Opportunities abound in reinsurance

09:59' SA - Tuesday, 28/12/2021

As might be expected, the pandemic affected all economic sectors in Vietnam, including insurance and reinsurance business activities. In that context and with the background of a diversified, flexible and effective business policy and input from its employees, Vietnam’s home-grown reinsurer PVI Reinsurance (PVI Re) still achieved its forecasts.

PVI Re is a member of PVI Holdings, formerly Petrovietnam Insurance Joint Stock Corporation, a Vietnam-based investment holding company.

We spoke to chief executive officer Trinh Anh Tuan about the most significant developments for the reinsurer in the past year.

“In 2020, PVI Re recorded the highest profit before tax since the establishment of the company of $8m, equal to 113% of the planned target and 6% higher than last year,” said Mr Trinh.

Breaking down this figure, Mr Trinh said, “Profit from reinsurance business activities reached $2.5m, equal to 113% of the planned target and 18% higher than 2019. In the first six months of 2021, total revenue was $50m, completed 128% of the plan and increased 12% over the same period. Profit before tax reached $3.6m, equivalent to 110% of the target.

“Profit from reinsurance business and profit from financial investment both exceeded target, reaching$1.5m and $2.1m respectively. In the last months of 2021, PVI Re will continue to implement solutions to achieve the plan in terms of both top and bottom line,” said Mr Trinh.

Big changes
The reinsurer also saw some very significant corporate changes during the year. “In particular, 20 July 2021 marked a milestone of 10 years of PVI Re’s presence in the market,” said Mr Trinh.

“After 10 years of growth and development, PVI Re has transformed from a one-member limited liability company in 2011 into a joint-stock company listed on the stock exchange with total assets of $211m and a total reserve fund of nearly $132m. In 2019, AM Best upgraded PVI Re’s financial credit rating from B+ to B++, affirming its solid financial foundation and reflecting its maintained and developed business results.

“The company has gradually become an international reinsurer. Overseas business has reached 30% of our revenue from reinsurance activities. In particular, the PVI Re brand has been well recognised in Laos and Cambodia as an active reinsurer contributing to the development of their insurance markets,” said Mr Trinh.

Looking to the future
Mr Trinh has no intention of taking his foot off the accelerator in the year ahead. “The global insurance market still continues to be highly competitive,” he said.

“In 2022, besides boosting business activities in the local market, PVI Re plans to expand to overseas market in a cautious and stable manner. PVI Re will also continue to pursue the goal of adding value for customers by supporting risk assessment and claims settlement,” said Mr Trinh.

I terms of corporate governance activities, PVI Re continues to improve its enterprise risk management in accordance with standards of PVI’s major shareholders, HDI and IFC.

“Besides, facing positive prospects in the coming period, PVI Re is in the process of preparing to increase our charter capital to $45.88m (VND1.044tn) after being approved by the annual general meeting of shareholders. We still invest more resources in developing information technology and apply it in management and business activities, thereby helping us open up many opportunities for new products and services and increase our competitiveness in the market.

“With a team that is young, qualified, dynamic, united and willing to innovate, PVI Re always aims to become a reinsurer with the best professional service quality in the market,” said Mr Trinh.

Infrastructure and health
As one of Asia’s fastest-growing economies over the decades, infrastructure has been a central factor in Vietnam’s fast-paced economic development.

“Freight volumes are expanding rapidly,” said Mr Trinh. “Road traffic has increased by 11% annually and the demand for energy is expected to grow by about 10% per year until 2030. The transport ministry announced its 2030 master plan for transport infrastructure that could be worth as much as $65bn. It would include the construction of 5,000 kilometers of expressways, a deep-water port in Hai Phong, high-speed rail routes running along major north-south arteries and the completion of Long Thanh International Airport near Ho Chi Minh City,” said Mr Trinh.

Such rapid growth will offer significnt opportunities for insurers and reinsurers alike – while health insurance has become a top concern because of the pandemic.

“The pandemic has propelled health onto the global stage, as healthcare providers around the world seek to leverage technology to help combat the crisis,” said Mr Trinh.

“The digital health revolution will profoundly and permanently reshape how healthcare is accessed and provided - so it is imperative that the insurance market considers how to provide integrated solutions that more seamlessly address emerging health perils.”

The prospects for cyber cover, however, are less clear-cut. “Cyber could be a potential new product in future in Vietnam. Howerver, local insurers and experts need to have a better understanding of it before turnover will increase,” said Mr Trinh.

Regulation
All jurisdictions are facing regulatory issues stemming from IFRS17 and capital adequacy requirements – and Vietnam is no exception.

“Currently, PVI Re’s main accounting system still follows Vietnamese Accounting Standards (VAS). The Ministry of Finance has an official IFRS roadmap to apply to public companies by 2025,” said Mr Trinh.

“However, PVI Re has been implementing IFRS4 for the consolidation of PVI’s IFRS reports for many years. In addition, PVI Re is also implementing IFRS17 under Talanx’s project and on the basis of KPMG’s advice. It is expected that the financial statements under IFRS17 will be prepared for the first period of the fiscal year 2023. So, basically, our systems are already prepared for these changes,” he said.

Capital adequacy is also on the radar for the reinsurer.

“Regarding management of capital adequacy, the Ministry of Finance manages the base for reinsurers on a margin of solvency basis,” said Mr Trinh.

“PVI Re has reached 250%-300% on this basis over recent years compared to the minimum level set by the Ministry of Finance. Vietnam’s new law on insurance business is being developed and may be applied in the near future, in which the Ministry of Finance is expected to deploy risk-based capital to manage the minimum capital of insurance enterprises. However, it may take five years to put this method into practice,” said Mr Trinh.

Global versus domestic reinsurance
How does Mr Trinh see the balance between domestic and foreign reinsurers in Vietnam changing in the next few years?

“Currently, there are only two reinsurance companies in Vietnam, namely VinaRe and PVI Re,” said Mr Trinh. “I don’t think there will be any more local reinsurance companies in the near future because the non-life insurance market in Vietnam is quite competitive.

“In fact, foreign reinsurers account for approximately 80% of the market share in Vietnam, the remaining 20% belonging to the two local reinsurers. With my understanding of the Vietnamese insurance market, I firmly believe that the market share of local reinsurers will increase, but certainly, a larger proportion will still belong to foreign reinsurance companies in the near future.

“For PVI Re, we consider large foreign reinsurers as business partners rather than competitors. Currently, PVI Re is cooperating very well with international reinsurance companies in providing capacity for the Vietnamese market. The large reinsurers also highly appreciate PVI Re’s understanding of the Vietnamese market and have good relationships with us,” said Mr Trinh.

Source: Asia Insurance Review

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