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Myanmar opening for business as government moves to liberalise local insurance market, says Axco
Axco Insurance Information Services (Axco) has released its latest non-life country report on Myanmar. In 2016, the Ministry of Finance and Planning in Myanmar announced further plans to liberalise the insurance market, allowing foreign players into market. The government first opened up the insurance market to domestic and international insurers in 2012, breaking the monopoly held by state-owned Myanma Insurance.
Axco reports that at present, insurers can only compete on the basis of service to agents or clients, as Myanma Insurance controls rating, policy terms and conditions, and commissions. Additionally, independent companies can only underwrite certain classes.
The non-life market consists of Myanma Insurance and 12 independent and locally owned insurers, nine of which have composite licences although only six actively compete with Myanma Insurance for non-life classes.
Insurers are not allowed to buy reinsurance and are limited to accepting a maximum sum insured of MMK 500mn (c. USD 400,000). For clients who need a policy in excess of that limit, a local company must co-insure the excess with the other five insurers, at 10% each, and Myanma Insurance, which takes the remaining 50%.
Although there are no official figures produced, Axco sources estimate the non-life market in 2014 to be worth around MMK 34,500mn (c. USD 25mn), 94% of the country's total insurance market. The non-life insurance market has low levels of penetration and market premium is just 0.05% of GDP, with per capita spend below one US dollar. The market is dominated by fire (property) risks at over 80% market share.
There is however, opportunity for non-life insurance penetration to increase. There is growing appetite from Myanmar's burgeoning middle class; those earning in excess of USD 500 per month. Myanmar's economic development has led an influx of local people into the formal labour market, providing them with a regular income.
Since the programme of liberalisation began, a number of international non-life insurers have established representative offices, including Mitsui Sumitomo, Sompo and Tokio Marine & Nichido Fire Insurance. However, these regional offices look after the local interests of their group clients and place any business through Myanma Insurance as a fronting company. Since they are not licensed, they are not allowed to market their products or conduct business in Myanmar. It is expected that the number of such representative offices will increase in future.
Tim Yeates, Managing Director at Axco, commented:
"Myanmar's government is attempting to attract foreign companies into the local insurance market through a process of gradual liberalisation. Although there is still a long way to go before foreign companies can progress beyond representative offices, the growing middle class could provide a future customer base. "With such low insurance penetration, there is opportunity for foreign capital to enter the market and compete with local players, though an understanding of the local market will be essential."
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