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Insurance supervision in cambodia

Insurance supervision in cambodia







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    Insurance supervision in cambodia Insurance supervision in cambodia Document Transcript

    • MINISTRY OF ECONOMY AND FINANCEFinancial Industry Department Insurance Division Insurance Supervision in Cambodia September 29th – 30th, 2010 In Meatra Head of Insurance Division meatra_in@mef.gov.kh 1 OUTLINES 2
    • 3 1. History of Insurance Establishment in Cambodia It can be noted that according to the history of Cambodia the developmentof 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 (Con’t)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 . 51. 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
    • 2-Insurance Sector under FSDS 2006-2015 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 3-The Insurance CommissionerA- 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 Cambodias insurance market. 8
    • 3-The Insurance Commissioner (Con’t) 2-The Insurance CommissionerC- Roles and Responsibilities of Insurance Commissioner Insurance Division comprises four units, namely supervision, regulation, marketdevelopment 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. 9 3-The Insurance Commissioner (Con’t) 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. 10
    • 3-The Insurance Commissioner (Con’t)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. 11 3-The Insurance Commissioner (Con’t)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. 12
    • 3-The Insurance Commissioner (Con’t)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: -LifeInsurance 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). 13 3-The Insurance Commissioner (Con’t)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. 14
    • 4. Insurance Industry Performance for 2009 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. 154. 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
    • 4. Insurance Industry Performance for 2009Number of Companies >General Ins. Company = 06 > Reinsurance = 01 > Broker = 01 > Agent = 01 17 4. Insurance Industry Performance for 2009 18
    • 4. Insurance Industry Performance for 2009 195. Important Insurance Events For 2009 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. 216- ChallengesThere 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
    • 7- Way Forward Develop Life insurance and Microinsurance Recruit more staffs Enforcement of existing law and regulations Public insurance awareness Information sharing Premium tariff 23 24