Insurance Services
Market Research Report
Executive Summary
Number of Pages: 32

Author: Joshua Jake Levine
Approving Officer: Frederic Gaynor
Officer's Title: Senior Commercial Officer
International Copyright, U.S. & Foreign Commercial Service and U.S. Department of State.


From the perspective of American insurance companies, more promising activity has taken place within Vietnam's insurance market since March, 1999 than in the five years prior. Whereas insurance companies operating in Vietnam until this year had been wholly or partly owned by the Vietnamese government, recently several licenses have been granted to foreign insurers to operate as wholly foreign-owned life and non-life insurance companies in Vietnam. Other foreign firms recently won licenses to sell a wide range of insurance products to large state-owned Vietnamese companies such as oil and gas monopoly PetroVietnam and to their customers as well. This bodes well for their foreign competitors.

After several years of two trial joint ventures with Asian insurers and a regional broker, it appears that authorities had decided that opening the market to a number of foreign insurers was acceptable. While this apparent evolution of the Vietnamese insurance industry bodes well for American firms such as American Insurance Group (AIG), John Hancock, and Ace (formerly Cigna), which operate offices in Vietnam, such companies can additionally place real hope in the July initialing of a trade agreement between the U.S. and Vietnam. That agreement calls for a phasing in of changed policies that will allow for greater opportunities for U.S. insurance companies (and other services) to operate freely in Vietnam. That includes marketing and selling life and non-life products directly to Vietnamese and foreign customers.

The amount of life and non-life insurance policies written by Vietnamese insurers in 1998 was approximately $130 million as estimated by the Ministry of Finance, which regulates the industry, against $42.2 million (587.33 billion dong, Vietnam's local currency) paid in claims. The total market premiums account for only 0.56 percent of the country's gross domestic product, 10 to 20 times lower than that of regional and developed countries respectively, according to the Ministry of Planning and Investment, which grants licenses to insurers. Even so, the amount of premiums written has grown by between 30 and 40 percent annually since 1993. More than 40 foreign insurance companies and six brokerages have established offices in Vietnam because of they perceive a large market potential and are attracted to this high annual growth.

In terms of present demand, foreign entities operating in Vietnam must purchase insurance from an insurer incorporated in Vietnam. Domestic firms must also purchase insurance, although this is a relatively recent development and it appears that many state-owned enterprises have not yet done so. In terms of future demand, very few insurance products that are already popular in other countries including Thailand and China, such as life insurance, are even available in Vietnam. Therefore foreign insurers believe that increased marketing and strategic alliances will increase demand for new products that will be affordable to the majority of Vietnam's 80 million current residents, starting with Ho Chi Minh City's metropolitan population of more than five million.

Until 1994, a single company, Bao Viet, which was established in the 1960s and operated by the Ministry of Finance, served Vietnam's insurance needs. It focused primarily on insurance for import-export, small scale maritime and river navigation insurance and motor vehicle insurance. That company served the demands of a small economy comprised only of other state-run companies. But as the economy underwent "doi moi," or economic renovation, foreign firms and joint ventures demanded insurance products that were beyond Bao Viet's capabilities. At the same time, several dozen regional and multi-national insurance companies expressed interest in serving the market of Vietnam.

As a result, a 1993 decree was signed by the Prime Minister which made it legal for foreign insurers to establish representative offices, enter into joint ventures, and establish 100 percent foreign-owned businesses, so long as these operations were first approved and licensed by government authorities. A 1997 decree which replaced the first established more explicit guidelines, explicitly legalized reinsurance of domestic firms by foreign ones, and established a state-run Vietnamese reinsurance company, VinaRe, which in effect acts as a broker between domestic insurers and foreign reinsurers.

These two decrees also aimed to diversify the insurance market among state-run companies by dismantling Bao Viet's monopoly. Today there are five major domestic insurance companies: Bao Viet, Bao Minh (an insurance company in Ho Chi Minh City, which until 1995 was a branch of Bao Viet), Bao Long (a newly established company in Ho Chi Minh City), PetroVietnam insurance Company (PVIC) and PJICO (The Petroleum Joint Stock insurance Company). PJICO is combined venture between seven Vietnamese state-owned companies and one re-insurance company (Vietnam Reinsurance Company). Bao Viet and Bao Minh together currently account for more than 80 percent of premiums written. Combined, these companies account for 700 offices nationwide and employ 10,000. Other corporations with a high demand for insurance (such as maritime and aviation corporations) are additionally in the process of establishing their own insurance firms.

Aside from the 40 or so representative offices foreign insurers have established in Vietnam already, since 1997, joint ventures have been established between Vietnamese insurers and two Japanese companies, one French, two U.K., one Australian; in addition two 100 percent foreign owned license have been granted, one to a Taiwanese-Canadian joint venture and a second to a German-French joint venture. A further joint venture between another Australian insurer and a Vietnamese bank is also pending final approval as of July 1999. One foreign joint venture brokerage has also been operating for four years. Many of these companies are among the world's largest multi-nationals, already active throughout Asia. Further, one or more American insurers are also expected to receive licenses to sell directly to the Vietnamese market by the end of 1999.

(END OF EXECUTIVE SUMMARY -- REPORT 32 PAGES)