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Vietnam’s insurance market captures foreign investors
The Hanoitimes – The participation of foreign investors has helped domestic insurers enhance their insurance capacity through training, legal framework and operation of products.
The participation of foreign investors in Vietnam’s insurance sector will boost the market while enriching domestic insurers with experience and governance.
South Korea’s Hyundai Marine & Fire Insurance Co. Ltd. (HMFI) is the latest investor who announced this week a plan to join the Vietnamese insurance market by acquiring a 25 percent stake of VietinBank Insurance (VBI).
Accordingly, VBI will issue 16.7 million shares to HMFI to raise the Vietnamese insurer’s charter capital to VND667 billion (US$28.5 million). The deal is expected to be completed on the first half of 2019 after the Ministry of Finance approves in principle the charter capital change.
The offer price will not be lower than the book value of VBI as of December 31, 2017. Shares issued to foreign investors cannot be transferred within 10 years after the completion of the offer, except for in some special cases.
To be the shareholder of VBI, the Korean investor requires that there should be at least one foreign investor on the Board of Directors who is not involved in management activities, to ensure the best support for VBI. This person will join VBI’s Board of Directors when the Ministry of Finance revises VBI’s license to increase its charter capital and record foreign shareholders.
Before HMFI, many other foreign insurers, such as Prudential, Manulife, AIA, Mirae Asset and Sun Life, have also stepped up their presence in Vietnam.
Phung Ngoc Khanh, general director of the Ministry of Finance’s Insurance Supervisory Authority (ISA), said that in recent years, Vietnam’s insurance market has received strong interest from foreign investors, especially after promotion conferences in major markets such as the US, Japan and South Korea.
In the life insurance sector, for example, which is operated primarily by foreign investors, Khanh said equity rose by 30 percent annually between 2016 and 2018, while total insurance revenue increased by 30 percent per year and the amount of investment put back into the economy was up 28 percent.
“These figures show the confidence of foreign investors in the domestic insurance market, creating momentum for fast growth between 2015 and 2018,” said Khanh.
According to the Ministry of Finance, Vietnam’s insurance sector has targeted revenue of VND129.24 trillion (US$5.52 billion) this year, up 22.38 percent against 2017. If it hits the target, it would be the fifth consecutive year the insurance industry has posted annual growth of more than 20 percent.
Diversified products
According to Minister of Planning and Investment Nguyen Chi Dung, with the entrance of foreign investors, many service sectors, including insurance have developed remarkably in recent years.
Reports from the Ministry of Finance showed that the number of life insurance products in Vietnam rose from 100 in 2009 to 450 today. The number of non-life insurance products also surged from 200 in 1999 to the current 850.
New insurance products, such as microinsurance, pension insurance and health insurance have been also implemented to meet the demands of customers, contributing to socio-economic development and ensuring social security, said General Director Khanh.
Modern distribution models of the local insurance industry have also been gradually developing, thanks to the participation of foreign investors. Bancassurance was launched in Vietnam for the first time in 2001 with the cooperation between AIA and HSBC, while online distribution channel was implemented by a majority of large-sized insurers in 2016.
Besides, according to analysts from Bao Viet Securities Co, the participation of foreign investors has helped domestic insurers enhance their insurance capacity through training, legal framework and operation of products.
Accordingly, VBI will issue 16.7 million shares to HMFI to raise the Vietnamese insurer’s charter capital to VND667 billion (US$28.5 million). The deal is expected to be completed on the first half of 2019 after the Ministry of Finance approves in principle the charter capital change.
The offer price will not be lower than the book value of VBI as of December 31, 2017. Shares issued to foreign investors cannot be transferred within 10 years after the completion of the offer, except for in some special cases.
To be the shareholder of VBI, the Korean investor requires that there should be at least one foreign investor on the Board of Directors who is not involved in management activities, to ensure the best support for VBI. This person will join VBI’s Board of Directors when the Ministry of Finance revises VBI’s license to increase its charter capital and record foreign shareholders.
Before HMFI, many other foreign insurers, such as Prudential, Manulife, AIA, Mirae Asset and Sun Life, have also stepped up their presence in Vietnam.
Phung Ngoc Khanh, general director of the Ministry of Finance’s Insurance Supervisory Authority (ISA), said that in recent years, Vietnam’s insurance market has received strong interest from foreign investors, especially after promotion conferences in major markets such as the US, Japan and South Korea.
In the life insurance sector, for example, which is operated primarily by foreign investors, Khanh said equity rose by 30 percent annually between 2016 and 2018, while total insurance revenue increased by 30 percent per year and the amount of investment put back into the economy was up 28 percent.
“These figures show the confidence of foreign investors in the domestic insurance market, creating momentum for fast growth between 2015 and 2018,” said Khanh.
According to the Ministry of Finance, Vietnam’s insurance sector has targeted revenue of VND129.24 trillion (US$5.52 billion) this year, up 22.38 percent against 2017. If it hits the target, it would be the fifth consecutive year the insurance industry has posted annual growth of more than 20 percent.
Diversified products
According to Minister of Planning and Investment Nguyen Chi Dung, with the entrance of foreign investors, many service sectors, including insurance have developed remarkably in recent years.
Reports from the Ministry of Finance showed that the number of life insurance products in Vietnam rose from 100 in 2009 to 450 today. The number of non-life insurance products also surged from 200 in 1999 to the current 850.
New insurance products, such as microinsurance, pension insurance and health insurance have been also implemented to meet the demands of customers, contributing to socio-economic development and ensuring social security, said General Director Khanh.
Modern distribution models of the local insurance industry have also been gradually developing, thanks to the participation of foreign investors. Bancassurance was launched in Vietnam for the first time in 2001 with the cooperation between AIA and HSBC, while online distribution channel was implemented by a majority of large-sized insurers in 2016.
Besides, according to analysts from Bao Viet Securities Co, the participation of foreign investors has helped domestic insurers enhance their insurance capacity through training, legal framework and operation of products.
Source: http://www.hanoitimes.vn/investment/2018/11/81E0CFF7/vietnam-s-insurance-market-captures-foreign-investors/