Pascal Brandt-Gagnon is general manager of Asia Insurance (Cambodia). In January 2005 Asia Insurance became the first and only company in Cambodia to offer Bankers Blanket Bond (BBB) insurance. In January 2006, Acleda, Cambodia's leading micro-finance bank, purchased BBB insurance and saw deposits increase dramatically in the ensuing weeks. Brandt-Gagnon spoke to Cat Barton about Cambodia's anti-insurance mentality, the lack of public confidence in the banking sector, and the impact of introducing BBB insurance to the country.
What is a Bankers Blanket Bond?
Bankers Blanket Bond - BBB - is essentially an all risk policy. It protects the bank from crimes such as fraud, embezzlement, all kinds of losses relating to cash, and deposits.
What kinds of risk are we talking about?
When you talk of bank insurance, you are talking about interior risks, for example fraud, and exterior risks, for example electronic theft [which is when hackers intercept electronic bank transfers and divert the money to a different account.
Do Cambodians have much faith in the banking and insurance sectors?
In Cambodia, there is historically very little confidence in the banking sector, but this is slowly changing. The reasons for that are varied. And confidence in the banking industry and the insurance industry go hand in hand.
How can Asia Insurance (Cambodia) provide BBB?
When you talk about BBB you are talking about a very specific type of insurance, where claims can run into the millions, so you need a specialized market to reinsure this sort of risk, such as the London market. With BBBs, the majority of risk is reinsured. All insurance companies in Cambodia must have deposits of at least four million [dollars] but with that you can't take a fifty million dollar hit on a claim: that's why it must be reinsured.
What message is a bank sending out when it buys BBB?
The bank has made a definite statement about their transparency and quality of governance. Also, it is a statement to their customers and depositors that they are protected against internal and external risks. A bank that buys BBB makes a statement and sets an example; they want to protect you. They are saying, "Look, if something does happen, God forbid, then we have invested in an insurance security for you."
Acleda deposits went up after they announced they had bought BBB. Is this to be expected?
Yes, I am not surprised. Acleda has created a good name for itself: through the services it offers, its internal governance, its success. This latest statement was saying, "We are not just here to do business, we care about protecting your assets." This speaks volumes about what kind of an institution you are. It is a very strong, positive statement.
How will the ability to offer BBB impact on the insurance industry in Cambodia?
It gives the industry, and the company underwriting the risk, credibility. It shows that even though this is still a small market in its infancy we are able to deal with complex risks. It shows we can quantify and analyze complex risk and provide insurance and reinsurance.
There is not much of an insurance mentality in Cambodia. There is no legislative framework to force insurance on people. But with insurance, the idea is not just to make money or get more premiums: insurance is a financial security. It's about protection.
The best example is life insurance: if something should happen to you then at least your relatives will receive some form of financial assistance.
The mentality here is not to have insurance, but that is slowly changing. Now many people do and the market has grown - from four million dollars in 2002 to eleven million dollars today. However, the potential market is still more.
BBB can help people to think of Asia Insurance as a reliable and serious company. However, the impact on the insurance industry will take much longer to be felt [than on the banking sector].
Do you think more banks will purchase BBB insurance?
If Acleda deposits go up as a result of their acquiring BBB then the money is coming from somewhere - either from out under pillows, or from other banks. This could encourage other banks to follow their example.