A number of insurance companies in the first quarter this year sent files to the Ministry of Finance seeking for permission to raise capital, Saigon Economic Times said Monday.
The companies are Bao Viet, Bao Minh, Vinare, Bao Long, Vien Dong and BIC, and newly-licensed enterprises such as Toan Cau, Bao Nong and Bao Tin.
The move followed the government’s Decree No. 46 issued March 3, 2007 that stipulated legal capital of VND300 billion (US$18.75 million) for non-life insurance companies, VND600 billion (US$37.5 million) for life insurance trading and VND4 billion (US$250,000) for insurance brokerage firms.
Insurance companies that have not reached the above level of legal capital have to add in three years. Therefore, many insurers who had known about the stipulation in advance sought to raise capital before the decree is effective.
General Secretary of Vietnam Insurance Association, Phung Dac Loc, however, said the decree is not the key reason, insurance companies are urgently preparing for tough competitive environment.
The insurer seeking the highest hike is the Bank for Investment and Development of Vietnam’s Insurance Company (BIC). BIDV poured additional VND300 billion (US$18.75 million) into BIC to raise its chartered capital to VND500 billion (US$31.25 million) in June 2007.
Pham Quang Tung, BIC director said the level of legal capital stipulated in the decree is too small as compared with foreign insurance firms. The new level is necessary to help enterprises boost their capacity and prestige to foreign firms, reduce pressure of reinsurance and have conditions to expand operations to related fields.
In the context the capital market is booming, insurance companies are not difficult to reach the new level of legal capital. Improved financial capability does not only create confidence for customers and partners but also is the basis for insurance firms expanding operations to related fields and grasping opportunities from the booming stock market. (Saigon Economic Times)
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