The Ministry of Finance is developing a plan to evaluate and classify insurance businesses into four groups, each of which is subject to a particular administrative management, in a bid to restructure the insurance market.
Under the plan, which is expected to be implemented this year, the first group will consist of insurers with adequate financial abilities and profitable operations, according to Saigon Times Online newswire.
Members of this group will be allowed to maintain and expand their operations if they can develop effective business plans.
The second group will include companies which are still able of paying their customers, though encountering difficulties in operation, such as suffering huge operating expenses, facing high rates of compensation, or failing to earn profits for two consecutive years.
The relevant authorities will evaluate the operation’s effectiveness of insurers belonging to this group, and help them reduce expenses. The companies’ operational expansionwill be subject to close monitoring from the authorities.
Insurance companies which are not likely to be able to ensure their payments will fall into the third group. Members of this group will be required to re-evaluate their financial ability, restructure investment and administrative management, handle debts, increase equity, and even transfer their insurance contracts to other companies.
The last category will include insurers that are completely incapable of paying their customers. These businesses will thus be subject to special supervision, and will be asked to claim bankruptcy or merge with others if they cannot improve their situation.
Figures from the Ministry of Finance show that there are 39 insurance companies operating countrywide. Of these, 29 insurers are operating with a gain.
The industry’s revenues have steadily increased over the last ten years, with the average growth rate of 18.5 percent, according to the ministry.
Last year, the insurance sector posted a revenue of VND45 trillion (US$2.16 billion), and VND38 trillion from a year earlier.
