Three foreign insurers cancel Myanmar launches over last-minute policy change

Sule Pagoda, Yangon, Myanmar. Photo: Harish Shivaraman/Unsplash

Three foreign insurance companies have canceled plans to launch operations in Myanmar after the government tweaked the requirements at the last minute.

Thailand’s Muang Thai Insurance and Muang Thai Life Assurance, as well as South Korea’s DB Insurance, could not finalize agreements with local partners, an industry insider said.

The Myanmar government recently announced approval for six new foreign insurers to set up joint ventures in the country. Nine had originally applied to the government, including the three that have since given up.

Until around April, the government seemed to imply that the foreign companies could purchase outstanding shares in local insurers to set up joint ventures, according to the industry insider. But at the eleventh hour, it said the foreign players can buy only newly issued shares.

The change means that proceeds will be funneled into the local insurers’ business operations. Local partners that had hoped make money from stock sales grew hesitant, ultimately dooming joint ventures planned by the three foreign companies.

The government likely sought to bolster the finances of local insurers by essentially mandating capital increases. But industry insiders disagree with the strategy. “A capital increase only results in excess capital given the current size of the market,” one said.

Myanmar’s insurance market amounted to $166 million in fiscal 2018. It accounts for 0.2% of gross domestic product, the least among members of the Association of Southeast Asian Nations.

The Ministry of Planning and Finance on Wednesday announced Japan’s Sompo Holdings, Mitsui Sumitomo Insurance and Tokio Marine Holdings as successful applicants to set up joint ventures for nonlife insurance. Japan’s Nippon Life Insurance and Taiyo Life Insurance, as well as Thailand’s Thai Life Insurance, got the go-ahead for life insurance.

Five players have previously been approved to set up wholly owned subsidiaries in Myanmar.

Players on the new list will receive official approval to enter the Myanmar market after their investments are complete. They aim to begin operations in October.

There is plenty of room for growth. IKBZ Insurance, which will partner with Mitsui Sumitomo Insurance, sees the nation’s insurance market expanding to 4 trillion kyat ($2.6 billion) in the next decade.

In an IKBZ consumer survey this April and May, just 17% of respondents had heard of insurance. But roughly 60% were interested in buying it after receiving an explanation.

This article was first published on Nikkei Asian Review. 

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.