Myanmar to open up insurance market to foreign players

The Myanmar government’s gradual liberalisation of its insurance market could create opportunities for international insurers, according to consultant Axco Insurance Information Services.

Axco’s latest country report into the non-life insurance sector in Myanmar references the 2016 pledge from the Ministry of Finance and Planning to allow more foreign players into the insurance market, building on the initial breaking of the monopoly held by state-owned Myanma Insurance in 2012.

Almost five years on, the insurance market is still dominated by Myanma – it controls rating, policy terms and conditions, and commissions, meaning that other insurers can only compete on the basis of service to agents or clients.

In the non-life market, Myanma faces competition from six independent, locally owned insurers, all of which currently face a number of restrictions.

For example, independent insurers are prohibited from underwriting certain classes and can only insure up to a maximum of MMK 500m ($400,000). Nor are they permitted to buy reinsurance.

However, Axco believes there are opportunities for foreign insurers to tap into Myanmar’s non-life market, which the consultant estimates is worth more than $25m.

One reason is the low rate of penetration – market premium is just 0.05% of GDP and per capita spend is less than $1. However, with a growing middle-class and more local people working in the formal labour market and with a regular income, this penetration rate could increase.

Another reason cited by Axco is the government’s desire to attract more overseas insurers into the market – the main objective of the liberalisation.

At present, there are a modest number of international insurers in the country, including Japanese insurers Mitsui Sumitomo, Sompo and Tokio Marine & Nichido Fire Insurance, all of which have set up regional offices in the country that look after local interests of group clients. But due to the lack of a license, they must place any business through Myanma Insurance, which acts as a fronting company.

“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,” said Tim Yeates, managing director at Axco, commenting on the report.

“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,” he added.