9 December 2020

The insurance market in Myanmar has been liberalised with the issuances of Directives No. 1 to 6 as it allows for the opening of the insurance market to foreign markets which will bring more competition for local insurance business and expands the sector. This will encourage healthier competition and better services.

Part 1 discusses on Directives No. 1 to 3 which sets out provisions for insurance agents, bancassurance and customer protection for unfair insurance products. Part 2 will discuss the remaining directives, Directives No. 4 to 6, which were issued on 12 May 2020 and will come into force on 1 October 2020. The key terms for Directives No. 4 to 6 are set out below.

Directive No. 4

This Directive is the most complex of all the Directives issued by the Financial Regulatory Department (FRD). Directive No. 4 deals with reinsurance which allows insurance companies to obtain reinsurance from other insurers/reinsurers, albeit subject to certain conditions. It seeks to streamline the administration of reinsurance activities and ensure adequate reinsurance coverage to protect policy holders, insurers and reinsurers. The Directive sets out the following:


Paragraph 2 sets out the definitions for 16 reinsurance and regulatory terms. Except for the definition of reinsurance treaty, insurance segment and insurer, the terms are defined within the international parameters. Nonetheless, there could be confusion to some of the terms.

For instance, reinsurance treaty is defined as a reinsurance contract between the cedent and reinsurer for one year or longer (sub-para (e)) whereas the definition of reinsurance contract (sub-para (l)) as a commercial agreement legally binding. It can be said that both sub paragraphs seems to define the same thing albeit with different words. In our opinion sub-para (e) tries to define the “treaty reinsurance” as one of the methods of reinsurance rather than as a “reinsurance treaty” and this supposition is in agreement with the context as the previous paragraph, sub-para (d), provides for the definition of “facultative reinsurance”, which is another method of reinsurance.

Sub-para (m) sets out the definition of “insurer” to mean an insurer or a joint venture partner that has been granted an insurance and/or reinsurance license in Myanmar. Under this definition it includes both insurer and reinsurer. This is beyond international parameters as insurer and reinsurer are treated separately in international context. In international practice, insurer cannot be reinsurer and vice versa. However, at sub-paragraph (o), “reinsurer” is defined as joint venture partner or 100% wholly owned subsidiary foreign reinsurer or foreign reinsurer’s branch that has been granted a reinsurance license in Myanmar. Further, in other paragraphs, such as on “compulsory retention”, insurer and reinsurer are mentioned separately.  From this it can be said that despite the definition in sub-para (m), the Directive aims to treat reinsurer and insurer as a separate entity.

Objectives and Maximisation of Retention

Among the four objectives set out in paragraph 3 of the Directive provides four objectives maximisation of retention within the country (3(a)) and simplification of the administration of reinsurance business (3(d)) are noteworthy. To implement the maximisation of retention it is compulsory for every insurer and reinsurer to maintain the maximum retention that is proportionate to its strength, quality of risks and volume of business (4(a)). Further, each permitted kinds of insurance must have a retention program. These are the general principles of compulsory retention in Myanmar. The Directive also fixed the amount of life insurance retention, both for life insurer and life reinsurer, at 20% of sum at risk for each life insurance business (para 5) and insurers and reinsurers shall justify their retention program if required by the Insurance Business Regulatory Board (“IBRB”) (para 6).

Reinsurance Program

Every Myanmar insurer shall submit their annual reinsurance program together with the retention program to IBRB, 10 days before the commencement of the financial year and within 30 days after the commencement submit the finalised reinsurance program and details of actual placements (7(i)(ii)(iii)). Any change in the reinsurance program must be reported to IBRB within 15 days from the date of approval by the Board of Director (para 7(iv)). When formulating an effective and appropriate reinsurance program and retention policy, seven factors are to be considered:

  • analysis of related businesses;
  • overall risk appetite;
  • extent of required reinsurance protection;
  • level of risk concentration;
  • retention levels;
  • type of reinsurance program; and
  • mechanism of reinsurance (para 8).

At this point, we note there are some differences between the English and Myanmar version. In the English version, paragraph 8 states “mechanism of reinsurance”, instead of the word “mechanism”, with the Myanmar word equivalent to “method” in the English language is used  Moreover in the Myanmar version, it is written that the seven factors “must be included” whereas in the English version such factors “must be considered”. Further clarification is required when taking into account whether the factors are to be “considered” or “included”.

Paragraph 9 provides for “matters to be considered in the final reinsurance program”. However, in the Myanmar version it is written as “facts to be included in the reinsurance arrangement”. The Myanmar version is the official version and if there is any conflict between the two, the Myanmar version shall prevail over the English version.

Catastrophic Risk

Catastrophic risk protection provides that every Myanmar insurer shall ensure that its reinsurance arrangements in respect of any catastrophe accumulations are adequate (10(a)). However, the word “catastrophe accumulations” is ambiguous. When looking at the Myanmar version it is simply written as “Catastrophic Risks”.

The difference in the English and Myanmar version can be seen at paragraph 10 (b) of the English version which states that:

“(b) May have the Myanmar catastrophe modeling report, if available, and the reinsurance arrangements being based on the Myanmar catastrophe modeling report for the forthcoming financial year.” (Emphasis added)

In the Myanmar version, the phrase “Myanmar plan for catastrophe risk insurance” is used. It is important to highlight the differences between the English and Myanmar version and to be careful when translating from Myanmar to English.

Record Keeping

Every Myanmar insurer shall keep a backup of their date and submit electronic copies of each and every reinsurance contract, list of reinsurers with ratings and shares in proportional and non-proportional reinsurance arrangement. Hard copies of those documents shall be maintained for the specified period and shall be made awardable for FRD on-site inspection.

Eligibility criteria of Cross Border Reinsurer

Reinsurance placement with a cross border reinsurer (“CBR”) will be allowed only when the following criteria has been met for the past three consecutive years:

  • authorised by the home country regulator to transact reinsurance business;
  • minimum rating of BBB from Standard and Poor or equivalent;
  • minimum solvency margin or capital adequacy as specified by the home country regulator;
  • have the following compulsory cession limits during any financial year, unless an exemption has been granted by the IBRB:
Rating of CBRs standard and Poor or equivalentMaximum cession limits allowed per CBR
Greater than A+50%
Greater than BBB+ up to and including A+40%
BBB and BBB+20%


Note: Compulsory cession limits means that every Myanmar insurer or reinsurer and foreign reinsurer must cede a compulsory maximum cession of up to 10% of any insurance segment business to state-owned insurance, Myanma Insurance, who has option to refuse or accept all or part of it. The above percentages are calculated on the total reinsurance premium ceded outside Myanmar.

Moreover, they must have a good claim record and comply with other reasonable requirements set out by the IBRB. IBRB has authority to make relaxation and changes of those criteria and limits of cession for a cross border reinsurance.

  • Reinsurance Placement Procedure: The Directive sets out that a cedent, which is an insurer who assumes liability under a primary policy and transfers a portion of the risk to another insurer, shall be free to obtain reinsurance cover from any reinsurer having at least BBB from Standard and Poor or equivalent (para 14(a)(b)). A cedent shall offer the best terms obtained from a CBR in following order:
    • state-owned Myanma Insurance;
    • other Myanmar reinsurers and foreign reinsurers’ branches registered and licensed in Myanmar; and
    • the CBR who provided the best terms.

These provisions apply whether reinsurance placement is made directly with reinsurers or through brokers (para 116). However, they do not apply to insurance pools, existing co-insurance scheme of the insurers and reinsurance placements of life insurers who are responsible to utilise Myanmar capacity before any CBRs.

Directive No. 5

The Directive deals with the existing insurance policies in the Thilawa Special Economic Zone. The Directive sets out that for the three Japanese companies who have already been granted insurance license to operate in Myanmar as a Joint Venture General Insurance Companies is to stop underwriting new policies in Thilawa Special Economic Zone as of 1 October 2020. The liabilities for existing insurance policies will be maintained until the expiry of the policy. The three Japanese insurance companies are:

  • Sompo Japan Nippon Koa Insurance Incorporation
  • Tokio Marine and Nichido Fire Insurance Co., Ltd and
  • Mitsui Sumitomo Insurance Co., Ltd

Directive No. 6

The essence of Directive No. 6 is to empower the eight Myanmar General Insurance Companies and Myanma Insurance to offer the following products throughout Myanmar, starting from 1 October 2020:

  • Industrial All Risk Insurance;
  • Construction All Risk/Erection All Risk insurance; and
  • Bailee’s Liability Insurance.

These types of insurance are very technical in nature and requires specialist knowledge in order to underwrite them efficiently. Therefore, it might take some time for general insurers to start underwriting them.


Myanmar is attempting to keep up its insurance market with other ASEAN countries’. The aforementioned Directives are seen as noteworthy achievement toward that directions. It is anticipated that more directives will be issued in the near future to further regulate and stabilise the market,

If you have any questions or require any additional information, please contact Dr Maung Maung Thein or the ZICO Law partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice.


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