VietNamNet Bridge – The export credit insurance pilot program is about to finish at this year’s end, but it’s not too early to say that the target of having 3 percent of import-export turnover insured proves to be unattainable.

Insurers all say that it is very difficult to persuade businesses to take export credit insurance policies, even though they understand well that this would help minimize payment risks.

In an effort to encourage export companies to take export credit insurance policies, the government in 2010 launched a pilot program, under which it commits to prop up 20 percent of original insurance premiums. For example, if the insurance policy has the value of $20,000, businesses would have to pay $16,000 only.

According to Bao Viet Tokyo Marine, a joint venture between Vietnamese Bao Viet and Japanese Tokyo Marine, export companies have to pay $12,000 at minimum a year for a client.

However, the financial support is not enough to persuade businesses to spend money on insurance policies.

Analysts said L/C (letter of credit) still has been most popular among Vietnamese businesses. However, this payment method just accounts for 20 percent of the total export value in international trade, while the other 80 percent is made with other methods, including the deferred payment.

Huynh Thi My, Secretary General of the Vietnam Plastics Association (VPA), admitted that very few plastics companies have their exports insured, or have the intention of taking export credit insurance policies.

There were 1,800 plastics enterprises in Vietnam in 2012 which exported $1.92 billion worth of the products in the year, while the figure is expected to increase by 18 percent this year.

The representative of an insurance company revealed that only a few of the new customers in 2013 are domestic export companies, while the majority of the customers were the branches of foreign companies assigned by the holding companies to take insurance policies.

According to the Vietnam Insurance Association, only about 10 insurance policies of this kind is taken every year.

A report by the Insurance Department under the Ministry of Finance showed that in the first six months of 2013, insurers provided 21 insurance policies under the pilot program with the total insurance premiums of VND12.6 billion.

While insurers complain about the businesses’ lack of the awareness about the significance of export credit insurance, Nguyen Thi Thu Ha, General Director of Saphia Packaging Company in Long An province, affirmed that she lacks information about the insurance products.

“I tried to contact a lot of Vietnamese insurance companies, including Bao Viet and Bao Minh, the two big guys, to ask information about export credit insurance, but the workers there told me that they did not know about this,” she said.

Export credit insurance is a kind of non-life insurance. Seven out of the total 30 non-life insurers in Vietnam are eligible for providing insurance policies under the government initiated pilot program.

The subjects to receive the government financial support include a group of 8 farm and seafood producers and a group of 14 industrial products (garments, shoes, electronics, computer parts…).

The pilot program is scheduled to finish at the end of this year. However, according to Mai Hong Viet, Marketing Director of Bao Viet Tokyo Marine, insurers have proposed the Ministry of Finance to extend the program because the number of clients remains modest.

K. Chi