Myanmar to open up insurance market to foreign investors

The insurance sector in Myanmar is still in its infancy and dominated by the state owned enterprise, Myanma Insurance (“MI”). Through the Myanmar Insurance Law 1993, MI was empowered to engage in all insurance business activities, permit other insurance companies to issue the type of policies as MI authorizes, and monopolize third-party liability and re-insurance. As a result, MI offers over 40 different types of insurances and monopolizes the market for over two decades, while local private insurance companies (currently there are 12 of them, of which one is yet to be granted license) are limited to 12 types of policies under permission of MI. The list of private insurance companies is provided below:

Sr.	Company Name	Address	Remarks
1	First National Insurance Public Co., Ltd.	No. 400/406, Merchant Street, Botahtaung Township, Yangon	General Ins. + Life Ins.
2	I.K.B.Z Insurance (Public) Co., Ltd.	No. 608, Bo Sun Pat St., Pabedan Township, Yangon	General Ins. + Life Ins.
3	Young Insurance Global Co., Ltd.	No. 647(A), Pyi Road, Kamayut Township, Yangon	General Ins. + Life Ins.
4	Grand Guardian Insurance Public Co., Ltd.	No. 19/20 (A,B,C & D) Junction Square, Pyi Road, Kamayut Township, Yangon	General Ins. + Life Ins.
5	Global World Insurance Co., Ltd.	No. 44, Thein Phyu Road, Pazundaung Township, Yangon	General Ins. + Life Ins.
6	Excellent Fortune Insurance Co., Ltd.	No. 53/54, Sat Sayar U Tun Street, Shwe Pyi Thar Industrial Zone, Insein Township, Yangon	General Ins. + Life Ins.
7	Aung Thitsar Oo Insurance Co., Ltd.	Room 602/604, Myawaddy Bank Luxury Complex, No. 151, Bogyoke Road, Lanmadaw Township, Yangon	General Ins. + Life Ins.
8	Pillar of Truth Insurance Co., Ltd.	No. 14-02, Sakura Tower, Sule Pagoda Road, Kyauktada Township, Yangon	General Ins. + Life Ins.
9	Ayeyar Myanmar Insurance Co., Ltd.	No. 480, Lower Kyeemyindine Road, Kyeemyindine Township, Yangon	General Ins. + Life Ins.
10	Capital Life Insurance Co.,	No. 277/285, Middle of Bo Aung Kyaw Street, Kyauktada Township, Yangon	Life Ins.
11	Citizen Business Insurance Public Ltd.	No. 5, Sayar San Plaza First Floor, Bahan Township, Yangon	Life Ins.
12	Aung Myint Moh Min Insurance Co., Ltd.	No. 28, Corner of Shwedagon Pagoda Road and Pantrar Street, Dagon Township, Yangon	Life Ins.

The Insurance Business Rules 1997 stipulates the insurance company shall be a company incorporated and registered in accordance with the Myanmar laws. The minimum capital requirements for insurance companies in Myanmar Kyat (“MMK”) are as follows:

1. life insurance business: MMK 6 billion
2. non-life insurance: MMK 40 billion
3. Composite insurance: MMK 46 billion

Of the abovementioned minimum capital, 10% must be deposited at the state owned Myanmar Economic Bank and 30% must be invested in the Government Treasury Bonds. There is no risk based capital; the capital requirements are based on a solvency margin. A separate fund for each class of general business and for life assurance must be established. In addition, the business license fee as stipulated under the rules is MMK 3 million and annual fees is fixed at MMK 1 million.

The insurance sector in Myanmar is regulated under the Myanmar Insurance Business Law 1996 and the Myanmar Insurance Law 1993. Additionally, there are Myanmar Insurance Business Rules 1997 which sets out the powers and functions of Insurance Business Supervisory Board (“IBSB”) as the regulatory body. Pursuant to an amendment in 2015 of the Insurance Business Law 1996, the powers and functions of IBSB have been transferred to the Financial Regulatory Department (“FRD”) under the Ministry of Planning and Finance. It shall also be expected that FRD will lead the licensing process in the coming days. Nevertheless, IBSB continues to assume an active role to influence the policy making. For example, in January and March 2017, IBSB held two meetings to discuss the insurance market development in Myanmar and establishment of the open insurance market operation in order to facilitate transparency, competition, and remove monopoly of the state to create free entry and exit from the insurance industry.

The current regulatory framework was contemplated for and in the context of a monopolized and closed insurance market. Therefore the requirements for insurers in these law may be out of date. One obvious example is that the IBRB fixes the premium rates and coverage of insurance across all companies. Consequently, price, as the most effective signal and tool in market competition, loses its function and local insurance companies can only compete at this time through their customer services.

The Insurance Business Law, 1996 and the subsequent rules mentions stipulations regarding the business license for the insurance company. The following details are required to be submitted to FRD for procuring the business license:

1. Letter addressing the IBRB (the letter must now be addressed to FRD since the functions of IBRB/IBSB have been transferred to FRD)
2. Application form (ah-ma-kha 1)
3. Supporting documents for instance proposal, policy, premium rates, and related papers

The FRD will grant relevant business license in Form (ah-ma-kha 2) within 15 days on submission of supporting documents evidencing the paid-up capital, deposit and license fee. An insurer may not transfer its license and shall provide information about its shareholders as and when required by the FRD.

At present the foreign insurance companies are only permitted to open Representative Offices in Myanmar. There are till date 21 such companies, 18 of which are listed below.

List of Foreign Insurance Companies Representative Offices

1. American International Assurance Co. 2. ACE INA International Holdings 3. MetLife 4. Mitsui Sumitomo Insurance Co. 5. Muang Thai Life Assurance 6. Sompo Japan Insurance 7. Tokyo Marine & Michido Fire Insurance Co. 8. Taiyo-Life Insurance Co. 9. Poema Insurance 10. Great Eastern Life Assurance Co. 11. Prudential Holdings 12. Pana Harrison (Asia) Pte. 13. Manulife Financal Life Insurace 14. Wilis Co. and 15. United Overseas Insurance 16. New India Assurance 17. Jardine Lloyd Thompson 18. Marsh Insurance.

As stated above at present foreign investors are barred from the insurance market, except for 3 foreign insurance companies that are restricted to operate in the Thilawa Special Economic Zone only (listed below). Amid growing foreign interest in Myanmar’s largely untapped market, the government has recently notified all foreign insurers with representative offices that they would be eligible to apply for an SEZ license. Thus, by inference the insurance companies will be allowed to operate in insurance services after applying to FRD for a business license and Thilawa SEZ Management Committee (“TSMC”) for SEZ license.

List of Foreign Insurance Companies Operating in Thilawa SEZ

1. Tokyo Marine & Nichido Fire Insurance Co Ltd 2. Sompo Japan Insurance Inc 3. Mitsui Sumitomo Insurance Co

Monitoring Requirements

According to our correspondence with FRD officials, a separate fund for each class of general business and for life assurance must be established. In addition to this, 10% of the net insurance premium generated shall be determined as the net worth of a life insurance business and the net worth of a general insurance business shall be determined in accordance by the FRD; 50% of the net premium income generated in the closed underwriting year immediately preceding the current year; 50% of the claim reserve provided for the closed underwriting year.

Moreover, the FRD/IBSB has the power to establish a fund at the Myanma Economic Bank, for the protection of life assurance policy-holders. Policyholders get priority over an insurer’s assets in the event of insolvency (subject to certain preferential payments – section 230 Myanmar Companies Act). Furthermore, the insurer is mandated to submit the audited final and other accounts compiled in Form (ah-ma-kha 3) together with the report of its performance within 4 months after the end of the relevant underwriting year.

Regulatory Environment

The insurance sector is regulated by the Ministry of Planning and Finance’s (“MOPF”) Financial Regulatory Department (“FRD”). The current regulations are quite restrictive and private insurance companies are only allowed to compete through their customer service, as premiums and coverage are set by the IBRB.

Some private companies are only allowed to offer life insurance, while others are allowed to offer general and life insurance.

The last round of license was in 2014, when 100% owned Myanmar companies have been granted restricted licenses.

The Forthcoming Insurance Liberalization Plan

On 7 June 2017, Dr. Daw Sandar Oo, Managing Director of Myanma Insurance, outlined the reforms from the Ministry of Planning and Finance (which oversees Myanma Insurance) in a presentation at Myanmar Investment Forum 2017. In this presentation she announced that a blueprint for insurance market reforms will be published by the Ministry of Planning and Finance within the next three months. The expectation is that this will open the insurance market to foreign insurers, allowing them to underwrite and sell policies in Myanmar. She also stated, “The comprehensive insurance liberalization plan has already been finalized, with the assistance of the World Bank group, and also it has been approved by our cabinet.” We take a look at the implications of the blueprint, ahead of its publication, based on our exclusive correspondence with Myanma Insurance. We outline the key points below.

There is no proposed legislative change to the existing legal regime. The blueprint will serve as an additional guideline to reform the insurance sector. As noted above there are currently 12 private local insurance companies, of which 11 have been granted licenses. Of these, 3 offer only life insurance and 8 companies offer composite (life as well as general) insurance.

Foreign life insurance companies there will be allowed 100% foreign investment. There is no proposed limit on the number of licenses to be issued in the life insurance category.

For composite insurance the foreign companies will require to form a JV with the existing 9 local companies that offer composite insurance. For such JV, a minimum shareholding of 35% has been fixed for the local partner, which means that the foreign company is allowed to have majority shareholding (up to 65%). Since there are 8 existing local companies that offer composite insurance, at present 8 licenses will be issued in this category to foreigners to form JV with the existing local companies. As and when more licenses are issued to local companies for composite insurance, foreign companies will also be issued licenses so that JV can be formed.

One of the most important clarifications regarding the insurance sector is that foreign companies looking to obtain business license and establish an insurance company will require an MIC permit for insurance business in Myanmar. Foreign companies looking to obtain license will require an existing representative office for insurance business in Myanmar. Without a representative office, foreign companies would not be allowed to participate in the tender or make bids for issuance of licenses. Upon commencing operations the representative office would be a branch office and subsequently a subsidiary company would be required to be incorporated to function as a foreign insurance company in Myanmar.

The minimum capital requirement will be the same for local and foreign companies, as the government wants to ensure a “level playing field”. The present minimum capital requirements, as noted above, are being reviewed and shall be reduced.

Regarding brokers, agents, etc., this will also be open to foreign companies and there is no limit to the number of licenses that will be issued. They will be separately registered.

Foreign insurers have been prepared for this day. Previously they were allowed to establish a representative office in Myanmar though they were not allowed to engage in any actual business. 24 representative offices of foreign insurance companies (3 of them are in the special economic zone) have been set up so far and the first batch of foreign insurance licensees in Myanmar shall be, not surprisingly, coming from them. Although the details are unknown yet, our information source suggests foreign insurance companies will be allowed to play a part in the general insurance business under a joint-venture with a local partner, and that the life insurance market will be open to 100% foreign owned companies.

Opportunities

We note that at present the insurance sector in Myanmar is still in its infancy and the regulatory requirements are outdated. While this is the case at present, we foresee a phase of rapid development in the form of the forthcoming blueprint. This is expected to open up the insurance sector to foreign insurers.

The arrival of foreign insurance companies might also be good news to other investors. Foreign investors are required to insure themselves for certain risks with a Myanmar licensed insurer under the investment laws and rules, but many investors find it hard to comply because of the underdeveloped insurance market in Myanmar.

Amid growing foreign interest in Myanmar’s largely untapped market, liberalization of the market is a necessary and inevitable step. We welcome the blueprint as a respectable move by the government and view it as a step in the right direction.