FWD, controlled by Richard Li, the entrepreneur and son of Hong Kong's richest man Li Ka-shing, has been pursuing a rapid Asian expansion in the last couple of years that has positioned it as a significant regional insurer.
"This transaction and partnership with Vietcombank will take our Vietnam business to the next level and boost our ambitions to build a leading bancassurance franchise across the region..." FWD Group CEO Huynh Thanh Phong said in a statement on Tuesday.
FWD and Vietcombank declined to comment on the value of the deal. The person with knowledge of the deal value declined to be identified as he was not authorised to speak with the media.
Under the agreement, Vietcombank will distribute FWD's life insurance products. FWD also agreed to purchase Vietcombank-Cardif Life Insurance, a joint venture between Vietcombank and BNP Paribas Cardif.
Vietcombank has over 550 branches and transaction offices across the country.
The so-called bancassurance model - as opposed to the traditional agency model - is lucrative for commercial banks in Asia because global insurers are willing to pay hefty fees for access to lenders' branch networks.
Southeast Asia has emerged as a battleground for foreign insurers who are attracted by the region's lower insurance penetration levels and faster growth rates for life insurance premiums than in their home markets.
In July, FWD agreed to acquire the life insurance business of Thailand's Siam Commercial Bank for 92.7 billion baht ($3.05 billion) in Southeast Asia's biggest insurance M&A deal.
FWD has a presence in Hong Kong and Macau, Singapore, Japan, Thailand, Indonesia, Malaysia, the Philippines, and Vietnam.
The transaction is subject to regulatory approvals, FWD and Vietcombank said. Credit Suisse advised Vietcombank on the deal.
($1 = 30.3500 baht)
By Anshuman Daga and Khanh Vu