HCMC – The Ministry of Finance will start restructuring the insurance market this year, with an aim to promote the development of healthy insurers and consolidating weaker firms as part of the drive to stabilize the financial market.
The ministry is compiling a set of criteria to assess and categorize insurance companies into four groups, with specific management and supervision measures for each group.
The categorization will be carried out this year, according to the ministry’s report on restructuring State-owned enterprises and securities and insurance firms.
The first group will consist of insurance companies with guaranteed solvency and profitable business. Enterprises in this group will be reinforced and maintained, allowed for expansion in line with efficient business schemes, but they will be closely inspected and supervised to ensure compliance with the law.
Group two will include enterprises with guaranteed solvency, but struggling with high operational costs, high compensation rates and no profit in two consecutive years. Management agencies will evaluate the efficiency and reduce operational expenses for this group’s members.
Meanwhile, those on the verge of losing solvency, with margins of solvency lower than the minimum level, will be gathered in group three. These companies need financial assessment, investment restructuring, and debt settlement, and parts of their insurance policies can be transferred to other firms.
The last group will comprise insolvent companies, which will be put under special control and applied the solutions in accordance with the Law on Insurance Business. During the special control period, if enterprises failed to overcome their difficulties, they would be forced to merge into other firms or take court receivership under prevailing laws.
Insurance enterprise restructuring will be in line with the restructuring of credit institutions, State-owned enterprises, and stock market to be deployed in the 2012-2015 period as mapped out by the finance ministry.
The finance ministry is making a detailed scheme for submission to the Prime Minister for approval in this quarter. The Government will focus on restructuring insurance companies, together with securities and fund management firms, in 2012 and 2013.
Regarding the scheme, the Government will set tougher conditions for insurance business establishment. Initially, companies with equity lower than statutory capital are asked to supplement capital to meet the regulatory requirements.
In addition, the Government has requested State groups and corporations to divest their capital in insurance industry, enhancing administrative and operational capabilities of insurance companies based on three pillars: financial security, risk management, and information disclosure.
Moreover, in the 2012-2014 period, export credit insurance and agricultural insurance will be piloted, along with the addition of new products and services.
According to the finance ministry, there are currently 39 insurance enterprises nationwide, including 28 non-life insurance companies, 11 life insurance companies and 12 insurance brokerage companies.
