The Ministry of Finance is studying to soon grant business license for some foreign insurance companies to set up, or operate in Vietnam in coming times, said Le Quang Binh, head of the MoF’s Insurance Department. In a recent interview, Binh talked about this plan of the MoT. Excerpts:
Vietnam is stepping into a strong economic integration process. How has Vietnam’s insurance sector prepared for this process?
We are revising and supplementing policies for development of the country’s insurance sector. At present, the Law on Insurance is already in force and the government has also issued decrees to guide implementation of the law. The government is calculating to apply common standards of international insurance associations, and then step-by-step complete a legal framework closely resembling and associated with Asean countries and the world with the aim of further improving the insurance industry environment in Vietnam.
Changes are being made not only in the market mechanism but also the administrative mechanism especially as Vietnam is trying its best to join the World Trade Organisation. In addition, as integrating internationally, Vietnam also must set a target of bringing back internationally standardised insurance products for customers. And, as an integrated country, the international business environment would help local insurers develop strongly and improve their competitive capacity.
To reach the above target, the MoT is studying to issue strict guideline on restructuring local insurance firms. Particularly, the MoT has recently [partially] equitised the country’s second largest state-owned insurer Bao Minh and this firm is performing very profitably.
The ministry is also equitising the state-run reinsurance firm Vinare. Equitisation of this firm is ongoing and the important aspect is that as the country integrates, administrative and safeguard policies [protecting domestic insures] must be gradually reduced. For example, the compulsory reinsurance rate was regulated at 20%, but when equitising, Vinare must call on its shareholders—insurance companies—to further reduce and change administrative mechanisms.
The aim of equitising the above SOEs is improve their financial capacity, raising capital from the society to reduce fundings from the state budget.
Vietnam is still proceeding with bilateral talks with the US for WTO entry. In the negotiation process, has Vietnam faced any obstacles relating to the present mechanism and policy on the insurance industry?
In my view, at present, Vietnam has not yet faced any obstacles concerning the insurance industry nor the government’s policies. Because in some bilateral talks, foreign investors remarked positively about Vietnam’s insurance trading mechanism and policies including the Law on Insurance.
However, Vietnam is required to further reduce its safeguard policies in the insurance industry. I can say that Vietnam enjoys a lot of advantages in its WTO membership negotiations in relation to the insurance industry.
Since the start of 2005, Vietnam’s insurance industry has seen some new foreign faces. Is this an ongoing trend?
As I said, the point is the business environment. If the legal framework is good, the insurance market will grow strongly and the economic potential has already created conditions to improve the living standards of the people in Vietnam. It is obvious that insurance is signalling strong growth. Thus, foreign investors can see the potential of Vietnam’s insurance industry and they are willing to pumps in large amounts of capital in the country.
I think that the appearance of some new “faces” is a good sign that portends well for future insurance market prospects. But of course, as I mentioned, together with this integration trend, local insurance firms must further improve their financial capacity, quality of products and services and competitive capacity.
At present, the MoT is also deliberating to license a French life insurance firm, and then approve in principle a business license of ACE INA and officially grant a license to the Marsh Group.
How many foreign insurance firms will be licensed to operate in Vietnam this year?
No specific figure can be released at this stage because it depends on integration commitments between Vietnam and other countries. Nevertheless, the MoT is considering licensing a few more foreign insurance firms in the near future.
Thoi bao Kinh te Vietnam, March 22, 2005
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