vietnam non-life (pc) report 49432 7155

INSURANCE MARKET REPORTVIETNAM: NON-LIFE (P&C)

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NON-LIFE (P&C)

Country MapMap of the Area

Market DevelopmentsKey Facts

General Country InformationPolitics and the Economy

Supervision and ControlTaxation

Legal SystemInsurance Market Overview

ReinsuranceDistribution Channels

Multinationals, Captives, ART and Risk ManagementInsurance Policies

Natural HazardsProperty

Construction and Machinery BreakdownMotor

Workers' Compensation and Employers' LiabilityLiability

Surety, Bonds and CreditMarine, Aviation and Transit

Personal Accident and TravelAppendix No 1 - Market Statistics

Appendix No 2 - Company StatisticsAppendix No 3 - Directory

Country Map 1

Map of the Area 2

Market Developments 3

Key Facts 5

General Country Information 7

Country Indicators 7

History 7

Geographic Description 8

Population and Demographic Trends 10

Largest Cities 14

Politics and the Economy 15

Government Structure 15

Current Political Situation 15

Economy 17

Currency and Exchange Control 26

Supervision and Control 28

Legislation 28

Compulsory Insurances 29

Changes in Legislation 31

Supervision 33

Non-Admitted Insurance Regulatory Position 36

Fronting 41

Company Registration and Operating Requirements 41

Taxation 47

Legal System 49

Insurance Market Overview 54

Historical Development 54

The Market Today 54

Market Participants 57

Reinsurance 63

Local Reinsurance Market 63

Local Reinsurance Arrangements 65

Distribution Channels 73

Multinationals, Captives, ART and Risk Management 79

Multinationals 79

Captives 80

A.R.T. & Risk Management 80

Insurance Policies 81

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Contents Page

Vietnam - Non-Life (P&C) Report

Natural Hazards 84

Earthquake and Other Geological Hazards 84

Windstorm 88

Flood 91

Bushfire 94

Subsidence 94

Hail 94

Property 95

Construction and Prevention 96

Social Hazards 98

Householder/Homeowner 100

Industrial and Commercial 102

Agriculture 108

Construction and Machinery Breakdown 112

Construction and Erection all Risks 112

Machinery Breakdown 117

Motor 120

Workers' Compensation and Employers' Liability 128

Liability 132

General Third Party 132

Product Liability 136

Professional Indemnity 138

Directors' and Officers' Liability 140

Pollution and Environmental Liability 143

Financial and Professional Risks 145

Surety, Bonds and Credit 147

Marine, Aviation and Transit 150

Marine Hull 151

Marine Cargo 154

Marine Liability 159

Energy 160

Aviation 161

Personal Accident and Travel 166

Personal Accident 166

Travel 168

Appendix No 1 - Market Statistics 171

Insurance Supervisor's Report 171

Non-Life Market Totals 171

Non-Life Insurance 172

Personal Accident 175

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Contents Page


Appendix No 2 - Company Statistics 177

Appendix No 3 - Directory 179

Industry Organisations 179

Insurance Companies 179

Reinsurance Companies 184

Captive Managers 184

Intermediaries 184

Loss Adjusters 186

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Contents Page


Country Map

1Vietnam - Non-Life (P&C)

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Country Visited: Nov 2013

Map of the Area


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Market Developments


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• Circular No 121/2012/TT-BTC of 26 July 2012, issued by the Ministry of Finance on regulations oncorporate governance, introduced greater obligations for board members of both listed and non-listedpublic limited companies.

• Law No 07/2012/QH-13 of 18 June 2012 replaced Decree No 74/2005 on money laundering.

• In July 2012 the government announced that it required state-owned enterprises to withdraw from "risky"investments in real estate, banking, finance and insurance by 2015. Companies were required to submitrestructuring plans that include divestment from areas not related to their core business, includingwithdrawal from investments in joint ventures and associated companies.

• HSBC has sold its stake in Bao Viet's life and non-life operations to Sumitomo Life Insurance Co forVND 7.1tr (approximately USD 340mn) to reflect the potential of the market.

• The government has initiated a project to set up and develop a safe and sustainable system ofmicrofinance institutions for the assistance of low-income individuals and small businesses.

• Ministry of Finance Decree No 123/2011/ND-CP became effective from 15 February 2012, inter aliaallowing cross-border insurance trading (non-admitted business) in certain circumstances. Furtherdetails are given in the Supervision and Control section of this report within the heading Non-AdmittedInsurance Regulatory Position.

• Ministry of Finance Circular No 124/2012/TT-BTC became effective 30 July 2012, detailing furtherguidelines on Decree No 123/2011/ND-CP, as well as Decree No 45/2007/ND-CP.

• Following on from the above, the Ministry of Finance issued Circular No 125//2012/TT-BTC dated 7 July2012, to further clarify Decree No 123/2011/ND-CP, specifically in respect of financial issues regardinginsurers and reinsurers. Whereas Decree No 123 and Circular No 124 above have official Ministry ofFinance translations into English, Circular No 125 does not, and each (foreign-owned) company hasbeen left to interpret its contents individually, thereby resulting in some inconsistency.

• The reinsurance renewal season from 1 January 2013 has seen a toughened stance from internationalreinsurers following generally poor results in the region (Thailand flood, Japanese tsunami, New Zealandearthquakes) coupled with increased incidence of fires in Vietnam. Swiss Re is spearheading tighterterms both directly through lead treaty participation, and indirectly as a shareholder of VinaRe, theformer state-owned reinsurer.

• German direct insurer ERGO has bought a stake in local company Global Insurance Company, and iscurrently looking to increase the holding.

The FutureIncreasing capacity and a desire for top-line growth will continue to force rates down for all major classes,despite efforts by the major regional reinsurers to contain aggregate accumulations and insistence ontransparency in dealings for compulsory fire business.

Market Developments


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Financial stability of the market will remain an issue, as well as the absence of IFRS for other thanforeign-owned insurers. The new guidelines are reported to aspire to European Solvency I equivalence,whilst Solvency II is not spoken of. Despite the lack of clarity in Circular No 125/2012/TT-BTC, the objectclearly is to tighten financial stability of the market, especially in respect of what is allowable as assets insolvency calculations. This could well develop into a scenario whereby merger and acquisition activity isprompted, as a viable alternative to outright insolvency of some of the smaller companies, in order toreduce overall market capacity and introduce some semblance of order.

A reported ASEAN initiative to introduce freedom of services across all member states is not seen as afuture threat to the local insurance market, at least for the short or medium term.

Key Facts


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Growth in the non-life, life, and PA and healthcare markets up to and including 2012 is shown below,showing a continuation of the development in 2012 following positive progress in previous years.

New statistical information may have been included in the appendices.

• The rate of exchange used in this report is VND 20,828 : USD 1. For previous years the average annualrate for the year in question has been used. Further details are provided within the Currency andExchange Control subsection in the Politics and the Economy section of this report.

• Vietnam's land area is 127,246 square miles (329,565 square kilometres) and it had a population of 89.5million in 2012, estimated to grow to 91.3 million in 2014.

• Following almost 100 years of colonial rule, Ho Chi Minh, leader of the Viet Minh independencemovement, declared independence from French rule in 1945. After the defeat of the French in thesubsequent war, the Geneva Agreements divided Vietnam into north and south. Hostilities continuedwith the US supporting the south. US troops withdrew in 1973 and Saigon fell two years later, allowingthe reunification of the country.

• Vietnam is located in south-east Asia. It is bounded by the South China Sea to the east, Laos andCambodia to the west and China to the north. The country can be divided into three regions - north,central and south Vietnam. The capital, Hanoi, is situated in the north.

• Vietnam's political situation is stable and did not alter significantly following the Communist Partyconference held in January 2011. The Communist Party is expected to maintain its leading role for theforeseeable future.

• The economy has seen sustained growth averaging between 6% and 8% since 2000, although GDPgrowth has slowed to 5% in 2012, with forecasts of between 5% and 6% for 2013 and 2014. Inflationremains high, due in part to three currency devaluations in 2010, but has eased to 9.09% in 2012, withforecasts of 6.9% and 6.6% for 2013 and 2014 respectively.

• Non-life premium income for 2012 including PA and healthcare was VND 22.76trn (USD 1.09bn), growthof 10.33% compared to 2011.

Key Facts


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• The market currently comprises 29 non-life companies, 13 life insurers and two reinsurance companies.It is dominated by three large local insurers, Bao Viet, Bao Minh and PV Insurance, which togethercontrol around 55% of the total non-life premiums. There are eight 100%-owned foreign non-lifeinsurers, as well as 32 representative offices of foreign insurers in the country.

• All insurers wishing to do business in Vietnam must be authorised. With some exceptions, businesssituated in Vietnam should be placed with an insurer authorised to operate in the country. Exceptionsinclude when the cover is unavailable in the market, and when it is expressly authorised by aninternational treaty to which Vietnam is a signatory. Foreign individuals and foreign-invested companiesmay also place their insurances on a cross-border basis, all subject to certain onerous pre-conditions.

• Market tariffs are in operation for all obligatory classes of insurance.

• Vietnam's membership of the World Trade Organisation is driving change and in recent years the markethas been opened up to foreign companies. Liberalisation of the market will continue and foreigncompanies will be authorised if they comply with the entry requirements.

• The main non-life distribution channels are companies' agency forces, brokers and direct sales: theagency network is more important to the domestic insurers than the foreign property and casualtycompanies. Only a small volume of business is transacted through banks. No insurance is sold by theinternet as yet, while quotations are available and call-centres to deal with enquiries as a result.

• Vietnam is subject to typhoons and tropical storms. These principally affect the centre of the country andmay cause severe flooding. There is exposure to earthquake, especially in the north-west, but it is oflittle consequence to the insurance market as insured values and penetration are low.

• The main obligatory insurances include: motor third party liability, aviation liability, professional indemnityfor a number of professions, fire and explosion insurance for certain high-risk industries, and someconstruction-related insurances.

General Country Information


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Country IndicatorsDemographic and economic data are shown below, with projections for the final two years.

Indicator 2010 2011 2012 2013 2014Total population(mn)

87.85 88.79 89.50 90.40 91.30

Total GDP (USDmn)

106,426.85 123,599.75 146,833.50 166,098.75 182,516.97

Real GDP growth(%)

6.78 5.89 5.00 5.20 5.50

Inflation (%) 8.86 18.68 9.09 6.90 6.60

Unemployment (%) 4.29 3.60 n/a n/a n/aSource: IMF and EIU

History

Early History

11th c The Ly dynasty, the first significant independent Vietnamese dynasty was established.Dykes, canals and roads were built and agriculture was developed throughout the country.

1788 The Vietnamese kingdom collapsed following a peasants' revolt.19th c France assumed control first over the southern part of the country, which became a French

colony in 1867, then over central and north Vietnam, which became a protectorate in 1887.

20th/21st Century

1941 The Revolutionary League for the Independence of Vietnam (Viet Minh) was formed bynationalists under Ho Chi Minh's leadership in response to the Japanese invasion of thecountry during World War 2.

1945 Ho Chi Minh proclaimed an independent Democratic Republic of Vietnam but Francerefused to relinquish control, leading to a protracted war between the French andnationalist forces.

1954 The French were defeated at Dien Bien Phu. The Geneva Agreements which ended thewar divided the country into north and south. US-backed Ngo Dinh Diem assumed powerin the south while Ho Chi Minh retained power in the north.

1959 The North Vietnamese-backed National Front for the Liberation of South Vietnam (VietCong) was formed to oppose Diem.

1963 Diem was assassinated in a generals' coup as violence escalated and the US committedtroops to support the south.

1968 North Vietnamese troops launched the Tet (New Year) offensive which, though a militarydefeat, shook the American public by its display of strength. It proved a turning point in theconflict. Peace talks began in Paris.

1973 The Paris Peace Agreement was signed which provided for the complete withdrawal of UStroops. Fighting between the north and south continued for two more years.

1975 Without US support southern resistance crumbled and Saigon fell on the 30 April, endingthe 30-year war for Vietnam's liberation and unification.

1976 The National Assembly (Quoc Hoi) formally proclaimed the country's reunification underthe name of the Socialist Republic of Vietnam. Hanoi was designated the capital city andSaigon renamed Ho Chi Minh City.



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1979 Vietnamese forces toppled the Pol Pot regime in neighbouring Cambodia. China, the chiefsupporter of Pot's regime, invaded Vietnam sparking a brief but bloody border war.Vietnam suffered more losses but China was forced to withdraw and both sides claimedvictory.

1986 The Communist Party's sixth party congress embarked on "doi moi", a bold series ofeconomic reforms, in an effort to encourage foreign investment, reduce central control withmore autonomy given to state enterprises, and implement more flexible financial and fiscalpolicies.

1992 Vietnam adopted a new constitution that reaffirmed the central role of the Communist Partybut stipulated that the party be subject to the law. The constitution continued to advocatestate domination of the economy but acknowledged the importance of foreign investment.

1993 Relations with the People's Republic of China were normalised.1994 The US lifted its 19-year economic embargo on the country.1995 Diplomatic relations with the US were normalised and the country became a member of

the Association of South-East Asian Nations (ASEAN) and an observer at the WTO.1996 The eighth Communist Party Congress elected a new 170-member Central Committee and

Politburo. The economic policy of "doi moi" received widespread approval.1997 Progress was made in settling territorial disputes over the Gulf of Tonkin and the land

border with China. The first US ambassador since 1975 arrived to establish an embassy inthe country.

2000 In November US President Bill Clinton became the first sitting US head of state to visitVietnam since the war ended and relations were normalised. A bilateral trade agreementbetween Vietnam and the US was signed and ratified by both governments in late 2001.

2002 National Assembly elections in May resulted in the election of 498 deputies, 90% of whomwere Communist Party members.

2004 In December the first US commercial flight since the end of the Vietnam war touched downin Ho Chi Minh City.

2006 In June the prime minister, president and National Assembly chairman were replaced byyounger leaders.

2007 In January after 12 years of talks Vietnam became the 150th member of the WTO.In July Nguyen Tan Dung was re-appointed prime minister.

2011 In January Nguyen Tan Dung was re-appointed prime minister and Trong Tan Sang wasappointed president.

2012 In November the government introduced annual votes of confidence for the prime ministerand the president.

2013 Online discussion of current affairs was banned from August.

Geographic Description

Country NameThe Socialist Republic of Vietnam.

Frontiers and CoastlineVietnam is bounded by the South China Sea to the east, Laos and Cambodia to the west and China to thenorth. Long and narrow, the country stretches 1,025 miles (1,650 km) from north to south.



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Land AreaThe land area is 127,246 sq miles (329,565 sq km). Vietnam forms part of the Indo-China peninsula insouth-east Asia.

AdministrationVietnam is divided into 63 provinces and five municipalities - Can Tho, Danang, Hanoi, Haiphong and HoChi Minh City. The provinces and municipalities all have equal status and report directly to the centralgovernment. They are subdivided into districts, towns and villages which are placed under the authority ofthe locally elected People's Councils which in turn elect People's Committees, who continue to haveconsiderable autonomy in the daily administration and management of local resources and activities.

TopographyThe country can be divided into three regions: North Vietnam, Central Vietnam and South Vietnam. NorthVietnam is mountainous, especially in the north and north-west, while the lowlands consist of the Red RiverDelta and the coastal plains. Central Vietnam is divided into a narrow coastal strip, a broad plateau and theAnnamite Mountain Chain which separates the plateau from the coastal lowlands. South Vietnam includesthe Mekong river system and is low, marshy and flat land while, further north and east, forests and ruggedterrain dominate the landscape.

The principal river systems are the Red River in the north and the Mekong River in the south. There arethree large lakes: the Ba-Be, HoTay and Hoan-Kiem.

The highest point is Fan Si Pan at 10,320 feet (3,144 metres).

ClimateThe climate ranges from tropical in the south to subtropical in the north. Both north and south are affectedby monsoons. North Vietnam has a hot and humid wet season from mid-May to mid-September and awarm and humid dry season from mid-October to mid-March with two short transition periods.

In the south the seasons come later and in Central Vietnam rainfall is heaviest between September andJanuary when the coast is subject to tropical storms.

Average annual precipitation in Hanoi is 72 inches (1,830 millimetres) with areas in the AnnamiteMountains exceeding 160 inches (4,060 mm). Average temperature ranges in Hanoi are from 63ºF (17ºC)in January to 84ºF (29ºC) in June.

In the south the climate is tropical with average temperatures ranging between 77ºF and 86ºF (25ºC and30ºC) throughout the year. The dry season runs from November to April and the wet season from May toOctober. April and May are particularly hot with temperatures reaching an average 95ºF (35ºC).

Average temperatures and rainfall for Hanoi, 21º 02'N, 105º 52'E are shown in the graph below.

Hanoi



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Ho Chi Minh City

Population and Demographic Trends

PopulationThe last census was held in 2009. The General Statistics Office of Vietnam reported that the populationthat year was 85.79 million, a lower figure than those published by international observers. In 2011 thepopulation was estimated to be 87.84 million, trending slightly lower than external forecasts.



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Vietnam has 54 ethnic groups. The largest is the Viet (Kinh), an estimated 88% of the population. The Tay,Thai, Hoa and Khmer each have a population of some one million with small ethnic groups making up theremainder.

An estimated 31% of the population live in urban areas and the urban population is expected to continue togrow rapidly. There is a wide disparity in wealth between the urban and rural populations.

Total population figures are shown below.

Year Population (mn)2011 88.79

2010 87.85

2009 86.90

2005 83.16

2000 78.76

1990 67.10

1980 54.02

1970 44.93

1960 35.17Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Projected total population figures are shown below.

Year Population (mn)2050 103.96

2040 104.05

2030 101.48

2020 96.36Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Birth and death rates per '000 are shown below.

Year Birth rate Death rate Rate of natural increase2010 to 2015 15.9 5.2 10.7

2005 to 2010 17.2 5.2 12.0

2000 to 2005 17.2 5.3 11.9

1995 to 2000 19.0 5.8 13.2

1990 to 1995 27.3 6.9 20.4

1985 to 1990 31.4 9.0 22.4

1980 to 1985 34.1 11.0 23.1

1975 to 1980 34.6 14.6 20.0

1970 to 1975 39.1 18.1 21.0

1965 to 1970 42.4 18.6 23.8Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Infant mortality rates per '000 live births are shown below.



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Year Infant mortality rate2010 to 2015 18.3

2005 to 2010 20.4

2000 to 2005 23.1

1995 to 2000 29.2

1990 to 1995 37.9

1985 to 1990 54.8

1980 to 1985 70.0

1975 to 1980 97.6

1970 to 1975 118.4Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

The age structure of the population is shown below, with projections for the final three years.

Age group 1970 1980 1990 2000 2010 2015 2025 2050To 14 44.2 40.7 38.0 32.1 23.6 22.5 19.4 14.7

15 to 59 48.4 52.0 54.7 60.1 68.0 67.4 65.3 54.4

60 andabove

7.4 7.3 7.3 7.8 8.4 10.1 15.3 30.8

Note: due to rounding the breakdown above may not equal 100%.Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

The age structure of the population aged 65 and above and 80 and above is shown below, with projectionsfor the final three years.

Age group 1970 1980 1990 2000 2010 2015 2025 205065 andabove

4.8 4.9 5.0 5.6 6.0 6.4 10.2 23.1

80 andabove

0.5 0.6 0.7 0.9 1.2 1.5 1.7 6.2

Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Life ExpectancyLife expectancy at birth is shown below.

Year Males Females2010 to 2015 62.3 77.4

2005 to 2010 72.3 76.2

2000 to 2005 71.2 74.9

1995 to 2000 69.0 72.4

1990 to 1995 66.1 69.6

1985 to 1990 61.1 64.9

1980 to 1985 56.8 61.2

1975 to 1980 49.7 55.2

1970 to 1975 45.3 50.5

1965 to 1970 45.7 50.2Source: Axco Global Statistics / Industry Associations and Regulatory Bodies



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Life expectancy at various ages is shown below.

Present age 2010 to 2015Males Females

At Birth 62.30 77.35

5 70.07 73.71

10 65.25 68.82

20 55.68 59.02

30 46.42 49.39

40 37.15 39.83

50 28.10 30.53

60 19.69 21.70

70 12.39 13.85

80 6.98 7.83

90 3.66 4.01

100+ 1.61 1.67Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Major Causes of DeathThe following table shows the 10 leading causes of death.

Cause of death 2008 (latestavailable information)

Total

Cardiovascular diseases 39.39

Tumours 14.48

Infectious and parasitic diseases 10.04

External causes 9.05

Respiratory diseases 7.52

Digestive diseases 4.36

Respiratory infections 3.89

Maternal, congenital and perinatalconditions

3.71

Nutritional, metabolic and endocrinaldisorders

3.29

Mental disorders and diseases of thenervous system

2.24

Other causes 2.02

Total 100.00Note: due to rounding the breakdown above may not equal 100%.


LanguageVietnamese is the official language. There are minor differences in the spoken language between the north,centre and south of the country. Foreign languages in regular use include Chinese, Japanese, French,Russian and English. English is used the financial and commercial sectors.

ReligionAround 55% of the population are Buddhists. Religious minorities include Taoists, followers of Confuciusand Christians.



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Largest Cities

CapitalThe following population figures are 2011 estimates.

Hanoi - population 2.95 million. Hanoi is the political and cultural capital but second to Ho Chi Minh City incommerce. Noi Bai airport is 23 miles (38 km) from the city centre.

Hanoi is situated in the north of the country on the Hong (Red) river.

Other Major Areas/CitiesHo Chi Minh City - population 6.4 million. Ho Chi Minh City, formerly known as Saigon, is the commercialand industrial centre of Vietnam. Tan Son Nhat airport is a few kilometres from the city centre. Saigon seaport is the biggest in Vietnam.

The city is situated in the south of the country on the Mekong River.

Hai Phong City - population 925,000. Hai Phong City is a major sea port close to the Gulf of Tonkin and 63miles (102 km) from Hanoi. It has only a domestic airport but still ranks third in terms of the destinations forforeign investment.

Da Nang City - population 834,000. Da Nang City has a modern sea and airport and is an entry point forcentral Vietnam. It is an important industrial centre.

Politics and the Economy


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Government Structure

ConstitutionThe current constitution was promulgated in 1980 and provides for elected institutions such as the NationalAssembly and People's Councils while affirming the dominant role of the Communist Party in state andsociety. The constitution was amended in 1992 to reflect economic reforms undertaken in 1986 as well asthe decision to reduce the role of the party in the governing process. The constitution was again amendedin December 2001, allowing elected members of the National Assembly to pass no-confidence motions anddismiss ministers.

Executive/LegislatureUnder the constitution, the head of state is the president, elected for a five-year term by the NationalAssembly from among its members. The president is advised by a National Defence and Security Counciland is assisted by a cabinet composed of a prime minister, a deputy prime minister and other seniorministers. All ministers are appointed by and are accountable to the National Assembly.

The National Assembly is the highest organ of state power and passes legislation and amends theconstitution. There are 493 deputies elected for five years by all citizens over 18 years of age. The NationalAssembly holds two sessions each year to pass legislation proposed by the executive branch of thegovernment.

There is a standing committee of the National Assembly, which is chaired by the president, and acts on itsbehalf at other times and supervises the enforcement of laws and the activities of the government. Amember of the standing committee cannot be a member of the government.

Electoral SystemThe 493 members of the National Assembly are elected by universal and direct suffrage of those over age18 for five-year terms. The last elections to the National Assembly were held in May 2011 and the next aredue in 2015.

The assembly appoints the president and the cabinet.

Local GovernmentProvinces and municipalities are subdivided into districts, towns and villages, which are placed under theauthority of the locally elected People's Councils. These in turn elect People's Committees, who haveconsiderable autonomy in the daily administration and management of local resources and activities.

Current Political Situation

Present GovernmentVietnam has a unitary political system with a strong central government; exclusive power resides with theCommunist Party, the sole legal party in the country. In July 2011 Nguyen Tan Dung was re-appointedprime minister and Trong Tan Sang appointed president.

The armed forces are represented at senior levels by a minister of defence in the cabinet and seniormilitary officials frequently serve in the party central committee and politburo.



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Political SituationVietnam's political situation is stable. At the Communist Party conference held in January 2011appointments of younger leaders reflected a balance between rival factions.

Conservatives inside the party are concerned that the economic reforms of the last two decades haveproceeded too quickly and may provoke instability. The fast rate of industrial growth has led to a boom inthe construction of factories, power plants and infrastructure improvements, but this has been accompaniedby displacement of communities and a growing disparity in income between urban and rural areas.

Nguyen Tan Dung, the prime minister, has been faulted within the party for dissolving a committee staffedwith establishment figures that was charged with implementing economic reform. His attempt to reformstate-owned corporations to resemble South Korean corporations has also failed due to structuralinefficiencies. In October 2012 an apology by the General Secretary, Nguyen Phu Trong, for persistenthigh-level corruption and poor economic performance was seen as a veiled criticism of the prime minister'sperformance. The prime minister subsequently took ownership of the slowing economy and introduced aplan to restructure the state sector.

The National Assembly also has begun to question legislation more critically, opening the possibility ofgradual liberalisation within the system as different factions vie for influence. The assembly was expectedto initiate performance reviews of selected officials from June 2013.

Moreover, entrepreneurs and the intelligentsia have become increasingly vocal in their dissent, leveragingsocial media to complain of cumbersome regulations and corruption. In 2012 Transparency Internationalranked Vietnam 123rd out of 174 countries in its corruption perception index. The National SteeringCommittee for Corruption Prevention and Control has a mandate to ensure that the anti-corruption law isimplemented and the power to suspend officials.

In addition to corruption, the government has been criticised on a number of issues including environmentaldegradation, land seizures and persecution of various ethnic and religious minorities. Externalorganisations have reported official involvement in human rights abuses. In 2012 Reporters withoutBorders ranked Vietnam 172nd out of 179 countries in its annual index of press freedom. Media reports in2013 also indicated that human trafficking in the country was increasing. Labour export firms with links topublic companies have reportedly exacerbated the problem by charging high fees to workers seekingoverseas positions, leaving workers in debt and unable to escape exploitative situations. The governmenthas adopted anti-trafficking legislation but has not fully implemented the law. Attendees of human rights"picnics" in major cities in May 2013 also reported harassment.

Despite growing dissent, however, the Communist Party is expected to maintain its leading role for theforeseeable future.



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International RelationsVietnam has diplomatic relations with major Western powers and other countries, including important ties toRussia and China. Vietnam upgraded its strategic partnership with Russia to a comprehensive strategicpartnership in 2012. Vietnam also launched a remote sensing satellite with Belgian co-operation in May2013 and planned to launch a second in 2017.

The relationship between Vietnam and the US suffered in the two decades following the end of the VietnamWar but has improved since 2000. Economic ties have deepened as US investment has poured into thecountry and military ties have also expanded rapidly. Vietnam sees the US as a useful counterbalance toChinese influence in the region.

Relations with China have improved since the border war between the two countries in 1979 butdisagreements remain as the two countries have competing claims to sovereignty over the Spratly andParacel Islands in the South China Sea. The area around these islands is considered to have largedeposits of oil and gas and is a key shipping route, making the islands highly desirable: they are alsoclaimed by Brunei, Malaysia, the Philippines and Taiwan. The US supports the Vietnamese position andargues that a multilateral approach is required to resolve the issue. China, however, prefers bilateralnegotiations with individual claimants. Vietnam protested at China's deployment of 32 fishing boats to theSpratly Islands in May 2013, following Chinese firing on Vietnamese fishing boats near the Paracel Islandsin March that year. Periodic disputes in contested areas are expected to continue.

Vietnam is expected to continue its pursuit of free trade agreements, especially with the EU, and tonegotiate financial services and investment agreements with countries in the Trans-Pacific StrategicEconomic Partnership Agreement (TPP). The formation of the Asian Economic Community (AEC) betweenASEAN members from 2015 was expected to increase the economic clout of the region relative to the USand China while further liberalising trade.

Vietnam became a member of ASEAN in 1995 and a member of the WTO in January 2007. The country isalso a member of Asia-Pacific Economic Cooperation (APEC), the UN, the IMF and the International Bankfor Reconstruction and Development/EBRD (World Bank).

Economy

Economic PerformanceThe economy is dependent on agriculture with nearly 50% of the country's labour force working in relatedindustries. Although the sector has declined in importance since the 1990s, Vietnam remains a leadingexporter of agricultural commodities including coffee, rice, pepper and cashew nuts.



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The economy grew an average 7.26% in the first decade of the 21st century but economic development iscounterbalanced by inadequate infrastructure, inefficient state-run companies and underdeveloped humancapital. The regulatory framework for foreign investment remains restrictive. Investors are limited by theindustries they can access, the structure of their investment vehicles, their ability to finance their operationsand their capacity to respond to changes in economic circumstances. Despite these factors, foreign directinvestment averaged 8.4% of GDP between 2007 and 2011.

Investment in deep-water ports will enable Vietnam to capitalise on its geographical position betweensouth-east Asia and China to become a trans-shipment hub. Improving exports, particularly of rice, wereexpected to support growth of 5.2% in 2013 and 5.5% in 2014. Growth has slowed in recent years, dippingto 5% in 2012, a 13-year low. The economy has been hampered by oversupply in the housing market, theburden of indebted banks and the share of the economy consumed by inefficient public enterprises.

The economic plan for 2013 through 2020 outlines a comprehensive restructuring of the finance sector aswell as accelerated sales of shares in public companies. Both moves will be countered by vested interestsin state banks. Official estimates of non-performing loans in the banking sector were valued at 6% of totalassets in early 2013, with outsiders surmising that the rate could be three times higher. In May 2013 thegovernment announced that banks would be compelled to sell bad assets to a newly-created debtmanagement company.

The 2013 to 2020 plan also trumpets a "flexible" policy stance to address inflation and secure sustainablegrowth as Vietnam's catch-up period ends. Inflation remains high but was expected to ease from 9.1% in2012 to 6.9% in 2013. The rate has fallen from a 2011 peak of 18.68% after three currency devaluations,which took place in November 2009, February 2010 and February 2011. The devaluations prompted thecentral bank, the State Bank of Vietnam, to increase the benchmark rate to 15%. After a series of cuts therate was lowered in May 2013 to 7% to spur consumption amidst high unemployment.

In May 2013 Standard and Poor's reported that Vietnam's sovereign debt was rated BB-.

Gross Domestic ProductTotal GDP figures are shown below in local currency and US dollars (USD) converted at the averageannual rate of exchange.



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Growth in real GDP in local currency is shown below.

The main contributors to GDP are shown below.

Industry 2012Percentage of total

Industry 33.53

Services 33.06

Manufacturing 20.89

Agriculture 12.52Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

GDP per capita in US dollars (USD) and in comparable economies is shown below.



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Country 2012GDP per capita

Singapore 51,207.41

Malaysia 10,359.27

Thailand 5,479.76

Indonesia 3,537.64

Vietnam 1,640.60Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Current Account BalanceThe current account balance in US dollars (USD) is shown below.

Foreign Exchange ReservesForeign exchange reserves, excluding gold, are quoted in US dollars (USD) below.



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InflationAnnual consumer price inflation is shown below.

Interest RatesKey interest rates are shown below.

Investment type 2008 2009 2010 2011 2012Discount rate 10.25 8.00 9.00 15.00 n/a

Deposit rate 12.73 7.91 11.19 13.99 10.60

Lending rate 15.78 10.07 13.14 16.95 13.50

Money market rate 10.30 8.00 9.00 15.00 9.00

Treasury bill rate 12.13 8.04 11.15 12.35 n/a



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Source: IMF

EmploymentThe percentage of unemployment is shown in the graph below.

The total labour force in 2011 was 51.39 million. The estimated distribution of employees by sector thatyear is shown below.

Industry % of totalAgriculture, forestry and fishing 48.39

Manufacturing 13.85

Commerce and repairs 11.57

Construction 6.40

Accommodation and catering 3.96

Education 3.44

Activities of Communist Party,socio-political organisations, publicadministration, defence and socialsecurity

3.06

Transportation and storage 2.81

Other service activities 1.46

Healthcare and social work 0.95

Financial intermediation 0.60

Mining and quarrying 0.55

Information and communication 0.53

Arts, entertainment and recreation 0.50

Professional, scientific and technicalactivities

0.44

Administrative and support serviceactivities

0.39

Employment in private households 0.36

Utilities 0.28

Real estate 0.24

Water supply, sanitation and wastemanagement

0.21

Activities of extraterritorialorganisations and bodies

0.01



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Industry % of totalTotal 100.00


EarningsMinimum wage rates vary by region and are determined annually by the Ministry of Labour, Invalids andSocial Affairs. The government aims to enforce a "liveable" minimum wage by 2017.

Since 1 January 2013 the minimum wage in Vietnam has been assigned according to four categories asdescribed below.

• Category 1 includes the inner districts of Hanoi and Ho Chi Minh City, and mandates that employees bepaid at least VND 2,350,000 (USD 112.83) per month.

• Category 2 includes the outlying districts of the two largest cities, as well as other major economiczones. Workers in this region are entitled to a minimum monthly wage of VND 2,100,000 (USD 100.83).

• Category 3 workers reside in areas with slower growth projections and are due a minimum monthlysalary of VND 1,800,000 (USD 86.42).

• Category 4 encompasses the areas that have the lowest economic projections. Minimum monthlysalaries for this category are set at VND 1,650,000 (USD 79.22).

An employer is also required to contribute 15% of total wages to the social insurance fund administered bythe state and 2% for health insurance.

Under the personal income tax system implemented from 1 January 2009, Vietnamese and foreigners aretaxed equally, with rates increasing progressively between 10% and 20%.

Average gross monthly earnings for state sector employees by industry in 2011 (latest availableinformation) are shown below.

Industry type Gross monthly earningsVND '000 USD

Financial intermediation 6,573.20 320.49

Utilities 5,934.50 289.35

Information and communication 5,342.20 260.47

Transportation and storage 5,036.20 245.55

Mining and quarrying 4,852.80 236.61

Real estate activities 4,601.30 224.35

Commerce and repairs 4,397.70 214.42

Professional, scientific andtechnical activities

4,333.30 211.28

Agriculture, forestry and fishing 4,165.70 203.11

Water supply, sanitation andwaste management

4,095.20 199.67

Manufacturing 3,955.60 192.86

Accommodation and catering 3,847.30 187.58

Average all sectors 3,775.20 183.28

Construction 3,669.00 178.89

Healthcare and social work 3,628.40 176.91



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Industry type Gross monthly earningsVND '000 USD

Administrative and supportservices

3,583.70 174.73

Arts, entertainment and recreation 3,444.40 167.94

Education and training 3,426.40 167.06

Activities of Communist Party,socio-political organisations, publicadministration, defence andcompulsory social security

2,963.00 144.47

Other service activities 2,507.50 122.26Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Key IndustriesAgriculture and fisheries

Vietnam is the world's largest exporter of rice, surpassing Thailand's output in 2012. Of all cultivated land,85% is devoted to paddy production. Output rose by over one million tonnes in 2011 following the adoptionof a large scale field model.

Other crops include maize, sweet potato, cassava, sugar cane, soya beans, rubber, peanuts, coconut,coffee and tea. Livestock is raised in some areas.

Vietnam also produces both saltwater and freshwater fish products and has an aquaculture industry in theMekong delta.

Agriculture and related industries accounted for nearly half of all employment in 2011 and for 12.52% ofGDP in 2012.

Energy and manufacturing

Oil has been found in Vietnam's long continental shelf and deposits are believed to exist in the Mekongdelta. Total offshore reserves, some of which are located in contested waters, are believed to be in excessof 4.4bn barrels. Because of insufficient refining capacity, however, the country remains dependent onimported petroleum products. Crude oil accounted for 7.09% of all exports in 2012. In May the governmentannounced that a new refinery and petrochemical plant valued at USD 27bn would be built in central BinhDinh with the co-operation of VTT, a Thai company. The plant was projected to process 660,000 barrels aday.



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Demand for electricity has expanded rapidly as a result of industrialisation, mass migration to the cities andrising living standards. Hydro-power projects are underway in the central and central highland regions, andfor the use of natural gas in other power plants. Natural gas reserves were estimated at 7trn cubic ft(1.39trn cu m) in 2012. Vietnam has coal reserves estimated at 165mn short tonnes, most of which isanthracite.

Heavy industry is concentrated in the north and light industry in the south. Growth sectors include oil andgas, steel, chemicals (including fertilisers and rubber goods), cement, garments, footwear and printing.Some new sectors, such as fine arts and handcrafts and car and motorcycle assembly, have begun toemerge, largely as a result of foreign direct investment, and are growing rapidly. Light manufacturingremains important: textiles continue to account for over 14.56% of all exports, whilst total manufacturingaccounted for 20.89% of GDP in 2012.

Mineral resources

Most of the country's abundant natural resources, especially its mineral deposits, remain untapped.Vietnam is believed to hold the third largest deposit of bauxite in the world, which is principally located inthe Central Highlands. The 2010 Mineral Law took effect on 1 July 2011, mandating protections foruntapped resources and minimum capital investments for licence holders, equal to 30% of equity for miningprojects and 50% of equity for exploration projects. The industry represents 0.55% of employment and anestimated 4% of GDP.

Tourism

Tourism is viewed as a long-term growth industry. The sector was forecast to contribute 4.5% of GDP in2013 and supported 1,831,500 jobs in 2013. Vietnam welcomed 2,414,361 arrivals in the first four monthsof 2013, reflecting a 5.3% annual decrease.

Exports and ImportsExports are shown below, with leading commodities reported as percentages of total exports and in USdollars (USD).

Commodity 2012Percentage USD mn

Textiles and garments 14.56 16,695.80

Footwear 7.38 8,460.70

Fisheries products 7.68 8,799.10

Crude oil 7.09 8,122.30

Other 63.29 72,554.30

Total 100.00 114,632.20



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Source: EIU

The most important export destinations are shown below.

Destination 2011Percentage USD mn

US 17.59 17,047.70

Japan 11.04 10,702.30

China 10.59 10,261.38

South Korea 4.85 4,696.06

Other 55.93 54,198.56

Total 100.00 96,906.00Note: due to rounding some totals may not equal the breakdown above.

Source: EIU

Imports are shown below, with leading commodities reported as percentages of total imports and in USdollars (USD).

Commodity 2012Percentage USD mn

Machinery, equipment and parts 17.13 19,584.90

Steel 8.56 9,792.40

Refined petroleum 9.85 11,261.30

Materials for textile industry 4.82 5,508.30

Other 59.64 68,200.10

Total 100.00 114,347.00Source: EIU

The most important sources of imports are shown below.

Source 2011Percentage USD mn

China 30.70 29,890.24

South Korea 14.30 13,924.83

Singapore 10.80 10,513.47

Japan 10.14 9,868.00

Other 34.06 33,159.45

Total 100.00 97,356.00Note: due to rounding some totals may not equal the breakdown above.

Source: EIU

Currency and Exchange Control

Currency and Exchange RateThe local currency is the Vietnam dong (VND). It was devalued by the authorities in November 2009,February 2010 and February 2011. The devaluations reduced the value of the dong against the dollar by5.4%, 3.25% and 8.5%, respectively.

The average annual exchange rate against the US dollar (USD) is shown below.



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The exchange rate when this report was in preparation has been used for all current conversions and isshown in the Key Facts section of this report. For previous years the average annual rate for the year inquestion has been used.

Exchange ControlThe Vietnamese dong is not a freely convertible currency. All goods and services in Vietnam must betransacted in VND.

The State Bank is the central bank, supervising monetary policy, setting interest rates and managing theexchange rate. The State Bank removed the cap on interest rates for dong loans from 1 June 2002although the government still has a measure of control over market rates through state-owned commercialbanks, which account for 80% of the banking sector.

Only authorised banks are allowed to buy and sell foreign currency. Foreign investors may transfer profitsabroad but all VND must be converted into foreign currency in Vietnam for the transfer.

Foreign-invested companies have the right to purchase foreign currency to satisfy their requirements forcurrent transactions, for capital transactions and for other approved transactions provided they are able toprovide supporting documentation. The State Bank approval for purchases of foreign currency byforeign-invested companies is no longer required.

Insurers have no difficulty in acquiring hard currency for the settlement of reinsurance.

Supervision and Control


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Legislation

Insurance LegislationThe current laws and regulations governing insurance business in Vietnam are described below.

• Law on Insurance Business No 24/2000/QH10 of 9 December 2000, which is supported by the decrees,decisions and circulars noted below.

• Decision No 175/2003/QD-TT of 29 August 2003 approving the strategy for the development of theinsurance market from 2003 to 2010.

• Decision No 153/2003/QD-BTC of 22 September 2003 which established the financial ratios to be usedby the Insurance Department of the Ministry of Finance for monitoring and supervisory purposes.

• Decree No 18/2005/ND-CP of February 2005 setting out a legal framework that will enable companies ina common industry to establish a mutual insurance operation.

• Decree No 45/2007/ND-CP March 2007 on market conduct, and its corresponding Circular No155-2007-TT-BTC providing detailed guidelines on the implementation of certain articles of the Law onInsurance Business.

• Decree No 46/2007/ND-CP of 27 March 2007 on certain financial issues including capital, solvencymargins and technical reserves and the corresponding Circular No 156-2007-TT-BTC which regulates it.

• Decree No 115/1997/ND-CP and Decision No 23/2007 in connection with obligatory motor third partyliability insurance.

• The State Bank of Vietnam (SBV) issued a circular that reinforces the provisions of the Ordinance onForeign Exchange Control of 13 December 2005 and Decree No 160 of 2006 obliging all contracts,payments and quotations to be made in VND, banning any link to a foreign currency amount orindexation in accordance with the movement of the VND against foreign currencies.

• Circular No 86/2009/TT-BTC of 28 April 2009 altering some of the provisions of CircularNos155-2007-TT-BTC and 156-2007-TT-BTC.

• Decree No 41/2009/ND-CP of 5 May 2009 establishing sanctions for administrative violations ininsurance business and its regulations contained in Circular No 03/2010/TT-BTC of 12 January 2010.

• Law No 59/2010/QH12 on the protection of consumers' interests was passed on 17 November 2010.The law effectively introduces the concept of strict liability on those manufacturing, importing ormarketing goods and sets out new rules for consumer contracts and telemarketing.

• Law No 61/2010/QH12 of 24 November 2010 made changes to the Law on Insurance Business. Someof the changes brought the legislation into line with alterations already made by state regulation,including those resulting from WTO accession. Some of the changes were implemented by Decree No123 of 27 December 2011.

• Circular No 220/2010/TT-BTC of 30 December 2010 on guidelines governing the compulsory fire andexplosion insurance "regime".



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• Decision No 2195/QD-TTg was signed by the government in December 2011, authorising the instigationof a project to set up and develop a safe and sustainable system of microfinance institutions for theassistance of low-income individuals and small businesses. The first stage of the plan, between 2011and 2015, empowers the Ministry of Finance to study the tax, insurance, accounting and financingmechanisms necessary; the second, from 2016 to 2020, will involve the proposal of a complete systemto the government, including finance sources.

• Decree No 123/2011/ND-CP, amending Decree No 45/2007/ND-CP, to clarify certain points in previouslegislation.

• Circular No 121-2012-TT-BTC of 26 July 2012, issued by the Ministry of Finance on regulations oncorporate governance, introduced greater obligations for board members of both listed and non-listedpublic limited companies.

• On 18 June 2012 the National Assembly passed Law No 07/2012/QH-13, which repealed previouslegislation and set out new rules to prevent money laundering.

• Circular No 151/2012 increasing limits and minimum premiums for compulsory third party motorinsurance.

• Circular No 124/2012/TT-BTC dated 30 July 2012, superseding Circular No 155/2007 with the purposeof ensuring healthy competition and co-operation, and preventing monopoly.

• Circular No 125/2012/TT-BTC of July 2012, dealing with financial requirements of insurers. There is noofficial English translation from the Ministry of Finance, which is aware there are unofficial translations inuse by foreign companies, in order that they can do business under its auspices.

Legislative ProcessLegislation in Vietnam is often developed by the ministry responsible, which for the insurance industry isthe Ministry of Finance. It is then passed to the Ministry of Justice for review before it is submitted to theNational Assembly for approval and finally for signature by the president, after which it is gazetted.

There is increasing consultation between the Ministry of Finance and the Association of VietnameseInsurers (AVI) before new insurance legislation is drafted and introduced and some exchange of views withsenior industry figures also occurs. Legislation tends to be based on the practices of other insurancemarkets as Vietnam tries to modernise and internationalise its insurance market.

Statutory TariffsAll compulsory insurances are subject to statutory tariffs.

Compulsory Insurances

List of Compulsory Insurances• Motor third party liability.

• Aviation third party passenger liability insurance and the internationally recognised additional insurancesfor scheduled airlines.



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• Professional indemnity for lawyers, architects, engineers, securities companies (stockbrokers), notaries,auditors, fund management companies, insurance brokers and contractors supervising the execution ofbuilding works.

• Fire and explosion insurance on 16 different types of high-risk industries.

• Employers' liability insurance in respect of construction works (enabling legislation is still awaited).

• Insurance for contractors performing surveys for construction work and for performing supervision of theconstruction.

• A guarantee covering construction tenders presented.

• Insurance for the contract works (enabling legislation is still awaited).

• Transportation of passengers and inflammable substances by inland waterway.

• Travel insurance for all Vietnamese citizens travelling abroad.

• Marine oil pollution arising from the International Convention on Civil Liability for Oil Pollution Damage.

Supplementary Information on Compulsory InsurancesArticle 8 of the Law on Insurance Business lists the compulsory classes of insurance as motor third party,aviation carriers' liability to passengers, professional indemnity for lawyers and insurance brokers. Furtherdetails can be found in the Motor, Aviation and Liability - Professional Indemnity sections of this report.

The obligation for fund management companies to insure is contained in the Decision issuingRegulationson the Organization and Operation of Fund Management Companies, N. 35-2007-QD-BTC of 15 May2007.

The Law on Securities of 2006 establishes the obligation for securities companies to hold insurance.

Obligatory fire and explosion cover was established by Decree No 130-2006-ND-CP of 8 November 2006for 16 types of high-risk establishments identified in Decree No 35-2003-ND-CP where there is consideredto be a significant danger of fire or explosion. Under the terms of the decree these establishments wererequired to obtain a certificate from the fire department attesting that the safety provisions demanded bylegislation are in force; the certificate was demanded by insurers as a condition precedent to cover andmight be given only after risk improvements were made. As great difficulties and delays were caused bythese conditions, the authorities relaxed the requirements, making it easier to obtain the cover. Circular No220/2010/TT-BTC, the enabling circular putting the original decree into place, came into force on 1 March2011, and makes compulsory the buying of fire and explosion insurance for risks under USD 30mn, inrespect of 16 risk classifications and sub-classes.



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The obligatory insurances in connection with the construction industry are contained for the most part in theConstruction Law No 16/2003/QH11. The insurance in respect of tenders is contained in Decree No111/2006/ND-CP, which regulates the Bidding Law No 61/2005/QH11 and the selection of contractorsunder the Construction Law.

Vietnam has ratified the International Convention on Civil Liability for Oil Pollution Damage1969, renewedin 1992 (amended in 2000) and referred to as the CLC Convention. There is an associated mandatoryrequirement to maintain "insurance or other financial guarantee" in respect of oil pollution. The treatyrequires owners of ships carrying more than 2,000 tonnes of oil in cargo to maintain "insurance or otherfinancial security" sufficient to cover the maximum liability for one oil spill. Further details can be found inthe separate Axco report on International Agreements.

Implementing decrees and circulars have been issued in connection with motor third party liability, aviationthird party liability and fire and explosion insurance. The Insurance Regulatory and SupervisoryAdministration has no knowledge of any circulars or decrees pending in connection with the otherinsurances, so that they may be obligatory by law but cannot be implemented as the regulations have notbeen issued.

All compulsory insurances are subject to a statutory tariff. No limits of liability are specified in thelegislation, except for motor third party liability, details for which can be seen in the Motor section of thisreport within the heading, Statutory Third Party Limits.

Changes in Legislation

Legislative UpdateOne decree and two circulars were issued in July 2012 as detailed below.

• Decree No 123/2011/ND-CP amended Decree No 45/2007/ND-CP, clarifying certain points in legislationspecifically regarding:

• reinsurance business and reinsurance companies

• cross border insurance (admitted/non-admitted rules)

• health insurance providers

• insurance for state-owned enterprises

• the setting up of a policyholders' protection fund, in the event of insolvency.

• Circular No 124/2012/TT-BTC superseded Circular No 155/2007 with the purpose of ensuring healthycompetition and co-operation, and preventing monopoly. The circular addresses:

• formation of companies



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• registering of foreign branches

• "fit and proper persons" rules

• standards for senior executives and actuaries

• internal inspection and control

• principles of sales procedures

• product approval before marketing

• agents' commissions

• reinsurance programme management

• fronting and local retentions

• agents' activities and qualifications

• broking activities

• regulation of representative offices

• account/portfolio transfers.

•Circular No 125/2012/TT-BTC deals with

• financial requirements of insurers

• solvency margins (equivalent to Solvency I, it was claimed)

• capitalisation

• reinsurers' minimum financial ratings.

There is no official English translation, although reference is made further on in this report to unofficial localtranslations on which foreign insurers have depended so far in order to operate within its auspices.

Further recent legislation is noted below.

Circular No 121/2012/TT-BTC of 26 July 2012, issued by the Ministry of Finance on regulations oncorporate governance, introduced greater obligations for board members of both listed and non-listedpublic limited companies.

On 18 June 2012 the National Assembly passed Law No 07/2012/QH-13, which repealed previouslegislation and set out new rules to prevent money laundering.



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Decision No 2195/QD-TTg was signed by the government in December 2011, authorising the instigation ofa project to set up and develop a safe and sustainable system of micro-finance institutions for theassistance of low-income individuals and small businesses. The first stage of the plan, between 2011 and2015, empowers the Ministry of Finance to study the tax, insurance, accounting and financing mechanismsnecessary; the second, from 2016 to 2020, will involves the proposal of a complete system to thegovernment, including finance sources.

Projected LegislationIn mid-September 2012 the Ministry of Finance issued Decision No 2330/QD-BTC, outlining the plans todevelop the insurance industry over the period 2011 to 2015. Details were given of a plan to restructure theinsurance industry and to create a new classification of insurance companies, further described in theInsurance Supervisory Authority heading with the section of this report on Supervision.

The enabling legislation to enact compulsory workers' compensation cover for the construction industry isstill awaited.

Although several obligatory professional indemnity insurances are established by law, the circulars ordecrees necessary to implement them are still pending.

There is no apparent progress on the nuclear energy law, nor compulsory medical malpractice insurance.

International Financial Reporting Standards (IFRS) are still not on the local agenda, nor equivalence toSolvency II.

Supervision

Insurance Supervisory AuthorityThe Ministry of Finance supervises the insurance market including insurance and reinsurance companies,agents and brokers. Loss adjusters are not regulated.

The powers of the Insurance Department were upgraded from 2003, reflecting the greater importancebeing placed by the government on the sector. A further widening of its responsibilities took place in 2008when it became the Insurance Regulatory and Supervisory Administration, which has the power to imposefines. There is no official separation for regulatory purposes of the life market, non-life market, insurancecompanies, reinsurance companies and brokers but unofficially supervision is split into three areas: life,non-life and others.

The minister of finance is Dinh Tien Dung, whose vice minister is Tran Xuan Ha, directly in charge of theInsurance Regulatory and Supervisory Administration (IRSA). Trinh Thanh Hoan is head of the InsuranceDepartment, and Mr Phung Ngoc Khanh is deputy director general under him.

The Ministry of Finance is responsible for the supervision of all "banks, non-bank financial institutions andfinancial services" including the non-life insurance industry, and considers all new licence applications. Thisresponsibility was delegated to it by the state by Government Decree No 100/Cp in 1993 and a moredetailed description of its duties is contained in Chapter V of Decree No 45/2007/ND-CP. The regulator'sduties include:



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• formulating strategies for the development of the insurance market and providing guidelines for theimplementation of legislation

• issuing and withdrawing licences for insurers, reinsurers, brokers and representative offices

• promulgating and ratifying the implementation of regulations, clauses, commission and premium scales

• taking the necessary measures to ensure that insurers are financially sound and that they fulfil theirundertakings to policyholders

• inspecting and checking insurance business activities, resolving complaints and dealing with breaches ofthe law on insurance business.

Provisions for the supervision of insurance business activities are covered in Articles 120 to 129 of the Lawon Insurance Business (No 24/2000/QH 10), and clarified in Decree No 45/2007/ND-CP. Inspections ofinsurers are carried out at least once a year.

The IRSA had been considered to exercise firm but fair control over the market but now it has beensuggested that it is becoming exceptionally strict in its application of the law. It has taken steps to controlthe training of agents more tightly and intends to take action against the infringement of commission scalesand unfair competition practices, increasing its inspection activity and applying sanctions whenevernecessary.

In this regard, the department has drawn up four classifications of insurers (life and non-life) together with abroad description of the powers which can be exercised by the supervisor:

• companies which meet solvency requirements and have profitable operations - assuming this ison-going, the level of supervision will be minimal;

• companies who are solvent, but struggle to maintain profitability due to high operating ratios, for twoconsecutive years - the department will oversee a corporate and/or financial restructuring;

• those companies in immediate danger of insolvency - solvency needs to be restored with a restructuringplan approved by the department;

• those already insolvent - to be placed under the immediate control of a solvency control board, to beestablished by the regulator.

At the time this report was being prepared, companies were still waiting to discover their fate. The ultimateintention is for increased merger and acquisition activity to both strengthen the market and reducecompetition by reducing the number of companies.

The supervisor is funded entirely from the state budget: no contribution is required from the insurancemarket.

Statutory ReturnsThe fiscal year runs from 1 January to 31 December and all companies are required to submit returnsquarterly, six-monthly and annually. Monthly reports should be submitted within 15 days following the lastday of the month, quarterly within 30 days following the end of the quarter and annual returns with 90 daysfollowing the year-end. Annual returns, which must be the subject of an independent audit, comprise:



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• report on the operations of the company for the year

• balance sheet

• profit and loss account

• cash flow statements

• all other documents as required by the Ministry of Finance to clarify the above documents.

A series of financial ratios are also required which serve as an early-warning system for potential problemsand further reports may be demanded if any worries over solvency exist.

Full details of the reporting procedures are contained in Section 10 of Circular No 125/2012/TT-BTC, whichalso specifies that insurers and insurance brokers must make public their financial statements by publishingthem in three consecutive editions of a national newspaper and in a local newspaper where they operatewithin 120 days of the end of the fiscal year.

Representative offices of foreign insurers or brokers in Vietnam must provide six-monthly and annualreports on their operations to the Ministry of Finance and to the People's Committee of the city or provincewhere they have opened their office .

A possible move to International Financial Reporting Standards (IFRS) continues to be contemplated but itis not expected to receive priority status.

Insolvency RegulationSection 4 of Chapter III of the Law on Insurance Business entitled Recovery of Solvency, Dissolution,Bankruptcy of Insurance Enterprise sets out the procedures for dealing with situations of potentialinsolvency. The regulatory authority is empowered to take the following action should it suspect that anenterprise is in danger of insolvency:

• demand from the enterprise an immediate report on its financial condition

• insist that it prepare a recovery plan including the reorganisation of management.

Should the recovery plan prove insufficient to bring about the desired recovery, a board of solvency controlmay be established which may, among other measures:

• limit the area of business activity or suspend it completely

• transfer the portfolio of the insurer to another company

• demand the suspension of the management and executive personnel.

If the insurer remains insolvent, the board of solvency may, subject to the approval of the Ministry ofFinance, withdraw its licence to operate and dissolve the company. The Insurance Regulatory andSupervisory Administration has no powers to introduce its own personnel to manage the company.



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Law No 61/2010/QH12 of 24 November 2010 makes provision for a policyholders' protection fund tocompensate policyholders in the event of the bankruptcy of an insurer, details of which are provided inDecree No 123/2011/ND-CP. Companies are charged no more than 0.3% of net retained premium income,until such time as the fund reaches 5% of non-life insurers' total assets.

Under the terms of Article 2 of the Decision Promulgating the Regime of Compulsory Insurance for MotorVehicle Owners' Civil Liability insurers are authorised to withhold 2% of the compulsory motor third partypremiums as a contribution to a fund established in part to indemnify victims of hit-and-run and uninsuredmotor vehicles. The fund is administered by the Association of Vietnamese Insurers.

Consumer Dispute ResolutionInsurance companies are required to supply policyholders with clear procedures to be followed in the eventof a dispute regarding the insurance. A dissatisfied policyholder should first try to resolve the problemdirectly with the insurance company. If that fails, the policyholder may refer the matter to the InsuranceRegulatory and Supervisory Administration of the Ministry of Finance, which does not happen very often. Ifit intervenes, its decision will usually be accepted by the two parties to the dispute. The matter may also bereferred to arbitration as provided for in the policy conditions. As a last resort, the consumer may take legalaction, but this is generally avoided.

Certain types of disputes may be referred to the People's Committees of towns and villages.

The commercial arbitration law, No 55/2010/QH12 of 17 June 2010, took effect from 1 January 2011. Thelaw is designed to facilitate the use of arbitration as a rapid and more effective means of disputesettlement: there are seven arbitration centres throughout the country.

There is a consumers' association, the Vietnam Standards and Consumers Association (VINASTAS), butno ombudsman, though consideration is being given to setting up such a service. Law No 59/2010/QH12on the protection of consumers' interests was passed on 17 November 2010, and includes the concept ofarbitration as a possible form of dispute settlement. Market sources report that it is rare for parties sufferinga loss to approach the consumers' association for advice and assistance.

Non-Admitted Insurance Regulatory PositionDefinition

Non-admitted insurance refers to the placing of insurance outside the regulatory system of the country inwhich the risk is located. A non-admitted insurance policy may be one that is issued abroad or one in whichthe risk(s) may be included in a global master policy by an insurer that is unauthorised in the country inwhich the risk is located. An authorised insurer is one that has been granted permission to do business in acountry (or region) by the local supervisory authority. The text below describes the regulations that apply tonon-admitted insurance for this country.

SummaryNon-admitted insurance is not permitted in Vietnam because the law provides that insurance must bepurchased from local authorised insurers with some exceptions.



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Legislation

The relevant legal provisions setting out the requirement for insurers to be authorised are contained inArticle 3 of Decree No 45/2007/ND-CP of 27 March 2007. This specifies that "any organization or individualwishing to conduct insurance business, reinsurance business or insurance broking business in Vietnammust be granted a licence for establishment and operation by the Ministry of Finance pursuant to the Lawon Insurance Business " (local unofficial translation).

The relevant legal provisions setting out the requirement for risks to be insured with locally authorisedcompanies are contained in the same article which in its second paragraph specifies that "organizationsand individuals having insurance requirements shall have the right to select an insurer and shall only bepermitted to participate in insurance with an insurer licensed to operate in Vietnam" (local unofficialtranslation).

The above has been revised by Decree No 123/2011/ND-CP, which outlines the circumstances whereby"cross-border" business may be transacted, and by whom. There are three basic principles:

• only foreign owned enterprises with more than a 49% shareholding, and foreign individuals, may buy"cross-border" insurance, ie on a non-admitted basis;

• the non-resident insurer must be in a country with an international trade agreement with Vietnam, andmust have

• at least 10 years previous trading in that class of business in that country

• a head office approval to do business in Vietnam

• no record of any illicit trading activities in that country in the three years prior to doing business inVietnam

• total assets of USD 2bn (USD 100mn in the case of brokers)

• minimum Standard and Poor's/Fitch rating of BBB+, A M Best B++, Moody Baa1, or equivalent

• three consecutive profitable years of operation prior to the commencement of business in Vietnam;

• the cross-border service can only be accessed by a duly authorised and registered broker in Vietnam.

• In addition, there are four stipulations regarding claim servicing and handling abilities, including adeposit of VND 100bn (USD 4.8mn) in a Vietnam licensed bank.

• The above provisions on cross border trading do not apply to health business.

• Article 3 of Decree No 123/2011/ND-CP has been interpreted by the market to mean that non-admittedinsurance is permitted for reinsurance, international maritime insurance and international aviationinsurance.

A further exception is when the insurance is not available in the local market.



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InsurersCompulsory insurances may not be placed on a non-admitted basis.

Decree No 123/2011/ND-CP of 27 December 2011 sets out the requirements for business to be placed ona non-admitted basis within the scope of the provisions of any international treaty, as set out in theLegislation heading of this report within this Non-Admitted Insurance Regulatory Position section.

Article 3 of Decree No 123/2011/ND-CP has been interpreted by the market to mean that non-admittedinsurance is permitted for reinsurance, international maritime insurance and international aviationinsurance.

A further exception is when the insurance is not available in the local market.

With these exceptions, all insurance contracts entered into between Vietnamese organisations orindividuals and insurance enterprises not registered in Vietnam shall be null and void.

Local Risk Definition

A local risk is not defined in current legislation.

Exchange Controls

Currency exchange control is not an issue for non-admitted placements because the relevant legislation,the government decree on foreign exchange management, allows the purchase of foreign currency to meetpayments "on the basis of declaring related legal documents".

Tax

It has not been possible to obtain a definitive answer to whether premiums paid overseas are taxdeductible for the buyer but the general opinion in the market is that, provided that the insurance is placedin accordance with the law and all the relevant premium taxes are paid, they may be deducted for taxpurposes. Article 9 Paragraph 1 (dd) of Law No 09/2003/QH11, the Law on Corporate Income Tax, lists"insurance of assets.. and other hired services" as acceptable expenses. It makes no specific reference towhere the insurances are placed.



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Insurer Responsibilities

The law does not impose any obligation on insurers involved in non-admitted placements to warn buyersthat they are not subject to local supervision.

Multinationals

The terms of the World Trade Organization (WTO) agreement specify that insurance services provided toforeign-invested enterprises and foreigners working in Vietnam may be placed on a non-admitted basis.Decree No 123/2011/ND-CP of December 2011 specifies the circumstances in which cross-borderinsurance may be placed. Further details may be found in the Legislation section of this report within thisNon-Admitted Insurance Regulatory Position section. The rules are particularly onerous, such that brokersare advising clients not to place their business direct, but to use a locally authorised insurer.

DIC/DIL

The legislation does not address the use of global difference in conditions/difference in limits covers orexcess layers above a primary local policy.

Premium Taxes

VAT is payable on non-admitted insurances in accordance with Article 2 Paragraph 2 of Decree No123/2008/ND-CP of 8 December 2008 which stipulates that "Vietnam-based production and businessorganizations and individuals that purchase services (including services associated with goods) fromforeign organizations without permanent establishments in Vietnam or overseas individuals not residing inVietnam shall pay value-added tax".

BuyersInsurance buyers may not place their business with non-admitted insurers abroad except in the in terms ofDecree No 123/2011/ND-CP of 27 December 2011 relating to cross-border business. Further details canbe found in the Legislation heading of this report within this Non-Admitted Insurance Regulatory Positionsection. Article 3 of Decree No 123/2011/ND-CP has been interpreted by the market to mean thatnon-admitted insurance is permitted for reinsurance, international maritime insurance and internationalaviation insurance.

A further exception is when the insurance is not available in the local market, although it is not permissibleto place business abroad simply in order to find wider conditions or a more competitive price.



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When insurance is not available in the local market, no specific authorisation to insure with a non-admittedinsurer needs to be sought from the Ministry of Finance but, in the event of an inspection, the regulatorwould expect to find evidence in writing that the consumer tried to obtain cover locally and failed, or that therisk fell within the provisions of an international treaty.

Claims payments may be made into the country without tax implications by a non-admitted insurer providedthat the insurance operation is deemed to conform to the provisions of the law.

IntermediariesIntermediaries (ie brokers or agents) have to be authorised to do insurance business.

Under the terms of Article 1 of Section 6 of Circular No 98/2004/TT-BTC, insurance brokers were allowedto advise on and offer to their clients only insurances that were approved by or registered with the Ministryof Finance. Insurance agents could only operate with the companies with which they had an agencycontract. This circular was replaced in December 2007 by Circular No 155/2007/TT-BTC and that is silentregarding the placing of non-admitted insurance by intermediaries. In the market, however, it is generallyunderstood that intermediaries may not place non-admitted insurances other than those unavailable in thelocal market or authorised by means of an international agreement. The decree implementing Law No61/2010/QH12 of 24 November 2010 that made changes to the Law on Insurance Business, (Decree No123 of 27 December 2011), established the requirements for brokers to place non-admitted business.Further details may be found under the Legislation heading in this Non-Admitted Insurance RegulatoryPosition section.

Market PracticeInsurers, brokers and foreign-invested commercial enterprises have followed the law but have takenadvantage of fronting to place the bulk of their insurance programmes overseas. Following the changes tolegislation and Vietnam's accession to the WTO, Decree No 123/2011/ND-CP of 27 December 2011 setsout the circumstances in which cross-border insurances may be issued. Further details may be found underthe Legislation heading in this Non-Admitted Insurance Regulatory Position section.

Due to the onerous responsibilities and bureaucracy involved, however, local brokers would invariablyadvise their local multinational clients to go the fronting route, with a small local company retention.

Article 45 of Circular No 124/2012 of July 2012, however, forbids 100% reinsurance, so fronting is nowallowed only with a local retention, which must not exceed 5% of equity capital, although no minimum isstated.

Fines/PenaltiesArticle 14 of Decree No 188/2003/ND-CP states that a warning will be issued or a fine of between VND5mn (USD 240) and VND 10mn (USD 480) levied for obtaining insurance from foreign insurers engaging inillegal insurance business in Vietnam and for compelling individuals or companies to obtain insuranceabroad.



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FrontingFronting is a common practice in the market and is accepted, albeit with some reluctance, by the regulatoryauthority, on the grounds of insufficient local market capacity. The authority has expressed its wish that asmuch business as possible be retained in the country.

Article 45 of Circular No 124/2012 of July 2012, however, forbids 100% reinsurance, so fronting is nowallowed only with a local retention, which must not exceed 5% of equity capital, although no minimum isstated.

Several local companies such as Bao Viet, Bao Minh and United Insurance Company of Vietnam arehappy to front for global programmes but the fronting insurer is determined by the global carrier. If it is oneof the multinational carriers, then its local office will front the local policy. Although local insurancecompanies accept global rates without objection as they are usually higher than those offered on the localmarket, local wordings are generally used as they are based on the international conditions from theAssociation of British Insurers (ABI) and Munich Re. DIC/DIL policies are then issued centrally asnecessary. The retention taken by local companies varies greatly but in most cases it is a nominal amount.Fronting for 100% of a risk is strictly forbidden.

Article 46 of Circular No 124/2012/TT-BTC establishes the requirement that the leading foreign reinsurerand all foreign reinsurers accepting 10% or more in any reinsurance contract must be rated at least BBB byStandard and Poor's, B++ by AM Best, Baa by Moody's or equivalent in the previous financial year. Whenreinsurance is ceded to overseas parent companies or to companies within the same group that have nocredit rating, details must be given in writing to the Ministry of Finance, certifying solvency.

Fronting commission ranges between 2.5% for large programmes and 7.5% to 10% for smaller risks. Anaverage of about 5% is generally paid.

There have been no fronting problems between local and foreign companies.

Company Registration and Operating Requirements

Establishing A Local CompanyThe current legislation setting out the procedures for the establishment and operation of insurancecompanies, reinsurance companies and brokers comprises Chapter III, Section I of the Insurance Law (No24/2000/QH 10), Chapter II of Decree No 45/2007/ND-CP, Section II of Circular No 155/2007/TT-BTCproviding guidelines in connection with the decree and Circular No 86/2009/TT-BTC that madeamendments to Circular No 155/2007/TT-BTC.



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Circular 124/2012/TT-BTC of 30 July 2012 provides further guidelines in the implementation of all theabove, specifically Decree 45/2007/ND-CP and Decree 123/2011/ND-CP, and over-rides all previous.

The decree and circulars in particular set out the detailed procedures for the establishment and operationof insurance companies, reinsurance companies and brokers, indicating the documents to be submitted tothe Ministry of Finance, the application processes and documentation applicable, regulations onreinsurance and insurance agents and the establishment of representative offices of foreign companies,brokers and agents, and what companies must do immediately after registration and permission have beengranted.

According to Circular No 124/2012/TT-BTC, the following provisions must be satisfied and documentssubmitted to the Ministry of Finance:

• signed draft charter of the company

• first five-year business plan

• CVs of members of the board of directors and top management

• documents regarding details of those original corporate shareholders with at least a 10% holding

• Identity papers of shareholders, being individuals

• commercial bank certification of lodgement of charter capital, and that the funds are legal

• details of products and pricing structures

• proof of the right to use the office premises detailed in the plan

• proof of readiness of the IT system to support the business.

Branches of foreign insurers need all the above in addition to further documents specified in Clauses 6, 7and 8 of Decree No 123/2011/ND-CP.

Types of Insurance OrganisationDecree No 123/2011 describes the type of insurance operations as:

• one member joint stock company

• two or more member joint stock company

• limited liability company

• branch of a foreign insurer, for non-life only, including health.

Mutuals and co-operatives are no longer catered for.



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The above may be a non-life insurer or reinsurer, a life insurer or reinsurer, or health insurer or reinsurer.Reinsurers may be any combination of the above, but life and non-life insurers must be separate, and holdseparate licences. There is no prohibition on holding companies having two or more subsidiaries.

There is also no restriction on banks investing in insurance companies, and there are a number ofexamples where banks have invested in non-life insurers.

More specific rules are expected for microinsurance operations.

Foreign OwnershipThere are no restrictions on 100% foreign ownership companies, and foreign insurers are allowed to set upbranches, by virtue of Decree No 123/2011/ND-CP, being the direct result of membership of the WTO.

Types of LicenceOne licence is issued for all non-life classes, excluding aviation and satellite business, for which an extraVND 50bn (USD 2.4mn) each is required in capitalisation if such business is written. The list of classes isset out in Article 7 of the Law on Insurance Business No 24/2000.

Healthcare is included in the personal accident sector and is considered to be a non-life class of insurancebut can be written by life companies as a rider to a life policy.

Composite licences are no longer granted.

Insurers may accept inward reinsurance, for which no separate licence is required.

Capital RequirementsAccording to Decree No 46/2007/ND-CP and Circular No 156/2007/TT-BTC the minimum legal capitalrequired is set:

• for a non-life insurer at VND 300bn (USD 14.4mn), enabling a company to write all lines of businessexcept aviation and satellite insurance; if it wishes to write one of these lines of business, an additionalVND 50bn (USD 2.4mn) of capital must be paid up for each.

Further minimum capital and asset requirements were established by Decree No 123/2011/ND-CP ofDecember 2011. These were as follows:

• one member limited liability insurance companies - total assets of VND 2trn (USD 96.02mn)

• two member limited liability insurance companies - total assets of VND 1.5trn (USD 72.02mn)

• branches of foreign insurers - total assets of USD 2bn and legal capital of VND 200bn (USD 9.6mn)

• health insurers - legal capital of VND 300bn (USD 14.4mn)



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• non-life reinsurance company or health reinsurance company or combined non-life and life reinsurancecompany - legal capital of VND 400bn (USD 19.2mn)

• life or life and health reinsurance companies - legal capital of VND 700bn (USD 33.6mn)

• reinsurance companies writing non-life, life and health reinsurance - legal capital of VND 1.10trn (USD52.81mn).

Foreign branches of non-life insurance businesses may undertake insurance or reinsurance business inaccordance with Article 13, Clause 1.a. of Decree No 123/2011/ND-CP, and thus capital requirements forinsurance and reinsurance branches are the same.

Solvency MarginsThe solvency margin of an insurer or reinsurer is considered to be the difference between the value ofassets and the debts payable at the time of calculation. The assets and liabilities that may be taken intoconsideration are specified in Article 16 of Circular No 125/2012/TT-BTC. Reinsurance premiums ceded toreinsurers which fail to meet the minimum requirements laid down by the MoF may not be brought intoaccount.

In accordance with Article 15 of Circular No 125/2012/TT-BTC, the minimum solvency margin of a non-lifeinsurer, non-life reinsurer, and branch of a foreign insurer is the greater of the following calculations:

• 25% of the total premiums retained at the time of the calculation, and

• 12.5% of the total original insurance premiums (taken to mean gross written premium), plus any inwardsreinsurance premiums at the time of the calculation.

• The solvency margin must at all times exceed the minimum solvency margin, failing which the MoF mustbe informed, which will decide under legislation what remedial action to take.

For the purposes of calculating the solvency margin liquid assets may be used, plus discounted valuesvariously for investments, bonds, property, stocks and shares. Receivables are also allowed, but heavilydiscounted by age.

The MoF is not considering a move to Solvency II requirements until the EU has ironed out all currentproblems, after which time equivalence may be considered, which is not thought to be in the foreseeablefuture.

Reserve RequirementsReserve requirements and the formulae for their calculation are set out in Article 7 of Section 2 of CircularNo 125/2012/TT-BTC, which provides guidelines for the implementation of Decree 46/2007/ND-CP.

The reserve requirements for a non-life insurer, health insurer and foreign non-life branch include unearnedpremium reserve (UPR), outstanding claims reserve (including IBNR) and a large loss fluctuation reserve.



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Reinsurers of non-life and/or health business must establish reserves in accordance with Article 8 ofDecree No 46/2007/ND-CP.

UPR, which is established net of reinsurance, may be calculated as follows:

• 25% of total retained premiums in respect of goods in transit by road, rail, river, sea and air; 50% of thetotal retained premiums in all other classes, or

• using the eighths method for 12 month policies, or 16ths for periods of insurance of more than 12months, or

• using the 24ths method, or 48ths, as above, or

• on a per diem basis, for whatever term of the policy.

The provision for outstanding claims must include elements for both known claims (case reserves), andincurred but not reported events. There is no fixed methodology for fixing the former, except on a case percase basis, to include all elements of the loss, including any additional costs and fees etc, on top of theindemnity.

The IBNR reserve is calculated by taking into consideration the percentage that IBNR claims represent ofall claims, the increase in premiums written and the delay in settlement of outstanding claims. In theabsence of the required statistical information, the insurer or branch must include an IBNR for eachproduct, between 3% and 5% of the product's premium reserve.

Alternatively, the total indemnity reserve (case reserve plus IBNR) for any one product can be calculatedusing the chain ladder method ("coefficient of arising indemnity"), as exemplified in the circular. Previousloss histories are thus essential to set up the calculations.

In order to establish a large loss fluctuation reserve for products which historically are prone to such,insurers and branches are required to set aside between 1% and 3% of retained premiums until thebalance in the reserve represents 100% of the retained premiums in the fiscal year. Alternatively insurersand branches can set aside additional reserves calculated by a formula laid down in Paragraph 4.3.b) ofCircular 125/2012/TT-BTC.

By Article 10 of Circular No 125/2012/TT-BTC technical reserves and solvency margins, and theapplication to the Ministry of Finance to approve the selected methodology, and supporting documents,must be signed off by the company actuary. The person must be registered by the non-life company withthe Ministry of Finance and copies of his or her qualifications must be provided.

Investment RegulationsThe principles and rules for investment by insurers, reinsurers and foreign branches are contained inArticles 11, 12 and 13 of Circular No 125/2012/TT-BTC, and detail the different methodologies for investingequity capital and "idle capital from insurance reserves" (as per the unofficial translation), as per Articles 13and 14 of Decree 46/2007/ND-CP, and Article 44 of Decree 123/2011/ND-CP for reinsurers.

The over-riding general principles (Article 11) are:



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• liquidity

• a prohibition on loans for direct investment in securities, real estate or other insurers

• a prohibition on investing with related shareholder interests, except in credit institutions

• investment in credit institutions of Group 1 or Group 2 of state bank ranking

• to account separately for investments from owners' capital, idle capital from insurance reserves, andother legal sources, ensuring proper record keeping

• any offshore investments to be approved by the Ministry of Finance before implementation.

RetentionsArticle 44, Paragraph 3 of Circular No 124/2012/TT-BTC states that the maximum retention for any one riskfor an insurer or branch of a foreign insurer is limited to 5% of the equity capital. Article 45, Paragraph 1 ofCircular No 124/2012/TT-BTC prohibits 100% reinsurance, but does not specify a minimum retention forany one risk.

For reinsurers, the maximum net retention limit is 10% of equity capital.

Taxation


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Insurance Premium or Policy Taxes and ChargesThe taxes and charges applicable are shown below.

Insurance class Description of tax or charge % (unless otherwise stated) To be paid byAll classes excluding PA,health and travel; workers'compensation; agricultureinsurance; compulsory fire andexplosion insurance; insuranceon oil operations andequipment, foreign tankerschartered by oil contractors foruse in Vietnamese waters orareas under joint explorationby Vietnam and anothercountry; reinsurance

VAT 10.00 Insured

Compulsory fire and explosioninsurance under property andenergy policies

Fire Prevention Charge 5.00 Insurer†

Motor obligatory third party Motor Guarantee Fund Up to 2.00 Insurer†

All classes Policyholders' protection fund Variable Insurer

Note: † paid to the authorities by the insurer as a deduction from the total collected premium.Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

The VAT applies to gross policy premiums and, in the absence of payment by the insured, the insurer isultimately liable for its payment. The Decree Regulating the Regime on Compulsory Fire and ExplosionInsurance indicates that "insurers conducting compulsory fire and explosion insurance shall be responsibleto deduct 5% from the total compulsory fire and explosion insurance premiums collected", suggesting thatthey are liable for that tax also regardless of whether or not it has been specifically charged to or paid bythe insured.

The policyholders' protection fund has been established by Law No 61/2010/QH12 of 24 November 2010 tocompensate policyholders in the event of the insolvency of an insurer and its resultant closure. Thecontributions payable and details of the operation of the fund appear in Section 4, Articles 28 to 37 ofDecree No 123/2011/ND-CP, and the fund is managed by the Association of Vietnamese Insurers.Companies are charged no more than 0.3% of net retained premium income, until such time as the fundreaches 5% of non-life insurers' total assets, and 3% for life insurers. Reinsurance premiums are notsubject to VAT.

No other taxes, stamp duty or charges are levied. No contribution is required from insurance companies tofund the services of the regulatory authority.

Legislative UpdateThere has been no recent new legislation that might affect taxation.

Withholding Taxes on Premiums Paid OverseasPremiums for non-admitted insurance attract VAT in the same way that admitted insurance premiums do.

By Decree No 122 of 27 December 2011 the rate of withholding tax on reinsurance premiums is 0.1%.

Taxation


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VATA VAT system applicable to the supply of goods and services is in operation. The main legislation relatingto VAT is Law No 13/2008/QH12 of 3 June 2008, Decree No 123/2008/ND-CO of 8 December 2008, whichissued the associated regulations, and Circular No 129/2008/TT-BTC of 26 December 2008 guiding theimplementation of certain articles. VAT is applied to insurance premiums as indicated above; it is alsoapplicable to motor repairs and other claims costs.

There are three rates of VAT:

• 0% - for exported goods and services

• 5% - for areas of the economy concerned with essential goods and services

• 10% - the standard rate.

The classes listed as exceptions to the application of VAT are all exempt from the tax.

Corporation TaxIn accordance with the Business Income Tax Law, corporation tax is chargeable on insurance andreinsurance companies' profits at the standard rate of 25%. The law applies to both foreign and domesticinsurers. The Ministry of Finance provides specific guidance on the calculation of deductible expenses forcorporation tax purposes and reserves calculated in accordance with the insurance law are fully taxdeductible.

Definitions of revenue and expenditure of insurance business are contained in Section 5, Articles 17, 18and 19 of Circular No 125/2012/TT-BTC (for insurers, reinsurers and branches), and Articles 20, 21 and 22for brokerages.

CaptivesCurrent tax legislation is silent on the use of offshore captives. The insurance market has not yet developedto the point where the formation of captives by companies operating in Vietnam might be worthconsidering.

Legal System


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Summary and TrendsVietnam is a country in transition, gradually opening to outside influences. It became a member of theWorld Trade Organisation (WTO) in 2007 and the application process became the catalyst for change in allsectors of society as the country brought its social and legislative framework more into line withinternational models. This has been seen most recently in the issue of a new consumer protection law andimplementing decree that took effect on 15 December 2011.

Vietnamese culture is not litigious and most people have no idea of their legal rights or how to pursue them:in many instances disputes will still be referred to the local People's Committee, the executive arm of localgovernment. Awareness of formal judicial institutions such as the courts and supporting organisations suchas legal aid centres and mediation groups is low and tends to decline in proportion to income levels. Thesituation is changing, however, especially in the cities, as foreign investment grows and international anddomestic organisations educate people about their rights. As a general rule, the more serious the incident,the greater the chance that legal action will be taken, but insurers report no obvious upswing inlitigiousness. This may be because a culture of conflict avoidance means that, if a claim against a thirdparty is pursued, it is more likely to be settled out of court than to go through the legal process, and nosignificant increase in claims against third parties or in court action is anticipated as a result of the newconsumer protection legislation, at least in the foreseeable future. If police are called to the scene of aminor traffic accident, they are likely to encourage an amicable settlement of losses.

In almost all cases an out-of-court settlement is reached. When insurance is involved, the insurer, the thirdparty and frequently the broker may all take part in the negotiations. Once an agreement has been made, itis registered with the police as being in full and final settlement of all injuries and damages arising out ofthe incident.

Basis of Legal SystemThe Vietnamese legal system comprises the constitution and the body of codes, decrees, laws, ordinances,decisions, circulars and directives. Laws are passed only by the National Assembly and ordinances areissued only by the Standing Committee of the National Assembly. The government issues decrees,decisions, directives and circulars; decisions and regulations are issued by individual ministries.

The 2005 Civil Code, introduced in 2006 to replace the 1996 Civil Code, forms the basis of Vietnam's legalsystem: it retains six of the seven parts of the original code and amends 314 of the 838 articles. The codeand its statues cover civil, commercial, business and labour relations including the rights to intellectualproperty and technology transfer, personal rights and the right to take legal action.

Commercial transactions are also governed by the Commercial Law and the inclusion of aspects ofcommercial relations in the 2005 Civil Code has opened up the possibility of conflict between the twopieces of legislation.

Legal System


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An unsatisfactory aspect of Vietnamese legal practice is its failure to distinguish between civil and criminalliability. Contractors and factory managers who are responsible for causing death through negligence ordishonesty are more likely to be imprisoned than sued for damages.

Law No 59/2010/QH12 on the protection of consumers' interests was passed on 17 November 2010. Thelaw effectively introduces the concept of strict liability on those manufacturing, importing or marketinggoods for injury or damage caused by the product: the only exception is when the defect in the product wasnot verifiable by scientific or trading standards at the time the product was manufactured, imported or sold.The law also obliges manufacturers or importers to take immediate steps to stop supplying defectivegoods, to recall the product, announce the withdrawal in the media, and advise the authorities of thecompletion of the recall when it is done. The law provides that an "uninterrupted service contract", definedas one in force for more than three months, must be approved by the Ministry of Industry and Trade andthe sale of the product may be stopped by the ministry at any time if it is thought to be unfair to theconsumer. Doubts have been raised about whether the insurance market is subject to the decree as, if it is,it will imply an overlap of control over insurance with the Ministry of Finance. Implementation Decree No99/2011 was issued on 27 October 2011 and took effect on 15 December 2011.

The Civil Code provides that the statute of limitations shall be the time limit specified by law. To the extentthat subordinate legislation refers to specific time periods to apply to specific circumstances, the timeperiod in such subordinate legislation prevails. Therefore, a three-year period of limitation from theoccurrence of the insured event as specified in the Law onInsurance Business (Article 31) applies to legalproceedings involving insurance contracts.

For tort claims a period of one year applies, for civil contracts a period of two years counted from the datethe interest of an individual or entity is infringed unless otherwise provided by law. Disputes in connectionwith movable or immovable property have a period of limitation of 10 years and 30 years respectively.

LitigiousnessMost Vietnamese are not aware of their legal rights. They are not litigious, and their culture favoursresolution of disputes, both between individuals and involving business matters, through discussion andnegotiation.

It has been alleged that a factor deterring litigation is the assumption that in many cases the decision of thecourt may be influenced by the financial incentives paid to court officials: in short, whoever pays most,wins.

Legal System


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Access to the CourtsCourt fees and costs may seem low in comparison with those of other countries but are too high for most ofthe local population, who earn very low wages. Costs range between VND 200,000 (USD 10) for civil casesin the courts of first instance when the value of the property in dispute is VND 4mn (USD 192) or less, toVND 112mn (USD 5,377) plus 0.1% of the value of the property in disputes where the value exceeds VND4bn (USD 192,049). In cases involving fatalities, no charge is made to the victim's relatives. It is alleged,however, that payments to judges and other court officials may be higher than the stated range of costs.Access to the legal system is also hampered by a lack of knowledge, especially among the poor, of how itsinstitutions operate, and a general lack of confidence in the legal process and institutions, even amongthose who have used them.

While lawyers' fees are beyond the means of most Vietnamese, legal aid centres, of which there are morethan 60 in the cities and provinces, provide free legal advice to the poor. In addition, in the case ofwork-related claims, trade union support is available.

Lawyers' fees are fixed by the government but unofficial arrangements are said to be common and some"no win, no fee" arrangements and other additional payments have been seen in recent years. The amountcharged depends on the sums involved and the complexity of the case but the average is said to be about25% of the amount awarded. Lawyers are free to advertise their services: so far, there have been noinstances of "ambulance chasing".

Court ProcedureThe judicial system is based on Communist legal theory and French civil law.

The court system has three levels: the district courts, the provincial courts and the Supreme People'sCourt. Each administrative district has a District People's Court which is the court of first instance forcriminal cases and civil, labour, economic and administrative disputes. Most cases at the first instance aresettled by a professional judge aided by two lay assessors, all of whom are elected by and accountable tolocal government. Each province has a Provincial People's Court which acts as a court of appeal for casesreferred from the district courts and also as a court of first instance for serious crimes. Cases are heard bythree judges. The Supreme People's Court is the highest appellate court in the country: its members areelected by the National Assembly for five-year terms.

The Supreme People's Office of Supervision and Control or Procuracy is responsible for the uniformimplementation of the law. The office is headed by a procurator-general who is appointed for a five-yearterm by the National Assembly. Below the central office are local offices of supervision and control whichensure observance of the law by local government bodies and by all citizens.

Legal System


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Jurisdiction in a civil case may rest where the defendant is located or where the dispute arises and incertain instances a plaintiff may select the court in which to commence the case. If a party to a dispute is aforeigner the dispute will be heard by a provincial court.

Pre-hearing conciliation is compulsory in civil proceedings and is conducted by the court. If conciliationfails, the court then proceeds with a preliminary, public hearing. There is no time limit for a trial. Disputeswill be tried by a hearing panel including a judge and two jurors.

The judicial process is swift: most cases go through the system in six to 12 months and sometimes less ifall the documentation is in order.

There is still a preference for claims to be settled out of court: this can be by direct negotiation between theparties, by arbitration or by the intervention of the People's Committee. Recourse to litigation tends to beavoided whenever possible. A new commercial arbitration law, No 55/2010/QH12 of 17 June 2010, cameinto effect on 1 January 2011. The law is designed to facilitate the use of arbitration as a rapid and moreeffective means of dispute settlement utilising the seven arbitration centres that exist throughout thecountry.

Awards in the courts are assessed by judges, assisted in the district People's Court by two lay assessors.Awards may also be made by the People's Committees, arbitrators and local mediation groups.

Although the United States Agency for International Development (USAID) reported that the judicial systemin Vietnam has improved greatly since 2000, judges continue to be appointed by the government and arevetted for political reliability. There is a general perception in the insurance market that the courts aresubject to political pressure and may sometimes be corrupt.

Assessment of CompensationThe award of damages is governed by the Civil Code and Resolution 01/2004/NQ-HDTP of 28 April 2004.Damages in cases involving injury include: compensation for medical expenses; compensation paid to acarer during the recovery process; loss of or reduction in income; expenses for long-term care; pain andsuffering. Awards for pain and suffering are capped at 30 times minimum monthly salary. Death awards willtake account of some of these factors and also of burial expenses: the average starting point for a deathclaim is about 20 times monthly salary. Award amounts may also be influenced by factors such as the ageof the victim, the degree of disability, his or her occupation and salary, dependants, prospects, and so on.Awards may also be made for damage to honour, dignity and reputation.

Legal System


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There is no set method of assessment, resulting in award amounts which may seem arbitrary. In the caseof motor vehicle accidents, the minimum third party limit may simply be applied without any othercalculation being made. There are no limits or thresholds and no structured settlements in the market.Court awards are very low by western standards and also by those of more developed Asian countries. Theaverage payment for a death resulting from a motor vehicle accident is about VND 30mn (USD 1,440) andthe maximum is about VND 50mn (USD 2,400). This has increased little in recent years.

On appeal, cases are viewed on their merits: awards are not routinely upheld, overturned or modified.

The courts have the power to apply interest to the amount of the award and costs but this is not common.Payment of awards is enforced by the Office of Judgment Enforcement which has wide powers includingthe freezing of the defendant's bank accounts, the seizure of his or her property and the withdrawal of sumsfrom bank accounts. Despite that, in practice, considerable problems have been experienced in theenforcement of judgments. An element of costs is generally included in the award made to the successfulparty in the litigation. That will not necessarily be for 100% of the costs incurred but only those items thatthe court considers justifiable. Typically, that will involve the recovery of 100% of the court costs but not thelawyer's fees.

Punitive and exemplary damages are unknown in Vietnam. Awards may be made for pure economic orfinancial losses but not for moral damages; as far as could be ascertained, no cases have been brought forloss of office or for racial or sexual discrimination.

Insurance Market Overview


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Historical Development

History

Pre-1976 Before reunification, a number of insurance companies operated in South Vietnam. In thenorth there was no commercial insurance market. In 1963 the state-owned Bao Viet wasestablished in the north, principally to cover marine cargo risks.

1993 Decree No 100/CP was issued heralding the development of an insurance market.Aon became the first international licensed broker in Vietnam.

1994 The state-owned Vietnam National Reinsurance Company was registered. Bao Minh wasestablished, bringing to an end the monopoly of Bao Viet.

1996 The Ministry of Finance signed an order converting Bao Viet into the Vietnam InsuranceCorporation, which was licensed as a composite insurer.Bao Viet and Tokyo Marine and Nichido Fire established Vietnam International AssuranceCompany, the first joint venture involving a foreign insurer.

2000 Law on Insurance Business No 24/2000/QH10 was approved at the eighth session of the10th legislature and came into effect on 1 April 2001.

2001 Groupama became the first 100% foreign-owned insurer in Vietnam.2006 The part-privatisation of the state insurers Bao Viet, Bao Minh, Petrovietnam Insurance

and Vietnam National Reinsurance Company (VinaRe) was completed.2007 Vietnam became the 150th member of the World Trade Organisation. Steps were taken to

open up the market to foreign players.2011 PVI Reinsurance Corporation was established as the second domestic reinsurer in the

market.2012 HSBC sold its stake in Bao Viet's life and non-life operations to Sumitomo Life Insurance

Co.PVI Group started a joint venture life company with Sun Life of Canada.

The Market Today

Summary and TrendsVietnam is continuing its slow path to modernisation, compared to developed markets, for its non-lifebusiness, but in the process, suffering most of the ills which other markets have managed to survive in amuch longer timespan.

The once booming and expanding new economy, export driven mainly by foreign direct investment,attracted too many companies in a rush to cash in, but the expansion has drastically slowed, leaving 29insurers, and two reinsurers, to fight over existing business. The result is ever reducing rates, certainly forproperty and marine classes, and unsustainable competition in the medium to long-term. Certainly as far aslocal companies are concerned, strategy is purely top-line based, with salary packages for topmanagement geared to production rather than profitability. The market is still short of experienced andqualified practitioners at all levels, which will cause problems in the long-term.



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Whilst the supervisor, the Ministry of Finance, is trying to bring some semblance of order to proceedings,their three latest offerings, Decree No 123/2011 and Circular Nos 124/2012 and 125/2012, have causedmore confusion than harmony. Neither has addressed previous problems, specifically homogenisingreporting standards, defining profitability to international norms, and properly classifying business types.The long march to IFRS, according to at least one observer, is currently in reverse.

Whilst economic activity has certainly slowed in 2012, continuing into 2013, premium growth is stillapparent, especially in the property account. This is due in no small measure to the intervention of SwissRe, which by various means, has exerted some influence on rating levels, and has ensured the properapplication of the tariff rating on the 16 classes of high-risk fire business. Swiss Re not only has a share inVinaRe, the former state-owned reinsurer, but also lead the majority of local property treaties, andtoughened up on terms in the January 2013 renewal season.

Despite everything, profitability appears positive, although the lack of standard reporting hides the affects ofunder-reserving, something which Circular 125/2012 is trying to address.

Otherwise, expansion is not government or legislation-led. There are no plans for widening the scope ofstatutory classes, and casualty classes are not generally bought, or sought. Personal lines, excludingcompulsory motor, are also slow, and penetration rates are low. Banks are awash with money, but even atlow interest rates, cannot tempt potential borrowers, especially for house purchase.

Market SizeA breakdown of the total market size in 2012 is shown below.

Life Non-life Personal Accident &Health

Total market

Premium in VND mn 17,295,188.70 18,746,313.00 4,011,680.00 40,053,181.70

Premium in USD mn 829.15 898.72 192.32 1,920.19

% of total market 43.18 46.80 10.02 100.00Source: Axco Global Statistics / Industry Associations and Regulatory Bodies


Vietnam ranks 64th in the world in non-life premium terms (excluding personal accident (PA) andhealthcare), between Egypt and Kazakhstan (2011 figures).

The following table compares the annual growth rates of non-life premium income in local currency with thenominal GDP growth and inflation rates over last available five years.

2008 2009 2010 2011 2012Premium growth (%) 30.23 25.32 24.98 20.97 10.33

Nominal GDPgrowth (%)

29.84 11.67 19.45 27.97 20.82

Inflation rate (%) 23.12 7.05 8.86 18.68 9.09



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Growth in the non-life, life, and PA and healthcare markets is shown below.


The division of the market in 2012 is shown below.

Note: due to rounding some totals may not equal 100%.

Market PenetrationMarket premium as a percentage of GDP and expenditure on a per capita basis expressed in USD areshown below for the year 2012; comparisons are made with China, Malaysia and Thailand.



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Life including riders Non-life (P&C) Personal Accident &Healthcare†

Total

% per capita % per capita % per capita % per capitaVietnam 0.56 9.26 0.61 10.04 0.13 2.15 1.31 21.45China 1.72 102.48 1.03 61.33 0.24 14.37 2.98 178.18Malaysia 2.89 299.66 1.40 145.10 0.22 22.64 4.51 467.39Thailand 3.39 180.10 1.35 71.61 0.28 14.80 5.02 266.51

Note: † PA & Healthcare data represents PA & Healthcare business other than life riders, whether written by life, non-life or specialisthealthcare insurers. Details of the split of such business (where available) are included in Appendix 1.

Due to rounding some totals may not equal the breakdown above.Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

The comparatively low penetration rate for non-life business reflects the still large divergence between therich and poor in modern, mainly rural, Vietnamese society, and the dominance of foreign-owned economicactivity.

Market Participants

Summary and TrendsThe direct market has not expanded in the last 18 months in terms of numbers of participants, althoughmovement has taken place in the corporate make-up and share-holdings of certain companies:

• ERGO from Germany has bought into local insurer Global Insurance Co

• HSBC has sold its share in Bao Viet to Sumitomo Life.

Also, Baoviet Tokio Marine Joint Venture Insurance has changed its name to Baoviet Tokio MarineInsurance Company Limited, from 1 July 2013.

The three largest local companies still control over 50% of the non-life market, including mostgovernment-controlled or connected business, which outsiders observe, is maintained by illicit commissionpayments to interested parties. Thus a two-tier market is evident, whereby the international community,both underwriters and brokers, tend to operate separately, also managing in the main to avoid vastvolumes of personal lines, especially compulsory and voluntary motor.

There are currently 29 direct insurers, of which

• nine are single member, limited liability companies

• four are multi-member limited liability companies

• 16 are joint stock companies.

Eight of the companies are 100% foreign-owned, while others have minority foreign interests. In additionthere are 32 foreign company representative offices.



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There is some movement towards the formation of broader financial services groups, as described below.

Bao Viet Holdings was formed in 2006. The group comprises the following subsidiaries: Bao VietInsurance; Bao Viet Life; Bao Viet Securities; Bao Viet Fund Management Company; Bao Viet Bank andBao Viet Investment Joint Stock Company. It has two independent institutions: Bao Viet Training Centreand Bao Viet Insurance Research Institute. Sumitomo Life has recently taken over HSBC's shareholding inBao Viet.

Following the model of Bao Viet, Bao Minh established Bao Minh Securities Joint Stock Co and Bao MinhFund Management Joint Stock Co as part of a plan to diversify into other sectors.

PV Insurance Corporation is part of PVI Holdings which is owned by the Vietnam Oil and Gas Corporation(Petrovietnam) which has subsidiaries in many sectors. PVI Holdings also has direct interests in a reinsurer(PVI Reinsurance - PVI Re), a hospital (PVI Hospital Joint Stock Company), an investment company (PVIInvestment and Development Joint Stock Company) and a media company (PVI Media). It has recently setup a life insurance company and a fund management company.

A number of other insurance companies have bank shareholders, including Incombank-Asia Insurance,Petrolimex Insurance (PJICO) and Vien Dong Insurance.

There are no mutual companies, or co-operatives.

Privatisation/DeregulationThe part-privatisation process was completed by 2007, whereby the former national companies - Bao Viet,Bao Minh, PV Insurance and VinaRe - were partially sold off. As a result each insurer now has a majorforeign strategic partner. These are: Sumitomo Life (Bao Viet); AXA Insurance (Bao Minh); TalanxHDI-Gerling (PV Insurance) and Swiss Re (VinaRe).

State Insurance CompaniesThe state retains a 100% shareholding in two non-life enterprises, BIDV Insurance Company andVietinbank Insurance Company (Bao Ngan), and smaller shares in Vietnam Reinsurance Company, BaoViet, Bao Minh and PV Insurance. It also has indirect shareholdings in several other companies.

Market StructureThe market comprises companies with three distinct legal forms: joint stock companies, single memberlimited liability companies and multiple-member limited liability companies. The state has interests directlyor indirectly in several direct insurers and in the reinsurer, VinaRe.

A number of banks have shareholdings in insurance companies, including the following:

• BIDV in BIC Insurance Company



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• Incombank-Asia Insurance - a 50/50 joint venture between Industrial and Commercial Bank of Vietnamand Asia Insurance Company

• Vietcombank in Petrolimex (PJICO) Insurance Company

• Vien Dong Insurance - major shareholders include the Saigon Commercial Bank and the Hanoi BuildingCommercial Bank .

The leading insurance companies ranked by premium income for 2012 are shown below.

The most significant players in Vietnam's non-life market are Bao Viet, Bao Minh and PV Insurance, whichhad a combined market share of over 54% in 2012. If fourth-placed PJICO (owned by the state-ownedPetrolimex Group) and fifth-placed PTI (owned by the Post and Telecommunications Ministry) are added,the combined market share of government-controlled companies represents a fraction over 70% of grosswritten premiums.

Bao Viet is a joint stock company which counts the Ministry of Finance among its shareholders. It operatesin more than 60 provinces throughout the country. It writes all classes of business, including life, and holdsa dominant position in most classes. Its share of the non-life market declined from about 52% in 2000 to23.66% in 2012, only because the market has expanded.

PV Insurance is a wholly owned subsidiary of Petrovietnam that has been in business since 1996 and waspart-privatised at the end of 2006. Although it writes most classes of non-life business, it specialises inmarine, engineering and especially energy insurances, a segment in which it has gained a good reputationinternationally. Its market share in 2010 was 20.6%.



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Bao Minh used to be a wholly state-owned company but was partly privatised in 2004. It writes only non-lifeinsurance, having sold its interest in Bao Minh CMG to Dai-ichi Life in 2006. The market share of thenon-life company fell from about 25% in 2000 to 11.04% in 2012. In September 2007 the AXA Grouppurchased a stake in the company.

Foreign insurers are not permitted to operate in Vietnam through underwriting agencies, and representativeoffice licences do not allow insurers or brokers to solicit for business. There are no risk retention groups ordomestic captives, and Lloyd's is not licensed.

There are 32 representative offices of foreign insurers in the country.

Market ConcentrationThe aggregate market share (%) of the top five and top 10 companies over the last available five years isshown below.

Market segment 2008 2009 2010 2011 2012Top 5 companies 80.18 73.50 69.92 69.26 70.04

Top 10 companies 90.60 85.73 82.68 81.86 82.53Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Company ChangesWithin the last 18 months, various movements have taken place in the market, with shares changinghands, rather than new companies appearing or existing companies withdrawing:

• ERGO from Germany has bought into local insurer Global Insurance Co

• HSBC has sold its share in Bao Viet to Sumitomo Life.

Total AssetsThe non-life total assets over the last available five years were as follows:

2007 2008 2009 2010 2011Total assets (VNDbn)

16,650.00 22,759.00 27,537.00 34,350.15 35,546.23

Growth (%) 102.68 36.69 20.99 24.74 3.48Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Technical ReservesThe total technical reserves over the last available five years were as follows:

2007 2008 2009 2010 2011Total technicalreserves (VND bn)

4,461.00 5,503.00 7,416.00 9,425.85 12,091.02

% of gross premium 54.32 50.26 53.92 55.22 58.76Source: Axco Global Statistics / Industry Associations and Regulatory Bodies



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Expense RatiosNo details of expense ratios are published.

ProfitabilityNo information is published by the Ministry of Finance or the Association of Vietnamese Insurers on theprofitability of the market but unofficial local sources indicate that, despite competition and rate reductions,results continue to be positive. The caveat here is that no definition of profit appears in local legislation, andcompany figures, at least those not using IFRS, are open to doubt.

RetentionsThe following table shows the retention ratios (net written premiums against gross written premiums) bymajor class over the last available five years.

Line of business 2008 2009 2010 2011 2012Property 40.18 45.30 38.28 37.03 29.43

Construction andengineering

34.67 33.55 41.36 36.53 37.27

Motor 99.28 98.52 99.31 99.39 99.22

Liability 74.02 71.69 64.89 73.28 60.00

Surety, bonds andcredit

19.02 55.72 22.81 25.97 21.33

Marine, aviation andtransit

40.11 37.97 40.36 41.50 39.12

Personal accidentand healthcare

96.49 96.12 95.26 94.47 96.38

Total non-lifemarket

63.85 65.16 65.67 65.08 62.85


PoolsThere are no pools in the Vietnamese insurance market.

Insurance AssociationThe Association of Vietnamese Insurers (AVI) was established under Decree No 23/1999/QD-BCTCBCPand inaugurated in December 1999. Phung Dac Loc is secretary general of the association.

The AVI's principal objectives are to:

• mediate on behalf of its members with the supervisory authorities on legislation and other mattersaffecting the industry with particular emphasis on the strategic development of the Vietnameseinsurance industry

• organise forums for the dissemination of laws and policies, and make recommendations to improveinsurance legislation and related issues

• develop rules governing the co-ordination of activities of its members including self-regulation



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• collect, collate and publish statistics relating to insurance business

• assess the results of and develop plans for the insurance industry

• assist in the co-ordination of training for staff and agents by conducting and arranging workshops andseminars

• develop public relation programmes to promote the industry to the general public.

It is now also responsible for the policyholders' protection fund.

The association has two standing committees (legal and financial): there are no regular meetings ofmembers.

Reinsurance


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Local Reinsurance Market

Summary and TrendsWhilst there are two local reinsurers now in the market, VinaRe (the previously government-controlledcompany) and latterly PVI Reinsurance Corporation (a wholly owned subsidiary of PVI Holdings), the mostactive and dominant player is Swiss Re. Historically Swiss Re has lead the majority of the local companies'proportional and/or non-proportional treaties, and now partially owns, and effectively controls by virtue of amanagement agreement, VinaRe. Thus it has an overwhelming influence on what is happening currently inthe local direct market, by imposing terms of treaties, from 1 January 2013 specifically, and also byadditional facultative capacity via VinaRe, which is supported by the Talanx group via HDI-Gerling, whichhas a stake in PVI Insurance.

Circular No 220/2010/TT-BTC came into force 1 March 2011, and makes compulsory the buying of fire andexplosion insurance for risks under USD 30mn, in respect of 16 risk classifications, and sub-classes, andprovides a tariff. This was largely ignored and/or abused, and Swiss Re/VinaRe insisted on its fullimplementation, as well as aggregate accumulation limits for natural perils, from 1 January 2013.

For risks over the USD 30mn threshold, fire and perils or IAR rates are that fine, that internationalreinsurers have withdrawn support, with the result that local reinsurance, or coinsurance, is used to placelocal risks, whereby it is reckoned that the market capacity is such that most if not all local risks can beabsorbed in Vietnam. The exception to this is probably the energy market, which is controlled by offshorereinsurers, at internationally acceptable rates, terms and conditions, via PVI Re.

There are no longer compulsory cessions to VinaRe, but traditionally the local companies still deal withthem, both treaty and facultative placements. By virtue of Circular No 124/2012/TT-BTC, retrocessions areno longer allowed back to the original insurer.

From the 1 January 2012 treaty renewal season, Swiss Re also insisted on extraneous perils event limits,which has forced further use of facultative placements offshore, forcing rates up in certain instances.

Local Reinsurance Company Operating RequirementsThe Law on Insurance Business specifies that "insurance enterprise" means an enterprise which is"established, organised and active under the provisions of this law and other applicable laws andregulations to conduct insurance business and reinsurance business". Reinsurers are treated in the sameway as insurance companies and all provisions established in legislation for insurers also includereinsurers.

Minimum capital and asset requirements were further established by Decree No 123/2011/ND-CP ofDecember 2011. These were as follows:

• branches of foreign insurers - total assets of USD 2bn and legal capital of VND 200bn (USD 9.6mn)

• non-life reinsurance company or health reinsurance company or combined non-life and life reinsurancecompany - legal capital of VND 400bn (USD 19.2mn)

Reinsurance


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• life or life and health reinsurance companies - legal capital of VND 700bn (USD 33.6mn)

• reinsurance companies writing non-life, life and health reinsurance - legal capital of VND 1.10trn (USD52.81mn).

Two per cent of the legal minimum capital must be deposited in a local bank as a security guarantee thatmay be drawn upon, with the permission of the Ministry of Finance, in situations of inadequate solvency.

Charter capital is required to be fully paid up within six months of receiving the authorisation in principle tooperate.

Other provisions relating to establishing a local company, technical reserves and solvency are the same asthose set out for direct insurers in the insurance law, Decree No 46/2007/ND-CP, Decree 123/2011/ND-CPand Circular Nos 124/2012/TT-BTC and 125/2012/TT-BTC. Full details may be found in the relevantparagraphs of the Company Registration and Operating Requirements section of this report withinSupervision and Control.

State Reinsurance CompanyThe domestic reinsurer Vietnam National Reinsurance Company (VinaRe) was 100% state-owned until2004. It is now part-owned by the state. Swiss Re became the company's strategic partner in 2008 when itpurchased a stake in the reinsurer.

The state also holds an indirect shareholding in the new reinsurer, PVI Reinsurance Corporation.

There are no compulsory cessions to either company.

Local Reinsurance CompaniesVietnam National Reinsurance Company (VinaRe), established in 1994, is the principal local reinsurer. Itsmajor shareholders include the 13 non-life companies which were operating in the market at the time of itscreation, the state and Swiss Re.

While continuing to support the local market, VinaRe has also expressed its wish to expand its portfolio ofreinsurance accepted overseas with the help of Swiss Re. Its stated intention is "to build the company intoan enterprise with a strong financial capacity, capable of playing a leading role in the domestic and regionalmarket".

It has no involvement in any alternative risk transfer (ART) operations.

PVI Reinsurance Corporation was set up in October 2011, incorporating the PVI Group's previousreinsurance operations. The company operates mainly in the local energy and marine segments, fromwhich it gains approximately 75% of its income via PVI, the balance being local and regional business.

Reinsurance Written by Direct CompaniesDirect insurers are permitted to accept inwards reinsurance. There are no current relevant statisticsshowing business volumes, either local or regional.

Reinsurance


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International Reinsurance (Inwards)Other than VinaRe and PVI Re, the local market of direct insurers do not write international business. Thetwo local reinsurers have made their intentions clear that they wish to write an international book also, butthere are no figures to show current volumes, or profitability thereof.

Company ChangesThere have been no recent company changes.

Local Reinsurance Arrangements

Summary and TrendsThe Vietnamese market is very traditional in its reinsurance arrangements. As yet there has been no realmovement towards non-proportional reinsurances to replace proportional covers but it is reported that moreand more companies are taking working excess of loss cover and many are increasing their retentions.

Proportional treaties still predominate in most classes, especially for the smaller players in the market,though some local companies have moved to excess of loss arrangements for marine hull and cargo astheir experience has been good.

For property, casualty and construction/engineering risks reinsurance arrangements also generally remainproportional though some miscellaneous accident excess of loss covers exist.

Motor is generally retained for net account.

There are no pooling arrangements for any class. The government instigated two pilot schemes foragriculture/aquaculture risks, and export credit guarantee business, neither of which performed profitablyfor either direct or reinsurers.

Whilst all direct transactions in Vietnam, including insurance buying, must be completed in VND, this doesnot apply to reinsurance, where the majority of treaty business is placed overseas. Thus all reinsurancetreaties and limits are expressed in USD.

At present there is no interest in financial reinsurance or alternative risk transfer (ART).

Regulatory ConsiderationsRegulations specific to the writing of reinsurance are established by Section 5 of Circular No124/2012/TT-BTC. A company's reinsurance programme must be approved by its board of management orboard of directors on an annual basis or when market conditions change. It is not necessary to submit it tothe Ministry of Finance for approval but the Insurance Regulatory and Supervisory Administration mayrequest details if it wishes or inspectors may examine the programme during inspections. If, on inspection,the regulatory authority finds reinsurance security which is unacceptable, it has the power to demand that itbe substituted.

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Insurance companies are required to retain no more than 5% of their equity on each risk or on each loss,and must therefore reinsure the excess above that amount. Reinsurers are not permitted to retain morethan 10% of their capital on any one risk. Insurers are not permitted to cede 100% of any risk though nominimum retention is specified. Reinsurance may not be ceded to foreign reinsurers at terms morefavourable than those offered to local reinsurers, by virtue of Article 45 of Circular No 124/2012/TT-BTC,Paragraph 3, although in practice this is said to happen occasionally. Retrocessions are not allowed to theoriginal insurer of the risk.

A withholding tax of 0.1% applies on all payments made to overseas reinsurers.

Under many Vietnamese tax treaties, the profits of foreign reinsurers derived from reinsurance in Vietnammay be exempt from corporation tax if a notification file is presented to local tax authorities. In accordancewith Circular 28/2011/TT-BTC, treaty notifications must be prepared on an annual basis covering allinsurance policies signed, or expected to be signed, with Vietnamese insurers in that year.

Premium and loss reserves are no longer retained under proportional treaties.

Currency exchange control is not an issue in the market, as long as payments abroad, mostly in USD, aresupported by relevant documentation.

There are no local reinsurance brokers, and retail brokers are only permitted to handle reinsurance if anextra VND 4bn (USD 192,049) capitalisation is paid up.

Many foreign brokers are involved in the handling of both treaty covers and large risks, but it is notnecessary for them to be registered with the Ministry of Finance.

Non-admitted

Insurance companies are free to place their reinsurance wherever they wish and with any company thatthey wish. There is no requirement for overseas reinsurers to be registered with the Ministry of Finance.

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Circular No 124/2012/TT-BTC established the requirement that the leading foreign reinsurer and all foreignreinsurers accepting 10% or more in any reinsurance contract must be rated at least BBB by Standard andPoor's/Fitch, B++ by AM Best, Baa1 by Moody's or the equivalent in the previous financial year. Whenreinsurance is ceded to overseas parent companies or to companies within the same group that have nocredit rating, details must be given in writing to the Ministry of Finance. The market view is that the situationhas not been well controlled by the authorities, especially in relation to facultative reinsurance.

Article 15, Paragraph 1 b) of Circular No 125/2012/TT-BTC stipulates that for reinsurance premium cededto reinsurers not meeting the above criteria, the minimum solvency requirement for that business will be100% of premiums for the original contract.

Reinsurance StatisticsPremiums ceded by non-life insurers locally and abroad are shown below.

2008 2009 2010 2011 2012Premiums cededlocally (VND mn)

1,617,472.00 1,810,627.00 2,186,163.00 2,373,807.00 3,223,550.00

% of direct writtenpremiums

14.86 13.27 12.82 11.51 14.16

Premiums cededabroad (VND mn)

2,603,303.00 3,291,643.00 4,127,961.00 5,435,968.00 5,933,013.00

% of direct writtenpremiums

23.91 24.13 24.21 26.35 26.07


The following table shows the reinsurance ratios (premiums ceded against gross written premiums) bymajor class over the last available five years.



65.33 66.45 58.64 63.47 62.73

Motor 0.72 1.48 0.69 0.61 0.78

Liability 25.98 28.31 35.11 26.72 40.00


80.98 44.28 77.19 74.03 78.67


59.89 62.03 59.64 58.50 60.88


3.51 3.88 4.74 5.53 3.62


36.15 34.84 34.33 34.92 37.15


RetentionsThe following table shows the retention ratios (net written premiums against gross written premiums) bymajor class over the last available five years.

Reinsurance


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34.67 33.55 41.36 36.53 37.27

Motor 99.28 98.52 99.31 99.39 99.22

Liability 74.02 71.69 64.89 73.28 60.00


19.02 55.72 22.81 25.97 21.33


40.11 37.97 40.36 41.50 39.12


96.49 96.12 95.26 94.47 96.38


63.85 65.16 65.67 65.08 62.85


Local Risk SharingMarket practice used to be to avoid coinsurance, with companies preferring to write 100% of any risk andplace reinsurance. Now, however, as competition is pushing rates down not supported by overseascapacity, business is being placed more frequently on a reciprocal basis in the local market, especiallylarge risks in the CAR and energy sectors. This tendency is being encouraged by brokers and by someclients who expressly request that their business be shared among several insurers. It is common forreinsurers to impose a limit of about 50% of the normal treaty capacity for risks accepted as a follow line incoinsurance in order to limit or control their exposure.

Facultative reinsurance is also used extensively, mainly for engineering and other property business. Theuse of facultative has increased in recent years as rates have declined and reinsurers have refused tofollow them down. In some cases local direct insurers have been obliged to place the reinsurance in theinternational market at rates higher than the underlying primary rate, resulting in very low margins or evenlosses. This is now forbidden, under the terms of Article 45 of Circular No 124/2012/TT-BTC. Whenpossible, such risks are placed through facultative reinsurance in the local market and several companiesnow have reciprocal facultative arrangements to cater for these situations.

There are no local market pools.

The government instigated two market pilot schemes for agriculture/aquaculture risks, and export creditguarantee business, neither of which have performed profitably for either the direct insurers involved, orreinsurers.

Treaty ReinsuranceThe market comprises both very large and very small companies, including some start-ups, so that it isdifficult to generalise about their practices. Most insurers' arrangements, however, would be likely to takesome of the forms described below, and always expressed in USD, whereas direct insurance transactionsmust be in VND.

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Property: one or two surplus treaties with a total capacity of about USD 40mn though it is understood thathigher limits of up to USD 100mn exist for the larger local insurers. Retentions may be protected byworking excess of loss cover, which, in the case of the largest companies, has a limit of about USD 5mn.Companies also arrange catastrophe excess of loss cover, generally combined with the working excess ofloss, providing cover for about USD 5mn in excess of USD 250,000. Absolute net retentions range fromUSD 200,000 to USD 1mn.

From 1 January 2013 renewals, capacity was restricted in respect of categories 3 and 4 of the compulsorytariff, due to poor results affecting overall reinsurer profitability, together with percentage of lossdeductibles, rather than fixed amounts, although treaty commissions were not reduced in many cases.Small reductions of 1% were imposed otherwise. Additional facultative cover was also more difficult toplace, and Swiss Re imposed further capacity restrictions on coinsurance shares, altogether trying to forceprimary rates up, and business is being lost as a result. It was reported some of the smaller companies hadproblems finalising their treaties, or were late in completing, with some anecdotal evidence of cover beinggranted on risks with no reinsurance support.

Engineering: typically reinsured by a surplus treaty with cover up to USD 40mn or USD 50mn. Smallercompanies have a treaty capacity of about USD 10mn to USD 15mn. Gross retentions may reach USD5mn or even USD 10mn and net retentions about USD 1mn to USD 1.5mn. Most companies have excessof loss covers with limits of up to USD 50mn but one major company operates without excess of loss cover.The smaller companies may have a combined property treaty that also covers the engineering classes andcombined excess of loss protection, including cover for about USD 5mn in excess of USD 250,000.

Marine: there is no common way of dealing with marine reinsurance in the market. It may be handled bymeans of proportional treaties (quota share and/or surplus), with separate contracts for each or by acombined treaty. It is becoming more common for marine hull and cargo to be reinsured by means of anexcess of loss treaty with a single limit of about USD 8mn to USD 10mn. The average net retention formarine is about USD 200,000 to USD 300,000. Companies may operate with a working excess of losscover.

Miscellaneous accident: this is insured on a surplus treaty basis, with retentions and limits that may varyaccording to the type of business included. The treaty covers a range of classes including theft, liability,professional indemnity, personal accident, workers' compensation and, in one case at least, motor. Coveris arranged up to a maximum of about USD 10mn in the case of the major foreign players, less for smallerdomestic companies, and retentions are up to a maximum of USD 500,000. Excess of loss cover is alsofound, with limits of about USD 4.5mn in excess of USD 500,000.

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Motor: in the case of the large companies motor is accepted for net retention, protected by working excessof loss cover, and facultative reinsurance is placed when required, for large value vehicles. Smallerinsurers may have treaty cover, either proportional or non-proportional. Quota share covers are not evident.

Aviation: a small volume is retained locally and the balance placed with VinaRe and in the internationalmarket. There are no local reinsurance treaties and all business is placed facultatively.

Cessions to treaties are usually made on a sum insured basis.

Reserves are no longer retained under proportional treaties. There are no arrangements on a multi-yearbasis but, as has been described, a number of the proportional treaties are on a multi-class basis.

Many of the local Vietnamese companies offer a share in their treaties to VinaRe which often accepts asmall line, but for the most part reinsurance treaties (proportional and non-proportional) are placed with theinternational market with companies like Swiss Re and Munich Re. The Lloyd's market is the leader forenergy risks.

Not all companies buy working excess of loss cover but there is a trend towards greater take-up. Treatiesmay comprise a single cover including working and catastrophe excess of loss.

The major international insurers tend to rely on in-house group capacity, with possibly a small share placedin regional markets.

Facultative ReinsuranceFacultative reinsurance is arranged mainly for large engineering and property risks but it is also used formarine hull and cargo, aviation insurances, and to a lesser extent casualty risks.

The facultative option is taken usually for risks in excess of treaty capacity, particularly property and CARrisks, and those that are excluded from treaties because of the nature of the risk or the fact that the ratesand terms and conditions are unacceptable. The erosion of rates has made it much more difficult to placefacultative reinsurance with the professional reinsurers, including VinaRe, with the result that an increasingvolume is being placed on a reciprocal basis with other local direct insurers. Market capacity is such thatmost local risks may be absorbed, with the exception of the speciality upstream and downstream energyrisks.

The majority of facultative placements by local insurers are on a proportional basis.

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Catastrophe ReinsuranceMost but not all companies have catastrophe reinsurance for property business, to include theirengineering portfolios. Though the majority have bought the cover to protect against accumulation losses,some of the large companies purchase catastrophe cover specifically for the typhoon risk. Catastrophetreaties offer cover for all perils of nature and the accumulation risk. Some buy the cover for non-marinerisks only while others buy cover for their whole book of non-life business. Scant attention is paid in themarket to control of accumulations and reinsurers suspect that, though they ask the direct insurers tomaintain a control, the exercise is not always performed in as rigorous a fashion as required, althoughSwiss Re, via VinaRe, is now exerting more pressure in this regard.

Treaties have a maximum capacity of about USD 7mn, with most limits in the USD 2mn to USD 3mn range,and most are combined working and catastrophe excess of loss covers though some companies haveseparate treaties for each. Companies protect themselves down to about USD 200,000 to USD 500,000.

Rates are fixed by the international reinsurers using their own catastrophe models but the professionalmodelling companies have not yet developed models for the catastrophe risk in Vietnam. Treaties includereinstatement provisions; these vary but there are generally two, though for a large capacity treaty theymay comprise three for the first layer, two for the second and one for the third, all at 100% additionalpremium. There are no multi-year programmes.

Catastrophe reinsurance is all placed in the international market, mainly with Swiss Re, Munich Re, CCRand some Malaysian companies.

Alternative Risk TransferThere is no use of alternative risk transfer in the local market.

Treaty Reinsurance CommissionCurrent treaty commissions payable in the market are as follows:

• property - up to 20% to 35% (fixed) and some on a sliding scale

• miscellaneous accident - up to 32.5% (fixed)

• engineering - up to 35% (fixed)

• marine - up to 32.5% (fixed).

In some cases there may also be a profit commission of 15% to 20% calculated on a rolling three or fiveyears' basis.

Facultative Reinsurance CommissionRates for facultative reinsurance are as follows:

• property - 15% to 20%

Reinsurance


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• engineering - 15% to 20%

• liability - 15% to 25%

• marine hull and cargo - 15% to 25%.

DistributionLocal retail brokers are permitted to handle reinsurance provided that they have a capital of VND 4bn (USD192,049) in excess of the minimum legal capital for a retail broker.

Some local retail brokers, mainly the foreign-owned companies, place reinsurance in international markets,principally for aviation and property and casualty risks, through their group reinsurance brokers. Largedirect insurers have their own reinsurance departments that handle both treaty and facultative placements.

There is no requirement for foreign reinsurance brokers to be registered with the Ministry of Finance.

Distribution Channels


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Summary and TrendsNon-life distribution remains the traditional agency networks, mostly linked to the local companies' ownbranch networks, and, to a lesser extent, bancassurance. The latter, however, is still embryonic bycomparison, except for motor linked to car purchase loans and other lesser personal lines. Somecompanies, especially the bank-owned insurers, have in-house agents.

The 11 brokers represented in Vietnam are making inroads into the SME sector, but are mainly involvedwith international joint venture companies, or foreign direct investment (FDI) business linked to theirmultinational client base.

In practice, there is some overlap in the types of business handled by each type of intermediary and agentsand brokers are to be found in all market sectors. So far banks have been involved mainly with motor, PAand travel insurance among the non-life classes. Despite their better efforts, banks have not been able toexpand the mortgage market, and the expected growth in premium volume in this area has yet tomaterialise.

A large percentage of market premium volume, as yet unquantifiable, is placed direct, and indeed many ofthe current local companies were established for that purpose. Cynics would say that this end of the marketis untouchable due to the opaque nature of the client/company relationship.

Internet sales and e-commerce generally is not a factor in Vietnam at present.

The table below shows the percentage of total non-life gross written premiums handled by brokers for thelatest five years available.

Distributionchannel

2007 2008 2009 2010 2011

Brokers 16.00 17.10 14.40 15.10 21.96Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Direct HandlingMost local companies operate with direct sales forces whose members work to targets and are paid asalary plus, in some cases, a share of commissions on the business they generate. Senior managementand underwriting staff may also be used as sales staff to generate business and some companies adopt amore aggressive approach than others. These employee-agents may place business only with thecompany which employs them. Some company branch offices can issue policies and settle claims whilesome operate only as points of sale: their role is determined by management policy.

A significant amount of government business is placed directly with the local insurers. Most of PVInsurance Corporation's energy business is placed directly with the company as its parent company is thestate-owned monopoly handling oil and gas.



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E-CommerceOn 1 March 2006 a new Law on Electronic Transactions took effect covering, among other issues, the useof electronic signatures and electronic signature authentication services. Circular No 37/2009/TT-BTTTT of14 December 2009 issued the regulations on the licensing and registering of organisations supplying adigital signature authentication service. In general, however, legislation regulating the e-commerce sector islax and incomplete.

The development of e-commerce is further hampered because only about 10% of the population of Hanoiand 50% of that of Ho Chi Minh City have bank accounts.

Internet penetration is low due to the shortage of land lines. Most access is through smart phones.

There are no legal constraints on selling online but so far only one insurer, Liberty, is doing so, for personallines - motor, PA and travel.

Some insurance companies have websites, most of which are used as vehicles for corporate information.Clients may also report claims and access their policy information through the internet. Most insurers'websites simply have a form to complete in order to request a contact from the insurance company. Someof the largest companies offer travel insurance on their websites but the premium cannot be paid online.

Insurers do not yet offer their brokers and agents the possibility to update, change or even access theirclients' data on their websites.

Other Direct MarketingThere are no direct writers in the market and little likelihood of their appearance in the foreseeable future.Telesales is not a significant feature at all.

Insurers advertise in the press and on billboards, and to a lesser extent on television and radio. They mayalso advertise on flyers sent to consumers' homes or distributed through banks, hospitals and so on, butthis is not a common practice among the non-life companies. Most direct marketing in the non-life sectorhas been of motor and travel policies.

Liberty Insurance operates a call-centre that is staffed 24 hours a day, offering a range of client servicesincluding claims reporting, policy information and renewal details in addition to a towing service andcontacts with garage and medical services networks.



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BancassuranceBancassurance is emerging, mainly in the life sector, but its development is constrained because so fewindividuals have bank accounts. Only an estimated 10% of the population of Hanoi and 50% of that of HoChi Minh City have bank accounts and banks are more concerned about growing their core business thanselling insurance. In the non-life classes, banks have made some sales of motor, PA and travel cover, butless so homeowners' insurance, as the mortgage market has not taken off to any great extent. Banks havemade some attempts to move into the commercial insurance sector, but only by referring potential clients totheir associated insurance companies. Though banks have not yet taken an active role in selling insurance,this may change in the near future as they seek to offer a complete service to their clients and also todevelop new sources of income.

There are no legal restrictions on the cross-ownership of banks and insurers and several banks haveshareholdings in insurance companies. Also, there are no restrictions on banks conducting insurancebusiness or linking credit with insurance, but so far synergies between banks and insurers are not beingexploited to any degree. Examples of links between banks and insurers are:

• Vietcombank and Petrolimex Joint Stock Insurance Company

• Bank for Investment and Development of Vietnam (BIDV) and BIC Insurance Company

• Incombank and Incombank Asia Joint Venture Insurance Company

• Sacombank and Vien Dong Joint Stock Assurance Company

• Asia Commercial Bank and Bao Long Insurance Company

• Sacombank and Bao Minh

• Standard Chartered Bank and Mitsui Sumitomo Insurance Company Vietnam (MSIG).

In some cases, a bank will co-operate with more than one insurer and it is not uncommon to see the salesdesks of different insurers in bank branches. Insurance companies sometimes place their own staff inbanks as sales agents but more often they rely on bank staff to market their products or act as referralagents. Although bank employees are supposed to have some insurance training, especially if they areselling the products of foreign insurers, in practice their knowledge is minimal and they are frequently toobusy to devote time to selling insurance. This is encouraging insurance companies both to improve trainingand also to use their own sales staff to support the bank employees.

Banks may demand that customers purchase insurance cover for a loan but they cannot specify that it isbought from an insurer with which they are associated. In practice, however, the rates offered and theconvenience of one-stop shopping means that most loan-related policies are purchased from the banks'associated insurers. No action has been taken by the Ministry of Finance to stop this practice.

AgenciesAgents play a significant role in the insurance distribution system in Vietnam, in both the personal and thesmall commercial lines sectors and in the interface between state-owned clients and their insurers wherecommission terms are as likely to influence the placement of insurance as the scope and terms of cover.Some business is sold through the post office by PTI and through petrol stations by PJICO.



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The regulations governing the appointment and operation of agents are to be found in Articles 84 to 88 ofLaw No 24/2000/QH-10 (the insurance law), Article 30 of Decree No 45/2007/ND-CP and Section 6 ofCircular No 124/2012/TT-BTC. Agents are required to have a written agency agreement with theirprincipal(s), and must meet the criteria noted below.

An individual must:

• be a Vietnamese citizen who has full capacity for civil acts and legally resides in Vietnam

• have completed secondary or higher level schooling

• have completed a training course on insurance arranged by an insurance company or an agency havingthe authority to organise such course

• have entered into an agency contract with an insurance company or companies.

An individual is not permitted to act as an agent in the following cases:

• having a criminal record

• being an officer or a member of staff of the insurance company or a body participating in insurance orthe insured

• working for more than one principal unless the original principal consents, in which case there must be aseparate written agency agreement.

A company is entitled to appoint an agent to conduct licensed forms of insurance and is responsible for theactivities of its agent. It must also provide training for agents in a recognised training establishment inaccordance with the terms of the law. Following concern expressed by the Ministry of Finance overcompany practices in respect of the recruitment and training of agents, Circular No 86/2009/TT-BTCamended the regulations on agents' training institutions, and the examination and licensing of agents andStatements No 7415, 8619 and 9054 of 2009 also dealt with regulations and changes to agency training,including examinations and certification requirements. As a result of changes to the Law on InsuranceBusiness introduced by Law No 61/2010/QH12 of 24 November 2010 the training requirements forinsurance intermediaries were made even stricter: agents now require a certificate to practise from atraining establishment approved by the Ministry of Finance. As part of a drive by the regulator to improveintermediaries' qualifications and knowledge of the business, the ministry established regulations on thecontent of the training programmes and the form of the training required, all finally enshrined in Section 6 ofCircular No 124/2012/TT-BCP.

In the event of a breach of contract conditions on the part of the agent, the insurance company is stillresponsible for any damage suffered by the insured but it has the right to recover its outlays from the agent.All cancellation of agency contracts as a result of a breach of law or professional rules must be advised tothe Association of Vietnamese Insurers.

The supervision of agencies is in the hands of the Insurance Regulatory and Supervisory Administration ofthe Ministry of Finance. There are in excess of 200,000 agents in the market.



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Insurance BrokersThere are currently 11 registered insurance brokers in the market. Of these, five were foreign-owned (AonVietnam, Gras Savoye Willis, Jardine Lloyd Thompson Ltd, Marsh and Toyota Tsusho Insurance Broker(Vietnam) Corporation) and six local. A further four foreign brokers have representative offices.

The regulations governing the appointment and operation of brokers are to be found in Articles 89 to 93 ofLaw on Insurance Business No 24/2000, Section 5 of Decree No 123/2011/ND-CP, Articles 38/9 and 41/2,and Section 7 of Circular No 124/2012/TT-BTC, Articles 51/2/3/4. The requirements for setting up a brokerare similar to those for setting up an insurance company and are set out under the heading Establishing aLocal Company in the Company Registration and Operating Requirements section of this report, withinSupervision and Control.

According to Decree No 46/2007/ND-CP and Circular No 156/2007/TT-BTC, the legal capital requirementfor a broking operation is VND 4bn (USD 192,049) which is the same for all companies irrespective ofcountry of origin. If the broker wishes to operate also as a reinsurance broker, a further VND 4bn (USD192,049) capital is required.

Brokers are required to have professional indemnity insurance although the law is silent on the amount ofcover actually required. Multinational brokers will have the cover as part of their global programmes; localbrokers buy locally, in one case for only USD 200,000. Cover up to USD 5mn is available in the localmarket; cover for higher amounts must be sought abroad. Some local brokers are alleged to buy the coveronly in their first year of operation in order to obtain their licence: they then allow the cover to lapse.

It is not usual for brokers to have binding authorities although some have developed schemes forhospitalisation cover with leading companies.

There is no insurance brokers' association in Vietnam.

The percentage of non-life income distributed by brokers has grown from 16.00% in 2007 to 21.96% in2011.

Intermediaries' CommissionsCircular No 124/2012/TT-BTC, Article 4 1 sets out the maximum commission payable to agents as follows:

Type of insurance Commission (%)Property and damage 5.0

Construction and installation 5.0

Transportation of goods by land, sea,air, river and railway

10.0

Hull and liability on vessels at sea orinland waterways

5.0



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Type of insurance Commission (%)As above, for inland waterways andfishing vessels

15.0

Liability 5.0

Aviation 0.5

Auto 10.0

Voluntary fire and explosion 10.0

Credit and financial risks 10.0

Business loss 10.0

Agriculture 20.0

Compulsory insurance

a) motor third party liability 5.0

b) motorbike third party liability 20.0

c) aviation liability 3.0

d) professional indemnity for lawyersand insurance brokers

5.0

e) fire and explosion 5.0Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Maximum brokerage is 15%, for any class, as per Article 54.1 of Circular No 124/2012/TT-BTC.

Insurers are not permitted to make additional payments to their non-life intermediaries.

Consumer ProtectionThere are no statutory or voluntary codes of conduct in the market other than the general instructionscontained in the Law on Insurance Business No 24/2000 QH10, and Articles 28/29/30 of Decree No45/2007/ND-CP.

Circular No 124/2012/TT-BTC, Section 6, introduced minimum training requirements and qualifyingexaminations to be run by companies and the Association of Vietnamese Insurers.

The international brokers adhere to the norms laid down by their parent organisations, and havecompliance managers in place.

Company ChangesThere have been no recent company changes.

Multinationals, Captives, ART and Risk Management


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Multinationals

Local MultinationalsOnly a few local companies such as Vietnam Airlines, Trung Nguyen Coffee and FPT Corporation (atelecommunications company) operate on an international basis. Domestic Vietnamese insurers now haveaccess to an international network facilitating the placement of global programmes following strategicreciprocal arrangements with foreign insurers. The foreign insurers present in the market are subsidiariesof companies with extensive foreign networks that can also support international programmes.

There is no standard way of handling the insurances of the few Vietnamese multinationals. In most cases,however, programmes are designed centrally by the broker and main insurer and local policies are issuedand fronted, and reinsured back to the holding company in Vietnam, while obligatory insurances andpersonal lines covers are placed and retained locally. DIC/DIL policies are issued centrally if local policiesfail to provide the desired cover. Premiums are paid locally to the local insurers.

Foreign MultinationalsThere is no standard way of handling the business of foreign multinationals operating in Vietnam althoughmost will be insured through their group global programmes. This is usually done in one of two ways:

• an integrated programme in which local policies are issued and reinsured back to the holding insurer,and a central DIC/DIL taking care of shortfalls in cover

• less commonly, the international programme is relied on to cover the local assets and liabilities, as perthe new guidelines under Decree No 123/2011/ND-CP, as non-admitted business.

The latter option, however, is not popular among brokers, as it is too onerous still.

Obligatory insurances and personal lines covers are generally placed and retained locally.

The local market does not like global wordings so local wordings (which in any case are based oninternational wordings) and local market rates (which are invariably lower than the programme rates) areused. When necessary, DIC/DIL covers are issued centrally.

The retention taken by local companies varies greatly but most retain as much as possible. UnderVietnamese legislation no obligatory local retention level for any one risk is specified, but Article 45 ofCircular No 124/2012/TT-BTC states that a retention must be kept in Vietnam, and Article 44 states itcannot be more than 5% of equity capital. No minimum is stated, however.

Multinationals, Captives, ART and Risk Management


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Bao Viet and Bao Minh are the principal local companies handling multinational business, and they areamenable to ceding to global underwriters, reinsurers and/or captives. PV Insurance Corporation managesmultinational programmes for oil and gas interests. The only caveat to this arrangement, introduced byCircular No 125/2012/TT-BTC, is that if any reinsurer taking more than 10% of a risk does not comply withminimum financial rating criteria, the direct insurer has to treat 100% of the direct risk premium for solvencymargin purposes instead of the net retained premium.

Captives

Summary and TrendsThere are no captives in Vietnam. No local companies own or rent a captive as they have not yet reachedthe critical mass necessary to justify it, and there is no captive-related legislation.

Local LegislationThere is no specific local legislation in respect of captives.

Locally Domiciled CaptivesThere are no locally domiciled captives.

Local Captive OwnersThere are no local captive owners. The nearest such arrangement would be PVI Insurance, which is 67%owned by Petro Vietnam (33% by the Talanx group), and controls all the Petro Vietnam business and itsreinsurances, mostly offshore.

The Korean electronics group, Samsung, has a subsidiary insurance group, a subsidiary of which is inVietnam, handling all the local insurance requirements of its two manufacturing plants, including employeebenefits.

A.R.T. & Risk Management

Summary and TrendsThese concepts are not features of the Vietnamese insurance market.

Insurance Policies


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SupervisionWhen introducing new products, assuming existing products are approved already, insurers and branchesof foreign insurers are subject only to the provisions of Article 20.3 and 4 of Decree No 45/2007/ND-CP thatstipulates that wordings must be clear and transparent, the language must be accurate and all technicalterms defined, the wordings must comply with insurance legislation and all premium scales must becalculated on the basis of statistical data. In addition Article 26.4 of Decree No 123/2011/ND-CP providesthat the Ministry of Finance (MoF) can step in where premium rates are considered insufficient and forcethe company to withdraw the product or adjust the rates. Circular No 124/2012/TT-BTC further clarifies andstipulates additionally that:

• the direct rate must not be lower than the reinsurance rate, if applicable

• the MoF is empowered to request the suspension of the product if it feels the rates are inherentlyunprofitable

• the insurer must then revise its terms and conditions, and then submit revisions to the Mof in aprescribed report format, signed by the company actuary

• by the 15th of each month insurers must submit to the MoF details of any new products issued duringthe previous month.

Uniform wordings and rates are still applied to compulsory insurances, however.

Policy WordingsUniform wordings are used for the compulsory covers.

There is little difference in local policy conditions in most classes as they tend to follow internationalwordings to make reinsurance easier. Broker wordings may be freely used. There are no non-standardexclusions in common use in the market.

The law is silent on the language to be used in insurance contracts: the only requirement is that thewording must be transparent and clear. In practice, while most policies are issued in Vietnamese, a varietyof policy languages is used. Policies for foreign-invested companies tend to be in English and the Englishwording may be the version that prevails in a court of law.

Local Insurance LawLaw on Insurance Business No 24/2000/QH-10 recognises the principles of non-disclosure, insurableinterest, innocent misrepresentation, subrogation and arbitration. There is no statutory cooling-off period forpolicyholders except in the case of door-to-door sales where the law sets a three-day cooling-off period.

There is no legal requirement to provide additional limits for legal costs in addition to the usual limits ofindemnity.

It is usual in most classes for jurisdiction to be Vietnam, but exceptions are made for other classes such asfinancial risks and product liability, where worldwide excluding or including the US and Canada may begiven, subject to reinsurance support.

Insurance Policies


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Policy IssueThere is no requirement for a policy to be issued within a certain time period although the insurance lawspecifies that insurers are obliged to issue the policy "immediately after entering into the contract".

Certificates of insurance are required to be issued only for obligatory third party motor insurance covers.

There is no obligation for the insured to sign the insurance contract although some local companies requestit.

Policy CurrencyAll direct policies are issued in VND, following recent directions from the State Bank of Vietnam.

Reinsurance is different, however, whereby the predominant currency is USD, and foreign exchangecontrol is not a problem as long as applications are supported by contracts and invoices for the requiredamount.

Premium Payment and TermsThe insurance law stipulates that cover will begin from the moment that the contract is completed or thereis evidence of acceptance of cover by the insurer and the insured has paid the premium, unless otherwiseagreed. In practice, a period of 30 days for premium payment is generally agreed between the insurer andthe client. In the case of corporate clients and major classes of business, the period for payment of thepremium is stipulated in the policy, usually 30 but sometimes 45 or 60 days.

By law, the broker or agent must transfer the premium to the insurer within seven days of its receipt. Inpractice, credit terms are the subject of negotiation between the insurers and intermediaries, the averagebeing about 30 days. Payment to the broker is considered to be payment to the insurance company.

Following the reinforcement of the provisions of the Ordinance on Foreign Exchange Control of 13December 2005 and Decree No 160 of 2006 premiums may no longer be collected in a foreign currency asall transactions, with a few exceptions, must be carried out in VND.

Cancellation and RenewalCancellation provisions depend on the individual policy conditions and vary by class of business but as ageneral rule the insured may cancel the policy at any time by notifying the insurer in writing; the insurer isrequired to give notice in writing to the insured with seven, 15 or 30 days' notice.

There is no tacit renewal of policies. Renewal notices are issued by companies prior to the expiry of eachperiod of insurance, and the onus is on the client to request renewal. Failure to do so results in the policybeing lapsed. In some cases an automatic renewal clause may be applied, holding covered for 30 days toallow time for the premium payment.

There are no long-term agreements and no multi-year policies are available in the market.

Insurance Policies


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Types of PolicyA wide range of policy types is issued in the market including

• compulsory wordings for 16 classes of fire risk for fire and explosion cover, and motor third party liability

• standard fire and named perils

• industrial all risks/CAR

• package policies for homes and SMEs

• individual or multi-class liability wordings, and financial liability wordings

• broker wordings, which are used mainly in the energy sector.

Although insurers report an increasing demand for package covers for SMEs, some still prefer to take basicfire and perils cover. State-owned risks are also frequently insured on a fire and perils basis.

Other than the compulsory wordings, most policies tend to follow internationally accepted terms andconditions, translated into Vietnamese if required. The larger local companies have over the years adaptedreinsurers' wordings for local use, and the foreign companies have imported and/or adapted their owngroup wordings from other territories.

AverageProperty policies including CAR and machinery breakdown covers contain the standard condition ofaverage, and the application of average is recognised in the insurance law. As far as is known, the averageclause has never been deleted from a property insurance policy but a coinsurance clause is sometimesapplied ensuring the non-application of average provided that the sum insured represents an agreedpercentage, typically 80%, of the value at risk.

InflationPolicies issued in Vietnam do not generally contain inflation protection clauses though some propertycovers may contain a 10% or 20% escalation clause or an automatic increase clause for fixed assets.

Natural Hazards


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Earthquake and Other Geological Hazards

ExposureVietnam comprises four main tectonic units: from the north of the country to the Red River (part of thesouth China platform); from the Red River to the Tra Bong fault (the north Vietnam folded system); from theTra Bong fault to the Hau River fault and from the Hau River fault to the southern border. Each unit isseparated from its neighbour by a deep fault. Most of the faults are strike-slip faults and the deep faultrunning from north-west to south-east is particularly active.

The main vulnerable areas are the north of the country including Hanoi, which lies on the Red River fault,the central coastal area and south-eastern continental shelf. Recent state-funded seismic research shows30 areas exposed to the hazard of an earthquake of 5.5 or more on the Richter scale, the most at riskbeing Son La, Song Ma-Fumaytun, Dong Trieu and the Red River/Chay River area. The report indicatesthat since 1900 there have been two level 8.0 or more earthquakes, 17 level 7.0 or more and 115 level 6.0or greater, suggesting that the country is not as low an earthquake risk as is frequently proclaimed.

Despite the fact that many earthquakes of magnitude 7.0 or higher have occurred, earthquake has neverbeen recognised as a major hazard in Vietnam. This is because the mountainous north-west region, whichis the area of greatest exposure, is sparsely populated and there is no industry of any consequence, so therisk of loss or damage to property is minimal.

Historic data suggests that the Vietnamese coastline has been exposed to tsunamis in the past andseismologists agree that the potential for similar events in future is real. A tsunami with a height of morethan 1.5 metres could be generated by a 7.5 magnitude earthquake south of Hainan Island on the CentralVietnam shelf and one of more than four metres could be caused by an 8.5 magnitude earthquake at theManila Trench. Such events would cause serious economic and insured losses as most of Vietnam's majorpopulation centres are on the coast.

Until 2006, no earthquake building codes were in use in Vietnam and, according to the general constructioncode, zones prone to earthquakes measuring less than 4.7 did not require earthquake proofing. This codetook no account of the high-rise construction in Ho Chi Minh City, or the fact that the soil in the south isprincipally alluvium, clay and mud. Recognising that it was out of date, the Ministry of Constructionintroduced regulations covering earthquake-resistant construction of which the principal legislation is theVietnamese Construction Code and Standards for Dwelling Houses and Structures in Earthquake Zones of2006.

Accumulations and PMLsExposures are minor due to the low penetration of insurance across the country. There are someaccumulations of high value individual risks such as the oil refinery, ports and the bigger industrialcomplexes, especially where foreign interests are involved, eg Samsung Electronics.

Natural Hazards


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Reinsurers request information on accumulations and this is reported to them either quarterly or annually.The data is collated using the Munich Re zoning map. There is no requirement to report earthquakeaccumulations to the Ministry of Finance. Doubts have been expressed about the controls over thecollection of data and its accuracy.

The following return periods for intensities V to VII are followed by the market:

Zone Intensity Return periodZone 0 MM V in 50 years

Zone 1 MM VI in 50 years

Zone 2 MM VII in 50 yearsSource: Market sources

Most local companies do not work on a PML basis, instead ceding risks to their treaties based on the suminsured.

No computer models have been developed for Vietnam by any of the major modelling companies.

Limits and Scope of CoverNo separate earthquake policies are issued. There is little perceived risk and the cover is includedautomatically in the industrial all risks policy and other package policies and offered as an extension to thestandard fire policy. In such cases earthquake cover is generally given without charge. Almost all policiesinclude the risk. The standard cover is for earthquake or volcanic eruption, including flood and overflow ofthe sea occasioned thereby. Fire following earthquake is also covered. No first loss policies for earthquakeare issued; insurance is generally arranged on a full sum insured basis though a sub-limit is occasionallyapplied.

No state or market pool or catastrophe fund exists but VinaRe is still suggesting the creation of acompulsory natural perils catastrophe pool to which all insurance companies would contribute in order tocreate a fund out of which payments would be made in the event of a catastrophe, but little progress hasbeen made.

Rating and DeductiblesNo separate rate is charged for earthquake, which is simply included in the additional perils cover. Theoverall rate for perils cover is about 10% of the normal fire rate for the risk but some companies are knownto give the cover free of charge if the perceived hazard is low. If separate earthquake cover is given, it isalmost always included at no additional cost.

It used to be usual to apply a deductible for earthquake but it is increasingly common to give the coverwithout any deductible.

Loss HistoryThe last major earthquake to hit the country was the Tuan Giao event of 1983 when a tremor of magnitude6.0 and intensity VI affected Hanoi, Hoa Binh and Haiphong in the north. No information on the extent ofdamage is available, and there were no reports of insured damage.

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In 2001 the town of Dien Bien Phu was hit by an earthquake measuring 5.3 on the Richter scale. Twopeople were injured and damage estimated at USD 13mn was caused.

A tremor measuring 5.1 on the Richter scale hit Ho Chi Minh City and southern Vietnam in early November2005 causing minor damage to some buildings. This was the third tremor in a month to affect the area, theprevious two being of magnitude 2.9 and 4.3.

In 2007 and 2008 several earthquake events in China and Laos produced tremors that were felt in Hanoi,causing people to flee buildings.

UtilitiesCurrently there are no underground gas pipe networks supplying residential property but a few exist inindustrial areas. These are fitted with automatic cut-off valves. There are a number of hydro schemes, andelectricity is supplied by overhead cables.

There are many dams throughout the country, including in the most hazardous areas of the north where themassive Son La dam became operational in 2011. Concern has been expressed locally at its constructionin such a seismically sensitive area as, if it were to collapse in an earthquake, a huge flood wave would besent down the River Da threatening the Hoa Binh dam further downstream and even Hanoi, almost 186miles (300 km) away. This scenario is generally dismissed as "unlikely" and "alarmist" as, following a studyin 2004 of the seismic hazard in the area, the dam and power plant are being constructed to withstandtremors measuring up to 9.0 on the Richter scale.

Disaster PlanningVietnam has a large number of committees for flood, storm control and disaster (CSFC) preparedness atnational, city, provincial and district levels, and within relevant ministries. Each village also has a CSFCofficer. The committees' role is to prepare for the storm season, give instructions to the populace as theseason approaches and co-ordinate the relief in the aftermath of a disaster.

There is also a disaster management unit, which is a joint project between the UN and governmentagencies. The unit would help co-ordinate post disaster emergency assistance and appeals.

In the event of an emergency the civil defence and military would be called in to help. The internationalfederation of the Red Cross and the Red Crescent are also active participants in emergency situations.

CatNet(R) Earthquake Map

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Source: Swiss Re CatNet(R) www.swissre.com(c) Country map: GfK Macon AG

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Windstorm

ExposureVietnam is exposed to typhoons and tropical storms moving from the East Sea (China Sea) which are aregular occurrence between the months of July and November (typhoon season) each year. The wholecoastal region is susceptible to storms but the main areas affected are the region between Hanoi andHaiphong in the north, Da Nang in the centre and the area round Vung Tau in the south of the country.These storms are usually accompanied by extensive flooding and it is not unusual for rail and road links tobe cut and flight schedules to be disrupted.

Typhoon Kai-Tak hit Hanoi and the northern provinces of Vietnam in August 2012, killing 27 people,damaging about 12,000 homes and flooding 23,000 hectares of farming land. No information on insured oreconomic losses is available.

The northern provinces were affected once again in October 2012 when Typhoon Son-Tinh passed overthe area. It left eight people dead, three missing and almost 100 injured; it also destroyed or damagedmore than 50,000 homes and left 95,000 acres of farmland under water. Economic losses have beenestimated at between USD 180mn and USD 330mn.

The increase in tropical storm activity in recent years and especially the effects of Typhoons Xangsane andDurian in 2006 have raised concerns among reinsurers that the problem could be exacerbated by climatechange, and many have now incorporated aggregate limits into their property treaties. Despite this, thelocal insurance market does not seem particularly concerned about the potential for future loss.

It is understood that the construction code contains regulations relating to windstorm-resistant construction.

Accumulations and PMLsNo specific windstorm monitoring is performed in the market but foreign reinsurers request accumulationstatistics including all natural perils on a Cresta zone basis or following reinsurers' zoning maps. Cedingcompanies must report their aggregate exposures each quarter.


Local companies do not work to return periods and all windstorm cessions are made on a sum insuredbasis.

Reinsurers, especially Swiss Re, imposed extraneous perils aggregate limits in proportional treaties from 1January 2012, in order to alert direct companies to the dangers of accumulations, especially in the wake ofthe Thailand floods and Japanese tsunami of 2011.

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Limits and Scope of CoverIt is common for property policies to include cover against windstorm damage either under a fire and fullperils policy, or by automatic inclusion in a property all risks package: thus almost all policies carry thecover.

Two standard covers are available as an extension under the market fire policy, as follows:

1. storm and tempest excluding damage caused by:

• the escape of water from the normal confines of any natural or artificial water course or lake reservoircanal or dam or any water tanks apparatus or pipes

• inundation from the sea whether resulting from storm or otherwise

• frost, subsidence or landslip, to awnings, blinds, signs or other outdoor fixtures and fittings, gates andfences and moveable property in the open; to premises in course of construction, alteration or repairexcept when all outside doors, windows and other openings are complete and protected against stormor tempest; and by water or rain other than by water or rain entering the building through openingsmade in its fabric by the direct force of the storm or tempest

2. storm, tempest and flood excluding damage caused by frost, subsidence or landslip

• to awnings, blinds, signs or other outdoor fixtures and fittings, gates and fences and moveableproperty in the open

• to premises in course of construction, alteration or repair except when all outside doors, windows andother openings are complete and protected against storm or tempest

• by rain except rain entering the building through openings made in its fabric by direct force of thestorm or tempest

• resulting from the escape of water from any tank apparatus or pipe.

Insurers do not normally survey risks for windstorm cover, but they would pay special attention if cover wasrequested on a risk in the most exposed areas of the country and might arrange a survey in thosecircumstances or at least increase their rates and deductibles. In extreme situations cover might bedeclined.

Rating and DeductiblesThere are generally no separate rates charged for windstorm which is simply included in the additionalperils cover or the overall policy rate. The overall rate for perils cover is about 10% of the fire rate butcompanies have been known to give the cover free of charge if the perceived hazard is low. A higher ratemight be charged for risks situated in the areas of highest exposure but competition is making selectiveunderwriting less common.

Deductibles for perils of nature range from the local equivalent of USD 2,000 for small cases to USD10,000 and more for large ones.

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Loss HistoryThe centre of the country is affected by several typhoons and tropical storms each year most of whichcause significant damage and occasionally some fatalities. The most important events since 2006 areshown below.

Date Name Wind speed (kph) Deaths Economic loss (USDmn)

October 2012 Son-Tinh n/a 8 330

August 2012 Kai-Tak n/a 27 n/a

August 2010 Mindulle 85 10 44

July 2010 Conson 85 2 27

November 2009 Mirinae 130 123 280

September 2009 Ketsana 166 163 587

September 2008 Hagupit 150 43 n/a

October 2007 Lekima 120 86 131

December 2006 Durian n/a 95 456

October 2006 Xangsane 166 39 500Source: Market sources

Insured losses from Typhoon Xangsane amounted to USD 9mn. Losses from Ketsana have beenestimated at USD 7mn and from Mirinae at USD 7.8mn.

In 2010 six storms and six tropical depressions affected the China Sea causing severe economic lossesbut insured losses were lower than usual. The country was also hit by several storms in 2011 but no detailsof losses are available.


The northern provinces were affected once again in October 2012 when Typhoon Son-Tinh passed overthe area. It left eight people dead, three missing and almost 100 injured; it also destroyed or damagedmore than 50,000 homes and left 95,000 acres of farmland under water. Economic losses have beenestimated at between USD 180mn and USD 330mn.

CatNet(R) Windstorm Map

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Source: Swiss Re CatNet(R) www.swissre.com(c) Country map: GfK Macon AG

Flood

ExposureFlood from both rivers and the sea resulting from typhoons and tropical storms is Vietnam's most severenatural perils exposure. While flooding of the Mekong and its tributaries benefits agriculture by depositingsilt on the surrounding farmland, widespread flooding caused by storms can have a devastating impact onordinary life and the economy. Flooding has become more frequent and more severe in recent years, andat least one flood as a result of typhoon is now expected every year.

Areas of greatest exposure are:

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• the central highlands and coastal areas from Binh Thuan to Thanh Hoa

• the Mekong delta south of Ho Chi Minh City, in particular the districts of Tien Giang, Ben Tre, DongThap, An Giang, Can Tho, Kien Giang, Soc Trang, Bac Lieu and Ca Mau in Binh Duong province

• Hanoi, Hai Phong and Ha Long in the north. Hanoi in particular has problems with inundation due toinadequate drainage, despite attempted improvements by dredging.

Floods have not been the cause of many insured losses because areas susceptible to flooding do not havemuch industry.

As a result of its historical propensity to flooding, Vietnam has taken measures to try to limit its effects.These include river bed clearance, dam construction, increased channel capacity for flood diversion, andmonitoring and repair of dykes. The country has nearly 4,970 miles (8,000 km) of dykes including 3,730miles (6,000 km) of river dykes and 1,240 miles (2,000 km) of sea dykes. In addition, there are 3,000under-dyke sluices and 310 miles (500 km) of embankments. There are still a number of serious problems,however: most dykes were built a long time ago without much understanding of geotechnical principles,and breaches and collapse frequently occur; most sluices are out of date and seriously damaged; in thecentral provinces, sea dykes are low and frequently washed away; and dyke monitoring is largely visual.The country does not impose any restrictions on flood plain development.

In February 2010 the government announced that it would undertake the construction of a flood drainagecorridor along the Red River. The project, which is estimated to cost about USD 5.2bn, will involve therelocation of about 15,000 households along the river and another 6,000 along its tributaries. It is beingimplemented in two phases: the first is from 2010 to 2015 and the second is from 2016 to 2020. Thebuilding of the flood corridor is considered to be essential for the protection of Hanoi.

In the same month legislation was issued to permit the authorities to fine any organisations or individualsguilty of violating flood prevention regulations, including the illegal exploitation of forests or land andencroaching on protected areas. According to the government, the action has been taken to increase thepublic's awareness of flood prevention.

Accumulations and PMLsThe main areas of accumulation are Hanoi and Haiphong in the north, where most heavy industry andstate-run enterprises are located. Most foreign-invested businesses are located in purpose built industrialprocessing zones in the south around Ho Chi Minh City. These zones are well laid-out, well drained and ingeneral free from flooding.

Companies are required to monitor their accumulations and report them to their reinsurers at quarterlyintervals. Monitoring is done using either Cresta zones or reinsurers' zoning maps.

Local companies do not work on a PML basis, ceding to their treaties on the basis of sums insured.

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Reinsurers, especially Swiss Re, imposed extraneous perils aggregate limits in proportional treaties from 1January 2012, in order to alert direct companies to the dangers of accumulations, especially in the wake ofthe Thailand floods and Japanese tsunami of 2011.

Limits and Scope of CoverThe normal cover, if not included in an all risks wording, is:storm, tempest and flood excluding damagecaused by frost, subsidence or landslip

• to awnings, blinds, signs or other outdoor fixtures and fittings, gates and fences and moveable propertyin the open

• to premises in course of construction, alteration or repair except when all outside doors, windows andother openings are complete and protected against storm or tempest

• by rain except rain entering the building through openings made in its fabric by direct force of the stormor tempest

• resulting from the escape of water from any tank apparatus or pipe.

Flood is automatically covered under package policies and most fire policies are extended to include fullperils cover. The flood prone areas are well defined by the industry, and companies do give cover in theseareas provided they are satisfied the risk exposure is manageable. If the risk is perceived as higher thannormal, an increased rate or higher deductible will usually be applied though prudent underwriting is said tohave given way to commercial considerations in recent years. It is usual for large risks and risks in high-riskareas to be surveyed when flood cover is requested and for risk improvement recommendations to bemade. In extreme cases risks may be avoided.

Though damages caused by landslip are excluded, the cover is frequently requested and generally addedback without charge.

Rating and DeductiblesNo separate rates are charged for flood which is simply included in the additional perils cover granted as apackage of risks. The overall rate for perils cover is about 10% of the fire rate but some companies areknown to give the cover free of charge if the perceived hazard is low. A higher rate might be charged forrisks situated in the areas of highest exposure but competition is making selective underwriting lesscommon. If separate cover for flood is given, the rate tends to be about 0.01% to 0.05% depending uponthe risk situation.

Deductibles for perils of nature range from the local equivalent of USD 2,000 to USD 10,000 and more.

Loss HistoryFlooding is a common occurrence in Vietnam and normally follows as a result of typhoon activity. Some ofthe most important recent events are shown below.

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Date Location Deaths Economic loss (USDmn)

Insured loss (USD mn)

November 2011 Central and southVietnam

105 135.0 n/a

October 2010 Ha Tinh and QuangBinh

138 n/a n/a

November 2009 Central and southVietnam (Typhoon

Mirinae)

123 280.0 7.8

September 2009 Central provinces(Typhoon Ketsana)

163 587.0 7.0

September 2008 Northern Vietnam 43 n/a n/a

October 2007 Central provinces 86 131.0 n/a

August 2006 North and centralVietnam

42 n/a n/a

December 2005 Quang Nam and NinhThuan provinces

11 n/a n/a

October 2005 Central provinces 67 n/a n/a

September 2005 Mekong Delta 69 15.5 n/aSource: Market sources

Insured losses tend to be minimal as there is little industry in the most affected areas but the insured lossesfrom Typhoon Xangsane in October 2006 amounted to USD 9mn. Insured losses from Ketsana have beenestimated at USD 7mn and from Mirinae at USD 7.8mn.

Bushfire

ExposureThe incidence of bushfires resulting from forest fires is increasing. At present, bushfire does not causeunderwriters concern as most industrial and commercial risks are located well away from forested areas.As industrial and commercial developments expand, however, there could be cause for concern.

There have been no known losses, and insurers do not track exposures.

Subsidence

ExposureSubsidence is not covered by the standard fire or all risks policy, and is not known to have been requested.

Hail

ExposureThere is no perceived exposure or risk of hail.

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Summary and TrendsWhilst premium continues to rise, this is assisted by more rigorous application of the 16-class compulsorytariff for fire and explosion cover, rather than a sudden increase in new market business. In addition, theagriculture account within property received a boost from a government scheme to promote the business,albeit unsuccessfully results-wise.

Reinsurers specifically have become more aggressive in the application of restrictive underwritingmeasures on treaty renewals from January 2012, with the long-term intention of halting the unbridledcompetitive nature of the market, by imposing aggregate limits on proportional treaties for extraneousperils.

The Ministry of Finance has also introduced new legislation by way of decree and circulars, with theintention of curbing competition, and controlling intermediary commissions. There has been no recentincrease in capacity, and rating appears to have stabilised, certainly in the higher end market for risks overUSD 30mn, the threshold for the compulsory fire and explosion cover.

Loss ratios have improved, although at least two large fires in 2013 will have an adverse effect on thefigures and graph shown below.

Gross written premium for all property business, including CAR/engineering and agriculture, amounted toVND 2.55trn (USD 122.41mn) in 2012, growth of 37.62%, and representing 13.61% of the total income,excluding PA and healthcare.

StatisticsThe total property account premium and paid loss experience for the five years up to 2012 is shown below.The rise in 2012 income is primarily due to the stricter application of the compulsory fire and explosion tarifffrom 1 January 2012. The account is broken down into its constituent parts further on in this report.


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Major InsurersThe leading property insurers and their market shares are shown below, for the whole of the propertyaccount, which comprises compulsory fire and explosion, agriculture and "other property" (energy risks areseparately reported). Thus market shares are not consistent across these sub-classes.

Company Market share 2012 (%)PVI 22.84

Bao Viet 20.89

Bao Minh 20.47

PJICO 5.18

Baoviet Tokio Marine 3.39

UIC 3.24

BIC 2.99

Fubon 2.69

MSIG 2.66

Toan Cau 2.25Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Construction and Prevention

Building RegulationsBuilding regulations applying to all types of construction in Vietnam have been in place for many years. Themost recent changes were made when the Construction Law No 16/2003/QH-11 and allied regulationswere introduced. Despite the provision for government inspectors in the legislation, enforcement has notalways been stringent, with the result that the quality of some construction is not what it should be.

All plans for new buildings must be seen and approved by the Ministry of Construction and, aftercompletion, they must be inspected by the local fire service inspectors which are responsible for issuing alicence for the designated usage.

Construction regulations exist covering the standards to be applied to ensure that constructions areresistant to earthquake, windstorm and flood. The principal legislation relating to earthquake-resistantconstruction is the Vietnamese Construction Code and Standards for Dwelling Houses and Structures inEarthquake Zones of 2006. Many foreign-invested projects are built to international codes, including NFPAsprinkler and hydrant standards, far exceeding the minimum local requirements.

Built EnvironmentThe built environment of the major cities is a mixture of old and new with modern skyscrapers co-existingwith flimsy constructions. Since Vietnam started to open up in 1990, Ho Chi Minh City has beentransformed from a collection of colonial houses and commercial buildings to a modern city with wide,sweeping avenues.

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New commercial buildings are of massive construction with non-combustible materials, typicallysteel-framed brick or concrete structures with steel-truss roofs, although few are protected by sprinklersystems. Hotels and major retail complexes have internal hydrant systems. Industrial zones are welllaid-out, and factory units are built of non-combustible materials and are well separated. New apartmentcomplexes are of modern non-combustible construction, well designed and with internal hydrant systems.

Large areas of all the cities, however, still contain concentrations of poor quality constructions with a highproportion of wood, and these present a serious conflagration risk.

Problems tend to occur when buildings get older as housekeeping is not yet developed and thedeterioration of electrical wiring gives rise to a large number of fires.

Building Cost IndexThere is no building cost index available for Vietnam.

Fire BrigadesThe public fire brigade operates on a full-time, professional basis. The service, however, suffers from a lackof funding and of modern and appropriate equipment: all fire engines are old, even in Ho Chi Minh City.The problem has been exacerbated by alleged corruption: several fire engines donated by the UK someyears ago were simply sold. The brigades may not have breathing apparatus and would have extremedifficulty in tackling a fire in a high-rise building. This was evident in 2002 when a fire engulfed theInternational Trade Centre in Ho Chi Minh City, reportedly killing over 200 people. City authorities admittedlater that fire-fighters had no protective clothing, rescue apparatus or any ladder that could reach beyondthe sixth floor. Since this incident, the fire services in major cities have been holding regular fire practicesinvolving the evacuation of buildings, and equipment has been upgraded.

Water supply is a problem in some cities but the situation is said to be improving. Although the cities havefire hydrants, they are thought to be insufficient in number and water pressure may not always beadequate, especially outside the major cities.

Fire engines on call may be delayed during rush hour as there is no practice of giving way to them tofacilitate their passage.

The new industrial zones are well laid out, however, and often have their own fire brigade services withhydrants and an ample supply of water. These brigades are often more effective than the brigades in themajor cities.

Some high-rise buildings have dry risers installed and it is now common to find these in new buildings.

According to local reports, turntable ladders on the most modern equipment can reach no higher than the11th or 12th floor. There are many taller buildings in Ho Chi Minh City. The tallest, the Bitexco FinancialTower, opened in 2010: it has 68 storeys and rises to a height of 882 feet (269 metres).

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Physical Risk ManagementA number of foreign-invested companies impose their group's risk management philosophy and conducttraining programmes for their staff. Otherwise, awareness of risk is low and loss prevention is minimal inmost local factories and office premises. The situation is changing, however, especially as the local fireinspectors point out many factors following the occurrence of a fire. The insurance market has arrangedconferences on risk management to raise awareness.

There is no local risk management association.

Risk QualityThere are a large number of high-risk activities in Vietnam, including woodworking and textile risks, most ofwhich operate out of old and hazardous premises.

Fire regulations exist, but observance is patchy. Modern office complexes are fitted with sprinkler systemsbut cases have been found where the sprinkler heads were not connected to pipes and a water supply.

All types of extinguishers are found but many small businesses do not have them and their correct andtimely servicing is not guaranteed. Traditional shophouse risks, those having an office, shop ormanufacturing unit on the ground floor and living accommodation above, rarely have any form of fireprotection.

Most local businesses are not receptive to risk improvement recommendations if there is a cost involvedunless it is a condition of obtaining cover or guarantees a rate reduction. The problem is especially acute inthe present soft market as any suggestion of risk improvement may encourage the client to seek analternative quotation from another company that may not demand any risk improvement.

Insurers do not consider moral hazard to be a major problem although all admit that instances of fraud dooccur and it is reported that insurance claims are routinely inflated.

Social Hazards

BurglaryBurglary is not seen as a major problem in the market and the incidence of theft from both private dwellingsand industrial premises is now minimal. Most incidents involve commercial premises, especially in thesouth of the country, and there are few large-scale, organised thefts. Petty and/or opportunistic crimeremains, where the main interest is cash and high-value, easily transportable, easily disposable goods.Target risks are banks and jewellers' shops, shopping malls and stores selling mobile phones andelectronic goods. Crime against the person is usually cash-oriented, to feed a drug problem.

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Burglary, that is theft following violent and forcible entry and/or exit, is included automatically in property allrisks packages, homeowners' policies and SME package policies, and may also be given as an extensionto the fire policy. It is not now normally insured by a stand-alone theft policy though cover is available onthat basis if required. The risk is generally subject to a policy sub-limit of about USD 200,000 to USD300,000 under package covers but up to USD 1mn may be given in special circumstances; a few first losspolicies have been issued in special cases, mainly in respect of foreign-invested risks, but it is not commonpractice in the market.

Theft is not rated separately in package policies. Rates are low, with the average rate for a standardcommercial risk 0.8‰ to 1.2‰ and for a hotel 0.75‰ and 1.75‰, but may be much lower. Deductibles maybe fixed amounts, up to USD 1,000 or a percentage of the loss amount, usually 10%, with a minimum ofUSD 500 or USD 1,000.

Statistics are not available for burglary alone as premiums and claims are incorporated in the casualtyportfolio. Results are said to be good, with few losses and no serious claims.

ArsonArson is not viewed as a major problem in the market although claims managers and loss adjusters reportthat cases do occur. A downturn in the economy could be the catalyst, however, for increased incidence.

Strikes, Riots and Civil CommotionsProperty all risk contracts and package policies include cover against strikes, riots and civil commotion, andit has become common to include the cover automatically in the special perils extension to fire policies:incidence is rare, competition is keen and it is increasingly requested. The standard cover includesmalicious damage caused by riot or by striking or locked out workers, if not included in an all risks wording.

The rates changed for the cover are very low and it is now common practice to give it free of charge asthere is no perceived risk. When a rate is charged, it tends to be nominal, as low as 0.05‰, and an excessof about USD 1,000 is generally applied. It is common to give 100% cover but sub-limits have beenimposed by some companies.

There are no real problems of unrest in the country. The last serious disturbance was in 1997 in south-eastHanoi when people rioted in protest over the alleged mishandling of infrastructure projects.

TerrorismThe threat of terrorism is low and cover is seldom requested. The risk is excluded from all reinsurancetreaties and all policies in the market but some companies offer the cover, by stand-alone policy, up to theirretention level at a rate of between 0.02% and 0.03%, with zero excess. It has been known for at least onecompany to include terrorism in its all risks cover. For cases where higher limits are required, coinsuranceis arranged locally among those companies willing to provide cover.

There is little demand, most of which comes from foreign-invested enterprises and hotels. There is norelevant local legislation and no market pool.

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Householder/Homeowner

Summary and TrendsThere is little demand from individuals for insurance on their homes and contents. Although foreigners takethe cover, the Vietnamese do not unless they are obliged to do so. When cover is requested, the foreigncommunity prefers a homeowners' comprehensive-type cover, whilst the local population goes for thecheapest option, or the minimum cover a financial interest requires, usually fire plus additional perils. Mostlocal insurers now offer a package policy but fire and named perils policies are much more common. Alarge percentage of the policies simply give cover on the building; contents policies are not common, due toit not being a purchase priority.

The mortgage market is at an early stage of development, and one of the largest insurers estimates thatless than 5% of homes have any form of mortgage. The Vietnamese in general prefer to borrow from familyto build homes. There is no freehold land, thus to build a home requires a 50-year occupation permit fromthe government, with no right to open-ended ownership.

A large percentage of homes are owner-occupied but many are of poor construction and, although insurersare prepared to offer cover in all cases, for many homeowners the rates are too high. There is littlecompetition for the business and rates in this segment have suffered less pressure than those in thecommercial and industrial sectors.

StatisticsThere are no statistics for householder/homeowner business, and premiums and claims are included in theoverall fire or casualty portfolio. Local underwriters indicate that the homeowners' package represents onlya tiny percentage of the total property portfolio and, although home insurances on a fire and perils basis aremore common, that segment is also insignificant when compared with the industrial and commercialportfolios.

Limits and Scope of CoverThe scope of cover is fairly standard, and follows the UK and Australian homeowner policy forms, althoughperhaps a little more restrictive. Cover available is as follows:

• section 1: fire and named perils, on contents, including loss of rent cover (additional perils beingexplosion, lightning, storm, flood, falling trees/poles, earthquake, theft, malicious damage, waterdamage, SRCC and impact)

• section 2: as above, for buildings

• section 3: personal accident for the occupier and family

• section 4: liability, including tenant's, owner's and general public liability, up to VND 2.08bn (USD100,000).

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All sections have four pre-determined limits (or categories), with pre-fixed premiums, which are notadvertised, and are thus open to negotiation or "discount".

Optional extensions are available for workers' compensation for domestic staff, theft by domestic staff,personal assault after drawing cash from an ATM, accidental breakage, electrical damage to domesticappliances and accidental loss or damage to items away from the home, and additional commutingexpenses as a result of theft of insured's motor-bike (a preferred means of local travel). Legal expensecover is included in the third party liability limit.

The alternative cover generally taken by local homeowners comprises fire, theft and a full range of namedperils including earthquake, windstorm and flood.

The basis of cover is typically reinstatement for the building and market value for contents. New for oldcover is available provided that the contents are in good condition.

Rating and DeductiblesUnderwriting factors include the nature of the dwelling, type of construction and protections offered. Someinsurers also use geographical location as a rating criterion but the practice has been more or lessabandoned in the current soft market and some companies now have a single rate applicable for the wholecountry.

Rates are not given on company websites with the cover examples, due to the competitive nature of thebusiness. Proposers are simply invited to submit, either direct or through an agent.

Competition for the business has shown a steady increase, but rates are now reasonably stable. At presentrates as low as 0.1% on buildings and contents cover are regularly offered. Deductibles range from VND2.08mn (USD 100) to VND 10.4mn (USD 500) but in some cases a single policy deductible as low as VND1mn (USD 49) may be charged.

An indication of the approximate movement in rates since the base year 2006 is shown in the table below.These are based not on official figures but on the opinion of local underwriters.

Homeowners risk rate movements2013 60

2012 60

2011 60

2010 65

2009 75Source: Market sources

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Loss ExperienceNo statistics are available in connection with loss experience but companies report that experience hasbeen very good and the class is profitable. Theft and water damage are the main causes of loss but neitheris a frequent occurrence. The recent typhoon activity in 2012 did not pose any undue problems to themarket, due to the remoteness of the areas affected, while the main risk concentrations are in the twomajor cities.

ReinsuranceMost risks are retained for net account, which is normally itself protected by an aggregate catastropheexcess of loss programme.

Major InsurersNo statistics are available, but all companies would have a personal package of some sort, some moresophisticated than others. There is no clear leader as such.

DistributionThe main two channels are in-house agents and banks, who direct loan clients to their associatedcompany. All players have websites detailing cover, but not prices, and proposers are invited to submitdetails for quotations, or contact an authorised agent.

Industrial and Commercial

Summary and TrendsLocal insurers still identify three distinct market segments, despite the recent legislative changes whichwere meant to open up the market to all players. These are noted below.

• Government business remains almost exclusively in the hands of the local insurers despite the fact thatforeign companies may now write the business. It may take a long time for the foreign companies tobreak into the segment, however, as the local companies have the contacts in the state enterprises. It isalleged, too, that the local companies may be making illegal commission payments in order to retain thebusiness. This is despite the new "transparent" tender process which is exercised at each renewal.

• Local commercial and manufacturing concerns are insured mainly by the local insurers. Many of thesmaller businesses, especially the family-owned companies, have no insurance but the first signs ofchange are being seen as banks and other lenders are demanding evidence of insurance cover fromtheir clients. Foreign insurers are becoming more involved in the SME segment, and some now operatesuccessfully in it.

• Foreign-invested businesses are required to be insured in accordance with the provisions of the Law onForeign Investment and insurance must be sought in Vietnam in accordance with the terms of the Lawon Insurance Business. This has provided a flow of business to the foreign-invested insurers, as most ofthis segment is controlled by the overseas interests via international programmes. If the programmeinsurer is not represented locally, the local insurers are increasingly willing to become interested asfronting insurers.

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Both all risks package policies and fire and perils policies are issued in the market. Most foreign-investedcompanies continue to take all risks cover while local companies, including state-owned risks, havetraditionally been insured under fire and perils policies. Market sources agree that the penetration ofindustrial all risks cover is increasing, however, driven particularly by foreign consumers and brokers, andboth the foreign-invested insurers and the 100% Vietnamese companies are equally willing to grant thecover.

There has been a substantial increase in business volumes in the past few years as the economy hasexpanded rapidly and Vietnam has opened up to foreign investment. The influx of new business has beenaccompanied by an increase in the number of insurers operating in the market, which had risen to 29 in2011, but none since.

The increased capacity in the market had a noticeable effect on business practices. Rates are still beingforced down for all types of risks, deductibles reduced or eliminated altogether and wider cover is beinggranted without an increase in price. Although the new entrants, some of which have established up to 20branch offices in their first year of operation and are said to be very predatory, appear to be the mainculprits as they strive to build a portfolio, other larger and more established players are being obliged tofollow and risk analysis and surveys are becoming less common. Since the 2013 renewal season,however, rating in the 16-class compulsory fire and explosion business has stabilised due to reinsurerpressure, and business beyond the class threshold of USD 30mn sum insured has also bottomed out.Local coinsurance is now used to complete cover as a result.

At least one company prefers to provide facultative support to local underwriters at net terms, rather thanchase the business direct, whilst another's attitude is strict on risk selection, but flexible on rates. So far,both strategies appear to be working.

In addition, the arrival of new companies has increased competition for staff. The number of trainedpersonnel in the market is limited and movement of staff from one company to another is increasing whilesome insurers are being forced to operate with inexperienced staff in positions of responsibility, with theobvious result.

StatisticsTotal property income and loss experience for the last five years up to 2012 are shown below. The increasein 2012 is down to the stricter application of the 16-class fire and explosion tariff. Separate figures forindustrial and commercial property are not available but it can be assumed that this makes up the bulk ofthe property account.

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Limits and Scope of CoverA typical industrial risk may be covered either by an all risks policy or by a standard fire and named perilsinsurance. Foreign-invested and large companies are more likely to be covered by all risks packages whilemost local and small and medium-sized companies typically have fire and additional perils cover.State-owned risks, including some large risks, are generally insured under named perils policies as thestate always prefers to take the minimum cover that is strictly necessary. Things are changing, however,and it is becoming more common for package policies to be issued in place of the traditional covers.

In addition to the standard fire, perils and theft cover, property all risks covers may include machinerybreakdown, electronic equipment, loss of profits, fidelity guarantee, goods in transit and cash in safe and intransit, with sub-limits. Policies do not always include machinery breakdown though it can be added byendorsement, seldom include loss of profits, which is generally insured under a separate policy, and neverinclude liability covers, given only separately.

Most policies are issued on a reinstatement value basis for the building cover and on either a market valueor a new for old basis for contents. New for old is more common among foreign insureds and market valueamong local enterprises.

The standard fire policy, including fire, lightning and explosion of gas used for domestic purposes, is alsoavailable and in common use. A full range of perils including earthquake, storm, flood, theft and strikes,riots and civil commotion, malicious damage, and impact is offered, frequently for a token additionalpremium.

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There is an increasing use of package policies although a large number of clients still prefer basic fire, withor without perils, as it is much cheaper. A few commercial package policies exist, usually generic forms thatcan be adapted for any type of business, with cover including fire, additional perils, loss of profits(frequently on a daily basis), fidelity, theft, personal accident, money, machinery breakdown, etc. The smallcommercial package may also include an element of general third party liability cover and even productliability, both for a small limit.

A fire and explosion compulsory tariff exists for 16 industries, and sub-classes, with a uniform policy cover.Some companies prefer to take wider, all risks cover instead of the obligatory policy as the tariff rates forthe compulsory insurance are much higher than the normal market rates for all risks. The sum insuredthreshold is USD 30mn, above which the risk may be market-rated even if the risk is one of the 16designated, although the first USD 30mn must be tariff-rated.

A few industry-specific policies are offered by foreign insurers.

There are no non-standard exclusions in any of the standard or package policies. Exclusions are thenormal nuclear and war risks, subsidence and landslide; earthquake cover is included in the policy cover.Terrorism may be either included in an all risk package (by at least one foreign insurer), added back for anominal additional premium, or a separate policy issued.

Business InterruptionBusiness interruption is a relatively new cover in the market and is requested almost exclusively byforeign-invested clients. There is little active marketing of the product by brokers or insurers. As a resultdemand is not growing. Cover is included in some IAR policies as an optional extra, as well as mostcommercial package policies. Some stand-alone policies are issued along with named perils covers.

In most instances the standard Association of British Insurers gross profit, difference basis wording is used.Periods of indemnity vary from six to 18 months, with 12 months being the most usual, at a rate of 90% to100% of the underlying material damage rate for a 12-month period. At least one foreign multinational isoffering a simplified form of cover in its SME package policy that pays an agreed amount per day if thebusiness is interrupted.

Suppliers' and customers' extensions are both given, generally on a blanket basis as that is usuallyrequested by brokers, though named suppliers and customers cover is becoming more common as somecompanies resist the trend. A sub-limit is applied, generally of about VND 4.16bn (USD 200,000), but itmay be as low as 10% (in most cases) or as high as 100% (in a few) of the policy sum insured. In thecurrent soft market brokers are increasingly requesting that the cover be included free of charge or atnominal cost.

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Denial of access (usually with a one kilometre limit and a financial sub-limit) and the public utilitiesextension are also regularly requested by brokers and given by insurers. In the case of the public utilitiesclause, a 24-hour deductible generally applies and it is not usual for sub-limits to be imposed.

Time deductibles are common, usually of 48 or 72 hours.

Some 10% to 15% of insured businesses are thought now to have the cover.

Rating and DeductiblesRates have continued to fall year on year, but appear to have been halted after the 2012 renewal season,when tougher terms were imposed by reinsurers. Examples of prices currently available in the market areshown below, which have not moved appreciably in the last two years, but there are examples of largevariations among insurers, and location.

Industrial all risks (%)Modern office block (sprinklered) 0.025 to 0.027

Modern office block (non-sprinklered) 0.035

Hotel (sprinklered) 0.025

Hotel (non-sprinklered) 0.040

Garment factory 0.100 to 0.200Source: Market sources

All risks cover is subject to a minimum deductible of at least USD 500 but it may be much higher accordingto the risk insured.

The rates above are indicative of the lowest available in the market but instances of cheaper one-off pricingcan be found.

An indication of the approximate movement in rates since the base year 2006 based on market estimatesis shown in the table below. The table has been compiled using the opinions expressed by localunderwriters and is a generalisation across all market segments and all types of risk.

Industrial and commercial risk rate movements2013 50.0

2012 50.0

2011 55.0

2010 60.0

2009 67.5Source: Market sources

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Major RisksThere are no clearly defined conflagration zones; buildings in likely conflagration areas, such asshop-houses, are often not insured. Apart from high value office and hotel complexes in the major cities,the main concentrations of risk are in the south of the country where manufacturing industry is situated. PhMy, south of Ho Chi Minh City, is the centre for the oil and gas industry and has a number of power plantssupplying the industry. There are also a number of industrial parks in Ho Chi Minh City. Petrochemicalinstallations and power plants located throughout the country are also major risks.

The local market can handle most risks, especially as coinsurance is being used more and more sincerates are too low for international market support.

Loss Experience and Largest LossesLoss experience for industrial property business has been good: paid loss ratios were under 50% for thefive years to 2010. The picture for 2011 is different, however, with a loss ratio of 56.2%: while losses fromnatural catastrophes continued to be low, there have been several large fire losses, including a USD 36mnloss said to be the largest suffered by the property market to date. The loss ratio in 2012 was 36.1%.

The main industrial losses in the period 2009 to the end of June 2013 are shown in the table below.

Date of loss Insured Occupation Loss amount (USD mn)19 May 2013 Unknown Shoe factory Unknown

March 2013 Unknown Wooden furniture factory 7.0

22 April 2013 Unknown Mattress warehouse 2.5

13 April 2013 SacomBank Warehouse 4.0

December 2012 Unknown Warehouse Unknown

2011 Hualon Corp Textile factory 36.0

2011 Ha Nam Textiles Textile factory 6.0

2011 Panasonic Vietnam Electronics 5.3

2011 Phu Yen Pharmacy Pharmaceutical factory 4.5

2011 Bibica Corp Confectionary 4.0

2011 Nhon Trach Packing Plastic/paper bagmanufacturer

3.5

2011 Sang Shun Furniture 2.0

2011 Long Huei Safety equipment 2.0

2010 Dong Bang Steel Steel wire 1.0

2010 Huu Nghi Warehouse 1.0

2010 Scan Asia Pacific Woodworking 1.4

2010 Samil Vietnam Textiles 3.2

2010 Poh Huat Co Furniture 5.0

2010 Tan Dong Duong Co Printing inks 2.5

2009 Hyosung Vietnam Not known 5.0

2009 CT Thai Hoa Lam Dong Not known 1.6

2009 Haoviet Storage Not known 3.8

2009 New Toyo Pulppy Paper mill 6.0

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Source: Market sources

Major InsurersThe leading property insurers and their market shares are shown below.


Bao Viet 20.89

Bao Minh 20.47

PJICO 5.18


UIC 3.24

BIC 2.99

Fubon 2.69

MSIG 2.66


The above are an amalgamation of all property business, excluding engineering/CAR, and energy. Figuresare provided separately by the Ministry of Finance for fire and explosion only, and other property/all risks,and there is a different market share for each. Regardless, the top five remain the same, ie the governmentrelated companies, with over 80% of the business.

ReinsuranceProperty business is generally reinsured by means of one or two surplus treaties with a total capacity ofabout USD 40mn though it is understood that higher limits of up to USD 100mn exist for some insurers.Retentions may be protected by working excess of loss cover which, in the case of the largest companies,has a limit of about USD 5mn. Companies also arrange catastrophe excess of loss cover, generallycombined with the working excess of loss. Net retentions range from about USD 250,000 to about USD1mn. Treaty cessions are made on a sum insured basis.

The international insurers tend to rely on in-house group capacity.

DistributionSmall industrial and commercial risks are introduced by agents while insurance for the larger risks is eitherarranged directly with insurance companies or through brokers. Insurance companies may also have theirown direct sales teams to service corporate clients.

Agriculture

Summary and TrendsThis class of business was given a boost in 2012 with the government's pilot scheme, paying for 100%,80% or 60% of premiums, dependent on farming family income levels. Unfortunately underwriters andreinsurers have all lost money and the scheme is now in limbo. Whilst the purely agricultural business wasgood, the aquaculture side, mostly prawn breeding, suffered large losses in recent flooding.

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Otherwise, the class is underdeveloped, and traditional underwriters who have previously tried to open it uphave failed, effectively due to poor experience and high administration costs.

The French specialist Groupama restricts its business to targeted clients, livestock only, and even then onlybreeding risks, rather than fattening farms, for pigs and cattle. Hence it was not part of the government pilotscheme as there was no risk selection process.

StatisticsThe market premium and loss statistics for the last five years to 2012 are shown below, indicating the pilotscheme figures for 2012, which have since further deteriorated into 2013, according to market sources.


Limits and Scope of CoverBao Viet has offered cover for rubber plantations in the central highlands against the risks of fire, storm andtyphoon but there has been little demand for the insurance. Sums insured are fixed on the basis of pastyields.

Groupama writes mainly livestock insurance on pigs, buffaloes and cattle. The policy covers death fromaccident or disease.

Cover for crops, of which little is written, excludes catastrophe losses such as those caused by typhoon.Most current insurance is said to be in relation to flood damage to rice crops and fire and drought losses oncoffee. There is no cover in the market for growing crops or fruit trees.

The government pilot scheme in some districts of some provinces was written jointly by Bao Viet and BaoMinh. Each had a monopoly in certain areas, retaining 60% of the business written and ceding 40% to theother. The covers offered were:

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• cover against losses from natural perils for rice, including catastrophe losses, classified as storm,drought, flood and frost. Diseases such as brown plant hopper, leaf curl and yellow dwarf were alsocovered. The sum insured was fixed on the basis of the average yield of the previous three yearsmultiplied by the area to be covered and the price per hectare. The policy offered 80% cover, with 20%as an obligatory self-retention by the insured

• cover against epidemics for cows, buffalo, pigs and poultry; diseases covered included foot and mouthand flu.

The scheme paid subsidies to farmers depending on their income: 100% for very poor farmers, 80% forpoor farmers, 60% for normal farmers and 20% for farming organisations.

Rating and DeductiblesThe rate for rubber plantations ranges from 0.6% to 0.9% and a deductible of 10% of the sum insured isapplied, with a minimum of VND 50mn (USD 2,400).

The rate for livestock insurance varies considerably but on average is about 1.0%. An excess of one in 10animals generally applies.

Loss ExperienceUntil the pilot scheme was introduced, experience was volatile.


The northern provinces were affected once again in October 2012 when Typhoon Son-Tinh passed overthe area. It left eight people dead, three missing and almost 100 injured; it also left 95,000 acres offarmland under water. Economic losses have been estimated at between USD 180mn and USD 330mn.

After the scheme, experience deteriorated and underwriters and reinsurers are seeking more selectiveunderwriting and enhanced terms.

Major InsurersThe leading agriculture insurers and their market shares are shown below.

Company Market share 2012 (%)Bao Viet 49.57

Bao Minh 39.07

PVI 8.56

ABIC 1.57

Groupama 0.77Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

ReinsuranceVinaRe was appointed reinsurer for the pilot scheme. Otherwise, livestock support is bought in London.

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HailHail is not recognised as a separate class in Vietnam.

GlassGlass is not recognised as a separate class in Vietnam.

Construction and Machinery Breakdown


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Construction and Erection all Risks

Summary and TrendsThe construction industry has suffered a further setback since the brief recovery after the financial crisis in2008. Some smaller and medium-sized infrastructural development has either been cancelled or put onhold, while insurance requirements for foreign direct investment (FDI) projects are more often than notplaced in the country of origin of the funds. The major source of FDI projects is now Korea, rather thanJapan previously.

The Hanoi airport extension and new highway/bridge connection to the city is continuing. In addition,various infrastructural developments have been announced for the future:

• the first 4.3 miles (7 km) line of a 7-line sky-rail system linking Hanoi to its commuter suburbs, valued atUSD 100mn

• Vietnam-Laos highway

• A 10-route urban metro system for HCMC.

Vietnamese banks tend not to finance projects, and simple residential or commercial building has fallen off,partly due to the increase in bankruptcies of principals.

Two new industrial projects are now under way:

• Samsung is constructing a second plant for the manufacture of smart phones, with a total contract value(TCV) of over USD 2bn, in Thai Nguyen, with a local policy issued by Samsung Insurance

• PetroVietnam's new refinery in central Vietnam (TCV of USD 4bn) with PVI fronting for Singapore andJapanese interests, with a Japanese main contractor. Another refinery is also on the drawing board.

What little new business there is, is fiercely contested, given that anything government-controlled issecured by one of the three main companies, and then possibly coinsured or reinsured with the others.One foreign insurer is actively providing capacity to local companies on a net rate basis, instead of trying tocompete for the business direct.

In 2012 the construction segment wrote VND 2.95trn (USD 141.33mn), a 22.47% growth over 2011,although this is not seen locally as a continuing trend. The account represents 15.7% of the non-lifemarket, excluding PA and health.

StatisticsPremium and loss figures for the five years up to 2012 are shown below.



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HazardThe major hazards for contract works are related to natural perils, in particular typhoons and tropicalstorms: these can cause widespread flooding which, in turn, provokes landslip and subsidence. Theexposure is particularly severe in the centre of the country, and frequent losses are sustained to roadprojects from landslides and foundations being washed away.

Vibration and weakening and removal of support require close attention from underwriters when projectsites are adjacent to existing buildings or close to public thoroughfares. The problem has become soserious that some multinational insurers will not quote on public works in built-up areas and it is becomingmore and more difficult to find international reinsurance support for such risks. Contractors are alleged toshow little concern or even understanding of the third party risks involved in high-rise construction in citycentres and local underwriters too do not seem to consider such risks a significant problem.

Theft of tools and materials from project sites occurs but is not a major issue.

Building Contract ConditionsNo uniform building contract conditions are in use in the market: large projects are generally subject toFIDIC (the International Federation of Consulting Engineers) terms and conditions. The insurance is mostlikely to be arranged by the principal or otherwise by the main contractor. If arranged by the principal, theinsurance company would work only with the principal, and only the principal could make a claim againstthe insurer, receive a payment under the policy or decide to whom it should be paid. The standard period ofmaintenance is 12 months for residential projects and 18 or 24 months for large contracts. The period forinfrastructure projects may reach five years.



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Foreign-funded projects may require advance loss of profits insurance, but otherwise the cover is notgenerally found in the market. There is little demand for decennial cover although Bao Viet can write it.Some latent defects cover has been requested by Japanese principals.

The construction law requires professionals such as consulting engineers and architects to haveprofessional indemnity insurance but no limit is specified: in practice, for annual cover it is typically aboutVND 20.82bn (USD 1mn) while for cover on a project basis it may be a percentage of the total contractprice varying from about VND 10.4bn (USD 500,000) for small projects up to a maximum of about VND104bn (USD 5mn). For small projects it may be VND 2.08bn (USD 100,000) to VND 4.16bn (USD200,000). Cover is almost always arranged on a project-by-project basis.

Limits and Scope of CoverA local Vietnamese policy is used to write CAR business, closely based on the Munich Re form, and thepackage includes:

• Section 1a - project works

• Section 1b - contractor's plant and machinery

• Section 2 - third party liability

• Section 3 - delay in start up

• Section 4 - marine cargo.

In the case of erection risks, Munich Re's standard policy wording (Form E 65.0-E 1) for contract works(machinery), translated into Vietnamese, is used. The Munich Re guidelines for the class are also ingeneral use in the market. The Swiss Re policy wording is also used as it is acceptable to reinsurers.

Brokers like to use their own manuscript wordings, but they do not stray far from the Munich Re policyconditions. The scope of cover varies for individual contracts, and the terms and conditions for the largerinfrastructure projects are influenced by the international market.

It is not common for open cover policies to be issued for smaller projects but a few are in place, especiallyfor lift contractors and air-conditioning installers. Policies, which are subject to monthly declarations, usuallyhave a minimum and deposit premium payable at inception and a premium adjustment at the end of theperiod based on the actual work carried out.

Standard CAR policy exclusions are:

• war and terrorism

• radioactive contamination and nuclear reaction

• any act of default on the part of the insured or their representatives

• any partial or total cessation of work exceeding four weeks which has not been notified to insurers.



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Contractors' plant and equipment may be insured under the same policy as the contract works but it isusual for a separate annual policy to be issued.

Contractors' LiabilityThe labour code makes employers responsible for work-related injuries resulting in death or permanentdisability of employees. An employer is also liable for the payment of the salary and medical expensesincurred by an employee who contracts an occupational disease or is injured as a result of a work-relatedaccident, from the point at which first-aid emergency treatment is applied until the employee is fullyrecovered. Despite the legal liability, few contractors arrange either workers' compensation or employers'liability insurance. The situation is likely to change in the near future as legislation has now been passedmaking personal accident cover on workers compulsory and, once the relevant regulations have beenissued, the Insurance Regulatory and Supervisory Administration has indicated that steps will be taken toensure that the legislation is enforced. To date, however, no regulations are in place.

When workers' compensation insurance is issued, the policy limit is generally low, perhaps no more thanVND 10mn (USD 480). When employers' liability cover is taken, it is arranged as a separate policy.

Public liability limits vary greatly in accordance with the size of the project. They may be linked to contractvalue, typically a maximum of 50%, or set as a flat figure that may be as low as VND 1bn (USD 50,000) oras high as VND 208bn (USD 10mn). Usually, the limit is about VND 10.4bn (USD 500,000) to VND20.82bn (USD 1mn).

Third party cover is given in the market only with the contract works insurance, never in isolation.

Rating and DeductiblesSince 1995 a reference tariff has been in operation, based on Munich Re rates. It is applicable only togovernment contracts with a total value of VND 1trn (USD 50mn) or less and rates above and below theguidelines may be applied. For small projects, the tariff is more or less disregarded and, in the current verysoft market, rates are falling still. Underwriters were, however, reluctant to divulge examples.

Loss HistoryThe main recent losses were as follows:

Date Insured Cause of loss Amount (USD mn)2010 Thi Vai Port Landslide 11.0

2010 Ca Mau Power Plant n/a 1.8

2010 Saigon M&C Tower Third party damage 1.0

2008 Cua Ong Cold Company Crane collapse 3.9

2008 Ha Long Cement Factory n/a 1.1

2008 Cam Pha Cement Factory Various 1.7Source: Market sources

Underwriters report no serious incidents since 2011.



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Major InsurersThe leading construction and engineering insurers and their market shares are shown below.


PTI 14.98

Bao Viet 11.26

Samsung Vina 9.17

Bao Minh 8.03

BIC 5.89

Toan Cau 4.67

PJICO 4.44

ABIC 3.57

MIC 3.15Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

ReinsuranceWhile most companies have surplus treaties for this class, possibly up to USD 50mn, capacity is such thatfor large risks, local support is invariably required, since rates are that low that international markets havewithdrawn. Local coinsurance and reinsurance is used, and total market capacity is such that most riskscan be comfortably retained in Vietnam.

If foreign principals or contractors are involved, controlling the insurances, then international markets orreinsurers will dictate terms, using a local fronting company.

DistributionProjects relating to oil and gas, or those involving Japanese contractors, are usually handled directly withinsurance companies.

State-sponsored projects are placed either directly, by a tender mechanism, while most foreign-investedconstruction projects are arranged by brokers.

Building Cost IndexThere is no building cost index available for Vietnam.

Principal ContractorsContractors specialise in different categories of work as shown below:

• cement projects - Kumagi Gumi from Japan

• hydro power and power generation - EDF (Electricite de France), Alstom and ABB

• roads - Vietnamese contractors

• tunnelling work - Song Da Corporation.



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Vietnamese contractors are often the principal sub-contractors for major projects. Increasingly Koreancontractors are appearing, as the major source now for FDI is Korea, having taken over from Japan.

Machinery Breakdown

Summary and TrendsWhile there is some demand for electronic equipment insurance, there is little for machinery breakdowncover, which, until recently, was written mainly as a separate policy. The number of requests received frombrokers to include the cover under industrial all risks policies is increasing and this is now commonly done.Insurers are frequently requested to grant the cover as an add-on, free of charge. Almost all the demandcomes from foreign-invested companies in the manufacturing sector, as well as hotels and shopping mallswith elevators and/or escalators.

Many local reinsurance treaties grant cover for non-manufacturing risks only or impose a much lower limitfor manufacturing risks, obliging direct insurers to make a specific request for cover when it is required. It iscommon in the market to arrange local reinsurance in these circumstances to avoid the need for foreigninvolvement, thereby allowing lower rates to be quoted. Most insurances, especially policies for SMEs,cover all machinery, insurers preferring to avoid the possibility of selection against them although cover forselected machines only is given for some energy risks such as power plants.

StatisticsMarket premium and loss experience for machinery breakdown, for the five years up to 2012 are shownbelow. These provide some insight into the volatile nature of this account, driven basically by contractors'plant. The lower income in 2012 was due to fewer new projects, and/or the increased incidence of includingbreakdown cover in property all risks programmes.




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Limits and Scope of CoverMachinery breakdown may be covered as part of an industrial all risks insurance or other package policy,attached by endorsement to a named perils policy or issued as a separate policy: cover under packagepolicies is the most common, occasionally for full value but usually with a sub-limit of about VND 10.4bn(USD 500,000). Business interruption may be included as a separate section of the machinery breakdownpolicy or, more usually, insured under a separate policy, but there is little or no demand for the cover. Thepolicy, when issued separately, includes mechanical but not chemical explosion and excludes third partyliability and natural perils with the exception of storm. The standard market wording is that of Munich Re:some Swiss Re-based wordings are also found.

Computer equipment is covered under an electronic equipment policy which excludes damage caused byearthquake, typhoon and loss by theft and failure of public supply but covers loss or damage occasioned byfire.

The standard boiler and pressure vessel policy in use covers damage other than by fire caused by andsolely due to explosion or collapse, including also third party cover. Exclusions include defects due to wearand tear, and failure of individual water tubes in boilers, locomotive or other multi-tubular types, insuperheaters or in economisers.

Construction plant and machinery is insurable on a new, replacement value basis but if the values insuredare less than the actual new replacement cost average is applied. Standard exclusions include wear, tearand deterioration, mechanical and electrical breakdown, loss or damage resulting from immersion in tidalwaters, loss in transit and loss or damage resulting from wilful acts or neglect.

Rating and DeductiblesCover for textile machinery is available at 0.20% to 0.25%, subject to deductible of 5% of each and everyloss with a minimum of VND 2.08mn (USD 1,000). The average rate for most types of machinery is about0.12%. The rate for the insurance of a steam boiler is 0.25% to 0.30%.

Lower rates are applied when the risks are included in a package policy, or no charge at all is made.

Loss HistoryAccording to separate statistics produced by the Association of Vietnamese Insurers, the historical paidloss ratio has been under 35% in the five years up to 2012, although rising. No losses of any consequencehave been reported in 2013.

Major InsurersThe leading construction and engineering insurers and their market shares are shown below.



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PTI 14.98

Bao Viet 11.26

Samsung Vina 9.17

Bao Minh 8.03

BIC 5.89

Toan Cau 4.67

PJICO 4.44

ABIC 3.57

MIC 3.15Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

CAR and engineering classes are not broken down any further.

ReinsuranceReinsurance falls under the engineering treaty, which is typically a surplus treaty with cover up to USD40mn or USD 50mn. Smaller companies have a treaty capacity of about USD 10mn to USD 15mn, with netretentions about USD 1mn to USD 1.5mn.

Other companies may include in a property treaty, with smaller sub-limits than fire/all risks.

DistributionDistribution is mainly through brokers, whilst small amounts of business are placed directly with insurers,depending on the client.

Statutory Inspection RequirementsThere is a government body responsible for inspecting boilers and machinery. After inspection, a certificateis issued valid for three, six or 12 months depending on the age and condition of the machinery, after whichit is inspected again.

Extended WarrantyNo extended warranty cover is available in the market.

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Summary and TrendsMotor insurance remains the largest class in the market with written premiums totalling VND 6.33trn (USD303.43mn) in 2012, equivalent to 33.7% of the total non-life market premium (excluding PA andhealthcare). Direct written premiums rose by only 1.59% in 2012 over 2011 following a 15.85% increasethe previous year. This is attributable to the inherent economic problems of the country, rather than purecompetition. Bank lending criteria have become stricter in relation to car purchase, while premiums remainrelatively static, top-line; competition is discount-related, rather than gross premium per vehicle.

Rating methodology remains unsophisticated, based on value/cc capacity, with little or no vehicleclassification or segmentation, except for private car/company car/taxi. Hire cars are rated as companycars, and commercial vehicles have a different scale altogether.

Most registered vehicles are motor-cycles, over 95%, and this mode of transport remains the vehicle ofchoice, basically due to cost, but insurance penetration is still unacceptably low.

Good results have continued up to 2012, although the paid loss ratio has risen to 53.44%. Fraudulent andoverstated claims continue to be significant features of the business, while new loss recording andreserving regimes imposed by Circular No 125/2012/TT-BTC will probably see loss ratios deteriorate evenfurther, as currently only paid losses are shown.

Whilst saying this, the market is short-tail in nature, and third party claims, even bodily injury, are settled asquickly and as economically as possible, rarely following a legal or judicial path.

Legislative UpdateThere has been no recent new legislation that might affect motor insurance.

Projected LegislationNo projected legislation affecting motor insurance was known of when this report was in preparation.

StatisticsMotor premiums and losses over the five years to 2012 are shown below.

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Statutory Third Party LimitsPursuant to Decree No 115/1997/ND-CP of 17 December 1997 on the Regime of Compulsory Insurance ofCivil Liberties of Motorised Vehicle Owners ( subsequently replaced by Decree No103/2008/ND-CP),Decision No 23/2007 of the Ministry of Finance and Circular No 126/2008/TT-BTC wereissued raising the minimum limits from 1 June 2007 to VND 50mn (USD 2,400) per person for bodily injuryand a similar amount for property damage. The limits apply to private cars and commercial vehicles. Thelimit for motorcycles is VND 30mn (USD 1,440) per person. No changes have been made to the limits sincethen.

The obligation to insure applies to "motor vehicle owners who join traffic in the territory of the SocialistRepublic of Vietnam". Motor vehicle is defined as "an automobile, tractor, construction vehicle or machine,agricultural or forestry vehicle or machine or a special-type vehicle, which is used for security or defencepurpose (including trailers and semi-trailers pulled by automobiles or tractors), two-wheeled motorcycle,three-wheeled motorcycle, motorbike or a similar motor vehicle (including motor vehicles for disabledpeople) which runs on road" (Decree No 103/2008/ND-CP). The law applies to all motorised vehicles andno exceptions are listed.

There is no mechanism within the legislation for self-insurance, by way of a cash deposit or bond of anysort.

Owners must produce proof of insurance when they register their vehicle.

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Other Regulatory ConsiderationsWhatever traffic legislation is imposed, it seems to be ignored by most road users, ie motorcyclists.Changes to the law in 2008 increased the maximum permitted speed limits applicable to different types ofvehicles and made the wearing of crash helmets obligatory for motorcycle riders on all public highways. InNovember 2011 new measures were announced to improve traffic congestion and reduce accidents,including stricter driving tests, more drink-driving controls (which currently apply only to motorcyclists) andstiffer penalties for police officers who take bribes from motorists. The police do attempt to enforce the law,but it is still widely ignored by road users.

Vietnam has no bad risks pool and companies are obliged to offer the minimum obligatory third party coverto anyone requesting it. Such is the appetite for business that even someone with a poor claims recordwould have little difficulty in finding an insurance company prepared to offer the desired cover. While someinsurers are said to be taking greater care in underwriting, few check the loss history or contact theprevious insurer. Now, however, the Association of Vietnamese Insurers (AVI) is working on the creation ofa database which will hold the complete history of all policyholders in connection with the obligatory cover.Member companies will be able to consult the statistics in order to see the loss history of the proposer. It isstill not known when the project will be completed.

Uninsured drivers are acknowledged to be a problem; official figures reveal that only about 30% of themotorcycles in the country have the obligatory cover. Many are insured in order to be registered, as proofof insurance is required, but the owner then "forgets" to renew the cover. Decision 23/2007 established aguarantee fund to compensate the victims of uninsured or hit-and-run drivers, which was implemented byDecree No 103/2008/ND-CP. All motor insurers writing obligatory third party insurance are required tomake an annual contribution of up to 2% of their compulsory third party premiums to the fund, which ismanaged by the AVI. The fund is also used to pay for road safety campaigns and for road improvementssuch as new traffic signals and slip roads. In the absence of cover from the fund the injured party is obligedto seek redress from the guilty party if he or she is known; if it is an unidentified vehicle, the injured partyhas no comeback.

International MotorA protocol (Protocol 5 - ASEAN Scheme of Compulsory Motor Vehicle Insurance) signed in May 2001provides for a common scheme of compulsory motor vehicle third party liability insurance for ASEANcountries. The Blue Card scheme was one of the protocols adopted by the ASEAN transport ministersunder the ASEAN Framework Agreement on the Facilitation of Goods in Transit between ASEANCountries. The formalised documentation for the operation of the scheme has been completed and eachmember country or signatory to the protocol has nominated a national bureau that will represent thecountry on the panel of offices that oversees the scheme. Although most national bureaux have reportedthat they are ready to operate the scheme, it has not yet been put into effect.

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An agreement was signed in 2009 by Vietnam, Cambodia, Laos and Thailand by which a common systemof third party cover would be set up to facilitate travel between them. A limit of USD 50,000 applies to bothprivate and commercial vehicles and a proof of insurance is given. The system is still not operational, dueto various bureaucratic hold-ups not necessarily in Vietnam.

Foreign vehicles from other countries wishing to enter Vietnam may extend their local policies prior todeparture or buy insurance on arrival there.

Limits and Scope of CoverThe following types of cover are available:

• obligatory third party only cover

• obligatory plus additional voluntary third party cover in excess of the compulsory limits; this is issuedalong with the obligatory cover as a single policy - most foreigners and some Vietnamese drivers buyhigher limits, which may be freely chosen or selected from options; for example, one company offers achoice of VND 104mn (USD 5,000) and VND 208mn (USD 10,000) or USD 10,000 and VND 312mn(USD 15,000) for bodily injury and property damage respectively - some foreigners buy an additionalVND 500mn (USD 24,006) to VND 1bn (USD 48,012)

• comprehensive cover comprising third party cover and damage to the insured vehicle caused bycollision, fire, explosion, storm, flood, lightning, hail and theft (total loss only for theft) may also bepurchased: this is issued as a separate policy.

Further options that can be added include driver and passenger personal accident, accidents caused bygoods carried and personal effects cover. Legal expense cover is included in the limit.

Terrorism cover is not given under the motor policy and there is no interest in including it.

One major motor insurer estimates that about 40% to 50% of its motor portfolio has minimum third partyonly cover, 15% has third party only (compulsory plus voluntary) and the remaining 35% to 45% has fullycomprehensive insurance. Comprehensive cover is not generally given for motorcycles.

At least one foreign insurer only writes accidental damage, and fronts for Bao Minh in respect of the liabilityelement, either compulsory or voluntary, particularly in respect of fleets.

No unlimited third party cover is available in the market.

Rating and DeductiblesThe minimum statutory cover is subject to a fixed tariff premium, as follows:

Type of vehicle Annual premiumVND USD

1. Two-wheeler motor vehiclesUnder 50cc 55,000 3

From 50cc 60,000 3

2. Three-wheeler motor vehicles 265,000 13

3. Private Cars

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Type of vehicle Annual premiumVND USD

less than 6 seats: 345,000 17

6 to 11 seats 690,000 33

12 to 24 seats 1,100,000 53

above 24 seats 1,590,000 77

Pick-up 811,000 39

4. Passenger carrying vehicles10 seats 1,260,000 61

20 seats 2,550,000 123

Above 25 seats 3,210,000 + 30,000 per additionalseat

155 + 1 per additional seat

5. TrucksUnder 3 tonnes 656,000 32

3 to 8 tonnes 1,280,000 62

8 to 15 tonnes 1,760,000 85

Above 15 tonnes 2,240,000 108Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Taxis are charged at 150% of the commercial vehicle seating capacity rate in Section 4 of the ratingschedule. Buses are rated as per Section 3 according to seating capacity.

Rates for voluntary covers are flexible and generally set by the insurers on the basis of the experience bytype of vehicle (motorcycle, car, truck) in the portfolio in the previous three years. Some use is now beingmade of market segmentation and differentiated rating but typically the only distinction made for ratingpurposes is between old and new vehicles. All rates in theory now, as per Circular No 125/2012/TT-BCP,should be actuarially calculated, (other than compulsory rates), such that the MoF can be convinced thatrating is not inherently unprofitable.

Passenger cover may be charged as a rate on sum insured. Partial theft cover is frequently given toforeign-owned vehicles at an additional rate of 0.5%. Own damage cover is not generally offered formotorcycles, except for some company motorcycles when a rate of about 1.0% is charged. Theft cover isnot normally given.

The market approach to deductibles differs. Foreign insurers generally apply a low deductible, sometimesas low as USD 10 for private cars, while local insurers apply a franchise, typically of about VND 500,000(USD 24). Voluntary deductibles and franchises in excess of those mentioned are possible, givingentitlement to a premium discount: two times the deductible attracts a 5% discount and four times thedeductible attracts a 10% discount. Few take advantage of these, preferring to keep the policy deductibleor franchises as low as possible.

The table below shows the approximate movement of motor voluntary rates since the base year, 2006(100). The data are prepared on the basis of unofficial estimates given by local underwriters for the marketmotor portfolio as a whole, and whilst premiums appear unaltered, competition exists in the discountsallowed off gross premiums:

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Motor rate movements2013 85.0

2012 87.5

2011 87.5

2010 87.5

2009 87.5Source: Market sources

No Claims Discount SystemPractice differs by company: a no claims discount is offered by some companies after a minimum of twoyears' accident free insurance; some companies allow a maximum of 40% for five or more years free ofclaim and at least one offers a maximum of 5% for two or more years free of claim.

The scale offered by one leading motor insurer provides 5% after one year claims free, rising by 5% perannum until reaching the maximum 20% after four years. In most cases, the whole discount is lost on theoccurrence of a claim.

Companies generally offer an additional discount of 5% to 10% to clients placing all their insurances withthe company, as well as introductory discounts to attract business to start with.

Loss Experience and Trends in Court AwardsMost losses are covered by the comprehensive section for private cars and taxis and by the third partysection for lorries. The personal accident cover is worst for two-wheeled vehicles but the overall motorclaims ratio for motorcycles is between 10% and 15% for the market as a whole. Helmet use is nowcompulsory for all riders, including passengers, which appears to be having a positive effect, and policing ismore stringent. Theft claims are not a problem for motorcycles, as cover is rarely given.

Court awards are very low by the standards of western nations and other more developed Asian countries.The average payment for a death resulting from a motor vehicle accident is about VND 30mn (USD 1,440)and the maximum is about VND 50mn (USD 2,400). These amounts have remained stable over the years,and there appears to be no pressure from any quarter to increase them, certainly not the courts.

Many insurers operate with a system of approved repairers. In this case it is normal practice to offerdifferent policies, one which requires that the vehicle be repaired by a repair shop approved by the insurerand another, which is more expensive, which permits a free choice of repair shop.

The largest and most expensive element in vehicle repair is that of spare parts, as most must be imported.Second-hand and unbranded spares may be used, with the agreement of the insured, especially whendelays are likely to occur in importing originals. Labour costs, though low, have been increasing more orless in line with inflation.

There are no knock-for-knock or claims-sharing agreements in the market.

Major InsurersThe leading motor insurers and their market shares are shown below.

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PJICO 15.77

PTI 11.05

Bao Minh 8.87

PVI 8.03

Liberty 5.18

AAA 4.30

BIC 3.86

MIC 3.10

Xuan Thanh 2.11Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

There is no differentiation between compulsory and voluntary, and market shares may differ in the twosegments. Certainly for the compulsory cover, the two original local companies, Bao Viet and Bao Minh,would have an advantage due to their wider branch and agency sales networks.

ReinsuranceThe business is almost invariably retained for net account.

DistributionBusiness is estimated to be split about 50/50 between direct business and the agency networks ofcompanies.

Vehicle StatisticsVietnam's vehicle registry does not publish numbers, and previous statistics have been taken from ESCAP(UN Economic and Social Commission for Asia and the Pacific), which has also changed its database.

Motor Fleets and Commercial VehiclesVietnam is not a major fleet market but there are fleets belonging to petrochemical companies, touristvehicle fleets and airline fleets as well as taxis and buses. Fleets are mainly owned and self-managedthough leasing is becoming more common. The quality of management is said to vary greatly but, as ageneral rule, the larger the company, the more likely it is that its fleet will be well managed. Fleetmanagement is best among the foreign-invested companies.

Fleets are generally rated on an individual vehicle basis and a discount is applied in accordance with thenumber of vehicles insured. Most are insured on a fully comprehensive basis. One company allows adiscount of 5% for a fleet of 10 to 20 vehicles, 10% for 11 to 20 vehicles, 15% for 51 to 100 vehicles and20% for more than 100 vehicles. Others are more generous, granting 10% for as few as five vehicles risingto 25% for 31 or more. The number of vehicles necessary to be considered a fleet varies from company tocompany.

One major insurer rates fleets, which it considers as three or more vehicles, on the experience of the pastthree years, both at inception and renewal.

Some companies apply a low claims discount, as follows:

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• claims ratio below 40% - discount 10%



• claims ratio below 10% - discount 25%.

An additional discount of 10% is given by some insurers when there are at least 30 vehicles in the fleet andall are new. The premium may be further discounted to take account of the value of the client or simply toobtain or retain the business.

In the current soft market, even if a technical approach to rating is adopted, rates may be adjusteddownwards for purely commercial reasons.

Market experience on fleets appears to be mixed though there is general agreement that results for taxifleets have been very poor.

The major fleet insurers are Bao Viet, PV Insurance and Bao Minh.

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Summary and TrendsThe state provides neither workers' compensation nor employers' liability cover: both are handled by theprivate insurance market. The Ministry of Finance has an approved rating structure for workers'compensation insurance, and cover must follow its standard policy wording.

The Labour Code imposes a legal responsibility on employers in relation to work-related injuries resulting indeath or permanent disability of employees. An employer is also liable for the payment of both medicalexpenses incurred by an employee who contracts an occupational disease or is injured as a result of awork-related accident and for the payment of his or her salary from the time of the accident until fullrecovery.

There is currently no legal obligation on employers to arrange insurance for workers' compensation oremployers' liability but legislation was passed in 2006 that will make cover compulsory for employers in theconstruction sector. The regulations and tariff to implement the legislation must be drafted by the ministryconcerned but the market still awaits their appearance.

Travel to and from work is considered to fall within the definition of work, and is covered by the socialinsurance law provisions; occupational disease is covered by both workers' compensation (WCA) andemployers' liability (EL) policies.

There is currently little demand in the market for either workers' compensation or employers' liability coverand most of the policies issued to date, especially for EL, are for foreign-invested companies. If EL cover isbought, it is included in a general third party liability cover as an additional item, and separately rated onthe agreed limit any one loss/any one year, anywhere up to VND 208bn (USD 10mn) for foreign-investedrisks.

Some companies buy group personal accident cover as an alternative to provide some form of automaticpayment, rather than a strict liability or common law settlement.

StatisticsPremium and loss figures are included in miscellaneous casualty and cannot be separately identified.

Regulatory ConsiderationsArticle 107 of the Labour Code of 1995 requires all employers with the exception of state- ownedenterprises to compensate employees for death, injury or disease resulting from their employment asfollows:

• in the case of death or permanent disablement with a reduction in the ability to work of at least 81% - 30base monthly salaries; where an employee is found to be at fault for an accident, compensation may belimited to 12 months' salary

• if the permanent disablement causes a reduction in the ability of the employee to work of between 5%and 81%, the compensation is fixed in accordance with a scale of benefits

• medical expenses from the time of the accident until full recovery of the injured employee



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• basic salary during the period during which the employee is incapacitated.

The code allows employers the freedom to choose whether or not they insure their liability but underlegislation passed in 2006 , cover will become obligatory for all employers in the construction sector assoon as the relevant regulations are passed establishing the policy wording and tariff to be applied: so far,however, these have not been issued.

The workers' compensation policy operates regardless of negligence on the part of the employer andcovers the employer's statutory liability. Policy benefits are freely negotiable by the insurers and client andbenefits lower than or in excess of statutory benefits may be agreed.

The employers' liability cover, which operates in the event of negligence on the part of the employer,protects against the potential common law liability. Benefit levels are fixed by the client.

The law does not require certificates of insurance to be issued for either workers' compensation oremployers' liability insurances.

Legislative UpdateThere has been no recent new legislation that might affect workers' compensation and employers' liability.

Projected LegislationThe enabling legislation to enact compulsory workers' compensation cover for the construction industry isstill awaited.

ExpatriatesExpatriates who are legally resident and working in Vietnam are covered by the labour code, subject to itsprovisions, and may not opt out.

The workers' compensation policy specifically excludes accidents, injury and occupational diseaseoccurring outside the territorial limits of Vietnam but it may be extended to cover employees temporarilyworking overseas.

Limits of IndemnityCover for workers' compensation is generally arranged up to the statutory limit of liability but higher or lowerlimits may be granted.

For employers' liability, which is taken mainly by foreign-invested companies, the normal limit is VND20.82bn (USD 1mn) any one occurrence and VND 41.64bn (USD 2mn) or VND 62.46bn (USD 3mn) in theaggregate, but has been known to reach VND 208bn (USD 10mn), any one loss and in the aggregate,especially for the larger employers where there is a large accumulation risk.



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Scope of CoverThe Law on Social Insurance, No 71/2006/QH-11, establishes that employees are entitled to the protectionof the work accident regime at the workplace and during working hours, outside the workplace and beyondworking hours when on assignment for their employer, and on journeys to and from workplace andresidence within a reasonable time and on a reasonable route. That cover is granted by a workers'compensation policy.

The policy gives cover for Vietnam only but some companies are prepared to extend it for an additionalpremium to include other countries on a 12-month renewable basis.

The limits requested and granted in the market seldom reach levels that necessitate the placement ofexcess layers. It is understood that some facultative excess of loss has been placed for employers' liabilitybut limits generally are within treaty or other automatic reinsurance capacity.

Some brokers advise clients to take out 24-hour personal accident cover instead of workers' compensationinsurance, which is done mainly by local companies as a cheaper option. The policies cover death,disability, medical expenses and salary benefit.

RatingAll companies are free to fix their own rates and, after several years of stable rates, increased competitionfor business is leading to some price reduction.

An EL extension to a GTPL policy could cost 0.1% of the chosen limit.

There are no deductibles.

Loss ExperienceThere are no loss statistics for workers' compensation and employers' liability business but it is said thatresults are more or less acceptable for most activities. The main exception is the construction industry,which produces most claims and very poor results, from high incidence (as a result of poor sitemanagement and safety controls) rather than average cost of claim.

Workers' compensation claims tend to be small while very few claims are experienced under employers'liability covers.

Major InsurersThere are no statistics but the major workers' compensation insurers are said to be Bao Viet and Bao Minh.

ReinsuranceThe business falls under whatever protections companies have for their liability account, even though theexposures are small. Underlyings would be upwards of USD 250,000.



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DistributionWorkers' compensation is usually placed through agents, whilst clients requiring employers' liability wouldnormally be handled by brokers.

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General Third Party

Summary and TrendsVietnam is not a litigious society: indeed, there is a long tradition of non-confrontation. Most people,especially low-income groups and the less well educated, have no idea of their legal rights or knowledge ofhow to pursue them. There is little awareness of formal judicial institutions such as the courts andsupporting organisations such as legal aid centres and local mediation groups. The situation is changing,however, as foreign investment grows, especially in the cities, and there is greater contact with othercultures. Also, international and domestic organisations are making increased efforts to inform people oftheir rights. As a general rule, the more serious an incident, the greater the chance that legal action will betaken, but it is still most likely that any dispute will be settled out of court.

In this context, there is little demand for public liability insurance. Insurance is seen primarily or evenexclusively as a means of asset protection and liability cover would be considered an unnecessaryexpense. There are no compulsory general third party covers and interest has been limited to hotels andother businesses with foreign contacts. As more foreign-invested companies enter the market, however,demand is increasing from both local and foreign companies, large and small. A steady stream of enquiriesand requests for cover is being received from contractors; there is much less interest from themanufacturing sector.

Cover is automatically included in SME packages, but not IAR-type covers.

Companies report that competition for general third party liability is increasing and prices are falling.

In 2012 written premium amounted to VND 512.4bn (USD 24.57mn), equivalent to 2.73% of the totalnon-life market portfolio (excluding PA and health), and an increase of 12.83% over the previous year.

Legislative UpdateThere has been no recent new legislation that might affect general third party liability.

Projected LegislationNo projected legislation affecting general third party liability was known of when this report was inpreparation.

StatisticsLiability premium and paid loss statistics for the five years up to 2012 are shown below, with lossesshowing an upward trend, although still a small percentage ratio. There was no apparent reason for thejump from below 10% in 2011 to over 20% in 2012.

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Limits and Scope of CoverAll companies in the market write the business and cover is freely offered either as part of a package policyor as a stand-alone cover. For stand-alone insurances a variety of policy wordings is available. Wordingsare normally on an occurrence basis. Local legislation does not establish any extended reporting ordiscovery period but it is market practice to give six months.

The standard market wording covers:

all sums which the insured becomes legally liable to pay as compensation in respect of

1.1 accidental bodily injury to or illness of any person

1.2 accidental loss of or damage to property

arising from the business and occurring during the period of insurance and within the territorial limits statedin the schedule and happening or caused as described in the schedule under the heading "description ofbusiness"

2 all costs and expenses of litigation

2.1 recovered by any claimant against the insured

2.2 incurred with the written consent of the company in respect of any claim against the insured forcompensation to which the indemnity expressed in the policy applies.

The principal exclusions are:

• liability for death or bodily injury to anyone under a contract of employment to the insured

• liability to property belonging to the insured or in his or her care, custody or control

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• liability for death or bodily injury loss or damage in connection with any mechanically propelled vehicle ormachine etc

• liability assumed by agreement

• pollution howsoever caused

• punitive or exemplary damages.

Although all pollution is excluded from the standard policy, sudden and accidental cover may be addedback for an additional premium.

The geographical scope of the policy is usually Vietnam unless otherwise requested, when it may beextended to worldwide or worldwide excluding the US and Canada.

Legal jurisdiction may be restricted to Vietnam but it is more common for insureds, especially internationalhotels, energy companies and foreign-invested enterprises, to have foreign jurisdiction, usually worldwideor worldwide excluding the US and Canada. Local companies' reinsurance treaties generally exclude coverfor the US and Canada so that they are obliged to buy facultative reinsurance in order to give the cover.The jurisdiction may be a problem for joint venture companies as one partner may prefer Vietnam while theforeign partner prefers a foreign jurisdiction.

Limits vary in accordance with the type of risk. For office risks they range from VND 2.08bn (USD 100,000)to VND 10.4bn (USD 500,000), for manufacturing risks from VND 20.82bn (USD 1mn) to VND 104bn (USD5mn) (including product liability), and for hotels from USD 5mn to VND 208bn (USD 10mn). Under packagepolicies limits tend to be small, generally no more than VND 4.16bn (USD 200,000). There is no standardapproach to legal costs. Most companies provide cover for costs in addition to the policy limit for anunlimited amount; some major multinational insurers consider costs to be included in the limit when thepolicies cover the US and Canada. If costs are insured separately, an additional premium applies. Highindemnity limits may be arranged by layering, but this is not common. State-owned companies and thosewithout any foreign involvement have very low limits if they are insured at all.

Punitive damages are not awarded under Vietnamese law.

Rating and DeductiblesPremiums for general liability are modest as there is little demand for the business. The following rates andpremiums are currently obtainable in the market for a limit of USD 1mn:

• office risk - VND 10.4mn to VND 14.56mn (USD 500 to USD 700)

• hotel - usually rated on the number of rooms but a minimum premium of VND 2.08mn (USD 1,000) toVND 4.16mn (USD 2,000) would be charged for combined public and product liability cover if worldwidejurisdiction is not offered and USD 2,000 to VND 6.24mn (USD 3,000) if it is; for a limit of VND 208bn(USD 10mn) the premium would be at least VND 208mn to VND 312mn (USD 10,000 to USD 15,000)

• factory - 0.1% on annual turnover, adjustable, to include product liability.

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Pricing for small limits has remained more or less unchanged in recent years; premiums for higher limitshave suffered a reduction of up to 20%.

The policy deductible is negotiable but usually about 5% of the limit, with a minimum of VND 10.4mn (USD500), rising to about VND 208mn (USD 10,000), for products to US/Canada.

Premium discounts will be granted for higher deductibles.

Loss ExperienceMost claims involve small amounts and claims incurred are low; the claims paid ratio has been lower than30% in each of the past nine years, being only 4.1% in 2010, but gradually rising to over 20% in 2012.Insurers report an increase in claims frequency rather than average claim cost, especially for "slip and trip"claims, presented against hotels by foreigners.

Underwriters report few losses of any significance to date, other than one in September 2006 involving thedeath of a child in the swimming pool of a hotel, settled for USD 20,000.

Major InsurersThe leading liability insurers and their market shares are shown below.


Bao Viet 19.80

PJICO 10.62

Bao Minh 10.03

AIG 9.34

QBE 5.69

ACE 3.23

MSIG 2.77

PTI 2.39

VNI 2.05Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

ReinsurancePublic liability is reinsured as part of the miscellaneous accident group of classes on a surplus treaty basis,with retentions and limits that may vary according to the type of business included. Cover is arranged up toa maximum of about USD 10mn in the case of the major foreign players, less for smaller domesticcompanies, and retentions are up to a maximum of USD 500,000. Excess of loss cover is also found, withlimits of about USD 4.5mn in excess of USD 500,000.

Some facultative reinsurance is required from time to time for large risks such as luxury hotels, with limits ofUSD 10mn, and for some cases with US/Canada jurisdiction.

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DistributionThe normal distribution channels for stand-alone insurance are either direct or through brokers. Agents arenot often involved thus.

Agents and brokers are now getting involved in SME package policies, which automatically include publicas well as product liability.

Product Liability

Summary and TrendsThe class remains largely underdeveloped and there is little demand even from those who might be awareof the cover. Vietnamese culture is not litigious and individuals have little consciousness of their legalrights, thus demand comes mainly from foreign-invested companies which are specifically export-driven,rather than exposed to the local market. Even large Vietnamese companies are unlikely to show anyinterest in the insurance unless obliged by contract to carry it, normally for exports.

Most policies issued are connected with exports of primary foodstuffs, such as rice and coffee, often as aresult of contract conditions, but Vietnam's burgeoning trade with the United States is driving demand frommany different sectors. Underwriters also report an increase in interest from the food industry, includingcompanies involved in the preparation and sale of cooked foodstuffs.

The entry into effect of the consumer protection Law No 59/2010/QH12, which tightens the legislation onthe marketing of defective products, was expected to raise awareness of consumer rights and lead to morelitigation when damage or injury is caused.

Policies are either issued on the QBE combined general liability and products form, or the Munich Re formas stand-alone covers. The cover is rarely given as part of package policies, even with a very low limit;stand-alone policies and combined general and product liability policies are much more common.

Legislative UpdateThere has been no recent new legislation that might affect product liability.

Projected LegislationNo projected legislation affecting product liability was known of when this report was in preparation.

StatisticsNo separate statistics are available for product liability.

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Limits and Scope of CoverProduct liability is almost always given in the market either as a stand-alone policy or as an endorsement tothe public liability policy. The cover includes exports if required and most demand is for export-relatedbusiness where insurance is demanded by the buyer. The limits of indemnity may be a single sum peroccurrence and in the aggregate or a sum per occurrence and two or three times that figure in theaggregate. When combined with general liability cover, a single overall limit or separate limits may apply.The normal is up to VND 104bn (USD 5mn) any one occurrence.

Punitive damages are not a feature of the Vietnamese legal system.

Jurisdiction may be worldwide excluding the US and Canada, though requests for full worldwide cover arefrequent. Local companies are generally required to refer enquiries to their treaty reinsurers if worldwidejurisdiction including the US and Canada is requested, as the reinsurance treaties exclude it. Worldwidejurisdiction is also available from some of the foreign insurers, and ACE or AIG are known to providereinsurance support occasionally to local companies for US/Canada jurisdiction.

Cover is usually on a claims made basis but policies on an occurrence basis are also common. Locallegislation does not establish any extended reporting or discovery period but it is market practice to givethree to six months.

Rating and DeductiblesThe class is rated locally except for those cases requiring reinsurance support. It is usually rated onturnover and annually adjusted at 0.1%, unless the turnover is very small or the product is seen asnon-hazardous, when a flat premium rather than a rate is generally applied. Prices are said to be falling asnew companies are writing the business aggressively in order to obtain market share.

Loss ExperienceThere are no separate statistics for product liability but insurers report that claims are minor and results forthe business are good. Many local claims involve food poisoning, although no serious events haveoccurred.

Major InsurersThe business is written by all companies in the market, and AIG, ACE, QBE and Bao Viet are among themost active insurers.

ReinsuranceThe business is combined with the public liability protection. As exports to the US and Canada arefrequently excluded from treaty cover, a significant amount of facultative reinsurance is also placed.

DistributionAlmost all the business is placed through brokers.

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Territorial LimitsExports may be insured and most of the policies issued refer to export-related business. Jurisdiction islimited whenever possible to worldwide excluding the US and Canada, but requests for full worldwidejurisdiction are common. Cover is available from foreign insurers in the market for exports to the US andCanada with US/Canadian jurisdiction, but domestic insurers must either approach their treaty reinsurersfor reinsurance support or buy facultative reinsurance locally.

Special RisksRisks include pharmaceuticals and manufacturers and distributors of animal feed. There are no specialpolicy forms locally for such risks, which are usually excluded from treaties and placed facultatively. Policywordings specific to the risks are generally supplied by reinsurers.

Product Guarantee, Recall and Malicious Product TamperThere is no cover in the market for product guarantee or malicious product tamper.

Product recall is available either as a stand-alone policy or as an endorsement to the product liability policy,with a sub-limit. Cover is given only for recall expenses, storage and destruction.

Professional Indemnity

Summary and TrendsThere is little demand for professional indemnity (PI) cover as the risk of claims or litigation is very low: nocase involving PI has ever appeared in the courts in Vietnam. Although several obligatory insurances areestablished by law, the circulars or decrees necessary to implement them have not been issued andconsequently there is no obligation to buy the cover. Demand comes principally from large enterprises,particularly those with foreign connections, and some interest is also being shown by constructionbusinesses and security companies. There is also considerable demand from construction professionalswho require the insurance to meet contract conditions.

The Law on Insurance Business24/2000 makes the cover obligatory for insurance brokers and lawyers,and other legislation establishes the obligation to insure for securities companies, fund managementcompanies and other professions. Implementation legislation for many of the professions is still pending,however. Insurers agree that, as the country develops, demand will increase. At least one foreign insurer ismarketing a package specifically for financial institutions and investment fund managers, covering bothprofessional indemnity and D&O.

There are at least eight hospitals which buy medical malpractice.

Professional associations are not strong in Vietnam, and it is difficult for them to impose their ideas onmembers on subjects like the need for insurance.

Local claims managers and press reports suggest that the frequency of medical malpractice claims isgrowing. To date, all have been settled out of court.

Legislative UpdateThere has been no recent new legislation that might affect professional indemnity.

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Projected LegislationAlthough several obligatory insurances are established by law, the circulars or decrees necessary toimplement them are still pending. The projected legislation in respect of compulsory medical malpracticehas still not been enacted.

StatisticsNo separate statistics are available for professional indemnity insurance.

Limits and Scope of CoverPolicy wordings are similar to UK and US market conditions, and limits may go up to VND 208bn or VND416bn (USD 10mn or USD 20mn) though the normal limit is about VND 20.82bn (USD 1mn), to whichinsurers try to restrict cover. The limits of indemnity may be a single sum per occurrence and in theaggregate or a sum per occurrence and two or three times that figure in the aggregate. The legislation andregulations establishing the compulsory insurances do not specify any limit, allowing insureds to select verylow limits if they wish. Limits for engineers and architects range between VND 20.82bn and VND 208bn(USD 1mn and USD 10mn) according to contract requirements, but few annual covers are sold to theseprofessions. Hospitals are looking at VND 104bn (USD 5mn) for their medical malpractice cover.

Cover is on a claims made basis and a local jurisdiction clause usually applies, but foreign jurisdiction,generally worldwide excluding the US and Canada, may be arranged for an additional premium. There arealso a few cases of worldwide cover, including the US and Canada. When local jurisdiction is fixed, as thecourts have no legal expertise to handle PI claims, the policy may contain an arbitration clause that allowsarbitration to be carried out in Singapore or Hong Kong. Punitive damages are not recognised inVietnamese law but it is understood that a few policies have been extended to include them where they arenot prohibited.

Local legislation does not establish any extended reporting or discovery period but it is market practice togive one. This ranges from six months to about seven years, but the most common period is between sixand 12 months.

Rating and DeductiblesPI is generally rated with the assistance of reinsurers and rates are considerably less than in theinternational market.

For a limit of VND 20.82bn (USD 1mn) for a legal practice, or others like accountants, engineers,architects, stockbrokers, annual premiums are in the range of VND 104mn to VND 416mn (USD 5,000 toUSD 20,000). If the practice is small, the premium may be as low as VND 41.6mn to VND 62.4mn (USD2,000 to USD 3,000). A deductible of VND 41.6mn to VND 104mn (USD 2,000 to USD 5,000) generallyapplies.

Loss ExperienceA few large claims of about USD 250,000 were made under medical malpractice policies over the pastdecade, but not recently. Press reports also suggest that claims against doctors and hospitals arebecoming more frequent and out-of-court payments are made to resolve them, rather than letting them goto court. No claims are known to have been made under other PI policies in Vietnam.

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Major InsurersACE, AIG and QBE are the main market leaders, whereas Bao Viet and Bao Minh write project businessfor engineers and architects.

ReinsurancePI business may be placed on the miscellaneous accident surplus treaty, where it is generally subject tolow limits, or reinsured facultatively on a case by case basis.

DistributionDistribution is almost exclusively through brokers though a small volume of business is placed direct,through agents and through banks.

ProfessionsThe insurance is bought mainly by those professions that are obliged to have the cover. The legislationdoes not specify the limit which should be insured.

The international insurance brokers have cover in excess of VND 104bn (USD 5mn) under globalarrangements placed overseas while cover for lawyers varies according to whether or not they have foreignconnections. Local lawyers insure for about VND 20.82bn (USD 1mn) but, if they are correspondents of aninternational law firm, limits of VND 104bn or VND 208bn (USD 5mn or USD 10mn) are usual.

Most demand comes from construction industry professionals who commonly arrange cover for about VND20.82bn (USD 1mn) although limits of VND 104bn to VND 208bn (USD 5mn to USD 10mn) have beengranted in connection with large contracts with foreign principals. Cover is available on both an annual andsingle project basis: most is bought in relation to single projects.

Demand for medical malpractice insurance comes almost exclusively from foreign clinics and hospitals butreinsurance cover is difficult to secure from the international market. Demand is being driven to someextent by the foreign lenders such as the World Bank which requests at least VND 104bn (USD 5mn)cover, a figure that may be reduced locally to VND 20.82bn (USD 1mn.)

Fund managers take the cover with a limit of VND 64.46bn to VND 104bn (USD 3mn to USD 5mn) in thecase of small funds and VND 208bn to VND 416bn (USD 10mn to USD 20mn) for large funds.

Requests are also received from IT companies, for limits between VND 20.82bn and VND 104bn (USD1mn and USD 5mn) and from international schools for limits of up to VND 104bn (USD 5mn).

Directors' and Officers' Liability

Summary and TrendsCurrent demand is almost exclusively from investment funds, set up locally by the local and regional banks,and the banks themselves. Cover is bought on a package basis including professional indemnity and crime.

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Brokers have been specifically trained to prospect suitable clients and sell the business by the interestedinsurers, who are ACE, AIG, Chubb and QBE, although QBE is not in the financial institutions (FI) market.Other than financial institutions, targets tend to be foreign companies, which should have the cover tocomply with their own internal corporate governance rules, or foreign joint ventures. This is particularly sowhere local non-executive directors are involved, and the company pays the premium for them to have thecover, usually as a pre-condition for their service.

Given the lack of compulsory legislation for the class, and the absence of rules in this respect from the localstock exchange, there is little or no demand beyond the above-mentioned. Claims, if any, are not publicisedor the subject of litigation, and therefore awareness is scant, for both potential clients as well as claimants.

Company LawThe main piece of legislation that governs D&O cover in Vietnam is the Enterprise LawNo 60/2005/QH-11and its regulations issued by Decree No 139/2007/ND-CP.

Legal liability falls on all managers of enterprises, defined as "the owner or director of a private enterprise,unlimited liability partner of a partnership, chairman of the members' council, chairman of a company, amember of the board of management, director or general director and other managerial positions asstipulated in the charter of a company".

Local law does not restrict the right of companies to indemnify their directors or to pay the premium of thepolicy covering their directors. This is not seen as an employee benefit for tax purposes.

Limits and Scope of CoverThe policy form commonly used is based on the London market wording. An outline of the usual coverprovided is given below.

The policy offers an indemnity to directors and officers for legal costs and damages and expenses incurredarising from claims brought against them personally due to wrongful acts. Cover is granted to all directorsand officers, executive and non-executive, present, future and past without any time restriction. The policyalso covers spouses and heirs of the directors and officers.

The basic cover includes:

• Side A cover - directors' and officers' personal liability, providing indemnity to the individual when noreimbursement is provided for by the company's constitution

• Side B cover - company reimbursement, giving indemnity to the company when it has reimbursed anindividual in accordance with the company's constitution.

Side C cover is also available and may be added if requested at an additional premium. Brokers insist onSide A cover being non-rescindable.

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Both entity and non-entity employment practices indemnity are included; prospectus indemnity may becovered but it is usually necessary to add it by endorsement at an additional premium. New acquisitionsmade by the insured enterprise are included automatically in the policy provided that the company's netasset value is not increased by more than 20% or 25%, and effective control is obtained. Cover on theinsured enterprise ceases on the sale of all or part of the company if control of the company is lost.

The main exclusions are fines, penalties or exemplary damages, dishonest or fraudulent acts, insuredversus insured actions (in the US only), major shareholder exclusion, pollution (though related defencecosts may be covered) and bodily injury, sickness or disease.

The FI package available for PI, D&O and crime covers follows the same pattern and exclusions andpossible extensions, based on a US wording.

The normal limits of indemnity are VND 20.8bn to VND 41.64bn (USD 1mn to USD 2mn) per occurrenceand in the aggregate although requests for VND 104bn to VND 208bn (USD 5mn to USD 10mn) have beenreceived and met.

Cover is on a claims made basis. Local legislation does not establish any extended reporting or discoveryperiod but it is market practice to give up to 12 months without charge. Longer periods may be purchasedfor an additional premium.

Rating and DeductiblesIn most cases rating, terms and conditions are provided by regional underwriters in Singapore or Australia,who provide facultative cover surplus to a small local retention. A deductible of VND 208mn to VND 520mn(USD 10,000 to USD 25,000) applies to Side B cover only.

All business is re-rated at renewal on a rating matrix, completed with an updated proposal.

Underwriters are tight-lipped on their rating methodologies, although an indication was that premiumscharged are split 30%/60%/10% D&O/PI/crime.

Loss ExperienceThere have been incidents of claims being made against company directors and officers for malpractice butwith no D&O insurance in place to cover them: some cases involving bankers occurred in 2008. All claimsare handled out of court in the utmost secrecy: no claims involving D&O have been paid in Vietnam.

Major InsurersChubb, ACE, AIG and QBE are the main players, although QBE does not participate in FI business.

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ReinsuranceAll business if reinsured in-house on a facultative basis, surplus to a small local retention. No company hasautomatic reinsurance capacity for D & O.

DistributionThe business is broker only, most of whom have been trained specifically to deal with the class.

Pollution and Environmental Liability

Summary and TrendsVietnam is in the early stages of industrialisation, and consciousness of pollution and environmental liabilityhas not yet developed. Many factors are raising issues of concern about the environment: slash and burnagriculture and uncontrolled logging are contributing to deforestation and degradation of the soil;groundwater pollution, especially from arsenic, is widespread and increasing populations, heavy traffic andbadly regulated industrialisation are degrading the environment in the major cities. A report released in late2007 by the United Nations Environment Programme named Hanoi and Ho Chi Minh City as two of the sixcities in the world suffering from the most serious air pollution.

Generally speaking, foreign-invested companies, especially multinationals, are aware of pollution andenvironmental risks but Vietnamese businesses are uninterested in environmental matters and many areresponsible for water and air pollution. While legislation exists to combat environmental impairment, actionagainst polluters is discouraged because local governments tend to be judged by the degree of economicgrowth achieved in their regions. The central government Ministry of Natural Resources and Environmentencourages local action against polluters, however, and polluting industries may be fined or even closeddown.

There are also private environmental organisations such as the Vietnam Green Building Council andincreasing attention is being paid to them.

On the other hand, there is a view that the Mekong is polluted by upstream Chinese industry which manybelieve operates totally out of control of any environmental protection legislation. Vietnamese industry assuch is less polluting. There is, however, some heavy industry, using harmful chemicals, oil andpetrochemical and pharmaceutical industries which all have a potentially harmful effect on the environment.

Thus a small potential market is being built up, mainly in the energy/oil and gas sectors both upstream anddownstream risks, with little manufacturing business. The general feeling is among buyers that the cover istoo expensive for the exposures.

Legislative UpdateThe main pieces of local legislation dealing with protection of the environment are the Petroleum Law(1993), the Law on Environmental Protection (1993), the Mineral Law (1996) the Decree on Sanctions forAdministrative Violations of the Law on Environmental Protection (1996) and the Law on Water Resource(1998).

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Decree No 117/2009 on sanctions for administrative violations in respect of environmental protection wasissued to replace Decree No 81/2006 and raise awareness about environmental protection amongbusinesses and the public. Under the new decree, organisations or individuals who breach environmentallaws will receive a warning or be fined up to VND 500mn (USD 24,006). The decree also establishes thatenterprises discharging untreated waste water into the environment will be subject to a fine and possiblythe revocation of their licence to operate until they take corrective measure. Businesses importing wastewill also face penalties of up to VND 500mn (USD 24,006) and have their licences revoked for six to 12months. Polluting factories or enterprises may have their activities suspended.

New laws and regulations aimed at specific sectors of industry and agriculture are issued on a regularbasis by provincial authorities. In mid-2008 a document was issued by one province stating that no newinvestment certificates would be issued in industrial zones which do not have a complete waste watertreatment system by the end of that year. Though compliance with the rule will be very difficult, the localauthorities have stated their intention to enforce it strictly.

Projected LegislationNo projected legislation affecting pollution and environmental liability was known of when this report was inpreparation.

StatisticsNo separate statistics are available for pollution and environmental liability insurance.

Limits and Scope of CoverThe standard public liability policy excludes all pollution cover but sudden and accidental cover may beadded back for an additional premium or frequently at no additional cost. A sub-limit may be applied.

Gradual pollution cover is bought by the oil and gas industry, for both onshore and offshore operations,downstream and upstream. Limits of VND 208bn to VND 416bn (USD 10mn to USD 20mn) are provided,rating and capacity from the American insurers for PVI to issue a direct policy. Annual inspections arecarried out by reinsurers' engineers.

No cover is offered in the market for business interruption following sudden and accidental or gradualpollution.

Rating and DeductiblesNo information on pricing for gradual pollution was available from underwriters.

Pollution from sudden and unforeseen events is normally added back for no additional premium.

Loss ExperienceThere have been some high profile cases involving pollution damage but no claims have been paid.

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Major InsurersAll insurers are prepared to grant sudden and accidental cover, whilst two American insurers provide PVIwith capacity and rating for gradual environmental impairment insurance.

ReinsuranceGeneral third party liability risks, including sudden and accidental pollution cover, may be included in themiscellaneous casualty surplus treaty facilities or retained for net account and protected by excess of lossarrangements.

Gradual pollution risks are reinsured facultatively, on a case by case basis to the insurer providing termsand conditions, surplus to a small local retention.

DistributionMost requests for pollution cover are handled by brokers, although the oil and gas industry tends to bedirect, client to insurer.

ExposureThere is a risk of pollution to rivers and surrounding farmland from industry, particularly the manufacture ofchemicals and textiles and dyeing processes. Huge volumes of waste are generated by fish-farming, whichis polluting the Mekong Delta and other areas and oil industry activities are creating a risk of pollution fromthe spillage or seepage of oil in fishing grounds.

Most international manufacturing concerns with potentially hazardous processes safeguard against spillageand the escape of toxic waste. Many locally owned and managed factories, however, dispose of untreatedwaste without due regard to the impact on rivers and surrounding areas.

One of the biggest sources of ground and water pollution is human waste that is treated inadequately or notat all.

Financial and Professional Risks

Summary and TrendsMost financial and professional risks are limited to bankers' blanket bonds and money insurance. In anumber of cases, money is included in property all risks packages but it may also be insured on astand-alone basis. Cover is often purchased for cash in transit and money on premises, in and out of safes.

Many of the newer exposures such as e-commerce and intellectual property are not yet required in themarket though there have been some cases of contingency insurances such as hole-in-one cover, and afew enquiries have been received for mergers and acquisitions insurance, which is viewed by severalcompanies as a prospective growth area in future.

Scope of Cover and RatingIf enquiries are received, cover will be arranged on a case by case basis, with conditions and ratessupplied by reinsurers.

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Major InsurersCover may be arranged by all direct insurers through the international reinsurance market but in practicethe insurances are more likely to be handled by the major multinational insurers.

Surety, Bonds and Credit


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Summary and TrendsBoth domestic and export trade credit are written in the market but not in high volumes. The amount ofbusiness written fell significantly in 2009 as a result of the global recession but recovered strongly in 2010,and further in 2012. Insurers report that there is again considerable demand for the cover, especially fromforeign and foreign-invested companies, and the market is thought to offer considerable potential.

To promote exports and export insurance, Prime Ministerial Decision No 2011/QD-TTg established a pilotscheme to offer export credit insurance for 2011 to 2013, hence the sudden increase in premium. Thescheme, set up with a panel of seven insurers, offers short-term cover for political and commercial risksand the Ministry of Finance is offering a 20% contribution towards the cost of the insurance. Exporters mayarrange trade credit insurance through other providers but will not then benefit from the premium subsidy.

The bond market is limited, comprising mainly construction bonds of various types.

Fidelity guarantee risks are normally insured as stand-alone cover, but may also be included in a propertypackage policy with a sub-limit. Current rates are about 1% to 2% of the limit plus VND 83,310 (USD 4) peremployee covered and the policy is generally subject to a deductible of up to VND 104mn (USD 5,000).

Total premium written for surety, bonds and credit in 2012 amounted to VND 47.98bn (USD 2.3mn), up101.32% on 2011. The class represented just 0.25% of the total non-life portfolio in 2012.

StatisticsSurety, bonds and credit written premium and loss ratios for the last available five years are shown below.Please note that claims data was unavailable for 2010.




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Construction/Other BondsBoth insurers and banks write bond business, which is restricted to bid, advance payment, performanceand maintenance guarantee bonds for the construction industry: these are described below. Only a smallvolume of business is written by insurers, and recent experience has been poor, due to a high level ofbankruptcies.

• Bid bonds are usually issued for 5% or 10% of the total contract price for a period of three months at arate ranging between 2% and 5% of the bond amount.

• Advance payment bonds can be for amounts up to about VND 41.64bn (USD 2mn) and the rate chargedis about 4% to 5%.

• Performance bonds typically have limits of up to USD 1mn. The rate is about 2.5% to 3% of the limit.

• Maintenance guarantee bonds typically have a limit of about VND 5.2bn (USD 250,000) and a rate ofabout 3% to 4%.

A deductible is applicable in all cases, commonly 10% of the loss, with a minimum of VND 208mn (USD10,000). Collateral, usually in the form of a bank guarantee for 75% of the value of the bond, is demandedby insurers. The collateral deposits demanded by banks are higher than those taken by insurers.

There are no automatic reinsurance arrangements: all risks are shared locally.

Export CreditExport credit insurance is written in the market by the Vietnam Development Bank and several specialistcredit insurers represented locally, which are licensed to write both the commercial and political risk.

To promote exports and export insurance, Prime Ministerial Decision No 2011/QD-TTg established a pilotscheme making export credit insurance available for 2011 to 2013. The scheme, set up with a panel ofseven insurers, offers short-term cover for political and commercial risks and the Ministry of Finance offersa 20% contribution towards the cost of the insurance. The political risk extends to cover the prevention ofimport or export of goods and war, subject to the superpower exclusion (that is war between any of thefollowing: the US, UK, France, China and the Russian Federation). Cover is available for between 75% and90% according to the country's grade. Exporters will be free to arrange trade credit insurance through otherproviders but will not then benefit from the premium subsidy. The scheme is for a list of specific industriesonly, and then subject to financial criteria.

The normal export credit insurance offered in the market is issued on a whole turnover basis though somespecific account cover and catastrophe cover is available for favoured clients. Both commercial andpolitical risks are covered for up to 90% or 95%, with cover limited to short-term only, normally 90 daysmaximum.

Domestic Trade CreditDomestic trade credit is offered for commercial risks on similar terms to those specified above. It is takenmainly by multinationals, on a short-term (less than 120 or 180 days) basis, generally but not always forwhole accounts.

Marine, Aviation and Transit


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Summary and TrendsThe national fleet, government-owned Vinalines, actually comprises 19 different companies with a totalfleet of 142 vessels, of 2.96mn dwt, and is undergoing a process of renewal, refurbishment and generalupgrading, concentrating on container vessels and specialist tankers. The shipping industry has grownsubstantially in the last 20 years in line with the export driven economy, and deep-water port developmentis part and parcel of this growth.

The hull insurance market is also growing, and the national companies with VinaRe effectively control thebusiness.

The cargo account follows the fortunes of the world economy, and the partial recovery after the financialcrisis has now evened off, according to 2012 statistics. Underwriters are not looking for growth in 2013, asrates are continually under pressure from an avaricious market with over-capacity for business which hastraditionally been very profitable.

There is also a specialist energy market for onshore and offshore development risks, and upstream anddownstream property and liability risks, controlled by PVI, a subsidiary of the PetroVietnam group(government-owned) and the monopoly holder for all oil and gas business in and out of Vietnam, bothproduction, refining and sales.

The P&I clubs most active in Vietnam are West of England, London Steamship and the Norwegian P&Iclub, GARD.

Vietnam Airlines is also expanding, and has a controlling share in the new Cambodian airline.

All the above accounts, other than cargo to a lesser extent, are largely supported by internationalreinsurance capacity, and rates, terms and conditions.

The overall MAT account (excluding energy, which is included in other classes - property, liability) totalledVND 6.16trn (USD 295.31mn) in 2012, an increase of only 1.56% over 2011, representing 32.86% of totalmarket premium, excluding PA/health.

Article 3 of Decree No 123/2011/ND-CP has been interpreted by the market to mean that non-admittedinsurance is permitted for international maritime insurance and international aviation insurance.

StatisticsThe gross written premiums and paid losses for the class overall for the five years to 2012 are shownbelow.



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Marine Hull

Summary and TrendsThe national fleet of mostly blue water tonnage, government-owned Vinalines, actually comprises 19different companies with a total fleet of 142 vessels, of 2.96mn dwt, and is undergoing a process ofrenewal, refurbishment and general upgrading, concentrating on container vessels and specialist tankers. Itsuffered the market's largest loss recently, Vinalines Queen, which sank off Luzon in December 2011 for aloss of USD 27mn hull and machinery, in addition to cargo interests and crew EL. The vessel was carryingnickel ore from Indonesia to China.

The brown water fleet comprises coastal steamers, ferries, tugs and barges, floating restaurants and touristriver cruisers, oil-rig servicing vessels and floating cranes. The fishing fleet, composed of both coastal anddeep-sea fleets, is based mainly in the south of the country. There are some shipbuilding risks but very fewlocal pleasure craft.

The local market, which has a capacity of almost USD 100mn, handles most of the blue water business, allof the brown water and fishing fleet risks and all the pleasure craft. Local market rates are now lower thaninternational rates and in some cases it is becoming more difficult to find foreign reinsurance support,obliging local direct insurers to reinsure in the local market.

Competition is severe, especially from new players in the market, whose lack of experience in the classand desire to capture market share have led to rate reductions.

The hull and P&I income for 2012 shrank slightly in 2012, to VND 1.8trn (USD 86.1mn), back to 2010levels, due to competition and reduced values, although the account remains profitable overall. The hulland P&I income accounts for 9.57% of the total non-life income, excluding PA and health.

Article 3 of Decree No 123/2011/ND-CP has been interpreted by the market to mean that non-admittedinsurance is permitted for international maritime insurance.



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StatisticsMarine hull and P&I premium and paid loss ratios for the five years up to 2012 are shown below.


Marine HazardHazards to shipping include typhoons and tropical storms which can occur from July to November eachyear, and the lack of pilotage in and around the major ports. The other main hazard is piracy in territorialand international waters in the South China Sea and in the Philippine and Indonesian archipelagos.Commercial vessels have been hijacked at anchor and while underway and then disguised and the cargodiverted to ports in east Asia. There are no reefs in local waters.

The average age of the ocean-going and coastal-trading merchant fleets is reducing as new vesselsreplace older ships. Maintenance of the fleets is also said to have improved. The masters and most of thecrew of the ocean-going fleets are Vietnamese and the standard of seamanship and crewing is good.There is a maritime training facility, the Vietnam Maritime University, in Haiphong, which was set up by thegovernment in 1956, providing undergraduate and graduate training on navigation, ships' machinery andshipbuilding among other subjects. By contrast, many of the numerous fishing vessels found along thecoast and in the river deltas operate without proper navigational equipment. Some coastal vessels are alsopoorly maintained and operate with inadequate navigational equipment and crews that are not properlytrained.

Marine RisksThe 142 Vinalines fleet is made up of

• 108 dry cargo vessels

• 22 container vessels

• 12 oil product carriers/tankers.



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Petrolimex, PetroVietnam's competitor, also own a fleet of ocean-going tankers totalling 158,000 dwt, plusbrown water tankers totalling 100,000 dwt.

There is a flourishing shipbuilding and ship repair industry in Vietnam.

Limits and Scope of CoverLondon Institute Hull Time Clauses, ITC Hulls 1983 and ITC Hulls 1995, are used, but for coastal and rivervessels local conditions based on these clauses may apply. Fishing vessels are generally insured on localclauses and Norwegian clauses are used for some shipbuilding risks.

There is no local package for the insurance of pleasure craft.

RatingRates for the smaller risks such as coastal vessels, barges and ferries are fixed by the local market on thebasis of the usual factors (type and age of vessel, management, loss history), and are heavily influenced bycompetition. Rates and conditions for large vessels, including the ocean-going fleets, are set by reinsurersor fixed locally on the basis of the rates pertaining in the international market though they may be adjusteddownwards for commercial reasons.

Current indicative market rates are as follows:

• new ocean-going tanker - 0.3% to 0.5%

• fishing boats - 0.5% to 1.0%

• river barges - 0.8% to 1.0%.

War risks are placed in local treaties. In the current soft market London war rates are no longer strictlyapplied but are deemed to be included in the overall rate for the risk.

Competition in the hull market has been keen, but both price and deductibles have remained relativelystable since 2011.

Loss Experience and Largest LossesExperience has been relatively poor for the hull and liability market, and results are affected by any singularlarge loss. Results for fishing vessels are especially bad. There have, however, been no large casualties,since the loss of Vinalines Queen in December 2011, for USD 27mn.

The other main casualties in the five years to 2013 were as follows (USD mn):

2010 Sinking of mv Van Don 2.35

2010 Sinking of mv Hung Cuong 3.76

2010 Sinking of mv Phu Tan 2.00

2010 Sinking of mv Hop Thanh 1.61

2010 Grounding of mv Dong Phong 1.85

2008 Grounding of mv Inlaco Spring 1.00

2008 Collision of the Quoc Tu Giam 2.50



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Source: Market sources

Major InsurersThe leading marine hull and P&I insurers and their market shares are shown below.


Bao Viet 26.17

PJICO 12.29

Bao Minh 7.78

BIC 2.85

PTI 2.71

MIC 2.68

Toan Cau 2.18

ABIC 1.28

SVIC 0.71Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

ReinsuranceThere is no common way of handling marine reinsurance in the market. It may be dealt with by proportionaltreaties (quota share and/or surplus), with separate contracts for each, or by a combined treaty. It isbecoming more common for marine hull and cargo to be reinsured by means of an excess of loss treatywith a single limit of about USD 8mn to USD 10mn. VinaRe is active.

Due to low rates compared to international markets, local coinsurance or reinsurance is utilised for largervalue vessels.

P&I risks are usually entered with the West of England Club, London Steamship Owners' Mutual, theSteamship Mutual and GARD of Norway. In certain circumstances, particularly for river-cruise vessels,liability covers for brown water vessels are fronted by local insurers and reinsured to the clubs.

DistributionA substantial volume is placed directly with the government-linked insurers, given the vessel ownership.Petolimex has its own in-house insurer.

Where banks have a financial interest in a vessel, they are known to instruct shipowners where to place theinsurance, especially if they have a sister insurer in the financial group.

Marine Cargo

Summary and TrendsEconomic, export-driven growth has slowed after the recovery in 2010, and the cargo market has followedsuit. Loss experience, however, remains at under 30%, despite intense competition for whatever businessis available.



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There is no obligation to insure either exports or imports and no statutory obligation to insure them locallyand so exports are frequently sold FOB and imports purchased CIF. As a result, it is calculated that localinsurers underwrite less than 10% of exports and about one-third of imports. Imports remain the largersegment of business for local insurers. One very large cargo account is, however, insured locally, importsand exports, but reinsured heavily back to the Korean parent.

The entry of several new insurers into the market in recent years has increased market capacity but alsoheightened levels of competition. Terms of cover are widening, and stock throughput covers are becomingpopular in the broking fraternity, rather than the underwriters, who despair over unknown accumulations instorage locations outside of Vietnam.

The market also includes a significant volume of inland transit business, by road and rail.

The cargo account increased by 6.2% in 2012 compared to 2011, to VND 1.93trn (USD 92.43mn),representing 10.3% of the non-life account, excluding PA and health.

StatisticsMarine cargo premium and paid loss ratios for the five years up to 2012 are shown below.


HazardVietnam has a total of 114 ports, all government-owned and operated. Of these, 14 are considered to bekey to the economic development of the country. Even the largest ports, in Haiphong, Da Nang andSaigon, for example, are small compared with those of many of Vietnam's neighbours and muchinvestment is being made to improve them. Local dock and port facilities continue to be upgraded andreforms have been made to port administration procedures in an effort to speed up cargo handling. TheGeneral Department of Customs has extended the use of electronic customs processing and electronicprocedures are now widely used for stock control, logistics and inland clearance depots.



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Saigon Port in Ho Chi Minh city is the main seaport, with five terminals and 22 wharves handling generalcargo, ro-ro, bulk, containers and passenger traffic: it has a container capacity of 50,000 twenty-footequivalent units (TEUs). Haiphong is the next largest port, with a container capacity of 40,000 TEUs. It hasopened a facility for container trans-shipment which may be further developed.

The Vietnam International Container Terminal (VICT) operates a terminal at Ho Chi Minh City with 1,594feet (486 metres) of berth and 20 ha of container yards and storage warehouses. Using a sophisticated ITsystem, known as the TMS, in terminal operation and management, the terminal handled about 317,987TEUs in 2010, up from 306,834 TEUs the previous year.

The first deep-sea port in the central coastal province of Ha Tinh, north of Da Nang, opened at thebeginning of 2002. The complex includes a 600-foot (183 m) causeway, a cargo storage area of 80,000square feet (7,432 sq m), asphalt roads and advanced port equipment. It is suitable for vessels of up to15,000 dwt and is designed to handle 460,000 tonnes of cargo a year. In 2007 Vinalines announced it wasconsidering a joint venture with Japanese and Belgian partners to develop the ports of Van Phong andLach Huyen as major transhipment points, and several more new ports are already under construction orplanned in the southern province of Ba Ria-Vung Tau. In the north of the country, three new berths arebeing built in Cai Lan Port in Halong City to receive container ships of up to 40,000 dwt, which willtransform the port into the main deep-water port in the north of the country.

There are few delays in the ports and increasing containerisation is improving turn-around times. Somedelays and accumulation of cargoes do still occur, however, as the ports do not yet have the necessaryinfrastructure to accommodate the increased volume of large vessels. Saigon and Haiphong areparticularly susceptible to delays in entry to the ports.

Security has improved at Saigon seaport, and Haiphong port is now regarded by underwriters as the portmost likely to present problems. Containerisation has helped to reduce the incidence of damage from roughhandling, at least in the south of the country where most container facilities are located. Although thefts arenot a major problem, they do occur, even from containers which may arrive at their destinations presentingunbroken seals. There is also some pilferage on inland transits when whole containers are stolen but this isnot common. Target goods for theft are high-value electronic goods, designer clothing and mobiletelephones.

The main causes of loss are bad weather, especially during the typhoon and tropical storm seasonbetween July and November each year, rough handling and delays on seafood and other perishablegoods. Some shortage of bulk cargoes also occurs, which are not extinguished by the policy deductible.



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Limits and Scope of CoverThe market uses mainly the London Institute Cargo Clauses (ICC) in translation although there is alsosome use of local market wordings based on the institute clauses. Local clauses are used for inlandtransits.

Cargo is most commonly insured on ICC A (all risks) clauses 1982 and 2009 except for oil shipments whichare covered either on Bulk Oil Clauses or ICC C, and frozen food which is insured under the InstituteFrozen Food Clauses. ICC C clauses may also be used for poor quality risks. Cover may be given forunexplained losses from containers when there is no evidence of tampering provided that the containersare accompanied by security guards from warehouse to warehouse.

A local carriers' liability act is thought to be in operation but there is no legally imposed local limit of liabilityand shipments are insured on the basis of declared value and liability is accepted in full. In practice,insurers seldom try to effect recoveries as the costs far outweigh any recoveries made. The maximuminsured limit of liability for carriers' policies, of which there are few in operation, is about VND 10.4bn (USD500,000).

Some freight forwarders arrange cover for goods in transit and in their custody and control but the premiumis high and the insurance is not common. Insurers are said to avoid both carriers' liability and freightforwarders' liability policies whenever possible.

Advance loss of profits insurance may occasionally be requested by financiers on large projects, forexample power stations, and on foreign-invested projects. Terms and conditions of cover, which varyaccording to each project, the type of cargo involved and the project period, come from the internationalinsurance and reinsurance markets.

RatingMarine cargo business is still the subject of intense competition, regardless of commodity and destination.Underwriting standards have been relaxed and wider covers have been granted without any correspondingincrease in premium, although underwriters still try to avoid stock throughput wordings.

Inland transit rates are about 0.03% for large accounts and 0.05% for others.

War risks are normally placed in reinsurance treaties at London market rates.

Loss ExperienceThe main losses that occurred between 2005 and 2010 are shown in the table below. There have been nomore recent serious losses reported.



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Year Vessel Loss Amount (USD mn)2010 m/v Van Don 02 Sinking - iron and steel 4.0

2010 m/v Trong Anh 27 Vessel sank 0.5

2009 Inland transit South Africa Theft of container of TVs 2.0

2008 m/v Captain Uskov Missing - steel 1.3

2008 m/v New Hangzhou Sinking - loss of steel 7.6

2007 m/v Harvest Sinking - loss of steel 3.0

2006 m/v Henza Damage to flour cargo 1.5

2006 m/v Hoang Chien 08 Loss of steel consignment 1.2

2006 m/v Dewi Buynyu Vessel sank 0.9

2005 m/v Zhe Hai 308 Vessel sank 2.3Source: Market sources

Major InsurersThe leading marine cargo insurers and their market shares are shown below.

Company Market share 2012 (%)Samsung Vina 22.20

Bao Viet 18.98

PJICO 12.41

PVI 8.29

Bao Minh 6.66


MSIG 3.67

PTI 3.46

SVIC 2.66

Bao Long 2.42Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Samsung Vina's leading position gives an idea of the size of the company's major account, compared tothe rest of the market.

ReinsuranceThere is no common way of handling marine cargo reinsurance in the market. It may be reinsured bymeans of proportional treaties (quota share and/or surplus), with separate contracts for each or by acombined treaty. It is now becoming more common for marine hull and cargo to be reinsured by means ofan excess of loss treaty with a single limit of about USD 8mn to USD 10mn.

DistributionCargo insurance business is mainly placed directly with the company, though some inland transits,government contracts and small shipments may be placed through agents.

A small amount of business is placed through banks in support of their letters of credit.

Brokers control their international account requirements, whether or not part of a global programme, andwould arrange local certificates where necessary via a local insurer.



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Marine Liability

Summary and TrendsThe marine liability market is small. About 12 or 13 local insurers write the business, effectively fronting forP&I clubs and one multinational insurer writes P&I on a fixed premium basis, which is attracting somebusiness away from the clubs. As a result, several fixed premium P&I clubs have now also entered themarket and competition for the business continues but is less intense than in recent years.

The major risks such as port and terminal operators' liability are placed locally and fronted out to theinternational market. A small volume of carriers' and freight forwarders' liability are also written in themarket, but these are not considered desirable risks.

Local MarketThere are few pleasure craft in the market and the liability covers consist only of some port and terminaloperators' liability, carriers' and freight forwarders' liability and some P&I cover for tourist river cruisersoperating on the Mekong.

The policies for ports are covered in the general liability departments of companies.

Compulsory CoversVietnam has ratified the International Convention on Civil Liability for Oil Pollution Damage1969, renewedin 1992 (amended in 2000) and referred to as the CLC Convention. There is an associated mandatoryrequirement to maintain "insurance or other financial guarantee" in respect of oil pollution. The treatyrequires owners of ships carrying more than 2,000 tonnes of oil in cargo to maintain "insurance or otherfinancial security" sufficient to cover the maximum liability for one oil spill. Further details can be found inthe separate Axco report on International Agreements.

PollutionPollution is included in P&I covers up to a limit of about USD 1mn.

Vietnam has ratified the International Convention on Civil Liability for Oil Pollution Damage1969, renewedin 1992 (amended in 2000) and referred to as the CLC Convention. There is an associated mandatoryrequirement to maintain "insurance or other financial guarantee" in respect of oil pollution. The treatyrequires owners of ships carrying more than 2,000 tonnes of oil in cargo to maintain "insurance or otherfinancial security" sufficient to cover the maximum liability for one oil spill. Further details can be found inthe separate Axco report on International Agreements.

P&IP&I is generally written separately from the hull insurance. The clubs most active in Vietnam are West ofEngland, which has 65% of the market according to sources, the London Steamship Owners, SteamshipMutual and GARD.



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Some P&I business for deep-water fishing fleets and some coastal vessels is insured in the local marketand retained for net account. QBE offers a P&I cover on a fixed premium basis to a maximum of USD30mn, which is said to be attracting business away from the P&I clubs.

Limits of LiabilityThe larger ports and terminals have liability cover ranging from VND 104bn to VND 208bn (USD 5mn toUSD 10mn); smaller operations insure for about VND 41.64bn (USD 2mn).

Cover for ocean-going vessels follows the limits of the 1974 convention in accordance with the grosstonnage of the vessel; brown water vessels generally carry insurance for about VND 5.2bn to VND 10.4bn(USD 250,000 to USD 500,000) and the fishing fleet limits ranging between VND 1bn and VND 20.82bn(USD 50,000 and USD 1mn).

Limits for freight forwarders are mostly about VND 4.16bn (USD 200,000).

Major InsurersThe leading marine hull and P&I insurers and their market shares are shown below.


Bao Viet 26.17

PJICO 12.29

Bao Minh 7.78

BIC 2.85

PTI 2.71

MIC 2.68

Toan Cau 2.18

ABIC 1.28

SVIC 0.71Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

Energy

Summary and TrendsVietnam has a large energy sector comprising both upstream and downstream risks. Upstream risksinclude rigs for oil and gas exploration and recovery and their construction, property and liability insurancesand well control; downstream risks include hydro and gas-powered power plants, chemical plants, arefinery, fertiliser plants and the sale and distribution of oil and gas and their derivatives.

Energy is not defined as a class by law, but separate figures are available from official sources. The maininsurers have specialist energy departments to handle the business, the principal one being PVI, amajority-owned subsidiary company of the Petrovietnam Oil and Gas Group, enjoying a virtual monopoly.Other local energy insurers include Bao Viet, ACE, Tokio Marine and PJICO, which accept small amountsas reinsurance.



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PVI provides all risks cover including exploration, third party oil and gas risks, drilling platforms, drillingbarges, third party liability and property all risks cover for oil and gas lease operators, drilling contractorsand gas well service contractors. It also provides cover for energy construction risks, with a gross capacityfor EAR of VND 1.87trn (USD 90mn), and working risks of VND 1.25trn (USD 60mn).

The terms, conditions and rates are established by reinsurers and most risks are written in the local marketand fronted out. The reinsurance in respect of upstream business is ceded principally to Lloyd's whiledownstream business, comprising pipelines, refineries, and gas and power plants, is placed within Asia,mainly in Singapore and Hong Kong, by facultative reinsurance. Marsh runs a non-automatic market facilityup to USD 450mn for downstream risks at Lloyd's,

The upstream policy wordings comprise standard London market wordings for platform risks and controlledwells, with different wordings for different stages of exploration and operations. PVI has some automaticcapacity in London for offshore risks. Downstream risks are insured under industrial all risks wordings,including business interruption. General third party liability and machinery breakdown are insuredseparately: general liability is covered under the comprehensive Munich Re policy.

PVI Insurance also co-operates with foreign contractors such as BP, Petronas and JVPC (Japan VietnamPetroleum Corporation) and fronts their insurance programmes in Vietnam ceding reinsurance to captivesand nominated insurers alike, although local joint ventures are normally at least 51% PVI and it thereforecontrols where insurances are placed.

There are two new refineries planned - one still on the drawing board, and one now under construction incentral Vietnam, with a TCV of USD 4bn, by Japanese contractors The EAR cover is PVI-fronted with asmall retention, and reinsured in Singapore and Japan via Aon.

The brokers handling the business are Marsh, Aon, JLT and Willis. Miller's and UIB get involved in Londonreinsurance placements. No local Vietnamese brokers are involved.

In 2012 premiums totalling VND 1.67trn (USD 79.91mn) were written, a decrease of 6.29% over the 2011figure. Only one relatively small loss has been reported recently, involving an offshore well-head platform,of USD 5mn to USD 6mn, cause unknown.

Aviation

Summary and TrendsThe aviation insurance market handles the hull, engine spare parts and third party liability insurances forseveral civil fleets as well as the local general aviation industry. The main local insurers are the VietnamAirlines Insurance Company (VNI - Hang Khong), Bao Minh, Bao Viet, PTI and PVI. Business is handledwith the support of foreign reinsurers on a facultative basis, mainly from London.



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No local insurer has any automatic aviation treaty facilities.

There are few privately-owned light aircraft. The commercial sector is expanding, relying on the futurepotential of a market which currently only counts 14.1mn annual passenger journeys, out of a totalpopulation of almost 90 million. One such company, Air Mekong, ceased operating in early 2013.

Aviation business accounted for VND 769.34bn (USD 36.88mn) in 2012, an increase of 26.79% over 2011,and represented 4.1% of the total non-life account, excluding PA and health.

Article 3 of Decree No 123/2011/ND-CP has been interpreted by the market to mean that non-admittedinsurance is permitted for international aviation insurance.

StatisticsThe gross written premiums and paid loss ratios for the class for the five years to 2012 are shown below.


AirlinesThe national carrier is Vietnam Airlines, established as a state enterprise in 1989, which flies to 51 localand international destinations in the US, Europe, Asia and Australia, including code-share arrangements(as a member of the Sky Team alliance). It has a modern fleet of 85 aircraft comprising:

• 10 Boeing B777-200ER

• nine Airbus A330-200

• 48 Airbus A321-200

• 16 ATR-72



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• two Fokker 70.

In addition it has placed orders for another 28 aircraft including 10 Airbus A350s, four Airbus A380s, 10Airbus A321s, and eight Boeing 787s. It also has a 49% interest in Cambodia Angkor Air, whoseinsurances are placed on the back of the Vietnam Airlines fleet.

Other local carriers include Jetstar Pacific Airlines, Vasco (a subsidiary of Vietnam Airlines which is alow-cost carrier), VietJet and Vietstar, all offering internal flights. The latter is a subsidiary of theVietnamese Air Force, and also operates general cargo transport, pilot training courses, and repair andmaintenance facilities.

In addition, SFC Helicopters operates a fleet of new western-built Pumas and Super Pumas, used fortourism, search and rescue, oil and gas operations, aerial photography, parachuting and leasing activities,and there are two smaller helicopter leasing companies, the Northern Service Flight Company and theSouthern Service Flight Company.

General AviationThe general aviation market comprises several local airlines (the insurances for most of which are placedlocally), three helicopter services companies, the liability insurances for 20 airports and maintenancefacilities, hanger-keepers' liability, and PA cover for passengers and crew. Deductible insurance, that is, thedifference between the deductible demanded by the international market and that which the client isprepared to bear, is also available.

There are few privately owned light aircraft in the country.

SpaceVietnam's first satellite, Vinasat-1, owned by the Vietnam Post and Telecom Group, was launched in April2008. The insurance was placed through Marsh as coinsurance with Bao Viet and the Post and TelecomInsurance Company: the premium was USD 21mn. Rates and conditions were fixed by the London market.Viasat-2 followed in May 2012, and there are several more on order.

There is no local expertise in space risks, although Bao Viet advertises itself on its website as the marketleader.

Aviation LiabilitiesThe only compulsory aviation insurances are those set out in the Warsaw Convention, incorporated into theCivil Aviation Law of 2005, on which the limits purchased are based. Vietnam Airlines has a third partypolicy limit of USD 1bn and a fleet value in excess of USD 4bn. Its personal accident cover is unlimited.



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The civil aviation industry is regulated by the Civil Aviation Administration of Vietnam (CAAV) and thecountry is split into three sectors managed by the Northern, Middle and Southern Airports Corporations.Vietnam has 20 civil airports of which seven handle international flights. The three main airports, in Hanoi,Ho Chi Minh City and Da Nang, are understood to have liability cover of about USD 300mn to USD 500mnany one occurrence and in the aggregate, with smaller limits applying to the others in accordance with theirsize. The cover includes airport and terminal liability plus passengers, cargo, catering and refuelling. Eachairport also has a separate policy covering air traffic control for a similar amount. A deductible of VND208mn (USD 10,000) applies to third party property damage only.

In addition, there is refuelling liability cover for VINAPCO with a limit of USD 400mn and product liabilitycover of USD 10mn for in-flight catering services. The maintenance risk is generally covered with a limit ofabout USD 250mn and the ground services risks for USD 50mn.

Risks are rated by the international market but placed locally with Bao Viet, Bao Minh, PV Insurance andVNI and heavily reinsured abroad.

Vietnam is a signatory to the Warsaw Convention, but not to the Montreal Convention.

Loss ExperienceThere have been no fatal accidents involving Vietnamese carriers in recent years. On 1 March 2011 aVietnam Airlines Airbus A320 suffered damage when on the ground resulting in a claim payment of USD5.4mn, which partially accounts for the 50% spike in the graph in the Statistics section.

There have been no more recent losses.

Major InsurersThe leading aviation insurers and their market shares are shown below.


VNI 30.87

PVI 11.66

Bao Minh 7.73

PTI 2.14Source: Axco Global Statistics / Industry Associations and Regulatory Bodies

ReinsuranceThe business tends to be shared around the five local government-linked insurers, either on a coinsurancebasis, or facultatively, with net retentions only, as well as possible cessions to VinaRe. Surplus capacityover net retentions is bought facultatively from international markets through international brokers, either inLondon or more recently, Singapore.

No local company has any automatic treaty reinsurance capacity.



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DistributionThe Vietnam Airlines reinsurance account is shared between Willis and JLT.

Aon and Marsh are also involved with other aviation business.

Personal Accident and Travel


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Personal Accident

Summary and TrendsThe personal accident portfolio comprises both individual and group policies, and both high value and lowvalue products are offered. The business is written as a stand-alone cover by non-life companies and isincluded in some other insurance packages, such as the voluntary motor policy in respect of the driver andpassengers, the homeowners' policy and the commercial package policy. It is also written by life companiesas a rider to life policies. The market comprises mainly group policies, however, as very little individualbusiness is written. A group is generally defined as 10 or more persons and the cover is taken by families,affinity groups in schools and universities and by employers, who use it as a cheaper alternative to workers'compensation insurance to cover their legal liability under the Labour Law.

Children's and students' personal accident cover is arranged by schools or colleges, which collectpremiums from the parents or the students. Schools often act as agents for insurance companies. It isestimated that between 20% and 25% of the personal accident portfolio is made up of such business.

Gross direct premium income for personal accident and health insurance (not available separately) writtenby non-life insurers in 2012 was VND 4.01trn (USD 192.32mn), up 22.25% over 2011. The class was thelargest class after motor and MAT, and the fastest growing account, responding to the increased demandmainly from international and foreign joint venture clientele who are more inclined towards employeebenefits for all levels of staff, not only expatriates.

StatisticsThe gross written premiums and paid losses for the class for the five years to 2012 are shown below. Noseparate figures for PA and health are available, but it is accepted by local players that the health portfoliois the main contributor to the inexorably rising loss ratio, not helped by over-zealous competition.




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Limits and Scope of CoverSeveral types of PA cover are offered in the market, including:

• accidents to passengers travelling in motorised vehicles

• 24-hour standard personal accident

• accidents at work only

• children's and students' personal accident.

The most popular cover is the 24-hour standard personal accident protection covering death, permanenttotal and partial disability, and medical expenses, including hospitalisation. Temporary total disability coveris available; historically, it was seldom granted but is now becoming more readily available as a relativelycheap addition to, rather than total replacement of, employees' compensation (EC) to cover the insured'slegal liability to workers for accidents at work. Industrial disease is an optional extra.

Limits tend to be low, typically about VND 208mn to VND 416mn (USD 10,000 to USD 20,000) for thedeath benefit but higher limits are available and granted in the market. As an employee benefit, the capitalsum for death and total permanent disablement (normally defined as over 81% disabled as per thecontinental scale of benefits) is linked to salary, typically 30 x monthly salary. All categories of employeewould enjoy the same multiplier, whether expatriate management, middle management, local staff ormanual labour.

Some companies are able to insert an accumulation limit in their policy, for example VND 6.24mn (USD3mn) any one loss and any one year of insurance, whereas others are not disposed to limits.

Rating and DeductiblesMost companies still rate in accordance with occupation, although a few do not and it is becoming morecommon to disregard occupation in order to obtain business. There are normally four classifications ofoccupation:

• Class I - professional or administrative duties

• Class II - non-manual occupations with some exposure to risk or with a lot of travel involved

• Class III - manual occupations where the risk of injury is heavy

• Class IV - dangerous occupations or works involving special hazards or exposures.

Accidental death and disablement cover tailored to the Labour Code is rated at a flat rate on 30 months'salary without differentiation for occupation.

Rates for groups are calculated on an individual basis, and a discount of up to 50% applied according tothe number of persons insured. Sex and age are not rating factors. As an example, the annual premium forthe typical scheme described under the heading Limits and Scope of Cover amounts to VND 10.4bn (USD500,000), on a quarterly adjustable basis, for an ever-increasing head-count, currently 35,000.



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Loss ExperienceThe loss ratio for the scheme described under the heading Limits and Scope of Cover is below 20%. Themarket has not experienced any large accumulation losses, although the account is exposed to local trafficaccidents and other transport accidents.

Major InsurersThe leading PA and healthcare insurers and their market shares are shown below.


Bao Minh 13.42

PTI 7.74

PVI 7.55

ABIC 5.33

PJICO 4.63

AAA 3.01

AIG 2.62

Liberty 2.26


ReinsuranceMost companies accept the business for net retention, placing facultative reinsurance when it is required. Afew include the class on their miscellaneous accident treaties.

Some facultative reinsurance is placed for high limit policies.

DistributionChildren's and students' personal accident cover is sold through schools acting as agents for insurers.Agents and branches of the larger insurers sell personal accident cover to industrial and commercialclients.

Brokers also handle personal accident insurance on behalf of their corporate clients where group coversare arranged, in their employee benefits division.

Some credit card cover is given through the banks but so far the amount of business is small and limits arelow, given that only 10% of Vietnamese have bank accounts.

Creditor InsuranceNo creditor insurance is written in the market.

Travel

Summary and TrendsThe travel insurance market is small as there is little local tourism. Recent growth has been driven by thedemand from EU states for evidence of travel insurance giving at least EUR 30,000 (USD 40,000) medicalcover before issuing a visa.



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StatisticsNo statistics are available for travel insurance.

Limits and Scope of CoverCover provided by most companies is either available online, or at least details provided in a downloadablebrochure for completion and submission. The extent of cover has broadened in the recent past and verymuch mirrors what is available elsewhere in more developed markets in the region. As an example,condensed details are shown below of a typical plan offered by an international insurer, which specialisesin personal lines, including health and motor.

• There are three levels of cover and price - classic, executive and premier - each either individual orfamily (maximum two adults plus unlimited related children up to age 17).

• There are three rating areas - ASEAN, Asia Pacific and worldwide.

• There are six classifications of cover, all with separate sub-limits, totalling 30 items of cover:

• personal accident - usual death and PTD continental scale

• medical expenses, plus incidental costs

• unlimited medical evacuation/repatriation of mortal remains expenses

• public liability

• inconveniences - cancelation, disruption, delay, overbooking, 24-hour assistance (via SOS (Vietnam)assistance hot-line)

• losses - money, passports, baggage/personal effects, car rental excess, fire cover for home contentswhile away.

• Optional extras include hijack benefit, automatic extension of trip due to delay, and disruption/withdrawalof hotel services following riot or strike at destination hotel.

• Major exclusions include:

• pre-existing medical conditions

• treatment for stress and related conditions or psychological problems

• intentional self-injury or suicide

• professional or dangerous sports

• non-prescription drugs or alcohol abuse

• HIV/Aids

• STDs

• contraception, pregnancy, childbirth, miscarriage, abortion or their complications



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• preventative costs - vaccinations and the like

• dental treatment except as a result of accident.

Rating and DeductiblesPolicies are rated according to the geographical area being visited, the length of the trip and the type ofplan selected. As an example, using the above described cover, for an annual executive plan for anindividual, in the Asia Pacific region, the annual premium would be VND 2.84mn (USD 136), andapproximately double for worldwide cover, including US and Canada. The amount of cover would be:

• PA/PTD - VND 2bn (USD 96,024)

• medical expenses - VND 1.6bn (USD 76,820), plus extra on return to Vietnam

• Medivac etc - unlimited

• liability - VND 1.5bn (USD 72,018)

• inconveniences - cancelation/curtailment VND 80mn (USD 3,840); disruption - VND 40mn (USD 1,920);flight misconnection six hours - VND 3mn (USD 144); travel delay for each six hours - VND 12mn (USD576)

• losses - money - VND 3mn (USD 144); travel documents plus added accommodation - VND 24mn (USD1,152); baggage - VND 40mn (USD 1,920); rental car AD excess - VND 12mn (USD 576); financialcollapse of Vietnam travel agent - VND 50mn (USD 2,400); fire damage to home contents while abroad -VND 30mn (USD 1,440).

No deductibles are specified, only that "reasonable and customary charges will apply to any benefitpayment".

Loss ExperienceResults have been very good, and insurers report that there have been no accumulation losses. Claimstend to be small, usually for medical expenses. There are no separate statistics available purely for travelbusiness.

Major InsurersMost of the foreign insurers and the large domestic companies write the cover on a package basis, in someshape or form, with varying descriptions of cover and price. No two are the same.

ReinsuranceReinsurance is the same as for personal accident business.

DistributionThe class is distributed extensively through travel agents, and increasingly on the web. Most sites are,however, non-transactional, and direct customers still need to deal with a company on a personal basis.

Given the low premiums, and thus commission, intermediaries avoid the class.

Appendix No 1 - Market Statistics


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Insurance Supervisor's Report

SummaryThe Ministry of Finance publishes an annual report on the insurance market. The fiscal year runs from 1January to 31 December.

For this Axco report, statistics sourced from both the insurance association and the insurance supervisorhave been used.

Change in FormatThere have been no recent changes in format.

Date of Latest ReportAnnual and quarterly statistics are shown up to 2012.

Non-Life Market Totals

IntroductionPremiums quoted below are gross written for the five years to 2012.

Yearly Totals

In this table complete years are shown. If quarterly figures are available these are shown under a quarterlytable below.

YEAR 2008 2009 2010 2011 2012

Total Non-Life Excluding PA & HealthcarePremiums VND Mn 9,289,490.00 11,683,625.00 14,550,163.00 17,346,164.00 18,746,313.00

PA & Healthcare Written By Non-Life CompaniesPremiums VND Mn 1,597,688.00 1,960,336.00 2,501,672.00 3,281,458.00 4,011,680.00

TOTAL NON-LIFE INCLUDING PA & HEALTHCAREPremiums VND Mn 10,887,178.00 13,643,961.00 17,051,835.00 20,627,622.00 22,757,993.00

Growth % 30.23% 25.32% 24.98% 20.97% 10.33%

Premiums USD Mn 667.83 799.53 916.13 1,005.75 1,091.04

Growth % 28.65% 19.72% 14.58% 9.78% 8.48%

Rate of Exchange toUSD

16,302.2500 17,065.0833 18,612.9167 20,509.7500 20,859.0000

Source: Axco Global Statistics/ Industry Associations and Regulatory Bodies

Due to rounding some totals may not equal the breakdown above.

Quarterly Totals

In this table the build-up of quarterly figures is shown where the figures are available. The latest quarteravailable is shown and for comparison the history back to the same position in the previous year.



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YEAR 2011 to Q4 2012 to Q1 2012 to Q2 2012 to Q3 2012 to Q4

Total Non-Life Excluding PA & HealthcarePremiums VND Mn 17,346,164.00 5,343,273.00 9,881,628.00 14,092,185.00 18,746,313.00

PA & Healthcare Written By Non-Life CompaniesPremiums VND Mn 3,281,458.00 858,212.00 1,631,514.00 2,766,645.00 4,011,680.00

TOTAL NON-LIFE INCLUDING PA & HEALTHCAREPremiums VND Mn 20,627,622.00 6,201,485.00 11,513,142.00 16,858,830.00 22,757,993.00

Growth % n/a 21.96% 12.68% 9.65% 10.33%

Premiums USD Mn 1,005.75 297.31 551.95 808.23 1,091.04

Growth % n/a 19.92% 10.80% 7.82% 8.48%


20,509.7500 20,859.0000 20,859.0000 20,859.0000 20,859.0000



Non-Life Insurance

Premiums and Loss RatiosGross written premiums and paid loss ratios are shown below for the last available five years. The lossratios shown are paid claims as a percentage of written premiums. No account is taken in 2013 and beforeof outstanding claims either brought forward or carried forward, but this is due to change in 2014.

Yearly


YEAR 2008 2009 2010 2011 2012

PropertyPremiums VND Mn 1,057,020.00 1,191,546.00 1,491,673.00 1,855,332.00 2,553,374.00

Growth % 1.43% 12.73% 25.19% 24.38% 37.62%

Premiums USD Mn 64.84 69.82 80.14 90.46 122.41

Growth % 0.21% 7.69% 14.78% 12.88% 35.32%

Loss Ratios % 20.70% 45.81% 31.47% 56.17% 36.08%

Construction & EngineeringPremiums VND Mn 1,428,458.00 1,727,174.00 2,244,565.00 2,407,139.00 2,948,091.00

Growth % 60.38% 20.91% 29.96% 7.24% 22.47%

Premiums USD Mn 87.62 101.21 120.59 117.37 141.33

Growth % 58.44% 15.51% 19.15% (2.68)% 20.42%

Loss Ratios % 13.78% 17.93% 28.13% 22.01% 22.72%

MotorPremiums VND Mn 3,182,808.00 4,375,229.00 5,377,844.00 6,230,443.00 6,329,214.00

Growth % 24.80% 37.46% 22.92% 15.85% 1.59%

Premiums USD Mn 195.24 256.38 288.93 303.78 303.43

Growth % 23.29% 31.32% 12.69% 5.14% (0.12)%

Loss Ratios % 57.49% 47.71% 49.89% 53.30% 53.44%

Workers' Compensation & Employers' Liability



© AXCO 2013


YEAR 2008 2009 2010 2011 2012Premiums VND Mn No separate statistics are available for this class.

Growth %

Premiums USD Mn

Growth %

Loss Ratios %

LiabilityPremiums VND Mn 185,683.00 314,291.00 397,188.00 454,133.00 512,402.00

Growth % 2.80% 69.26% 26.38% 14.34% 12.83%

Premiums USD Mn 11.39 18.42 21.34 22.14 24.57

Growth % 1.55% 61.70% 15.87% 3.76% 10.94%

Loss Ratios % 5.62% 3.77% 4.08% 7.77% 22.80%

Surety, Bonds & CreditPremiums VND Mn 28,532.00 7,590.00 22,182.00 23,832.00 47,979.00

Growth % 4,296.30% (73.40)% 192.25% 7.44% 101.32%

Premiums USD Mn 1.75 0.44 1.19 1.16 2.30

Growth % 4,243.14% (74.59)% 167.95% (2.50)% 97.95%

Loss Ratios % 0.18% 0.83% n/a 35.85% 13.22%

MiscellaneousPremiums VND Mn 97,239.00 378,837.00 248,804.00 310,186.00 195,316.00

Growth % (68.48)% 289.59% (34.32)% 24.67% (37.03)%

Premiums USD Mn 5.96 22.20 13.37 15.12 9.36

Growth % (68.86)% 272.18% (39.79)% 13.14% (38.09)%

Loss Ratios % 159.17% 44.46% 20.74% 32.79% 56.91%

Marine, Aviation & TransitPremiums VND Mn 3,309,750.00 3,688,958.00 4,767,907.00 6,065,099.00 6,159,937.00

Growth % 51.55% 11.46% 29.25% 27.21% 1.56%

Premiums USD Mn 203.02 216.17 256.16 295.72 295.31

Growth % 49.72% 6.48% 18.50% 15.44% (0.14)%

Loss Ratios % 41.58% 33.38% 30.50% 36.72% 29.71%

TOTAL NON-LIFE (Excluding PA & Healthcare)Premiums VND Mn 9,289,490.00 11,683,625.00 14,550,163.00 17,346,164.00 18,746,313.00

Growth % 29.80% 25.77% 24.53% 19.22% 8.07%

Premiums USD Mn 569.83 684.65 781.72 845.75 898.72

Growth % 28.23% 20.15% 14.18% 8.19% 6.26%


16,302.2500 17,065.0833 18,612.9167 20,509.7500 20,859.0000



Quarterly




© AXCO 2013



PropertyPremiums VND Mn 1,855,332.00 576,184.00 1,255,192.00 1,830,610.00 2,553,374.00

Growth % n/a 32.15% 91.36% 27.98% 37.62%

Premiums USD Mn 90.46 27.62 60.18 87.76 122.41

Growth % n/a 29.94% 88.16% 25.84% 35.32%

Loss Ratios % 56.17% 22.19% 28.61% 29.81% 36.08%

Construction & EngineeringPremiums VND Mn 2,407,139.00 860,477.00 1,487,676.00 2,109,565.00 2,948,091.00

Growth % n/a n/a n/a 18.72% 22.47%

Premiums USD Mn 117.37 41.25 71.32 101.13 141.33

Growth % n/a n/a n/a 16.73% 20.42%

Loss Ratios % 22.01% 13.45% 25.87% 22.03% 22.72%

MotorPremiums VND Mn 6,230,443.00 1,676,458.00 3,168,482.00 4,604,577.00 6,329,214.00

Growth % n/a 4.86% 2.22% 0.53% 1.59%

Premiums USD Mn 303.78 80.37 151.90 220.75 303.43

Growth % n/a 3.11% 0.50% (1.15)% (0.12)%

Loss Ratios % 53.30% 42.84% 49.41% 52.47% 53.44%

Workers' Compensation & Employers' LiabilityPremiums VND Mn No separate statistics are available for this class.

Growth %

Premiums USD Mn

Growth %

Loss Ratios %

LiabilityPremiums VND Mn 454,133.00 133,365.00 260,607.00 392,067.00 512,402.00

Growth % n/a 21.26% 7.31% 30.00% 12.83%

Premiums USD Mn 22.14 6.39 12.49 18.80 24.57

Growth % n/a 19.23% 5.51% 27.82% 10.94%

Loss Ratios % 7.77% 51.52% 32.03% 22.49% 22.80%

Surety, Bonds & CreditPremiums VND Mn 23,832.00 22,068.00 33,281.00 37,909.00 47,979.00

Growth % n/a 940.45% 133.90% 106.32% 101.32%

Premiums USD Mn 1.16 1.06 1.60 1.82 2.30

Growth % n/a 923.03% 129.98% 102.86% 97.95%

Loss Ratios % 35.85% 0.37% 4.69% 4.65% 13.22%

MiscellaneousPremiums VND Mn 310,186.00 57,089.00 108,120.00 153,825.00 195,316.00

Growth % n/a (94.85)% (95.97)% (32.45)% (37.03)%

Premiums USD Mn 15.12 2.74 5.18 7.37 9.36

Growth % n/a (94.93)% (96.03)% (33.58)% (38.09)%

Loss Ratios % 32.79% 80.02% 58.65% 59.08% 56.91%

Marine, Aviation & TransitPremiums VND Mn 6,065,099.00 2,017,632.00 3,568,270.00 4,963,632.00 6,159,937.00

Growth % n/a 74.14% 61.46% 4.96% 1.56%

Premiums USD Mn 295.72 96.73 171.07 237.96 295.31

Growth % n/a 71.22% 58.75% 3.20% (0.14)%

Loss Ratios % 36.72% 25.19% 23.89% 28.05% 29.71%



© AXCO 2013


YEAR 2011 to Q4 2012 to Q1 2012 to Q2 2012 to Q3 2012 to Q4TOTAL NON-LIFE (Excluding PA & Healthcare)Premiums VND Mn 17,346,164.00 5,343,273.00 9,881,628.00 14,092,185.00 18,746,313.00

Growth % n/a 21.07% 10.99% 7.87% 8.07%

Premiums USD Mn 845.75 256.16 473.73 675.59 898.72

Growth % n/a 19.04% 9.14% 6.06% 6.26%


20,509.7500 20,859.0000 20,859.0000 20,859.0000 20,859.0000



Personal Accident

Premiums and Loss RatiosIn the Vietnamese market, premium income for personal accident is combined with health insurance and isnot available separately. Personal accident business is written by both life and non-life companies but onlyoverall, global data is produced by the Ministry of Finance and the AVI.

Healthcare is addressed as a product line within the Axco Life & Benefits reports.

Yearly


YEAR 2008 2009 2010 2011 2012

PA & Healthcare Written By Non-Life CompaniesPremiums VND Mn 1,597,688.00 1,960,336.00 2,501,672.00 3,281,458.00 4,011,680.00

Growth % 32.79% 22.70% 27.61% 31.17% 22.25%

Premiums USD Mn 98.00 114.87 134.41 160.00 192.32

Growth % 31.19% 17.21% 17.00% 19.04% 20.21%

Loss Ratios % 45.29% 46.81% 43.09% 44.67% 45.75%

PA & Healthcare, Other Than Riders, Written By Life CompaniesPremiums VND Mn No separate statistics are available for this class.

Growth %

Premiums USD Mn

Growth %

Loss Ratios %

TOTAL PA & HEALTHCAREPremiums VND Mn 1,597,688.00 1,960,336.00 2,501,672.00 3,281,458.00 4,011,680.00

Growth % 32.79% 22.70% 27.61% 31.17% 22.25%

Premiums USD Mn 98.00 114.87 134.41 160.00 192.32

Growth % 31.19% 17.21% 17.00% 19.04% 20.21%

Loss Ratios % 45.29% 46.81% 43.09% 44.67% 45.75%


16,302.2500 17,065.0833 18,612.9167 20,509.7500 20,859.0000





© AXCO 2013


Quarterly



PA & Healthcare Written By Non-Life CompaniesPremiums VND Mn 3,281,458.00 858,212.00 1,631,514.00 2,766,645.00 4,011,680.00

Growth % n/a 27.79% 24.13% 19.75% 22.25%

Premiums USD Mn 160.00 41.14 78.22 132.64 192.32

Growth % n/a 25.65% 22.05% 17.74% 20.21%

Loss Ratios % 44.67% 41.90% 48.96% 46.30% 45.75%

PA & Healthcare, Other Than Riders, Written By Life CompaniesPremiums VND Mn No separate statistics are available for this class.

Growth %

Premiums USD Mn

Growth %

Loss Ratios %

TOTAL PA & HEALTHCAREPremiums VND Mn 3,281,458.00 858,212.00 1,631,514.00 2,766,645.00 4,011,680.00

Growth % n/a 27.79% 24.13% 19.75% 22.25%

Premiums USD Mn 160.00 41.14 78.22 132.64 192.32

Growth % n/a 25.65% 22.05% 17.74% 20.21%

Loss Ratios % 44.67% 41.90% 48.96% 46.30% 45.75%


20,509.7500 20,859.0000 20,859.0000 20,859.0000 20,859.0000



Appendix No 2 - Company Statistics


© AXCO 2013


IntroductionStatistics are provided in this section for all the companies operating in the non-life market. No statistics areproduced for the international reinsurers accepting business in the Vietnamese market.

Insurance CompaniesThe following table contains information on premiums by company, market share and portfolio growth forthe companies in the non-life market for the year 2012, compared to 2011.

Further information on insurance companies is provided within the Market Participants subsection in theInsurance Market Overview section of this report.

INSURANCECOMPANIES

Written Premiums Growth Market Written Premiums

2012 2012 % Share 2011VND Mn USD Mn % VND Mn

Bao Viet 5,384,075.00 258.12 10.39% 23.66% 4,877,259.00

PV Insurance 4,658,978.00 223.36 9.85% 20.47% 4,241,086.00

Bao Minh 2,285,563.00 109.57 3.40% 10.04% 2,210,316.00

PJICO 1,971,467.00 94.51 4.43% 8.66% 1,887,780.00

PTI 1,639,692.00 78.61 53.27% 7.20% 1,069,809.00

Samsung Vina 732,505.00 35.12 66.80% 3.22% 439,143.00

BIC 670,377.00 32.14 7.46% 2.95% 623,818.00

GIC 491,356.00 23.56 2.11% 2.16% 481,180.00

MIC 474,232.00 22.74 10.05% 2.08% 430,938.00

Cong ty AAA 473,260.00 22.69 2.12% 2.08% 463,454.00

ABIC 454,960.00 21.81 11.54% 2.00% 407,887.00

VNI 448,343.00 21.49 (24.36)% 1.97% 592,769.00

Liberty 441,523.00 21.17 9.82% 1.94% 402,054.00

SVIC 311,231.00 14.92 (0.26)% 1.37% 312,056.00

MSIG 291,461.00 13.97 18.05% 1.28% 246,896.00

BV Tokio Marine 273,816.00 13.13 10.27% 1.20% 248,312.00

AIG 272,177.00 13.05 8.67% 1.20% 250,462.00

Bao Long 252,248.00 12.09 (17.67)% 1.11% 306,378.00

Vien Dong 224,906.00 10.78 (22.54)% 0.99% 290,367.00

Xuan Thanh 221,742.00 10.63 15.20% 0.97% 192,482.00

UIC 183,174.00 8.78 31.80% 0.80% 138,974.00

Bao Ngan 121,061.00 5.80 (20.05)% 0.53% 151,412.00

Fubon 118,134.00 5.66 14.58% 0.52% 103,099.00

QBE 84,743.00 4.06 7.37% 0.37% 78,927.00

HUNG VUONG 79,318.00 3.80 44.90% 0.35% 54,741.00

Groupama 75,724.00 3.63 39.61% 0.33% 54,240.00

ACE INA 67,147.00 3.22 48.19% 0.30% 45,310.00

Cathay Insurance 49,887.00 2.39 138.34% 0.22% 20,931.00

Phu Hung 4,893.00 0.23 (11.71)% 0.02% 5,542.00

Others n/a n/a n/a n/a n/a

MARKET TOTAL 22,757,993.00 1,091.04 10.33% 100.00% 20,627,622.00



Appendix No 2 - Company Statistics


© AXCO 2013


Reinsurance CompaniesFurther information on the reinsurance market is provided in the Reinsurance section of this report, and noother statistical information is available for 2012.

Appendix No 3 - Directory


© AXCO 2013


Industry OrganisationsInternational dialling code: + 84

Major city/town codes: Hanoi - 4

Insurance Regulatory and Supervisory AdministrationMinistry of FinanceSocialist Republic of Vietnam28 Tran Hung Dao StreetHanoiTel: 2220 2828Fax: 2220 2875www.mof.gov.vn

Association of Vietnamese Insurers (AVI)8th Floor, 141 Le DuanHanoiTel: 3942 8461Fax: 3942 2601www.avi.org.vn

Insurance CompaniesInternational dialling code: + 84

Major city/town codes:

Hanoi - 4

Ho Chi Minh City - 8

AAA Assurance Joint Stock Company2 Bis Tran Cao Van Street

District 1

Ho Chi Minh City

Tel: 3822 8499

Fax: 3822 8488

www.aaa.com.vn

ACE Insurance Company LimitedSaigon Finance Center

9 Dinh Tien Hoang Street, 8/F

Da Kao Ward, District 1

Ho Chi Minh City

Tel: 3910 7227



© AXCO 2013


Fax: 3910 7228

www.aceinsurance.com.vn

Bao Minh Insurance Corporation26 Ton That Dam Street

District 1

Ho Chi Minh City

Tel: 3829 4180

Fax: 3829 4185

www.baominh.com.vn

Bao Viet Vietnam Insurance Corporation35 Hai Ba Trung Street

Hoan Kiem District

Hanoi

Tel: 3826 2774, 3824 4466

Fax: 3825 7188

www.baoviet.com.vn

Baoviet Tokio Marine Insurance Joint Venture Company6th Floor, Sun Red River

23 Phan Chu Trinh Street

Hoan Kiem District

Hanoi

Tel: 3933 0704

Fax: 3933 0706

www.via.com.vn

Bank for Investment and Development of Vietnam Insurance Joint Stock Company (BIC)10th Floor Vincom A Tower

191 Ba Trieu

Hai Ba Trung District

Hanoi

Tel: 2220 0282

Fax: 2220 0281

AIG Vietnam Insurance Co Ltd9/F Saigon Center

65 Le Loi Street

District 1



© AXCO 2013


Ho Chi Minh City

Tel: 3914 0065

Fax: 3914 0067

www.aig.com.vn

Global Insurance CompanyItaxa House, 2nd Floor

126 Nguyen Thi Minh Khai

District 3

Ho Chi Minh City

Tel: 3933 0114

Fax: 3933 0116

www.gic.com.vn

Groupama Vietnam General Insurance Co LtdSailing Tower, 14th Floor

111a Pasteur Street

District 1

Ho Chi Minh City

Tel: 3827 0124

Fax: 3827 0125

www.groupama.vn

Liberty Insurance Company LimitedTumho Asiana Plaza, 15/f

39 Le Duan St

District 1

Ho Chi Minh City

Tel: 3812 5125

Fax: 3812 5018

www.libertyinsurance.com.vn

Mitsui Sumitomo Insurance Company Vietnam (MSIG)Sun City Building, Floor 11

13 Hai Ba Trung Street

Hanoi

Tel: 3936 9188

Fax: 3936 9189



© AXCO 2013


www.msig.com.vn

Nha Rong Joint Stock Insurance Company (Bao Long)185 Dien Bien Phu

Da Kao District

Ho Chi Minh City

Tel: 3823 9219

Fax: 3822 8967

www.nharonginsurance.com

Petrolimex Joint Stock Insurance Company (PJICO)Mipec Tower - 21/22F

229 Tay Son Road

Dong Da District

Hanoi

Tel: 3776 0867

Fax: 3776 0868

www.pjico.com.vn

PV Insurance Joint Stock Corporation (PVI)154 Nguyen Thai Hoc Street

Ba Dinh District

Hanoi

Tel: 3733 5588

Fax: 3733 6284

www.pvi.com.vn

Posts and Telecommunications Joint-Stock Insurance CompanyFloor 8, HaRec Building

4A Lang Ha Street

Ba Dinh District

Hanoi

Tel: 3772 4466

Fax: 3772 4460

www.pti.com.vn

QBE Insurance (Vietnam) Co LtdUnit 1603, Metropolitan Tower

235 Dong Khoi Street

District 1



© AXCO 2013


Ho Chi Minh City

Tel: 3824 5050

Fax: 3824 5054

www.qbe.com.vn

Samsung Vina Insurance CompanyDiamond Plaza Building - 9th Floor

34 Le Duan Street

District 1

Ho Chi Minh City

Tel: 3823 7812

Fax: 3823 7811

www.svi.com.vn

UIC United Insurance CompanyTung Shing Square Tower - 11th Floor

2 Ngo Quyen Street

Hoan Kiem District

Hanoi

Tel: 3826 2686

Fax: 3934 1752

www.uicvn.com

Vien Dong Assurance Joint Stock Company (VASS)11 Nguyen Thi Dieu

District 3

Ho Chi Minh City

Tel: 920 6979

Fax: 920 6420

www.vass.com.vn

Vietinbank Insurance CompanyVinare Building

141 Le Duan - 3rd floor

Hoan Kiem

Hanoi

Tel: 3942 5650

Fax: 3942 5646

Vietnam National Aviation Insurance Joint Stock Company (VNI)



© AXCO 2013


Viet Tower Building, 16th Floor

So 1 Thai Ha

Dong Da District

Hanoi

Tel: 6276 5555

Fax: 6276 5556

www.vna-insurance.com

Reinsurance CompaniesInternational dialling code: + 84

Major city/town codes: Hanoi - 4

PVI Reinsurance Corporation154 Nguyen Thai Hoc StreetBa Dinh DistrictHanoiTel: 3733 5588Fax: 3733 6284www.pvire.com.vn

Vietnam National Reinsurance Company (VinaRe)Vinare Building - 7th Floor141 Le DuanHoan Kiem DistrictHanoiTel: 3942 2354/65 to 69Fax: 3942 2351www.vinare.com.vn

Captive ManagersThere are no captives in Vietnam. All the international brokers listed below have captive managementcapability.

IntermediariesInternational dialling code: + 84

Major city/town codes:Hanoi - 4Ho Chi Minh City - 8

Insurance Brokers/ConsultantsAon Vietnam LimitedSuite 702



© AXCO 2013


7/f Sailing Tower

111A Pasteur

Ho Chi Minh City

Tel: 3822 4884

Fax: 3822 2700

www.aon.com

Gras Savoye Vietnam Co LtdSaigon Trade Centre

37 Ton Duc Thang

7th Floor Suite 708

District 1

Ho Chi Minh City

Tel: 3910 0976

Fax: 910 0974

www.grassavoyewillis-vn.com

Jardine Lloyd Thompson Vietnam LimitedGemadept Building, 5th Floor

6 Le Thanh Ton Street

District No 1

Ho Chi Minh City

Tel: 3822 2340

Fax: 3829 9714

www.jltasia.com

Marsh8 Nguyen Hue Blvd, Level 6

District 1

Ho Chi Minh City

Tel: 3822 7456

Fax: 3822 7343

www.marsh-asia.com

Reinsurance BrokersThere are no specialist reinsurance brokers in Vietnam. The above-mentioned retail brokers have accessto in-house reinsurance centres of competence.



© AXCO 2013


Loss AdjustersInternational dialling code: + 84

Major city/town codes: Ho Chi Minh City - 4

Crawford (Vietnam) Co Ltd9th Floor Sun Wah Tower

115 Nguyen Hue Blvd

District 1

Ho Chi Minh City

Tel: 3821 9199

Fax: 3821 9299

www.crawco.com.vn

Matthews - Daniel International VietnamSaigon 3 Building, R 401

140 Nguyen Van Thu Street

District 1

Ho Chi Minh City

Tel: 911 1903

Fax: 910 3412

www.matdan.com

vietnam non-life (pc) report 49432 7155

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