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Business

Money in, money out

Released at: 13:51, 21/07/2015

Money in, money out

Non-life insurers performed will in the opening months of this year but rising payouts means the sector is still in a modest position.

by Lan Huong - Hung Khanh

The non-life insurance sector is undergoing a restructure per the blueprint set by government in order to enhance the safety of the system, increase the efficacy of operations, and improve the competitive advantages of insurance companies, under Decision No.1826/QD-TTg from the Prime Minister. After a disappointing business performance in 2014, when revenue in the non-life insurance market was lower than in life insurance for the first time, non-life insurers bounced back in the first four months of the year.

Gaining momentum

According to report from the Insurance Supervisory Authority at the Ministry of Finance, the estimated total revenue of the insurance sector as a whole in the first four months was VND19.1 trillion ($875.92 million), with revenue from non-life insurance premiums at VND9.93 trillion ($455.38 million) and VND9.16 trillion (420.07 million) from life insurance.

Non-life insurance premiums grew 16.5 per cent in the first four months against the same period last year. The increase remains modest, however, compared to the 20.75 per cent increase for the insurance market as a whole and the 25.71 per cent increase in the life insurance sector. Regardless, the recovery of the non-life insurance market provides it with momentum for the remaining months of the year.

The majority of market share is held by five insurers: the PetroVietnam Insurance Corporation (PVI), the Bao Viet Vietnam Insurance Corporation (Bao Viet), the Bao Minh Insurance Corporation (Bao Minh), the PJICO Insurance Corporation (PJICO), and the Post & Telecommunication Joint Stock Insurance Corporation (PTI). In the first four months of the year these five accounted 62.33 per cent of the market. Leading in terms of premium revenue is PVI, with total revenue of VND2.12 trillion ($97.22 million), an increase of 13.15 per cent compared with the same period of 2014 and representing a market share of 21.34 per cent. Following was Bao Viet, with VND1.79 trillion ($82.08 million) in premiums, an increase of 4.43 per cent year-on-year and 18.02 per cent of the market, then Bao Minh with VND910 billion ($41.73 million), 2.41 per cent higher and accounting for 9.17 per cent.

Many other non-life insurers also recorded significant increases in revenue, including the VASS Assurance Corporation with VND355 billion ($15.35 million), an increase of 4.68 times, the Vietcombank Insurance Company with VND121 billion ($5.54 million), an increase of 2.04 times, the Phu Hung Assurance Company with VND15 billion ($687,900), an increase of 2.04 times, and the Military Insurance Company with VND455 billion ($20.86 million), an increase of 1.62 times.

Meanwhile, there were a few non-life insurers who saw revenue tumbling compared with the same period of 2014. The AAA Insurance Company recorded revenue of VND72 billion ($3.30 million), a decline of 58.13 per cent, and the Vietnam National Aviation Insurance Company saw revenue of VND86 billion ($3.94 million), 9.77 per cent lower.

In terms of products, motor vehicle insurance accounted for the largest proportion of all premium revenue, with VND3.1 trillion ($142.16 million), accounting for 31.27 per cent, followed by health insurance and personal accident insurance with VND2.14 trillion ($98.14 million), or 21.57 per cent, property and damage insurance with VND1.79 trillion ($82.08 million), or 18.10 per cent, fire insurance with VND875 billion ($40.12 million), accounting for 8.81 per cent, and shipping insurance and ship owners’ civil liability insurance with VND756 billion ($34.67 million), accounting for 7.61 per cent.

Payouts also on the rise

A point worth noting is that total payouts also increased significantly. According to the Ministry of Finance, claims in the non-life market in the first four months were estimated at VND4.42 trillion ($202.70 million), with an average payout ratio of 44.55 per cent.

Twenty-one out of the 30 non-life insurance companies in Vietnam had a payout ratio lower than the market average in the first four months. The nine who have payout ratios higher than the market average are MSIG (218.33 per cent), UIC (148.98 per cent), Cathay (140.25 per cent), Fubon (141.61 per cent), PHS (99.45 per cent), BVTM (89.32 per cent), PVI (64.82 per cent), BSH (59.05 per cent), and Liberty (55.6 per cent).

The Insurance Supervisory Authority report said that this was because some companies paid out on damages in the first four months that were actually incurred in 2014. Specifically, the highest payouts were by PVI, for damage to the Cua Lo 1 Song Hong Basin oil well, with an estimated at VND710 billion ($32.56 million), and for damage to the Chim Sao gas pipeline, which is estimated at VND189 billion ($8.66 million).

Over the last two years the restructuring of Vietnam’s insurance market has mainly focused on non-life insurers. While some were forced by authorities to restructure, the remainder did so at their own instigation. Development was so rapid, in some cases, that risk management was found wanting. For this reason the government is keen to restructure the industry, to give it stability into the future.

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