VietNamNet Bridge - The potential of the Vietnamese insurance market is great: total insurance premiums in 2014 reached VND52.68 trillion, an increase of 13.2 percent over 2013.

Before its annual shareholders’ meeting in 2015 took place, PTI found a foreign strategic shareholder, Dongbu, an insurer from South Korea, which now holds 37 percent of PTI’s stake.

PTI then issued 30 million shares to receive VND1.077 trillion from Dongbu. A part of the money has been used to raise charter capital from VND504 billion to VND804 billion.

Many other deals have also been successful this year. BIDV Insurance Corporation (BIC) decided to issue 41 million, or 35 percent of total shares, to FairFax Asia Limited, a subsidiary of Canadian Fairfax Financial Holdings. 

Meanwhile, PJICO plans to issue 17.7 million shares, or 20 percent of total shares, to its foreign shareholder in 2015.

Analysts see a new movement of top-tier insurers looking for foreign partners. This shows that Vietnamese insurers are making plans to improve competitiveness.

Prior to that, some big players in the market including Bao Viet, Bao Minh and PVI also found their foreign shareholders.

BSH has completed its plan to increase charter capital from VND300 billion to VND700 billion. MIC plans to raise capital from VND500 billion to VND600 billion, and is still looking for foreign partners.

In 2014, PVI successfully increased its capital by 13.5 percent to VND2.1 trillion. Vinare, the only Vietnamese re-insurance corporation, has raised its capital from VND1 trillion to VND1.3 trillion. 

Most recently, an insurance joint venture has been set up with three partners – Vietnamese Military Bank, Belgian Aegas Insurance and Thai Muang Thai life insurance.

There are many reasons for insurers to raise their capital. Insurers, like bankers, need huge capital to satisfy their business needs. Moreover, higher charter capital will allow a larger operation scale.

Fubon Life, which increased its charter capital in August, said it needs to have more capital to strengthen the financial foundation. Its 2014 finance report showed it took a loss of VND21 billion in 2014.

According to VPB Securities, in the past, insurers focused on competing with each other for market share, but now they focus on developing in-depth development strategies and risk management.

“A lot of insurers plan to raise their charter capital to improve their capability and reinforce the financial position,” according to a VPB Securities’ report.

However, insurers’ main reason for pouring more capital into their business is the great potential of the Vietnamese market. 

BSC Securities cited a BMI report as saying that the growth rate of the Vietnamese insurance market in 2004-2014 was 16.4 percent, higher than the average growth rate of 10-12 percent in other regional countries.

NCDT