AM Best maintains stable outlook on Vietnam's non-life insurance market

KUALA LUMPUR, Oct 31 (Bernama) -- AM Best has maintained its stable market outlook on Vietnam’s non-life insurance segment, citing market growth underpinned by economic tailwinds, regulatory developments expected to help drive growth and climbing domestic interest rates that should benefit investment income.

In its latest Best’s Market Segment Report, “Market Segment Outlook: Vietnam Non-Life Insurance”, the rating agency said Vietnam’s non-life insurance premiums recovered strongly over the first half of 2022, with market statistics showing a year-over-year (y-o-y) growth of 13.6 per cent.

AM Best said future growth is likely to be supported by structural economic tailwinds that will continue to benefit the economy.

“Vietnam could benefit from ‘friendshoring’, a recent trend whereby firms look to mitigate supply chain risks by diversifying part of their raw material sources, manufacturing or logistical capabilities to countries with shared values,” it said.

A new insurance business law that takes effect at the start of 2023 might lead to increased participation of foreign players and potentially greater market competition over time, it added.

AM Best viewed the associated benefits of increased foreign participation, including knowledge transfer, healthy competition and additional financial flexibility, as outweighing the negatives.

“These regulatory changes should strengthen the market’s financial resilience and promote risk transparency as it matures,” said AM Best senior financial analyst Chris Lim.

AM Best opined that non-life insurers in Vietnam are expected to benefit from rising domestic interest rates supportive of investment income.

It said while low interest rates have underpinned Vietnam’s economic growth and recovery from the pandemic, the country’s central bank has signalled its intention to tighten monetary policy to manage rising inflation and stabilise the Vietnamese dong.

“As term deposits and fixed income instruments make up most of the non-life segment’s total investments, a gradual recovery of interest rates to pre-pandemic levels is seen as supportive of the market’s non-technical earnings and overall operating performance,” said AM Best analytics director Michael Dunckley.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry.

-- BERNAMA