YANGON -- Myanmar's government on Friday provisionally authorized five multinational insurance companies, including U.K.-based Prudential and Japan's Dai-ichi Life Holdings, to establish wholly owned subsidiaries in one of Southeast Asia's least-insured countries.
The Planning and Finance Ministry's announcement came as a surprise as it had earlier said it would allow only up to three foreign companies enter the insurance market.
Also approved were Manulife of Canada, AIA of Hong Kong and U.S.-based Chubb, according to the ministry.
It marks the first time that the heavily-state-controlled economy has allowed foreign ownership in its fledgling insurance market, which was estimated to be worth only $13 million in life insurance premium revenue as of 2017.
The entry of multinational insurers with well established operations will bring a jolt of competition to a market consisting only of small local players. Dai-ichi forecasts the market to expand 100-fold to $1.3 billion in 10 years.
The five companies are expected to begin operating by the end of this year after completing procedures for the establishment of subsidiaries and other requirements.
In addition to the five companies approved on Friday, the government will choose by May other foreign insurers allowed to form joint ventures with local providers under a 35% ownership cap.
Japanese players Taiyo Life Insurance, Mitsui Sumitomo Insurance, Sompo Japan Nipponkoa Insurance and Tokio Marine & Nichido Fire Insurance are discussing terms with potential local partners. Thailand's Muang Thai Life Assurance and Thai Life Insurance are also in talks with potential partners.
Myanmar's government opened the insurance business to private companies in 2013 after a long state monopoly. The government also indicated it would issue business licenses to foreign insurance companies, allowing them to open representative offices. However, it only rolled out the necessary procedures in January because preparing the criteria for screening applicants took longer than expected.
"The entry of the foreign insurance [companies] will have a positive effect on development of our [insurance] industry because they can bring technology, capital and also expertise" said Sandar Oo, managing director of Myanma Insurance, who also in charge of insurance policies at the ministry.
Myanmar's insurance penetration rate, or the ratio of insurance premiums to gross domestic product, is estimated at less than 0.1%. Even Vietnam, whose insurance market remains underdeveloped, has a higher rate of 2.1%, while Japan's comes in at 8.6%, according to the Swiss Re Institute.
Dai-ichi Life, one of Japan's biggest listed insurance groups, is seeking a first-mover advantage in emerging markets as part of its plans for overseas expansion. In March 2013, it set up a wholly owned subsidiary in Cambodia.