Vietnam Credit Insurance Market 2014
Credit insurance is relatively new to Vietnam and many businesses lack awareness of its significance, protection and benefits. Exporters and traders believe and place trust upon long-term and established business and personal relationships as the ultimate protection.
From 2011 to 2013, the Vietnamese Government launched a pilot program to encourage companies engaging in exports to take out export credit insurance policies, under which Insureds could obtain a 20 percent contribution towards insurance premiums. This program has since ended without too much success and as yet there appear to be no further Government incentives on the horizon.
As an emerging market, and currently with an economy facing many macro issues, Vietnamese enterprises are in dire need of capital and cashflow to fund expansion as well as export contracts. In this regard, many enterprises have looked to the banking industry to consider utilising credit policies as collateral for additional financing.
The Government via The State Bank of Vietnam (SBV) intend to promote the use of credit insurance as acceptable and bankable collateral thus going forward we believe the credit insurance market in Vietnam will perhaps see some positive movement in this direction.
Out of a total of 29 non-life insurance companies in Vietnam technically only five have offered credit insurance namely AIG, QBE as well Atradius, Coface, Euler Hermes with the latter three via appointed local underwriting partners since Vietnam has local admitted policy regulations in place.
The total revenue of the insurance industry in 2014 was US$2.45 billion, up 14.2% compared to 2013. Non-life insurance premium was US$1.18 billion and life insurance at US$1.27 billion respectively.
The premium written for credit insurance is a tiny fraction of the above and is estimated at approximately just over US$3 million although these numbers can be somewhat low as there are also a considerable amount going into global programs where premiums are not factored in.
With low penetration and density levels, Vietnam’s insurance industry in general and credit insurance in particular still has much opportunities for growth. An example in point is that the Insurance Regulators hope, as a development strategy, for the Vietnam insurance market, during the period from 2011 to 2020, for total premiums to account between 2% to 3% of Vietnam’s GDP by 2015 and 3% to 4% of the GDP by 2020.