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SLORC opens insurance door with joi
- Subject: SLORC opens insurance door with joi
- From: ausgeo@xxxxxxx
- Date: Wed, 18 Jun 1997 05:22:00
Subject: SLORC opens insurance door with joint venture
Asia Times News
Myanmar opens insurance door with joint venture
Stephen Brookes, Yangon, 17th June 1997
------------------------------------------------------------------------
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".