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Non-life insurance industry: Still in difficult time

Wednesday, 03/06/2015, 04:33

After three years of continuous decrease, direct premium volume growth rate has started to show signs of recovery in 2014. This is thanks to economic recovery and efforts of non-life insurance enterprises in restructuring during the difficult time. However, since administration expenses have increased as enterprises prepare for the implementation of Circular 194 of the Ministry of Finance as well as income from financial investment was affected by low interest rate, business results in the industry have not been improved significantly in this year.


In non-life insurance sector, motor vehicle, property and healthcare insurance are still the segments with highest proportion over the past years whilst fire insurance, healthcare insurance and cargo insurance normally have the highest direct premium volume growth rate in the market. In 2015, motor vehicle insurance and property insurance are expected to have optimistic business results.

In particular, for motor vehicle insurance, the increase in number of motor vehicles, especially in the car market could be an advantage for premium volume of motor vehicle insurance. In 2014, car market had a significant growth of 43% and in January 2015 only, the growth rate was more than 80% in comparison with the same period of last year.

For property insurance, there are many advantages such as the recovery of real estate market, expansion of production, especially expansion of FDI to grasp the opportunities when treaties such as TPP, FTA are signed.

However, in this year, non-life insurance market also faced with many difficulties. In particular, insurance enterprises need to prepare to meet the requirements of Circular 194/2014 of the Ministry of Finance which amends Circular 124 and 125, with effective date since February 1st 2015 which relate to the supervision of owner’s equity and premium income collected from insurance buyers (last date of application is January 1st 2016). Therefore, administration expenses of insurance enterprises may increase. In addition, according to the timeline, divesting from investments beyond the core business of some groups as well as State Capital Investment Corporation (SCIC)’s divestment of state capital in some insurance enterprises will need to be completed urgently in 2015. Many insurance enterprises have started their capital increase plan since 2014 and tried to complete them by the end of this year to enhance their financial strength before the State agencies have any adjustments to strengthen their management in this sector.

In the non-life market, top companies such as PVI (23%), Bao Viet (21%), Bao Minh (10%), PJICO (7%), and PTI (6%) take more than 70% of market share. The remaining share is distributed among 24 other market players.

Although the market premium volume has increased, income from investments is still the most important factor for the non-life insurance industry and safety is always the top concern for this activity. Therefore, profit of non-life insurers mostly comes from interests on deposits (more than 60%). The continuous decline in interest rate has significantly affected profit of insurance enterprises. Therefore, the business results have not been improved although premium volume may increase. On the other hand, in order to compensate for the decline in income from bank deposits, many enterprises will have to look for other opportunities such as establishing joint-venture companies overseas such as in Laos and Cambodia; or enterprises can balance their investment portfolios by eliminating inefficient investments.


With the market growth potential, especially in the segments as analyzed above, companies with big market share in motor vehicle and property insurance are highly valued. In addition, with the State policies, insurance industry can develop sustainably with their focus on service quality and variety of products. Therefore, enterprises with good and efficient distribution network and good control of expenses will receive special attention from investors.     

(According to Investment Review)

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