Playing with the big boys

In the last few years PVI Re has met its top line and bottom line, with combined ratio for the last five years averaging 85% in August of this year. The reinsurer also achieved a ratings upgrade from AM Best to B++, reflecting its balance sheet strength and operating performance.

Reinsurance business in Vietnam is challenging, due to the high capacity of reinsurance in the market, coming in from Singapore, East Asia, Middle East and London. Vietnam is an open market for international reinsurers, so there is almost too much capacity for a small market, said Mr Trinh.

“The ratings upgrade is good for the local market, but not good enough when compared to international reinsurers. We currently focus on our niche market, and providing value to our clients. We cannot act like the big boys like Munich Re, or Swiss Re, or Allianz Re. We prefer to follow their lead on terms and conditions and try to provide value through improved service and engagement. It is not as convenient for the international reinsurers to provide this same value, but we are present in the local market and we are close to our clients,” he said.

Value-added service
The company provides this value through supporting clients with risk surveys, as it has a lot of risk assessors and engineers amongst their underwriters. “Whenever our clients have a need for risk surveys, we can easily send our engineers down to the site. We also provide training in risk surveys, claims and reinsurance. We also support them in handling claims as well,” he said. “We have to find our own way and our own value to our client. Most local insurers appreciate the value we provide, which is how we keep our clients and business.”

The reinsurer also has a relatively limited business profile, partly due to the risks that the Vietnamese market concern itself with. “We write mostly property and engineering as our major lines. Currently, property and engineering contribute to two-thirds of our turnover. We do dabble in marine, but not very much – the marine market in Vietnam is tough on profitability. We also write liability; it's a small sector, however. We can also write personal lines such as motor or healthcare.”

Its clients are mostly concerned with engineering risks, said Mr Trinh. As a developing country, Vietnam has a lot of construction and infrastructure projects. On the property side, there are also a lot of manufacturing risks such as in the factories producing plastics, textiles and shoes. “There has been a lot of investment into manufacturing and those risks can be quite complicated, so our clients need our advice and expertise in managing them,” he said.

Expanding the business
He expects the market, next year, to grow 12% to 15%. Property and engineering, along with personal and liability lines, will provide the most growth for the company in the future.

“Beyond our classic strengths, we will expand on the retail business, such as motor, healthcare and liability. The competition in the property and engineering lines is severe, so it is hard to grow in those sectors, and we have to look at other avenues in order to maintain underwriting profit,” he said

Engineering internal growth
As for every Vietnamese (re)insurer, talent is a challenge. There are many engineers in the market, but there are issues in recruiting them to become experts the insurance industry requires. Language is an issue – the older, more experienced engineers don't have a good command of English, while some younger engineers speak English well, but do not have the requisite xperience, especially in on-site matters. Recruiting people who meet both requirements is a major hurdle.

“For us, recruiting also means training them,” he said. “Thanks to our major shareholders and portfolio, we have a lot of opportunity for training. We have a major shareholder from Germany, HDI Global, who have very a good and strong engineering team, more than 200 engineers around the world. We send our people to HDI offices for on-the-job training, help them build experience.”

Vietnam also currently faces a problem with headhunting, so getting employees to stay loyal is an important factor for the industry. “We provide them good benefits which enables them to be loyal to the company. Other local insurers also have very attractive offers, so we have to ensure that our key personnel stay with us. And we are proud that most of our key personnel have been around since PVI Re started in 2011.”

The actuarial field is also quite barren, as the market still lacks qualified actuaries. Most of the better actuaries prefer to work in the life sector, because the pay packages are higher, leaving the non-life sector adrift. “For us, we take advantage of our system, as we are part of PVI Holdings, which also owns PVI Insurance. PVI Holdings have several qualified actuaries who can support both companies in their actuarial needs. We can share the resources as needed, so far it has been manageable for us. If we need further support, we can also approach our foreign shareholders for aid,” he said. “We are also planning, within the next two years, to train qualified actuaries within the company,” he said.

A healthiermarket
The Vietnam Ministry of Finance is currently seeking advice from the industry on ways to improve the market, as it is working on amending the insurance laws by next year. This will also have the added benefit of making regulatory processes more efficient.

Mr Trinh said there are several improvements to the market that are required. “One way is to apply risk-based capital (RBC) to Vietnam market,” he said. “Right now, the government only requires each insurer to have $13m in charter capital. I think $13m was fit for 20 years ago, but not for today's economy. At the very least, it needs to be $25m for insurance companies and even more for reinsurers,” he said.

He believes that the market will be able to adopt and manage to RBC with few issues, stating that Vietnamese companies are flexible. It will make the market healthier; in Japan and Korea for instance, the market is huge, but there are only a handful of insurers in those markets. In Vietnam, there are over 30 non-life insurers alone, many of them small companies. RBC will lead them to increase capital or merge together and become bigger companies, which is better for the market and better for the clients.

Source: Asia Insurance Review