Vietnam insurance report q1 2016

Q1 2016
www.bmiresearch.com

VIETNAM
INSURANCE REPORT
INCLUDES 5-YEAR FORECASTS TO 2019

Published by:BMI Research


Vietnam Insurance Report Q1 2016
INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: November 2015
ISSN: 1752-8410

BMI Research
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2015 Business Monitor International Ltd
All rights reserved.

All information contained in this publication is
copyrighted in the name of Business Monitor
International Ltd, and as such no part of this
publication may be reproduced, repackaged,
redistributed, resold in whole or in any part, or used
in any form or by any means graphic, electronic or
mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.


Vietnam Insurance Report Q1 2016
INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: November 2015
ISSN: 1752-8410

BMI Research
Senator House
85 Queen Victoria Street

London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2015 Business Monitor International Ltd
All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor
International Ltd, and as such no part of this
publication may be reproduced, repackaged,
redistributed, resold in whole or in any part, or used
in any form or by any means graphic, electronic or
mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.

Vietnam Insurance Report Q1 2016

CONTENTS
BMI Industry View ............................................................................................................... 7
Table: Headline Insurance Forecasts (Vietnam 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

SWOT .................................................................................................................................... 9
Insurance ................................................................................................................................................. 9

Industry Forecast .............................................................................................................. 11
Life Premiums Forecast ............................................................................................................................ 11
Table: Life Premiums (Vietnam 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table: Life Insurance Claims (Vietnam 2009-2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Non-Life Premiums Forecast ..................................................................................................................... 15
Table: Non-Life Premiums (Vietnam 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Table: Non-Life Insurance Claims (Vietnam 2008-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Non-Life Sub-Sector Forecast .................................................................................................................... 20
Table: Non-Life Insurance Premiums By Product Line (Vietnam 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Insurance Risk/Reward Index .......................................................................................... 30
Asia Pacific Industry Risk/Reward Index ...................................................................................................... 30
Table: Asia Pacific Insurance Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Market Overview ............................................................................................................... 32
Life Market Overview ............................................................................................................................... 32
The Product Offering .............................................................................................................................. 32
The Competitive Landscape ..................................................................................................................... 33
Table: Life Insurance Market (USDmn) 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Non-Life Market Overview ........................................................................................................................ 35
The Product Offering .............................................................................................................................. 35
The Competitive Landscape ..................................................................................................................... 36
Table: Non-Life Insurance Market (USDmn) 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Company Profile ................................................................................................................ 40
AIA Group ............................................................................................................................................. 40
American International Group (AIG) ........................................................................................................... 43
Bao Viet Holdings ....................................................................................................................................
Manulife Financial ..................................................................................................................................
Prudential plc .........................................................................................................................................
PVI Holdings ..........................................................................................................................................
Sun Life Financial ...................................................................................................................................

45
48
50
53
56

Methodology ...................................................................................................................... 58
Industry Forecast Methodology ................................................................................................................ 58
Risk/Reward Index Methodology ............................................................................................................... 61
Table: Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

© Business Monitor International Ltd

Page 4

Vietnam Insurance Report Q1 2016
Table: Weighting of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

© Business Monitor International Ltd

Page 5



Vietnam Insurance Report Q1 2016

BMI Industry View
BMI View: Vietnam's insurance industry is growing rapidly, bolstered both by domestic economic growth
and by a gradual improvement in terms of the range of products available in the market. The non-life sector
is more established, with motor and health and personal accident insurance particularly popular. Life
insurance is currently the smaller sector, and demand for long-term savings or retirement products
continues to be hampered by low household income levels. Premiums across both life and non-life are
expected to increase throughout our forecast period through to 2019. As the investment environment
gradually improves, we expect to see more multinationals entering the market who are keen to take
advantage of the strong growth potential.

Table: Headline Insurance Forecasts (Vietnam 2012-2019)

2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

18,390.85

22,650.00

23,482.35

26,271.96

29,022.73

31,733.50

34,389.68

36,989.79

Gross life premiums
written, VND, % y-o-y

61.6

23.2

3.7

11.9

10.5

9.3

8.4

7.6

Gross life premiums
written, USDbn

0.88

1.08

1.11

1.18

1.26

1.39

1.52

1.64

Gross life premiums
written, USD, % y-o-y

59.9

22.2

2.8

6.9

6.6

9.8

9.3

8.5

Gross non-life
premiums written,
VNDbn

22,757.99

24,454.99

28,341.94

32,077.98

35,876.86

39,829.17

44,075.64

48,526.36

Gross non-life
premiums written,
VND, % y-o-y

11.0

7.5

15.9

13.2

11.8

11.0

10.7

10.1

Gross non-life
premiums written,
USDbn

1.09

1.16

1.34

1.45

1.56

1.74

1.94

2.16

Gross non-life
premiums written,
USD, % y-o-y

9.9

6.7

15.0

8.1

7.9

11.5

11.6

11.1

Gross life premiums
written, VNDbn

e/f = BMI estimate/forecast. Source: AVI/BMI

© Business Monitor International Ltd

Page 7


Vietnam Insurance Report Q1 2016

Key Updates And Forecasts
■

The larger non-life sector will see the strongest growth throughout our forecast period, with gross nonlife premiums written expected to increase by an average annual rate of over 10% to reach USD2.2bn in
2019, up from USD1.4bn in 2015.

■

Although slightly slower, growth will also be strong in the smaller life sector, where premiums are
expected to increase by around 8% annually to reach USD1.6bn in 2019, up from USD1.2bn in 2015.

■

Health insurance providers may face an increase in claims amid reports that the cost of healthcare
services at state-owned hospitals may increase by two to seven times the current costs. Fees are being
raised to include the salary of medical personnel.

© Business Monitor International Ltd

Page 8


Vietnam Insurance Report Q1 2016

SWOT
Insurance

Vietnam Insurance SWOT Analysis

Strengths

■

Both the life and non-life insurance segments have been growing at double-digit
rates, and have the potential to do so for the foreseeable future.

■

There are clear signs of pricing discipline in the non-life segment and claims control is
improving.

■

Given the domination of the life segment by subsidiaries of regional and global
majors, lack of capital will not pose a constraint.

■

The non-life segment is well diversified away from motor insurance - a staple line in
many under-developed markets.

Weaknesses

■

The high growth anticipated in the life and non-life segments of the Vietnamese
market is coming off a very small base.

■

Many of the domestic non-life companies are subscale and lack ready access to new
capital.

■

Many Vietnamese households do not have sufficient income to purchase nonessential life or non-life products.

■

The domestic economy remains undiversified which limits potential for growth of lines
such as credit/financial guarantee and general liability insurance.

Opportunities

■

The massive growth in agency networks that is currently underway in the life segment
should enable a sizeable increase in overall premiums.

■

The size and importance of commercial lines means that the non-life segment should
grow in real terms as long as the economy can continue to expand.

■

Life companies are developing new and improved products such as education
savings plans for children.

© Business Monitor International Ltd

Page 9


Vietnam Insurance Report Q1 2016

Vietnam Insurance SWOT Analysis - Continued
■

Life companies are entering into bancassurance relationships and are undertaking
other distribution initiatives.

■

The government has launched a trial program to promote the development of export
credit insurance.

■

Substantial multinationals continue to develop subsidiaries in the non-life and life
segments.

Threats

■

High inflation could constrain households from becoming first time users of life
insurance, in a country where well over 90% lack cover.

■

Lack of development and volatility in the Vietnamese capital and bond markets
complicate investment strategies.

■

Restrictions on foreign investment/ownership in many sectors could deter potential
investors.

■

Vietnam is vulnerable to natural disasters which would impact heavily upon the
country's non-life firms.

© Business Monitor International Ltd

Page 10


Vietnam Insurance Report Q1 2016

Industry Forecast
Life Premiums Forecast
BMI View: The outlook is increasingly positive for Vietnam's emerging life insurance market. Although
rates of penetration and density are currently low, premiums are growing rapidly and the industry
continues to develop in terms of product offerings and the scope of distribution channels. We expect to see
solid growth in premiums throughout our forecast period to 2019, based largely on wider domestic
economic growth and rising household income levels - though we do note that at present life insurance
products remain unaffordable for many households in Vietnam.

Latest Updates
■

Ongoing currency movements mean we have adjusted our short-term forecasts for gross life insurance
premiums written and now expect to see an increase of 6.9% to USD1.18bn, while in local currency

terms growth will be more positive at 11.9% to VND26,272.0bn.

Structural Trends

While we foresee sustained longer term growth in life insurance premiums, we are mindful of potential
setbacks due to economic shocks and general low levels of awareness among Vietnamese households of the
benefits of various life insurance products. Although the insurers have been working to improve customers'
understanding of life insurance, a more fundamental problem is that most households cannot afford it.

In spite of ongoing growth, therefore, Vietnam's life insurance segment remains a relatively small
investment opportunity for international life insurers, in comparison to other countries across South East
Asia. Nevertheless, the segment has been benefitting hugely from the product and distribution know-how
and regional scale of (most of) the international companies which are establishing a presence in the country.
As the country's business environment becomes more favourable to foreign investors and as wider
economic growth improves household income levels, we expect to see further long-term growth in
Vietnam's life insurance sector.

© Business Monitor International Ltd

Page 11


Vietnam Insurance Report Q1 2016

Premiums Expected To Rise
Gross Life Insurance Premiums (2012-2019)
40,000

80

30,000

60

20,000

40

10,000

20

0

0
2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

Gross life premiums written, VNDbn (LHS)
Gross life premiums written, VND, % y-o-y (RHS)

e/f = BMI estimate/forecast. Source: AVI/BMI

Life Insurance Premiums: Growing Rapidly From Low Base

Ongoing commitment by the Vietnamese government to improving macroeconomic fundamentals and
forging financial stability should bode well for the country's economy as a whole, and notably also for the
insurance sector. Accordingly, we expect to see gross life insurance premiums grow by 6.9% to USD1.18bn
in 2015. However, with life density (life premiums per capita) at around USD12.7 in 2015, and life
penetration (life premiums as percentage of GDP) of 0.6%, we are mindful that many households are still
struggling to properly afford life insurance. Looking forward, we foresee that life premiums will continue to
rise at solid single-digit rates through to 2019, to reach USD1.64bn. Accordingly, the various multinational
insurers that have established operations in Vietnam are, in our view, right to see the market as an attractive
opportunity for future investment. Thus, it is likely that by 2019 at least one of the largest players will have
significant success with the development and distribution of micro-insurance products to reach out to the
low-income households.

Vietnam's life expectancy at 76.2 years on average (71.2 years for men and 80.6 years for women) is about
average for the South East Asia region, higher than states such as Malaysia, China and Thailand but lower

© Business Monitor International Ltd

Page 12


Vietnam Insurance Report Q1 2016

than more developed states such as Japan and Hong Kong, which reflects the progress which still needs to
be made in terms of public healthcare in Vietnam. The government has invested heavily in improving
infrastructure and staffing levels - including recently increasing pay for medical staff in order to keep more
trained personnel working in state facilities - however, access to medical care remains limited, particularly
in poorer rural areas.

The Vietnamese population is generally a young one. The group of over 65s numbers around 6.29mn (in
2015), which represents 6.7% of the total population. This is a much smaller proportion of the overall
population than Japan, China and Thailand. While the increasing life expectancy means that the over 65s
group will grow to some 7.5mn in 2019, this will still represent just 7.7% of the total population. Life
insurance providers are therefore presented with a young potential market, one where the large working age
population is well able to work for longer and contribute more to life savings plans which support the
payment of claims to retirees. The increasing life expectancy also suggests scope for rising demand for
various life products as individuals are increasingly aware of the need to provide for later in life income
cover and support - particularly in light of limited government provided social welfare benefits.

Life Expectancy And Old-Age Demographics
Life Expectancy And Population Aged 75+ (2012-2019)
100

3,150

3,100

75

3,050
50
3,000
25

2,950

0

2,900
2012

2013

2014

2015f

2016f

2017f

2018f

2019f

Life expectancy at birth, male, years (LHS)
Life expectancy at birth, female, years (LHS)
Population, 75+, total, '000 (RHS)

f = BMI forecast. Source: National Sources/BMI

© Business Monitor International Ltd

Page 13


Vietnam Insurance Report Q1 2016

The primary risk to our current forecasts for growth in the Vietnamese life insurance market are economic
in nature. At present the BMI Country Risk team expects to see annual real GDP growth of over 6% over
the medium term. However, the potential for a renewed maritime dispute with China does pose a downside
risk to these forecasts and, in addition, should the US economic recovery hit a standstill, this would pose a
salient risk to Vietnam's export sector, and consequently our economic growth forecast, given the sector's
strong orientation to the US economy. If Vietnam's GDP growth rate stalls, this would impact household
income and investment returns and would therefore require a downwards revision of our current forecasts
for growth in life insurance premiums written.

Table: Life Premiums (Vietnam 2012-2019)

2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

18,390.85

22,650.00

23,482.35

26,271.96

29,022.73

31,733.50

34,389.68

36,989.79

Gross life premiums
written, VND, % y-o-y

61.6

23.2

3.7

11.9

10.5

9.3

8.4

7.6

Gross life premiums
written, USDbn

0.88

1.08

1.11

1.18

1.26

1.39

1.52

1.64

Gross life premiums
written, USD, % y-o-y

59.9

22.2

2.8

6.9

6.6

9.8

9.3

8.5

Gross life premiums
written, % of GDP

0.6

0.6

0.6

0.6

0.6

0.6

0.6

0.6

Gross life premiums
written, % of gross
premiums written

44.7

48.1

45.3

45.0

44.7

44.3

43.8

43.3

Gross life premiums
written, VNDbn

e/f = BMI estimate/forecast. Source: AVI/BMI

Claims: Growing As Industry Develops

The trend of life payments and claims by Vietnam's life insurers has been one of rapid growth since 2011.
We observe an average growth rate of 38.3% between 2011 and 2013, with an absolute increase from
USD150mn to USD380mn (VND4,221.75bn to VND8,095.00bn). While this shows that claims and
payments have been growing from a rather low base, we believe that this development does also reflect the
growth of the country's life insurance segment, as well as the positive receipt of effective product
innovations. As a result, we expect that such considerable increases in claims may persist over the coming
years, in line with Vietnam's overall rapid economic growth and the further development of the life
insurance sector.

© Business Monitor International Ltd

Page 14


Vietnam Insurance Report Q1 2016

Table: Life Insurance Claims (Vietnam 2009-2013)

2009

2010

2011

2012

2013

2,507.71

2,786.51

4,221.75

5,740.15

8,095.00

-

11.1

51.5

36.0

41.0

Life insurance gross loss ratio

21.2

20.2

37.1

31.2

35.7

Claims life, USDbn

0.14

0.15

0.20

0.28

0.38

-

3.4

40.2

34.6

40.0

Claims life, VNDbn
Claims life, VND, % y-o-y

Claims life, USD, % y-o-y

Source: AVI/BMI

Non-Life Premiums Forecast
BMI View: We are forecasting healthy growth in non-life insurance premiums written in Vietnam
throughout the forecast period to 2019. Wider domestic economic growth is boosting household income
rates, providing scope for greater spending on non-essential insurable items, and demand for health
insurance is rising. Public investments in infrastructure will also boost demand for currently less developed
lines such as property insurance.

Latest Updates
■

Updated industry figures and ongoing currency movements mean we have updated our forecasts for gross
non-life premiums written in 2015 and now expect to see growth of 13.2% in local currency terms to
VND32,078.0bn (in US dollar terms growth of 8.1% to USD1.4bn).

Structural Trends

The non-life sector in Vietnam is slightly more developed than the life sector, with motor, health and
personal accident and transport insurance constituting the key lines. Over the longer term we expect to see
growth across all of the non-life sectors, though some, such as credit/financial guarantee insurance, will
remain minor lines in light of the limited penetration of formal banking services in the country. As
premiums grow and the investment environment is improved, we expect to see more multinationals entering
the Vietnamese non-life market, which would help to diversify the product offering and potentially expand
the reach of non-life insurance via the introduction of more affordable products catering to the large section
of the market with low household incomes.

© Business Monitor International Ltd

Page 15

Vietnam Insurance Report Q1 2016

Growth Continues
Gross Non-Life Premiums (2012-2019)
60,000

17.5

15
40,000
12.5

10
20,000
7.5

0

5
2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

Gross non-life premiums written, VNDbn (LHS)
Gross non-life premiums written, VND, % y-o-y (RHS)

e/f = BMI estimate/forecast. Source: AVI/BMI

Non-Life Insurance Premiums: Healthy Growth Potential

With gross non-life premiums set to increase by 8.1% in 2015, reaching USD1.45bn, we have a positive
outlook for Vietnam's non-life insurance segment. In spite of low per capita premiums of USD15.5 and low
non-life penetration (premiums as a percentage of GDP) of 0.7% (in 2015), we anticipate that increasingly
more households should become better able to afford non-life insurance products as Vietnam's economy
continues to strengthen. The non-life segment is expected to grow at an annual rate of around 10.5%
between 2016 and 2019, to reach USD2.16bn by the end of the current forecast period. In addition to
increases in industrial/commercial lines following the countries rapid economic expansion (we forecast
6.4% growth in real GDP in 2015), the rise of non-life insurance will predominantly be driven by motor
vehicle insurance.

© Business Monitor International Ltd

Page 16


Vietnam Insurance Report Q1 2016

Growth Across All Lines

Non-Life Premium Growth Rates (2012-2019)
50

0

-50

-100
2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

Motor vehicle insurance, VND, % y-o-y
Property insurance, VND, % y-o-y
Transport insurance, VND, % y-o-y
Health and personal accident insurance, VND, % y-o-y
Credit/financial guarantee insurance, VND, % y-o-y
General liability insurance, VND, % y-o-y

e/f = BMI estimate/forecast. Source: AVI/BMI

As with the life insurance sector, the primary risk to our current forecasts stems from the potential
derailment of domestic economic growth prospects. Currency weakness and high fiscal deficits have the
potential to impact economic expansion, and should the expected GDP growth of over 6% not materialise
we would need to revise downwards our positive forecasts for non-life premiums growth. Conversely,
should economic growth prove better than expected, creating the potential for faster growth in private final
consumption and enhanced investment in infrastructure, we would be looking to an upwards revision of
growth forecasts.

© Business Monitor International Ltd

Page 17


Vietnam Insurance Report Q1 2016

Table: Non-Life Premiums (Vietnam 2012-2019)

2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

Gross non-life
premiums written,
VNDbn

22,757.99

24,454.99

28,341.94

32,077.98

35,876.86

39,829.17

44,075.64

48,526.36

Gross non-life
premiums written,
VND, % y-o-y

11.0

7.5

15.9

13.2

11.8

11.0

10.7

10.1

Gross non-life
premiums written,
USDbn

1.09

1.16

1.34

1.45

1.56

1.74

1.94

2.16

Gross non-life
premiums written,
USD, % y-o-y

9.9

6.7

15.0

8.1

7.9

11.5

11.6

11.1

Gross non-life
premiums written, %
of GDP

0.7

0.7

0.7

0.7

0.8

0.8

0.7

0.7

Gross non-life
premiums written, %
of gross premiums
written

55.3

51.9

54.7

55.0

55.3

55.7

56.2

56.7

e/f = BMI estimate/forecast. Source: AVI/BMI

Claims: Costs Will Increase

Similar to Vietnam's life insurance segment, non-life insurance claims have also grown rapidly since 2009.
Especially the years 2011 and 2013 exhibited significant growth rates of 32.3% and 20.7% respectively (in
local currency terms), with total claims reaching VND10,7110.25bn in 2013, up from VND4,510.67bn in
2008. This trend can be attributed to the nature of the segment, where large-scale commercial and industrial
risks account for a substantial share of non-life premiums. As a result, although losses are not frequent, they
are substantial when they do occur. We anticipate that non-life claims will grow even more rapidly as motor
vehicle and property insurance are accounting for an increasingly larger share of total written premiums.

© Business Monitor International Ltd

Page 18


Vietnam Insurance Report Q1 2016

High Motor And Transport Costs
Non-Life Insurance Claims By Type (2013) USDmn

Source: AVI/BMI

As well as accounting for the majority of premiums written, motor insurance is also the largest source of
non-life claims in the Vietnamese non-life insurance sector, accounting for some 30.2% of claims paid in
2013 (latest available figures). This is a decrease on previous years indicating that insurers are gradually
improving claims control processes. Transport insurance, which also has a large share of premiums, is
another major source of non-life claims. We believe that this follows Vietnam's increasingly more important
role in international trade exports growing at a healthy rate. Health and personal accident insurance,
currently the third largest source of claims, has seen costs increasing rapidly in recent years, a trend which
we expect to continue moving forward as Vietnam raises fees in state owned medical facilities and as care
standards and availability are generally improved.

© Business Monitor International Ltd

Page 19


Vietnam Insurance Report Q1 2016

Table: Non-Life Insurance Claims (Vietnam 2008-2014)

Claims non-life, VNDbn
Claims non-life, VND, % y-o-y
Non-life insurance gross loss ratio

2008

2009

2010

2011

2012

2013

4,510.67

5,272.33

6,384.15

8,445.00

8,873.58

10,711.25

-

16.9

21.1

32.3

5.1

20.7

41.5

38.6

37.4

41.2

39.0

43.8

Source: AVI/BMI

Non-Life Sub-Sector Forecast
BMI View: Vietnam's non-life insurance sector has a healthy mix of well-established lines and we expect to
see sustained growth across all sub-sectors throughout our forecast period to 2019. Motor insurance will
retain its dominant position, followed closely by health and personal accident insurance, which is
increasingly popular among those who can afford it in Vietnam. Transport insurance will likely lose some
market share due to stronger growth in motor insurance, while the smaller lines such as credit and
financial guarantee insurance will struggle to gain any significant ground.

Latest Updates
■

Ongoing currency movements mean we have adjusted our forecasts for short-term growth in motor
insurance premiums in US dollar terms, and we now expect to see growth of 5.1% to USD386.3mn.

■

Similarly, transport insurance premiums are now forecast to increase by 4.9% in US dollar terms to
USD246.7mn in 2015, while maintaining stronger growth in local currency terms.

■

Growth in property insurance has accelerated, and we now expect to see premium growth of 4.3% over
2015 leading to premiums of USD112.0mn.

Structural Trends

Vietnam's non-life market is more diversified than many other emerging insurance markets. While motor
insurance dominates, transport insurance and health and personal accident insurance are also very well
established in the country. Property insurance is an underdeveloped line and one we expect to see grow over
the longer term, though in the medium-term the development of this line will remain hampered by low
household income rates and limitations on foreign home ownership.

There are avenues for further growth in the non-life sector. Microinsurance, catering to the many lowincome households, could significantly expand the reach of insurance cover. Development of lines under
the catch-all 'other' category, such as agricultural insurance, is also progressing, with Vietnam's

© Business Monitor International Ltd

Page 20


Vietnam Insurance Report Q1 2016

vulnerability to extreme weather events making crop failure cover an increasingly popular line. As
restrictions on foreign investment are lifted and the insurance market opens to more multinationals, we
expect to see a greater level of product availability, which will help to ensure long-term and sustainable
growth in premiums.

Relatively Diverse Non Life Market
Non-Life Insurance Premiums By Product Line (2016) USDmn

Source: AVI/BMI

Motor Insurance: Remaining The Major Line

Although motor vehicle insurance is relatively less important in Vietnam's non-life segment than in other
low income countries, motor vehicle related lines are nevertheless forecast to account for a little over one
quarter of all premiums written in the segment in 2015, making it the most well established line in the
market. In this year, we see motor vehicle insurance premiums increasing rapidly by 5.1% to reach
USD386.3mn, broadly in line with our expectations for wider economic growth in Vietnam, though
currency movements mean growth will be stronger when measured in local currency terms (at 10.0%).

Strong growth in the autos market in Vietnam underpins our optimistic outlook for motor vehicle insurance.
The BMI Autos team expects vehicle sales to grow by 17.9% in 2015, followed by average annual growth

© Business Monitor International Ltd

Page 21


Vietnam Insurance Report Q1 2016

of around 9.8% through to 2019. At the same time, domestic vehicle production capacity is growing rapidly.
The country's vehicle fleet is therefore expected to increase from 3.2mn in 2015 to around 3.6mn in 2019,
leading to an increase in passenger car density from 24.0 vehicles per 1,000 of the population to 26.4
vehicles by the end of the forecast period. All of this indicates higher demand for motor vehicle insurance.

Expecting Healthy Growth
Motor Premiums (2012-2019)
15,000,000

15

10,000,000

10

5,000,000

5

0

0
2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

Motor vehicle insurance, VNDmn (LHS)
Motor vehicle insurance, VND, % y-o-y (RHS)

e/f = BMI estimate/forecast. Source: AVI/BMI

We anticipate steady double-digit growth in motor insurance premiums between 2016 and 2019, due to the
growth in the autos sector as noted above, and as the sub-sector expands in line with the overall non-life
segment. Motor vehicle premiums are expected to grow at an average annual rate of 12.3%, to reach
USD614.6mn in 2019. Given the fragmentation of the competitive landscape, we expect that the rise will be
driven mainly by the increase in the numbers of vehicles on Vietnam's roads. In short, the development of
motor vehicle insurance will be driven by volume, rather than by increases in prices/rates.

© Business Monitor International Ltd

Page 22


Vietnam Insurance Report Q1 2016

More Cars Equals More Insurance
Vehicle Fleet Size (2012-2019)
5,000,000

40

4,000,000
35

3,000,000

2,000,000
30
1,000,000

0

25
2012

2013e

2014e

Vehicle fleet, units (LHS)

2015f

2016f

2017f

2018f

2019f

Vehicles per 1,000 of population (RHS)

e/f = BMI estimate/forecast. Source: BMI/OICA

Beyond the current forecast period there is certainly scope for continued growth in the motor vehicle
insurance sector. Auto sales in Vietnam continue to rise as more households can afford new car purchases,
and the country is also expanding its domestic autos manufacturing capacity in order to meet demand though Vietnam will be reliant upon autos imports for some time to come. As car insurance is a compulsory
line in Vietnam, an increase in new car sales indicates long-term growth potential for the motor insurance
sector.

Transport Insurance: Well Established Line

Accounting for nearly one fifth of total non-life premiums, transport insurance accounts for a larger
percentage of activity in the segment than one might expect in a country with Vietnam's per capita incomes.
We see transport premiums increasing by 4.9%, to reach USD246.7mn in 2015. This rise is reflective of the
buying of transport insurance by (predominantly) state-owned enterprises, and, very often, through the nonlife insurance companies that are affiliated with them.

© Business Monitor International Ltd

Page 23


Vietnam Insurance Report Q1 2016

Transport A Key Line
Transport Premiums (2012-2019)
10,000,000

15

7,500,000

10

5,000,000

5

2,500,000

0

0

-5
2012

2013

2014e

2015f

2016f

2017f

2018f

2019f

Transport insurance, VNDmn (LHS)
Transport insurance, VND, % y-o-y (RHS)

e/f = BMI estimate/forecast. Source: AVI/BMI

We expect transport insurance to increase at an average annual rate of 8.0% through the 2016-2019 forecast
period, to reach USD335.7 in 2019. We believe that this positive outlook is underpinned by Vietnam's
increasingly significant role in international trade. For example, the country is seeking to play a greater role
in the electronics supply chain in the near future, which is a key source of demand for air freight transport.
In addition, Vietnam's pharmaceutical sector exports much of its output, but it also imports a lot.

Trade by the country's pharmaceutical sector is expected to grow at double-digit rates in the coming years,
which will further drive up demand for transportation, and this will consequently impact positively on
written transport insurance premiums. These positive economic growth factors support our expectations of
continued long-term growth in Vietnam's transport insurance sub-sector beyond the end of the current
forecast period in 2019. This is particularly the case as several of the leading domestic non-life firms
specialise in various transport lines, including the provision of specialised transport insurance for the
growing energy sector or for the large fishing industry.

© Business Monitor International Ltd

Page 24