The Insurance Business Regulatory Board (IBRB) of Myanmar released Directive 4/2020 on May 12, 2020, which completely altered the insurance sector in that country. Reinsurance has previously only been accessible in Myanmar through the government-run Myanma Insurance, with no other providers. With some limitations, insurance companies will be permitted to seek reinsurance from other insurers or reinsurers in Myanmar or overseas after this regulation enters into force on October 1, 2020.
What Is Reinsurance?
Reinsurance, often known as reinsurer insurance or reinsurer reinsurance, is a vital component of the insurance sector. Since it enables insurers to spread out their risk and survive big claims. With the launch of six foreign-Myanmar insurance joint ventures and five foreign life insurer licenses. It is anticipated that this new directive would cause more seismic shifts within Myanmar’s insurance industry. This wider distribution of insurance risk is a very good development for the Myanmar insurance sector.
Insurers Have To Hold Maximum Risk Retention:
Every insurer in Myanmar is required by the directive to retain risk up to a maximum level that is proportionate to its financial strength. And to develop an appropriate retention policy for each insurance sector. That must be at least 20% of the amount at risk for life insurers and reinsurers doing life insurance business. A reinsurance program and retention policy must also be created by each Myanmar insurer. And submitted to the IBRB at the start of each fiscal year.
Insurers Have To Hold Reinsurance License:
Any reinsurer wishing to conduct business in Myanmar is required to hold a reinsurance license issued by the IBRB. Now, with certain restrictions, foreign or cross-border reinsurers lack a license to operate an insurance company in Myanmar also permitted. They need to have held a valid license for at least the previous three years. They must have a credit rating from S&P or a similar agency of at least BBB for the preceding three years. For at least the last three consecutive years, they must have maintained a minimum solvency margin or capital adequacy. As required by the regulator in their native country. They must adhere to any additional criteria that the IBRB may impose.
Guideline About The Recruiting of a Reinsurer:
Except for life insurance, insurers must present reinsurers with the best terms they were able to secure in a certain order. It is Myanma Insurance, Myanmar Reinsurers, Foreign Reinsurers, or Foreign Reinsurers with representative offices in Myanmar. Insurance companies are only required to follow this order of precedence if the terms being offered are comparable.
Therefore, This directive undoubtedly represents a significant advancement in the further liberalization and risk-spreading within the Myanmar insurance market. And it is likely to herald significant changes in reinsurance and retrocession both within Myanmar and beyond.