A burned down house...and no insurance. Infinity hopes to reach first-time insurers.

The Kingdom's recent banking bonanza has prompted one of Cambodia's richest men,

Kith Meng, to help launch Infinity Insurance in an attempt to harness the industry's

increasing profits.

Jeffrey Whittaker, Infinity's chief operating officer, said huge inroads made in

recent years by the banking industry and foreign direct investment had shown Cambodia

was a viable, and lucrative, market.

"It's no longer just aid that's coming in. Aid is nice but foreign direct investment

is much better. There are a lot of infrastructure projects going on - railways, roads,

sewage and wastewater treatment, new cities - it offers a lot more scope for insurance

business."

Infinity has some high quality backers, among them global giant Swiss Re and Meng's

Royal Group which includes Mobitel, ANZ Royal Bank and CTN.

In order to operate in Cambodia, insurance companies must have $7 million worth of

capital. This is a government requirement in order to ensure companies have enough

cash in reserve to meet claims.

Insurance is viewed as an essential product for a well-functioning financial market.

As the government plans to introduce, among other advances, a Cambodian stock market,

new insurance carriers are undoubtedly to be welcomed.

But the industry has had a stuttering start.

In 2004, market leader Indochine, was forced out of business when it failed to meet

government demands for a $700,000 installment of its required $7 million capital.

Indochine managing director Philippe Lenain said he had been victimized by the government-owned

Caminco, and was hounded out of business despite his assurances he could meet capital

demands.

He said that such high operating costs in an industry then worth just $8 million

would strangle the life out of industry players.

Lenain fled the country with his family after taking refuge in the French Embassy

when he claimed their safety had been threatened.

Those who remained in the market are now seeing considerable gains.

Cambodia Re Director of Operations, Rath Sarath, said after a slow start the company

was now starting to see profit.

As a reinsurer, it provides financial backing to insurance companies in exchange

for a compulsory stake in the state-owned company. "Up until now my company

was successful but not so successful that we could say profitable," he said.

Cambodia Re's annual report showed a 20 percent Gross Written Premium or GWP - which

refers to the total premium from all policies - increase in 2006 and it doubled its

net income from 2005.

As the profit increased it was able to continue its investments and ensure that capacity

[the amount of cash reserved to ensure claims are paid] was extended each year -

ultimately benefiting the insurance companies.

The capacity and number of insurers was likely to increase year on year, he said.

Whittaker was similarly excited by Cambodia's potential now that overseas cash was

flowing, but admitted there were several challenges to overcome.

Infinity's product range includes construction, engineering and marine cargo policies

and policies such as fire, theft and personal injury, the former aimed squarely at

the corporate market, with the latter also applicable for individuals.

Policies for fire, engineering and construction, motor and miscellaneous (including

liability) insurance accounted for 87 percent of all non-life GWP in 2006, and industry

figures showed these classes had been steadily growing for the past eight years.

However, about 95 percent of these policies are placed with the corporate market,

and the remaining personal policies are largely motor policies, often placed through

corporate schemes.

These figures showed that although the corporate market was increasingly aware of

risk and insurance was becoming more commonplace, breaking into the personal insurance

market would be much more difficult. "The sheer fact is up until the last couple

of years not many individuals had bank accounts - it was a cash society," said

Whittaker.

"The perception is it's expensive, it's a luxury product. We're aiming to convince

the public that insurance is not a luxury, it's an affordable essential product -

it's more expensive if you have an accident and have no protection at all."

The total insurance market in Cambodia, estimated to be worth less than $8 million

in 2004, has now grown to $15 million and is expected to increase rapidly as its

potential is realized.

A 2005 Ministry of Economy and Finance industry review said the non-life insurance

business in Cambodia had been growing at more than 25 percent compound for the past

four years.

It anticipated an explosion in the personal and medical lines of business as incomes

rose.

Cambodia's current crop of insurers is small - Infinity joins Caminco, Asia Insurance,

Forte and Cambodia Re.

But anticipated market projections suggest more competitors would soon join them.

The government's "open, friendly investment policy" meant there were few

barriers towards setting up business in Cambodia, said Whittaker.

The perception of insurance and in banking until a few years ago was "we don't

do banks, we keep it under our beds," he said.

The intangible nature of insurance was often a reason for reluctance, said Whittaker,

but the fact remained insurance was "one of the cheapest financial products

in the world."

"People don't think about it...they're willing to buy a flat screen TV and a

car and everything else but insurance comes at the very bottom of the pile. That's

our problem to change."

Insured for a good reason

• Lloyd's of London - the world's largest insurance market - started in Edwards

  Lloyd's Tower St coffeehouse in 1688. Sailors, merchants, ship-owners and others

  from the shipping community would meet to discuss shipping news and make insurance

  deals.

• Chinese merchants are believed to be the first to practice a form of insurance,

  around 2000-3000BC. When the traders encountered violent river rapids they would

  spread goods among many ships in the event one met an unfortunate demise.

• In 2006 a British insurer reportedly insured three Scottish sisters against Immaculate

  Conception. The policy, intended to cover the costs of raising the Son of God, was

  later cancelled after complaints from the Catholic Church that it was in 'poor taste'.

• Among the more impressive personal assets to be insured are Keith Richard's fingers;

  Marlene Dietrich's voice; America Ferrera's [TV's Ugly Betty] smile for $10m; Dolly

  Parton's 42" bust for $600,000; Betty Gable's legs for $1m, thereby giving rise

  to the expression "million dollar legs".