Vietnam’s non-life insurance market is eyeing potential growth and should be supported by structural economic tailwinds that will continue to benefit the economy, AM Best said.
In addition, Vietnam could benefit from “friendshoring”, a recent trend whereby companies seek to mitigate supply chain risks by diversifying some of their raw material sources, manufacturing or logistics capabilities towards countries sharing common values, according to the global rating agency.
in a new Best Market Segment Report“Market Segment Outlook: Vietnam Non-Life Insurance”, AM Best says it maintains stable market segment outlook on non-life insurance segment in Vietnam, citing market growth supported by economic tailwinds , regulatory developments which should help stimulate growth and escalating domestic interest rates which should benefit investment income.
In addition, a new law on insurance business that will come into force in early 2023 could lead to increased participation by foreign players and potentially more competition in the market over time. AM Best considers the benefits associated with increased foreign participation, including knowledge transfer, healthy competition and additional financial flexibility, to outweigh the disadvantages.
“These regulatory changes should strengthen the market’s financial resilience and promote risk transparency as it matures,” said Chris Lim, senior financial analyst, AM Best. “Vietnamese insurers may need to manage transition risks arising from this development and there may be pressure on companies to obtain appropriate risk management or actuarial talent to comply with the new requirements.”
According to the report, non-life insurers in Vietnam stand to benefit from rising domestic interest rates which are supporting investment income. Although economic growth and recovery from the pandemic have been supported by low interest rates, the country’s central bank has signaled its intention to tighten monetary policy to manage rising inflation and stabilize the Vietnamese dong.
“Pressure to tighten monetary policy will likely translate into increases in domestic interest rates in the short to medium term. life, a gradual rise in interest rates to pre-pandemic levels is seen as supportive of market non-technical earnings and overall operating performance,” said Mr. Michael Dunckley, Director, Analytics, AM Best.
Non-life insurance premiums recovered strongly in the first half of 2022 with year-on-year growth of 13.6%, according to market statistics.