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.

The Best’s Market Segment Report, “Market Segment Outlook: Vietnam Non-Life Insurance,” also notes 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.

Property insurance was a key business growth driver in 2023. Government spending on renewable energy, transportation, and other large-scale infrastructure projects is likely to drive greater demand for insurance coverage going forward. 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.

“Vietnam remains a magnet for foreign direct investment, as investors continue to seek global supply chain diversification. FDI inflows are expected to continue as one of the growth engines of the country’s economy, which in turn will bolster demand for commercial lines insurance,” said Ken Lau, senior financial analyst, AM Best.

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.

“Even though insurance companies have increased their asset allocations to higher-risk investments for yield enhancement, investment yields are expected to remain subdued over the near term given the companies’ typically large allocations to term deposits and government bonds,” said Chris Lim, associate director, analytics, AM Best.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=345027.

To view a complete list of Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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