Insurance supervision in cambodia

MINISTRY OF ECONOMY AND FINANCE

Insurance Supervision in Cambodia

September 29th – 30th, 2010

Financial Industry Department

Insurance Division

In Meatra

Head of Insurance Division

[email protected]

1

OUTLINES

2

3

It can be noted that according to the history of Cambodia the development

of the Insurance Sector had evolved through three main stages:

From 1956 to 1975

Insurance business in Cambodia first started in 1956 with the existence

of some insurers to serve the needs of market at that time.

Since 31 December 1963, the Government bought back all private

shares from the Insurance Companies.

On 09 January 1964 the National Assembly adopted the Law on

Monopoly which enabled the state to assume control of insurance

business in the country.

In the period of Khmer Rouge Regime, all infrastructures were

destroyed and merchandising activities were fully removed including

insurance activities.

4

1. History of Insurance Establishment in Cambodia

1-History of Insurance Establishment in Cambodia

From 1990 to 1999

In line with the economic and financial reform policy of the

Government, a Sub-decree 24 RNK dated 20 September 1990 was

issued that related to the organization and functioning of Ministry of

Finance. It also mentioned about the establishment of Cambodian

National Insurance Company with the rank of department.

On 30 January 1992, the National Assembly adopted Law on

Insurance Business Establishment consisting of 4 Articles and the

insurance sector was placed under supervision and regulation by

state.

The purpose of this law was to contribute in social and economic

development and to compensate the victims against losses caused

by natural catastrophes, accidents and other mishaps.

After the Law on Insurance Business Establishment was

promulgated, there were several important events .

5

1. History of Insurance Establishment in Cambodia (Con’t)

1-History of Insurance Establishment in Cambodia

From 2000 to Present

Since 2000, Cambodia made a transition to a Free Market Economy

that allowed the growth of insurance market in Cambodia, the

Government has updated the law and regulations which was

promulgated during 1990-1999.

Law on Insurance consisting of 56 Articles was adopted by National

Assembly on 20 June 2000. Thereafter, Sub-decree on Insurance was

adopted on 22 October 2001.

After the Law and Sub-decree on Insurance was promulgated,

Ministry of Economy and Finance issued several Prakas and Circulars

During this period, there were many important developments.

6

1. History of Insurance Establishment in Cambodia (Con’t)

The development of insurance sector is embodied in the Financial Sector Development Strategy 2006-2015. The Financial Sector Development Strategies (FSDS) 2006-2015 identifies steps that should be taken to move the industry forward as following:

1) Immediate Priorities (2006-2009)

2) Intermediate and medium term priorities (2009-2012)

3) Longer-term goals (2012-2015)

7

2-Insurance Sector under FSDS 2006-2015

8

A- Establishment of the Financial Industry Department

Financial Industry Department (FID) has been established under the Sub-

decree on organizing and functioning of Ministry of Economy and Finance on

January 20, 2000. DFI conducted its own organization structure with 5 divisions

including insurance division.

DFI is responsible to control and supervision over the insurance industry in

accordance with Cambodia law on insurance. Insurance Division shall assist

the department to establish better regulation and supervision and strengthen

the public confidence in the insurance industry.

B- Vision and Mission of Insurance Division

The vision of Insurance division is to foster the development of a sound

insurance industry that will make significant contributions to the well being of

the people of Cambodia and play a key role in the socio-economic

development of the country.

The mission of the Insurance Division of the Department of Financial Industry

(DFI) is to promote the orderly development of the local insurance industry

and at the same time to instill public confidence in Cambodia's insurance

market.

3-The Insurance Commissioner

9

2-The Insurance Commissioner

C- Roles and Responsibilities of Insurance Commissioner

Insurance Division comprises four units, namely supervision, regulation, market

development and Administrative and IT unit.

Insurance Division has its roles and responsibilities as following:

To implement and achieve missions and objectives as defined in FSDS 2006-

2015.

To monitor the financial position of insurers including off-site examination and

on-site inspection.

To provide a clear mandate and policy for the licensing and registration of

insurers, agents, brokers, and loss adjusters.

To provide legal review and updating of law and regulations relating to

insurance in line with the growth of insurance market.

To foster the development of a sound insurance industry that will make

significant contributions to the well being of the people of Cambodia and play

a key role in the socio-economic development of the country.

3-The Insurance Commissioner (Con’t)

10

To protect the interests of the public through prudent regulation and

supervision of the insurance companies with emphasis on a sound legal

framework.

To ensure sustainable develop the insurance industry via conducting regular

dialogues with GIAC on matters of national importance, building of public

awareness, reviewing public complaints against insurers, cross border

insurance within the ASEAN framework and development of Information

Technology.

To improve the knowledge and capability of insurance officers in various areas

to learn and understand the new development of regulation and supervision

framework in regions and worldwide.


11

d- Supervision of Insurers

Every year insurance division conducts financial examination to all insurance

companies based on the manual off-site desk review. Off-site review has been done

after the submitting of annual audited report. Beside the off-site desk review,

Insurance Division conducted monthly examination on operation of all insurers and

intermediaries.

Insurance Division is also responsible to conducts on-site inspections to insurers

annually completing off-site desk review. On-site inspection is a part of the

enhancement of financial examination.

Through these inspection visits, Insurance Division will get a better understanding

of the latest developments, operation and the financial position of insurers. Such

inspections concentrate on areas like management, internal control, asset and

liabilities management, underwriting, investment, and legal compliance.


12

e- Insurance Legislation Development

In view of the rapid changes taking place in the financial markets both at home and abroad,

Insurance Division has undertaken a comprehensive review of the existing legal framework for

insurance regulation and supervision. Moreover it is also perceived that the Law on Insurance

introduced in 2000 may have become obsolete. In this regard, the Asian Development Bank

has sanctioned a Technical Assistance program to assist the MEF with the said view. The

review of the Law and regulations for insurance is progressing well under the guidance of an

international insurance expert and it is hoped that it will be ready for adoption by 2011.

Beside that , in view of market demand for Micro-insurance, Insurance Division has drafted,

with assistance from Nomura Research Institute (NRI) and IFC/MPDF, a Sub-decree on Micro

Insurance to regulate the market efficiently and effectively. Moreover, the micro insurance

business is committed by the government under the Financial Sector Development Strategy

2006-2015. Currently, Insurance Division has prepared and finalized a draft Sub-decree on

Microinsurance and it will be put in the operation sometimes in 2010 in order to respond the

needs of businessmen who wish to operate micro-insurance business as well as to provide the

opportunities for low income people to receive the benefits such as health care etc.


13

f- Licensing Process

Up on the law on insurance, an applicant shall register at Ministry of Commerce

before applying insurance license from Ministry of Economy and Finance.

Application for and issuance of a license to engage in the insurance business shall

be in accordance with the rules and detail procedures as prescribed in ministerial

regulations. Such approval may be granted with conditions as the Deputy Prime

Minster may prescribe.

Insurance companies can carry out each of following insurance classes:

-Life Insurance Company which is required to have registered capital at least

equivalent to SDR 5,000,000 (USD 7,000,000).

-The General Insurance Company which is required to have registered capital at

least equivalent to SDR 5,000,000 (USD 7,000,000).

-Life insurance and General Insurance company which is required to have

registered capital at least equivalent to SDR 10,000,000 (USD 14,000,000).


14

g- Overseas Training Programs

In 2009, several officers were sent to attend the training programs conducted by

various international institutions such as GTZ, GRET, Inwent, JICA, General Insurance

Association of Japan (GIAJ), ASEAN Insurance Training and Research Institute

(AITRI), Singapore College of Insurance, and Bank Negara Malaysia etc. These were

complemented by conferences, seminars, and workshops on a variety of subjects as

following:

- International Networking on OECD financial supervision for catastrophe;

- International Approaches to health financing and health insurance (South

East Asia);

- Advanced Course on Non-life insurance and Risk Management;

-Non-life insurance system development for Indochina countries;

-On-site and off-site examination for insurance supervisors;

-Capital adequacy measurement;

-Risk management and market conduct;

-Risk based capital methodology.


In 2009, the insurance industry comprises of six direct writing

companies and one reinsurance company. Most of the insurance

companies are joint venture companies with varying amounts of

foreign equity participation. The intermediary sector is not developed

as there are only two agents and no brokers licensed.

Gross Premiums of general insurance business decreased by 3.18 % to

USD 20.01 million which represented 0.19% of Cambodia Gross

Domestic Product (GDP). For 6 month of 2010, the gross premium of

the whole market increased by 35% to USD 11.43 million over the

previous year (2008: USD 8.5 million).

The reduction in gross premium was a result of global financial crisis

which caused several big constructions’ activities (Engineering) to be

either delayed or cancelled. It can be noted that Engineering business

dropped by 68.24% compared to previous year.

The net premium retained in Cambodia was only US$7.65 million. The

retention ratio was also low at 38.23% reflecting a high level of

reinsurance cessions abroad. All the direct insurers are required to

cede 20% of their premium to Cambodia Re which registered a gross

premium of US$2.5 million in 2009.15

4. Insurance Industry Performance for 2009

The insurance business was profitable in 2009 with the industry

registering an underwriting profit of US$5.8 However, underwriting

profit in 2009 decreased by 6.73% comparing to previous year.

Net Loss incurred ratio increased from 35.12% in 2008 to 39.52% in

2009. The increase in loss is the result of a big fire to a garment

factory. This year, Cambodia also experienced some storm damage

caused by Ketsana which caused flood and damaged many hotels in

Siem Reap.

Total assets of the insurance market stood at $US75.5 million

including Cambodia Re, or just 0.73% of GDP. The insurance

companies are highly liquid as cash deposit is the main category of

asset followed by investment in property and trade receivables in the

form of outstanding premiums and claims recoveries from

reinsurance companies.

16


17


Number of Companies

> General Ins. Company = 06

> Reinsurance = 01

> Broker = 01

> Agent = 01

18


19


On 25 August 2009, all licensed insurance companies signed

the MOU for the Establishment of an Insurance Underwriting

Pool in order to underwrite compulsory motor insurance policy

for all cross border travel by road.

On the 24th of September 2009, Financial Industry Department

was delegated to sign the MOU concerning the cooperation on

Compulsory Motor Vehicle Insurance for Vehicles in Cross

Border. This MOU was made between and among four

neighboring countries which are Ministry of Economy and

Finance, Kingdom of Cambodia, Ministry of Finance, Lao

People’s Democratic Republic, Office of Insurance Commission

(OIC), Kingdom of Thailand, Ministry of Finance, Socialist

Republic of Vietnam.

20

5. Important Insurance Events For 2009

On 8th October 2009, Financial Industry Department was

delegated to participate the 12th ASEAN Insurance Regulators

Meeting (AIRM), held at Vientiane, Lao PDR. The meeting is

arranged once a year by each ASEAN member countries. Many

topics have been discussed in this meeting.

On 24 October 2009, the International Association of Insurance

Supervisors (IAIS) conducted its Annual General Meeting in Rio

de Janeiro, Brazil. In the meeting, IAIS officially declared that

Ministry of Economy and Finance of Cambodia has become its

member after completing all requirements. Therefore,

Cambodia now is an authorized member and this achievement

is in accordance to the Financial Sector Development Strategy

2006-2015.

21

5. Important Insurance Events For 2009

There are some issues and challenges as follows:

� Human resource

� Management Information System and IT support (Early Warning Software System);

� Agency and Broker service;

� Public awareness;

� Information sharing

� Premium tariff;

22

6- Challenges

�Develop Life insurance and Microinsurance

�Recruit more staffs

�Enforcement of existing law and regulations

�Public insurance awareness

�Information sharing

�Premium tariff

23

7- Way Forward

24

Insurance supervision in cambodia

Economy & Finance

Transcript of Insurance supervision in cambodia