Vietnam: Infrastructure spending likely to boost non-life insurance demand
Source: Asia Insurance Review | Sep 2024
Government spending on renewable energy, transportation, and other large-scale infrastructure projects is likely to drive greater demand for non-life insurance coverage going forward, says AM Best.
The global credit rating agency in its latest Best’s Market Segment Report, titled ‘Market Segment Outlook: Vietnam Non-Life Insurance’, adds that Vietnam’s non-life insurance market growth also should continue to benefit from the country’s reputation as an attractive destination for foreign direct investment. Property insurance was a business growth driver in 2023.
AM Best is maintaining a ‘Stable’ outlook on Vietnam’s non-life insurance segment, citing accelerating non-life premium growth and increased demand for commercial lines insurance. It notes that the country’s Insurance Business Law as a recent regulatory refinement supporting the ‘Stable’ outlook, as the newly adopted requirements on risk management, internal controls, internal audits and actuarial standards are expected to enhance risk governance and strengthen financial conduct.
At the same time, market competition has eroded the underwriting profit margins of the motor and health insurance segments, owing partly to looser underwriting. Near-term pricing competition in these lines could constrain technical margins.
The non-life insurance industry’s earnings also may be dampened by lower investment yields over the near term. The State Bank of Vietnam lowered the policy interest rate multiple times in the first half of 2023 and is expected to maintain an accommodative monetary policy stance over 2024. A