Best’s Market Segment Report: Vietnam Non-Life Market Shows Growth Despite Challenging Operating Environment

Vietnams non-life market has experienced a high rate of growth in the most recent five-year period, which stands in contrast to the subdued growth in many neighboring markets, according to a new A.M. Best report.

The Bests Market Segment Report, titled, Vietnam Non-Life Market: A Growth Story in a Challenging Operating Environment, states the non-life market in 2017 recorded total direct premium written of approximately VND 41 trillion, or USD 1.8 billion, which is small by international standards; however, the non-life markets growth prospects remain positive given the low penetration rate in Vietnam of 0.8%.

However, while growth in this retail-led market has been strong, underwriting margins have been decreasing rapidly. Operating expenses are high and economies of scale have yet to be realized as the market is still in a developing stage. Significant spending on technology, branch networks and competition for distribution channels is still required.

Nonetheless, investors, including those from overseas, have been attracted to Vietnams non-life market, which is one of the few markets in Asia without restrictions on foreign ownership. Paid-up capital for the top five non-life insurers has increased 29% since 2013.

Credit Ratings on Vietnams non-life insurers are supported by solid risk-adjusted capitalization and overall positive earnings, due to good investment results. Although many companies have made high dividend payouts and their premium growths have been high, capital injections have been forthcoming, helping to support risk-adjusted capitalization. However, without margin improvements, attracting new capital will become increasingly difficult.

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