If it leaves, it will be the first international insurance company to do so.
Finance ministry officials, who acknowledged insurer's intention to withdraw, said it planned to sell to another international insurer working in Vietnam.
But the ministry's Insurance Department director, Le Quoc Binh, told Vietnam News that he had yet to be officially notified by Allianz VN.
Comes as no surprise
The German-invested company's decision has not surprised insurance industry insiders.
Last year's its share of the premium market was just 1.7 per cent.
Total turnover was slightly more than US$5 million, including $1 million reinsured, a source from within Allianz VN said.
Finance ministry's insurance department figures show that the seven foreign invested insurers in Vietnam held 7 per cent of the market last year.
But it was down to 5.7 per cent in the first half of this year.
The rest of the market is held by State-owned and joint-stock companies.
An insurance analyst says that although foreign-invested life insurers have thrived in Vietnam, sales by foreign invested non-life insurers have not matched expectations.
Allianz Vietnam has invested $7 million in Vietnam's market and employs 30 staff.
Most of its customers are drawn from overseas markets and those in the domestic market amounting to only a fraction of its turnover.
The company source said Allianz VN had been crippled by the imposition of a low 8-per cent commission cap.
Domestic insurers were able to circumvent the ruling to offer higher rates, he said.
Vietnam News understands that BIDV - QBE - a joint venture insurer between the Bank for Investment and Development of Vietnam (BIDV) and Australia's QBE - are negotiating a take-over of Allianz VN.
BIDV-QBE held 0.5 per cent of Vietnam's non-life market by the end of last year.
Taking over Allianz policy contracts holds risks for BIDV - QBE but it would also expand their market share, analysts said.
The Insurance Department says that if an acquisition agreement is lodged and approved, Allianz will have to surrender all of its policy contracts to the buyers within 30 days.
The acquisition will later be made public in accordance with the law.
But if the negotiations fail, the finance ministry will have to settle the transfer and Allianz customers benefits will not be affected.
Allianz VN was licensed to operate in Vietnam in 1999 with US$7.5 million in chartered capital.
Since 2002 15 per cent of its capital has been held by the International Monetary Fund.
The withdrawal of an international insurance company with 60 million customers world wide and a total turnover last year of 97 billion euros would undoubtedly dampen enthusiasm for Vietnam's fledging non-life insurance market.
Vietnam law prohibits foreign-financed insurers from seeking customers from State owned enterprises.
(Source: Asia Pulse/VNA)