The Economist 07Dec2019

The EconomistDecember 7th 2019 Finance & economics 75

K

o phoe tharis a cheery 22-year-old li-

quor-store clerk from Mandalay, a city

in central Myanmar. Death, and other less-

certain future misfortunes, are far from his

mind. A host of insurance companies new-

ly arrived in the country would like to

change that. Last week the finance minis-

try issued licences to foreign life insurers

for the first time. Five—aia, Chubb, Dai-

Ichi Life, Manulife and Prudential plc—

have been permitted to operate as wholly

owned subsidiaries. Others are required to

find local partners.

Foreign insurers have long licked their

lips at the prospect of moving into Myan-

mar. South-East Asia’s largest mainland

country, it is home to 54m people, more

than half of whom are under 30. Less than

4% of the population has insurance of any

sort. But under military dictatorship,

which ended in 2011, the market was mono-

polised by a state firm.

Not until the country made the transi-

tion to democracy, and the government

loosened its grip on the economy, were lo-

cal private insurers allowed to operate.

Even after Aung San Suu Kyi, whose ruling

party was elected in 2015, promised to al-

low foreign investment in the sector, there

were delays. Fed up with the government’s

sluggishness, Samsung Life Insurance, a

South Korean firm, closed its Yangon office

last year. 

Other insurers are betting their pa-

tience will pay off. ikbz, a local firm, thinks

the insurance market may be worth $2.6bn

in annual premiums in a decade’s time. But

there are bumps on the road to growth. In

2015 just 0.01% of the population had a life

policy, a smaller share than in Laos, Cam-

bodia or Vietnam. Some people in Myan-

mar don’t know what insurance is, or think

it a waste of money—or even unlucky, be-

cause it circumvents karma.

Aung Si Thu Kyaw, a fruit trader in Yan-

gon, has motor but not life insurance be-

cause he doesn’t understand how this “new

concept” works. A freelance agent based in

Yangon told a local magazine in February

that, while fire and vehicle insurance were

popular, life policies were a much harder

sell. The only people he could persuade to

buy one were his relatives.

Anil Mancham, the boss of ikbz, also at-

tributes anaemic growth to a lack of trained

sales agents—and of attractive products.

Until last week the industry regulator re-

quired all insurers to sell the same plans at

the same price. The need to avoid adverse

selection meant products were limited. But

he is optimistic that things will pick up.

When insurers opened for business in oth-

er South-East Asian countries ten to 20

years ago, they encountered, and sur-

mounted, similar obstacles. In Vietnam,

for instance, the industry is now growing at

10-20% annually.

Both Mr Mancham and Son Nguyen, the

president of Chubb Myanmar, see their in-

dustry’s future in modern technology. Just

26% of Myanmar’s adult population have a

bank account, but there are more phones

than people. Chubb and ikbz are experi-

menting with selling insurance via e-wal-

lets; aia plans to sell its products via Face-

book. Perhaps in time Mr Thar will come to

rely less on karma, and arrange a safer fu-

ture with a tap on his phone.  7

YANGON

Myanmar admits foreign life insurers

Insurance in Myanmar

Meant to be

T

he pastdecade and a half has seen

boom and bust, inflation and defla-

tion, globalisation and trade tensions.

Through such economic and political

cycles you might expect currencies to go

in and out of fashion. In fact the two that

have strengthened the most against the

dollar over this period—Thailand’s baht

and Israel’s shekel—have done so consis-

tently. They have outshone other cur-

rencies over one, five and ten years, too.

What explains their popularity?

Inflation is part of the answer. Ex-

change rates partly reflect relative pur-

chasing power, so a country with low

inflation should see its currency

strengthen against that of a country

where prices are rising fast. Both Israel

and Thailand have had low annual in-

flation: 1.4% and 2.2% respectively, on

average, over the past 15 years.

Another factor that causes exchange

rates to move is one country becoming

relatively more productive than another.

Economic growth is a reasonable proxy

of productivity, and Israel and Thailand

have had fast growth. (China has also

grown quickly, but the yuan has been hit

hard by the trade war.)

One curiosity is why both currencies

have performed well over each of the four

time horizons. The answer may reflect

policy. Both Israel and Thailand in-

tervene in markets to limit upward pres-

sure on their currencies. If they are very

strict, currency regimes can end abrupt-

ly, as when Switzerland abandoned its

peg in January 2015. But Israel and Thai-

land have been more flexible, which has

strung out their appreciations over time.

One-way baht

Exchange rates

For 15 years two currencies have reliably outperformed all others

Coining it

Sources: Bloomberg; IMF *Standard deviation of the daily percentage exchange-rate change over the previous year

25

20

15

10

5

0

2010 1918161412

Thai baht Israeli shek el

Swiss franc

Swiss franc

Chinese yuan

Singapore

dollar

Israeli shekel

Thai baht

-5 0 5 10 15 20 25

Currencies against the $

Dec 3rd 2019, % change on previous:

1 year 5 years 10 years 15 years

Switzerland

Israel

Singapore

Thailand

China

3.02.52.01.51.00.50

Switzerland

Thailand

Israel

Singapore

China

1086420

Currency volatility against the $*

Consumer prices, average annual % increase, 2003-18 GDP, average annual % increase, 2003-18