Vietnam’s Revised Insurance Law Opens Sector Further for Foreign Firms

Vietnam’s revised insurance law has come into force, freeing up the sector for foreign firms keen to tap into the demand for insurance services in the Southeast Asian nation. We discuss the scope of Vietnam’s insurance market.

On January 1, 2023, a revised version of Vietnam’s Law on Insurance Businesses came into force. This new law presents a number of opportunities for foreign firms that operate within the insurance sector.

Revisions to the law, most importantly, will allow for foreign firms to contribute the full chartered capital of an insurance business in Vietnam. This means that a local partner will not be required.

This should open the market further for foreign insurance firms that want to start doing business in Vietnam.

Vietnam’s insurance market in numbers

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In 2021, Vietnam’s insurance industry reached VND 255,876 billion (US$10.9 billion), including VND 218,357 billion (US$9.3 billion) in insurance premiums while the remaining VND 37,519 billion (US$1.6 billion) came from investment income, according to the Ministry of Finance (MoF).

Insurance Premiums 2020 vs 2021 (VND Billion)

Source: The Annual Report of the Vietnam Insurance Market 2021

Vietnam’s insurance market is expected to grow at a compound annual growth rate (CAGR) of 8.5 percent. This is expected to translate from VND 60.15 trillion (US$2.6 billion) in 2021 to VND 90.24 trillion (US$3.5 billion) in 2026, in terms of gross written premiums (GWP), according to data analysts GlobalData.

Foreign enterprises in Vietnam’s insurance market

Foreign insurance companies have 18 representative offices in Vietnam. This includes five in Ho Chi Minh City with the remaining 13 in Hanoi.

Most of these enterprises are from South Korea, with a total of six representative offices in the country. This was followed by Japan with four offices, Chinese Taiwan with three offices, and then one office each for companies from Germany, Hong Kong, France, Russia, and the United Kingdom.

Of these, nine insurance companies offer products other than life insurance, six offer life insurance, and three are insurance brokers.

Foreign insurance companies in Vietnam

Source: The Annual Report of the Vietnam Insurance Market 2021

(*) Previously known as LIG insurance Co., Ltd.

(**) Nipponkoa Insurance Co., Ltd previously known as Sompo Japan Insurance Inc.

Key players in Vietnam’s insurance market

Vietnam’s insurance market (excluding life insurance) is dominated by five key players, which accounted for 53.27 percent of non-life insurance premiums in 2021. This was to the value of VND 59,135 billion (US$2.5 billion). Notably, this was a 4.34 percent increase over 2020.

Those five key players are:

• Bao Viet was established in 1965 and is Vietnam’s biggest insurance provider. It also provides a range of other financial services.
• PetroVietnam Insurance (PVI) is a subsidiary of the Vietnam Oil and Gas Group. Though it provides personal insurance, its focus is on insurance solutions for businesses in Vietnam.
• Post and Telecommunications Insurance Corporation (PTI) was originally a part of the Vietnam Post Corporation (VPC); however, as of December 2021 VPC had divested all of its shares in the company. Its two primary stakeholders are now VNDirect and DB Insurance from S.Korea.
• Bao Minh Insurance was founded in 1994. In 2006 it was listed on the Hanoi Stock Exchange and in 2008 on the Ho Chi Minh City stock exchange. As of December 2021, it was Vietnam’s fourth biggest insurer.
• Military Insurance Company (MIC) was established in 2007 and is Vietnam’s fifth biggest insurer. It began as a subsidiary of the Central Military Commission but is now publicly traded.

There are a further 27 other insurers operating in the non-life insurance sector that cover the remaining 46.72 percent of insurance premiums.

Insurance market regulation in Vietnam

The key regulatory document governing Vietnam’s insurance industry is the aforementioned Law on Insurance Businesses.

The law came into force in 2000 and was subsequently updated in 2010 and 2019 with the most recent version coming into force at the beginning of 2022.

There are also a number of Circulars, Laws, and Decrees governing various sections of Vietnam’s insurance market.

Entering Vietnam’s insurance market

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With the most recent update of the Law on Insurance Businesses, foreign enterprises are permitted full ownership of their operations in Vietnam which should give them greater control.

Keeping this in mind, with a penetration rate of just 3.38 percent, the Vietnamese insurance market has ample room to grow. This coupled with an increasingly wealthy consumer class—20 million Vietnamese are expected to be spending more than US$30 a day by 2030 up from 4 million in 2020—may provide insurance companies with a unique opportunity to enter the market as it enters a potentially very profitable upswing.

For more information on entering Vietnam’s insurance market contact the business advisory unit at Dezan Shira and Associates.

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