In light of its (MoF) plan on restructuring insurance firms, which is being drafted, insurance firms may be divided into four groups.
Group one consists of firms operating effectively with stable profits. Firms in group two could still ensure payment capacity, but they face difficulties in operation on the back of high operating as well as indemnity costs. Group three includes firms facing insolvency danger, while group four firms are those losing insolvency and being put into special supervision.
Vietnam Aviation Insurance Joint Stock Company (VNI) deputy general director Ta Chien said re-arranging insurance firms was a step in the right direction since insurers were mushrooming, not corresponding to growth in service quality.
Some local insurers are upbeat with the restructuring plan while the Association of Vietnamese Insurers general secretary Phung Dac Loc was cautious when being asked about the plan.
An insurance firm representative said merger and acquisitions would be the only way-out for underperforming firms.
Industry insiders assumed mergers in the insurance sector would be simpler than those in banking area since the latter involves the system security.
Besides small firms, big players could embrace restructuring to boost competitiveness.
Reality shows that giant insurer Vietnam Petroleum Joint Stock Corporation (PVI) had succeeded with its reshuffle plan in 2011.
Accordingly, the PVI shifted into a parent company-subsidiary model and became PVI Holdings Company (PVI Holdings).
PVI Holdings then founded PVI Insurance Corporation operating in non-life insurance and PVI Reinsurance Company which are all limited liability businesses owned by PVI Holdings.
After the move in November 2011 PVI Holdings inked a strategic cooperative agreement to sell 25 per cent stake worth $92.8 million to foreign strategic partner Germany-based Talanx Group which could help it spread its wings outside Vietnam.
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