Insurance companies in Vietnam will have to almost triple their legal capital following a draft decree by the Vietnamese Finance Ministry designated to raise their competitiveness and better protect insurance customers.

Under the draft, non-life insurers should complete the raising of their legal capital to 200 billion Vietnamese dong (VND) ( nearly 12.6 million U.S. dollars) from current 70 billion VND ( over 4.4 million dollars), and life insurers to 400 billion VND ( roughly 25.2 million dollars) from current 140 billion VND (more than 8.8 million dollars) within five years since the draft's ratification, local newspaper Vietnam Investment Review reported Monday.

"The new decree, if ratified, can phase out incapable existing insurers and select capable new entrants coming with Vietnam's WTO accession," said senior official from the ministry's Insurance Department Le Song Lai.

Under an agreement with the United States on Vietnam's accession to the World Trade Organization, Vietnam will permit foreign insurance companies to open wholly foreign-invested subsidiaries with minimal limitations on their scope of business.

The newly-proposed levels for legal capital would not have much impact on the local insurance market, said Tran Ba Phuoc, chief executive officer of the Prevoir Vietnam Life Insurance Company, a subsidiary of leading French life insurance group Prevoir.

"The increased amount could better protect customers but it will not change market structure .. It is not a big amount for international insurers. Once Vietnam enters the WTO, the competition would be much tougher with the arrival of numerous international insurers," he said.

Vietnam's insurance premium revenues are targeted to reach 4 billion dollars, or 4.2 percent of the country's gross domestic product (GDP) in 2010, up from 15 trillion VND (nearly 943.4 million dollars), or 2.03 percent of the GDP in 2005, said the report.

Source: Xinhua