- POSTED: 20 Jun 2014 18:44
- UPDATED: 20 Jun 2014 19:14
One in 86 people in Myanmar has insurance policies. This means huge growth potential, but not everyone is convinced that the country is ready to open the market to foreign firms.
YANGON: Myanmar may only allow foreign insurance firms to operate in the country in 2018. The government had earlier signalled it may open the sector to international insurance players next year.
That gave hope to the 14 global names that have representative offices in the country, but not everyone is convinced Myanmar is ready to liberalise this market.
In a population of 60 million, only about one in 86 people in Myanmar has insurance policies, and that means huge growth potential.
Donald Kanak, chairman of Prudential Corporation Asia, said: "As families began to get into a cash economy, have a bank account, they accumulate some cash and they become aware of where they're going to deploy that cash, that's one thing. Secondly, people start to learn about financial products."
Currently, 12 local companies offer six types of insurance, such as automobile and fire coverage.
But an influx of foreign investment has sparked a need for more complex products and greater capital.
Nyo Myint, senior managing director of KBZ Group, said: "Together with the entry of the foreign banks into the country, we anticipate more business growing in Myanmar.
“Together with the expansion of the business, we have to also provide more coverage for the insurance.
“So in that sense, existing capabilities within our local companies are not sufficient. Unless we have collaboration with the international insurance companies, we cannot afford as required.”
But Myanma Insurance, which has monopolised the market for 50 years, disagreed.
The state-owned insurance provider has seen its premium income double in the last five years. It fears opening the gates could drown the local players.
Sein Min, general manager at Myanma Insurance, said: “If we allow (foreign players into Myanmar), our local market cannot compete with them.
“So that is why we need to encourage our local market first and then after that we have to consider foreign entities for insurance companies. They can get the opportunity in the near future, maybe three years or four years later.”
But international firms said it is not about saving the local sector.
They said Myanmar needs foreign insurers to fund its economic growth.
Kanak said: “Banks are relatively focused on short- and medium-term finance. They take deposits which are available and they make short- and medium-term loans.
“Who funds the long-term needs of the country when it's growing? Government-financed infrastructure and permanent capital in the system.
“Insurance companies are the provider, the logical long-term providers of capital so the two have to go hand in hand.”
Before Myanmar's military rule in the early 1960s, over 70 local and foreign insurance firms used to operate there.
Today, only 12 local private insurers are allowed to sell basic insurance products.
Industry players however, believe the industry can grow by at least five percent annually.
Reports have also estimated that the insurance market will be worth US$2.8 billion in 2030.