An emerging middle-class promotes growth
LONDON – Vietnam’s insurance market has experienced strong double-digit premium growth in recent years and demand for insurance product is forecasted to continue, according to a recently released A.M. Best Co. special report.
Insurers have benefitted from an emerging middle class, increased awareness of the benefits of insurance, and the introduction of compulsory lines of business. This greater take-up of insurance comes as the Southeast Asia country’s economy expands, enabling government spending on infrastructure projects.
The report, Vietnam’s Insurance Market Anticipates Continued Strong Growth, states that the insurance sector has seen premium growth rates in the double digits each year since Vietnam joined the World Trade Organization in 2007. However, while the insurance market is showing strong growth, insurance premiums as a percentage of gross domestic product (GDP) remains static at around 1.5%.
Yvette Essen, report author and Director of Industry Research- Europe & Emerging Markets, said insurers operating in Vietnam face a range of economic and regulatory challenges; in particular, inflation- which reached 18.8% in 2011- remains a serious concern. “In addition to economic challenges, insurance rates are under pressure from the competitive market environment,” she said. “A.M. Best notes that a number of insurers are attempting to improve pricing and terms and conditions although some companies have faced legal challenges when they have attempted to increase rates.”
A.M. Best believes recent and anticipated regulatory changes will lead to stronger insurers and a more structured governance of the sector. The Ministry of Finance is reported to be considering restructuring the insurance sector, classifying Vietnam insurers into four groups according to factors including their ability to meet solvency ratios.
Jeff Yeung, A.M. Best senior financial analyst, said: “While the Vietnamese government has formulated an insurance market development strategy for high growth in the coming years, the restructuring plan aims to create an environment for insurance companies to focus on healthy growth, such as setting profitability and capital adequacy as key business objectives, and strengthening risk management practices and transparency of information. A.M. Best believes the regulatory changes will lead to stronger insurers, as well as structured governance of the insurance sector, which will ultimately benefit insurance consumers.”
To access a free copy of this report in English, please visit here.
To access a free copy of this report in Vietnamese, please visit here.
To view a video of Yvette Essen discussing the report, please visit here.