Plans to Lift Restrictions on Insurance Companies
Private insurance came to Mongolia in earnest in 2004 and now there are 17 insurance companies doing good business in the country. One of these deals with life insurance policies and the others offer insurance cover in other areas. Their total capital is MNT56 billion and the premiums they receive annually amount to MNT32 billion. Payout in a year is around MNT6.5 billion.
The Law on Insurance, passed in 1997and amended in 2004, bars an insurer from buying and selling shares, from borrowing capital, and from offering its own shares to cover payment of claims. The way the capital market is developing at present, it is natural for insurance companies to invest there instead of keeping their money only in banks. Allowing them access to the capital market would benefit both the companies and the market by offering them a chance to expand. As times change, it is anomalous to restrict insurance companies’ investment options to banks and Government and Mongol Bank bonds.
A journalist of Uls Turiin Toim talks to S.Ganbold, Chief of the Insurance Section in the Financial Regulatory Authority, about the structure of the insurance sector.
Will the proposed Law on Investment Funds help insurance companies?
It is meant to. Insurance companies usually accumulate a large amount of money and need their capital to grow as they have to make regular payments to policy holders. We gave our opinion when the draft was being prepared but did not take any part when it was processed.
The investment fund would be more for life insurance companies, but we have just one of them.
That company led the demand for the law, but once it is passed, all insurance companies would benefit.
Will you also remove the bar on insurance companies trading in shares?
Certainly. Insurance companies must be allowed to invest their surplus capital profitably. But there has to be proper monitoring so that a fall in the stock market does not cripple the companies.
When will these steps be taken?
Businessmen have already asked the Government and the Prime Minister for quick action, and I think the changes would come soon.