AM Best has assigned a stable market segment outlook to Vietnam’s non-life insurance segment, citing solid risk-adjusted capitalisation levels among market participants, supported by conservative investment portfolios, and demographic and demand factors that support medium- to long-term growth prospects. Spillover effects of the ongoing U.S.-China trade war, which likely will benefit Vietnam, is also a factor that supports the stable outlook.
A new Best’s Market Segment Report, titled, “Market Segment Outlook: Vietnam Non-Life,” states that Vietnam’s non-life insurance market grew by 12% in 2019 to VND 52.3 trillion (USD 2.2 billion) in terms of direct premiums written (DPW). The health and personal accident and fire classes of business recorded remarkable growth of 20% and 30%, respectively, in 2019, supporting the sector’s overall strong growth. Notably, the primary drivers of business growth have been the health and motor insurance businesses, which registered robust 10-year compound annual growth rates of 27% and 18%, respectively.
Partially offsetting the stable trends in the Vietnam non-life insurance market include intense market competition, compounded by rising losses in property lines; lower growth of multiple business lines due to domestic and global economic slowdowns; and lower interest rates and capital market volatility, which are likely to impact investment income. Preliminary estimates for first-quarter 2020 show that numerous classes of businesses are expected to post lower premium volumes, owing to reduced economic activity.
However, growth in the health insurance segment is likely to be significant for 2020 because of an increased awareness of health insurance in light of the COVID-19 pandemic.
AM Best expects Vietnam’s non-life insurance segment to remain well-capitalised under the current economic climate, although over the medium to long term, insurers may require additional capital to support future growth. Several financially strong international insurance groups, which currently own strategic stakes in Vietnamese non-life insurance entities, have expressed interest to increase their level of ownership through new capital contribution or acquisition of existing shares. However, such developments are tied to the Vietnam government’s plans to divest its ownership stakes, which have been delayed due to bureaucratic procedures.