Tag Archives: Vietnam

Opportunities and Challenges ahead for Vietnam: Lessons Learned from Thailand

Earlier this month I gave a presentation at the 13th Asia Insurance Review conference in Ho Chi Minh City, Vietnam. It was a very worthwhile event that gave good insights into this young insurance market, and it was great to be in Ho Chi Minh City—a place that immediately captured me with its charm.


Bangkok, Thailand during the 2011 floods. Photo by Petty Officer 1st Class Jennifer Villalovos.

Vietnam shares striking similarities to Thailand, both from a peril and an exposure perspective. And, for Vietnam to become more resilient, it could make sense to learn from Thailand’s recent natural catastrophe (NatCat) experiences, and understand why some of the events were particularly painful in absence of good exposure data.

NatCat and Exposure similarities between Thailand and Vietnam 

Flood profile Vietnam shows a similar flood profile as Thailand, with significant flooding every year. Vietnam’s Mekong Delta, responsible for half of the country’s rice production, is especially susceptible to flooding.
Coast line Both coastlines are similar in length[1] and are similarly exposed to storm surge and tsunami.[2]
Tsunami & Tourism Thailand and its tourism industry were severely affected by the 2004 Indian Ocean Tsunami. Vietnam’s coastline and it’s tourism hotspots (e.g. Da Nang) show similar exposure to tsunami, potentially originating from the Manila Arc.2
GDP growth Thailand’s rapid GDP growth and accompanying exposure growth in the decade prior to the 2011 floods caught many by surprise. Vietnam has been growing even faster in the last ten years[3]; and exposure data quality (completeness and accuracy) have not necessarily kept up with this development.
Industrialization and global supply chain relevance Many underestimated the significance Thailand played in the global supply chain; for example, in 2011 about a quarter of all hard disk drives were produced in Thailand. Currently, Vietnam is undergoing the same rapid industrialization. For example, Samsung opened yet another multi-billion dollar industrial facility in Vietnam, propelling the country to the forefront of mobile phone production and increasing its significance to the global supply chain.

Implications for the Insurance Industry

In light of these similarities and the strong impact that global warming will have on Vietnam[4], regulators and (re)insurers are now facing several challenges and opportunities:

Modeling of perils and technical writing of business needs to be at the forefront of every executive’s mind for any mid-to long-term business plan. While this is not something that can be implemented overnight, the first steps have been taken, and it’s just a matter of time to get there.

But to get there as quickly and efficiently as possible, another crucial step stone must be taken: to improve exposure data quality in Vietnam. Better exposure insights in Thailand would almost certainly have led to a better understanding of exposure accumulations and could have made a significant difference post floods, resulting in less financial and reputational damage to many (re)insurers.

As insurance veterans know, it’s not a question of if a large scale NatCat event will happen in Vietnam, but a question of when. And while it’s not possible to fully eliminate the element of surprise in NatCat events, the severity of these surprise can be reduced by having better exposure data and exposure management in place.

This is where the real opportunity and challenge lies for Vietnam: getting better exposure insights to be able to mitigate risks. Ultimately, any (re)insurer wants to be in a confident position when someone poses this question: “Do you understand your exposures in Vietnam?”

RMS recognizes the importance of improving the quality and management of exposure data: Over the past twelve months, RMS has released exposure data sets for Vietnam and many other territories in the Asia-Pacific. To find out more about the RMS® Asia Exposure data sets, please e-mail asia-exposure@rms.com.  

[1] Source: https://en.wikipedia.org/wiki/List_of_countries_by_length_of_coastline
[2] Please refer to the RMS® Global Tsunami Scenario Catalog and the RMS® report on Coastlines at Risk of Giant Earthquakes & Their Mega-Tsunami, 2015
[3] The World Bank: http://data.worldbank.org/country/vietnam, last accessed: 1 July 2015
[4] Vietnam ranks among the five countries to be most affected by global warming, World Bank Country Profile 2011: http://sdwebx.worldbank.org/climateportalb/doc/GFDRRCountryProfiles/wb_gfdrr_climate_change_country_profile_for_VNM.pdf

Rammasun is One of the Strongest Typhoons to Hit Southeast China in Recent Years

RMS closely monitored typhoon Rammasun last week as it picked up strength en route to the Philippines. The world also watched, remembering the catastrophic damage typhoon Haiyan caused last November. While Rammasun did not wreak as much havoc as Haiyan, it still left a trail of damaged buildings and flooded crop fields in the Phillipines, southeast China and Vietnam. Below, RMS looks at the property damage and insurance industry implications as the typhoon hit both denser commercial metropolitan areas and agricultural provinces.

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RMS reports that on Friday, July 19 Super typhoon Rammasun, one of the strongest to hit southeast China in recent years, made three landfalls in the provinces of Hainan, Guangdong, and Guangxi.

Rammasun has significantly impacted the Philippines, southeast China and Vietnam. Rammasun brought strong winds, heavy rain, and storm surge to some coastal areas with close to 300,000 buildings damaged in the affected countries.

In China, damaging wind and floods have destroyed at least 37,000 homes and ravaged 468,500 hectares of crops in Hainan, Guangdong and Guangxi provinces. Virtually all brick-and-tile houses in the town of Wengtian, Hainan were either destroyed or had their roofs removed. Within a 24 hour period up to 15 inches of rain fell in the city of Haikou; the week before Rammasun hit, the southeastern provinces were reportedly experiencing heavy floods, which have only been exacerbated by the typhoon.

“Typhoon-related flood, which includes both rainfall driven and coastal flooding, contributes as much as 80% to typhoon average annual loss in China, with the coastal provinces driving the loss,” said Nikki Chambers, hazards scientist at RMS. “July to October are the most active months for typhoons in this region. On average 6 typhoons make landfall a year in China and typhoon Rammasun highlights the importance of accounting for all sources of typhoon losses, of which flood is the main driver.” Insurance penetration is extremely low in China particularly for residential risk, slightly higher for commercial and industrial lines of business. On average, about 15% of property risk in China is insured. Insurance penetration varies by province; Hainan has one of the lowest insurance penetrations in China. Guangdong is one of the more prosperous provinces; it is the second largest province for property insurance purchases, with 41.7 billion yuan (US$6.8 billion) in direct premiums for property insurance in 2012, according to the China Insurance Regulatory Commission.

Philippines

The typhoon wreaked havoc earlier in the week in the northern Philippines, which is still rebuilding after Typhoon Haiyan. Rammasun made its first landfall in the largely agricultural provinces south of the capitol Manila, leaving 94 people dead, and over 111,000 houses damaged, of which nearly 28,000 have been totally destroyed and 83,000 have been partially damaged., Based on analysis from the RMS Philippines Economic Exposure Database, the impacted provinces in the Philippines from Rammasun contains over 100 bn USD of insurable commercial building exposure, 80 bn USD of industrial building insurable exposure, and over 215bn USD of residential building exposure. Based on the RMS Philippines industrial cluster catalog, industry is clustered around metro Manila and in areas to the north and south of the capital in Central Luzon, which are located within the affected area of Rammasun. The insurance penetration rates in the Philippines is relatively low, though higher for commercial and industrial lines of business and will be centred around Manila and the industrial zones.

Vietnam

In northern Vietnam, Typhoon Rammasun made landfall Saturday morning, causing heavy flooding. At least eight people have died and it has affected more than 6,000 homes. The typhoon has damaged 3,300 hectares of rice and other crops and disrupted traffic in the region. Typhoon, Matmo, with maximum winds of 150km/h, is now threatening the area ravaged by Rammasun. RMS is monitoring the situation closely.