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SLORC opens insurance door with joi



Subject:  SLORC opens insurance door with joint venture

Asia Times News

Myanmar opens insurance door with joint venture

Stephen Brookes, Yangon, 17th June 1997


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Japan's Yasuda Fire and Marine Insurance agreed last week to set up a 
joint-venture company with Myanma Insurance in a move that may signal an 
opening up of Myanmar's state-held insurance sector. 

The new company - the first insurance joint venture in Myanmar - is likely to 
be set up within six months, officials at Myanma Insurance said. No name or 
financing details for the company have been settled, they said. 

At a June 12 ceremony marking the agreement, Minister for Finance and Revenue 
Brigadier-General Win Tin said: "As the economy expands and becomes more 
complex, more insurance activities" were needed. "Now is the proper time for 
Myanma Insurance to have a business partner, since the advent of the market 
economic system has caused government organizations to undergo drastic changes 
to be aligned with market mechanisms." 

Insurance has been a monopoly of the state in Myanmar for more than three 
decades. Under the Investment Law of 1988, foreign investors are required to 
take machinery, fire, marine and personal accident insurance with Myanma 
Insurance, and the company's turnover is more than US$100 million annually. 

The Myanmar Insurance Law of 1993 paved the way for privatization of the 
insurance industry, and in June 1996 new regulations opening up part of the 
insurance market were announced. 

Actual privatization of the insurance industry has been stalled, however, and 
foreign insurers are only allowed to set up representative offices. 

"Private insurance companies are not allowed to set up yet," said Deputy 
Managing Director of Myanma Insurance, Maung Thein. 

"New regulations are expected soon. But we expect that the joint venture will 
settle the problem of getting reinsurance," he added. "Life will be much 
easier." 

Reinsurance enables insurers - in this case Myanma - who have sold policies 
covering any number of risks, to effectively insure themselves against 
possible payouts on those risks. In doing so they spread the risk they are 
covering, and therefore increase the amount of coverage they can offer. 
Domestic reinsurance is not available in Myanmar and therefore companies need 
to approach established reinsurance markets in Japan, the United States or 
Europe - hence this latest tie-up. 

Without reinsurance, a domestic industry is effectively suffocated by its own 
limitations. 

Local insurance companies now act as insurance buyers for foreign investors, 
arranging full coverage through a foreign reinsurer while paying fronting fees 
to Myanma Insurance. 

Yasuda's representative office in Yangon refused comment on the new venture, 
but in a written statement Yasuda said that it had "high expectations of what 
this pioneer company can do to assist the development of the Myanmar insurance 
industry. 

"The establishment of a joint-venture insurance company in Myanmar will allow 
Yasuda to strengthen its worldwide network and improve its client services 
such as the provision of insurance cover, and claims handling," the company 
added. "This, in turn, will support the growing Japanese trend toward 
investment in Asia." 

A number of Japanese companies including Mitsui and Sumitomo had expressed 
interest in forming a joint venture with Myanma Insurance, said Maung Thein. 
Yasuda was picked, he said, because it was the second largest insurance 
company in Japan, and the first to have a representative stationed in Yangon. 

In remarks at the signing ceremony, Win Tin noted Yasuda had "exhibited its 
goodwill and enthusiasm towards our country in the most perceptible manner".