Myanmar has injected new life into its laggard insurance industry with today’s (November 28) issuance of licenses to a handful of foreign companies, including UK Prudential, Japan’s Dai-ichi Life, Hong Kong’s AIA, US Chubb and Canadian Manulife.

The Ministry of Finance authorized the widely anticipated but long delayed move to allow foreign insurers to operate in the local market as 100% wholly owned subsidiaries. It also provided for local-foreign joint ventures, with six life and non-life insurance licenses approved for Japan’s Mitsui Sumitomo Insurance, Taiyo Life and Nippon Life.

The announcement marks a significant step towards financial sector liberalization, allowing foreigners access to one of the last largely untapped insurance markets in the world. The move follows on other market-opening measures granted to the education, retail and wholesale sectors under the current administration.

The insurance market is particularly protected from outside competition. State Counsellor Aung San Suu Kyi’s government had promised to open the market to foreign companies in 2017, but nationalistic resistance among local incumbents apparently stalled the move.

The five life insurance licensees will be the first foreign providers to operate in Myanmar without local joint venture partners. The until now heavily protected market has been long dominated by the state-owned Myanma Insurance.

Foreign insurers were barred from doing business directly in the country except in Yangon’s Thilawa Special Economic Zone (SEZ), where three Japanese providers were granted permission in 2015.

“The liberalization is a significant milestone for Myanmar,” said Kelvin Yeong, chief actuary of AIA Myanmar. “Life insurance contributes to the country’s economy by channeling household savings to productive investments.”

Multinational insurer AIA’s flag flies alongside a building under construction in a file photo. Photo: Facebook

Yeong said AIA aims to be the first company to sell and issue insurance policies over its Facebook page. The Asia-focussed insurer is “committed to invest over the coming years to build a solid business in Myanmar to ensure Myanmar people are well protected,” he added.

The government had given the five insurers provisional licenses as “preferred applicants” in April.

Asked why it took more than half a year to secure the actual licenses, Yeong said insurers were required to go through a comprehensive regulatory review process that ensured they were operationally and financially ready to launch their businesses.

Insurance penetration in Myanmar, with less than .01% currently holding life policies as of 2015, is lower than other less developed nations including Cambodia, Laos and Vietnam, according to Swiss Re Sigma.

Sandar Oo, managing director of state-owned Myanma Insurance, acknowledged earlier this year that foreign insurers are keen to enter Myanmar because of the market’s low penetration rates.

Still, there is a concern among some in the insurance industry and business community that the government will seek to protect Myanma Insurance’s privileged position in the market via a pending draft Insurance Business Bill, which if passed will exempt the sector from the scrutiny of a new competition watchdog launched this year.

The proposed legislation, currently under public consultation and reviewed by Asia Times, says that the competition law “shall not apply to insurance products and rates” approved by the Insurance Business Regulatory Board, the industry’s state regulator.

Myanmar kyat notes fanned out by a currency trader in a file photo. Photo: Twitter

James Mythen, the Singapore-based partner of law firm Allen Overy, said Myanma Insurance does not enjoy a blanket exemption under the draft bill’s provisions, but is exempted from certain key provisions relating to licensing and corporate governance.

The legislation will also end the dual regulator role the state insurer serves, Mythen added. Instead, it will be regulated by the Insurance Business Regulatory Board and the Financial Regulatory Department which acts as the secretariat of the board.

“The law’s main stated objective is to create a legal and regulatory framework for the existing and incoming insurance companies and to facilitate an appropriate level of competition amongst them, whilst protecting the consumers in Myanmar,” he told Asia Times.

He said the proposed new law’s effectiveness in facilitating the industry would depend on how its more detailed regulations are enforced by authorities. Industry sources say the bill is expected to be passed some time next year, though it’s still unclear in which quarter.

The key legal challenge for the five foreign insurers “is likely to be in navigating through the regulatory landscape that is not only new to the insurance businesses but also to the regulators,” he said.

Myanmar State Counsellor Aung San Suu Kyi at the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) conference in Naypyidaw, November 22, 2019. Photo: AFP/Thet Aung

A day after the local Myanmar Times broke the news last January that South Korea’s Samsung Life Insurance had lost patience with the lack of liberalization progress and shut down its Myanmar business, the government announced plans to grant up to three licences to foreign life insurers.

It’s not altogether clear, however, why the government opted to grant five rather than three foreign licenses, industry watchers say.

“My understanding is five strong bids were submitted and rather than having to choose only three, the number of licenses was expanded [from three to five],” an insurance industry analyst in the region told Asia Times.

The previous Thein Sein government was widely praised by consultants and companies for what they saw as a transparent and efficient public tender in 2013 for the award of telecoms licenses.

In contrast, Suu Kyi’s administration came under fire for promising to open the insurance industry in the first quarter of 2017, but stalled the liberalization until this year, much to the chagrin of the foreign business community.

Incumbent Myanmar insurer AMI is among those poised to face new foreign competition. Photo: Twitter

The insurance industry analyst noted that Thein Sein’s government also delayed liberalizing the insurance sector, which it first broached as early as 2013.

“Overall, the liberalization of the insurance industry is one of the most promising business initiatives undertaken by [Suu Kyi’s] National League for Democracy,” the analyst told Asia Times. “The current government has done well to actually open the market, which the previous government was unable or unwilling to do.”

He said the liberalization has “top-level buy in” and that Finance Minister Soe Win deserves “a lot of credit” for pushing the initiative through.

Other industry observers note that opening the insurance market will be more complicated than liberalizing other sectors such telecoms because of the resistance of local players who are concerned about foreign competitors taking their market share and customers.

More than ten private local insurers were granted licenses after Myanma Insurance ended its decades-long monopoly in 2013. Grand Guardian Insurance, IKBZ Insurance and AYA Myanmar Insurance are now widely viewed as the country’s top three local insurers.