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MARKET REPORT - BRUNEI
country, this task turned out to be quite a challenge for most expenditure on infrastructure. However, it will continue to be
of the industry participants. Nevertheless, the new established difficult for the sector to significantly accelerate growth given
standard ensures financial statements are better comparable the high level of economic security enjoyed by the Bruneian
with peers. And the fair value approach should also ascertain citizens and the limited ability of local insurers to serve the
a more accurate representation of the respective financials. economy’s dominant economic sector.
AMBD and BITA are currently working on agency This limited ability due to sheer size of the local players
registration guidelines for the life insurance sector. At the certainly represents a chance for international reinsurers to
same time, common underwriting guidelines and principles grab a share of Brunei’s insurance market. Not only through
for the Motor business are being developed. Both initiatives traditional surplus and excess-of-loss treaties, but more so
are expected to be implemented over the course of the coming through fronting arrangements for big ticket items.
months.
Local insurers are allowed to pass on up to 100% of the
In another attempt of keeping more general insurance risk to reinsurers, and such use of local insurers with 100%
premiums in the country, an industry working group is also reinsurance has become standard practice for the oil and gas
looking into the feasibility of setting up a local reinsurance industry and contractors being involved in large infrastructure
company - Brunei Re. Structure, capitalisation or potential projects. Local insurers are then offered what is called a
shareholders of such entity are yet to be determined, but fronting contract, in which they earn a fee for being the insurer
this initiative has already triggered some attention in the of record. The local insurer also bears the small but potentially
international reinsurance markets. devastating risk of being wiped out by a large claim if the
Economy and insurance industry outlook international reinsurer goes bankrupt. Hence, this is a risk
Brunei remains heavily dependent on the oil and gas sector worth considering, when deciding on partners.
and the sharp drop in oil prices recently has already lead to a
slowdown in economic activity and government spending. Only Conclusion
absolutely necessary projects proceed, which leads to further The long-term future of Brunei Darussalam’s insurance
reduction in project insurance. industry is closely associated with the general development
of the country’s economy.
The ambition of the Brunei authorities to further diversify
the economy continues to struggle to gain momentum. In the GDP growth in 2015 is projected to be negative and 2016
longer term the Sultanate’s insurance sector will continue to does not look much more promising. With a continued low
grow in line with the broader economy and population. oil price and its challenges for the once-so-profitable oil and
gas industry, and limited success in diversification into other
Some of the expected boost to growth should come from areas, Brunei will face some tough times to keeping up with
investments in industrial segments such as oil processing its ASEAN friends.
and petrochemicals, as well as from planned government
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