Vietnam Insurance Country Overview
2013
Table of Contents 1.
Macroeconomic Picture ................................................................................................... 3
2. Insurance Market in Vietnam ........................................................................................... 4 2.1 Insurance Penetration Trend ........................................................................................................... 4 2.2 Insurance Market - 2012 .................................................................................................................. 4 2.3 Non-Life Insurance by Segment in Vietnam .................................................................................... 4
3. Competitive Scenario - Vietnamese Market ...................................................................... 5 4. Insurance Regulation in Vietnam ...................................................................................... 6 5. References ....................................................................................................................... 7
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1.
Foreign direct investment inflows in 2006 reached US$12 billion, with a growth rate of 32 percent per annum for the period 2002-06. Foreign investments almost doubled to US$20.3 billion in 2007 (12 months after Vietnam joined the WTO). Within the first seven months of 2013, Vietnam has managed to attract over US$12 billion in foreign direct investment (FDI) – a 19.6 percent year on year increase. Furthermore, nearly US$7 billion of the FDI came in as newly registered funds, up 10 percent year on year. Vietnam’s economy has grown so rapidly in recent years that it is easy to overlook some of its lingering challenges. In a span of five years, between 2003 and 2008, Vietnam’s economy more than doubled from US$40 billion to US$90 billion, and its exports more than tripled from US$20 billion
Source: IMF
to US$63 billion. Vietnam’s transition to a market economy has transformed the country and the lives of its people. In 1986, Vietnam launched Àöíi Múái—a homegrown, political and economic renewal campaign—that marked the beginning of its transition from a centrally planned economy to a socialist-oriented market economy. A stable political environment and the government's willingness to integrate with ASEAN and the global economy have attracted lots of interest from foreign investors. Vietnam joined the World Trade Organization (WTO) in January 2007. The economic performance of the last 20 years has been impressive. Between 1990 and 2010, Vietnam’s economy has grown at an annual average rate of 7.3 percent, and the per capita income almost quintupled. The rapid expansion of the economy has been accompanied by high levels of growth of international trade; large-scale inflows of foreign direct investment; a dramatic reduction in poverty; and almost universal access to primary education, health care, and life-sustaining infrastructure such as paved roads, electricity, piped water, and housing.
For four years in a row, Vietnam has had one of the highest inflation rates in Asia, averaging nearly 16 percent a year between 2008 and 2011. In both 2009 and 2011, the government took bold measures to curb inflationary expectations and to stabilize the economy. Not everything is plain sailing for Vietnam, however. With continued high inflation and slower economic growth, the economy started to run into troubled waters in early 2008. Vietnam's GDP slowed down to 6.5 percent growth in the first half of 2008, a much slower pace of growth than the 8.5 percent registered for 2007. In June 2008, inflation hit 23.1% as oil and food prices continued to skyrocket. Government initiatives to contain inflation further slowed down the economy. Consequently, investor confidence dipped and the Ho Chi Minh stock exchange halved between March 2007 and March 2008.
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2.
10.3% increase compared with 2011. Non-life insurance revenues for 2012 were USD 1.2 Bn, up 10.3% over the same period in 2011, while premium life insurance reached USD0.88Bn, a 10% increase over the same period in 2011.
2.1 Insurance Penetration Trend
Vietnam insurance market is considered having a tremendous growth opportunity. Life as well Non Life insurance penetration today is extremely low - it has been at the average level of 0.7% to 0.8%. This is supported by macroeconomic fundamentals. However non-life penetration has risen marginally in the last five years from 0.7% to 0.9% in 2010 and 2011 with 0.8% in 2012. Market development is at a very nascent stage. All major lines have been achieving tremendous growth and the government has also been encouraging the expansion of health insurance. The development of exports is boosting the number and value of commercial risks, and so on. Looking forward, it is reasonable to expect that penetration will further rise.
2.2 Insurance Market - 2012 Vietnam's insurance market is still small in size in comparison to its Southeast Asian peers. It opened up after Vietnam joined the World Trade Organization (WTO) in 2007 and has experienced a strong increase in direct premiums written (DPW), albeit from a low base. Vietnam’s insurance market has experienced strong, double-digit premium growth in recent years. Direct written premium reached USD 2.1 billion) in 2012, a
Vietnam’s fundamentals are very strong and the long-term growth prospects for the insurance industry, plus the openness to foreign investors, make this country a highly attractive market for potential entrants.
2.3 Non-Life Insurance by Segment in Vietnam Direct Written Premium for both life and non-life segment have been on a positive growth since past five years which is very encouraging. In the last five years Non-life sector has surpassed the Life sector in terms of Direct written premium dominates the industry. Direct premiums for non-life rose from USD0.42 Bn in 2007 to USD1.2 Bn in 2012 with CAGR of around 23%.
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3.
Leading Insurance Providers
Motor insurance accounted for the highest proportion of around 31% followed by Property and Casualty insurance with (~24%).Other major lines with substantial share are Health & Personal accident (15%), Hull and P&I (10%), Cargo (~8%) and Fire (6%). In addition to very low existing penetration rates and rising awareness of the benefits of being insured, mandatory insurance in rapidly growing. Sectors like motor vehicle and construction have been and will be strong premium drivers
In 2012, there were 57 service providers in the insurance market with diversified ownership structure. This includes 25 sole member limited liability companies (Sole member LLC), 8 liability limited companies with more than one member (LLCs) and 24 joint stock companies. In all there are 29 Non Life insurers, 14 Life insurers, 2 reinsurers and 12 insurance brokers.
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Non Life market was highly concentrated among top big 4 insurers witch held a combined market share of around 70% in 2012. Bao Viet leads the telly with ~23.5% share followed by PVI (~21%), Bao Minh (10%), PJICO (~9%) and PTI (~7%). More foreign insurers have come to Vietnam in recent years. Joining forces with domestic partners in doing business is the way many of them have chosen to penetrate the local market. In early 2013, Sun Life Financial from Canada made its official presence in Vietnam by becoming a partner in PVI Sun Life, a joint venture between the Canadian insurer and PetroVietnam Insurance (PVI). Cooperating with domestic partners to penetrate the domestic market proves to be the choice of many global insurance groups. In 2012, Australian AIG bought 30 percent of AAA’s stakes in a deal worth $20 million. The move served AIG’s strategy to increase its ownership ratio to 49 percent and more deeply exploit the domestic non-life insurance market. The best known affair in the insurance market was the one undertaken by Japanese Sumitomo Life late last year. The insurer officially set its foot in the Vietnamese market after spending 340 million dollars to buy 18 percent of Bao Viet’s stakes from HSBC to become the strategic shareholder in the biggest insurance group in Vietnam Foreign investors would have more opportunities to jump into the insurance sector when state owned economic enterprises have to withdraw their capital from insurance companies by 2015, and focus on their core business fields as per the request by the government Some of the market dynamics are quite reminiscent of the development of many other Asian markets. In a high-interest-rate environment, Vietnamese insurers have been offering policies with high interest guarantees of 7-8 percent, which is similar to many Asian markets in the late 1990s. The booming stock market has often led to unrealistic return expectations from retail investors, and increased pressure on life insurers to offer products with competitive returns. In November 2007, the Ministry of Finance approved the sale of investmentlinked products, after much lobbying from insurers.
4. The Ministry of Finance (“MOF”) has authority to issue legal documents (circulars/decisions which provide guidelines for the operation and other activities of insurers/reinsurers/insurance agents and insurance brokers). It can also grant/withdraw licenses in the insurance sector. The Insurance Supervisory Authority (“ISA”, which is part of MOF) assists MOF in nationally supervising the insurance business and market in Vietnam. Establishing offices in Vietnam To establish offices in cities or provinces in Vietnam other than the city or province where the company was established, companies must establish branches or representative offices in those other provinces and cities. Insurers licensed in Vietnam (including foreign-owned insurer) are not restricted from opening branches and representative offices in Vietnam. Approval from MOF is needed. Foreign insurers can open branches in Vietnam for general insurance business as a matter of law. The restrictions under the WTO Services Schedule for such activities were lifted at the beginning 2012. The establishment of such branches is subject to prudential regulations. As a practical matter, MOF will treat the establishment of a branch by a foreign insurer similarly to the establishment of a subsidiary. Foreign insurers or brokers can establish representative offices in Vietnam. The foreign insurer or broker must have been operating for five years and must have “a cooperative relationship with the Vietnamese bodies and organisations.” Representative offices are not permitted to conduct insurance business in Vietnam.
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FDI and Control approvals All restrictions on the ability of foreign insurers to establish 100 per cent foreign-owned subsidiaries were removed on 1st January 2008 according to the commitment of Vietnam with WTO. Some restrictions remain on the ability of foreign life insurers to establish branches in Vietnam. Mergers, amalgamations, or transfers of 10 per cent or more of the charter capital of an insurer or insurance broker require prior written approval of the MOF. Approvals from MOF are also required for a wide range of changes including a change of the Chairman of the Board of Directors, General Director (CEO), or Appointed Actuary. Minimum Capital (or Legal capital)
General and health insurer Life Insurer Reinsurer (general and health insurance) Reinsurer (life and health insurance) Reinsurer (all type of insurance) Branch of foreign insurer Broker Extra paid-up capital required: aviation insurance, petroleum insurance and satellite insurance For companies with more than 20 branches and representative offices
Minimum paid-up capital VND300 billion VND600 billion VND400 billion VND700 billion VND1,000 billion VND200 billion VND4 billion +VND50 billion for each type of insurance (as from 1 October 2012) +VND10 billion for each additional branch or representative office
st
VND20,815 = USD1.00 at 31 December 2012
5. Ministry of Finance – Vietnam World Bank VietNamNet nortonrose.com
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