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Last Updated on 17 May 2013 By Low Wei Xiang

Business

WHY INSURANCE LAWS NEED ENFORCEMENT

Chhay Rattanak, chairman of the Insurance Association of Cambodia and managingdirector of the Cambodian Reinsurance Company speaks at his office in Phnom Penh

earlier this month. Photograph: Scott HowesSince 2008, Chhay Rattanak has led Cambodias infant insurance industry, heading the Insurance Association of Cambodia and the Cambodian Reinsurance Company as chairman and managing director respectively. He spoketo the Posts Low Wei Xiang about what more has to be done to help the industry mature.

What does the Insurance Association of Cambodia (IAC) do?We changed our name from the General Insurance Association of Cambodia to IAC in the last three months.Before, we represented only non-life or general insurance companies there are currently six in raising issuesto the government, as Cambodia did not have life insurance until the end of 2012. Now we have three lifeinsurance companies, and they wanted to be part of the association as well, thus the name change.

Most ASEAN countries have separate associations for general and life insurance companies, but Cambodiacombines them into one, as the life insurance sector is still small.

What a re the types of insurance in Cambodia and which ones are popular?Generally, life insurance deals with issues associated to the insureds death, while general insurance deals witheverything else. For life insurance, as far as I remember, the industry has only set up three products in Cambodiarelated to savings, endowment and term life insurance. Meanwhile, our general insurance products arecomparable to other countries, and include fire, motor, health and personal accident insurance.

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Fire insurance is the most popular, constituting 28.9 per cent of the insurance market in 2012. Its take-up wasspurred in the last few years by garment factory owners who want to protect their assets, although it is notmandated by law.

Among the industries, the garment sector has the highest insurance take-up rate. Meanwhile, the constructionsector is not as highly insured, though construction insurance is compulsory. Enforcement is not as strong yet,because their licenses are given by the Ministry of Land Management, Urbanisation, and Construction, so theycan start building without insurance, which is handled by the Ministry of Economy and Finance. We are nowsetting up a working group to deal with this issue.

How is insurance perceived in Cambodia?Cambodias insurance industry is still young, and many people still do not understand what insurance is, or worrythey will not receive their payouts. But the situation has improved from the previous years, because IAC has beenworking with the government and insurance companies to increase public awareness.

Right now we are mostly reaching out to universities. The older generation sometimes has difficultyunderstanding what insurance is, and we target university students so that they can explain to their parents.Insurance is very hard to understand, so we have to keep our explanations basic and simple.

Some companies buy insurance overseas, is it a problem?They are not allowed to do it, as according to the law, if you are operating in Cambodia you have to buyinsurance locally, not overseas. This is to protect the insurance companies here. We know some foreign-runcompanies buy from overseas. I dont know why, but we are still figuring out a solution.

What is re-insurance, and what does the Cambodian Reinsurance Company (CRC) do?Re-insurance companies pay for a portion of the claims given out by insurance companies to their customers.For example, when an insurance company issues a policy for $100,000, they can re-insure a certain percentageto CRC, which is the only re-insurance company here. Based on the law, all re-insurance transactions must besubjected to 20 per cent as cession to CRC.

CRC started out in 2002 as wholly government-owned, but because the industry lacked expertise, AsianInsurance International was brought in in 2004 with a 20 per cent control of CRC.