As China’s recovery from COVID-19-induced shutdowns appears fragile, the (re)insurance community may have to look to other markets for new growth opportunities.
Investor confidence in China remains weak as global capital considers regulatory risk as unpredictable, retail sales and industrial production remain sluggish, the property sector, long considered one of the growth engines of the Chinese economy, is witnessing a prolonged slump, youth unemployment is high and some economists are predicting a period of deflation.
In contrast, in Vietnam all the stars seem to be aligning to make the nation ‘the next big growth story’ – and this could spell opportunity for insurers looking to fill the gap left by a slowing China.
There are many jewels in Vietnam’s crown. Apple, often a bellwether of smart outsourcing, is one of many leading technology companies already taking advantage of DEEP C Two.
DEEP C Industrial Zones is a Belgian developer and operator of an industrial zone and port infrastructure cluster in Haiphong and Quang Ninh province, a dynamic region in north Vietnam.
This is a manifestation of Vietnam benefiting from the ‘China plus one’ dynamic that is seeing multiple industries hedge their bets on exposure to China and adding buffers to their supply chains at a time of heightened geopolitical tension.
But a reality check shows that Vietnam’s physical infrastructure is already starting to creak under the strain of business growth. According to data published by the Vietnamese government, in 2022 the nation attracted $22.4bn in foreign direct investment (FDI), an increase of 13.5% over 2021. A further 962 new FDI projects have already been secured in 2023.
As the nation emerges as an industrial powerhouse, it will have to contend with multiple issues including eradicating unnecessary bureaucracy, training more people and eliminating corruption – but the industrial and economic growth will have to be accompanied by strong growth in insurance.
The nation is also pinning its hopes on leapfrogging its neighbours by focusing on the production of electric vehicles – through VinFast, a member of Vingroup.
It claims to have become the top car seller in its competing segments within its first two years – and claims to be able to produce 250,000 vehicles per year.
Perhaps in recognition of this vast untapped potential, the Vietnam government recently issued regulations on cross-border insurance services provided by foreign providers.
Under the new regulation, those providing cross-border insurance and insurance brokerage services are foreign insurance companies and insurance brokerages with headquarters in countries or territories with which Vietnam has signed international treaties on trade, including agreements on the supply of cross-border insurance services in Vietnam.
The decree stipulates that to be allowed to provide cross-border services in Vietnam, a foreign insurance or insurance brokerage company must have a licence from a state management agency in charge of foreign insurance where the company is headquartered and must provide proof that it has been operating legally for at least 10 years until the time it begins to provide cross-border insurance services in Vietnam.
Foreign insurers must be rated at least “BBB” by S&P or Fitch, “B “ by AM Best, or “Baal” by Moody’s, or have equivalent ratings in the previous fiscal year.
Foreign insurance companies are required to provide cross-border insurance services in Vietnam through an insurance brokerage company licensed and operating in Vietnam, while foreign brokerage firms must provide brokerage services for foreign insurers or branches of foreign insurers licensed and operating in Vietnam.
It looks like the Vietnamese baby is fast growing up into a strong a vibrant young adult.
Paul McNamara
Editorial director
Asia Insurance Review