in the country.
Since 2014 foreign insurers have been eligible to apply to underwrite policies within the Thilawa SEZ, and three Japanese companies have been granted operating licences for the SEZ: Sompo Japan Nipponkoa, Tokio Marine and Mitsui Sumitomo Insurance. All three received approval in 2015. To conduct business within the Thilawa SEZ, companies need a three-year track record in the country through a representative office and must pay $30,000 a year for the licence.
Insurers are new and need time to develop so they can withstand competition. Liberalisation will thus be a delicate process that balances opening up the market enough to bring in the capital, expertise and capacity of international companies without overwhelming local players. More freedom in terms of policy design and premium pricing will have to be undertaken in such a way as to avoid price wars and substandard coverage. And while the privatisation of Myanma Insurance would likely result in efficiencies and operational improvements, it would need to be done without damaging Myanmar’s most experienced and best-backed insurance firm.
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