Southeast Asia’s developing economies offer promising prospects for insurers willing to take a long-term investment approach, according to Swiss Re’s latest Sigma study.

Cambodia, Laos, Myanmar and Vietnam are in a group of 21 developing economies the report characterises as “frontier” markets.

Such economies are typically smaller than neighbouring countries, income levels are significantly lower and insurance coverage is generally below 1.5%.

“A key attraction of frontier markets is their catch-up potential,” the report says. “Many frontier markets also have abundant natural and human (young population) capital. 

“These favourable conditions will boost economic growth, which in turn will filter through to insurance sector growth in the years to come.”

Insurance coverage – premium as a percentage of GDP – ranges from 0.08% in Myanmar to 1.56% in Vietnam, which is the most advanced of the four southeast Asian countries.

Cambodia’s insurance coverage is 0.35% and Laos’ is 0.45%.

However, insurers must be patient.

“Capturing the potential in frontier markets will require a long-term strategy,” Swiss Re Chief Economist Kurt Karl said. “Nonetheless, this work shows there is a real ‘early-mover’ advantage to be gained for insurers that understand how to access and develop these markets.

“The benefits will come once these markets reach the critical middle-income threshold, when consumers and businesses start buying more insurance.”

Insurance development in the four countries is in its early stages, but their governments have laid the groundwork for the industry to grow.

Cambodia introduced a new insurance law in February last year, while in Myanmar, which recently emerged from decades of military rule, 12 private companies have been given conditional approval to provide insurance services.