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Non-life insurance in Q3 – mixed results under pandemic pressure

As production and commercial activities and services were disrupted by Covid pandemic in the third Quarter, GDP growth rate in Quarter III/2021 decreased by 6.17% year-on-year, the deepest fall since Vietnam has calculated and announced quarterly GDP. Strict social distancing measures applied in most major cities and provinces (including large industrial centers such as Binh Duong, Dong Nai, Ho Chi Minh City, etc.)  also hurt insurance sector in general and non-life market in particular.

Total premium volume of non-life sector in the first 9 months of 2021 was VND42,377 billion, increasing by about 2.6% over the same period of the previous year. On a quarter-on-quarter basis, premium volume of Quarter 3/2021 alone decreased by 14% – the sharpest decrease since the opening of insurance market so far.

The growth rate in the first 9 months of this year was only half of the same period of 2020, largely due to the sharp fall of retail business (personal accident/health, motor) which accounted for nearly 60% of the total market premium.

Market share

Personal accident/health and motor were directly and heavily affected by the lockdown measures in the third quarter of 2021 as well as declining consumer spending demand in the face of economic difficulties. Personal accident (mainly Personal Accident for bank loan holders) continued to decline by more than 10% due to the pandemic, however, Healthcare insurance maintained a good growth rate of nearly 17%.

Motor insurance decreased by more than 10.5 percent in the third quarter after a modest  growth of 1.25% in the first half year. During the distancing period, almost non-essential activities were halted and expenditures that were not considered necessary werereduced, resulting in almost negligible number of new cars sold.

Commercial insurance  

Written premium from Engineering Insurance recorded an estimated growth of 6.2% in the first 9 months of 2021 and this was the highest growth rate in recent years. Large insurance companies achieved good growth compared to the same period in 2020, however, the growth rate was much slower than in the first 6 months of the year. Engineering was heavily affected by the pandemic when many projects were postponed, canceled or the disbursement of large public investment projects were delayed due to social distancing measures. The positive growth in written premium in the first 9 months of 2021 were mainly generated from the large projects which were implemented since the beginning of the year. In general, the market situation in the third quarter was quiet, especially in August and September, and the written premium recorded in this period was mainly from previously issued policies. Losses are on the rise, especially with  large risks as well as the consequences of recent storms, which will be a major concern of Engineering (with high exposure from small and medium hydropower projects issued under CECR policy).

Cargo Insurnce continued to maintain a good recovery in Quarter 3/2021 with growth rate of more than 20% (compared to the decrease of 12% in Quarter 3/2020) with positive factors such as growth in import and export turnover (increasing by 24.4% in the first 9 months, of which exports increased by 18.8%, imports increased by 30.5%), increased import prices of petroleum, iron and steel. Written premium of Cargo continued to record good growth in most companies with large market shares such as PJICO, Bao Viet, Bao Minh, BIC.

However, compared to the pre-pandemic period (first 9 months of 2019), the written premium of Cargo Insurance grew by only about 6.5%. Under the pressure of increasing revenue, many enterprises focus on underwriting several high-risk commodities (agriculture products, animal feed, etc.). Harsh competition by undercutting premiumshas not shown any signs of cooling down. Although the loss ratio of this business is considered good compared to other commercial insurance lines, the sharp decline in tariff in recent years has also contributed to the rise in the loss ratio. Currently, the Cargo/Hull reinsurance contracts of enterprises in the market are still achieving good results (thanks to the results of Cargo) and the insurance commission obtaining from this business is still the highest among traditional commercial insurance products and reinsurance terms and conditions are also very competitive.

Property saw good growth thanks to its specific nature (enterprises and factories need insurance protection to ensure the safety of production and business and maintain their operations) and get support in policies (compulsory insurance, tariff, etc…). This line of business is not really affected by the pandemic and still maintains a stable growth rate of about 18% in the first 9 months of 2021. Most insurance companies recorded quite positive growth such as PJICO (increasing by 16%), PTI (12%), MIC (38%).

Loss picture

In addition to the large losses recorded in the first 6 months of 2021, in Quarter 3/2021, there was a large loss for CMI policy of Vung Ang 2 factory (PVI/SVI) with an estimated loss of about USD100 million.

This is considered the largest single loss of the insurance market in general and of Engineering in particular so far, showing the increasing loss trend for annual renewal policies of Engineering (CMI, MB, CECR …) and also serves as a warning about potential exposure of large losses with mega risks, especially with business interruption.

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