Myanmar Insurance Retention 2020 — The Myanmar Insurance Business Regulatory Board (“IBRB”) issued Directive 4/2020(“Directive”) which permits insurance companies to provide reinsurance services in Myanmar. This directive is to come into effect on the October 1 2020.
This directive from the Myanmar Insurance Business Regulatory Board states that, the purpose of permitting reinsurance in Myanmar is to maximise retention within the country, secure the best possible reinsurance coverage required to protect the interest of policyholders at a reasonable cost, develop the industry’s technical capability and financial capacity, and to simplify the administration of reinsurance business.
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Below are Overviews of the Myanmar insurance retention 2020 Provisions
In the directive, the term “reinsurer” is defined as a joint venture partner or 100% wholly owned subsidiary of a national or foreign reinsurer or a branch of a foreign reinsurer that has been granted a reinsurance license in Myanmar.
The Directive provides that every Myanmar insurer and reinsurer must do the following:
- Formulate a suitable retention program for each insurance segment. Where the segment consists of more than one product, the retention program for each product shall be separately defined
- Maintain the maximum retention commensurate with its financial strength, quality of risks and volume of business
- Ensure that the reinsurance arrangement does not involve a transfer of risks by a Myanmar insurer by ceding or retro-ceding most of or all of the assumed risk to cross-border reinsurers
The Directive defined a cross-border reinsurer (“CBR”) as an insurer with a reinsurance business license issued by its home jurisdiction, a reinsurer that is not registered in Myanmar as an insurance or a Reinsurance Company, a foreign reinsurer branch that carries on reinsurance business with a Myanmar insurer or reinsurer, or a foreign reinsurer.
Every Myanmar insurer and reinsurer transacting life insurance business must maintain a minimum retention of 20% of sum at risk for each life insurance portfolio. The IBRB may also require all Myanmar insurers and reinsurers to justify their compulsory retention programs in accordance with the rating of the CBRs and maximum overall cession limits allowed per CBR. The Directive defines “cession” as the part of the insurance passed to a reinsurer by the insurer, which issued a policy to the original insured or part of the contract risk ceded by a reinsurer to a retrocessionaire.
No Myanmar insurer shall place its reinsurance business with any CBR unless the CBR meets the eligibility criteria set out in the Directive. The criteria includes the requirement that the CBR has held a credit rating of at least BBB from Standard & Poor’s, or the equivalent from another international rating agency, for the immediate past three continuous years.
Compulsory Cession limits
The Directive stipulates that every Myanmar insurer or reinsurer and foreign reinsurer shall cede a compulsory maximum cession up to 10% of any insurance segment business to the state insurance company, Myanmar Insurance. Should Myanmar Insurance refuse to exercise its right to retain any portion of the risk offered, the residual part of the risk might be insured with the CBRs.
Non-compliant insurers, reinsurers and foreign reinsurers who have licensed branches within Myanmar and licensed brokers shall be punished in accordance with the Insurance Business Law and Rules.
Myanmar insurers are also required to submit their approved reinsurance and retention programs to the IBRB 90 days before the start of the financial year. The Directive also stipulates additional documentation, which should be submitted to the IBRB within 30 days of the start of the financial year.