A turning point came for the Vietnamese insurance market when the Vietnamese Government enacted Decree No. 100/CP, dated 18 December 1993, which regulates the insurance industry. Prior to this, there was only one company, the Vietnam Insurance Corporation (Baoviet), which operated on a subsidy basis. Almost seven years after the decree was made the market composition has changed radically. It is now composed of businesses of various types of ownership, including state-owned, shareholding companies, joint ventures with foreign ownership, and wholly foreign-owned companies.

In total there are 15 insurance companies, with several from each category. In addition are the Vietnam National Reinsurance Company (VINARE.), the state-owned professional reinsurer, and 32 representative offices of foreign insurers and brokers.

Ten players in the non-life market, Baoviet, Baominh, PVIC, PJICO, Baolong, PTI, VIA, UIC, BIDV-QBE, and Allianz/AGF, see premium income of more than $100 million, and together contribute 0.56% of the country's GDP. Personal lines, including personal accident and motor, account for a large part of the non-life market, with the two mentioned contributing 25.8% and 24.5% respectively.

Fire insurance is the most important among commercial risks, with premium income accounting for around 14% of the total market volume. Yielding equal premium is marine hull and cargo, the very first business to be underwritten in the market (in 1965). Oil & gas insurance has been developed since 1986, to coincide with the discovery of oil on the Vietnamese continental shelves. The line now accounts for approximately 4% of the total market volume. Engineering insurance is gradually gaining importance, to keep pace with the national infrastructure development during the renovation period. Premium income makes up around 10% of the total. Finally, aviation insurance has made rapid progress during the past few years, in line with the expansion of the flag carrier, Vietnam Airlines, both in terms of fleet value and revenue passenger kilometres. Its share of market premium is about 5.5%.

Life insurance got started in Vietnam in 1997, when Baoviet launched its subsidiary Baoviet Life. Since then four more life insurers have entered this new territory, including some high-profile global names such as Prudential and AIA, the Asia-Pacific arm of American International Group. Of the two joint-ventures, Chinfon-Manulife and Baoming-CMG, only the latter has a Vietnamese partner. This reflects the rather open-minded policy of the regulator, and the growing interest of international insurers in this high-potential market.

Life premium income has been increasing very fast, partly because the market started from scratch, but also because the prospects for the life sector are very favourable, particularly when considering the country's population is 78 million. While life insurance is financially beyond the reach of much of the population, some foreign insurers believe that at least 15% to 20% of people, up to 15.8 million individuals, could be in the market for life products. In addition, in line with the recovering economy, Vietnam's middle class will continue to expand in size.

Since 1994 many new types of insurance have been introduced to the market, using terms and conditions in accordance with international practice. This move aims to satisfy demand for cover for a growing economy in which foreign direct investment plays an important part. Thus, foreign investors in Vietnam can be assured that they are fully covered in the local market under international standard terms and conditions. Vietnam's industry professionals are trained to international standards. In addition, all the domestic insurers believe that technology transfer is very important, and will be extremely beneficial to the development of the market. They have sent hundreds of insurance practitioners to the famous insurance centres of the world for intensive training. Complementing that, on-site training through seminars and workshops is regularly held with the assistance of well-known insurance and reinsurance institutions.

Challenges remain. The main one facing the Vietnamese industry is low insurance penetration. Some types of commercial insurance have a penetration rate of only 20% to 25%, and a large proportion of public property has no cover. If the market is to be fully exploited, there must be a long-term and intensive campaign to raise awareness among the locals for the need for insurance. Another challenge is that the team of insurance practitioners, numbering around 10,000, needs more training in order to catch up with the global expertise in insurance and to help develop the domestic insurance market. Financial capacity is also a major challenge to many players in the market, a factor affecting the retention levels of the local market as whole.

The insurance industry's regulatory body is the Insurance Supervisory Department under the Ministry of Finance. Through the performance of the Department, many legal documents regarding the insurance industry have been put in force. Notably, the Insurance Law has been drafted, and is expected to be approved by the National Assembly this month – October 2000.

Trinh Quang Tuyen is managing director of VINARE., Vietnam's state-owned professional reinsurer. Miss Minh Chau is an officer of VINARE.'s information department.