In addition to the enhancement in management, supervisory activities and boosting insurance enterprises to do restructuring, in 2015, the Ministry of Finance has issued many policies, frameworks in insurance business, facilitating the development of this market.
Big progress in insurance policy in 2015
In 2015, the Ministry of Finance has submitted to the Government to promulgate Decree regulating insurance in investment construction activities; Decree replacing Decrees on insurance business.
In addition, the Ministry of Finance has promulgated some mechanisms, policies to encourage insurance enterprises developing new products such as aquaculture insurance, voluntary pension insurance, etc. In which, Circular 130/2015/TT-BTC amending Circular 115/2013/TT-BTC gives guidance on pension insurance and voluntary pension fund has solved many issues for insurance enterprises in the implementation of these products.
Through Association of Vietnamese Insurers, the Ministry of Finance has understood the difficulties of insurers and solved these issues by proposing to higher authorities to amend, supplement or abolish some regulations in statutory regulations relating to insurance business. For example, Insurance Supervisory Authority has proposed to supplement regulations on “insurance fraud” in the Criminal Law (amended) or abolish the chapter “insurance policy” from the Civil Law; to supplement insurance supervisory fee in the Fee and Charges Act passed by the National Assembly on November 25th 2015.
In addition, an increasingly comprehensive legal framework of Civil Law, Criminal Law, Investment Law, Enterprise Law and Law on Insurance Business has created favorable environment for the development of insurance market.
… and positive results
Big progress of insurance policy in 2015 has created favorable conditions for the development of insurance market, contributing to relatively impressive growth last year and the years to come. In specific, in 2015, the whole Vietnam insurance market had the highest growth rate since 2011, of nearly 22%, estimated at 68,024 billion dong according to Insurance Supervisory Authority, Ministry of Finance.
Estimated figures from the Association of Vietnamese Insurers also shows that both life and non-life market have impressive growth rate. In which, life insurance premium volume had the highest growth rate for the past 10 years, at 29.5% (premium volume estimated at 36,500 billion dong). In non-life insurance, premium volume was also at the highest in the past 5 years with growth rate of 14% (estimated premium volume at above 31,000 billion dong).
Other than premium volume, some other financial indicators of the whole market have also been improved significantly. At the end of 2015, total assets of the whole insurance market were estimated at 201,141 billion dong; total owners’ equity of the whole market was estimated at 42,388 billion dong. Claim payment of the whole market was estimated at 21,160 billion dong. Reinvestment in the economy was estimated at 152,543 billion dong. Insurers have participated in purchasing government bonds with the term of 20 years issued for the first time in Vietnam, with total volume of 6,230 billion.
In the process of restructuring insurers, in 2015, most insurers have met requirements on owner’s equity and solvency margin (44/45 enterprises). For the result of rating process for enterprises, 25 enterprises belonging to group 1 and 19 enterprises belonging to group 2, only 1 enterprise belonging to group 3 which is VASS. However, with the direction from the Ministry of Finance, the restructuring of this company has achieved certain goals, charter capital increased by 300 billion dong according to statutory regulations. In 2015, direct premium volume of VASS also increased by nearly three times in comparison with 2014.
Moving towards a transparency and sustainable market
For the increasingly sustainable and transparency of the market, the Ministry of Finance has been reviewing, establishing, completing frameworks and policies such as compulsory civil liability insurance of vehicle’s owner, compulsory fire insurance and studying to establish natural catastrophe insurance and nuclear insurance, etc.
The key point in the change of insurance policy in 2016 is the development of the two Decrees replacing Decrees on insurance business in the principle of ensuring uniformity, transparency, fairness for participants in the insurance market. The Ministry of Finance expects to submit to the Government to issue these documents in the third quarter of 2016.
On 18 December 2015, Insurance Supervisory Authority has had a meeting collecting opinions from insurers on the key contents of the second draft of this Decree. According to Mr. Phung Ngoc Khanh, Head of the ISA, the issuance of these two Decrees is to support insurers to maximize the potential of the market, well achieving targets of Insurance market development strategy into 2020.
According to Mr. Khanh, basically, the two new Decrees will still have contents of the four current Decrees (Decree 45/2007, Decree 46/2007, Decree 103/2008, Decree 123/2011) and amend 15 contents including: retention in reinsurance; party received insurance commission; regulations on related person; IT system; time limit of certificate of insurance agent; investment; technical reserves for healthcare insurance, reserves for natural catastrophe risk; revenue of broker activities; conditions, qualifications of shareholders asking for establishing insurers; authority of managing Motor vehicle insurance fund and Protection for the insured fund; conditions for investment and other relating issues.
Mr. Khanh said that, 2016 is the foundation year for the medium term in Development strategy of the insurance market (2016 – 2020). Accordingly, the ISA will develop and complete regulatory framework for insurance business; continue to maintain the growth rate of the market efficiently. At the same time, the ISA will enhance competitiveness of the insurers, move forward international standard practice and well prepare for the implementation of international commitments when free trade agreement between Vietnam and EU and TPP agreement are effective.
At the Meeting on review of 2015 and directions for 2016, Deputy Finance Minister Tran Xuan Ha highly appreciated the efforts of supervisory authorities in 2015 that greatly contributed to the sustainable development of the insurance market.
However, according to Deputy Finance Minister Ha, Vietnam insurance market still has many issues such as unhealthy competition, insurance fraud, supervisory activities of insurers have been strengthened but it has not met the market scale. Deputy Finance Minister suggests the ISA to strengthen supervisory activities in 2016 to facilitate the development of insurance market.
“In 2016, we need to continue to reform administration procedures to facilitate the development of insurance enterprises”, Mr. Ha stressed that.
(According to Investment Review)