The insurance market will continue to expand this year, with total premiums expected to reach 46 trillion dong (US$2.2 billion), up 24 per cent from last year, says a recent report from A.M. Best, a credit rating agency covering the insurance industry.
A.M. Best forecasted that inflation would remain a serious concern, eroding consumer spending and increasing compensation costs. Inflation reached 18.8 per cent in 2011, largely from higher food and fuel prices, and was projected to moderate only somewhat in 2012 to a still-high 12.1 per cent.
However, Association of Vietnam Insurers (AVI) general secretary Phung Dac Loc predicted earlier this year that the insurance sector had the potential to continue to expand further. He forecasted that non-life insurance premiums would increase by about 28 per cent to 27.5 trillion dong ($1.3 billion), while life insurance premiums were expected to grow by 18 per cent to 18.9 trillion dong ($900 million).
The director of the Ministry of Finance’s Insurance Supervisory Authority, Trinh Thanh Hoan, also predicted that total premiums could reach 43 trillion dong ($2 billion) in 2012.
Hoan cautioned, however, that companies needed to adapt to the competitive market, and he advised insurers to focus on attracting high-quality human resources, developing new products, expanding distribution networks and concentrating on micro insurance products.
A.M. Best expected difficult economic conditions over the next few years to create a challenging environment but anticipated that insurers would access the stock market and increase fund raising in the second half of the year to support business expansion.
According to the A.M. Best credit rating, Vietnam has fallen into A.M. Best’s CRT-5 (Country Risk Tier 5) category, the lowest tier, for countries considered to present the most risk in the Southeast Asian region.
In comparison, Singapore is assigned to CRT-1, which denotes a stable environment with the lowest proportion of risk. The Philippines and Indonesia were classed as CRT-4, while Malaysia and Thailand fall into the CRT-3 category.