|
THE MINISTRY OF
FINANCE
-------------
|
SOCIALIST REPUBLIC
OF VIET NAM
Independence - Freedom – Happiness
--------------
|
|
No. 99/2004/TT-BTC
|
Hanoi, October 19,
2004
|
CIRCULAR
GUIDING
THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE NO. 43/2001/ND-CP OF AUGUST 1,
2001 PRESCRIBING THE FINANCIAL REGIME FOR INSURANCE ENTERPRISES AND INSURANCE
BROKERAGE ENTERPRISES
Pursuant to December 9, 2000 Insurance
Business Law No. 24/2000/QH10;
Pursuant to the Government's Decree No. 43/2001/ND-CP of August 1, 2001
prescribing the financial regime for insurance enterprises and insurance
brokerage enterprises;
Pursuant to the Government's Decree No. 77/2003/ND-CP of July 1, 2003 defining
the functions, tasks, powers and organizational structure of the Finance
Ministry;
The Ministry of Finance hereby provides the following detailed guidance:
I. CHARTER CAPITAL
1. The provisions on charter capital of
insurance enterprises or insurance brokerage enterprises shall comply with
Article 5 of the Government's Decree No. 43/2001/ND-CP of August 1, 2001
prescribing the financial regime for insurance enterprises and insurance
brokerage enterprises.
2. Contributed charter capital of insurance
enterprises or insurance brokerage enterprises is the charter capital amount
actually contributed by the owners to the enterprises.
3. Within 15 days after the date they are
granted the establishment and operation licenses, insurance enterprises or
insurance brokerage enterprises must contribute a charter capital at a level
not lower than the legal capital level prescribed in Article 4 of the
Government’s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the
financial regime for insurance enterprises and insurance brokerage enterprises.
4. Throughout the process of operation,
insurance enterprises and insurance brokerage enterprises must maintain their
charter capital at a level not lower than the legal capital level prescribed in
Article 4 of the Government’s Decree No. 43/2001/ND-CP of August 1, 2001
prescribing the financial regime for insurance enterprises and insurance
brokerage enterprises. If, for any reasons, their charter capital decreases to
a level lower than the legal capital level prescribed in Article 4 of the
Government’s Decree No. 43/2001/ND-CP of August 1, 2001, insurance enterprises or
insurance brokerage enterprises must make additions to the contributed charter
capital so that it is not lower than the said legal capital level.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1. The escrow depositing by insurance
enterprises shall comply with Article 6 of the Government’s Decree No.
43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance
enterprises and insurance brokerage enterprises.
2. Where the escrow amounts of insurance
enterprises are lower than the level set in Clause 2, Article 6 of the
Government's Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the
financial regime for insurance enterprises and insurance brokerage enterprises,
such insurance enterprises shall have to supplement the escrow amounts as
prescribed.
3. Where the escrow amounts of insurance
enterprises are higher than the level set in Clause 2, Article 6 of the
Government's Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the
financial regime for insurance enterprises and insurance brokerage enterprises,
such insurance enterprises may readjust their escrow amounts as prescribed.
III. INSURANCE
OPERATION RESERVES
1. Insurance operation reserves are amounts
which enterprises must set up in order to cover pre-determined insurance
liabilities arising from the signed insurance contracts.
2. Insurance enterprises must set up
sufficient insurance operation reserves for each insurance operation and each
insurance contract corresponding to their retained liability proportion.
3. For non-life insurance business enterprises:
3.1. Non-life insurance business enterprises
must set up various insurance operation reserves as provided for in Article 8
of the Government's Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the
financial regime for insurance enterprises and insurance brokerage enterprises.
3.2. Non-life insurance business enterprises
may select and register with the Ministry of Finance the method of making
deductions to set up non-life insurance operation reserves under the guidance
at Point 3.4, Clause 3, Section III of this Circular or other more prudent
methods of making deductions for setting up operation reserves for application
after they are approved in writing by the Ministry of Finance.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
3.4. Methods of setting up non-life insurance
operation reserves:
3.4.1. The unearned premium reserve:
a/ The method of setting up the reserve
representing a percentage of total insurance premiums:
+ For insurance of cargoes transported by
land, sea, river, railway and air: The reserve shall be equal to 25% of total
insurance premiums of this insurance operation, retained in the fiscal year.
+ For other insurance operations: The reserve
shall be equal to 50% of total insurance premiums of these insurance
operations, retained in the fiscal year.
+ Non-life insurance enterprises shall not
apply the method of setting up the reserve representing a percentage of total
insurance premiums to insurance contracts concluded from January 1, 2006
afterwards.
b/ The method of setting up the reserve
according to coefficients of insurance contract terms:
(i) Method 1/8: This method assumes that
insurance premiums under insurance contracts issued in a quarter by an
insurance enterprise are distributed evenly among the months of the quarter, in
other words, all insurance contracts of a given quarter are assumed to be
effective in the midst of that quarter. The unearned premium reserve is
calculated according to the following formula:
Unearned
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
reserve
=
Retained
insurance
premium
x
Proportion of
unearned insurance
premiums
For example: The unearned premium reserve as
of December 31, 2004 is calculated as follows:
+ For insurance contracts with a term of up
to one year and still effective on December 31, 2004:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Proportion
of unearned insurance premiums
Year
Quarter
2005
I
1/8
II
3/8
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
III
5/8
IV
7/8
+ For insurance contracts with a term of over
1 year: The proportion of unearned insurance premiums, according to the
above-said formula, shall have a denominator being the insurance contract’s
term (expressed in years) multiplied by 8. The unearned premium reserve as of
December 31, 2004 of insurance contracts with a two-year term and still
effective on December 31, 2004 is calculated as follows:
Time when
insurance contracts cease to be effective
Proportion
of unearned insurance premiums
Year
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2005
I
1/16
II
3/16
III
5/16
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
IV
7/16
2006
I
9/16
II
11/16
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
13/16
IV
15/16
(ii) Method 1/24: This method assumes that
insurance premiums under insurance contracts issued in a month by an insurance
enterprise are distributed evenly in the month, in other words, all insurance
contracts of a given month are assumed to be effective in the midst of that
month. The unearned premium reserve is calculated according to the following
formula:
Unearned premium
reserve
=
Retained insurance
premium
x
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
For example: The unearned premium reserve as
of December 31, 2004 is calculated as follows:
+ For insurance contracts with a term of up
to one year and still effective on December 31, 2004:
Time when
insurance contracts cease to be effective
Proportion
of unearned insurance premiums
Year
Month
2005
1
1/24
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2
3/24
3
5/24
4
7/24
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
9/24
6
11/24
7
13/24
8
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
9
17/24
10
19/24
11
21/24
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
12
23/24
+ For insurance contracts with a term of over
1 year: The proportion of unearned insurance premiums, according to the
above-said formula, shall have a denominator being the insurance contract’s
term (expressed in years) multiplied by 24. The unearned premium reserve as of
December 31, 2004 of insurance contracts with a two-year term and still
effective on December 31, 2004 is calculated as follows:
Time when
insurance contracts cease to be effective
Proportion
of unearned insurance premiums
Year
Month
2005
1
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2
3/48
3
5/48
4
7/48
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
5
9/48
6
11/48
7
13/48
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
15/48
9
17/48
10
19/48
11
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
12
23/48
2006
1
25/48
2
27/48
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
3
29/48
4
31/48
5
33/48
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
35/48
7
37/48
8
39/48
9
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
10
43/48
11
45/48
12
47/48
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Unearned premiumn
reserve
=
Number of
remaining Retained insurance premium
x
days of
theinsurance contract
Total
number of days of insurance under the insurance contract
3.4.2. The compensation reserve:
a/ The method of setting up the compensation
reserve according to compensation claim dossiers:
With this method, non-life insurance
enterprises must set up two reserves:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
- The compensation reserve for losses already
arisen and falling under the insurance liability but not yet notified or
claimed for compensation: To be set up for each insurance operation according
to the following formula:
Reserve
forarisen losses not yet notified or claimed for compensation of the current
fiscal year preceding fiscal year
=
Total
compensation money for arisen losses not yet notified or claimed for
compensation of the last three fiscal years
x
Incurred
compensation money of the current fiscal year
x
Net
turnover of business activities of the current fiscal year
x
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Total
compensation money incurred in the last three fiscal years
Net
turnover of business activities of the preceding fiscal year
Average
delay time of compensation claims of the
in which:
+ The incurred compensation money of a fiscal
year comprises the compensation money actually paid in the year plus the
compensation reserve for unsettled compensation claim by year end.
+ The average delay time of compensation
claims is the average time counting from the time a loss occurs to the time an
insurance enterprise receives the loss notice or compensation claim dossier
(calculated in days).
Non-life insurance business enterprises may apply
the statistical method to setting up the compensation reserve for arisen losses
falling under the insurance liability but not yet claimed for compensation for
insurance contracts concluded before January 1, 2006.
b/ The method of setting up the compensation
reserve according to the compensation co-efficient:
This method is applied to setting up the
compensation reserve for each insurance operation on the principle of using
past compensation statistics for calculating compensation co-efficients in order
to predict the amounts insurance enterprises shall have to compensate in the
future. In order to calculate the compensation reserve by this method, non-life
insurance enterprises should analyze the past statistics to ensure that the
compensation payments over the years adhere to stable laws and see no
irregularity.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Step 1: Count up all compensation amounts actually
paid by December 31,2004 by the year of loss occurrence and the year of
compensation according to the following table (statistics used for the
demonstration purpose only):
Unit: VND million
Year of
loss occurrence
Year of
compensation
0
1
2
3
4
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
6
7
1997
5,445
3,157
2,450
1,412
600
352
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
185
1998
5,847
3,486
1,366
848
1,045
1,054
369
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1999
5,981
4,854
1,948
2,554
1,680
489
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
7,835
4,453
3,888
3,335
2,088
2001
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
6,517
3,563
3,984
2002
10,745
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
4,549
2003
14,137
8,116
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2004
15,162
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
According to the compensation data table
above (line of the year 1997):
The compensation amount actually paid in 1997
(compensation year 0) for losses occurring in 1997 is VND 5,445 million.
The compensation amount actually paid in 1998
(compensation year 1) for losses occurring in 1998 is VND 3,157 million.
The compensation amount actually paid in 1999
(compensation year 2) for losses occurring in 1999 is VND 2,450 million.
---------------
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
The count of compensation amounts paid for
losses occurring in 1998, 1999… 2004 shall be conducted in the same way as for
1997. The number of past years necessary for the count of compensation
statistics shall depend on the length of time from the time of occurrence of
losses till the time such losses are fully compensated for. Normally, liability
insurance operations have more past years necessary for the count of
compensation statistics than those of other insurance operations, such as
property insurance…
+ Step 2: Convert the compensation statistics
table by year made above into the cumulative compensation statistics table, in
which the cumulative compensation statistic of each year is the total of
compensation amounts actually paid in that year and those paid in the preceding
years.
Unit: VND million
Year of
loss occurrence
Year of
compensation
0
1
2
3
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
5
6
7
1997
5,445
8,602
11,052
12,464
13,064
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
13,847
14,032
1998
5,847
9,333
10,699
11,547
12,592
13,646
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1999
5,981
10,835
12,783
15,337
17,017
17,506
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2000
7,835
12,288
16,176
19,511
21,599
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
9,763
16,280
19,843
23,827
2002
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
16,929
21,478
2003
14,137
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2004
15,162
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
According to the cumulative compensation
statistics table above (line of the year 1997):
The cumulative compensation amount of 1997
(compensation year 0) for losses occurring in 1997 is VND 5,445 million.
The cumulative compensation amount of 1998
(compensation year 1) for losses occurring in 1998 is VND 3,157 million + VND
million 5,445 = VND 8,602 million.
The compensation amount actually paid in 1999
(compensation year 2) for losses occurring in 1999 is VND 2,450 million + VND
8,602 million = VND 11, 052.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
+ Step 3: Calculate the compensation co-efficient
over the years by dividing the cumulative compensation amount of a year by that
of the preceding year.
Year of
loss occurrence
Compensation
co-efficient
1/0
2/1
3/2
4/3
5/4
6/5
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1997
1,580
1,285
1,128
1,048
1,027
1,032
1,013
1998
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1,146
1,079
1.090
1,084
1,027
1999
1,812
1,180
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1,110
1,029
2000
1,568
1,316
1,206
1,107
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2001
1,668
1,219
1,201
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2002
1,576
1,269
2003
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Average
compensation co-efficient
1,625
1,236
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1,089
1,047
1,030
1,013
Then, calculate the average compensation
co-efficient from year 0 to year 1, from year 1 to year 2, from year 2 to year
3… by calculating the mean value of the compensation co-efficient of each
column of the table above.
+ Step 4: Use the average compensation co-efficient
calculated in step 3 for projecting the cumulative compensation amount of each
year for losses occurring in the years 1997, 1998,… 2004 (bold and italic
figures in the table below):
Unit: VND million
Year of
loss occurrence
Year of
compensation
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1
2
3
4
5
6
7
1997
5,445
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
11,052
12,464
13,064
13,416
13,847
14,032
1998
5,847
9,333
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
11,547
12,592
13,646
14,015
14,197
1999
5,981
10,835
12,783
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
17,017
17,506
18,031
18,266
2000
7,835
12,288
16,176
19,511
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
22,614
23,293
23,595
2001
9,763
16,280
19,843
23,827
25,948
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
27,982
28,346
2002
10,745
16,929
21,478
24,979
27,202
28,481
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
29,716
2003
14,137
22,253
27,505
31,988
34,835
36,472
37,566
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2004
15,162
24,638
30,453
35,417
38,569
40,382
41,593
42,134
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
The cumulative compensation amount of 2005
(compensation year 1) divided by losses occurring in 2004: VND 15,162 million x
1.625 = VND 24,638 million (1.625 is the average compensation co-efficient from
year 0 to year 1).
The cumulative compensation amount of 2006
(compensation year 2) divided by losses occurring in 2004: VND 24,638 million x
1.236 = VND 30,453 million (1.236 is the average compensation co-efficient from
year 1 to year 2).
The cumulative compensation amount of 2007
(compensation year 3) divided by losses occurring in 2004: VND 30,453 million x
1.163 = VND 35,417 million (1.163 is the average compensation co-efficient from
year 2 to year 3).
------------------
The cumulative compensation amount of each
year for losses occurring in 2003, 2002,… 1998 is calculated in the same way as
for 2004.
+ Step 5: Project the compensation reserve:
The compensation reserve as of December 31,
2004 is projected to be the total amount projected to be compensated for losses
occurring in 1997, 1998,…, 2004 less the total amount already compensated for
such losses as of December 31, 2004, in which:
The total amount projected to be compensated
for losses occurring in 1997, 1998,…2004 is the cumulative compensation amount of
compensation year 7 in the table above.
The total amount already compensated for
losses occurring in 1997, 1998,… 2004 as of December 31, 2004 is the cumulative
compensation amount lying on the diagonal line of the table above.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Year of
loss occurrence
Year of
compensation
Calculation
of the projected compensation reserve as of 31/12/2004
0
1
2
3
4
5
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
7
Total
amount projected to be compensated
Total
amount already compensated as of 31/12/ 2004
Projected
compensation reserve
1997
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
14,032
14,032
14,032
0
1998
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
14,015
14,197
14,197
14,015
182
1999
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
17,506
18,266
18,266
17,506
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
2000
21,599
23,595
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
21,599
1,996
2001
23,827
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
28,346
28,346
23,827
4,519
2002
21,478
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
29,716
29,716
21,478
8,238
2003
22,253
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
38,055
38,055
22,253
15,802
2004
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
42,134
42,134
15,162
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
TOTAL
208,341
149,872
58,469
So, with the above-said compensation
statistics, the projected compensation reserve of the insurance operation we
are studying as of December 31, 2004 is VND 58,469 million.
3.4.3. The compensation reserve for big loss
fluctuations:
The compensation reserve for big loss
fluctuations shall be set up annually till it is equal to the premium amount
actually retained in the fiscal year by an insurance enterprise. The annual
reserve shall be set up by the statistical method.
4. For life insurance business enterprises:
4.1. Life insurance business enterprises must
set up insurance operation reserves as provided for in Article 9 of the
Government's Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the
financial regime for insurance enterprises and insurance brokerage enterprises.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
For insurance products already approved by
the Finance Ministry, the enterprises must apply the methods and bases for
setting up the insurance reserves under the provisions of Point 4.4, Clause 4,
Section III of this Circular or other more prudent methods and bases for setting
up operation reserves for insurance contracts concluded from January 1, 2006
on.
4.3. Life insurance business enterprises must
not change the methods and bases for setting up insurance operation reserves in
a fiscal year. In case of change of such methods and bases in the following
fiscal year, life insurance business enterprises must seek the Finance
Ministry's written approval before application.
4.4. Method of setting up life insurance
operation reserves:
a/ The mathematical reserve:
- The method of setting up this reserve is
the method of net premiums adjusted by Zillmer co-efficient of 3% of the
insurance sum. The adjusted net insurance premium is used for calculating the
reserve must not be higher than 90% of the actually collected insurance premium
amount.
- The reserve calculation method: The
mathematical reserve by the method of net premiums adjusted by Zillmer
co-efficient of 3% of the insurance amount shall be calculated on the following
principle:
Mathematical
reserve
=
Current value of total
insurance sum payable in future
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Current value of
total net premiums adjusted by Zillmer coefficient of 3% of the insurance
amount collectible in future
- The reserve calculation bases: Life
insurance business enterprises shall use the following bases for calculating
the mathematical reserve:
+ The mortality table included in an appendix
to this Circular (The mortality table CSO 1980) (not printed herewith):
+ The maximum technical interest rate equal
to 80% of the interest rate of Government bonds with a 10-year term at the
nearest time before the time of request for approval of the method and bases
for setting up the reserve.
- The mathematical reserve is deemed to be
zero in cases where it is a negative number as result of the calculation based
on the above-said method and bases.
b/ The unearned premium reserve:
- To be applicable to contracts of a term of
under one year:
- The method of setting up the reserve:
Method 1/24 or method of making setting up the premium reserve on a daily
basis.
c/ The compensation reserve:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
d/ The profit-sharing reserve:
To be applicable only to contracts involving
the sharing of profits accrued through the years of insurance contracts and
calculated according to the following formula:
Profit - sharing
reserve
=
Total profit
publicized to be shared to the contract owner in the fiscal year
+
Accrued value of
the profit publicized to be shared to the contract owner in the previous
fiscal years but not yet paid thereto
e/ The balance assurance reserve: To be set
up annually till it is equal to 5% of the insurance premium amount collected by
an insurance enterprise in a fiscal year. The reserve to be set up annually is
equal to 1% of the pre-tax profit of each insurance enterprise.
IV. CAPITAL
INVESTMENT
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
V. SOLVENCY OF
INSURANCE ENTERPRISES
1. The insurance enterprises must maintain their
solvency throughout the process of their insurance business activities under
the provisions of Article 14 of the Government's Decree No. 43/2001/ND-CP of
August 1, 2001 prescribing the financial regime for insurance enterprises and
insurance brokerage enterprises.
2. An insurance enterprise is in danger of
insolvency when its solvency limit is lower than the minimum one.
3. The minimum solvency limit:
a/ The minimum solvency limit of a non-life insurance
business enterprise is equal to 20% of the total amount of insurance premiums
actually retained at the time of determination of the solvency limit.
For example: At the time of determination of
its solvency limit, insurance enterprise A, which conducts non-life insurance
business, has VND 1,000 billion as total amount of retained insurance premiums.
Its minimum solvency limit will be VND 1,000 billion x 20% = VND 200 billion.
b/ The minimum solvency limit of life
insurance business enterprises:
- For life insurance contracts with a term of
10 years or under, it is equal to 4% of the insurance operation reserve plus
0.1% of the insurance sum at risk;
- For life insurance contracts with a term of
over 10 years, it is equal to 4% of the insurance operation reserve plus 0.3%
of the insurance sum at risk.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
+ VND 200 billion as operation reserve for
life insurance contracts with a term of 10 years or under.
+ VND 20,200 billion as total insurance
amount of life insurance contracts with a term of 10 years or under.
+ VND 300 billion as operation reserve for
life insurance contracts with a term of over 10 years.
+ VND 50,300 billion as total insurance
amount of life insurance contracts with a term of over 10 years.
The minimum solvency limit of insurance
enterprise B will be: (4% x VND 200 billion) + 0.1% (VND 20,200 billion - VND
200 billion) + (4% x VND 300 billion) + 0.3% (VND 50,300 billion - VND 300
billion) = VND 8 billion + VND 20 billion + VND 12 billion + VND 150 billion =
VND 190 billion.
4. The solvency limit of an insurance
enterprise is the difference between the asset value and the liabilities of the
insurance enterprise. The following assets must not be included for calculation
of the solvency limit of an insurance enterprise:
4.1. Contributed capital amounts for
establishing other insurance enterprises from the source of owner's equities of
the insurance enterprise;
4.2. Irrecoverable debts according to current
law provisions;
4.3. Reward and/or welfare funds (if any).
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1. Turnover:
1.1. Turnover of an insurance enterprise
consists of revenues as specified in Article 19 of the Government's Decree No.
43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance
enterprises and insurance brokerage enterprises, including:
a/ Turnover from insurance business
activities: Collected principal insurance premiums, charges for re-insurance
acceptance; collected commissions for re-insurance ceding, collected charges
for agency services including loss assessment, consideration and payment of
compensations, request of indemnification by a third party, handling of 100%
compensated goods; collected charges for loss assessment, excluding the
assessment requested among internal accounting member units within the same
independent accounting insurance enterprise, subtracting the to be-spent
amounts for revenue reduction such as refunded insurance premiums, reduced
insurance premiums charges for re-insurance ceding, refunded charges for
re-insurance acceptance, reduced charges for re-insurance acceptance; refunded
commissions for re-insurance ceding; reduced commissions for re-insurance
ceding.
b/ Turnover from financial activities:
Revenues from investment activities as specified in Section 3, Chapter II of
the Government's Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the
financial regime for insurance enterprises and insurance brokerage enterprises;
revenues from the sale and purchase of securities; collected interests on
escrow amounts; revenues from the lease of assets; reimbursed balance of the
reserve for decrease in the securities prices and revenues from other financial
activities as provided for by law.
c/ Incomes from other activities: Proceeds
from the sale and liquidation of fixed assets; recovered bad debts which had
been written off; collected fines on contractual breaches and other revenues as
provided for by law.
1.2. The principles for determination of
turnover:
a/ Turnover from insurance business
activities, which consists of receivable amounts arising in the period, shall
be determined according to the following principle:
- Insurance enterprises shall account the
collected principal premiums as incomes when their insurance liabilities arise
toward the insurance buyers under the provisions of Article 15 of the Insurance
Business Law. Specifically:
+ Insurance enterprises shall account as incomes
when the insurance contracts have been concluded between the insurance
enterprises and the insurance buyers or there is evidence that the insurance
enterprises have accepted insurance and the insurance buyers have paid
insurance premiums.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
+ Enterprises have agreed with the insurance
buyers on the periodical payment of insurance premiums. In this case, insurance
enterprises shall account as incomes corresponding to the period or periods
during which the insurance premiums have been paid and must not account as
incomes the premium amounts not yet due for payment by the insurance buyers as
agreed upon.
- For the remaining revenues: Insurance
enterprises shall account them as incomes right after the economic activities
arise and there is evidence of acceptance of payment by the involved parties,
regardless of whether they have been received.
- For amounts to be spent in order to reduce
revenues: Insurance enterprises shall account them as income decrease
immediately after the economic activities arise and there is evidence of
acceptance of payment by the involved parties, regardless of whether they have
been paid.
b/ Turnover from financial activities is the
receivable amount arising in the fiscal year.
c/ Incomes from other activities mean all
proceeds from the sale of goods and the provision of services after subtracting
(-) decreased amounts in the prices of sold goods or returned sold goods (if
they are accompanied with valid vouchers), which the customers accept to pay,
regardless of whether or not they have been received.
1.3. The insurance enterprises' revenues
arising in the period must be accompanied with valid invoices or vouchers and
fully accounted as turnover.
2. Expenditures:
2.1. The insurance enterprises' expenditures,
which are payable and deductible amounts arising in the period as specified in
Article 20 of the Government's Decree No. 43/2001/ND-CP of August 1, 2001
prescribing the financial regime for insurance enterprises and insurance
brokerage enterprises, include:
2.1.1. Expenditures on business insurance
activities:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
b/ The operation reserves set up as provided
for in Section III of this Circular;
c/ Insurance commissions paid as provided for
at Point 5, Section II of the Finance Ministry's Circular No. 98/2001/TT-BTC of
October 19, 2001 guiding the implementation of the Government's Decree No.
42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of
articles of the Insurance Business Law;
d/ Expenses for loss assessment under the
provisions of Article 26 of the Government’s Decree No. 42/2001/ND-CP of August
1, 2001 detailing the implementation of a number of articles of the Insurance
Business Law;
e/ Expenses for agency services, including
loss assessment, consideration and payment of compensations, request for
indemnification by third parties;
f/ Expenses for handling of 100% compensated
goods;
g/ Expenses for management of insurance
agents;
h/ Expenses for loss prevention and
restriction as provided for in Section IX of the Finance Ministry's Circular
No. 98/2004/TT-BTC of October 19, 2004 guiding the implementation of the
Government's Decree No. 42/2001/ND-CP of August 1, 2001 detailing the
implementation of a number of articles of the Insurance Business Law;
i/ Expenses for assessment of risks of the
insured, including expenses for gathering of information on, investigation and
evaluation of, the insured;
j/ Salaries, wages, bonuses, severance
allowances and amounts of wage or salary nature according to relevant law
provisions applicable to each type of enterprise;
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
l/ Other expenses according to the relevant
law provisions applicable to each type of enterprise.
2.1.2. Expenditures on financial activities,
which are amounts to be spent in the fiscal year, include:
a/ Expenses for investment activities as
provided for in Section 3, Chapter II of the Government's Decree No.
43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance
enterprises and insurance brokerage enterprises;
b/ Interests paid to life insurance contract
owners as committed in the signed insurance contracts;
c/ Expenses for the lease of assets;
d/ Banking fees and loan interests;
e/ The reserve set up for decrease in the
securities prices.
f/ Other expenses as provided for by law.
2.1.3. Expenditures on other activities,
which are amounts to be spent in the fiscal year, include:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
b/ Expenses for the recovery of forgiven bad
debts which are now recoverable;
c/ Fines for contractual breaches;
d/ Other expenses as prescribed by law.
2.2. Insurance enterprises must not account
as expenditures the following amounts:
a/ Fines paid by collectives and individuals
for their law violations;
b/ Expenses for capital construction
investment, procurement of fixed assets, allowances for laborers meeting with
difficulties, donations for organizations and individuals according to the
relevant law provisions applicable to each type of enterprise;
c/ Non-business expenses, rewards, welfare
expenses, regular and irregular difficulty allowances, and other expenses
covered by other funding sources;
d/ Other unreasonable expenses as prescribed
by law.
3. Funds of insurance contract owners and
funds of owners of life insurance business enterprises:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
b/ The enterprises' assets must be recognized
accordingly for the insurance contract owners' fund and the owners' fund.
c/ All revenues collected by life insurance
enterprises, which are associated with business transactions of the insurance contract
owners' fund (including also incomes from the fund's property investment
operations), must be accounted for the insurance contract owners' fund.
d/ Assets created from the insurance contract
owners' fund shall be used to fulfill the liabilities and expenses associated
with the business transactions of this fund. Insurance enterprises must not use
the insurance contract owners' funds' assets for paying fines imposed on law
violation acts or economic contract breaches committed by life insurance enterprises.
e/ Where an insurance contract owners' fund
has a surplus (the difference between the assets and liabilities of the fund)
at the end of a fiscal year, life insurance enterprises may divide part of the
whole of such surplus to the insurance contract owners and owners after
obtaining the approval of the certified actuaries.
f/ The provisions on the insurance contract
owners' funds and owners' funds of life insurance enterprises shall apply from
January 1, 2006.
VII. TURNOVER AND
EXPENDITURES OF INSURANCE BROKERAGE ENTERPRISES
1. Turnover
Turnovers of insurance brokerage enterprises
as prescribed in Article 22 of the Government's Decree No. 43/2001/ND-CP of
August 1, 2001 prescribing the financial regime for insurance enterprises and
insurance brokerage enterprises, include:
1.1. Turnover from insurance brokerage
activities, consisting of receivable amounts arising in the period.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1.3. Incomes from other activities,
consisting of all proceeds from the sale of goods and the provision of services
after subtracting (-) the decreased amounts of the prices of sold goods,
returned sold goods (if they are accompanied with valid vouchers), which the
customers accept to pay, regardless of whether they have been collected or not.
2. Expenditures
2.1. The insurance brokerage enterprises'
expenditures consist of payable amounts arising in the period as prescribed in
Article 23 of the Government's Decree No. 43/2001/ND-CP of August 1, 2001
prescribing the financial regime for insurance enterprises and insurance
brokerage enterprises.
2.2. The insurance brokerage enterprises'
expenditures arising in the period must be accompanied with valid invoices or
vouchers.
VIII. PROFITS AND
DISTRIBUTION OF PROFITS
Profits and distribution of profits of
insurance enterprises and insurance brokerage enterprises shall comply with the
provisions of Chapter V of the Government's Decree No. 43/2001/ND-CP of August
1, 2001 prescribing the financial regime for insurance enterprises and
insurance brokerage enterprises.
IX. REPORTING REGIME
Insurance enterprises and insurance brokerage
enterprises shall have to make and send financial statements, statistical
reports and operation reports according to current law provisions.
1. Financial statements:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1.2. Accounting balance sheets as well as
business result and cash flow reports must be certified by independent auditing
organizations licensed to operate in Vietnam.
2. Statistical reports, operation reports:
Insurance enterprises and insurance brokerage enterprises shall make and send
to the Ministry of Finance quarterly and annual statistical reports and
operation reports, specifically as follows:
- For non-life insurance business
enterprises:
+ Report on the insurance premium turnover:
according to form No. 1-PNT
+ Report on insurance compensation: according
to form No. 2-PNT
+ Report on the payment of insurance
commissions: according to form No. 3-PNT
+ Report on deductions for setting up the
operation reserves: according to form No. 4-PNT
+ Report on investment activities: according
to form No. 5-PNT
+ Report on solvency: according to form No.
6-PNT (insurance enterprises shall make annual reports only).
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
+ Report on reinsurance turnover: according
to form No. 1-TBH
+ Report on reinsurance compensation:
according to form No. 2-TBH
+ Report on collection and payment of
reinsurance commissions: according to form No. 3-TBH
- For life insurance business enterprises:
+ Report on the number of contracts and the
life insurance amounts: according to form No. 1-NT
+ Report on life insurance premium turnover:
according to form No. 2-NT
+ Report on the payment of life insurance
amounts: according to form No. 3-NT
+ Report on life insurance commissions:
according to form No. 4-NT
+ Report on the cancellation of life
insurance contracts: according to form No. 5-NT
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
+ Report on investment activities: according
to form No. 7-NT
+ Report on solvency: according to form No.
8-NT (insurance enterprises shall make annual reports only).
- For insurance brokerage enterprises:
According to the form of report on insurance brokerage activities - form No.
1-MGBH.
- Quarterly reports: Insurance enterprises
must make and send them to the Ministry of Finance within 30 days after the end
of each quarter.
- Annual reports: Insurance enterprises must
make and send them to the Ministry of Finance within 90 days after the end of
each fiscal year.
3. Financial publicity for insurance enterprises
and insurance brokerage enterprises: On a quarterly basis, insurance
enterprises and insurance brokerage enterprises must make and send financial
statements to State management bodies stated at Point 1, Section IX of this
Circular.
4. Examination and inspection of the observance
of financial regimes
The Managing Boards, the general directors
(directors) of insurance enterprises and insurance brokerage enterprises shall
have to give explanations on relevant financial issues at the requests of State
management bodies performing State management functions according to law
provisions.
4.1. Insurance enterprises and insurance
brokerage enterprises shall be accountable for the accuracy and truthfulness of
their financial statements. The financial supervisions shall be conducted in
the following forms:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
b/ Examination by topic according to the
financial management requirements.
4.2. Insurance enterprises and insurance brokerage
enterprises, which violate the State’s financial regimes, shall be sanctioned
according to law provisions.
X. PUBLICIZATION OF
INFORMATION OF INSURANCE ENTERPRISES
1. Insurance enterprises and insurance
brokerage enterprises must disclose information in a timely and accurate manner
strictly according to law provisions and take responsibility for the accuracy
of the disclosed information according to law provisions.
2. Within 120 days as from the last day of
the fiscal year, insurance enterprises and insurance brokerage enterprises must
publicize the audited financial statements, including the following specific
information:
2.1. Business results in the fiscal year,
turnover, profits, total of operation reserve funds, total compensated amounts
and paid insurance sums.
2.2. Owner's capital, percentages of founding
members' capital contributed to the owner's capital;
2.3. General director (director), Managing
Board chairman,
Information shall be disclosed on the mass
media.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
1. This Circular takes effect 15 days after
its publication in the Official Gazette and applies as from January 1, 2005.
2. The Finance Ministry's Circular No.
72/2001/TT-BTC of August 28, 2001 guiding the implementation of the
Government's Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the
financial regime applicable to insurance enterprises and insurance brokerage
enterprises shall cease to be effective as from the date this Circular becomes
effective.
3. Any problems arising in the course of
implementation should be reported to the Ministry of Finance for consideration
and settlement.
FOR THE MINISTER OF
FINANCE
VICE MINISTER
Le Thi Bang Tam