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Local insurers urged to restructure to survive
While mergers and acquisition deals have heated up among banks and securities companies, the M&A picture for the insurance industry remains rather quiet despite warnings that appropriate and timely restructuring is needed in the sector if some firms are to survive.
The restructuring would help boost the financial capacity of insurers, control risks and build corporate governance towards world-class standards, said analysts at a recent conference. They recommended that insurers map out specific strategies for premiums to ensure that the revenue streasm were reinvested effectively, avoiding unexpected risks from foreign exchange, gold, securities or real property fluctuations that had caused losses to a number of insurers.
"Enterprises should restructure towards capitalising on their advantages in insurance products, clients and business networks, while improving customer care and resolving claims comprehensively and in a timely manner," said Viet Nam Association of Insurers secretary general Phung Dac Loc.
"Companies need to actively review their operations, restructure their organisations, improve business operations and investment effectiveness, map out key strategies focusing on target customers, and apply IT to cut costs and strengthen risk management capacity," the director of the Ministry of Finance's insurance management and supervision division, Trinh Thanh Hoan, told the conference.
According to the ministry, restructuring would be undertaken based on the classification insurance companies into four groups. Insurance enterprises that were performing well would be allowed to maintain and expand their current business operations. Insurers that were meeting their costs but saw high rates of compensation or which posted losses for two consecutive years would be re-evaluated for effectiveness and cost-cutting, and the business expansion of such firms would be strictly controlled and based upon the potential of each specific project.
The third class of firms would be those unable to meet their debts. These would be re-assessed for financial capacity, and management would be restructured, with ownership capital increased to help them meet their obligations or contracts transferred to other insurers.
The final class of insurers would include those which were insolvent or bankrupt under law and subject to special control by the State. These companies, if unable to recover, would be merged into larger insurers or allowed to go into bankruptcy proceedings.
VIETnamnews
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