THE fire at June Textile Factory will result in a claim of about US$16 million for a domestic insurance firm, according to General Insurance Association of Cambodia Chairman Chhay Rattanak.
The garment factory in Phnom Penh’s Sen Sok district had employed some 4,000 workers, until it caught fire on March 31.
The claim would be based on the company’s assessment of its loses, but according to a preliminary estimate, it would be between $15 million and $16 million, said Chhay Rattanak.
“The amount will not be a burden on the local company, as they have reinsured with a foreign partner,” he said. Chhay Rattank declined to name the Cambodian insurance firm yesterday.
“Our [GIAC] regulations do not allow a local insurance company to handle this large an amount themselves, as they don’t have enough ability to pay a big claim such as this – this is defined by the law to keep the industry growing,” he said.
Ministry of Economy and Finance Industry Division Head In Meatra said yesterday Cambodia’s laws require a local company reinsure in certain cases with a partner abroad, to avoid risk and keep the industry growing.
“A company in any country in the world cannot handle risk entirely on its own, requiring them to reinsure,” he said.
It is thought June Textiles was insured by Campubank Lonpac Insurance Plc, but officials from the insurance company declined to comment yesterday.
June Textile Director Albert Teoh declined to discuss the name of the insurance company, or the amount of loses yesterday.
“We cannot quantify,” he said. “There are a lot of losses. It should take months to complete the assessment.”
It will also take many months before the factory can resume operations, he added.
Forte Insurance General Manager Youk Chamreounrith said it was common practice in the domestic insurance industry to reinsure with reputable foreign partners to spread risk.
“We don’t want to keep the risk on our own, so we spread it to reinsurers, and they spread risk to their partners as well, complying with international best practices,” he said.
Chhay Rattanak said claims across the industry would increase this year compared to 2010, especially from property insurance.
However, he said he was optimistic about the overall growth of the industry in Cambodia, saying increased claims were not expected to cause severe impact.
“We expect to keep growing at 20 percent each year – the MEF is careful, and strictly control [the industry],” he said.
GIAC statistics show premium revenue increase by 24 percent year-on-year in 2010 to $24.9 million.