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AEC Focus - Cambodia: A nascent industry making big inroads

Source: Asia Insurance Review | Oct 2015

This month, Cambodia is hosting the 18th ASEAN Insurance Regulator’s Meeting (AIRM) and the 41st ASEAN Insurance Council Meeting (AIC), an annual forum for regulators and the private sector in the region. We bring you an update on the country’s fast-growing insurance sector.
By Ridwan Abbas
 
 
Cambodia’s insurance industry began in 1990 with just one state-owned insurer and has since grown to 11 insurers. 
 
   Last year, Cambodia introduced a draft insurance law to gain greater sustainability and bring oversight to the sector. The law – prepared by the Ministry of Finance and approved in a meeting presided over by Prime Minister Hun Sen – updates and amends a sub-decree regulating the insurance sector. 
 
   Among other things, the new insurance law will expand compulsory insurance on private vehicles, and also include provisions on microinsurance. 
 
Double-digit increases since 2009
Cambodia’s insurance sector’s revenue saw its fastest increase of 26.7% to US$53 million for 2014, according to the Insurance Association of Cambodia (IAC). The nascent insurance market has grown by double digits every year since 2009.
 
   With premiums of $18 million, fire insurance remained the largest portion of the total revenue, rising 32% y-o-y, and comprising a third of total intake. A new fire tariff was also recently introduced and took effect from 1 July 2014. 
 
   Engineering, health, motor vehicle, personal accident and miscellaneous premiums grew at 12-21% in 2014.
 
   Meanwhile, marine cargo insurance premiums grew by 316% compared to the year before, but at US$2.9 million, made up just 13% of total revenue.
 
   Mr Oeurn Chanvisoth, Secretary-General of IAC, said that the growth in marine-cargo insurance was due to surging demand for imported vehicles.
 
   The industry paid out a total of $18.3 million in claims last year, or 34.6% of revenue, on par with 2013.
 
Microinsurance
Another fast-developing segment of the business is in microinsurance, and there are currently two dedicated micro-insurers in the market. 
 
   One of them – The Cambodian Agriculture Cooperative Insurance Company (CACIC) – has announced the start of an agriculture microinsurance service to help rice farmers better respond to climate change.
 
   Farmers who become a member of CACIC will have to pay an insurance fee of around $10 per hectare each season, although this cost will vary slightly depending on the type of rice variety grown. 
 
   In return, they receive consultation on farming techniques, climate change resilience methods and will get an insurance payout when their crop is damaged either by flood or drought, according to Mr Yang Saing Koma, President of Cambodia Centre for Study and Development in Agriculture (CEDAC). 
 
   The goal of the insurance scheme is to help farmers who, hit by natural disasters, might sell their land so as to pay back high interest-rate loans or migrate for work abroad.
 
Outlook
Cambodia’s insurance market has significant potential growth, with its fast-growing economy and income per capita, as well as increasing concerns of Cambodians over needs for insurance. 
 
   In particular, the income per capita of Cambodia has been increasing with a GDP compound annual growth rate of 11% over the past decade. 
 
   However, there remains a need for local insurers to develop specific skills for product development, underwriting, claims policy and processing, loss assessment and actuarial expertise in order to compete with foreign rivals, said Mr Saman Wijaya Bandara, Head of Insurance and Forensic Consulting at EY Vietnam, Laos and Cambodia.
 
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