Global credit ratings agency AM Best has confirmed that it is maintaining a stable outlook on Vietnam’s non-life insurance segment.
The agency cities premium growth and regulatory enhancements that strengthen risk management and corporate governance, as the key factors contributing towards the outlook.
A recent report from Best also showcases the government’s relaxation of restrictions on foreign investment in Vietnam’s insurance industry as being a positive factor too.
The agency noted that it is of the view that this will be a favourable development over the long term; in particular, smaller local players can leverage foreign investors’ experience and industry expertise to purify their underwriting capability and business strategies.
It is important to note that Vietnam’s non-life gross written premiums grew year over year by 1.3% in the first half of 2023 to VND 34.9 trillion (USD 1.4 billion). This figure was met despite a slowdown in economic growth and issues associated with mis-selling of bancassurance products.
At the same time, the inadequacy of management and supervision of service quality and products sold through the bancassurance channel resulted in heightened regulatory scrutiny, and oversight of bancassurance deals by the Ministry of Finance also led to disappointing growth for some market players, and indirectly slowed down growth in individual lines of insurance.
Vietnam’s global trade activity also saw a decrease, mostly due to a weakened global economy in the first three quarters of 2023, which heavily impacted the country’s economic growth as well as the non-life insurance market’s performance.
YoY GDP increased by 4.1% in the second quarter of 2023 and 5.3% in the third, considerably lower than the annual growth rate of 8% that was seen in 2022 or the pre-COVID growth rates of 7.5% in 2018 and 7.4% in 2019.
Best stated that it expects Vietnam’s non-life insurance market to resume its growth momentum as global demand recovers and benefits the domestic economy.
The agency said that Vietnam is likely to remain an attractive destination of foreign direct investment on account of the government’s pro-business stance as well as its position as an alternative for companies seeking to diversify their supply chain operations away from China.
Ken Lau, senior financial analyst, AM Best, commented: “Vietnam’s non-life insurance market will likely resume its growth momentum as global demand recovers and benefits the domestic economy. Vietnam is likely to remain an attractive destination of foreign direct investment on account of the government’s pro-business stance and its position as an alternative for companies seeking to diversify their supply chain operations away from China.”
