Mongolia was one of the six countries that signed the MEFIN Declaration of May 2013 (also known as Cebu Declaration) and signified support to the promotion of inclusive insurance as a strategy for poverty reduction in the region. In January 2016, Mongolia renewed its commitment to the MEFIN Network, which was then formalized as a regional platform for peer-to-peer exchange of knowledge and experiences in inclusive insurance.
The financial sector in Mongolia has also been through considerable challenges during the last two decades but has emerged considerably strengthened by the process. Banking crises occurred in 1995, 1996, and 1999, leading to the significant effort expended in strengthening the regulation and structure of the banking system.
The commercial insurance market is still at a very early stage in Mongolia. For many years, the Mongolian Government was the sole and direct provider of insurance. This has changed over the past two decades with the privatization of the government insurance entity and the emergence of new entrants into the market. Currently, the insurance industry accounts for only 0.9% of the total assets in the financial sector, and gross written premium amounted to only 0.4%) GDP in 2010.
Mongolia is the world's 18th largest country, landlocked between Russia and China. With a population of just over 3.2 million, it has the lowest population density in the world. Over 60% of the population lives in urban areas; approximately 40% in the capital city of Ulaanbaatar.
The remaining rural population is scattered over vast distances, resulting in significant challenges in transportation, service delivery, and communication. Mongolia's Gini ratio, the coefficient that measures the inequality among income distribution, lies at 32.7 and the HDI at 0.735, ranking 92nd.
In Mongolia, herders living in remote regions have minimal access to information on the financial industry and hardly possess any understanding of the insurance market, and remain unfamiliar with insuring their livestock against risks of natural disasters; such as severe weather conditions such as snow blizzards and droughts which are common occurrences in Mongolia. As of the end of 2016, over 20% of Mongolians were considered to live below the poverty line.
The formalization of MEFIN as a network of Asian regulators in February 2016 led to the more active participation of the member countries in developing and promoting inclusive insurance throughout the region. Business models are shared among MEFIN countries, mainly through the MEFIN Public-Private Dialogue (PPD), which is held twice a year.
The Mutual Exchange Forum on Exclusive Insurance (MEFIN) has been organizing Public-Private Dialogues (PPDs) since 2016, which aim to discuss policy reforms and proportionate regulations on inclusive insurance. One of the most recent PPD's was from September 17 to 18 in Ulaanbaatar, Mongolia.
Spurred by mineral resource revenues, Mongolia's economic growth is expected to create a rolling demand in the private insurance market. The Mongolian insurance industry registered a CAGR of 26.7% during the period 2008-2012. However, the industry is relatively small and in its early development stage. In 2014, the definition and new regulations requirements for inclusive insurance products had been integrated into existing regulations.
UBCI was founded in 2002 with a decision of the city council of the capital Ulaanbaatar. Ulaanbaatar City Insurance (UBCI) is pioneering microinsurance in Mongolia with a successful home insurance coverage of climate risks. We caught up with company CEO Mr. Enkhbold, who shared some challenges faced by the sector in the country and the opportunities that joining the MiN presents for inclusive insurance in Mongolia. As of the first six months of 2019, the product has been responsible for the highest number of people covered and has continued to be the most successful product since the launch.