Circular No. 195/2014/TT-BTC dated December 17, 2014, guiding on assessing and ranking insurers

• Official number: 195/2014/TT-BTC
• Legislation Type: Circular
• Organization: The Ministry of Finance
• Signer: Tran Xuan Ha
• Issued Date: 17/12/2014

THE MINISTRY OF FINANCE --------	SOCIALIST REPUBLIC OF VIETNAM Independence – Freedom – Happiness ---------------
No.: 195/2014/TT-BTC	Hanoi, December 17, 2014

CIRCULAR

GUIDING ON ASSESSING AND RANKING INSURERS

Pursuant to the Law on Insurance Business No. 24/2000/QH10 dated December 9, 2000;

Pursuant to the Law on the amendments to a number of articles of the Law on Insurance Business No. 61/2010/QH12 dated November 24, 2010;

Pursuant to the Decree No. 45/2007/ND-CP dated March 27, 2007 of the Government detailing the implementation on some articles of the Law on Insurance Business;

Pursuant to the Decree No. 46/2007/ND-CP dated March 27, 2007 of the Government providing for the financial regulations to insurers and insurance brokers;

Pursuant to the Decree No. 123/2011/ND-CP dated December 28, 2011 of the Government detailing the implementation on some articles of the Law on amendments to a number of articles of the Law on Insurance Business and Decree No. 45/2007/ND-CP dated March 27, 2007 of the Government detailing the implementation on a number of articles of the Law on Insurance Business;

Pursuant to the Decree No. 215/2013/ ND-CP December 23, 2013 of the Government stipulating functions, tasks, powers and organizational structures of the Ministry of Finance.

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At the request of the Director of the Insurance Supervisory Authority;

The Minister of the Ministry of Finance promulgates the Circular guiding on assessing and ranking the insurers.

Article 1. The governing scope

This Circular provides guidance on assessing and ranking non-life insurers, health insurers, life insurers, reinsurers and branches of foreign non-life insurers which are licensed and legally operating in Vietnam (hereafter referred to as insurers).

Article 2. Regulated entities

1. Non-life insurers, health insurers, life insurers, reinsurance companies and branches of foreign non-life insurers which are licensed and legally operating in Vietnam (hereafter referred to as non-life insurers).

2. Life insurers that are licensed and legally operating in Vietnam (hereafter referred to as life insurers).

3. Organizations and individuals relating to ranking and assessment of the insurers.

Article 3. Purposes of ranking and assessing insurers

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2. The Ministry of Finance shall supervise insurers following the contents as define in Clause 1 this Article; to take appropriate measures to ensure the insurers and the insurance market to operate safely, effectively and stably.

Article 4. Assessing insurers

1. Criteria for assessing insurers

Insurers shall assess themselves according to the following criteria:

1.1 Non-life insurers perform the assessment according to criteria for assessing non-life insurers prescribed in Appendix 1 issued together with this Circular and the grading scale and method prescribed in Appendix 2 issued together with this Circular.

1.2 Life insurers perform the assessment according to criteria for assessing life insurers prescribed in Appendix 4 issued together with this Circular and the grading scale and method prescribed in Appendix 5 issued together with this Circular.

2. Grading scale and grading method

2.1 With regard to non-life insurers:

a) Criteria for assessing the solvency, the operational reserves and the business effectiveness based on the grading scale of each criterion.

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- Level A: from 200 to 300

- Level B: under 200

c) Criteria for assessing the capital, quality of assets and financial investment based on the grading scale, maximum score and deductions (if any) of each criterion. The maximum score of this group of criteria is 500, including:

- Level A: from 400 to 500

- Level B: under 400

d) Criteria to assess the business administration and transparency of information based on the grading scale, maximum score and deductions (if any) of each criterion. The maximum score of this group of criteria is 200, including:

- Level A: from 100 to 200

-Level B: under 100

2.2. With regard to life insurers:

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b) Criteria for assessing the insurance operation activities based on the grading scale, maximum score and deductions (if any) of each criterion. The maximum score of this group of criteria is 300, including:

- Level A: from 250 to 300

- Level B: from 200 to below 250

- Level C: from 100 to below 200

- Level D: under 100

c) Criteria for assessing capital, quality of assets and the business effectiveness based on the grading scale, maximum score and deductions (if any) of each criterion. The maximum score of this group of criteria is 500, including:

- Level A: from 450 to 500

- Level B: from 350 to below 450

- Level C: from 250 to below 350

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d) Criteria for assessing the business administration and transparency of information based on the grading scale, maximum score and deductions (if any) of each criterion. The maximum score of this group of criteria is 200, including:

- Level A: from 150 to 200

- Level B: from 100 to below 150

- Level C: from 50 to below 100

- Level D: under 50

Article 5. Ranking insurers

Pursuant to Article 4 of this Circular and the assessment results, the insurers shall rank as follows:

1. With regard to non-life insurers:

1.1 Group 1: non-life insurers that ensure the solvency and earn profits from insurance business other than reinsurance for 02 consecutive years, including:

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b) Group 1B: Non-life insurers that ensure the solvency and earn profits from insurance business other than reinsurance business for 02 consecutive years; the total score of groups of criteria is below 700.

1.2. Group 2: non-life insurers that ensure the solvency and fail to earn profits from the insurance business other than reinsurance business for 02 consecutive years, including:

a) Group 2A: non-life insurers that ensure solvency and fail to earn profits from the insurance business other than reinsurance business for 02 consecutive years, the total score of all criteria is over 700 and all groups of criteria are ranked A.

b) Group 2B: non-life insurers that ensure the solvency and fail to earn profits from the insurance business other than reinsurance business for 02 consecutive years, the total score of all criteria is under 700.

1.3. Group 3: non-life insurers at risk of insolvency, including non-life insurers whose solvency margin ratios are insufficient or the provision fail to meet the criteria prescribed in Appendix 1 issued together with this Circular.

1.4. Group 4: non-life insurers that go insolvent and are put under the special control, including non-life insurers in group 3, and fail to regain the solvency as requirements of the Ministry of Finance.

2. Life insurers

2.1. Group 1: life insurers that ensure the solvency, including:

a) Group 1A: life insurers that ensure the solvency, the total score of all criteria is over 850 and all groups of criteria are ranked A.

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c) Group 1C: life insurers that ensure the solvency, the total score of all criteria from 400 to below 650, have at least 01 group ranked C and none of them ranked D.

d) Group 1D: life insurers that ensure the solvency are not classified into group 1A, 1B or 1C.

2.2. Group 2: life insurers that are not classified into group 2 prescribed in point a (iii) Clause 5 Section III Decision No. 1826/ QD-TTg.

2.3. Group 3: life insurers that are at risk of insolvency, including life insurers whose solvency margin ratios are insufficient or the provision fails to meet the criteria prescribed in Appendix 1 issued together with this Circular. 

2.4 Group 4: life insurers that are at risk of insolvency are put under the special control, including life insurers ranked in group 3 and fail to regain the solvency as requirements of the Ministry of Finance.

Article 6. Measures

1. Responsibilities of insurers:

1.1. Take the initiative in maintaining the score or maximum score (if any) of each criterion:

a) With regard to non-life insurers: In the case insurers fail to maintain the score or maximum score (if any) of each criterion prescribed in Appendix 2 in this Circular, they shall take the measures in the Appendix 3 in this Circular and solvency recovery measures under laws.

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1.2. Submit reports to the Ministry of Finance prescribed in Article 7 in this Circular.

1.3. Take the measures prescribed in Clause 2 in this Article of the Ministry of Finance.

2. Responsibilities of the Ministry of Finance:

In consideration of the results of insurer rankings prescribed in Article 5 in this Circular, the Ministry of Finance implement one or several management, supervision measures as follows:

2.1. With regard to non-life insurers:

a) With regard to non-life insurers in group 1A, the Ministry of Finance shall:

- Encourage them to expand the content, scope and area;

- Carry out remote supervision.

b) With regard to non-life insurers in group 1B, the Ministry of Finance shall:

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- Supervise non-life insurers implementing the measures to ensure the grading scale and maximum score (if any) of each criterion;

- Direct non-life insurers to strengthen the internal control and inspection; check the network and organizational structure;

- Allow expansion of the business scope and scale ensuring the effectiveness, fair competition and conformity with applicable regulations.

c) With regard to non-life insurers in group 2A:

Besides taking the management and supervision measures provided for in point 2.1 (b) Clause 2 in this Article, the Ministry of Finance shall:

- Warn the non-life insurers and investors about the non-life insurers’ status;

- Direct non-life insurers to increase charter capital (if necessary); check the effectiveness, safety and liquidity of assets to restructure the investment activities appropriately;

- Direct non-life insurers to review and amend regulations, clauses, charges for insurance products to ensure the financial safety of enterprises and the interests of customers; adjust reinsurance programs (if necessary);

- Direct non-life insurers to reassess the effectiveness of the management procedures, professional procedures, and internal inspection and control;

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- Carry out thematic inspections at the premises non-life insurers.

d) With regard to non-life insurers in group 2B:

Besides taking the management and supervision measures provided for in point 2.1 (b, c) Clause 2 in this Article, the Ministry of Finance shall:

- Inspect non-life insurers;

- Reduce the business scope of any insurer that fails to earn profits from insurance business after 24 months.

dd) With regard to non-life insurers in group 3:

The Ministry of Finance shall take the measures prescribed in Article 80 of the Law on Insurance Business.

e) With regard to non-life insurers in group 4:

The Ministry of Finance shall revoke Licenses of establishment and operation of non-life insurers in accordance with point e Clause 1 Article 68 of the Law on Insurance Business.

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a) With regard to life insurers in group 1A, the Ministry of Finance shall:

- Encourage them to expand the content, scope and area;

- Carry out remote supervision.

b) With regard to life insurers in group 1B, the Ministry of Finance shall:

- Direct the life insurers to report causes and perform measures for ensuring grading scale, maximum score (if any) of each criterion;

- Supervise life insurers to perform measures for ensuring grading scale, maximum score (if any) of each criterion.

c) With regard to life insurers in group 1C:

Besides taking the management and supervision measures provided for in point 2.2 (b) Clause 2 in this Article, the Ministry of Finance shall:

- Warn the life insurers and investors of the life insurers’ status;

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- Allow the expansion of business scope and scale if life insurers with groups of criteria for assessment of capital, asset quality, and effectiveness ranked B. d) With regard to life insurers in group 1D:

Besides taking the management and supervision measures provided for in point 2.2 (b. c) Clause 2 in this Article, the Ministry of Finance shall carry out inspections at the life insurers’ premises.

dd) With regard to life insurers in group 3:

The Ministry of Finance shall take the measures prescribed in Article 80 of the Law on Insurance Business.

e) With regard to life insurers in group 4:

The Ministry of Finance shall revoke License of establishment and operation of life insurers pursuant to point e Clause 1 Article 68 of the Law on Insurance Business.

Article 7. Reporting policy

1. Within 90 days from the end of the preceding financial year, every insurer shall report the results of the assessment, rankings and the measure performance prescribed in Article 6 of this Circular to the Ministry of Finance depending on the business performance, business administration, risk management, the financial statement ascertained by an independent auditor of the preceding financial year.

2. Any insurer at risk of insolvency shall follow the reporting regulations prescribed in Article 78 of the Law on Insurance Business.

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1. This Circular shall take effect from February 1, 2015.

2. This Circular replaces Decision No. 153/2003/QD-BTC dated September 22, 2003 of the Ministry of Finance issuing system of criteria for monitoring insurers.

3. Any issue or difficulty that arises during the implementation of this Circular should be reported to the Ministry of Finance for timely solution./.

PP MINISTER
VICE MINISTER




Tran Xuan Ha

APPENDIX 1

NON-LIFE INSURANCE ENTERPRISE ASSESSMENT INDICATOR
(Issued with Circular No.195/2014/TT-BTC dated 17/12/2014 of the Ministry of Finance)

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1. Solvency margin ratio indicator

a) Method of calculation:

x =

Solvency margin (A)

Minimum solvency margin (B)

Data source:

(A): In accordance with the provisions in Article 16 of Circular No. 125/2012/TT-BTC dated 30/7/2012 of the Ministry of Finance guiding the financial system to the insurance enterprises, re- insurance enterprises, insurance brokerage enterprises and branches of foreign non-life insurance enterprises (hereafter referred to as Circular No. 125/2012/TT-BTC).

(B): In accordance with the provisions in Article 15 of Circular No. 125/2012/TT-BTC

b) Meaning:

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c) Amplitude: x ≥ 1

d) Analysis of causes why the indicator are beyond the amplitude:

- Owner’s equity and financial investment;

- Business scale, insurance business performance and retention level;

- Restriction of financial management, operation risk management and insurance and re-insurance claim.

- Restriction of corporate management: competence of management staff; internal inspection and control; compliance with operational procedures issued by the enterprise.

- Other factors.

2. Indicator of provision for insurance operation.

a) Method of assessment:

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b) Meaning:

These indicator assess the adequacy of provision for insurance operation by the methods approved by the Ministry of Finance in order to meet the liabilities committed to customers.

c) Analysis of causes why the indicator fail to meet the regulations of law:

- Combined assessment of solvency margin ratio indicator over the minimum solvency margin and combined ratio.

- Management and monitoring of statistical data of information of claim dossiers.

- Other causes.

3. Indicator of combined ratio

a) Calculation formula:

x = Claim ratio (x₁) + Insurance business operation cost ratio (x₂)

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x₁ =

Total insurance claim expenditure under the retention responsibility (A)

Net premium revenue (B)

x₂ =

Total costs of business activities (C)

Net premium revenue (B)

Data source:

(A): Code 15 – Report on result of business performance (excluding the claim expenditure used from the major fluctuation provision fund).

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 (C): (Code 17 + Code 26 - Code 04) - Report on result of business performance. For newly-established enterprises and newly put into operation, in the first 03 year, (C) does not include the costs of establishment and network development.

b) Amplitude: x < 100%

c) Meaning:

These indicator assess the enterprise’s profit/loss of insurance business.

d) Analysis of cause the indicator are beyond the amplitude:

- Scale and scope of business;

- Review and receipt of insurance, settlement of insurance claim.

- Receipt and retrocession of insurance.

II. GROUP OF ASSESSMENT INDICATOR OF INSURANCE OPERATION

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a) Method of calculation:

x =

Net premium revenue of this year (A)

- Net premium revenue of the previous year (B)

Net premium revenue of the previous year (B)

Data source:

(A), (B): Code 03 - Report on result of business performance

b) Amplitude: -10% ≤ x ≤ 30% (not applicable to enterprises operating in the first three years).

c) Meaning:

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d) Analysis of causes why the indicator are beyond the Amplitude:

- Considering the correlation with the following indicator: The solvency margin ratio indicator over the minimum solvency margin and combined ratio; combined ratio indicator; capital indicator commensurate with the scale of operation;

- Assessing the impact of change in enterprise’s policy on expansion/narrowing of operation scope; risk management; re-insurance; state policy on encouragement/limited deployment of insurance products, ...

- Other causes.

2. Premium debt ratio indicator over total original premium

a. Method of calculation:

x =

Original premium receivable (A)

Original premium (B)

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(A): Explanation of financial Statement

(B): Code 01.1 - Report on business result

b. Amplitude: x ≤ 20%

c) Meaning:

These indicator assesses the enterprise’s appropriation level of premium and quality of insurance business.

d) Analysis of causes why the indicator are beyond the amplitude:

- Combination with assessment: The solvency margin ratio indicator over the minimum solvency margin and combined ratio; appropriation ratio of provision indicator of bad debt; fluctuation trend of the original claim ratio and original premium revenue.

- The enterprise’s policy on insurance business (subjects as customers), debt of premium, collection of premium through agent, broker,....

- Capacity of business and risk management, relationship with customers, impact of competition, debt management capacity,...

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3. Assessment indicator of quality of claim settlement

a) Method of calculation: Including 2 indicators

a1. Unsettled claim dossier ratio indicator

x₁ =

Number of unsettled claim dossier at the end of financial year (A)

Total dossier requiring claim to be settled in the year (B)

Data source:

(A), (B): As reported by enterprise.

a2. Indicator of average time to settle the claim dossier

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Total time for claim settlement of settled dossiers in the year (A)

Total settled claim requiring dossiers in the year (B)

Data source:

(A), (B): As reported by enterprise (from the time of full receipt of dossiers).

b) Amplitude:

x₁ ≤ 15 days/dossier

x₂ is calculated from the date of having adequate claim dossiers and applied to each operation group as follows:

No.

Insurance operation

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1

Motor vehicle insurance

x₂ ≤ 15 days

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- Health insurance

- Responsibility insurance

x₂ ≤ 30 days

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Other insurance operations

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c) Meaning:

These indicators indicate the quality of claim settlement

d) Analysis of causes why the indicator are beyond the amplitude:

- Combined indicator analysis: combined ratio; ratio of change in net premium revenue; quality of management and operation staff; organization of internal control and audit.

- Procedure for claim settlement and arrangement of officer for claim settlement.

- Other causes.

III. GROUPS OF ASSESSMENT INDICATOR OF CAPITAL, ASSETS QUALITY AND FINANCIAL INVESTMENT

1. Owner’s equity indicator commensurate with the scale of operation

a) Method of assessment:

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- Assessing the appropriation of required reserve fund in accordance with the provisions in Clause 97 of the Law on Insurance Business.

- Assessing the management of owner’s equity in accordance with the provisions in Article 5 of Circular No. 125/2012/TT-BTC.

b) Meaning:

These indicators assess the management of owner’s equity and commensuration level between the owner’s equity with the enterprise’s operational scale and scope in accordance with regulation of law.

c) Analysis of causes why the indicator do not meet the regulations of law:

- Combined assessment of solvency margin ratio indicator over the minimum solvency margin and combined ratio.

- Policy on expansion of enterprise’s scope of activities, operations and new insurance products.

- Other causes.

2. Indicator of change of owner’s equity

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x =

Owner’s equity of this year (A) - Owner’s equity of the previous year (B)

Owner’s equity of the previous year (B)

Data source:

(A), (B): Code 400 - Balance sheet

b) Amplitude:  x ≥ -15% (not applicable to enterprises operating in the first three years).

c) Meaning:

These indicators assess the change of enterprise’s owner’s equity and indicates the enterprise’s financial capacity towards more improved or worse.

d) Analysis of causes why the indicator are beyond amplitude:

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- Assessment of fluctuation of indicator in the previous three consecutive years to identify trends and causes increase or decrease.

- Other factors: policy on profit distribution,...

3. Indicator of total premium over owner’s equity

a) Method of calculation:

x =

Total premium (A)

Owner’s equity (B)

Data source:

(A): Code 01.1 + Code 01.2 - Report on result of business performance

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b) Amplitude: x ≤ 500%

c) Meaning:

These indicators assess the adequacy of owner’s equity with the total insured liabilities without considering the assistance from the re-insurer. The greater the indicators are, the greater the requirements for capital to deal with the unusual fluctuations of loss are.

d) Analysis of causes the causes are beyond the amplitude:

- Combined assessment of indicator: solvency margin ratio indicator over the minimum solvency margin; compliance with regulations of law on provision for insurance operation; combined ratio; change in net premium revenue.

- Assessment of fluctuation of indicator in the previous 3 consecutive years to identify trends and causes increase or decrease.

- Causes related to the implementation of plan for expansion of scope of business operation....

- Other causes.

4. Indicator of short-term liability over the liquid assets

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x =

Short-term liability (A)

Cash and cash equivalents (B) + Deposit with term (C)

Data source:

(A): (Code 310 – Code 329) - Balance sheet (Short-term liability after calculation of provision)

(B): Code 110 - Balance sheet

(C): As reported by enterprise (excluding deposits not to be withdrawn before maturity)

b) Amplitude: x ≤ 100%

c) Meaning:

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d) Analysis of causes why the indicator are beyond the amplitude:

- Identification of proportion of items: payable to customers, internal payable and other payables in the total liabilities payable of the enterprise.

- Upon assessment in combination with assessment of solvency margin ratio indicator over the minimum solvency margin; proportion of cash and cash equivalents over the enterprise’s total assets.

- Assessment of fluctuation of indicator in the previous 3 consecutive years to identify trends and causes increase or decrease.

- Assessment of influence of enterprise’s policy on liability management and cash management .

- Monitoring, comparison and complete payment of all liabilities.

- Other causes.

5. After-tax profit margin indicator over owner’s equity

a) Calculation formula:

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After-tax profit (A)

Owner’s equity (B)

Data source:

(A): Code 60 – Report on result of business performance. For newly-established and operating enterprises, during the first 3 years, the costs of establishment and network development are excluded.

(B): Code 400 – Balance sheet

b) Amplitude: x > 5%

c) Meaning:

These indicator assess the profitability of owner’s equity.

d) Analysis of causes why the indicator are beyond the amplitude:

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- Assessment of business performance result of insurance and re-insurance operations affecting the indicator.

- Other causes.

6. Indicator of ratio of overdue debt from 1 year or more over owner’s equity

a) Calculation formula:

x =

Overdue debt from 1 year or more (A)

Owner’s equity (B)

Data source:

(A): As reported by the enterprise

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b) Amplitude: x ≤ 5%

c) Meaning:

These indicators assess the risks of bad debts affecting the owner’s equity, indicate the enterprise’s unrecoverable capital appropriation level. These indicators also indicate the enterprise’s debt management capacity as well as the compliance with regulations of law on management and settlement of liabilities.

d) Analysis of causes why the indicator are beyond the amplitude:

- Identification of proportion of enterprise’s bad debt over the total debts receivable.

- Combined assessment: indicator of debt receivable over the owner’s equity; ratio of provision for bad debts, fluctuation trend of original claim ratio and original premium revenue affecting the capacity for allocating the capital for insurance claim upon the increased risk of capital appropriation.

- Assessment of fluctuation of indicator in the previous three consecutive years to identify trends and causes increase or decrease.

- Assessment of influence of enterprise’s policy on liability management and cash management .

- Monitoring, comparison and urging the complete recovery of debts receivable.

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7. Indicator of ratio of provision for bad debts

a) Method of calculation:

x =

Amount of provision for bad debts (A)

Bad debts (B)

In which:

A, B: Enterprise’s report or explanation of financial statement.

b) Method of assessment: Compliance with regulations of law on ratio of provision for bad debt receivable.

c) Meaning:

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d) Analysis of causes why the indicator are beyond the amplitude:

- Combined assessment: criteria for debt receivable over the owner’s equity.

- Monitoring, comparison and urging the complete recovery of debts receivable.

- Other causes.

8. Indicator of compliance with laws on principle and structure of investment

a) Method of assessment:

- The list of investment capital and structure of portfolio in accordance with the provisions in Article 11, 12 and 13 of Circular No. 125/2012/TT-BTC and the amended or added documents (if any).

- Comparing the compliance with the provisions in Article 11, 12 and 13 of Circular No. 125/2012/TT-BTC and the amended or added documents (if any) on principle and portfolio structure.

b) Meaning:

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c) Analysis of causes why the indicator do not comply with law:

- Combined assessment of solvency margin ratio indicator over the minimum solvency margin, return on investment and ratio of provision for devaluation of investment asset.

- Enterprise’s compliance with investment policy.

- Other causes.

9. Indicator of return of investment

a. Method of calculation:

x =

Profit from financial activities (A)

0,5 x (Total of investment assets at the beginning of period + Total of investment assets at the end of period) (B)

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A: Explanation of financial statement

B: (Code 120 + Code 240 + Code 250 + Code 218.1) – Balance sheet

b. Amplitude: 4,5% < x ≤ 15%

c) Meaning:

These indicators assess the enterprise’s financial investment performance and indicate the quality of portfolio.

d) Analysis of causes why the indicator are beyond the amplitude:

- Combined assessment of indicator of compliance with law on investment capital and investment limit;

- Change in enterprise’s investment policy, change in enterprise’s capital and operational scale affecting the financial investment,….

- Other causes.

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a. Method of calculation:

x =

Amount of provision for devaluation of each type of investment asset (A)

Value of respective investment asset(B)

Data source:

(A), (B): Enterprise’s report or explanation of financial statement.

b) Method of assessment: Compliance with regulations of law on ratio of provision of each asset.

c) Meaning:

Assessment of quality of investment assets and compliance with regulations of law on ratio of provision.

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- Combined assessment of indicator of compliance with law on investment capital and investment limit;

- Change in enterprise’s investment policy, change in enterprise’s capital and operational scale affecting the financial investment,….

- Other causes.

IV. GROUP OF ASSESSMENT INDICATOR OF CORPORATE GOVERNANCE AND INFORMATION TRANSPARENCY

1. Indicator of organizational structure

a) Method of assessment:

- Table of description of enterprise’s organizational structure.

- List of title of management and operation: Name, qualifications, insurance certificate and diploma, working experience in insurance and the field in charge.

- Comparing the satisfaction of conditions of each title in accordance with the provisions in Articles 23, 24, 25, 26, 27, 28, 29 and 34 of Circular No. 124/2012/TT-BTC dated 30/7/2012/TT-BTC of the Ministry of Finance guiding the implementation of some articles of Decree No. 45/2007/ND-CP dated 27/3/2007 of the Government detailing the implementation of some articles of the Law on insurance business and Decree No. 123/2011/ND-CP dated 28/12/2011 of the Government detailing the implementation of some articles of the Law amending and adding some articles of the Law on insurance business (hereafter referred to as Circular No. 124/2012/TT-BTC) and the amended or added documents (if any).

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Assessment of compliance with laws on contingent of management and operation officers.

c) Analysis of causes why the indicator do not comply with law:

- Combined assessment of indicator of combined ratio, solvency margin ratio over the minimum solvency margin, after-tax profit margin over the owner’s equity and return on investment.

- Enterprise’s human resource policy.

- Other causes.

2. Indicator of management and operation and information transparency

 a) Method of assessment:

 - Description of organizational apparatus of division of internal inspection, control and audit; independence, function, number of officers, description of experience and diploma of each officer.

 - of method for internal inspection, control and audit.

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 + Implementation frequency;

 + Assessment opinions of relevant divisions and relevant individuals during the implementation.

- Comparing the internal inspection, control and audit with the provisions in Article 36 of Circular No. 124/2012/TT-BTC, Article 31 of Circular No. 125/2012/TT-BTC, Article 15 of Decree No. 2007/ND-CP dated 27/3/2007 of the Government detailing the implementation of some articles of the Law on insurance business and Article 35 of Decree No. 46/2007/ND-CP dated 27/3/2007 of the Government providing for the financial system to the insurance enterprises and insurance brokerage enterprises.

- Implementation of report from the provision calculating expert and solvency margin to the Board of Directors, Board of Executives as prescribed by law;

 - Compliance with regulation on prescribed information publicity to the enterprises such as publicity of year-end financial statement, changes in location of head office, branch, representative office,…a as prescribed by law;

b) Meaning:

 Assessment of compliance with regulations of law on enterprise’s internal inspection, control and audit.

c) Analysis of causes why the indicator do not comply with law:

- Combined assessment of indicator of combined ratio, solvency margin ratio over the minimum solvency margin, after-tax profit margin over the owner’s equity and return on investment.

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APPENDIX 2

TABLE OF AMPLITUDE, METHOD OF CALCULATION OF ASSESSMENT INDICATOR SCORE TO NON-LIFE INSURANCE ENTERPRISES
(Issued with Circular No.195/2014/TT-BTC dated 17/12/2014 of the Ministry of Finance)

No.

Indicator

Amplitude/

Method of assessment

Maximum score

Minus score

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I

GROUP OF ASSESSMENT INDICATOR OF SOLVENCY, OPERATIONAL PROVISION AND INSURANCE BUSINESS PERFORMANCE

The assessment indicator decide the grouping of non-life insurance enterprises under Decision No. 1826/QD-TTg.

1

Solvency margin ratio indicator

x ≥ 1

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If these indicators are beyond the amplitude or failure to comply with regulations of law, the non-life insurance enterprises are classified in group 3.

2

Indicator of insurance operation provision

Compliance with provisions in Article 7 of Circular No. 46/2007/ND-CP and Article 8 of Decree No. 46/2007/ND-CP.

No score

3

Combined ratio indicator

x < 100%

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If these indicators are beyond the amplitude for 02 consecutive years but still ensure the indicator I.1 and I.2, the non-life insurance enterprises are classified in group 2.

II

GROUP OF ASSESSMENT INDICATOR OF INSURANCE OPERATION

300

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...

- 10% ≤ x ≤ 30%

(Not applicable to the non-life insurance enterprises operating in the first 03 years).

No score

2

Premium debt ratio indicator over total original premium

x ≤ 20%

...

...

...

- If 20% < x ≤ 22%: minus 50 points

- If 22% < x ≤ 25%: minus 100 points

- If x > 25%: minus 150 points

3

Quality assessment indicator of claim settlement

150

...

...

...

Unsettled claim dossier ratio indicator

x₁ ≤ 15 days/dossier

75

If beyond amplitude: minus 75 points

3.2

Average time indicator of claim dossier settlement

- Motor vehicle insurance:

 x₂ ≤ 15 days

...

...

...

25

If beyond amplitude: minus 25 points

- Health insurance and liability insurance:

 x₂ ≤ 30 days

25

If beyond amplitude: minus 25 points

- Other insurance operations: x₂ ≤ 60 days

...

...

...

If beyond amplitude: minus 25 points

III

GROUP OF ASSESSMENT INDICATOR OF CAPITAL, ASSET QUALITY AND FINANCIAL INVESTMENT

500

1

Owner’s equity indicator commensurate with operational scale

...

...

...

100

In case of violation of law: minus 100 points

2

Change indicator of owner’s equity

x ≥ -15%

(Not applicable to the non-life insurance enterprises operating in the first 03 years)

No score

Assessment in relationship with indicator III.3

...

...

...

Total premium indicator over owner’s equity

x ≤ 500%

No score

Assessment in relationship with indicator III.2

4

Short-term liability indicator over the liquid assets

x ≤ 100%

25

...

...

...

5

After-tax profit margin indicator over owner’s equity

x > 5%

25

- If beyond the amplitude in the first year: minus 10 points

- If beyond the amplitude in the second year: minus 20 points

...

...

...

6

Indicator of ratio of overdue debt from 1 year or more over owner’s equity

x ≤ 5%

100

- If beyond the amplitude: minus 100 points

7

Indicator of ratio of provision for bad debts

...

...

...

Compliance with provisions in Circular No. 228/2009/TT-BTC

25

Violation of law: minus 25 points

8

Indicator of compliance with law on principle and structure of investment

Compliance with provisions in Articles 11, 12, 13 of Circular No. 125/2012/TT-BTC and the amended or added documents (if any).

...

...

...

100

- Violation of law on principle of investment: minus 50 points

- Violation of law on limit of investment assets: minus 50 points

9

Indicator of return of investment

4,5% < x ≤ 15%

...

...

...

- If beyond the amplitude in the first year: minus 10 points

- If beyond the amplitude in the second year: minus 20 points

- If beyond the amplitude in the third year onwards: minus 25 points

10

Indicator of ratio of provision for devaluation of investment assets

Compliance with law on provision ratio of each asset

...

...

...

Minus 25 points/1 asset due to improper provision as prescribed by law. Minus 50 points maximally

IV

GROUP OF ASSESSMENT INDICATOR OF CORPORATE GOVERNANCE AND INFORMATION TRANSPARENCY

200

1

Indicator of organizational structure

...

...

...

Compliance with provisions in Articles 23, 24, 25, 26, 27, 28, 29 and 34 of Circular No. 124/2012/TT-BTC and the amended or added documents (if any).

70

- Failure to comply with regulations on conditions of manager and operator: minus 25 points/01 title. Minus 50 points maximally

- Failure to comply with regulations on concurrence: minus 25 points/01 title. Minus 50 points maximally

2

Indicator of management and operation and information transparency

...

...

...

Compliance with regulations of law on internal inspection, control and audit; operational procedure

Compliance with provisions in Article 15 of Decree No. 45/2007/ND-CP,  Article 35 of Decree No. 46/2007/ND-CP; Article 36 of Circular No. 124/2012/TT-BTC and Article 31 of Circular No. 125/2012/TT-BTC.

100

- Shortage of procedure or inadequate contents of procedure as prescribed by law: minus 10 points/1 procedure. Minus 40 points maximally.

...

...

...

- Persons performing the inspection and control fail to meet the conditions 

- Heads of divisions fail to report to their superior leadership on the result of internal inspection, control and audit as prescribed by law: minus 20 points

Compliance with reporting regulations

Compliance with regulations of law

10

Enterprise violates the reporting regulations: minus 10 points

...

...

...

Compliance with provisions in Article 34 of Circular 124/2012/TT-BTC and amended or added documents (if any).

10

The calculation experts do not make periodical reports to the General Director or the Board of Executives or Member Board: minus 10 points

Sanction of administrative violation in the year

10

...

...

...

x:

Values of indicators shall be calculated by the non-life insurance enterprises and reported to the Ministry of Finance in accordance with the provisions in this Circular.

APPENDIX 3

MEASURES TAKEN TO ENSURE THE AMPLITUDE OF EACH INDICATOR TO THE NON-LIFE INSURANCE ENTERPRISES
(Issued with Circular No.195/2014/TT-BTC dated 17/12/2014 of the Ministry of Finance)

I. For the group of assessment indicator of solvency, operational provision and insurance business performance

1. Take measures to restore the solvency margin in accordance with the provisions in Article 79 of the Law on insurance business.

2. Appropriate the operational provisions properly and completely by the method registered with the Ministry of Finance and regulations of law.

3. Improve the insurance business performance:

...

...

...

b) Complete the procedure for risk management in insurance business; provide training and improve skills of risk assessment of non-life insurance enterprise’s staff.

c) Closely and effectively control the cost of business and management; control the claims and make payment of insurance properly, fully and in a timely manner in accordance with regulations of law and commitment in the insurance contract; balance the expenditures to effectively ensure the objectives.

d) Streamline the operational organizational apparatus to ensure the effectiveness and simplification.

dd) Narrow the operation areas, customers and products;

e) Adjust the re-insurance program.

II. For group of assessment indicator of insurance operation

1. Adjust the policies on business development: products, customers, areas and distribution channels;

2. Improve the customer services quality:

a) Complete the procedure for customer care, insurance claim settlement; strengthen the inspection and monitoring of implementation;

...

...

...

3. Adjust the re-insurance policy: criteria for re-insurance company, retention ration, re-insurance methods,....

4. Closely and effectively control the cost of business and management; control the claims and make payment of insurance properly, fully and in a timely manner in accordance with regulations of law and commitment in the insurance contract; balance the expenditures to effectively ensure the objectives.

5. Streamline the operational organizational apparatus to ensure the effectiveness and simplification; strengthen the quality of management and operation staff.

6. Narrow the operation areas, customers and products;

7. Modify or add the rules, provisions and premium list of insurance products to ensure the simplification, cleanliness, limit dispute and ensure the enterprise’s financial safety and customer’s interests.

8. Adjust the policy on agent development and assistance; complete the agent management procedure; improve the quality of recruitment, training and employment of agent.

III. For the group of assessment indicators of capital, asset quality and financial investment

1. Increase the charter capital to meet the business operation scale as prescribed by law or narrow the operational contents, scope and areas;

2. Adjust the structure and limit of investment assets; appropriate the prescribed devaluation of investment assets;

...

...

...

4. Make comparison, monitor and collect debts receivable, completely settle all debts payable, appropriate the provision for bad debts; strengthen the quality of risk assessment of business partners.

IV. For the group of assessment indicators of corporate management and information transparency

1. Adjust and complete the corporate management, recruitment and training or have plan to replace the employees who fail to meet the standards of profession, experience and diploma.

2. Strengthen the organization of division of internal inspection and control; modify and add the procedures for operation, internal inspection and control; perform the internal inspection and control; seriously comply with the reporting regulations as prescribed by law and have sanctions against divisions and individuals that fail to comply.

APPENDIX 4

CRITERIA FOR RANKING LIFE INSURERS
(Enclosed with Circular No. 195/2014/TT-BTC dated December 17, 2014 of the Ministry of Finance)

A. GROUP OF CRITERIA FOR SOLVENCY AND OPERATING RESERVE

I. Criteria for solvency

...

...

...

1.1. Formula

Solvency Margin Ratio

=

Solvency margin

Minimum solvency margin

Source of data:

Form No. 8-NT enclosed with Circular No. 125/2012/TT-BTC dated July 30, 2012 of the Ministry of Finance on guidelines for financial regulations applied to insurers, reinsurers, insurance brokers, and branches of foreign non-life insurers (hereinafter referred to as Circular No. 125/2012/TT-BTC).

1.2. Meaning

This criterion is meant to assess the financial capacity of the life insurer (hereinafter referred to as insurer), reflects its solvency compared to the minimum level.

...

...

...

2. General solvency

2.1. Formula

General solvency

=

Total Assets (A)

Total liabilities (B)

Source of data:

 (A): Index 270 of balance sheet

...

...

...

2.2. Meaning

This criterion reflects the insurer’s ability to cover its liabilities at the most general level without discrimination between short-term and long-term liabilities.

2.3. Margin: x > 1

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, and then send a report to the Ministry of Finance.

3. Quick Solvency

3.1. Formula

Quick Solvency

=

cash and cash equivalents (A) + Bank deposits

...

...

...

Source of data:

 (A): Index 110 of balance sheet

 (B): Index 300 of balance sheet – Operating reserve – Long-term liabilities

Bank deposit is the total amount of bank deposits having terms from 3 months to 1 year.

3.2. Meaning

This criterion reflects the insurer’s ability to cover its short-term liabilities within 1 year.

3.3. Margin: x > 1

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

II. Criteria for operating reserve

...

...

...

1.1. Change in operating reserve

a) Formula

Change in operating reserve ratio

=

Increase in reserve this year (A)

-

Increase in reserve last year (C)

Revenue from premium this year (B)

Revenue from premium last year (D)

...

...

...

 (A), (C): Index 01.3 + index 13 + index 14 of income statement.

 (B), (D): Index 01.1 + index 01.2 of income statement.

b) Meaning

This criterion is meant to assess the change in the ratio of operating reserve to revenue from premium of the insurer.

c) Margin: -20% ≤ x ≤ 20%

If the ratio is outside the margin, the insurer must run an analysis and send a report to the Ministry of Finance.

1.2. Ratio of reserves

a) Formula

Ratio of reserves

...

...

...

Level of reserves of each operation in the year (A)

Revenue from premium of equivalent operation in the year (B)

Ratio of type of reserve for each insurance product should be calculated separately (Term life insurance, endowment insurance, whole life insurance, permanent life insurance, investment-linked insurance, pension insurance, etc.)

Source of data:

(A): Form No. 6-NT enclosed with Circular No. 125/2012/TT-BTC.

(B): Form No. 3-NT enclosed with Circular No. 125/2012/TT-BTC.

b) Meaning

This criterion is meant to assess the ratio of operating reserve to revenue from premium of each operation.

c) Margin: Absolute number

...

...

...

2. Criteria for operating reserves

2.1. Mathematical reserve

a) Formula

Mathematical reserve ratio

=

Mathematical reserve according to the insurer’s method

 Minimum mathematical reserve according to regulations of law

Source of data: Provided by the insurer’s valuation unit.

b) Meaning

...

...

...

c) Margin: x ≥ 1

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.2. Reserves for unresolved claims

a) Formula

Ratio of reserves for unresolved claims

=

Reserve for indemnity at the beginning of period (A) + Sum assured (SA) of claims incurred in the period (B) – SA of denied claims in the period (C) – SA of claims paid (D)

  Indemnity reserve for unresolved claims at the end of period (E)

...

...

...

(A), (E): Description of financial statement about indemnity.

(B), (C), (D): Provided by the insurer’s operations departments.

b) Meaning

This criterion is meant to assess the adequacy of indemnity reserve.

c) Margin: x = 1

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.3. Unearned premium reserves (not including investment-linked insurance and pension insurance)

a) Formula

Ratio of change in unearned reserve to change in revenue from premium

...

...

...

Unearned premium reserve on December 31 this year

-

Total revenue from premium this year

Unearned premium reserve on December 31 last year

Total revenue from premium last year

Source of data:

- Unearned premium reserve: Form No. 6B-NT enclosed with Circular No. 125/2012/TT-BTC.

- Revenue from premium: total revenue from premium of products that have unearned premium reserves.

b) Meaning

...

...

...

c) Margin: -5% ≤ x ≤ 10%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

B. GROUP OF CRITERIA FOR BUSINESS ACTIVITIES

I. Criteria for new policies

1. Ratio of change in number of new policies

1.1. Formula

Ratio of change in number of new policies

=

Number of new policies this year    -     number of new policies last year

...

...

...

Source of data:

Number of new policies in the fiscal year (main policies): Form No. 2-NT enclosed with Circular No. 125/2012/TT-BTC.

1.2. Meaning

This criterion reflects the growth in number of policies.

1.3. Margin

Insurers over 5 years: -10% < x < 50%

Insurers under 5 years: 50% < x < 300%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

1.4. Analysis of reasons and addition of information in case the ratio is outside the margin

...

...

...

Number of additional policies for each product

=

Number of additional policies in the year for each product

Number of new main policies in the year

b) Relevant criteria:

- Change in premium revenue from new policies;

- Average SA of new policies;

- Ratio of cancelled policies;

- Productivity of insurance agents.

...

...

...

2. Criterion for ratio of change in premium revenue from new policies

2.1. Formula

Ratio of change in premium revenue from new policies

=

Total premium this year – Total premium last year

Total premium last year

Source of data:

Premium from new policies (including additional products): Form No. 3-NT enclosed with Circular No. 125/2012/TT-BTC.

2.2. Meaning

...

...

...

2.3. Margin

Insurers over 5 years: 0% < x < 50%

Insurers under 5 years: 50% < x < 300%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.4. Analysis of reasons and addition of information in case the ratio is outside the margin

a) Relevant criteria:

- Ratio of change in number of new policies;

- Average SA of new policies;

- Ratio of cancelled policies;

...

...

...

b) It is recommended that data over the last 3 – 5 years be analyzed to reflect the insurer’s growth tendency.

3. Average SA of new policies

3.1. Formula

Average SA of new policies

=

SA of new main policies (A)

Number of new main polices  (B)

Source of data:

(A), (B): Form No. 2-NT enclosed with Circular No. 125/2012/TT-BTC.

...

...

...

This criterion reflects quality of new policies.

3.3. Margin: Absolute number

3.4. Analysis of reasons and addition of information

a) Relevant criteria:

- Ratio of change in number of new policies;

- Ratio of change in premium revenue from new policies.

b) It is recommended that data over the last 3 – 5 years be examined to reflect the growth in premium from new policies.

4. Ratio of policies cancelled during free look period

4.1. Formula

...

...

...

=

Number of main policies cancelled during free look period (A)

Number of new main polices (B)

Source of data:

(A): Provided by the insurer’s operations departments.

(B): Form No. 2-NT enclosed with Circular No. 125/2012/TT-BTC

4.2. Meaning

This ratio reflects the quality of policies (quality of agents’ consultancy, customer services).

4.3. Margin

...

...

...

Insurers under 5 years: x < 15%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

II. Criteria for persistency of policies

1. Ratio of change in number of policies in force

1.1. Formula

Ratio of change in number of policies in force

=

Number of main policies in force this year -  Number of main policies in force last year

Number of main policies in force last year

...

...

...

1.2. Meaning

This ratio reflects the growth in number of policies in force in the year.

1.3. Margin

Insurers over 5 years: x > 3%

Insurers under 5 years: x > 15%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

1.4. Analysis of reasons and addition of information in case the ratio is outside the margin

a) Relevant criteria:

- Ratio of change in number of new policies;

...

...

...

- Ratio of cancelled policies.

c) It is recommended that data over the last 3 – 5 years be analyzed to reflect the insurer’s growth tendency.

c) When analyzing this criterion, it is recommended to examine each insurance product, average remaining insurance period of each product to make an overall assessment of the insurer’s operation.

2. Ratio of change in total premium

2.1. Formula

Ratio of change in total premium

=

Total premium this year – Total premium last year

Total premium last year

...

...

...

2.2. Meaning

This criterion reflects the insurer’s growth in premium.

2.3. Margin

Insurers over 5 years: x > 5%

Insurers under 5 years: x > 10%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.4. Analysis of reasons and addition of information in case the ratio is outside the margin

a) Relevant criteria:

- Change in premium revenue from new policies;

...

...

...

- Ratio of policy persistency.

- Ratio of total premium to charter capital.

b) It is recommended that data over the last 3 – 5 years be analyzed to reflect the insurer’s growth tendency.

3. Ratio of lapsed policies.

3.1. Formula

Ratio of lapsed policies

=

Number of main policies lapsed in the n policy year

0.5 x (number of main policies in force at the beginning of period + number of main policies in the n policy year in force at the end of period + number of main policies in the n policy year lapsed in the period)

...

...

...

3.2. Meaning

This criterion reflects the ratio of policies cancelled, which reflects the quality of policies, customer services, and effectiveness of the insurers’ agents.

3.3. Margin

Rate of lapsed policies in the first year: x < 25%

Rate of lapsed policies in the second year: x < 15%

Rate of lapsed policies from the third year onwards: x < 5%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

4. Ratio of persistency

4.1. Formula

...

...

...

=

Renewal premiums of current year (A)

Total premium last year (B) – Total premium of matured policies of current year (C)

Source of data:

(A): Form No. 3-NT enclosed with Circular No. 125/2012/TT-BTC.

(B): Index 01.1 + index 01.2 of income statement.

(C): Provided by the insurer’s operations departments.

4.2. Meaning

This criterion reflects the ratio of persistent policies, which reflects the quality of policies and  customers services.

...

...

...

Rate of persistency in the second year: x > 60%

Ratio of persistency in the third year: x > 70%

Ratio of persistency from the fourth year onwards: x > 85%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

III. Criteria for quality of agents

1. Ratio of change in number of recruited agents

1.1. Formula

Ratio of change in number of recruited agents

=

...

...

...

Number agents recruited last year

Source of data:

Appendix 14 enclosed with Circular No. 124/2012/TT-BTC dated July 30, 2012 on guidelines for the Government's Decree No. 45/2007/ND-CP and Decree No. 123/2011/ND-CP (hereinafter referred to as Circular No. 124/2012/TT-BTC).

1.2. Meaning

This ratio reflects the insurer’s agent recruitment and development policies.

1.3. Margin

Insurers over 5 years: -20% < x < 20%

Insurers under 5 years: -20% < x < 100%

If the ratio is outside the margin, the insurer must run an analysis and send a report to the Ministry of Finance.

...

...

...

2.1. Formula

Ratio of change in number of active agents

=

Number of active agents this year - Number active agents last year

Number of active agents last year

Source of data: Appendix 14 enclosed with Circular No. 124/2012/TT-BTC.

2.2. Meaning

This ratio assists in assessment of training quality and agent management

2.3. Margin

...

...

...

Insurers under 5 years: -20% < x < 100%

If the ratio is outside the margin, the insurer must run an analysis and send a report to the Ministry of Finance.

3. Productivity of agents

3.1. Formula

Productivity of agents

=

Number of new policies (A)

Average number of active agents (B)

Source of data:

...

...

...

(B) = (Total number of active agents at the beginning of period + Total number of active agents at the end of period)/2

3.2. Meaning

This ratio is meant to assess the quality of agents’ operation.

3.3. Margin: Absolute number

4. Ratio of premium debt to total premium

4.1. Formula

Ratio of premium debt to total premium

=

Debt premium (A)

...

...

...

Source of data:

(A): Index 131 of balance sheet

(B): Index 01.1 + index 01.2 of income statement.

4.2. Meaning

The ratio of premium debt to total premium shows the quality of the insurer’s premium collection  work.

4.3. Margin: x < 3%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

5. Use of distribution channels

5.1. Formula

...

...

...

=

Premium revenue by each channel (A)

Total premium revenue (B)

Source of data:

(A): Provided by the insurer’s operations departments.

(B): Index 01.1 + index 01.2 of income statement.

5.2. Meaning: This ratio is meant to assess the insurer’s distribution channel development strategy.

5.3. Margin: Absolute number

IV. Criteria for claim payment

...

...

...

1.1. Formula

Ratio of claim payment

=

Claim payment (A) ± increase (decrease) in reserves (B

Net premium (C) + investment interest from reverses

Where: investment interest from reserve = i x (V_o +V₁) x 1/2

Source of data:

(A): Index 15 of income statement.

(B): Index 13 + index 01.3 + index 14 of income statement.

...

...

...

(i): Average interest rate of Government bonds with 10-year term issued in the fiscal year.

V_o: Opening reserve

V₁: Closing reserve

1.2. Meaning

This ratio assists in analysis and assessment of net profit from insurance business.

1.3. Margin

The insurers operate in the first year: x < 10%

The insurers operate in the second year: x < 15%

The insurers operate in the third year: x < 20%

...

...

...

If the ratio is outside the margin, the insurer must run an analysis and send a report to the Ministry of Finance.

2. Criteria for assessment of quality of claim settlement

2.1. Ratio of pending claims

a) Formula

Ratio of pending claims

=

Number of pending claims

Number of settled claims

Source of data: Provided by the insurer’s operations departments.

...

...

...

This ratio is meant to assess the quality of claim settlement and policy management.

c) Margin: x < 5%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.2. Average time for claim settlement

a) Formula

Average time for claim settlement

=

Total time for settlement of claims

Number of settled claims

...

...

...

- The time for settlement of a claim (whether rejected or granted) is the period from the day on which satisfactory documents are received to the day on which the insurer issues a decision to reject/approve the claim: provided by the insurer’s operations departments.

- The number of settled claims is the number of claims that have been rejected or granted in the fiscal year: provided by the insurer’s operations departments.

b) Meaning

This ratio is meant to assess the quality of claim settlement and policy management.

c) Margin: x < 60 days

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.3. Claim payment

a) Formula

Ratio of claim payment

...

...

...

Total amount of claim payment

Total amount of granted claims

Source of data: Provided by the insurer’s operations departments.

b) Meaning

This ratio is meant to assess the quality of customer services and policy management.

c) Margin: x > 95%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.4. Ratio of rejected claims

a) Formula

...

...

...

=

Number of rejected claims

Number of settled claims

Source of data:

The number of settled claims is the number of claims that have been rejected or granted in the fiscal year: provided by the insurer’s operations departments.

b) Meaning

This ratio reflects the quality of customer services and quality of agents’ consultancy.

c) Margin

- For health insurance: x < 30%

...

...

...

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.5. Ratio of granted claims

a) Formula

Ratio of granted claims

=

Total amount of granted claims

Total amount of settled claims

Source of data: Provided by the insurer’s operations departments.

b) Meaning

...

...

...

c) Margin

- For health insurance: x > 70%

- For other insurance: x > 90%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

V. Criteria for reinsurance

1. Reinsurance ratio

Reinsurance ratio

=

Reinsurance premium (A)

...

...

...

Source of data:

(A): Index 02 of income statement.

(B): Index 01.1 + index 01.2 of income statement.

1.2. Meaning

This ratio reflects the insurer’s level of reinsurance in the fiscal year.

1.3. Margin: Absolute number

2. Ratio of reinsurance in the first year

2.1. Formula

Ratio of reinsurance in the first year

...

...

...

Reinsurance premium in the first year (A)

Total first year premium (B)

Source of data:

 (A): Provided by the insurer’s operations departments and reinsurance department.

 (B): Form No. 3-NT enclosed with Circular No. 125/2012/TT-BTC.

2.2. Meaning

This ratio reflects the insurer’s level of reinsurance in the first year of insurance policy.

2.3. Margin: Absolute number

3. Ratio of reinsurance in the following years

...

...

...

Ratio of reinsurance in the following years

=

Reinsurance renewal premium in the following years (A)

Total renewal premium (B)

Source of data:

 (A): Provided by the insurer’s operations departments and reinsurance department.

 (B): Form No. 3-NT enclosed with Circular No. 125/2012/TT-BTC.

3.2. Meaning

This ratio reflects the insurer’s level of reinsurance in the following years.

...

...

...

4. Reinsurance efficiency assessment

4.1. Formula

Reinsurance efficiency assessment

=

Collected reinsurance indemnity + Collected reinsurance commission by each product (A)

Corresponding reinsurance premium by each product (B)

Source of data:

 (A), (B): Provided by the insurer’s reinsurance department.

4.2. Meaning

...

...

...

4.3. Margin: Absolute number

VI. General criteria

1. Operating expense ratio

1.1. Formula

Operating expense ratio

=

Total expense of insurance business
(exclusive of commission) (A)

Net premium revenue (B)

Source of data:

...

...

...

(B): Index 01.1 + index 01.2 + index 02 of income statement.

When calculating this ratio, the insurer may deduct some non-recurrent expenditures on development of IT system serving management, operation, or agents, and include information about such expenditures on the report sent to the Ministry of Finance.

1.2. Meaning

This ratio reflects the insurer’s expense management efficiency.

1.3. Margin

First year of operation: x ≤ 400%

Second year of operation: x ≤ 100%

Third year of operation: x ≤ 50%

Fourth year of operation: x ≤ 30%

...

...

...

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2. Change of insurance product structure

2.1. Formula

Insurance product

Premium this year

Proportion of total premium this year

Premium last year

Proportion of total premium last year

(2) – (4)

...

...

...

(2)

(3)

(4)

(5)

I. Individual insurance

...

...

...

a. Whole life insurance

b. Permanent life insurance

...

...

...

c. Term life insurance

s. Endowment insurance

...

...

...

e. Annuity

...

...

...

g. Investment-linked policies:

- Universal:

- Unit-linked

h. Pension insurance

...

...

...

i. Other products

...

...

...

II. Group insurance

a. Whole life insurance

...

...

...

b. Permanent life insurance

c. Term life insurance

...

...

...

s. Endowment insurance

...

...

...

e. Annuity

g. Investment-linked insurance:

- Universal:

- Unit-linked

...

...

...

h. Pension insurance

...

...

...

i. Other products

III. Total premium

...

...

...

Total value of (5)

Source of data:

...

...

...

2.2. Meaning

This criterion reflects the change in business strategy of the insurer.

2.3. Margin: x < 5%

If the ratio is outside the margin, the insurer must run an analysis and send a report to the Ministry of Finance.

2.4. Analysis of reasons and addition of information in case the ratio is outside the margin

It is recommended to analyze the criterion based on assessment of relevant policies:

- The insurer’s policies on the main distribution channel, specific products of each channel;

- The insurer’s assessment of efficiency of each product.

C. GROUP OF CRITERIA FOR ASSESSMENT OF CAPITAL, ASSET QUALITY, AND BUSINESS EFFICIENCY

...

...

...

1. Capital sufficiency

1.1. Formula

Capital sufficiency

=

Charter capital (A)

Minimum capital corresponding to the scale and risks of the insurer (B)

Source of data:

(A): Index 400 of balance sheet

(B): Minimum capital corresponding to the scale and risks of the insurer (B) calculated in accordance with instructions of the Ministry of Finance.

...

...

...

This criterion reflects the sufficiency of the insurer’s charter capital with regard to its scale and risks.

1.3. Margin: According to applicable regulations

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2. Ratio of change of charter capital

2.1. Formula

Ratio of Change of charter capital

=

Charter capital this year (A) - Charter capital last year (B)

Charter capital last year (B)

...

...

...

(A), (B): Index 400 of balance sheet

2.2. Meaning

This ratio reflects the change of insurer’s charter capital in the fiscal year.

2.3. Margin: x ≥ -20%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

3. Ratio of total premium revenue to charter capital.

3.1. Formula

Ratio of total premium revenue to charter capital

=

...

...

...

0.5 x Charter capital last year (B)

+ Charter capital this year (C)

Source of data:

(A): Index 01.1 + index 01.2 of income statement.

(B), (C): Index 400 of balance sheet

3.2. Meaning

This ratio reflects the correspondence of charter capital and the insurer’s scale, regardless of support from reinsurance.

3.3. Margin

Insurers over 5 years: 20% < x < 900%

...

...

...

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

4. Ratio of net premium revenue to charter capital

4.1. Formula

Ratio of net premium revenue to charter capital

=

Net premium revenue (A)

0.5 x Charter capital last year (B)

+ Charter capital this year (C)

Source of data:

...

...

...

(B), (C): Index 400 of balance sheet

4.2. Meaning

This ratio reflects the correspondence of charter capital and the insurer’s scale with due account taken of support from reinsurance.

4.3. Margin

Insurers over 5 years: 20% < x < 900%

Insurers under 5 years: 5% ≤ x ≤ 900%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

5. Ratio of charter capital to liabilities

5.1. Formula

...

...

...

=

Charter capital (A)

Adjusted liabilities (B)

Source of data:

(A): Index 400 of balance sheet

(B): Index 300 of balance sheet – Accrued operating reserve – Value of Fund for protection of policyholders.

5.2. Meaning

This ratio reflects the insurer’s ability to cover its liabilities with its charter capital.

5.3. Margin: x > 1

...

...

...

6. Ratio of capital support to charter capital

6.1. Formula

Ratio of capital support to charter capital

=

Reinsurance commission (A)

+ Financial support from reinsurer

0.5 x Charter capital at the year’s beginning (C)

+ Charter capital at the year’s end (D)

Source of data:

...

...

...

(B): Provided by the insurer’s reinsurance department.

(C), (D): Index 400 of balance sheet

6.2. Meaning

This ratio is meant to assess the revenues from reinsurance commission and financial support from reinsurers.

6.3. Margin: x ≥ 0

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

6.4. Regulated entities

Refinancing insurers; insurers receiving financial support from reinsurers.

7. Ratio of charter capital to total capital

...

...

...

Ratio of charter capital to total capital

=

Charter capital (A)

Total capital (B)

Source of data:

(A): Index 400 of balance sheet

(B): Index 440 of balance sheet

7.2. Meaning

This ratio reflects the insurer’s financial autonomy.

...

...

...

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

III. Criteria for assessment of asset quality

1. Change of asset structure

1.1. Formula

Asset

Value this year

Proportion to total assets this year

Value last year

Proportion to total assets last year

...

...

...

(1)

(2)

(3)

(4)

(5)

1. Government bonds

...

...

...

- Less than 1 year

- 1 – 5 years

...

...

...

- Over 10 years

...

...

...

- Less than 1 year

...

...

...

- 1 – 5 years

- 5 – 10 years

...

...

...

- Over 10 years

...

...

...

4. Unlisted shares

...

...

...

5. Secured loans

6. Business premises

...

...

...

7. Other real estate

...

...

...

9. Capital contribution to joint venture

...

...

...

10. Investment in associate companies

11. Deposits

...

...

...

12. Cash and short-term investments

...

...

...

14. Total asset value

...

...

...

15. Total value of (5)

Source of data: Provided by the insurer’s investment department.

To calculate this ratio, first calculate the proportion of each type of asset to total assets, then calculate the difference between the proportion of the current year and that of the last year of each type of asset, then divide the sum of difference (absolute value) by total assets in order to determine the average change in proportion of assets in the insurer's investment portfolio.

...

...

...

This ratio is meant to assess the change of proportion of each asset to the insurer’s investment, which reflects the insurer’s investment tendency.

1.3. Margin: x < 5%

If the ratio is outside the margin, the insurer must run an analysis and send a report to the Ministry of Finance.

2. Ratios of receivables to charter capital

2.1. Ratio of receivables from customers to charter capital

a) Formula

Ratio of receivables from customers to charter capital

=

Receivable from customers (A)

...

...

...

Source of data:

(A): Index 131 of balance sheet

(B): Index 400 of balance sheet

b) Meaning

This ratio is meant to assess the risk of decrease in equity capital and assets because of customers’ insolvency or payment deferral.

c) Margin: x < 10%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

2.2. Ratio of internal receivables to charter capital

a) Formula

...

...

...

=

Internal receivables (A)

Charter capital (B)

Source of data:

(A): Index 133 + index 213 of balance sheet.

(B): Index 400 of balance sheet

b) Meaning

This ratio is meant to assess the risk of decrease in equity capital and assets because of deferral or default of internal receivables.

c) Margin: x < 1%

...

...

...

2.3. Ratio of bad debts to charter capital

a) Formula

Ratio of bad debts to charter capital

=

Total value of bad debts at the end of fiscal year (A)

Charter capital (B)

Source of data:

(A): Index 139 + index 219 of balance sheet.

(B): Index 400 of balance sheet

...

...

...

This ratio is meant to assess the risk of decrease in charter capital and assets because of bad debts.

c) Margin: x < 0.5%

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

3. Reserve for bad debts

3.1. Formula

Applicable to assets that require reserve for bad debts.

Reserve for bad debts

=

Reserve for bad debts of each asset (A)

...

...

...

Source of data:

(A): Reserve for bad debts corresponding to income from each asset portfolio in (B)

(B): Value of asset portfolio corresponding to book value of each type of assets sorted according to C.II.1.

3.2. Meaning

This ratio is meant to assess quality the insurer’s assets and risk of liquidity loss of assets

3.3. Margin: x < 5% for each asset portfolio.

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

4. Reserve for asset devaluation

4.1. Formula

...

...

...

=

Reserve for devaluation of each type of asset

Total value of corresponding assets

Source of data:

Assets classified at C.II.1.

4.2. Meaning

This is meant to assess the insurer’s asset quality, risk management works, as well as conformity with law on making reserve for asset devaluation.

4.3. Margin: x < 10% for each asset portfolio.

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

...

...

...

5.1. Formula

Correspondence between assets and liabilities

=

Average remaining term of policies, sorted by type (A)

–

Average period of capital recovery of corresponding assets (B)

Source of data:

(A): Provided by the insurer’s valuation department.

(B): Provided by the insurer’s investment department.

...

...

...

This criterion reflects the correspondence between the period of liabilities and period of assets.

4.3. Margin: 0 ≤ x ≤ 15 (years)

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

III. Criteria for business efficiency

1. Rate of net profit from insurance business

1.1. Formula

Rate of net profit from insurance business

=

Net profit from insurance business (A)

...

...

...

Source of data:

(A): Index 30 + index 21 + index 24 of income statement.

(B): Index 01.1 + index 01.2 + index 02 of income statement.

1.2. Meaning:

This ratio is meant to assess the efficiency of the insurer’s insurance business.

 1.3. Margin

Insurers over 10 years: 0% < x < 20%

Insurers under 10 years: not applicable.

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

...

...

...

2.1. Formula

Rate of return of asset investment

=

Profit from financial activities (A)

0.5 x (Opening total investment + Closing total investment) (B)

Source of data:

(A): Index 24 of income statement.

(B): Index 120 + Index 250 of balance sheet + term deposits of less than 3 months.

2.2. Meaning: This is meant to assess the insurer’s asset investment efficiency.

...

...

...

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

3. Rate of return of charter capital

3.1. Formula

Rate of return of charter capital

=

Post-tax profit (A)

Charter capital (B)

Source of data:

(A): Index 60 of income statement.

...

...

...

3.2. Meaning

This rate reflects efficiency of use of charter capital.

3.3. Margin

Insurers over 10 years: x > 1%

Insurers under 10 years: not applicable.

If the ratio is outside the margin, the insurer must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

4. Profit distribution between policyholders and shareholders

4.1. Formula

Profit distribution ratio

...

...

...

Profit for policyholders from fund of par policies

Profit for shareholders from fund of par policies

Reference: Provided by the insurer’s valuation department.

4.2. Meaning

This ratio reflects the conformity with regulations of law on distribution of surplus of the fund of par policies.

4.3. Margin: x ≥ 70/30

If the ratio is outside the margin, the enterprise must run an analysis and provide solution to ensure that the ratio does not exceed the margin, then send a report to the Ministry of Finance.

D. GROUP OF CRITERIA FOR ASSESSING BUSINESS ADMINISTRATION AND INFORMATION TRANSPARENCY

1. Organizational structure criteria

...

...

...

- The insurer must submit a report on its latest organizational structure to the supervisory body at the end of every fiscal year;

- The insurer shall review and assess the adequacy of operations departments: R&D, sales, valuation, indemnity, reinsurance, investment, and internal control;

1.2. Personnel

The insurer shall assess:

- Adequacy of managerial positions: the Chairperson of the Executive Board/the Chairperson of the Board of members/the company's President, General Director, Actuaries;

- Part-time managerial positions according to applicable regulations;

- Standards and conditions for holding managerial positions according to applicable regulations;

The insurer shall record and report changes to its personnel and managerial works in the current fiscal years.

2. Criteria for management and information transparency

...

...

...

- Adequacy of professional process as prescribed by law.

- Performance of internal control unit; reporting of internal control result to the Board of Directors as prescribed by law;

- The insurer’s internal audit as prescribed by law;

- Actuaries’ reports to the Board of Directors as prescribed by law;

- Publishing of information such as annual financial statements, changes of addresses of headquarter, branches, representative office, information about insurance policies, funds, voluntary pension fund, etc.

- Submission of reports as required by the Ministry of Finance.

APPENDIX 5

MARGINS AND GRADING METHOD FOR ASSESSMENT OF LIFE INSURERS
(Promulgated together with Circular No. 195/2014/TT-BTC dated December 17, 2014 of the Ministry of Finance)

...

...

...

Criterion

Margin/Assessment method

Maximum score

Deduction

Notes

A

GROUP OF CRITERIA FOR ASSESSMENT OF SOLVENCY AND OPERATING RESERVE

...

...

...

I

Criteria for solvency

No scoring

1

Criterion for margin rate for the solvency

x ≥ 100%

-

2

...

...

...

x > 1

-

3

Quick Solvency

x > 1

-

II

Criteria for operating reserve

...

...

...

1

General criteria for building up operating reserve

-

1.1

Change in operating reserve

-20% ≤ x ≤ 20%

-

1.2

...

...

...

Absolute number

-

2

Criteria for operating reserves

-

2.1

Mathematical reserve

x ≥ 1

...

...

...

2.2

Reserves for unresolved claims

x = 1

-

2.3

Unearned premium reserves (not including investment-linked insurance and pension insurance)

-5% ≤ x ≤ 10%

-

B

...

...

...

300

I

Criteria for new policies

50

...

...

...

1

Ratio of change in number of new policies

- Insurers over 5 years:
-10% < x < 50%

15

- Lower than margin in the first year: minus 5 points.
- Lower than margin for 2 consecutive year: minus 10 points
- Lower than margin for 3 consecutive years or longer: minus 15 points
- Higher than margin: no deduction; a report on new policies and capital scale must be submitted to the Ministry of Finance 

- Insurers under 5 years:
50% < x < 300%

2

Criterion for ratio of change in premium revenue from new policies

...

...

...

20

- Lower margin in the first year: minus 5 points
- Lower than margin for 2 consecutive years: minus 10 points
- Lower than margin for 3 consecutive years or longer: minus 20 points
- Higher than margin: no deduction, a report on new policies and capital scale must be submitted to the Ministry of Finance

- Insurers under 5 years:
50% < x < 300%

3

Average SA of new policies

Absolute number

No scoring

...

...

...

Ratio of policies cancelled during free look period

- Insurers over 5 years:
x < 7%

15

- Higher than margin in the first year: minus 5 points;

- Higher than margin for 2 consecutive years: minus 10 points

- Higher than margin for 3 consecutive years or longer: minus 15 points

- Insurers under 5 years:
x < 15%

II

...

...

...

50

1

Ratio of change in number of policies in force

- Insurers over 5 years:
x > 3%

15

...

...

...

- Outside margin for 2 consecutive years: minus 10 points

- Outside margin for 3 consecutive years or longer: minus 15 points

- Insurers under 5 years:
x > 15%

2

Ratio of change in total premium

- Insurers over 5 years:
x > 5%

20

- Outside margin in the first year: minus 5 points
- Minus 10 points if the score exceeds the margin for 2 consecutive years.
- Minus 20 points if the score exceeds the margin for 3 consecutive years or longer.

...

...

...

3

Ratio of lapsed policies.

No scoring

- Ratio of cancelled policies in the first year

x < 25%

No scoring

...

...

...

- Ratio of cancelled policies in the second year

x < 15%

No scoring

- Ratio of cancelled policies from the third year onwards

x < 5%

No scoring

...

...

...

4

Ratio of persistency

15

- Ratio of policy persistency in the second year.

x > 60%

...

...

...

5

Outside margin: minus 5 points.

- Ratio of policy persistency in the third year.

x > 70%

5

Outside margin: minus 5 points.

...

...

...

x > 85%

5

Outside margin: minus 5 points.

III

Criteria for quality of agents

50

...

...

...

1

Ratio of change in number of recruited agents

- Insurers over 5 years:
-20% < x < 20%

No scoring

- Insurers under 5 years:
-20% < x < 100%

2

Ratio of change in number of active agents

- Insurers over 5 years:
-20% < x < 50%

...

...

...

- Insurers under 5 years:
-20% < x < 100%

3

Productivity of agents

Absolute number

No scoring

4

Ratio of premium debt to total premium

...

...

...

50

- 3% ≤ x < 7%: minus 10 points.
- 7% ≤ x < 10%: minus 20 points.
- x ≥ 10% minus 30 points.

- Outside margin for 3 consecutive years: minus 10 more points

- Outside margin for 4 consecutive years: minus 15 more points

- Outside margin for 5 consecutive years: minus 20 more points

In any case, maximum deduction is 50.

5

Use of distribution channels

...

...

...

No scoring

IV

Criteria for claim payment

100

1

...

...

...

First year: x < 10%
Second year: x < 15%
Third year: x < 20%
Next years: x < 70%

No scoring

2

Criteria for assessment of quality of claim settlement

100

...

...

...

Ratio of pending claims

x < 5%

20

- 5% ≤ x < 10%: minus 10 points.
- x ≥ 10%: minus 20 points.

2.2

Average time for claim settlement

x < 60 days

...

...

...

 - 61 days ≤ x < 80 days: minus 10 points.
- x ≥ 80 days: minus 20 points.

2.3

Ratio of claim payment

x > 95%

20

- 75% ≤ x < 95%: minus 10 points.

- x ≤ 75%: minus 20 points.

2.4

...

...

...

For health insurance:
x < 30%

10

- 30% ≤ x < 40%: minus 5 points.

- x ≥ 40%: minus 10 points.

Other insurance:
x < 10%

10

 10% ≤ x < 20%: minus 5 points.

...

...

...

2.5

Ratio of granted claims

For health insurance:
x > 70%

10

- 50% < x ≤ 70%: minus 5 points.

- x ≤ 50%: minus 10 points.

Other insurance:
x > 90%

...

...

...

- 70% < x ≤90%: minus 5 points.

-x ≤ 70%: minus 10 points.

V

Criteria for reinsurance

No scoring

1

Reinsurance ratio

...

...

...

2

Ratio of reinsurance in the first year

Absolute number

3

Ratio of reinsurance in the following years

...

...

...

4

Reinsurance efficiency assessment

Absolute number

VI

General criteria

...

...

...

50

1

Operating expense ratio

First year: x ≤ 400%
Second year: x ≤ 100%
Third year: x ≤ 50%
Fourth year: x ≤ 30%
From fifth year: x ≤ 20%

50

- Outside margin in the first year: minus 15 points
- Outside margin for 2 consecutive years: minus 30 points
- Outside margin for 3 consecutive years or longer: minus 50 points

...

...

...

Change of insurance product structure

x < 5%

No scoring

C

GROUP OF CRITERIA FOR ASSESSMENT OF CAPITAL, ASSET QUALITY, AND BUSINESS EFFICIENCY

500

...

...

...

I

Capital criteria

200

1

Capital sufficiency

According to applicable regulations

...

...

...

100

Outside margin: minus 100 points.

2

Ratio of change of charter capital

x ≥ -20%

25

Outside margin: minus 25 points.

3

...

...

...

- Insurers over 5 years:
20% ≤ x ≤ 900%

- Insurers under 5 years:
5% ≤ x ≤ 900%

25

Outside margin: minus 25 points.

4

Ratio of net premium revenue to charter capital

- Insurers over 5 years:
20% ≤ x ≤ 900%

- Insurers under 5 years:
5% ≤ x ≤ 900%

...

...

...

5

Ratio of charter capital to liabilities

x > 1

25

Outside margin: minus 25 points.

6

Ratio of capital support to charter capital

...

...

...

No scoring

7

Ratio of charter capital to total capital

x > 10%

25

Outside margin: minus 25 points.

II

...

...

...

200

1

Change of asset structure

x < 5%

No scoring

...

...

...

Ratios of receivables to charter capital

50

2.1

Ratio of receivables from customers to charter capital

x < 10%

...

...

...

Outside margin: minus 50 points.

2.2

Ratio of internal receivables to charter capital

x < 1%

No scoring

2.3

Ratio of bad debts to charter capital

x < 0.5%

...

...

...

3

Reserve for bad debts

x < 5% for each asset portfolio

25

- Each criterion outside margin: minus 10 points.
- Maximum deduction: 25 points.

4

Reserve for asset devaluation

...

...

...

25

- Each criterion outside margin: minus 10 points.
- Maximum deduction: 25 points.

5

Correspondence between assets and liabilities

0 ≤ x ≤ 15 (years)

50

Outside margin: minus 50 points.

...

...

...

Criteria for business efficiency

100

1

Rate of net profit from insurance business

- Insurers over 10 years:
0% < x < 20%

- Insurers under 10 years: not applicable.

...

...

...

2

Rate of return of asset investment

x > 4%

30

Outside margin: minus 30 points.

3

Rate of return of charter capital

...

...

...

- Insurers under 10 years: not applicable.

50

Outside margin: minus 50 points.

4

Profit distribution between policyholders and shareholders

x ≥ 70/30

20

...

...

...

D

GROUP OF CRITERIA FOR ASSESSING BUSINESS ADMINISTRATION AND INFORMATION TRANSPARENCY

200

1

Organizational structure criteria

...

...

...

120

- Having all positions approved by the Ministry of Finance

Article 69 of the Law on Insurance Business, Clause 9 Article 1 of the Law on amendments to the Law on Insurance Business

20

No General Director/President/Actuary: minus 20 points

...

...

...

According to Article 23, Article 24, Article 25, Article 26, Article 27, Article 28, and Article 31 of Circular No. 124/2012/TT-BTC and its amendments (if any)

30

- Each position that fails to satisfy conditions: minus 10 points
- Maximum deduction: 30 points.

- Satisfactoriness of part-time managerial positions

According to Article 14 of Decree No. 45/2007/ND-CP, Article 29 of Circular No. 124/2012/TT-BTC.

30

...

...

...

- Establishment of mandatory departments prescribed by law

According to Article 28 and Article 36 of Circular No. 124/2012/TT-BTC and its amendments (if any)

40

- Each missing department: minus 20 points
Maximum deduction: 40 points.

2

Criteria for management and information transparency

...

...

...

80

- Establishment of professional procedures prescribed by law

According to Article 15 of Decree No. 45/2007/ND-CP, Article 36 of Circular No. 124/2012/TT-BTC.

30

- Each missing procedure: minus 10 points
- No internal control procedures: minus 20 points.
Maximum deduction: 30 points.

...

...

...

According to Article 36 of Circular No. 124/2012/TT-BTC.

10

 Report is not submitted by internal control unit to General Director, the Chairperson of the Board of members, the Chairperson of the Executive Board, or the company's President at least once a year: minus 10 points.

- Internal audit

According to Article 35 of Decree No. 46/2007/ND-CP, Article 31 of Circular No. 125/2012/TT-BTC.

10

...

...

...

-Conformity with regulations on reporting

According to regulations of law

10

Violations against regulations on reporting: minus 10 points

- Actuary’s report

According to Article 30 of Circular No. 124/2012/TT-BTC.

...

...

...

10

No periodic reports submitted by the actuary to General Director or the Board of Directors or the Board of members: minus 10 points.

- Penalties for administrative violations incurred in the year

10

Penalties for administrative violations incurred in the year: minus 10 points.

...

...

...

x: Calculated and reported to the Ministry of Finance by the insurer as prescribed in this Circular.

APPENDIX 6

MEASURES TAKEN TO ENSURE THE AMPLITUDE OF EACH INDICATOR FOR LIFE INSURANCE ENTERPRISES
(Issued with Circular No.195/2014/TT-BTC dated 17/12/2014 of the Ministry of Finance)

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1. Take measures specified in Article 79 of the Law on insurance business to restore the solvency margin.

2. Appropriate the proper and complete provision by the methods and basis registered with the Ministry of Finance and in accordance with regulations of law.

II. For group of assessment indicator of insurance operation

1. For indicators of new business

a) Improve the insurance products and develop new products in accordance with the market demand;

b) Assess the business strategy on the basis of market study and compare it with the implementation reality of the insurance enterprises of the same size.

c) Study to improve the quality of customer services;

d) Improve the quality of insurance agents;

dd) Expand distribution channels.

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a) Develop or improve the customer care procedure and improve the quality of customer services;

b) Review the structure and features of products under way;

c) Review and amend the policy to the insurance agent;

d) Review and modify the procedure for verification of insurance contract to ensure the customers are provided with products consistently with their needs and financial capacity to minimize the contract annulment.

3. For the indicators on quality of insurance agents.

a) Review the policy on development of insurance agent;

b) Complete the procedure/policy on management of insurance agents and policies on commission to agents in accordance with regulations.

c) Improve the quality of recruitment and training of insurance agents.

4. For indicators on insurance payment

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b) Develop and complete the procedure for claim settlement and make insurance payment towards maximizing the protection of insurers’ interests.

5. For indicators on re-insurance

Review the enterprise’s re-insurance policy.

6. For general indicators

a) Change the policy on cost management in order to bring the costs to the normal limit corresponding to the enterprise’s business and operation scale;

b) During the preparation for budget plan for the next financial years, the expenditures need to be balanced in order to maintain the cost indicator at the normal fluctuation.

III. For the group of assessment indicators on capital, asset quality and performance

1. For capital indicator

Increase the charter capital to meet the scale of business as prescribed by law or narrow the operational contents, scope and areas.

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a) Adjust the structure and limit of investment assets and appropriate the prescribed provision for devaluation of investment assets.

b) Complete the investment procedures and policies; strengthen the inspection and monitoring of implementation.

IV. For the group of assessment indicator on corporate management and information transparency

1. Adjust and complete the corporate management, recruitment and training or have plan to replace the employees who fail to meet the standards of profession, experience and diploma.

2. Strengthen the organization of division of internal inspection and control; modify and add the procedures for operation, internal inspection and control; perform the internal inspection and control; seriously comply with the reporting regulations as prescribed by law and have sanctions against divisions and individuals that fail to comply.