FOREIGN TRADE UNIVERSITY

SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS

**********

FINAL REPORT

Subject: Risk Management and Insurance

Code: TMAE308 (2.2/2021) CLC.1
Topic: An analysis of marine insurance business of BIDV
Insurance Corporation (BIC)

Group: 17 - TMAE308 (2.2/2021) CLC.1

No Student name Student ID

1 Nguyễn Trung Quân 1811150117

2 Phạm Kim Ngân 1810150023

3 Lê Phương Thảo My 1811150105

Lecturer: Assoc.Prof. PhD. Trần Sỹ Lâm

Hanoi - 2021
 TABLE OF CONTENTS

INTRODUCTION ...................................................................................................... 1
BODY ........................................................................................................................... 4
I. Company Overview: ............................................................................................... 4
1. History of Company: ................................................................................................ 4
2. Organizational structure of Company: ..................................................................... 5
3. Financial capacity of Company: ............................................................................... 5
4. Business lines of Company: ...................................................................................... 6
5. Company's performance: .......................................................................................... 8
II. Introduction to Marine Insurance Business of Company: .............................. 13
1. Overview about Marine Insurance Business: ......................................................... 13
2. Customer Profile: .................................................................................................... 13
3. Financial Performance: ........................................................................................... 15
III. Analysis of Marine Cargo Insurance Policy of BIC: ...................................... 20
1. Introduction of Marine Cargo Insurance of BIC: ................................................... 20
2. Real-case analysis of Marine Cargo Insurance Policy of BIC: .............................. 23
IV. Recommendations for Marine Insurance Business of BIC ............................ 26
1. Evaluation of the Marine Insurance Business of BIC: ........................................... 26
2. Recommendations of Marine Insurance Business of BIC: ..................................... 30
CONCLUSION ......................................................................................................... 33
REFERENCES ......................................................................................................... 34
 LIST OF TABLES AND FIGURES

Figure 1: BIC organizational structure ......................................................................... 5

Figure 2: Estimated market share in the non-life insurance sector in 2020 .................. 9
Figure 3: Gross written insurance in 2017 – 2020 ...................................................... 10
Figure 4: Profit before tax (on a stand-alone basis) in 2011 – 2020 ........................... 11
Figure 5: Revenue from cargo and hull and P&I insurance in comparison with total
revenue in 2015-2020 ................................................................................................. 15
Figure 6: Gross margin of cargo and hull and P&I insurance .................................... 16
Figure 7: Revenue and direct operating expense ratio of marine insurance of five non-
life insurance company in 2020 .................................................................................. 17
Figure 8: Debt ratio/Payment capacity of BIC in 2016-2020 ..................................... 19
Figure 9. Cargo Insurance Policy (BIC, 2021) ........................................................... 24
Figure 10. BIC Online (mobile application) ............................................................... 28
Figure 11. Baohiemtructuyen.com.vn (online selling website) .................................. 28
Figure 12. BIC’s Focus for 2021 (2020 annual report) .............................................. 30

Table 1. Summary chart - Risk covered/ excluded ..................................................... 20

 INTRODUCTION

In the 21st century, Vietnam's economy has made remarkable progress with the leading
economic growth rate and foreign investment attraction in Asia. A number of logistics
service companies have been founded to support the export of goods to foreign markets
as well as the import of raw materials to production sites. Import-export activities have
experienced a significant surge and become an important link in the economic
development chain.

Along with the growth of logistic activities in Vietnam, Marine Insurance is the most
common method used to protect the value of goods and ships from damage, theft or
general average. Depending on the modes of transport and regions, cargo insurance is
not always automatically included for all shipped goods. Although there is no
requirement to buy marine insurance, it is highly advisable to protect the s and goods
from exposure to risks. When it comes to choosing an insurance company, research
should be done to find the most trustworthy provider with affordable service, since an
insurance provider which has the highest rates does not always guarantee the best
coverage.

In order to contribute to the broader and more systematic research about marine
insurance providers in Vietnam, our group would like to develop a report under the
guidance of Assoc. Prof. Tran Si Lam on the topic of “An analysis of marine insurance
business of BIDV Insurance Corporation (BIC)”.

Objectives of the research

This research intends to analyze the performance of BIDV Insurance Corporation in the
specific aspect of its marine insurance business. Then, recommendations are proposed
for the company to enhance its performance and compete in the marine insurance market
of Vietnam.

Methodology of the research

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This report is based on secondary data research, collecting and analyzing public data
from various reliable sources on the internet. The references which assisted us in
grasping a better understanding and drawing insightful conclusions about the topic will
be cited according to APA standard at the end of the report.

Structure of the research

Apart from the introduction, literature review, references and appendix, the report
consists of 4 main parts:
Section 1: Company overview
Section 2: Introduction to Marine Insurance Business of BIC
Section 3: Analysis of Marine Cargo Insurance policy of BIC
Section 4: Recommendations for Marine Insurance Business of BIC

Acknowledgement
We would like to express our gratitude Assoc. Prof. Tran Si Lam for his guidance and
suggestions to help us understand and analyze the problem in the right direction. Due to
our limited understanding and materials, some mistakes are inevitable. We hope that
you can give feedback on the essay in order for us to improve our future reports. Besides,
we also hope that this essay will contribute as a review and analysis of a marine
insurance company for any potential customers to consider in the process of researching
for a suitable insurance provider.

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 LITERATURE REVIEW

In recent years, logistics in Vietnam appears to be an essential and strategic factor

towards national economic development. This leads to a significant increase in the
number of shipping and logistics companies in Vietnam recently. Particularly, according
to a survey of the Vietnam Logistics Association (2016), there are about 1,300 logistics
enterprises and thousands of other companies with international trade included in their
business activities, which indicates the potential growth of the marine insurance industry
in Vietnam.

A number of writing, including the recent journal "Những thông tin cần biết về bảo hiểm
hàng hải" on Thebank.vn 2021, focus on comparing the marine insurance products of 4
leading insurance providers AIG, ABIC, Chubb and Bao Minh. However, there are
totally more than 30 non-life insurance providers in Vietnam (Thị trường Bảo hiểm Việt
Nam 2019, Ministry of Finance, 2019). There is obviously a lack of robust reviews and
comparisons of marine insurance companies in Vietnam.

Therefore, this paper aims at giving the audience an overview and thorough analysis of
BIDV Insurance Corporation’s performance in the Vietnam market, helping them to
better select a suitable insurance provider and bringing the company to more potential
customers.

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 BODY
I. Company overview:
1. History of Company:
BIDV Insurance Corporation (BIC) was established based on the development
strategy conceived of by the Bank for Investment and Development of Vietnam as a
financial group operating under the BIDV trademark. BIDV bought the QBE
Insurance Group (Australia) shares to establish the BIDV – QBE joint venture (a
foreign company established in Vietnam in 1999). BIC officially began operating
under the new brand name on January 1, 2006, when BIDV officially acquired QBE's
stake in the joint venture. Some noteworthy milestones are:
- In 2008, BIC cooperated with Lao – Viet Bank (LVB), and Lao Foreign Trade
Bank established the Lao – Viet Insurance Company (LVI)
- In 2009, with the assignment of comprehensive management of Cambodia
Vietnam Insurance Company, BIC became the first insurance company in
Vietnam with a network of operations in all 3 Indochina countries (Vietnam –
Laos – Cambodia)
- From October 1, 2010, BIC officially transformed from a 100% state-owned
company to a joint-stock company under the new Bank for Investment and
Development of Vietnam Insurance Corporation – BIC.
- In 2013, with an aim to expand the operation overseas, BIC bought the share of
Lao Viet Joint Venture Bank in Lao Viet Insurance Joint Venture Company to
increase the share of BIC in LVI to 65% and issued a consolidated financial
statement since Quarter 3.
- In 2015, BIC entered into a share subscription agreement with Fairfax Asia
Limited, a wholly-owned subsidiary of Fairfax Financial Holdings, a global
insurer, and reinsurer headquartered in Toronto, Canada. Fairfax Asia Limited
acquired 35% of the outstanding shares of BIC to become a strategic investor of
BIC.
- In 2019, it was the first-time written premium of the parent company - BIC
reached the milestone of VND 2,000 billion. With the transformation of business
structure towards efficiency, in 2019, BIC made profits from insurance business.
BIC's vision is to become 1 in Top 5 of non-life insurance enterprises in the

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 market in terms of equity, market share, and profit and develop itself to a
reputable insurance brand and one of the business pillars of BIDV financial
group.

2. Organization structure of Company:

The organizational model of BIC includes the following levels:
- Headquarters in Hanoi: general management of all activities of BIC and is the
principal contact for reporting and receiving information to the Board of
Management at BIDV's head office.
- BIC branches in critical areas: will be direct business units. BIC will assign the
area in charge to each of its branches. Services arising from BIDV branches will
be sent/contacted to the BIC branch which is assigned to be in charge of the area.
- Representative offices: BIC's representative offices in potential areas will act as
a bridge, provide information and support insurance operations of BIDV's
branches. BIC will assign/send staff to directly support BIDV's branches, agent
management staff to be the contact point.

Figure 1: BIC organizational structure

The divisions in each section always try to coordinate and work closely together to
achieve the Company's common goal, which is providing clients with
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comprehensive solutions to manage financial risks and create sustainable profit and
value for shareholders. Besides, the Company also applies an effective risk
management system by top-down control with standards and guidelines and bottom-
up control with monthly and quarterly reports.

3. Financial capacity of Company:

According to the Decree 73/2016/NĐ-CP on details of the implementation of the law
on insurance business and the law on amendments to certain articles of the law on
insurance business, the Company must have a total worth of assets of at least 2,000
billion Vietnam dongs in the year immediately preceding the year that the application
for a license is submitted. In the 2020 financial statements of the company, the total
assets of BIC are nearly 4.650 billion VND which indicates that it is unlikely for
BIC to fail the requirement in the foreseeable future. The minimum legal capital of
non-life insurance enterprises varies from 300 billion VND to 400 billion VND
depending on the types of insurance provided. BIC also satisfies this requirement
with a charter capital of more than 1.172 billion VND and an owner's equity of more
than 5.500 billion VND.

There are also some key financial risks that may affect the business of BIC, such as
reinsurance risk and liquidity risk. Regarding reinsurance risk, BIC reinsures a
portion of the insurance risks it underwrites to control its exposures to losses and
protect its capital through treaty and facultative reinsurance arrangements. For the
purpose of engaging with reputable reinsurers, BIC strictly follows the conditions of
overseas reinsurers as detailed in Decree No. 73/2016/NĐ-CP issued by the
government of Vietnam. In fact, BIC requires a minimum A- as rated by A.M. Best
as part of its reinsurer criteria. Regarding liquidity risk, BIC has to meet daily calls
on its cash resources, notably from claims arising on its insurance contracts. There
is, therefore, a risk that cash will not be available to settle liabilities when due at a
reasonable cost. BIC manages this risk by monitoring and setting an appropriate
level of operating funds to pay these liabilities. The solvency requirements of BIC
now are higher than those set out in Circular No. 50/2017/TT-BTC dated May 15,

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2017, issued by the Ministry of Finance and Decree No. 73/2016/NĐ-CP issued by
the Government of Vietnam.

4. Business lines of Company:

According to the official website of BIC (2021), BIC's scope of operations are non-
life insurance, reinsurance, financial investments, and other activities regulated by
the law. BIC currently has 26 member companies, more than 160 sales departments,
and more than 1,500 insurance agents in Vietnam and 02 joint ventures in Laos and
Cambodia. With its substantial financial resources and widespread network, BIC
offers more than 100 non-life insurance products to the market to meet most of the
non-life insurance needs of its customers. BIC's products are divided into 3 main
types: Individual insurance, corporate insurance, and bancassurance insurance.

a. Individual insurance includes:

- Health insurance: Providing the best protection for customers when facing
illness, sickness, diseases, accidents or childbirth.
- Travel insurance: The insured will be indemnified in cases of injury, death, loss
or damage to baggage, and loss of consignment in the journey.
- Car insurance: The customer will be released from compensation responsibilities
when an unpredictable traffic accident happens.
- Motorbike insurance: As a means of transportation bearing the highest potential
risks, motorbike insurance from BIC will be the best solution to make customers
feel more secure during the journey.
- Home insurance: BIC will indemnify for the loss or damage of any property
inside the insured premises due to theft and burglary.

b. Corporate insurance of BIC includes various types of insurance as follow:

- Property insurance: BIC will indemnify the Insured for sudden and unforeseen
loss or damage to insured property by any perils not excluded in the policy
wording, ensuring the safety of all property, machinery, and equipment.

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- Engineering insurance: This type of insurance will cover any sudden physical
loss or damage to machinery by cases from inside machinery, boiler and pressure
vessel, construction and erection work, and electronic equipment.
- Aviation insurance: Insurance coverage geared specifically to the operation of
aircraft and the risks involved in aviation. BIC offers some types of aviation
insurance such as aircraft hull and machinery insurance, aviation liability
insurance, passenger liability insurance, and pilot life insurance.
- Financial insurance: This insurance consists of two smaller insurances. The first
one is money insurance with providing coverage on accidental losses that might
occur to the client's money in transit or in premises arising out of theft, robbery,
or stealing. The second one is surety bond – a type of guarantee that the obligor
(contractor) can undertake the underlying contract; otherwise, BIC will
indemnity to the obligee against any losses resulting from the failure of the
obligor to fulfil the obligations. BIC is seen as the most advantageous insurance
company in providing surety bonds thanks to being a 100% percent BIDV-owned
enterprise with a strong financial capacity.
- Liability insurance: In case of a claim under the coverage of the policy
(indemnify against damage to buildings while they are under construction), BIC
will defend in the name of and on behalf of the Insured any suit against the
Insured alleging such Personal Injury, Property Damage and seeking damages on
account thereof.
- Cargo insurance: BIC provides coverage for customers' legal liability for
damage, destruction, or other loss of property while being shipped by air or
inland transit.
- Marine insurance: to be discussed in the next chapter.

c. The Bancassurance channel in 2020 witnessed an impressive growth of more

than 70% compared to the figure in 2019, which is the highest growth rate so far.
Bancassurance of BIC includes:
- BIC Binh An: This insurance is for Vietnamese citizens or foreigners in Vietnam
that the Bank/Credit Institution approves the personal loan. There are many
benefits for the insured, such as death/permanent disability following the

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 accident, death due to illness or disease, accidental hospital allowance, and
funeral allowance.
- BIC Home Care: This is a comprehensive private/tenement house insurance:
Building coverage and contents coverage against many accidental circumstances.

5. Company's performance:
Vietnam's socio-economy in 2020 took place in the context of an epidemic of acute
respiratory infections due to an intense outbreak of Coronavirus (Covid-19) and
unpredictable changes on a global scale, which has seriously affected all socio-
economic aspects of countries around the world. However, in the last months of the
year, when most economies restart after a lockdown due to the Covid-19 epidemic,
it is forecasted that the world economic growth would show more signs that are
positive. Vietnam's GDP in 2020 increased by 2.91% (3.68% in the first quarter;
0.39% in the second quarter; 2.69% in the third quarter; 4.48% in the fourth quarter),
although this is the lowest growth rate in the period 2011-2020, but in the context of
the complicated developments of the Covid-19 epidemic, this is a great success for
Vietnam with the growth rate in 2020 belonging to the world's highest growth rate
group. (Ministry of Finance’s annual report, 2020)

The insurance market in 2020 continued to achieve high growth rates in the context
of the Covid-19 epidemic. According to updated data from the Ministry of Finance
(2020), a total estimated gross written premium of the market in 2020 reached VND
184,662 billion, an increase of 15% compared to 2019. In which the gross written
premium of non-life insurance reached VND 57,102 billion, increased by 8%
compared to 2019; the gross written premium of life insurance reached VND
127,560 billion, increased by 19,6%. (Ministry of Finance’s annual report, 2020)

9
 Figure 2: Estimated market share in the non-life insurance sector in 2020

a. Gross written premium:

Consolidated gross written premium (BIC and LVI) reached VND 2,752 billion, an
increase of 12.9% compared to 2019, of which direct written premium increased by
14%, inward premium decreased by 12% due to BIC actively restructuring the
reinsurance portfolio.

Figure 3: Gross written insurance in 2017 – 2020

Gross written premium of BIC stand-alone in 2020 reached VND 2,529 billion, an
increase of 13.7% compared to that of 2019, of which the direct written premium

10
grew by 17.4%, and inward premium decreased by 20.8% due to restructuring of
reinsurance operations.

b. Profit before tax:

Total consolidated profit before tax (BIC and LVI) in 2020 reached VND 375 billion,
outperforming PBT's plan of VND 241 billion. Separate pre-tax profit of BIC in
2020 reached VND 364 billion, an increase of 38.9%, 68.5% compared to 2019 and
2018, respectively. As can be seen from the graph below, despite the context of
Covid-19, BIC experienced significant growth of profit before tax in 2020. This can
be explained by a dramatic rise in the direct written premiums of health and personal
accident products (increased demand due to Covid-19) and also a sharp increase in
recoveries from reinsurance ceded.

Figure 4: Profit before tax (on a stand-alone basis) in 2011 – 2020

BIC’s banking insurance distribution channel (Bancassurance) continued to make

significant progress in 2020. The Bancassurance revenue grew nearly 70% compared
to 2019, the channel's highest growth rate ever. Currently, BIC is one of the top 3
non-life insurance companies in terms of banking insurance revenue. In addition to
the BIDV system, Bancassurance activities at other banks and credit institutions have
also been initially achieving positive results.

In overseas markets, BIC's business activities also recorded positive results. In Laos,
LVI's profit before tax grew by 578% compared to 2019. It helped the Company

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continue to maintain its leading position in profitability. In the Cambodian market,
CVI ranked 5th out of 17 leading non-life insurance companies in terms of market
share and continued to maintain its leading position in aviation insurance.

In 2020, BIC was honored for the 5th consecutive time to be recognized as one of
the top 10 most prestigious non-life insurance companies in Vietnam, according to
the assessment of Vietnam Report (2020). In particular, for the first time, BIC rose
to the 5th position among ten insurance companies announced on the rankings (1
level up compared to 2019). The top 10 most prestigious non-life insurance
companies in Vietnam were the independent research results of the Vietnam Report,
built according to objective and scientific principles. The company's reputation was
evaluated based on three main criteria including: Firstly, the quantitative analysis
model of the media reputation of the research subjects. Secondly, the business
performance and financial capacity of research subjects in 2019 - 2020, comparing
and evaluating with industry standards. Thirdly, the judgment of industry experts,
the results of customer surveys, and the results of surveying research subjects. In
addition to the Top 10 most prestigious non-life insurance companies in Vietnam,
by 2020, BIC is also ranked in the Top 500 most profitable enterprises in Vietnam
by the Vietnam Report for the 4th time in a row. (BIC’s annual report, 2020)

In conclusion, it can be seen that BIC has successfully exceeded the fulfillment of
2020 business targets, being the leading unit among BIDV's member companies.

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II. Introduction to Marine Insurance Business of Company
1. Overview about Marine Insurance Business:
Marine insurance covers the loss or damage of ships, cargo, terminals, and any
transport by which the property is transferred, acquired, or held between the points
of origin and the final destination.

In the corporate insurance section, BIC has introduced three types of marine
insurance, which mainly cover every customer's needs. They are marine cargo
insurance, insurance for civil liabilities of ship–owners, and hull insurance.
- Marine cargo insurance: It covers loss and/or damage during cargo movement in
international or domestic trade. Policies and coverage are tailored to clients'
needs. BIC follows the Institute Cargo Clauses (ICC 1/1/1982) and provides three
types of ICC for customers to choose suitable conditions for their goods.
- Hull insurance: This insurance is for both ocean vessels and river/coastal vessels.
The subject – matter is ships certificated by the Vietnam Register or the
equivalent foreign registry agencies operating in international maritime routes or
lakes, rivers, inland waters, and territorial waters of Vietnam. The insurance will
cover loss of or damage to the subject matter insured caused by many perils. For
river/coastal vessels, the assured may be covered for hull insurance in accordance
with two conditions, A and B, depending on the policy.
- Insurance for civil liabilities of ship owners: There are two sub-branch
insurances: insurance for civil liabilities of river/coastal ship-owners and
protection and indemnity insurance (P&I insurance) for ocean vessels. In
insurance for river/coastal ship-owner, it will cover for liabilities to the third
party such as expenses arising out of risks that happened during the operation of
the insured vessel; legal liabilities arising from damage to jetty, dam and dyke,
raft, …; collision liabilities, towage liabilities and cargo liabilities. Regarding to
P&I insurance, it is a club with similarity to marine insurance against third-party
liabilities and expenses arising from owning ships or operating ships as
principals. P&I covers for main risks such as personal injury to or illness or loss
of life of crew members, passengers, stevedores; loss of personal effects;

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 diversion expenses; life salvage; collision liabilities; pollution; towage contract
liabilities; wreck liabilities; fines; legal costs, etc.

2. Customer Profile:
a. Actual customers:
(1) Domestic clients:
Domestic clients and partners of BIC marine insurance are all over the country and
coming from diversified industries such as manufacturing, trading and construction.
Some of them are among the top companies with the largest market capitalization in
Vietnam and are market leaders in their industry. Their details are as follow:
- Vingroup: It is the largest conglomerate of Vietnam, focusing on technology,
industry, real estate development, retail, and services ranging from healthcare to
hospitality. Its headquarters is located in Vinhomes Riverside, Long Bien district,
Hanoi. Vinfast, which is automobile, cars and motorbike manufacturing, is
included in the Vingroup’s ecosystem. Vinfast’s business consists of a large
amount of cargo to be imported from overseas, so apparently, they have to buy
marine insurance to reduce transit risk. Vingroup’s current market capitalization
is 402,509 billion VND. (Cafef.vn, 2021)
- Hoa Phat group: Hoa Phat group is the leading steel manufacturing company in
Vietnam. As of January 2012, Hoa Phat Group has 11 member companies,
operating in the main fields of Steel Production - Mineral Exploitation - Coke
Coal Production - Real Estate Business - Furniture Manufacturing – Producing
construction machinery and equipment with factories in Hanoi, Hung Yen, Hai
Duong, Lao Cai, Yen Bai, Ha Giang, Ho Chi Minh City, Binh Duong. Its current
market capitalisation amounts to 230,355 billion VND. (Cafef.vn, 2021)
- Vinaconex: Vietnam Construction and Import - Export Corporation was founded
in 1988. Its business fields are construction and installation; real estate business;
industrial design and production consulting. Vinaconex’s headquarter is Hanoi-
based, but its network of subsidiaries and associates are across the country.
Vinaconex’s market capitalization is now 20,040 billion VND. (Cafef.vn, 2021)
- Co-opBank: Besides its parent company – BIDV, BIC also has strategic
partnership with other banks including Co-opBank. CoopBank’s network

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 currently consists of a head-office in Hanoi, 32 branches and 66 transaction
offices in 57/63 cities in provinces all over the country. On November 13, 2018,
BIC and Co-opBank held a signing ceremony of a comprehensive cooperation
contract, committing to prioritize the use of each party's products and services,
increasing cross-selling of products and services as well as introducing customers
to use products and services of partners. Co-opBank can filter its customer
database to find out potential customers and introduce them to use marine
insurance service by BIC. (Cafef.vn, 2021)

In addition to the companies mentioned above, there are also many small- and
medium import-export companies currently insured by BIC’s marine insurance.

(2) International market:

The majority of BIC's overseas customers come from Laos, who are acquired
through BIC's subsidiary in that country, LVI. In fact, Laos marine insurance
contracts make the highest revenue among BIC's foreign revenue streams. BIC can
also have foreign customers using its marine insurance via the introduction of Fairfax
– BIC’s strategic partner. However, due to limited information, we are not able to
summarize the customer profile for the foreign market of BIC.

b. Potential customer:
Indeed, BIC's pool of potential customers is located right in its domestic market,
where marine insurance needs have not been fully exploited and served by
Vietnamese insurance companies. Import and export activities carry many risk
factors, so according to international practice (2020), all imported and exported
goods must buy insurance. If there is a loss, the goods owner will be compensated
to recover capital. However, only about 5%-7% of Vietnam's exports and 33% of
imports are insured by domestic insurance companies. Therefore, as a leading
Vietnamese insurance company, BIC should take advantage in satisfying the needs
of Vietnamese buyers. Generally, ship owners, cargo owners and charterers can be
targeted. These companies can vary in sizes and industries as BIC’s marine insurance
can meet all customer’s needs.

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3. Financial Performance:
Financial performance is a subjective measure of how well a firm can use assets from
its primary business mode and generate revenues. The term is also used as a general
measure of a firm's overall financial health over a given period.

To measure BIC’s marine insurance financial performance, we use data collected in

the company’s financial statements from 2015-2020 to have an overview about how
marine insurance developed over a sufficient period. Gross margin ratios are then
calculated, together with revenue from marine insurance in comparison with total
net revenue. In addition, BIC’s overall financial performance is also analyzed to
convey a more comprehensive understanding of other fundamental financial aspects
of the company.

a. Financial performance of BIC’s marine insurance:

Figure 5: Revenue from cargo and hull and P&I insurance in comparison
with total revenue in 2015-2020

BIC’s net revenue from cargo and hull and P&I insurance operation increased stably
in the period of 2016-2018, from a total of 80,373 million VND to nearly 115,000
million VND. Then, the covid-19 pandemic prevailed, causing growth in almost all
sectors and fields to slow down. The disruption of international trade caused

16
consequences to Vietnam's production, export, and import activities. However,
positive signs were still witnessed in BIC marine insurance performance from 2019
to 2020, with a slight increase of 3% in hull and P&I insurance revenue and 20%
from cargo insurance revenue. In 2020, BIC’s net revenue from cargo and hull and
P&I were nearly 133,251 million VND, accounting for 6.2% of total revenue. It is
predicted that revenue from marine insurance would rise sharply when worldwide
merchandise trade flows recover in 2021.

Figure 6: Gross margin of cargo and hull and P&I insurance

In 2016, the gross margin of hull and P&I insurance skyrocketed to nearly 360%. It
could be explained by an exceptional amount of recoveries from reinsurance ceded
but this was a one-off event. It then reduced to 107% in 2017 and continued the
downward trend until 2019. Even so, BIC’s gross margin of hull and P&I insurance
is always very high compared to other companies operating in the same field.
Regarding cargo insurance, its gross margin declined sharply between 2015 and
2016 but then gradually recovered. Since 2018, that figure has experienced an
upward trend, reaching 81% in 2020.

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 Figure 7: Revenue and direct operating expense ratio of marine insurance
of five non-life insurance company in 2020

Marine insurance is a commodity product, meaning that marine insurance purchased

from one company is virtually the same as the next. In light of the competitive
industry economics, keeping costs in check is crucial. The lower the costs, the more
customers a company can attract with lower prices without hurting profitability.
Therefore, two indicators which are revenue and direct operating expense ratio are
used to compare the marine insurance’s performance among reputable non-life
insurance companies in Vietnam. Direct operating expense ratio is calculated by
dividing total direct operating expenses by total net revenue from marine insurance
business. The selected companies are Bao Minh insurance company, Petrolimex
insurance company (PGI), Bao Long insurance company (BLI) and Post and
Telecommunication insurance company (PTI). For the reasonableness of the
comparison, all selected companies are operating in the same type of business with
BIC. All the data was taken from the financial statements of each company. From
the graph, we can see that while BIC’s revenue from marine insurance only ranked
fourth, BIC managed to keep its operating cost to the minimum level. Hull and P&I’s
operating expense ratio varied significantly among these five companies. The
highest hull and P&I’s operating expense ratio was at nearly 180% of PTI, followed
by PGI and Bao Minh at 123% and 116%, respectively. If that ratio is higher than
100%, it means that the company is making losses when doing business. As a result,
it is inferred that the hull and P&I’s insurance market was very risky in 2020. All
18
five companies’ cargo operating expense ratios were under 30% with the lowest one
at 19% of BLI. Both BIC’s cargo and hull and P&I’s direct operating expense ratio
were under 20%, indicating good risk management when compared to those of other
companies.

b. Overall financial performance:

Figure 8: Debt ratio/Payment capacity of BIC in 2016-2020

If a company wants to accelerate its growth rate, it can use financial leverage. The
presented ratios are used to assess BIC’s capital structure and evaluate BIC’s degree
to which it is financing its operations through debt versus wholly-owned funds and
assets. BIC’s debt/equity only rose slowly throughout the period. The insurance
industry’s average debt/equity in quarter 1, 2021 is 3.92, while that figure of BIC is
only about 1.4. As a result, it is implied that BIC’s boards of directors are running
the company in a reliable and prudent way, ensuring natural growth over time. BIC’s
debt/asset ratio is the same as the industry's average, being 0.58 at the end of 2020.

Beside the current ratio to appraise liquidity, in the insurance sector, there are
regulatory capital requirements arising from the operations of the corporation that
require the corporation to hold assets sufficient to cover liabilities and satisfy the
solvency margin requirements in Vietnam (set out in Circular 50). On December 31,
2020, BIC’s solvency margin was 2,022,629 million VND, while the minimum
solvency margin was only 519,486 million VND. Therefore, BIC had a solvency
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margin ratio of 389%, which indicates a safe solvency position of the relevant
insurance operations.

After a full analysis of both BIC’s marine insurance financial performance and
overall financial performance, we can conclude that BIC has efficiently managed its
assets, liabilities and the financial interests of its stake- and stockholders to generate
outstanding outcomes. With persistent growth orientation associated with
operational efficiency, BIC has achieved very comprehensive and sustainable results
in its 15th year of operation.

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III. Analysis of Marine Cargo Insurance Policy of BIC:
Insurance policy is an insurance contract between the Insurer and Insured, hence a
highly important document in the insurance business execution. It is a top matter of
concern during the process of Insurer's evaluation and purchase decision making.
Therefore, to obtain a deeper understanding about BIC marine insurance, we analyze
the insurance policy of BIC in the specific terms of marine cargo insurance through a
real document. Before the real-case policy analysis, we introduce some background
information of BIC marine cargo insurance (based on BIC's introduction on its official
website).

1. Introduction of Marine Cargo Insurance of BIC:

BIC offers insurance for import and export goods transported by sea, usually applies
to common goods, except for goods such as coal, bulk oil, frozen goods, and frozen
meat. Marine cargo insurance of BIC has the following characteristics:

a. Scope of cover:
Under the terms of Marine cargo insurance ICC 1/11982 (Institute Cargo Clauses -
insurance terms issued by the Insurance Association of London and widely used
around the world), BIC is responsible for insuring for the following risks, unless
otherwise excluded:

Fortuitous Risks ICC (A) ICC (B) ICC (C)

Fire or explosion V V V

Vessel or craft being stranded grounded sunk or

V V V
capsized

Overturning or derailment of land conveyance V V V

Collision or contact of vessel craft or conveyance

V V V
with any external object other than water

Discharge of cargo at a port of distress V V V

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Earthquake volcanic eruption or lightning, V V X

General average sacrifice V V V

Jettison or washing overboard V V V

Entry of sea lake or river water into vessel craft

hold conveyance container liftvan or place of V V X
storage,

Total loss of any package lost overboard or

dropped whilst loading on to, or unloading from, V V X
vessel or craft.

General average and salvage charges V V V

Piracy, thief, pilferage and non-delivery.... V X X

Table 1. Summary chart - Risk covered/ excluded

(V: covered risks; X: uncovered risks)

b. Main exclusions:
Exclusions in import and export cargo insurance policies of BIC include:
- General exclusions: willful misconduct of the Insured; leakage, normal weight
loss; loss due to improper packaging; damage due to inherent defects, the unique
nature of the goods; damage due to delay; damage due to insolvency; damaged
by war weapons, atomic energy.
- The clause excludes non-conformity and unseaworthiness.
- Terms of war risk exclusion: loss, damage due to war, civil war
- Terms of exclusion of strike risk: loss or damage caused by the strike person;
consequences of the strike; terrorism.

c. Amount insured:
The amount insured is the value of the goods declared by the Assured and accepted
by the BIC. Normally, the insured amount is calculated based on: the value of the
cargo under the Contract, the invoice plus freight and insurance premiums.

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Normally, the maximum insured amount does not exceed 110% of the value of the
cargo, calculated at the CIF price. In which: C: is the value of goods; F: is the freight
charge; R: is the premium rate (excluding VAT).

d. Claim process:
(1) For the Insured:
- When there is a risk that may cause loss, the Insured must immediately notify
BIC or its representatives or the nearest agents of BIC by phone or fax;
- When loss occurs, notify by phone and fill in the Letter of Reservation/ Notice
of Loss according to form BM.6/HD-GDBT-02 and fax it to BIC (within 24
hours); Make a Notice of Loss (BM.7/HD-GDBT-02) to the Carrier or the
Carrier's agent or other third party related to the loss.
- Expeditiously take measures to limit losses, and at the same time notify BIC by
phone to coordinate settlement;
- Reserve the right to claim a third party (if any);
- Collect all documents related to damaged goods such as COR, ROROC;
- Send the claim documents to BIC. Claim documents include:
• Claim letter (BM.10/HD-GDBT-02);
• Original Certificate of Insurance/ Insurance Policy;
• Original Bill of Lading and/or copy of Contract of Carriage;
• Original or copy of Packing list and Commercial Invoice;
• Original Survey report or other evidences showing the extent of the loss
or damage;
• Letter of Reservation to carrier (if any);
• Landing account and weight notes at final destination;
• The delivery documents of the port or the authorities;
• Correspondence documents of the Insured with the Carrier and other
parties regarding their liability for loss;
• Invoice/Receipt of other expenses.

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Depending on the insurance conditions, the loss of the insured object, the required
documents listed above may be added or removed to prove the loss.

(2) For BIC:

- After receiving the loss notice, send an assessor of BIC or appoint an independent
assessment company to the scene to coordinate with the Insured in determining
the cause and extent of the loss;
- There is a decision on the preservation or sealing of the damaged goods;
- Negotiating with the Insured and related parties in the sale of salvage, claiming
a third party;
- Refuse written claim (if not covered) within 15 days;
- Carry out indemnification procedures within 30 days after receiving complete
and valid claim files of the Insured;
- Conduct legal procedures (if necessary)

2. Real-case analysis of Marine Cargo Insurance Policy of BIC

With the above background understanding of BIC marine cargo insurance, we
analyze the real Cargo Insurance Policy between BIC and its corporate customer to
obtain a more practical outlook on this segment of BIC marine insurance service.
For the purpose of information security, some information has been hidden.

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 Figure 9. Cargo Insurance Policy (BIC, 2021)

This Cargo Insurance Policy is based on the request of the Insured and includes 08
main parts:
- Name and address of the Insured;
- Information about Subject-matter Insured: name, sales contract number, packing
& conveyance, BL number, sailing date;
- Condition of Insurance;
- Amount Insured;
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- Choice of surveyor clause;
- Claim payment clause;
- Claim documents clause;
- Importance & Instruction for survey

Based on the document, it is safe to conclude that BIC's Cargo Insurance Policy is
sufficient in terms of information and clauses, which proves BIC's professionalism
and credibility as an Insurer.

Compared to the information on BIC’s website introduced in part 3.1, there are some
differences since modifications of clauses must be made according to each clause
choice and type of cargo. In this specific case, BIC's customers request insurance
under Institute Cargo Clause A and for Motorcycle cargo packed in containers. The
first difference is Condition of insurance, in which more exclusions are added
besides main exclusions, for example, “Excluding shortage of goods in intact sealed
container without any sign of broken” to better match with the packing of subject-
matter insured - container. Despite the addition of more exclusions, it is still fair for
the Insured since there is no exclusion that eliminates or restricts coverage. Secondly,
in terms of Claim documents, only 06 types of supporting documents are similar to
the website information and 02 types are added, including “Notice of loss/ damage
and reservation" and “Other documents in support of Claims”. However, this
difference does not imply inconsistency because it is noted on the website that the
required documents list may be added or removed according to specific cases.

The highlight of this Policy is the Importance and Instruction for survey clause,
where BIC imposes certain requirements and conditions on the Insured, such as
duties to follow after a loss. Detailed instructions are provided so that the Insured
can take immediate actions in the occurrence of loss hence, sufficiently prove its
claim and be qualified for indemnity. Therefore, this clause is highly necessary and
it is the Insured’s responsibility to read and follow strictly, not only to satisfy BIC's
requirements but also to protect the Insured's own rights.

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IV. Recommendations for Marine Insurance Business of BIC:
1. Evaluation of the Marine Insurance Business of BIC:
a. Strengths:
(1) High accessibility and credibility:
With more than 16 years of development, BIC has built a solid management system,
adaptability and provided quality insurance services to many customers. In terms of
marine insurance, BIC ensures high accessibility thanks to a nationwide network of
26 member companies and more than 100 sales departments nationally; the
availability of Bancassurance (distributing insurance products through banks) and
other E-business platforms and 2 foreign joint-ventures in Laos and Cambodia.
Therefore, BIC holds the potential to serve a considerable number of customers, both
domestically and internationally. Furthermore, marine insurance customers can be
assured by the credibility of BIC, in terms of both brand name and financial capacity,
considering its rankings and achievements. According to the Independent report of
Vietnam Report (2020), BIC ranks in the top 10 most prestigious non-life insurance
companies in Vietnam from 2016 to 2020. Besides, in 2018 BIC’s credit rating was
upgraded by A.M. Best from B+ to B++ which indicates a “Good” level. Thus,
corporate customers could grant their trust on BIC when purchasing marine
insurance products. (BIC's annual report, 2020)

(2) Good insurance quality:

BIC marine insurance product is favored by many corporate customers due to its
wide scope of cover, quick compensation procedure, professional insurance services
with enthusiastic, supportive staff and diversification in insurance product
packages. With the motto "Simple, fast, flexible", BIC is committed to providing
you with the best quality compensation service.

(3) Excellent customer service with advanced technology application:

Customers have always been at the heart of all BIC's business activities since its
establishment. In which, customer service is one of the most important jobs, a
decisive factor for BIC's sustainable development and expansion in the Vietnamese
marine insurance market. Together with the 24/7 hotline and official website, BIC

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has launched 3 online digital platforms to elevate its service quality with higher level
of interactivity and efficiency.
- Baohiemtructuyen.com.vn: BIC's online insurance selling website, was first
launched in 2008 and recently upgraded in 2019. The updated version maintains
friendliness with loyal customers while creating convenience for newcomers.
Customers who buy insurance online at BIC will also enjoy many other attractive
utilities such as: easy-to-look-up information about benefits, premiums,
compensation instructions; simple and fast online payment through various
methods such as transfer, international visa mastercard, domestic card, e-
wallet...; receiving the e-Insurance Certificate via email within 30 minutes after
payment (with the same legal value as the hard-copy Certificate of Insurance) or
registering to receive the original Certificate of Insurance hard copy at home
within only 1 working day.
- Cskh.bic.vn: BIC's online customer care website launched in 2019, which is an
important step for BIC to take care of customers during and after sales. With
cskh.bic.vn, customers not only can get regular updates about BIC's attractive
programs but also can interact with and experience several interesting features:
modern online gifts, updating the progress of claims processing, registering to
receive discount news from BIC via email…
- BIC Online: an integrated mobile application for smartphones and tablets. With
BIC Online, users can declare loss information and submit claims and insurance
payments online right on their personal mobile devices; easily look up the
network of BIC branches and agents; continuously update the progress of
compensation and insurance payment; check insurance policy information
simply and quickly.

Thanks to the high functionality of these platforms, BIC’s customers could save cost,
time and effort; protect their personal privacy and avoid repetitive sales calls;
increase ownership and proactivity during their experience. Especially in the context
of Covid-19 social distancing, such digital platforms offer higher safety level since
customers no longer have to directly interact with BIC sales force in order to close

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an insurance contract. As a result, BIC's customer experience is significantly
advanced, increasing its competitiveness in the marine insurance market.

Figure 10. BIC Online Figure 11. Baohiemtructuyen.com.vn

(mobile application) (online selling website)

b. Opportunities:
As mentioned above in the customer profile part, the Vietnam domestic market is
there to be further exploited and served by domestic marine insurance providers. The
rate of domestic insurance buyers buying marine insurance from domestic
companies is still very low. Therefore, it is a great opportunity for BIC to earn a
higher share in the domestic market and expand its pool of domestic customers.
Especially when championing Vietnamese market will be cheaper than foreign
expansion as BIC can utilize its current resources, facilities, experience and
network.

c. Threats:
(1) Business competition:
The marine insurance market has always been a lucrative market, which means fierce
competition among insurers. In the Vietnam marine insurance market, BIC faces
competition from domestic key players, including ABIC (Insurance Corporation of

29
Agricultural Bank) and Bao Minh who have similar or longer operating history and
are currently also boosting e-business activities to attract and better serve
customers. Even fiercer is the competition with foreign players since compared to
them, domestic players as BIC are weaker in financial capacity and younger in
operating experience, hence weaker in competitiveness. That explains the popularity
of marine insurance products from foreign players such as AIG (originated from
America) and Chubb (originated from Switzerland). Thus, failure to compete will
push BIC into many business problems.

(2) Covid-19 pandemic:

The uncertainty stemming from the Covid-19 pandemic has had a significant impact
on the world insurance industry and it has certainly impacted the marine insurance
sector. The stagnation of world trade combined with the fluctuation in oil prices has
resulted in a decline in comprehensive premiums. Marine insurance usually covers
physical damage, so COVID-19 does not directly affect the claim record of the
marine insurance sector. However, as part of a much broader insurance business
environment, marine insurance is being impacted indirectly. The question here is
how the marine insurance sector in general and BIC marine insurance business in
particular can maintain sustainable profit.

(3) Technological lagging:

Mr. Richard Turner, President of the International Association of Marine Insurers
(IUMI), holds the opinion that marine insurance is lagging behind other insurance
sectors in terms of digital transformation of operation, probably due to its relative
size. (Asia Insurance Review, 2020).

Similarly, BIC faces the threat of technological lagging. Despite certain efforts in
introducing E-business platforms, BIC is currently facing challenges in digitizing its
entire operation to facilitate sustainable development and competitiveness in the
future. Failure to transform may put BIC under the threat of inefficient management
and price competition since other marine insurers can offer lower prices after being
able to cut costs thanks to digitalization.

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2. Recommendations of Marine Insurance Business of BIC:
Overall, the marine insurance industry is an extremely appealing yet competitive and
challenging industry, requiring BIC’s continuous revision and improvement in all
aspects of its business operation. With our understanding of BIC marine insurance
business, we propose following solutions for the company to achieve greater success.

Figure 12. BIC’s Focus for 2021 (2020 annual report)

First and most importantly, BIC’s marine insurance business must always support
BIC's general focus and strategy. In order to achieve that, BIC should align its
strategy and execution in terms of process, sales & marketing and technology
application.

a. In terms of process:
BIC’s marine insurance team should review and optimize the underwriting process,
strengthen the close coordination between divisions at head office and branches to
save operational cost; increase synergy and consistency in performance and
importantly, boost and utilize the transfer of knowledge and valuable skills within
the organization.

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b. In terms of sales & marketing:
BIC should take actions to expand its domestic marine insurance customer pool since
this market holds great growth potential for the company.

(1) One initiative BIC can take into consideration is boosting brand awareness by
utilizing its partnership with like-minded organizations and businesses. For
instance, BIC marine insurance department can establish strategic partnership
with like-minded governmental organizations such as provincial trade promotion
agencies or import-export departments in coastal provinces to ask for support in
promotion of its marine insurance products to local trading companies by means
of fairs, webinars or simply promotional posters. As a result, awareness and trust
in BIC marine insurance could be increased since domestic companies are
introduced to BIC through a trustworthy source as government agencies. Besides,
this initiative also helps BIC save sales & marketing costs. Thanks to the
availability of local company network offered by the trade promotion agencies,
BIC can eliminate the cost of massive customer research and cold approach.

(2) Secondly, it is advisable for BIC to boost its brand image through offline
promotion such as posters, signboards, booths at major ports of Vietnam (Hai
Phong port, Vung Tau port, etc) to capture the attention of target customers.

(3) Sales channels should be diversified, both offline and online. Offline channels
should not be limited to only sales offices of BIC but opened up to sell through
the banking system (Bancassurance). Online channels such as BIC Online and
Baohiemtructuyen.com.vn should be continuously revised and upgraded in terms
of functions and user experience. For customers to be familiar with these new
buying channels, it is BIC's responsibility to educate them through Marketing
campaigns or media articles.

(4) Insurance fee should be made reasonable, to attract new customers and compete
with domestic insurers. Discount programs could be diversified in terms of

32
 customer profile. For example, BIC can offer 15% discount for the first contract
(to serve new customers), 10% discount for the fifth contract and so on. However,
in order to lower the price or budget for discount programs, BIC should revise its
cost structure and find solutions to better manage or cut down inefficient costs.

c. In terms of technology application:

Digital transformation is of great importance. This transformation should be rooted
from the internal daily operational activities of BIC, not only from platforms to
interact with customers as Baohiemtructuyen.com.vn. All aspects of operation from
budget planning, human resource management or insurance-related processes should
be transferred to digital platforms, favorably self-designed and managed platforms
by BIC for the purpose of information security. Therefore, it is reasonable for BIC
to invest in its in-house IT talent pool to facilitate more technology innovations
within the company. In addition, all employees and managers in BIC should be
equipped with technology knowledge and basic skills through training courses so
that digital change can happen successfully throughout the whole company.

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 CONCLUSION

Since Vietnam's economy is currently in the integration phase with the world, the
insurance market in general as well as the marine insurance market of the country are
having numerous development opportunities. Along with the drastic growth of marine
trade between Vietnam and other countries, demands for marine insurance are also
experiencing a surge in recent years.

To seize opportunities from the global playground, Vietnamese enterprises must take
serious actions to enhance their own competitiveness, improve the quality of human
resources as well as utilizing the application of information technology.

In the meantime, BIDV Insurance Corporation (BIC) is performing well in the

Vietnamese marine insurance market with high accessibility and credibility, good
insurance quality and excellent customer service with advanced technology application.
Thanks to these business strengths, the company is standing a golden chance of earning
a higher share in the domestic market and expanding its pool of domestic customers.

However, Vietnamese insurance industry is a competitive market. This, in combination

with the challenging situation caused by Covid-19 pandemic, requires BIC to innovate
to survive and soar in this market. It is advisable for BIC to invest in brand marketing
activities, diversify its sales channels and adjust product prices to an affordable level for
domestic consumers. With the prosperous potential to grow, as well as enormous effort
to remedy its current weaknesses and spread the brand awareness to new audiences, our
group believes BIDV Insurance Corporation will soon become a formidable competitor
in the Vietnamese marine insurance industry.

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