Myanmar to open insurance sector to foreign participation in 2018/19 (Oxford Business Group)
On August 28 representatives of the Insurance Business Regulatory Board (IBRB) announced that overseas insurance companies would be allowed to formally enter the market at some point during FY 2018/19, which begins on October 1. “We are planning to allow foreigners to participate in the domestic insurance market,” U Zaw Naing, secretary of the IBRB, told local media in August. “We will hire international consultants to help us screen and review foreign insurance providers before permitting them to compete in the market.”
In addition to establishing the screening and approval process, the IBRB has yet to lay out the regulatory requirements for overseas entrants, including whether they will be expected to form a working relationship with an existing domestic underwriter or operate as a stand-alone entity. However, clarification could be forthcoming. A new piece of legislation, updating the 1996 Insurance Business Law has been drafted by international development agency USAID and submitted to the Financial Regulatory Department (FRD). It is important that the new insurance business law is finalised and passed before market liberalisation takes place, according to U Myo Min Thu, managing director of AYA Myanmar Insurance, as it will set the appropriate governance for all players operating in the industry. The new law is currently being reviewed by the FRD, which is also receiving comments from local private players.
Strong appetite in underdeveloped market
With the lowest penetration rates in ASEAN – life insurance premiums as a percentage of GDP are just 0.01%, while non-life stands at around 0.07% – and economic growth accelerating as a result of liberalisation in other sectors, the Myanmar market presents a significant growth opportunity for overseas insurers
There is also a lot of space in the market for new players. A total of 12 private sector firms currently operate in the country, in addition to the national insurance provider, Myanma Insurance, which accounts for approximately 45% of all gross written premium. In addition to increasing competition for local underwriters, many of which do not have capital resources comparable to those of their overseas rivals, the presence of foreign operators will likely deepen the pool of professional staff in Myanmar, and boost technical and knowledge transfer.
In anticipation of the upcoming sector liberalisation, several international firms have already moved to establish a presence in the country. As of early 2018, 24 foreign insurers had set up representative offices: three of these – all Japanese underwriters – are allowed to sell insurance within the Thilawa Special Economic Zone. However, while the market holds potential, foreign operators will face some of the same challenges experienced by domestic operators. The majority of the 53.6m-strong population is unbanked, which has hindered efforts to increase personal insurance coverage, and there is a general lack of education about the benefits of insurance.
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