SINGAPORE--(BUSINESS WIRE)--AM Best is maintaining its stable market segment outlook on Vietnam’s non-life insurance segment, citing market growth underpinned by economic tailwinds, regulatory developments expected to help drive growth and climbing domestic interest rates that should benefit investment income.
In a new Best’s Market Segment Report, “Market Segment Outlook: Vietnam Non-Life Insurance,” AM Best notes that non-life insurance premiums recovered strongly over the first half of 2022 with year-over-year growth of 13.6%, according to market statistics. Prospective growth is likely to be supported by structural economic tailwinds that will continue to benefit the economy. Also, Vietnam could benefit from “friendshoring,” a recent trend whereby firms look to mitigate supply chain risks by diversifying part of their raw material sources, manufacturing or logistical capabilities to countries with shared values.
In addition, a new insurance business law that takes effect at the start of 2023 may lead to increased participation of foreign players and potentially greater market competition over time. AM Best views the associated benefits of increased foreign participation, including knowledge transfer, healthy competition and additional financial flexibility, as outweighing the negatives.
“These regulatory changes should strengthen the market’s financial resilience and promote risk transparency as it matures,” said Chris Lim, senior financial analyst, AM Best. “Vietnamese insurers may need to manage transition risks arising from this development and there may be pressure on companies to secure appropriate risk management or actuarial talent to comply with the new requirements.”
According to the report, non-life insurers in Vietnam are expected to benefit from rising domestic interest rates that are supportive of investment income. Although economic growth and recovery from the pandemic has been underpinned by low interest rates, the country’s central bank has signaled its intention to tighten monetary policy to manage rising inflation and to stabilise the Vietnamese Dong.
“The pressure to tighten monetary policy is likely to translate into domestic interest rate increases over the near to medium term. As term deposits and fixed income instruments make up most of the non-life segment’s total investments, a gradual recovery of interest rates to pre-pandemic levels is viewed to be supportive of the market’s non-technical earnings and overall operating performance,” said Michael Dunckley, director, analytics, AM Best.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=325511.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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