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The Japanese insurance group will own 51% of the new venture, with the remaining 49% held by the Laotian finance ministry. With capital of US$2 million, MSIG Insurance (Lao) Co. Ltd. will operate as a subsidiary of MSIG Holdings (Asia) Private Ltd., the regional holding company of Mitsui Sumitomo in Asia.
Mitsui Sumitomo aims to achieve premium income of 400 million yen (US$4.1 million) in five years' time. The new venture is expected to "commence operations shortly," said Mitsui Sumitomo in a statement.
The Japanese insurer said it is interested in the business potential of the nonlife insurance market in Laos, particularly for small- to medium-size enterprises which have growing needs for risk protection.
By opening ties with neighboring countries, Laos has expanded its networking with other markets and more factories are being built in the country. Therefore, Mitsui Sumitomo said Laos has good potential.
In Laos, the nonlife insurance market reached nearly 1.9 billion yen in premiums in 2006, up 217% from a year earlier. Laos reported a rise in nonlife insurance premium from 620 million yen in 2004 to 860 million yen in 2005. The country now has four nonlife insurance companies, including three foreign joint ventures with the finance ministry and national bank and one local company, in addition to Mitsui Sumitomo's new venture.
Although Laos has low gross domestic product of US$366 per capita in 2006 among the Association of Southeast Asian Nations, the country posted an 8.8% rise GDP in that year and it is expected to increase by an annual 7% to 8% in the future. The continuous GDP growth has driven the expansion of nonlife insurance in Laos, said Mitsui Sumitomo.
The joint venture with the Laos government "underpins Mitsui Sumitomo's strength" in nonlife insurance in Asia where it has "a long-term commitment to developing markets in Indochina and contributing activity to its economic growth," said Atsushi Yagi, chief executive of Mitsui Sumitomo Asia.
Mitsui Sumitomo has insurance operations in nine ASEAN countries including Brunei, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Yagi said the insurance group's strong network in the region "will be bolstered" with the addition of the Laos venture.
Mitsui Sumitomo Asia is one of three holding companies of Mitsui Sumitomo's global operations. The Japanese nonlife insurance group operates in more than 40 markets in the Asia-Pacific region, the United States and Europe, of which 16 operations are in Asia. The group had total assets of more than US$83.9 billion in March 2008.
Mitsui Sumitomo Insurance Co. Ltd. currently has a Best's Financial Strength Ratings of A+ (Superior).
(By Iris Lai, Hong Kong bureau manager: Iris.Lai@ambest.com)
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