According to a report by Nikkei, which cited insiders, local insurers decided to pull out of talks with Thailand’s Muang Thai Insurance and Muang Thai Life Assurance, and South Korea’s DB Insurance, after learning that they were only allowed to set up the joint ventures by buying newly issued shares of local insurers instead of existing shares, as previously communicated.
The Nikkei cited an unnamed industry insider who said that the local insurers were more reluctant about setting up the partnerships after learning about the new ruling, which was made known at the last minute by the government. According to the Nikkei, up until April, the understanding was that local insurers could sell existing shares to form these partnerships.
It was only last Friday that the government had issued an announcement on the further liberalisation of the local insurance market by giving approval for six foreign insurers to form partnerships with local insurers. In April, an announcement was made allowing five foreign life insurers to set up wholly-owned units in the country.
Foreign aid agencies and business lobby groups were supportive of the government’s latest announcement on Friday, with the US Agency for International Development (USAID) releasinga statement dated August 2 supporting Myanmar’s insurance industry reforms.
USAID said a fully competitive insurance market can improve the lives of the people and generate more high-quality jobs. Insurers can also be a source of long-term financing by investing in government bonds that can then be used to pay for large public-infrastructure projects.
“At USAID, we believe that private enterprise is the single most powerful force for lifting lives, strengthening communities, and accelerating self-reliance,’’ USAID Mission Director Teresa McGhie said.
“Incentivising greater private sector investment helps unlock new financing streams and greater choice of approaches and partners for development,’’ she added.
In April, the government approved Prudential, Dai-ichi Life, AIA, Chubb and Manulife to operate wholly-owned units for life insurance in the country.
Last Friday, six joint venture partners were approved, namely between AYA Myanmar General Insurance Company and Sompo Japan Nipponkoa Insurance, Grand Guardian General Insurance Company and Tokio Marine, Nichido Fire Insurance and IKBZ Insurance Company and Mitsui Sumitomo Insurance Company for non-life insurance.
In the life insurance segment, the government approved partnerships between Capital Life Insurance and Taiyo Life Insurance Company, Citizen Business Insurance and Thai Life Insurance, and Grand Guardian Life Insurance Company and Nippon Life Insurance.
IKBZ, which released a survey on the domestic insurance market recently, noted that the local insurance industry can potentially grow to K1.75 trillion in the next 12 months and grow to a K4 trillion market in 10 years.
In Myanmar, insurance penetration stands at just 0.07 percent of GDP, with the market valued at just US$70 million in 2016-17. Non-life insurers contributed to more than 70pc of the market. There are 30 categories of insurance products now being offered, with property insurance representing 80pc of total non-life income, according to Myanmar Insurance Association.