On 7 March I found myself in conversation with a senior market underwriter in Yangon, Myanmar discussing reinsurance. With a wry smile he crossed his fingers, the same gesture I had seen the day earlier from a senior actuary. My visit to Yangon in early March as Axco’s "man-on-the ground” was part of the research for the non-life and life insurance market reports. Three weeks later the earthquake hit.
The earthquake has brought tragedy to Myanmar, with lost lives, homes, and livelihoods. However, in the wake of this tragedy, a question does need to be asked, how prepared is the insurance market to address this crisis?
Market Developments
Despite his wry smile the underwriter with the crossed fingers remarked, “At least this time there is an insurance market to respond, unlike for Cyclone Nargis in 2008.” Over the past 15 years, the insurance market has seen strong growth in Myanmar in size, capacity and professionalism, even in the face of political and economic headwinds following the coup of February 2021.
The insurance sector is now characterised by professionalism and profitability. Once dominated by state-owned Myanma Insurance, the market has expanded to include 10 general insurers with three joint ventures involving Japanese giants Tokio Marine, SOMPO and MS&AD. Myanma Insurance has responded to competition with improved standards and practices.
This evolving insurance landscape offers crucial support for recovery efforts following the earthquake, something that not have been possible just a few years ago. Additionally, building standards are mostly adhered to, especially in cities and risk surveys for insured property are commonplace – an achievement not said about many countries. The biggest city, Yangon, was mostly undamaged, despite being much closer to the earthquake’s epicentre.
Market Challenges
Nonetheless, this disaster seems certain to reveal persistent challenges in the market framework that insurers have worked hard to avoid, or at least mitigate, in the last four years.
What are my primary concerns?
The protection gap: Myanmar’s protection gap is significant and most losses will not be insured.
Reinsurance challenges: Although local insurers sought reinsurance, mainly in Singapore and other ASEAN markets, the landscape has been complicated by international sanctions affecting some Myanmar banks, foreign currency constraints and the withdrawal of major international reinsurers and brokers.
Government infrastructure exposure: Myanma Insurance (MI) carries considerable exposure related to government buildings and infrastructure. Despite some reinsurance protections, it has also suffered from the challenging reinsurance environment.
Retention Strategies: In response to reinsurance difficulties, there is a tendency among insurers to retain as much risk as reasonably possible, while limiting per risk exposures, through selection and coinsurance. While this approach can reduce the reinsurance need, it leaves the catastrophe risk unaddressed.
The looming catastrophe risk has been a persistent market concern. Although some cat cover was bought, underwriters would prefer more. This sentiment also extends to life insurers, who have seen substantial growth in the last five years.
Looking Ahead
As residents of Mandalay embark on the challenging journey of rebuilding, much of the financial burden will rest on individuals and a government already grappling with severe economic challenges. Insurance will play a role in recovery, but it must evolve from a fledgling sector into a resilient industry with deep foundations and broad capabilities.
What steps could enhance the market’s resilience? One easy win would be to allow private insurers to collect premium and pay claims in foreign currency. This change would give them the resources to acquire reinsurance without the currency risk they currently encounter.
As discussions regarding elections at the end of 2025 continue, there is hope that this paves the way for a more stable environment benefiting this beautiful country and its talented people
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