United insurance life insurance

HDBank will choose a life insurance partner for an exclusive bancassurance deal

At the bank’s general shareholders meeting in April, HDBank’s vice chairwoman Nguyen Thi Phuong Thao said that the bank has received a lot of attention recently for an exclusive bancassurance agreement.

“Many international life insurance companies have offered to cooperate with HDBank, but the negotiation has not been completed due to the pandemic,” said Thao. “However, we are not under any pressure to sign an exclusive bancassurance deal at the moment because the contract value in 2021 or next year would be significant.”

Last year, some major lenders have entered the bancassurance competition by co-operating with life insurers. For instance, ACB inked a monopoly deal with Sun Life and VietinBank teamed up with Manulife.

Despite the adverse impacts of the pandemic, the bank reported its pre-tax revenue of VND5.818 trillion($252.96 million) last year, equivalent to an increase of 15.9 per cent on-year.

In the first quarter of this year, HDBank recorded VND2.1 trillion ($91.3 million), up more than 68 per cent on-year.

The bank is accelerating its digitally-led services with its “Di HDBank” application. Moreover, a majority of the bank’s customers have conducted online transactions on the HDBank digital banking platform via its Electronic Know Your Customer (eKYC) implementation.

Pham Quoc Thanh, general director of HDBank, said that since the last quarter of 2020, the bank has reinforced insurance cross-selling initiatives, with many positive performances in return. The bank sets a target this year to collect VND1 trillion ($43.5 million) of insurance service fees.

“Revenue from insurance services is an attractive promise for us in order to diversify our sources of income while reducing reliance on revenue from lending activities,” added Thanh.

HDI Global SE – a Germany-based corporation and the majority shareholder of Vietnamese non-life insurer PVI – has been fined for non-compliance with information disclosure and foreign ownership limit rules

VIR reported that on April 16 the State Securities Commission (SSC) fined HDI Global SE due to non-compliance with information disclosure and violating foreign ownership limit rules.

Specifically, a fine of VND125 million ($5,435) is stipulated in Article 28.2 of Decree No.108/2013/ND-CP dated September 23, 2013 on administrative penalties for violations in the securities market for performing one or more transactions in order to conceal real ownership of a security in order to avoid the obligation to disclose information in accordance with regulations.

The fine imposed on HDI is not a considerable amount. However, the SSC’s official decision to require HDI to transfer PVI shares back to their original owners to reduce its ownership ratio has raised tough questions among investors.

In accordance with Article 28.3b of Decree 108, PVI has to comply with the SSC’s requirement within 60 days of receiving the decision.

Many investors have asked how HDI will sell these shares and how it will change PVI’s management structure.

Currently, the foreign ownership limit in PVI has been raised to 100 per cent, but no single investor is allowed to own more than 50 per cent of the stakes. This raises questions whether HDI will find an insider to negotiate the number of shares that it must sell.

The story of HDI’s acquisition of PVI was also mentioned by a German newswire, Handelsblatt Today .

“Insurer HDI Global is facing unexpected legal problems due to its business expansion strategy in Asia. The subsidiary of the Talanx Group has been trying for years to bolster its influence in PVI – one of the largest insurance groups in Vietnam. However, regulators in the Southeast Asian country are now accusing the Hanover-based company of using unfair approach,” Handelsblatt Today noted. “In this particular case, the question is whether HDI has raised its stake in the Vietnamese insurer to more than 50 per cent in the former state-owned PVI in an inadmissible manner. From the point of view of the Vietnamese financial regulator SSC, HDI’s actions have violated local securities law.”

Jens Holger Wohlthat, member of the Board of Management of HDI Global SE, Hannover, also the chair of PVI’s board for 2017-2022 tenure, effective since January 16, 2020

On the other hand, HDI remains adamant that its investment in Vietnam is strictly compliant with Vietnamese regulations.

“ HDI confirms that its compliance with the local laws always remains its priority. HDI affirms that with respect to HDI’s investment activities in Vietnam, prior to making any transactions, the company always reviews and assesses the local regulations, to ensure that HDI’s investments in Vietnam are strictly compliant with Vietnamese regulations,” a representative of HDI Global SE previously said. “HDI has transparently provided its explanations and has been working closely with the SSC as well as other Vietnamese agencies regarding issues presented in OL 4513 and OL 5106 of the SSC within the required period by the SSC. HDI is convinced that we have complied fully with the laws and regulations of Vietnam and we intend to vigorously defend this position.”

“HDI trusts that the Vietnamese Government will provide judicious guidance to ensure the stability and legal safety for the investment activities of HDI in particular and those of foreign investors in general. HDI once again is committed to working closely with the Government of Vietnam, and especially with Vietnam Oil and Gas Group, to ensure that the relationship is effective and constructive, thus ensuring a significant contribution to the good trade relations between Vietnam and the Federal Republic of Germany,” the representative replied in an email response to VIR .

The workshop aimed to gain a comprehensive understanding of the Vietnamese context and identify the possible interventions and technical support needed for the country, which has been selected as one of the first 10 countries to participate in a new UNDP global initiative under its new Insurance and Risk Finance Facility (IRFF) to make inclusive insurance and risk financing central to development.

The UNDP workshop has seen in-depth discussions on an upcoming diagnostic study on disaster risk finance and inclusive insurance

This new initiative has been designed jointly with the Insurance Development Forum (IDF) and is financially supported by the German government. The UNDP will also work with the InsuResilience Solutions Fund (ISF) and global insurance industry partners to develop new disaster risk financing and insurance products to reduce the negative impacts of disasters.

Risk financing and inclusive insurance are important to protect lives, livelihoods, infrastructure, and homes from the impact of disasters, but also to provide coverage for sustainably protecting healthcare and education services, as well as employment, and agricultural supply chains. However, little attention has been paid to risk financing at the global and country levels.

There is, for example, a huge protection gap in developing countries (including Vietnam), where less than 5 per cent of losses due to disasters are covered by insurance, as compared to over 50 per cent in high-income countries. These protection gaps are also prevalent beyond disaster losses, resulting in increased expenses in healthcare and losses in property, livelihoods, and agriculture.

Research into multi-aspect disaster risk financing suggests that different insurance schemes could potentially reduce losses from disasters in the poorest countries by as much as 25 per cent through a range of risk financing tools, including parametric insurance, insurance-backed social protection, and indemnity-based products.

As a first step in the unfolding of this new initiative in Vietnam, the UNDP is carrying out a diagnostic study. The study, which will cover significant areas across the inter-related disciplines of insurance and risk finance, will help to articulate the evolution of the insurance supply side; develop a picture of the demand side; ascertain the gaps and opportunities in creating an enabling environment through government policy and regulatory environment; recommend means of building regulatory capacities; assess the financial standing of the insurance companies; and suggest suitable approaches towards developing new market opportunities. It will also help to generate an information profile for Vietnam and the knowledge relevant for inclusive insurance, such as providing the demographic, socio-economic, and sectoral context for developing insurance and risk transfer solutions.

According to Sitara Syed, UNDP deputy resident representative in Vietnam, who spoke at the workshop, “the concept of disaster risk financing is still relatively new in Vietnam, but the opportunities are considerable. In addition to putting national and local governments in a stronger position to plan for disasters ahead of time, a more enabling environment could also support quicker and more efficient response and recovery work for when disasters inevitably occur.”

“This initiative will require a significant level of support and collaboration with government ministries, such as the Ministry of Finance, as well as provincial and local authorities, development partners, insurance industry partners, and the private sector,” Syed highlighted.

Twenty years is a long period and many cannot work that many years under contracts only to pay insurance premiums.

Vietnam’s Ministry of Labor, Invalids and Social Affairs (MoLISA) has proposed that people would have to pay social insurance premiums for 15 years, instead of 20 years as at present, to begin to qualify for retirement pensions.

The period would then even be reduced to 10 years, the labor ministry said.

Contracted laborers must contribute to social insurance for the full 20 years to qualify for retirement pension but still have to work and pay premiums until 60 years and three months for men and at 55 years and four months for women is one among the inadequacies that the draft amendment to the Law on Social Insurance has to address, according to the MoLISA.

MoLISA proposes to cut social insurance contribution period to 10-15 years. Photo: Duy Anh

“Twenty years is a long period and many cannot work that many years under contracts only to pay insurance premiums,” the ministry said, adding that many have stopped halfway, choosing to give up on the retirement pension.

The MoLISA stressed that a large number of old people without pensions would create huge pressure on social welfare and healthcare funding.

“If the mandatory period of social insurance contribution is shortened to 10 years, the policy would encourage more people to enroll in the insurance scheme,” said the ministry.

The MoLISA has submitted the draft amendment to the Vietnamese government and will collect public opinions until June 16.

It is expected that the amendment will be submitted to the sitting of National Assembly (NA) in December 2022. If it is passed at the following NA meeting in May 2023, it will take effect from January 1, 2024.

Vietnam had around 14.1 million people in retirement, with only 4.9 million having access to the retirement pension by 2020.

Vietnam is currently among the most rapidly aging countries in the world. It officially entered the aging phase in 2011 when the number of people over 60 made up 10% of the population.

The ratio climbed to 12% in 2019 for a population of 95 million and is expected to rise to 17.9% in 2025, and to more than 20% in 2038. By then, Vietnam would officially become an aging nation.