Insurance market to be overhauled

Monopoly will be scrapped from the insurance industry within the next 3 years as highlighted in a development strategy for the 2011-2020 period.

The insurance market development strategy issued last week partially reflects the Government’s goal of restructuring the financial and insurance sectors.

According to the strategy, to enhance the insurance system’s ability to meet increasingly diverse demands, the priority solution will be to make it safer.

The fragmentation of the market must be eliminated first, according to the strategy.

Regulations guaranteeing fairness and transparency in insurance services should be completed as stated by the amended 2010 Insurance Law.

The strategy demands compliance with the principles of bidding and competition in the insurance sector. Administrative interventions in insurance transactions will be strictly supervised and treated.

Stakes held by State groups and corporations in insurance firms will be diversified as well as reduced to prevent monopoly.

The insurance market is envisaged to make up 2 percent -3 percent of gross domestic product (GDP) by 2015 and 3 percent – 4 percent by 2020.

There are currently 43 insurance firms in Vietnam. 29 of them are non-life insurers and 14 are life insurers, according to the Insurance Supervisory Authority of the Ministry of Finance.

The Ministry of Finance will start to restructure the insurance market this year in order to promote healthy insurers and consolidate weaker firms.

The ministry is compiling a set of criteria to assess and categorize insurance companies into 4 groups, with specific management and supervision measures for each group.

The categorization will be carried out this year, according to the ministry’s report on restructuring State-owned enterprises and securities and insurance firms.

The first group will consist of insurance companies with guaranteed solvency and profitable business.

Enterprises in this group will be reinforced and maintained, allowed for expansion in line with efficient business schemes, but they will be closely inspected and supervised to ensure compliance with the law.

Group 2 will be enterprises with guaranteed solvency but high operational costs, high compensation rates and zero profit in 2 consecutive years.

Management agencies will evaluate the efficiency and reduce operational expenses for this group.

Those on the verge of losing solvency, with margins of solvency lower than the minimum level, will be gathered in group 3.

These companies need financial assessment, investment restructuring, and debt settlement, and parts of their insurance policies can be transferred to other firms.

The last group will be insolvent companies. These companies will be put under special control and applied the solutions in accordance with the Law on Insurance Business.

During the special control period, if enterprises fail to overcome their difficulties, they will be forced to merge into other firms or take court receivership under prevailing laws.

Insurance enterprise restructuring will be in line with the restructuring of credit institutions, State-owned enterprises, and the stock market to be deployed from 2012 to 2015 as mapped out by the finance ministry.

Source tuoitrenews.vn

Tags: Vietnam insurance, Vietnam insurance market, Vietnam insurance sector