Insurers struggle to locate capital

Non-life insurance companies must have 300 billion dong in chartered capital at minimum, while life insurance companies must have 600 billion. Meeting the required levels is a serious challenge for these businesses.

Government Decree No. 46, dated March 27, 2007, stipulates that insurance companies must have the required chartered capital no later than April 30, 2010 or they will have to close.

It was difficult to mobilize capital in 2009 and many insurance companies failed to meet their goals. According to the Insurance Management and Supervision Agency under the Ministry of Finance, life insurance companies have met the required increase.

As for other types of insurance, six companies, including Samsung Vina, QBE, UIC, Bao Tin, Bao Long and Hung Vuong, all have yet to locate enough capital.

Some businesses have enough chartered capital, but cannot meet the requirements on capital structure. Four enterprises (PVI, PJICO, PTI, GIC) have institutional shareholders who contribute more than 20 percent of chartered capital. As for AAA Company, individual shareholders hold more than 10 percent of chartered capital. Three enterprises, PJICO, PTI and VASS have enough chartered capital, but still cannot meet the requirements on operation scope.

Capital mobilization challenges in 2009 forced many others to alter their plans. GIC insurance company, under the Vietnam Coal and Mineral Industries Group, transferred stakes equal to 10 percent of chartered capital without the approval of the Ministry of Finance. The two enterprises have decreased their chartered capital they stipulated in their operations license, but gave no report to the Ministry of Finance.

Phung Dac Loc, Secretary General of the Vietnam Insurance Association, commented that unfavourable stock market conditions led to difficulties in capital mobilization. He also cited complicated administration procedures in plan failures.

“A lot of enterprises missed opportunities to increase capital in 2007 and 2008,” Loc noted. “Some enterprises got the nod from the Ministry of Finance to raise capital, but did not get the ‘go-ahead’ signal from the State Securities Commission. As it took them a long time to explain to the securities watchdog, they missed the opportunities to mobilize capital when the market became unfavourable.”

According to Trinh Thanh Hoan, Head of the Insurance Management and Supervision Agency, if necessary, insurance companies can consider calling for foreign strategic investors to improve management and technology.

He added that foreign investment is limited now, as the world economy has still not fully recovered. Vietnam’s insurance market is considered a stiffly competitive market and the insurance companies that need to increase capital are not big names, so they are less attractive to foreign investors.

As such, Hoan thinks that it is more feasible to mobilize capital domestically.

Vietnam economytimes

Tags: Vietnam insurance industry, vietnam Insurers, Vietnam life insurers