Insurance companies have moderate capital increases
Insurance companies have moderate capital increases
Though domestic insurance companies have still increased their charter capital, the rate of rises has slowed due to the unfavourable developments of the Vietnamese financial and insurance market.
According to the Ministry of Finance’s Insurance Management and Supervision Agency, across the 2016-21 period, life insurance companies more than tripled their charter capital, from VNĐ26.86 trillion in 2016 to VNĐ117.57 trillion in 2021.
However, after 2022, the capital increase process has gradually slowed and there were only some charter capital increase cases.
For domestic life insurance companies, most of them are foreign companies or have parent companies abroad. Before 2021, the total revenue from newly exploited insurance premiums in Việt Nam surged, hitting double digits.
Therefore, the foreign parent companies of the domestic insurers saw the potential for long-term growth in the Vietnamese market and continuously invested capital in the domestic insurers. However, the number of new insurance contracts in Việt Nam has decreased sharply over the past few years, which has caused the parent companies to not prioritise investing in their Vietnamese insurance subsidiaries as before.
In addition, the current difficulty in the bancassurance channel has caused life insurance companies to no longer rush to increase capital to qualify for strategic cooperation with local banks. Previously, all three insurance companies, including Manulife, FWD and Sun Life, had to rush to increase their charter capital for the cooperations.
In addition to the unfavourable stock market situation, the crisis of confidence in the local insurance industry has also caused investors to be reluctant to invest more capital in domestic insurers.
According to experts, the charter capital increase helps insurers to strengthen their financial capacity and have more room to expand their business scale.
Notably, for the non-life insurance sector, the capital advantage will help insurers easily win bids of large projects. Therefore, despite the difficulties, some insurance companies are still trying to increase capital to maintain the competitiveness and meet the capital requirements of the projects’ owners.
A typical example is PVI Insurance. Thanks to its largest charter capital in the non-life insurance sector, PVI continuously won insurance contracts for key projects such as the Long Thành International Airport and Quảng Trạch No1 Thermal Power Plant.
For other non-life insurance companies such as PTI, MIC and PJICO, after a period of missing deadlines with shareholders, the companies this year have also restarted the capital increasing process to have the opportunity to win large insurance contracts.
To attract capital from domestic and foreign investors, experts said insurance companies need to quickly overcome the industry's shortcomings such as lack of information transparency, insurance fraud, insurance premium arrears and unfair competition.
In addition, insurance companies need to quickly build professional data, improve customer service quality and better protect customer rights in order to restore customer trust.
Insurance companies should also focus on attracting and finding international strategic partners to increase charter capital and access management experience and modern technology. Companies with strong internal resources and information transparency will have the opportunity to attract strategic investors, especially large investors from abroad.
Insurance companies can also engage in mergers and acquisitions (M&A) with smaller companies to expand their scale and strengthen their financial strength. The consolidation will help the insurance market become leaner and grow more sustainably.
