Integration and Vietnamese government commitments to open its market have been creating great changes in the insurance market of Vietnam.

A series of state-owned insurance firms like the Vietnam Insurance Corporation (Bao Viet), Bao Minh, PetroVietnam Insurance (PVI) have performed initial public offerings (IPO) and sold their stocks to foreign strategic partners, which are international insurance groups.

This is considered a real revolution in the insurance sector to increase competitiveness and maintain market shares for domestic insurers.

On two consecutive days, September 12 and 13, the two largest insurers of Vietnam, Bao Viet and Bao Minh, announced the names of their foreign strategic partners. Bao Viet chose the Hong Kong and Shanghai Banking Corporation (HSBC) while Bao Minh selected the AXA of France. The Vietnam Reinsurance Corporation (Vinare) and PVI are negotiating to choose their foreign strategic partners.

According to Vietnam’s WTO commitments, the Vietnamese insurance market will open completely as of January 1, 2008. After that, foreign-invested companies will be allowed to supply compulsory insurance services in Vietnam.

Therefore, local insurers will face a great challenge from experienced and financially-powerful foreign insurers.

“Not only after January 1, 2008, but from now on Vietnamese insurers have to accept competition from joint venture and wholly foreign-owned insurance companies,” said Phung Dac Loc, Secretary General of the Vietnam Insurance Association.

In 1993, the Vietnamese government issued Decree 100 opening the way for the establishment of some Vietnamese, joint venture and foreign-invested insurance companies in the country.

The further opening of the market and integration into the world is confirmed in the Vietnam-US Bilateral Trade Agreement, signed on October 12, 2001. Under this agreement, as of October 12, 2006, Vietnam lifted all barriers against American insurers in Vietnam, equivalent to Vietnam’s WTO commitments in the insurance field.

Local insurers have had at least six years so far to prepare for full integration. Except for newly established ones, other Vietnamese insurers have gained successes in improving their competitiveness, such as Bao Viet, Bao Minh, PVI and Petrolimex Insurance Company (PJICO).

“Vietnam has fully integrated in the field of insurance. To exist and develop, local insurers must cooperate with foreign partners on the principles of mutual benefit and sharing. The development strategy of the insurance sector to 2010, with the decision of equitising Bao Viet, Bao Minh and Vinare is brave,” said Le Quang Binh, former Head of the Insurance Management Agency under the Ministry of Finance, who is now Chairman of the Board of Directors of Bao Viet.

Two years after the Vietnamese Prime Minister issued Decision 310 dated November 28, 2005 approving the equitisation of Bao Viet and the estabilishment of the Bao Viet Finance-Insurance Group, the equitisation of Bao Viet has been finalised along with its IPO and its selection of strategic partners.

Based on Bao Viet’s IPO, the Ministry of Finance has redefined this group’s chartered capital – VND5,730 billion (US$358.12 million) – in which the state holds 77.54%, local shareholders 3.68%, foreign shareholders 10% and others 8.78%.

The biggest success of Bao Viet’s IPO is that it chose the only strategic shareholder – HSBC – which committed to provide great technical assistance to Bao Viet.

Meanwhile, Bao Minh also has its foreign strategic partner, AXA, the leading non-insurance company in Europe.

Under the agreement signed with AXA, Bao Minh will have access to the technical expertise of AXA Group’s global and regional platforms. The agreement will help his company diversify insurance products, improve the quality of insurance services, promote business administrative reform and build Bao Minh brand.