The development of insurance enterprises and their impacts on financial stability in Vietnam

Abstract

 Insurance companies are often viewed as a relatively stable segment of the financial system, since the balance sheet of these companies includes low liquidity debts. In addition, insurance companies contribute to stabilizing the financial market through reallocating risks and insurance for businesses and households. However, with the increasing scale of assets and the diversity of insurance products, along with the increasingly close linkage between insurance companies and commercial banks, these businesses are at risk of becoming a source of contaging financial instability from one region to another. This paper analyzes the role of insurance businesses to financial stability in Vietnam, thereby drawing some policy implications. Based on data reported by the Department of Insurance Supervision- Ministry of Finance, the article analyzes the development of insurance companies in Vietnam, thereby assessing the role of insurance businesses to financial stability in Vietnam through the scale of investment and the relationship between these businesses and the banking system. Finally, the article draws some suggestions to enhance the effectiveness of macro prudential policies for insurance companies in Vietnam.