Reinsurance and the Need for Adaptability

(DTCK)  Vietnamese insurance companies are increasingly turning to reinsurance as a series of unexpected large-scale losses continue to emerge, raising numerous issues that require resolution.

A “Wake-up Call” After a Series of Major Risk Shocks

In recent years, Vietnam’s insurance market has experienced a succession of large-scale risks causing significant consequences. First came Super Typhoon Yagi (Typhoon No. 3) – considered the most powerful storm since Typhoon Damrey in 2017 – which severely affected many coastal industrial parks and residential areas, with total estimated losses exceeding VND 8,000 billion. At the same time, major fires and explosions at factories in Bac Giang, Dong Nai, and other areas placed insurance companies on high alert.

As of April 18, 2025, according to reports of insurance firms, the total estimated casualty from Typhoon Yagi is estimated at VND 10,287 billion, with total claim expenses and advance payments amounting to VND 1,903 billion (source: Ministry of Finance).

In the situation of increasing risk, reinsurance has become an essential tool to mitigate financial exposure. The purchase of catastrophe reinsurance programs or loss-layering models has become more common – especially following lessons learned from Typhoon Yagi. However, after such large-scale shocks, international reinsurers – key players in the market – tend to raise premiums, tighten policy terms, and limit coverage for high-risk industries or geographic areas. This results in significantly higher reinsurance costs and squeezes profit margins for primary insurers, particularly in a market already under intense price competition. Insurers now face the challenge of balancing cost and profitability.

Speaking at the Hanoi Re International Conference 2025 (HRIC 2025), Mr. Trinh Anh Tuan, CEO of Hanoi Reinsurance Joint Stock Corporation (Hanoi Re), emphasized that in a constantly evolving world, each challenge serves as a test of the adaptability and strategic vision of a reinsurance company.

Under the theme “Turning Challenges into Opportunities,” Mr. Tuan also outlined Hanoi Re’s strategic goals in market expansion, digital transformation, and enhanced risk management capabilities, gradually affirming the company’s role as a Vietnamese reinsurer on the regional map. Through the message “Connecting Leaders, Sharing Visions at 1500,” Hanoi Re affirmed its commitment to long-term international partnerships and shaping the future of Vietnam’s reinsurance industry with internal strength and long-term vision.

Adapting in a Volatile Era

“After major risk shocks, international reinsurers may raise rates and tighten terms, resulting in increased reinsurance costs and shrinking margins for primary insurers.”

Also at the conference, Ms. Tran Thi Phuong Binh, CEO of Vietnam International Adjusters (VIA), noted that Typhoon Yagi was not just a natural disaster but also a test of coordination among insurers, adjusters, brokers, and insured/reinsured parties.

VIA implemented rapid-response solutions: deploying assessors across affected areas, increasing collaboration with contractors and consultants to restore operations quickly. However, challenges remain such as delayed documents due to long imported time for material parts, risks of fraudulent claims, or difficulties in identifying business interruption causes after natural disasters. Ms. Binh recommended more flexible reinsurance terms while invest more on real-time loss assessment technologies and data.

Mr. Musa Adlan, Managing Director for Asia region at Aon, noted that the global economy is undergoing major shifts. 82% of businesses expect supply chains to become more regionalized in the next five years amid fragmented trade, with over 3,000 new trade barriers since 2018. Tariffs, sanctions, and complex regulations are now the “new normal.” Notably, 44% of global CEOs see geopolitical risk as the top external concern in 2024 surpassing even economic instability.

He emphasized that sustainable operations now require real-time risk monitoring, instead of relying on past models. Organizations are adopting predictive analytics to assess supplier risks, cross-border ties, and political dynamics, while restructuring supply chains with built-in contingency planning instead of purely focusing on efficiency.

Aon’s representative also highlighted a “super” innovation cycle led by artificial intelligence (AI), projected to reach USD 407 billion by 2027. Yet systemic risks rise: 78% of organizations accelerated digital transformation post-pandemic, but fewer than 40% feel confident managing cyber risks. In 2023, the average cost of a data breach reached USD 4.45 million, up 15% over three years. Generative AI raises further concerns over fraud, misinformation, and IP theft. Aon advised building technological resilience beyond firewalls and insurance – embedding security in design, enabling real-time alerts, and promoting cross-functional risk governance.

In 2023, global natural disasters caused USD 380 billion in losses, of which only USD 123 billion was insured, leaving a protection gap of USD 257 billion. Climate change is reshaping risk at a rapid pace, with 1/4 of global assets directly exposed to physical climate hazards. Leading firms are now investing in future climate modeling, risk maps, extreme-scenario testing, and parametric insurance tools.

Faced with trade, tech, climate, and talent risks, Mr. Adlan urged organizations to shift from prevention to resilience, from reactive to continuous decision-making, and from passive coping to proactive strategy. Risk, if wisely approached, is not a threat, it’s a driver of innovation, growth, and trust.

“In a fragmented, volatile, and uncertain world, resilience ultimately is a choice,” Mr. Adlan concluded.