Posted on Aug 15, 2011 by Sergio Ulloa
Cambodia's fledgling insurance industry has hit a significant milestone with the development of the Southeast Asian country's first ever life insurance company, announced earlier this week.
On Sunday, the Cambodian government told media outlets that they had agreed to a joint-venture partnership with four foreign private insurance companies to establish the Cambodia Life Insurance Company. The four participating foreign insurers are going to be Hong Kong's Asia Insurance Co, PT Asuransi from Indonesia, and Thailand's Bangkok Insurance Public and Bangkok Life Assurance. Under the terms of the deal, Cambodia's Ministry of Economy and Finance (MEF) will hold a 51 percent stake in the new enterprise, and the remaining 49 percent will be split amongst the four foreign companies.
Mey Vann, MEF director for the financial industry department, was on hand to praise the deal, asserting that the introduction of a dedicated life insurance system would do much to accelerate the development of the country's financial industry and recently formed securities market. Life insurance companies increase financial mobilization within a country and often direct their resources to invest in other sectors as well, which can further grow and expand the national economy. It has become increasingly important to provide options for Cambodian citizens looking to invest their savings for future generations and participate in a more open financial market.
The government first issued licenses for life insurance operators in 2008 but there was no legislative framework available at the time which dealt directly with investment products. This regulatory deficiency combined with the marked low level of insurance and protection awareness across the country deterred initial suitors. The World Bank
has identified life insurance as an important development tool for a country like Cambodia, as the business sector can be used to actively encourage public saving and drive investment towards productive measures in society.
Further details about Cambodia's premier life insurance venture have yet to be disclosed. According to the country's 2002 insurance laws, the new firm would be required to have a minimum capital of US$7 million to be sufficiently solvent to begin operations. Getting the necessary infrastructure and regulatory framework in place for Cambodia Life may prove easier to accomplish than garnering the attention and interest of a client base that remains largely unaware of the benefits of insurance and unable to afford premiums.
The modern iteration of Cambodia's insurance industry began in 1990 with the establishment of a state-owned company, the Cambodian National Insurance Company (CAMINCO). After a decade of limited industrial development in the insurance sector, Cambodia's gradual transition to a free market economy in 2000 has allowed for sustainable macroeconomic progress that enabled private insurers to enter the country and revitalize the market. Today, the Cambodian insurance industry features six direct writing nonlife companies: Forte Insurance, CAMINCO, Asia Insurance, Campubank Lonpac, Infinity Insurance, and Cambodia-Vietnam Insurance. There is also one domestic reinsurance company, Cambodia Re, but as of yet no licensed brokers. These insurance companies generate a majority of their insurance premiums from foreign corporate sector clients taking out property, motor, fire and group medical insurance policies. Individual premium sales have contributed a very small proportion of business in a country where it is estimated between 1-2 percent of the 15 million population can afford to buy any insurance at present. As income levels rise, insurance companies hope to see greater volumes of personal and medical lines of business.
However, there is mounting evidence that show the Cambodian population is slowly catching on to the concept of insurance and the difference it can make. Records released from the General Insurance Association of Cambodia (GIAC) in January reveal that premiums grew by 24 percent in 2010 to US$24.9 million, from US$20.08 million during the year previously. "In 2010, the insurance sector stood in a very good position because of economic growth, especially as I saw people beginning to understand the benefits of having insurance," GIAC chairman Chhay Rattanak remarked.
In the past decade, general premium growth figures have increased significantly at an average annual rate of 17.02 percent, from US$10.85 million in 2005 to US$24.87 million in 2010, outpacing the country's gross domestic product growth rate in the process. Despite these promising results, the market's overall size is yet to see a marked improvement, which would attract more vital foreign investment and companies. Forte Insurance, established in 1999, has dominated, holding onto almost half of all non-life insurance premiums in the country. Cambodia remains towards the bottom of the charts among fellow ASEAN countries when it comes to insurance penetration and density (0.2 percent of population at US$1.48 per premium). Those inside the country maintain that these figures in fact demonstrate a pronounced potential for insurance sector growth in the future.
In comparison with its Asian neighbors, industry analysts have asserted that the Cambodian population is relatively young and would be an early adopter of new and innovative insurance products, such as micro-insurance
, if available in the market. The latest government forecast has Cambodia's real GDP growth prospects reaching 6.5 percent and 7 percent in 2011 and 2012, respectively. In line with the country's gradual economic development, the MEF expects gross premiums to reach US$54.53 million by 2015 as customer's confidence and understanding of insurance benefits improves in line with their ability to spend excess capital. If the national government upholds its responsibilities to effectively control technical frameworks, laws and regulations to preserve the benefits of both the insured and insurer, the industry has the potential to really thrive.
Insurance Companies Mentioned
Asia Financial Holdings Ltd provides general and life insurance services. Other activities include securities trading and holding, mortgage loan financing, providing health care services and investment holding. Operations are carried out in Hong Kong, Liberia and British Virgin Islands.
Bangkok Insurance Public Company Limited is based in Thailand. And provides non-life insurance. Bangkok Insurance services include travel, motor, personal accident (PA), health, residential and commercial property, personal property, third party liability, business all risks, industry all risks, marine and cargo and miscellaneous insurance services
Bangkok Life Assurance
Bangkok Life Assurance PCL provides life insurance services to a wide range of clients in Thailand. The company has over 71 branches throughout South East Asia. Bangkok Life Assurance was founded in 1951 and is headquartered in Bangkok, Thailand.
PT Asuransi Central Asia
PT. Asuransi Central Asia is a general insurance company and one of the leading business groups in Indonesia. The company was established on August 29th 1956 and has since played a preeminent role in the financial development of Indonesia.