The Association of Vietnamese Insurers is calling for a more transparent legal framework for the insurance industry, including a complete regulatory scheme and accounting standards for the industry to be in place by the time the amended Law on the Insurance Business takes effect in July.

The association also called on insurers to share a premium-floor list by April 22, especially the areas of motor vehicle, construction, cargo and hull insurance, in order to limit premium wars and unfair competition.

In a meeting last week, to gather industry comment on a development strategy for the insurance market through 2020, association chairman Trinh Quang Tuyen also said: “The licensing of new insurers and insurance brokers needs to be evaluated, in light of the fact that, while some insurers were more successful than had been expected, others have failed to develop.

“Those that failed did not have enough potential clients and offered less competitive products than other insurance companies.”

Appropriate technical standards for the establishment of insurance enterprises were indispensable to limit non-competitive products, which have caused premium levels to fall and affected the solvency of all insurance companies, he said.

Vien Dong Assurance Co’s deputy director Thai Van Cach noted that the amended law had new provisions on reinsurance aimed at ensuring the solvency of insurers. Under those provisions, domestic insurers were only allowed to offer reinsurance to foreign enterprises which achieved a sufficient credit rating from an international credit rating agency.

The investment strategies of insurance companies also needed to be reorganised, Tuyen said, encouraging companies to invest in securities, real estate, fund management, or other financial activities, including the financing of hospitals and schools.

A representative from AAA Assurance Co told Vietnam Financial Times that the target of the number of insurers should be reviewed, since the appearance of so many insurers has prevented the market from developing in depth. He also urged insurers to collaborate to develop professional standards for an industry that lacks professional skills and competes heavily for the few qualified executives.

Encouraging export insurance services

Around 95 per cent of Vietnamese exporters will take advantage of export insurance services if they are offered, according to a recent survey of enterprises by the Ministry of Industry and Commerce, but almost no insurance companies currently offer this form of insurance.

According to the Insurance Supervisory Authority of the Ministry of Finance, only three insurers offer export credit insurance – PetroVietnam Insurance, Bao Minh Insurance and QBE Insurance Co Ltd – as insurance companies providing this form of insurance needed extensive relationships with overseas banks and companies in order to evaluate the capacity of foreign importers.

Viet Nam Food Association general secretary Huynh Minh Hue city said that rice exporters had a great demand for export insurance, which would help companies expand markets without expanding risks. Export insurance could tend to replace letters of credit, he said.

An export insurance pilot programme will be carried out between 2011 and 2013 with the goal of covering 3 per cent of export turnover.

Source: VNS