The insurance industry in PNG looks forward to consolidation, more growth and regulatory reform in the coming year.

Port Moresby’s Poreporena Freeway collapses in March 2012. Credit: Mary Johns

Optimism in PNG’s insurance sector is high with companies seeking to expand amid the strong economic growth of PNG.

‘The economy is very healthy,’ says Chris Giddings of Pacific Re, a Port Moresby-based reinsurance firm, and President of the PNG Insurance Council, the peak body for the insurance industry.

Domestic business drives growth

Pacific MMI Insurance’s Wayne Dorgan

Most growth in the insurance sector has been by Papua New Guinean-owned companies, rather than foreign ones.

‘We have far more domestic companies than international companies,’ says Giddings, ‘which is actually good for the economy.’

One of the areas of growth, says Wayne Dorgan (pictured right), Managing Director of Pacific MMI Insurance, is the expanding SME (small-to-medium enterprise) market and the opportunity to develop products specifically for local businesses.

‘The National Development Bank and Nationwide Microbank have taken up couple of schemes we’ve come up with,’ he told Business Advantage PNG. While sold by the banks, these life and general insurance products are underwritten by Pacific MMI.

For overseas companies looking to move into the PNG market things are relatively straightforward:

‘There’s no restriction; foreign companies can come in provided they’re licensed by the insurance commissioner and stick to the rules and have the correct capital,’ says Giddings. ‘There are certainly opportunities coming into PNG.’

Changes in the sector

The Independent Consumer and Competition Commission gave regulatory approval for QBE to buy Mitsui Sumitomo late 2012.

‘Initially, the ICCC was concerned the take-over was going to lessen competition,’ ICCC Commissioner and CEO Dr Billy Manoka told media. However, the ICCC eventually determined that market concentration would only increase at a moderate level and that laws allow companies to set up with relative ease.

Revisions or even an overhaul of the 1995 Insurance Act, which has not been revised in 18 years, are anticipated this year. In particular, a strengthening of Sections 36 and 37, which cover exemptions to PNG’s insurance laws whereby all companies domiciled within PNG must purchase insurance locally.

The PNG LNG project was granted an exemption at government level and did its insurance dealings offshore and many companies associated with the project rode on its coattails, gaining exemptions in a number of areas.

‘We’re hoping that will be tightened up,’ says Giddings.

PNG idiosyncrasies

‘In the Pacific, we have a lot of idiosyncratic problems,’ says Dorgan, explaining that thanks to, say, poor responses by the fire brigade, buildings will be insured at higher premiums as there is a higher chance of their burning to the ground.

Poor internet service and infrastructure also mean that many of the calculations that are usually done online to work out costs must be done manually in PNG. However, with internet services slowly improving, such things may not be the irritation they are for much longer.