Anuul report report 2010

34

description

annual report of Insurance Sector in Cambodia

Transcript of Anuul report report 2010

Page 1: Anuul report report 2010
Page 2: Anuul report report 2010

Contents

1. FINANCIAL HIGHLIGHT ....................................................................................................................................... 2

2. MESSAGE FROM CHAIRMAN ............................................................................................................................. 4

3. MESSAGE FROM MANAGING DIRECTOR ........................................................................................................... 5

4. COMPANY ROLE ................................................................................................................................................. 6

5. MISSION STATEMEMT ....................................................................................................................................... 7

6. COMPANY PROFILE ............................................................................................................................................ 8

7. CAMBODIA INSURANCE MARKET OVERVIEW .................................................................................................. 12

8. ECONOMIC REVIEW 2009 ................................................................................................................................ 14

8.1 Agriculture and Rural Development .................................................................................................... 15

8.2 Financial and banking sector ............................................................................................................... 16

8.3 Garment Sector ................................................................................................................................... 16

8.3 Tourism Sector ..................................................................................................................................... 17

8.4 Construction ....................................................................................................................................... 18

8.5 Telecommunication ............................................................................................................................ 18

9. CAMBODIAN INSURANCE REVIEW 2010 .......................................................................................................... 19

9.1 Market performance and development ............................................................................................... 19

9.2 Cambodia Re’s performance ............................................................................................................... 19

9.2.1 Operational Performance for the last 3 year .................................................................................. 19

9.3 Property Reinsurance ........................................................................................................................... 21

9.4 Engineering Reinsurance ...................................................................................................................... 21

9.5 Moto Reinsurance ................................................................................................................................ 22

9.6 Marin Reinsurance ............................................................................................................................... 22

9.7 Medical & Health Reinsurance ............................................................................................................. 23

9.8 Miscellaneous Reinsurance ................................................................................................................. 23

10. RISK FACTORS AND MANAGEMENT ................................................................................................................ 25

10.1 Underwriting Uncertainty .................................................................................................................... 25

10.2 Retrocession Processing ....................................................................................................................... 26

10.3 Premium Delivery and investment ....................................................................................................... 26

11. INTERNAL AUDIT ....................................................................................................................................... 27

12. OUTLOOK FORWARD ………………………………………………………………………………………………………………………………...29

13. ACTIVITIES OF CAMBODIA RE ……………………………………………………………………………………………………………………..30

13.1 Inauguration Ceremony of Cambodia re’s new building ………………...……………………………………………….30

13.2 Training…………………………………………………………………………………………………………………………………………….30

14. REVIEW OF FINANCIAL PERFORMANCE ………………………………………………………………………………………………….....31

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1 FINANCIAL

HIGHLIGHT

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Fire &Engineering

Miscellaneous Medical Marine Motor

Grosss Premium Written

2006

2007

2008

2009

2010

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0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2005 2006 2007 2008 2009 2010

7,771,533

8,831,733 8,880,524 9,654,628

10,082,304 10,844,484

Total Assets

0

100,000

200,000

300,000

400,000

500,000

600,000

2005 2006 2007 2008 2009 2010

207,105

415,491 424,986 431,269

479,035 508,835

Net Income

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Last year 2010, Cambodia Economy recovered from the negative impact in 2009 and come back

to positive rate with GDP growth of 6.7%. This growth was boosted by the export of Garment

industry and growth in other sectors. Last year, it saw that Garment export increased by 24%;

Agricultural sector increased by 5.3%; Tourism Sector increased by 16% and Investment also

increased by 16%.

Along with Economic growth in the year 2010, Insurance Industry was seen growing as well by

attaining growth rate of 24% and generated Gross Premium of nearly 25 million USD. This was

thanked to the Government which lay out the right strategy, coordination policies, regulatory and

supervisory measure in respond to Global financial crisis in 2008 so that it could ensure the

sustainable economic growth of the country. Furthermore, Government has diversified the

economy and strengthening its core competiveness for future economic development. Hence, it is

projected to attain economic growth of 6% and 6.5% for the year 2011 and 2012 respectively.

Cambodia Re in 2010 performed very well by achieving gross premium growth of 17% comparing

to the year 2009 and the bottom line increase by 6%. Moreover, Cambodia Re played its

importance role in insurance industry in respond to the market which is badly impacted by some

loss by providing technical training to enhance risk management awareness of underwriter and

surveyor of local insurance companies. Even more, the company will continue to fulfill its various

activities of National Reinsurance Company in order to develop insurance industry in Cambodia.

Taking this opportunity, I am grateful to thank the Royal Government of Cambodia and the

Ministry of Economy and Finance, especially Financial Industry Department who have been

contributing to ensure macroeconomic stability and encourage for more foreign direct

investment. This would bring a visualized opportunity for the growth of insurance industry and

industrial development.

I am also thankful for the efforts of the company’s management and staff who have been putting

new ideas and innovation into practice in order to gain core competency in business operational

framework.

Dr. Hang Chuon Naron

2 MESSAGE FROM

CHAIRMAN

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The insurance industry for the year 2010 bound back to it track of growth after being hit of the

downturn in 2009 along together with the economic growth of the country. For the year 2010

operation, it was seen insurance industry increased by 24% comparing to the year 2009 with

Gross Premium reached nearly 25 million USD, in which Insurance related to Engineering was

dramatically increase of around 206%. However, at the end of last year, the industry was hit by

flood due to the heavy rain in the capital and some provinces. Also it was noticed that Garment

Factory was burn down by Fire 3 years in arrow from 2008 which badly impact the insurance

and reinsurance market.

For Cambodia Re’s side, its performance for the year 2010 still keep growing by achieving Gross

Premium growth rate of 17% comparing to the previous year performance. The company’s

Gross Premium reached to USD 2,9 million, in which Motor Business account 32.57% following

by Fire Insurance 31.46%, Miscellaneous 17.97%, Medical and Health 11.86% and Engineering

4.66% and the last one Marine Cargo 1.45%.

In this circumstance, Cambodia Re financial result showed that Net Profit for the year end was

amounted to 508,835 USD increased by 6.2% comparing to the year 2009, and Total Asset

reached to 10,844,484 USD.

Finally, I would like to take this occasion to express my sincerely thanks to the Board of

Director of Cambodia Re and employees who have make hard effort to bring the company to

this end. Also I would like express my gratitude to the Ministry of Economic of Finance,

particularly Financial Industry Department and to all insurance companies for their kind

cooperation during the year operation of 2010.

Dr. Chhay Rattanak Managing Director

3 MESSAGE FROM MANAGING

DIRECTOR

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4 COMPANY

ROLE

As set by the Royal Government of Cambodia, and the Ministry of Economic and Finance the role of Cambodia Re is

as follows:

To carry out reinsurance business operation of all class of risks, including general insurance and life

insurance;

To act directly or indirectly with insurance and reinsurance companies;

To fully cooperate with the existing or prospective enterprise or companies by way of sharing

participation, signing commercial contracts, buying shares, which are beneficial to Cambodia Re;

To directly or indirectly participate in all industrial, commercial, financial, movable and progress of

the above transaction;

To be responsible for the job safety and security;

To adhere to the working principles and manner as the business people do;

To effectively manage all activities;

To have rights and duties provided by the Government to achieve its planned objectives.

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5 MISSION

STATEMENT

Our Strategies : We pursue our objectives and goal by:

Accepting and retroceding the compulsory cessions from local insurance companies in Cambodia,

Providing information of local and international market trends on insurance and reinsurance to local

insurance companies,

Providing a working environment having openness and self-development,

Adhering to the principles of fair service, work with shareholders and do business according to a prudential

code of the business ethics so as to acquire satisfactory returns, and

Enhancing the capacity of the local market to provide Reinsurance services with the best standard of

reinsurance professionalism.

Our Values : Cambodia Re shall build its corporate values with:

Integrity—We shall deliver reinsurance quality and practices with high ethical standard to our customers

and reinsurance networks,

Customers—We listen to our local ceding companies and improve our reinsurance products to meet their

present and future needs with their expectation, along with value-added services,

Employees—Our prosperity largely depends on highly effective performance of how our employees

who are working together in a safety and healthy workplace where teamwork and development are

valued and recognized,

Accountability—We expect superior performance and are accountable for our actions and results.

Cambodia Re’s leaders set clear goals and expectations, provide and seek frequent feedback, and

Financial Responsibility—We are prudent and effective in the use of our financial resources.

Our Goal : To be the Effective National Reinsurer with the Best Quality Services in Cambodia.

Our Objectives : We shall achieve our goal by:

Providing best reinsurance services with international standard,

Delivering full customer satisfaction,

Empowering Cambodia Re’s people,

Innovating the reinsurance products and services in cooperation with our ceding companies in Cambodia,

and

Producing superior returns for our shareholders.

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6 COMPANY

PROFILE

Cambodian Reinsurance Company, known as Cambodia Re, was established under Sub-Decree No.

07AN.KR.MK by the Royal Government of Cambodia on 24th January 2002. The Company is incorporating with the

registered capital of USD 7 million for its operation regarding to the Insurance Law of Cambodia. In order to

build up the capacity and financial strengths with the ideal of privatization, company reached a Joint

Venture Agreement on 16th January 2004, with Asian Insurance International (Holding) Company “AII” with the

The Managing Director of Cambodia Re has been officially elected as chairman for the General Insurance

Association of Cambodia (GIAC) since 12th May 2005 and from then Cambodia Re on behalf of GIAC took its lead

to successfully host 5th Asian Insurance Congress 2005 which is the first congress ever organised, and many

others seminars workshop, meeting for the purpose of insurance improvement and protect public interest in the

industry.

Since the establishment in 2002, people in Cambodia Re have been making their efforts at their best for any

valuable transitions changing scenario for business in Cambodian.

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BOARD OF DIRECTOR

Mr. Rath Sa Rath,

Operation Director

Board Member,

the Employee’s

Representative

Mr. Teddy Hailamsash,

Asian Insurance Inter-

national Holding “AII”,

Board Member

H.E Koeut Rith,

Board Member

Mr. Im Sithol,

Board Member

Dr. Hang Chuon Naron Dr. Chhay Rattanak Mr. Rath Sa Rath Mr. Rath Veasna

BOARD OF MANAGEMENT

Dr. Chhay Rattanak,

Managing Director,

Board Member

Dr. Hang Chuon Naron

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Board of Management

The Board of Management has been set up since

2003 to calibrate business management and decision

making for the reason of environmental changes in

management perspective. Board of Management

comprises of Chairman, Managing Director,

Operations Director and Chief of Account and Finance

and Human Resources and some other appointed

persons called for at the time of the meeting.

The main purpose of the Board of Management, in

effect, aims at accomplishing some strategic goals

derived from strategic decisions made by the Board of

Directors by delivering some certain objectives and

following up those as closely as planned.

Customer relations have become an important focus

in today business operation of Cambodia Re which

leads to considerable effectiveness. Understanding

customers’ value will help us bring the company’s

effectiveness so that we would adopt best practices of

our reinsurance professional in the country, as well as

with our retrocession ire.

In accordance with the company’s goals, to optimal

outcome by empowering subordinators to achieve

functional objectives and gaining feed back from

them, the Board of Management is committed itself

to adapting best strategies possibly.

General business management

To bring organizational effectiveness as committed,

general business management is handled by

Managing Director.

The Managing Director is significantly playing a vital

role to ensure that there is organizational cost cutting

and whilst enhancing business operation. Moreover,

asset management is very essential for the company

to look after for an on-going investment.

Empowering with his encouragement to the staff with

reliable decisions he makes is to bring what we call

balanced authority distribution within organization.

Staff training becomes another factor to enhance their

capability when empowerment is needed. Because

training program can help staff to absorb new learning

and avoid risks such as complicated and unusual risks.

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Workgroup is fundamentally important for work

efficiency to the company. Staff member is

encouraged to have team building toward projects

or decisions which have to be made. We have an

underwriting team to assess ordinary and

complicated risks ceded by ceding companies, and

to make sure that the reliable information is

collected as much as possible regarding any

particular risk in order to better understand the

risk exposure for the company whenever claim

occurs between claim officer and underwriter. Our

core value is that our operation people have been

working together as the Think-Tank for

organisational capacity building and

implementation.

Teamwork

Local Partnership

Asia Insurance Company

Caminco Insurance Company

Campubanklonpac Insurance Company

Forte Insurance Company

Infinity Insurance Company

Cambodia Vietnam Insurance Company

International Partnership

Swiss Reinsurance Company

Toa Reinsurance Company

Asia Capital Reinsurance Group

Malaysian Reinsurance Bernhard

Labuan Reinsurance Company

Best Reinsurance Company

J.B Boda & Co(s).Pte

Bangkok Insurance

PT.Asuranci Central Asia

Asia Hong Kong

Partnerships

Cambodia Re has set up business partnership with both local and international companies:

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7 CAMBODIA INSURANCE

MARKET OVERVIEW

Historical Development of Insurance Industry

The history of the Cambodian Insurance market went

back to 1950’s which at that time a number of French

Insurance companies maintained operations in

colonial period and for a time after Independence.

Until 1975 a State-Owned Insurance Company, named

Society National assurance et Reassurances (SNAR)

carried on business in the country but ceased the

activities when the Khmer Rouge seized control of the

country.

For seventeen years, no insurance business was

conducting in Cambodia. In 1990, the Cambodian

National Insurance Company (CAMINCO) was

established to firstly conduct insurance business in

Cambodia. CAMINCO at the time was not so active

due to lack of technical expertise, human resources,

and related documents. Until the early 2000, in fact,

agents often placed insurance direct with insurance

companies offshore by passing through CAMINCO.

However, with the passing of insurance Law in June

2000 and subsequent Royal-Decree, and Sub-Decree,

companies transact insurance business in Cambodia

are required to register at the Ministry of Economy

and Finance with an authorized capital of USD 7

millions. Since then development has been gradually

made.

Privatization and Liberalization of the Insurance

Industry

During the operation of CAMINCO for ten years, it has

been noticed that the insurance market was actually

in embryonic stage while people in Cambodia had not

seriously understood how much they could get

benefits and compensation from insurance policy. Day

after day, anyway, insurance was understandable

better by main business organizations and

Non-governmental Organizations and now even the

local investor, and people.

Micro-Insurance also started to introduce in certain

province as pilot projects. In 1995, Asia Insurance

(Cambodia) with a bulk of shares from Asian Insurance

International (Holding) Company entered the market

as the insurance agent of CAMINCO at that time. The

industry was going to be fundamental growth as a

result of expanding the market. Soon after that, Forte

Insurance also accessed the market in 1999 as

another agent of CAMINCO. Eventually, the two

companies have been managing insurance

transactions as CAMINCO’s agents.

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In June 2000, Insurance Law was passed by the

Cambodian Parliament, yet there was a delay in

implementation of the corresponding Sub-Decree till

beginning 2002. The Law says that an insurance

company is required to have the registered capital of

USD 7 millions to get a license from the Ministry of

Economy and Finance. Therefore, those three

companies became licensed Insurance Companies. In

early 2002, the Cambodian Reinsurance Company

(Cambodia Re) was established to support local

insurance companies. This establishment has even

made contribution in order to freeze the outflow of

premium to overseas markets.

Initially, Cambodia Re was operating as a State-Owned

company, the capital of which is wholly owned by the

Royal Government of Cambodia (RGC). As from the

start, Cambodia Re had conducted business on its own

until the Company turns to be a Joint Venture from

January 2004.

This process has been an effort of the Ministry of

Economy and Finance where long and careful

negotiation had been made between Cambodia Re

and Asian Insurance International (Holding) Company

“AII”. The joint Venture Agreement signed on 16

January 2004. This establishment was aimed at

supporting and providing local reinsurance capacity to

all direct insurers in the Kingdom of Cambodia, and

based on the Insurance Law which specifies that all

reinsurance transactions has to be subjected to the 20

per cent as compulsory cession to Cambodia Re as the

National Reinsurance Company.

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8 ECONOMIC

REVIEW 2009

Cambodian economy in 2009 was observed to have a real GDP growth around 2 per cent according to

projection of the Ministry of Economy and Finance.

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8.1 Agriculture and Rural Development

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This sector so far is one of the main driving forces of the economic growth of the country and it becomes the one

strategic tool for the government to ensure sustainable development. In the year 2010, the government outline

plans to export one million tons of milled rice to global market by the year 2015. Last year 2010, we also see that

this sector become target of various Bank to offer loan. According to the news, the largest bank of Cambodia,

Acleda Bank, have loan to Agriculture sector account

12.25% and plan to increase up to 15.25% for the

year 2011.

In addition, the government also provide fund of 18

million for agriculture loan in the year 2010, and

double this amount in the year 2011. It is also pre-

paring 25 million funds to guarantee 50 percent of

credit offer to the rice industry by the commercial

bank. For investment, Agriculture is still a leading

sector for investor‘s money.

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For the year 2010, Banking and financial sector was also

active. We see that number of bank increase up to 29

banks, 7 specialized banks, 25 licensed Micro Finance

Institute, 2 bank representative office, 28 Credit operators

and 60 NGO which running the like operation.

In the year 2010, Banking Industry enjoyed the positive

growth as a whole, which is estimated at 20% growth. It

was seen much increase in deposit as well as loan in many

banking operators. Let alone Acleda Bank the leading

bank in Cambodia, had the deposit increased by 31.65%

or USD 911 million, while outstanding loan increased by

36.82% to USD 744.31 million. Similarly, another big bank,

Canadia Bank, also see its deposit and loan increase by 40

% and 30% respectively for the year 2010.

For MFI (Micro Finance Institute) side, according to the

statistic show that in the year 2010, the total loan of all 23

MFI increased by 33%.

8.2 Financial and banking sector

8.3 Garment sector

In the year 2010, Garment sector increase by 26% in term

of export comparing to the year 2009. The Garment

exports were worth a total of US$ 2.99 billion in 2010. The

main buyer are from United State which worth about 2

billion, while the other to Europe around 750 million.

For the year 2011, this sector is expected to continue

increase as the government has increase business

agreements made with other countries like Japan and

Asian member.

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Tourism is also another sector that play importance role in Cambodia economy, and it contributes much to the

economy growth and employment. In the year 2010, this sector generated revenue to the country roughly 1.78

billion USD increase by 16% comparing to the year 2009. It was about 2.5 million foreigner entering Cambodia in

that year.

Lasts year, it was also seen increase in travel and tourism companies to 392 companies from 374 in the year

2009.

There is much potential for this sector to growth in the coming year when there is direct linkage between

Cambodia and Europe country. As earlier, the country has agreement to have a direct fly from French to

Cambodia. Even more, new tourist sit are on focus like Eco tourism. It is

also seen that other international hotel brands are set to operate in the

kingdom such as Marriott Hotel and Best Western.

8.4 Tourism Sector

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Construction sector for the year 2010 was still not

favorable and still suffering from the world economic

crisis along with the slowdown of value and number of

construction. It was decrease around 60% during 2010

comparing to the previous year, and it was seen only

small projects such as hotel, restaurant, and housing.

According to Ministry of Land Management and

Urbanization, in 2010 there were 2149 projects with

value of USD 840 million less than the approved

projects of 2230 in 2009 with worth of USD 1,988

million.

For the year 2010, it noticed that the number of

internet using is increasing in the country with the

number of internet subscriber 173,675 and

29,589 in the year 2010 and 2009 respectively. To

this 2010, there were 37 internet service

providers.

Competitiveness is also seen in small and medium

business now a day in which they provide free

Wi-Fi as a value added service. So there is much

potential increase in the internet subscriber in the

coming years.

8.5 Construction

8.6 Telecommunication

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9 CAMBODIAN INSURANCE

REVIEW 2010

9.1 Market performance and development

In general, Market achieve premium growth of 24% in 2010 to the estimated amount of 24.9 million USD.

The increase driven by 4 main business such as Engineering, Miscellaneous, Medical and Health and Motor

Insurance. Engineering was seen to increase by 206% which boosted by insurance on the hydro dam project;

Miscellaneous grow by 26%; Medical and Health grow by 20% and Motor insurance grow by 9%. However,

the market are also hit by some loss in the late of 2010 caused by food and brought the total loss of Market

around 13 million.

9.2 Cambodia Re’s performance

Having experienced the market with local insurance companies since 2002, we have been working on local

issues in an international perspective for a radical speed of market development. We have aligned within

the framework of our industrial strategic development through our communicative management process at

all levels of in order to make it happen. Our strategic development is based on the understanding of

constructed ideas for sustainable development with low risk and volatility. Thus, sustainability is our pivotal

acceptance in our partnership.

9.2.1 Operational Performance for the last 3 year

With regard to our experiences with local and overseas markets and wise-leading of our management board,

Cambodia Re has been able to perform a well and satisfied underwriting result, particularly in the last 3

years.

Underwriting Year Gross Preprium Increased (%) Net Preprium Increased (%)

2008 2,360,528.95 34.95% 1,334,461.00 41%

2009 2,533,852.69 7.34% 1,433,574.00 7%

2010 2,976,625.47 17.47% 1,692,561.18 18%

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Premium by line of business

Line of Business 2008 2009 2010

Engineering 131,505.97 175,484.50 138,566.15

Fire 783,792.16 836,836.00 936,526.46

Miscellaneous 363,683.81 374,814.19 534,947.99

Medical 170,066.08 225,292.00 353,139.81

Marine 59,474.83 39,172.00 43,239.53

Motor 852,006.10 882,254.00 970,205.53

TOTAL 2,360,528.95 2,533,852.69 2,976,625.47

Engineering 5%

Fire 31%

Miscellaneous

18%

Medical 12%

Marine 1%

Motor 33%

Gross Premium 2010 By Line of Business

Engineering 7%

Fire 33%

Miscellaneous

15%

Medical 9%

Marine 1%

Motor 35%

Gross Premium 2009 By Line of Business

Engineering 6%

Fire 33%

Miscellaneous

15%

Medical 7%

Marine 3%

Motor 36%

Gross Premium 2008 By Line of Business

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9.3 Property Reinsurance

Property business accounted second main portfolio

of Cambodia Re business. In the year 2010,

Cambodia Re attain 11.91% increase in premium for

Fire line of business with amounted of 936,526 USD

whereas market Premium amounted to 6,174,999

USD or 1% increase from the year 2009. However,

we also impact by the loss in the middle of the year

from Fire and from flood at the year end due to

torrential rain. So the Claim incurred was accounted

to 691,185 USD of which 268,397 USD has been paid

during the year.

For Engineering Reinsurance business, it still suffered

with premium amounted to 138,566 USD or 21 %

decrease from 2009. It was correlated to the

construction sector in the year which was reported to

be decrease 60%. However, the market premium was

seen 206% increase to 3,823,890 USD . This dramatic

increase was boosted by a construction project of hydro

dam during the year.

Also, in the year, Claim incurred amounted to 44,671

USD of which 37,320 was paid.

9.4 Engineering Reinsurance

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9.5 Motor Reinsurance

It seems a constant growth of this line of business from year to year. In this 2010, Premium keeps growing

by 10% to 970,205 USD and make it majority portfolio of Cambodia Re business. Motor Insurance in

Cambodia is still not compulsory insurance except for Commercial Vehicle. Likewise, Claim also increased at

8% rate to 318,060 USD. However, concern is still placed on road accident which increasing from year to

year.

Marine business is quite subjective even though in the year 2010 Garment export increase by 26% as well as

other agriculture products but Marine line of business seems not to change at all for whole market premium.

But for Cambodia Re’s side, it was reported increased by 10%. Claim was still limited.

9.6 Marine Reinsurance

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9.8 Miscellaneous Reinsurance

In the year 2010, Miscellaneous line of business was seen much increase by 42.72% to 534,948

USD. Miscellaneous business includes Product liability, Public Liability, Personal Accident,

Workmen Compensation, Money and Burglary insurance.

This line of business is noticed to be increase in the last few years. However, still there are more

potential for growth the incoming year together with the growth of business registration. As

business entity is keen to buy Personal Accident for their employee. For the year 2010, business

registration was reported to be increased by 28% comparing to 2009.

On the claim side, it was amounted to 116,794 USD of which 97,823 USD was paid in the year.

9.7

This line of business still continues growing into the year 2010 with rate of 57% increase in

premium comparing to 2009 to amount of 353,139.81. However, Claim also keeps increasing as

well. In the year 2010, Claim incurred reached to 174,137 USD 80% increased comparing to year

2009.

Medical & Health Reinsurance

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Engineering 4%

Fire 31%

Miscellaneous 11% Medical

19% Marine

0%

Motor 35%

Gross Claim 2010 By Line of Business

Engineering 4%

Fire 79%

Miscellaneous 4%

Medical 3%

Marine 0%

Motor 10%

Gross Claim 2009 By Line of Business

Engineering 8%

Fire 48%

Miscellaneous 14%

Medical 9%

Marine 0%

Motor 21%

Gross Claim 2008 By Line of Business

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10 RISK FACTORS

AND MANAGEMENT

There is uncertainty of some risk factors

involved just like any insurer practice

during the year which were hereunder :

Our concerns about risks in all aspects of underwriting business ceded by local pedants on both treaty and facultative

basis. The primary concern is natural disaster even though Cambodia has never been facing catastrophe like flood, big

storm, volcano, earthquake or tsunami; no serious claim up to now. Furthermore, some major risks and their concerns

ceded to us were not known in details in the treaty base. So, whatever a decision and judgement made by any pedant

toward particular risks is actually affecting Cambodia Re in respect of operational performance and financial capital

support if unreliable uncertainty of risk analysis.

Moreover, a facultative risk is predicament to be identified as there was a delay as usual to get risk data and

information supposed to be provided by pedants. However, there must be a need for us to question further in order

clarify the given data banks of that particular risk. This could become another facet of uncertainty of the underwriting

succession and time consuming is sometimes is key consideration for our customers to require our acceptance in a

certain period of time so that they can also respond to direct customer within a time frame.

10.1 Underwriting Uncertainty

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Engaging operational activities, time frame for risk processing units is vitally significant for us to report to our

panel of reinsures. As a matter of fact, the effectiveness of our service delivery largely depends upon a chain

communication with our local ceding companies reflected by direct customers in cooperative manner and so

then with our retrocession ire finally. Therefore, our two way risk processing to give capital support and to seek

financial support backup is essentially centralising our think tank to underwrite particular risks, especially when

the risk consideration is beyond our treaty capacity.

Whilst the facultative risks were experienced to have had another predicament of financial support for

pedants’ proposal as it has involved in too much technicality and beyond our knowledge. It is perplexed for us

to seek supports from our retrocession ire for ceding risk proposal. This predicament arose because of lack of

knowledge of risks both pedants and us, and of how to spread risks by searching for best alternative

resolutions. This was a result from our limitation of capacity to write business. However, the business

performance has been involved in a bit beyond our technicality and better improved from year to year in

operational point of view.

10.2 Retrocession Processing

Premium Collecting has become another risk factor

due to a delay of payment from pedants which could

bring us difficulty to enforce treaty though it specified

thereon. This matter arose when there is a delay of

payment by direct customers to pedants. Thus, it was

slowly generating cash inflow due to this matter and

could freeze company investment opportunities to

that some extend.

More than this, certain companies often asked for

refund premium for the risks which almost expiry or

expired already. This, in fact, due to the competition

among ceding companies which sometime they allow the clients to delay he premium payment beyond the

premium warranty. Thus, making Cambodia Re retrocession Aires to be in hard situation sometime.

10.3 Premium Delivery and investment

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11 INTERAL

AUDIT

Internal control is in the process, in effect from 1st August 2004 by the Cambodia Re’s Board of Directors,

Management, and other personnel, designed to provide reasonable assurance in order to focus on the achievement

of both functional and organisational objectives in the following categories:

Effectiveness and efficiency of operations,

Reliability of financial report,

Compliance with applicable law and regulations.

Internal control system would be the organisational tool that helps managers be effective and efficient while avoiding

serious problems such overspending, operational failures and violation of law. Hence, the elements of internal

control are hereunder:

Controlling Environment: Orientating the determination of business goals, and formulation of effective

organisation’s structure, defining standards of ethics and prohibitions penalties, forbidding the

management and employees to engage in any activities that may lead to possible conflict of interest,

mapping out of policies and working procedures.

Risk Assessment: An assessment of both internal and external risks and their influential factors affecting

the company’s business transactions, an analysis and determination of risk management measure,

communication with respective staff members, including following up the implementation of the defined

measures.

Controlling Activities: A division of duties and responsibilities, a determination of authority and duties of

each level of executives including amount of money they can approve, as well as a supervision of the

company’s operational performance in accordance with related law.

Information Technology and Communications: A convention of the Board of Directors’ meeting,

documentation work for the meeting, writing the minute of meeting, formulation of the management’s

accounting, including storage of documents for account recording in line with the specified standards.

Monitoring: Following up and evaluating of actions to achieve a required target, making a correction in

case of deviation from target outcome.

Background

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Internal Audit is an independent appraisal function established to examine the activities of the company. The main

purposes of this function are:

To ensure that there is reliability of operational financial information.

To have a system to ensure the compliance to the policy, planning, and regulations that cannot affect the

company’s sustainable operations.

To assess whether asset safeguarding has been compiled in full.

To make sure the operational activities have been on track effectively and efficiently.

To provide management advisory information about the adequacy and effectiveness of company’s internal

control system and the quality of performance.

Purpose and Auditing Framework

Internal Audit Mission

The mission of Internal Audit is to promote the company to achieve the set goals by the following auditing features:

Internal Control and Compliance Audit: Examining the compliance of the company’s system, procedure,

structure and regulation to ensure that the controls are in place and functioning,

Operational Audit: Evaluating the work processing in each department in order to improve the work

performance and maximising human resource capacity in the company,

Special Audit Project: Checking and reviewing matter on a case-to-case basis when the need arises,

Advisory Audit: Giving recommendations to improve the company’s effectiveness and efficiency.

Audit reporting is one of the most important stages in an audit process. In this internal audit review, the

auditing data having formulated, collected, and processed are transformed into informative report that

satisfies the Management requirements.

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12 OUTLOOK

forward

Cambodia Re as well as market as a whole is expected to gain momentum of development of the industry in

coming years in a parallel to economic growth of the country which is projected to gain the growth of 6%,

6.5% and 6.5% in the year of 2011, 2012 and 2013 respectively.

As noticed, it see more potential for growth in this industry deriving from the strategy laid out by the

government to sustain its development such as increasing its capacity in production of Garment and

Agricultural sector. To this end, the government focuses on improvement of various infrastructures to

facilitate the strategy including irrigation system, road, electricity, and so on.

Moreover, on the service sector particularly financial service, which is very active and fast growing in last

few years, will see more growth after the stock exchange is set to launch in the middle of this year. Also

Tourism sector hope to enjoy further growth after direct linkage between Cambodia and European country

specifically French.

In fact, there are growing in business registration since last year and first quarter of 2011 mainly in

agro-business and agriculture, tourism, information and mining.

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13 ACTIVITIES OF

CAMBODIA RE

Cambodian Reinsurance Company was established on 24 January 2002 by Sub-Decree Nº 07 A.N.KR.M.K of the Royal

Government of Cambodia. Initially, “Cambodia Re” operating as a state-owned the company located in the same

building of “CAMINCO” on the corner street 13 and 106, Sangkat Wat Phnom, Khan Daun Penh, Phnom Penh.

The Cambodian Reinsurance Company “Cambodia Re”,

however, was moved to the new office building on 27

January 2009. This premise is belonged to the company, so

it is more comfortable and convenient. The change of

location could remark and respond to the development and

growth of “Cambodia Re”, as well as the insurance industry

as a whole.

13.1 Inauguration Ceremony of Cambodia Re’s New Building

Submitted, OECD Asian. Asian Insurance Council and East Asian

Insurance congress in overseas. Moreover, Cambodia Re’s staff

participated on many training topic different topics such as Property and

Engineering, Hong Kong, Risk Management training, Business

Interruption, International Financial Reports Standard ( IFRS ) and

Advance Microsoft-Office. We also conducted public training course on

Insurance Development in

Cambodia for Norton

University and National University of Management students in the

purpose of public awareness and confident on the insurance industry.

The Company’s objective is to build up the capacity of their staff by

improving their technical knowledge, and enable them to apply to their job

within the local and international market in order to help Cambodia Re to

become a professional reinsurance company.

13.2 Training

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14 REVIEW OF FINANCIAL

PERFORMANCE

Cambodian Reinsurance Company “Cambodia Re”(Registration No.: Co – 6063/02 Et)

Balance sheet as at 31 December 20102010

Note % US$ KHR’000 % US$ KHR’000

(Note 4) (Note 4)

ASSETS

Non-current assets

Statutory deposits 6 39 4,200,000 17,589,600 42 4,200,000 17,400,600

Property and equipment 7 18 1,953,865 8,182,787 19 1,966,299 8,146,377

Investment - - - - - -

Intangible assets - - - - - -

Other investment 8 8 875,000 3,664,500 9 900,000 3,728,700

Total non-current assets 65 7,028,865 29,436,887 70 7,066,299 29,275,677

Current assets

Premiums receivable 9 5 604,970 2,533,614 5 521,968 2,162,514

Cash and bank balances 10 29 3,126,069 13,091,977 24 2,407,353 9,973,663

Other receivables 11 1 84,580 354,221 1 86,684 359,132

Total current assets 35 3,815,619 15,979,812 30 3,016,005 12,495,309

Total assets 100 10,844,484 45,416,699 100 10,082,304 41,770,986

LIABILITIES AND SHAREHOLDERS’ FUNDS

Current liabilities

Unearned premium reserve 12 8 862,193 3,610,864 7 709,834 2,940,842

Claims outstanding 13 1 108,734 455,378 1 58,677 243,099

Short-term payables - - - - - -

Other payables 14 6 636,777 2,666,822 2 254,598 1,054,800

Provision for taxation - - - - - -

Total current liabilities 15 1,607,704 6,733,064 10 1,023,109 4,238,741

Long-term liabilities

Long-term liabilities - - - - - -

Total long-term liabilities - - - - - -

Shareholders’ funds

Share capital 15 64 7,000,000 29,316,000 69 7,000,000 29,001,000

Minority share - - - - - -

Catastrophe reserve 13 2,059,195 8,623,909 16 1,580,160 6,546,603

Retained profits 5 508,835 2,131,001 5 479,035 1,984,642

Dividend 3 -331,250 -1,387,275 - - -

Total shareholders’ funds 85 9,236,780 38,683,635 90 9,059,195 37,532,245

Total liabilities and

shareholders’ funds 100 10,844,484 45,416,699 100 10,082,304 41,770,986

20092010

The accompanying notes form an integral part of these financial statements

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(Registration No.: Co – 6063/02 Et)

Note US$ KHR’000 US$ KHR’000

(Note 4) (Note 4)

Underwriting income

Gross premium income 2,975,291 12,460,519 2,535,094 10,502,895

Premium cancelled and refunded - - - -

Total premium income 2,975,291 12,460,519 2,535,094 10,502,895

Reinsurance ceded -1,198,187 -5,018,007 -1,039,789 -4,307,846

Net premium income 1,777,104 7,442,512 1,495,305 6,195,049

Unearned premium reserve: 12

At the beginning of the year 709,834 2,972,785 705,688 2,923,665

At the end of the year -862,193 -3,610,864 -709,834 -2,940,842

Premium earned 1,624,745 6,804,433 1,491,159 6,177,872

Reinsurance commission 376,822 1,578,131 364,951 1,511,992

Loss commission - - -5,358 -22,198

Total underwriting income 16 2,001,567 8,382,564 1,850,752 7,667,666

Underwriting expenses

Gross claims paid -871,472 -3,649,725 -2,666,999 -11,049,377

Claim recoveries from reinsurers 294,664 1,234,053 2,045,175 8,473,160

Net claims paid -576,808 -2,415,672 -621,824 -2,576,217

Net claims outstanding: 13

At the beginning of the year 58,677 245,739 81,178 336,320

At the end of the year -108,734 -455,378 -58,677 -243,099

Net claims incurred -626,865 -2,625,311 -599,323 -2,482,996

Commission expense -600,884 -2,516,502 -513,069 -2,125,645

Contribution fees -14,572 -61,028 -12,841 -53,200

Total underwriting expenses 16 -1,242,321 -5,202,841 -1,125,233 -4,661,841

Underwriting profit 759,246 3,179,723 725,519 3,005,825

Administrative expenses 17 -1,456,398 -347,144 -1,438,218

Net underwriting profit 411,491 1,723,325 378,375 1,567,607

Investment income

Interest income from Government bonds 125,863 527,114 124,697 516,620

Interest income from placements with banks 120,231 503,527 101,147 419,052

Others - - 1,411 5,846

Total investment income 246,094 1,030,641 227,255 941,518

Investment expenses - - - -

Net profit from investment 246,094 1,030,641 227,255 941,518

Net profit before income tax 657,585 2,753,966 605,630 2,509,125

Income tax expenses 18 -148,750 -622,965 -126,595 -524,483

Net profit for the year 508,835 2,131,001 479,035 1,984,642

20092010

Cambodian Reinsurance Company “Cambodia Re”

Income Statement at 31 December 2010

The accompanying notes form an integral part of these financial statements

Page 34: Anuul report report 2010

ANNUAL REPORT 2010

CAMBODIAN REINSURANCE COMPANY

No.17, St.134, Sangkat Mittapheab, Khan 7 Makara, Phonm Penh,

Cambodia.