The insurance industry has called on the Cambodian government to open the door to more investment options so that the sector can more gainfully tap large pools of funds.
The lack of investment channels has forced insurers in Cambodia to rely on underwriting for profits instead of investment returns, reported Phnom Penh Post.
“The government has to support the development of a diverse and significant securities market in Cambodia to provide investment options that are suitable for insurance companies seeking to diversify the investment of their capital and reserves,” said Mr Huy Vatharo, Chairman of the Insurance Association of Cambodia (IAC).
Most investible funds are channelled into real estate or bank deposits or back into the insurance company for growth.
Cambodia’s insurance sector has grown exponentially since the establishment of the first state-run insurance company in 1990. Seven local and international insurers now provide general insurance coverage, while life insurance, first established in 2012, is served by four insurers.
According to Mr Vatharo, total insurance premiums increased fourfold in the last five years, from US$30.2 million in 2011 to $113.6 million last year. While the amount invested in securities remains negligible, Mr Vatharo said it appears to be increasing as insurers diversify their investment portfolios. Currently, though, the local bourse lacks liquidity, a situation which deters more investments.
Mr Antoine Fontaine, partner of law firm Bun & Associates, said insurers have limited options in investments.
“The stock exchange is still nascent; access to real estate is very restricted for foreign companies; private equity is generally considered neither as a sufficiently reliable nor liquid asset; and the Kingdom does not yet issue government bonds,” he said.
Moreover, insurers must satisfy a minimum capital requirement that mandates them to deposit 10% of their registered capital with the National Treasury. Furthermore, they must meet solvency requirements that require an additional 50% of their registered capital to be deposited in a commercial bank, as well as face restrictions on how they invest their float.