Why Vietnam’s insurers are pivoting to foreign reinsurers for large policies

Local firms reinsured $246m domestic reinsurance premiums, $902m were transferred to foreigners.

Non-life insurance and reinsurance companies in Vietnam are increasingly relying on foreign reinsurers to handle large portions of their premiums, according to industry experts as reported by Viet Nam News agency.  

Data from the Ministry of Finance’s Insurance Supervision Agency shows that Vietnam's total insurance premium revenue for the first half of 2024 was estimated at over $4.47b (VNĐ109t), marking a 3.8% decrease compared to the same period last year.  

In 2023, the non-life insurance market generated more than $2.91b (VNĐ71t) in revenue, reflecting a modest growth of about 3% year-on-year.  

Of this, around 40% of the premiums were transferred to reinsurance, with health and motor vehicle insurance contributing the remaining 60%.  

Local companies were able to manage these policies through reserves, according to Nguyễn Anh Tuấn, chairman of the Vietnam National Reinsurance Corporation (Vinare).  

Tuấn noted that whilst local firms reinsured only $246m (VNĐ6t) of domestic reinsurance premiums last year, they had to transfer $902m (VNĐ22t) to foreign reinsurers to ensure adequate coverage.  

He explained that domestic insurers can handle policies like health and motor vehicle insurance, which have relatively small insurance values, ranging from several hundred million to a few billion Vietnamese đồng.  

However, large-scale commercial projects, such as those involving property, engineering, and national infrastructure projects, require higher coverage amounts, necessitating reinsurance from foreign firms.  

Tuấn pointed out that this trend is not unique to Vietnam but is common in many developed countries.  

As Vietnam’s GDP continues to grow, transferring $902m (VNĐ22t) in domestic reinsurance premiums to foreign insurers is considered reasonable to ensure proper risk sharing.  

He emphasised the importance of selecting reputable and financially stable foreign reinsurers, who are capable of timely and full payments in case of losses.

($1.00 = VNĐ24,545.00)