Page 20 - Digital Edition SIRC Supplement

MARKET REPORT - BRUNEI

Opportunities for international
reinsurers in the market

While Brunei’s insurance industry is small and faces some headwinds with its close
association to the country’s economy, Mr Kolja Klawunn, Vice Chairman, Brunei
Insurance and Takaful Association, points out the opportunity for international
reinsurers in the market.

Although the business environment for insurers is Governance-related development
challenging, Brunei Darussalam’s small insurance The Brunei insurance market has been experiencing quite a
industry continues to expand gradually. The rapid few regulatory and governance-related changes in the course
growth of family takaful especially, points towards an of the past two years.
awakening of interest among ethnic Malays in life insurance-
related products. At the beginning of 2014, a new insurance industry
association was established. For the first time, all insurance
High court awards to accident victims have impacted the companies, life insurers, property & casualty players as well
profitability of mandatory
Motor and Workers’ as conventional and takaful
Compensation insurance. operators are represented
Long-standing factors within one industry body.
have affected insurance The establishment of the
penetration, including the Brunei Insurance and
Sultanate’s extensive social Takaful Association (BITA)
welfare system, which limits can be seen as an important
demand for private cover, and milestone. Not only do all
the structure of its economy, insurers in the country have
in which the dominant oil an official voice now, the
and gas industry needs to Authority Monetary Brunei
insure larger risks than local Darussalam (AMBD) also has
insurers can handle. The an appropriate counterpart
result is a highly competitive to discuss both insurance
industry in which takaful market as well as regulation-
providers seem to continue related topics.
grabbing market share.
Market update During the course of 2014,
The year 2014 saw an overall new agency registration
increase in general insurance guidelines (Property &
GWP by 6% to B$193.7 Casualty) became effective.
million (US$138.52 million), This requires existing and
driven predominantly by new agents now to register
Motor business. This sector with the Registrar of
still represents the biggest Companies (ROC) before
share of the insurance market officially registering with
with 47%, while it is also BITA and AMBD. Individual
responsible for 65% of agents would no longer be
gross claims. Other major accepted.
lines of business are Fire
and Workers’ Compensation Moreover, AMBD
with each representing introduced new Motor
approximately 8% of the overall GWP. The category Others, vehicle financing guidelines
which also includes Energy business, adds up to 27% of GWP and regulation. The industry
in 2014, most of that being ceded to reinsurers. In general, expects a reduction in Motor
claims figures can be described as rather moderate. premium income as a result.
BITA also introduced new commission structures effective
The Brunei insurance market currently consists of only 13 1 January 2015; high commission levels are now a thing of
insurance companies, one licensed broker and one licensed the past. However, parallel with this commission reduction,
loss adjuster. Out of the 13 insurance companies six are insurance premiums came under pressure as it was common
conventional general insurers, two general takaful operators, practice among agents to give some of their commissions away
three conventional life insurers and two family takaful as discounts to clients. This is particularly true for Property
operators. In a surprise development, Etiqa has recently where rate reductions could reach up to 30% in the first six
announced its departure from Brunei. As of 1 August 2015 months of 2015.
,the company has stopped entertaining both new and renewal In addition to the mentioned regulatory developments,
business. IFRS accounting principles have been introduced to the
financial industry. All financial institutions are requested to
produce IFRS-compliant accounts with their 2014 financial
statements. Due to limited expertise readily available in the

18 SIRC Supplement • November 2015 • www.asiainsurancereview.com Back to Contents