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.
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 and are similarly exposed to storm surge and tsunami.|
|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; 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, 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 firstname.lastname@example.org.
 Source: https://en.wikipedia.org/wiki/List_of_countries_by_length_of_coastline
 Please refer to the RMS® Global Tsunami Scenario Catalog and the RMS® report on Coastlines at Risk of Giant Earthquakes & Their Mega-Tsunami, 2015
 The World Bank: http://data.worldbank.org/country/vietnam, last accessed: 1 July 2015
 Vietnam ranks among the five countries to be most affected by global warming, World Bank Country Profile 2011