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INISTRY OF FINANCE
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SOCIALIST REPUBLIC OF VIETNAM
Independence Freedom Happiness
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No. 98/2004/TT-BTC
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Hanoi, October 19th, 2004
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CIRCULAR
ON PROVIDING GUIDELINES FOR IMPLEMENTATION OF DECREE 42/2001/ND-CP
OF THE GOVERNMENT DATED 1 AUGUST 2001 PROVIDING DETAILED REGULATIONS FOR
IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE LAW ON INSURANCE BUSINESS
Pursuant to the Law on
Insurance Business 24/2000/QH10 dated 9 December 2000;
Pursuant to Decree 42/2001/ND-CP of the Government dated 1 August 2001 providing detailed
regulations for implementation of a number of articles of the Law on Insurance Business;
Pursuant to Decree 77/2003/ND-CP of the Government dated 1 July 2003 on functions, duties,
powers and organizational structure of the Ministry of Finance;
The Ministry of Finance provides the following specific guidelines:
I. ESTABLISHMENT AND OPERATION OF INSURERS AND INSURANCE BROKERS
1. Application file for issuance of licence for establishment and operation:
1.1 An application file in accordance with article
64 of the Law on
Insurance Business shall comprise:
1.1.1
An
application form for issuance of a licence prepared in the sample form in Appendix 1 to
this Circular and
signed by the
legal representative
of,
or the person
authorized
by,
the
investor;
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1.1.3 List, curriculum vitae and notarised data about company managers and operators proving their ability, skills and professional qualifications;
1.1.4
Levels of capital contribution, list of organizations and individuals owning 10% or more of the charter capital, and
financial and other
information
on such organizations
and individuals;
1.1.5 Rules, terms and conditions,
premium rates, and insurance
commission scales for the insurance products proposed to be provided;
1.1.6 For an insurance
broking enterprise, an application file for issuance of a
licence shall
not
contain item 1.1.5 above, and the operational plan for the first five years of a broker shall not include methods of establishing professional reserves, a reinsurance program,
investment capital nor [data proving] solvency of the enterprise.
1.2.
In
addition to the documents stipulated in clause 1.1 above and depending on the type of enterprise proposed to
be established,
the
application for issuance of
a licence must include the following data:
1.2.1 For a State owned insurer or insurance broker:
(a)
Draft charter
of the enterprise containing
the
principal items as
stipulated in the Law on
Enterprises and its implementing
guidelines;
(b)
Letter
from the body which made
the
decision
on establishment
of the enterprise,
agreeing to it conducting insurance
business or insurance broking business;
(c) Explanatory statement of
the
capital
sources
funding the establishment
of the insurance
enterprise or insurance broking enterprise, certified by the competent body.
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(a)
Draft charter of the enterprise containing the principal items as stipulated in the Law on Enterprises and its implementing guidelines;
(b) Minutes
of meeting
of the investors on
the
establishment
of a shareholding
insurance company,
shareholding insurance
broking
company,
limited
liability insurance
broking
company, private insurance broking enterprise or insurance broking partnership;
(c) Certification
by the competent
body of
the
legal capacity of
the
investors and founding shareholders:
- If the investor is
a legal entity, it
must
lodge
a notarised
copy of the decision
on establishment of
the
enterprise,
the
business
registration certificate, and the investment licence
(if any);
- If
the
investor
is an
individual he
must lodge his
curriculum vita
in the form
stipulated by law.
(d)
Certification of the legality of the funding sources for establishing the company:
- If the investor is a legal entity, it must lodge audited financial statements for the 3 most recent years;
- If the investor is an individual he must lodge bank certification of the balance in his
deposit account,
or a term deposit
certificate with
at least
six months of
the
term remaining (from the date of lodging the application file), or a certificate of a deposit
account in the investor's own name. Files and documents on land and housing shall not be used to prove an investor's financial
capacity and ability to contribute capital;
(dd) Power of attorney to the investors' representative;
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1.2.3 For an
insurance
enterprise
or insurance broking enterprise
with 100% foreign
owned capital:
(a)
Draft charter of the insurer with 100% foreign owned capital containing the principal items
stipulated in the Law on Foreign Investment in Vietnam and its implementing guidelines;
(b)
Charter of the foreign investor;
(c) Operational licence of the foreign investor;
(d)
Letter of confirmation from a competent foreign body:
- Permitting the foreign investor to establish an enterprise with 100% foreign owned capital in Vietnam; and
if
the regulations of the country where the foreign investor has
its
head
office do
not
require
such a letter of
approval, then
there must
be evidence confirming this;
- Confirming the foreign investor is
permitting
to conduct the type
of insurance
business proposed to be conducted in Vietnam;
- Confirming the foreign investor
is in
a healthy financial
state
and
satisfies the regulatory requirements of his own country.
1.2.4 For a joint venture insurance enterprise or insurance broking
enterprise:
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(b)
Charter of the joint venture enterprise containing the principal items stipulated in the Law
on
Foreign Investment in Vietnam and its implementing guidelines;
(c) Charter of the foreign party to the joint venture;
(d)
Operational licence of the foreign party to the joint venture;
(dd) Letter of confirmation from the authorized foreign body:
- Permitting the foreign
investor
to establish a joint
venture insurance
enterprise in
Vietnam;
and if the regulations
of the country where the foreign
investor
has its head office
do not require such a letter
of approval,
then there must
be
evidence
confirming this;
- Confirming the foreign investor is
permitting
to conduct the type
of insurance
business proposed to be conducted in Vietnam;
- Confirming the foreign investor
is in
a healthy financial
state
and
satisfies
the
regulatory requirements of his own country.
(e)
Letter
from the authorized body permitting the Vietnamese party to
contribute capital
to the joint venture;
(g)
Explanatory
statement
of the sources funding
the
Vietnamese
party,
certified by
the
competent body.
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2. Procedures for receiving and dealing with applications for a licence:
2.1. An application file for issuance of a licence shall be received and checked by the Ministry of Finance on the following bases:
2.1.1 The requisite number of sets and the requisite number of documents to be included in the file;
2.1.2 The validity of the application for the licence;
2.1.3 The documents certifying legal entity status and financial status of the investor.
2.2.
Within a time-limit of sixty (60) days from the date of receipt of a complete application file
for issuance of a licence from an investor, the Ministry of Finance shall make a decision to issue or to refuse to issue a licence.
In
the case of refusal, the Ministry of Finance shall provide a written explanation.
During evaluation of an application file for issuance of a licence, and within a time-limit of
fifteen
(15)
working
days
from the date of
receipt
of a complete
application
file as
stipulated in clause 2.1 above, the Ministry of Finance may send a notice to the investor
to amend or add to the file where it considers it necessary.
The investor shall
provide
amendments or
additions within
a time-limit of
thirty
(30)
working days from the date of receipt of such request from the Ministry of Finance. If the investor fails to
complete
the
file
as required within
the
time-limit
for
providing amendments and
additions to the application file for issuance of a licence, including any
extension thereof, the application file shall no
longer be valid for consideration.
2.3. A licence shall be issued in the sample form in Appendix 2 (attached to this Circular).
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3.1. An application for issuance of a
licence shall be evaluated
on the following bases:
3.1.1 Law on Insurance Business and its implementing guidelines;
3.1.2 Other relevant laws.
3.2. An application for issuance of a
licence shall be evaluated
with respect to the following:
3.2.1 Evaluation of legal entity status and financial status of the investor by reference to:
(a). Document
establishing
the
enterprise
and the organizational and
operational charter of
the
enterprise
(where
the
investor
is a legal entity)
or the document
proving
legal entity status (where
the investor is an individual);
(b). Audited
financial statements
for
the
preceding
three
consecutive
years (where
the
investor is a currently operating
legal entity), including revenue,
asset value,
and
annual profit; the ability of
the investor
to
raise capital,
and evidence
from banks of balances in deposit accounts of the investor (where the investor is an individual); assistance from the head company (if any);
(c). Capital levels,
amount of
deductions for insurance reserves
and
other reserve
funds
in accordance
with regulations; investment
activities,
and business plan of
the
insurance enterprise or insurance broking enterprise proposed to be established.
3.2.2 Evaluation
of consistency
of establishing the insurance or
insurance broking enterprise
with socio-economic planning and interests:
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(b).
Consistency shall be considered
on the basis of the following specific items:
-. Ensuring the healthy development of the insurance market;
-. Requirements of
the
national
economy
for
the
types
of insurance products proposed to be marketed;
-. Consideration of
the ability to develop the potential of domestic insurance and the ability of the domestic market to retain premiums; the ability to
create jobs;
-. Process of
integration and development of
commercial relationships between
Vietnam and other countries.
3.2.3 Evaluation of insurance products in application for issuance of a
licence:
(a). Whether the regulations, terms
and conditions, and
premium
scales which have
been drafted
are consistent
with the current
provisions
of the law, whether they
are economically and technically feasible,
and whether
they are
consistent
with Vietnamese socio-economic conditions, customs and practices;
(b).
Development of new insurance products which insurers currently operating in the market
are
unable to provide shall
be
encouraged.
4.. Fees for issuance of licence:
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5. Amendment of or
addition to licence:
The procedures for approving changes under article 69 of the Law on Insurance Business shall
be
specifically implemented as follows:
5.1. Changing the name of an enterprise:
An insurer or insurance broker wishing to change the name of its enterprise shall forward
to the Ministry
of Finance
an application for a change
of name
signed
by the legal representative of, or person authorized by, the enterprise and the written confirmation of the change of name from the competent body or person having authority of the enterprise.
5.2. Increasing or decreasing charter capital
of an insurer or insurance broker:
An
insurer or
insurance
broker
wishing to
increase or decrease
charter capital
of the enterprise shall forward to the Ministry of Finance the following:
5.2.1
Explanatory
statement
of the increase or
decrease in
charter
capital,
bearing
the
signature
of the legal
representative of, or
person authorized by, the enterprise and
specifying the amount of the increase or decrease, the reasons for it, the plan for use of
capital, and the period within
which it is proposed
to be implemented;
5.2.2 The written approval of the competent body or person having authority of the enterprise of the increase or decrease in
the charter capital;
5.2.3 Explanatory statement of the financial sources used for increase in capital, in the case of increase in charter capital.
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5.3.1
An application file for the opening of
a branch or
representative office
of an
insurer
or insurance broker shall
be implemented in
accordance with
the
provisions
in articles 11
and 12 of Decree 42/2001/ND-CP
of the Government dated
1 August 2001 providing
detailed regulations for implementation
of a number of
articles of
the
Law on Insurance Business.
5.3.2
An application file for the opening
of an
overseas branch or
representative office of
an insurer or insurance broker shall be implemented in accordance with the provisions of the
laws relating to investment overseas.
5.3.3 An application file for the termination of a branch or representative office of an insurer or insurance broker shall comprise:
-. Application requesting termination of operation;
- Report on status of operation of the branch or representative office in the preceding three years.
Where the branch or representative office has not been operating for three years, a report on the status of operation from the time of commencement of operation shall be required;
- Responsibilities and matters arising out of the termination of operation.
5.4. Changing
the
location
of a head office, branch or
representative office of
an insurer
or insurance broker:
An insurer or insurance broker wishing to change the location of its head office, branch or
representative office shall forward to the Ministry of Finance an application file for change of
the
location
of its head office,
branch or
representative
office signed by
the
legal
representative of, or person authorized by, the enterprise.
5.5. Changing the area, scope or duration of operation:
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5.6. Transferring shares or capital contribution share:
An application for the transfer of shares or capital contribution share amounting to ten (10)
per
cent or more of the charter capital shall be prepared in one set and submitted to the Ministry of Finance, and shall
comprise the
following documents:
5.6.1
Application for the transfer
of shares or
capital contribution
share amounting
to ten (10) per
cent or more of
the
charter capital,
signed by the legal
representative of, or
person authorized by, the enterprise.
The
application shall specify the number and value of the
shares,
the
proportion
of capital
contribution
to be
transferred,
and the reasons for the transfer;
5.6.2 Information on the organization or individual being the transferee of the shares or capital
contribution share;
5.6.3 Contract for transfer of the shares or capital contribution share.
5.7. Changing the chairman of the board of management or the general
director (director):
5.7.1
No
later than fifteen (15) days prior to the date of issuance of the written appointment or
removal, either
during
a term
or at
the
end
of a term, of the chairman
of the board of
management or the general director
(director)
of an
insurer or
insurance broker, the chairman
of the board
of management
or the person authorized by him shall forward
to the Ministry of Finance a request for approval of the change.
5.7.2 An application file for change of the chairman of the board of management or the general director (director) shall comprise:
(a)
Written request for approval of change;
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(c) Curriculum
vita
of the appointee,
certified
by the board of
management or
the
person authorized by the
insurer or insurance broker;
(d) Certificates and diplomas showing the professional qualifications and expertise of the new chairman
of the board of
management or
the
general
director (director) who is
to be
appointed;
(dd) Minutes of the meeting which approved the appointment or removal of the chairman of the
board of management or the general director (director) of the insurer or insurance broker,
(if
any).
5.8. Division,
split, merger,
consolidation,
dissolution,
or conversion of
the
form
of an
enterprise:
The application,
the
procedures and
the
time-limit for resolution of
any request for division, split, merger,
consolidation, dissolution,
or conversion
of the form of
an enterprise shall be implemented in accordance with the provision of the relevant laws.
5.9. Time-limit for resolution of requests for amendment of or addition to licence:
Within a time-limit of thirty (30) days from the date of receipt by the Ministry of Finance of a complete
file
requesting amendment
of or
addition to
the
licence
of an
insurer or
insurance broker as stipulated in clauses 5.1 to 5.8 of Part I of this Circular, the Ministry of Finance shall notify the enterprise of its approval or refusal to approve the request of the enterprise.
In
the case
of refusal to
approve, written reasons must be provided.
In
the case of approval, the Ministry of Finance shall provide an amended licence in the sample form in Appendix 3 (attached to this Circular). The amended licence shall be an integral part of the licence for establishment and operation of the
insurance enterprise.
II. INSURANCE OPERATIONS
1. Registration of
insurance
regulations, terms and conditions,
and
premium
scales applicable to insurance products:
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1.2.
An insurer may
only register
insurance rules,
terms and
conditions, and
premium
rates
applicable to insurance products for the insurance business it is authorized to conduct in
its
licence for establishment and operation (or
certificate
of satisfaction of
all
standards and conditions for insurance business) issued to the insurer by the Ministry of Finance.
1.3.
An
insurer shall be responsible for the contents and legality of the insurance rules, terms and conditions, and premium rates applicable to insurance products which it registers with the Ministry of Finance.
1.4.
At the time of
registration of
its
rules, terms and
conditions, and premium
rates for insurance products,
an insurer shall
submit
to the Ministry
of Finance
the
following
documents:
1.4.1 Written request for registration of an insurance product in the sample form in Appendix 12 to this Circular;
1.4.2
Rules, terms and conditions, and premium rates which the insurer proposes to apply (in Vietnamese).
In the case
of insurance products underwritten pursuant
to international
practice such as maritime and aviation insurance and so forth, then the rules, terms and conditions, and premium rates may be registered in English.
1.5. Within a time-limit of 3 working days from the date an insurer lodges complete documents for registration of insurance rules, terms and conditions, and premium rates, the Ministry
of Finance shall
certify
that the insurer has finalised the procedures
for
registration of
such
insurance rules, terms and conditions, and premium rates.
1.6.
If an
insurer needs
to change or
amend the insurance
rules,
terms
and conditions, and
premium rates of its insurance products which have been registered with the Ministry of
Finance, it
must register such changes
following
the
procedures set out
in clause 1.4 above. In the case of special risks or risks not yet fully mentioned in the insurance rules, terms and
conditions, and premium
rates which have
already
been registered
with the Ministry of Finance, then the insurer and the purchaser of insurance shall be permitted to
agree the insurance conditions and the premium rates so that the risk will be insured, and
then the procedures for registration of the product shall be conducted after the contract is
signed.
2. Approval of insurance products:
2.1. Prior
to underwriting
life, health
or personal
accident insurance,
an insurer must
file
an application for approval of the particular insurance product, comprising:
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2.1.2 Rules,
terms and conditions, premium rates and commission applicable to the insurance product which the insurer proposes to underwrite;
2.1.3
Formula and methods
for
calculating premium and
reserves, with
an explanation
of the bases for same, relevant
to the insurance
product which
the
insurer proposes
to underwrite;
2.1.4
Relevant data
comprising
sample form for request
for
insurance
cover, the insurer's
explanatory
material
on its products and
services, any
sales literature
the
insurer
uses, and sample forms of information which a client must disclose and sign when purchasing insurance.
In the case of life products which distribute dividends, the bases for calculating premium for the proposed product
must include principles,
methods and the percentage dividend distribution
the
insurer
promises to
clients which must not
be less than 70% of
the total revenue from the insurance contract following the method which has been agreed by the Ministry
of Finance.
This provision shall
only apply to contracts
for
life
products
which distribute dividends and which are signed as from 1 January 2006.
2.2 The rules and conditions which an insurer submits to the Ministry of Finance for approval must ensure:
2.2.1 That
purchase of
subsidiary products
or riders to the main
product is
not a mandatory condition
for maintaining effectiveness of the main insurance product;
2.2.2
That there are
no terms and
expressions which are
difficult to
understand,
vague or ambiguous;
or if
such terms
must be used, then insurers
must
fully
define them and
provide a full
explanation of them so as to avoid misunderstanding on the part of clients;
2.2.3
The application file for approval
of a life product
must be signed by
the
head of the enterprise or
his legally appointed
proxy, and must be
certified
by
an appointed actuary
approved in accordance with the provision in Part III below.
3. Provisions on underwriting life insurance:
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3.1.1 To
ensure
that
their brochures use terms and
expressions
which
are simple, clear and
easy to understand, and do not include any information which will confuse clients;
3.1.2
When
describing
products, to
distinguish clearly between
benefits which
the
client is guaranteed to receive and benefits which are non-guaranteed, and to notify clients of the total insurance benefits receivable
pursuant
to any non-guaranteed contract
when
those
benefits are variable;
3.1.3
At
least once each year, insurers must check the assumptions used in the explanations in
their brochures.
If the assumptions are no
longer consistent with
the
actual
situation,
insurers must amend their sales brochures accordingly;
3.1.4
To
ensure that the brochures which introduce life insurance products and services do not contain information about
insured
interests which is
contrary to
the
rules, terms and
conditions already approved by the Ministry of Finance.
3.2. Sales literature:
3.2.1
An
insurer must provide clients with sales literature giving illustrations or examples of its
insurance
products,
either
directly or
via
agents or
brokers permitted to
operate in
Vietnam;
3.2.2
Assumptions
used to
make
calculations
in sales
literature
must
be approved
by an
actuary appointed
by the insurer before such sales
literature
is used
in order to
be provided
to clients;
and
sales literature
must be
clear,
complete and accurate so as
to help clients make an appropriate choice;
3.2.3
Insurers
shall
be liable
for
the
accuracy of
the
brochures which introduce their products and
services and
of all their sales
literature,
and
insurers shall be
liable to
keep such
material up-dated throughout the whole period of its use.
3.2.4
Insurers shall explain in their sales literature the conditions for receipt of surrender value
together with
the
benefits
and specific
sum which the client
will
receive as
surrender value, and
must specify if such benefits are guaranteed or non-guaranteed.
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If an insurance policy does not contain specific provisions, then an insurer must provide a client with
the following information in
writing when the insurer issues the policy:
3.3.1 Method of paying premium and dates when periodical payments of premium are due;
3.3.2 Name of an individual or of a section within the enterprise to contact if the client requires
assistance or if the client needs to have any contract issue resolved;
3.3.3 Responsibility of the client
to notify the insurer
of any change
of address of
the
person participating in insurance.
Insurers must provide annual notice to policy owners of the status of their contracts.
3.4. Surrender value of life insurance contracts:
3.4.1
A life insurance contract
shall only have a surrender value after it has been effective for
twenty
four
(24)
months or
more
in the case
of insurance
contracts
with periodical payments of premium;
3.4.2 Insurers shall have the
right to deduct unpaid debts prior to payment of surrender value to the insurance purchaser.
4.. Publication of list of insurance products:
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5. Insurance commissions:
5.1.
Insurers
may only pay
insurance
commissions
from
that
part
of insurance premium
actually collected in accordance with the rates of insurance commission stipulated by the
Ministry of Finance for each type of insurance product to the entities specified in article 20 of
Decree 42/2001/ND-CP
of the Government
dated
1 August 2001
providing
detailed regulations for implementation of a number of articles of the Law on Insurance Business.
5.2.
Insurance
commissions shall
be treated
as a cost of the insurer payable to
insurance brokers and
insurance agents.
An insurer may on
its
own
initiative
use insurance commissions for the following items of expenses:
5.2.1 Initial operating expenses (finding, persuading and introducing clients);
5.2.2 Expenses of collecting premiums;
5.2.3 Expenses of monitoring
insurance contracts and
persuading clients to maintain them.
5.3
The maximum
permissible
rates
of insurance commission
payable to
insurance agents
shall
be as
stipulated in
Appendix 4 List of
Maximum Rates
of Insurance Commission
Applicable to
Non-Life
Insurance
Products and
Appendix 5 List of Maximum
Rates
of Insurance Commission Applicable to Life Insurance Products attached
to this Circular.
Insurance commission applicable to a package insurance contract shall be calculated as
the
total commission for each risk insured by the package contract.
5.4.
Rates of
insurance
commission payable
to
an insurance broker shall be implemented in
accordance with
the
agreement between
the
insurer
and
the
broker, consistent with the
laws
of Vietnam and
with international
practice. Depending on
the
scope, level
and contents of
the
insurance broking
services which
are
provided, insurance commission
may
be paid to an insurance broker up to fifteen (15) per cent of the amount of premium
actually collected.
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1. A life insurance enterprise
must
use
an appointed actuary to
fulfil the following
duties:
1.1. To
sign, together
with the general
director (director)
of the life insurance enterprise, an
application file for approval
of an insurance product;
1.2. To establish mathematical reserves for life insurance contracts in accordance with law;
1.3. To
approve
distribution
of any
annual surplus
of the policy owners'
fund on
a fair
and reasonable basis and in compliance
with law;
1.4. To assess the financial capacity of the life insurer by checking its solvency at the end of
each accounting period;
1.5. To provide quarterly and annual reports to the board of management of the life insurer on
the
current financial status and future prospective financial status of such life insurer;
1.6.
To
promptly report in writing to the general director (director) and board of management of
the
life
insurance company
any
irregular incidents
which may
prejudice
the
financial status of such life insurer, and to propose remedial
measures;
1.7.
If a life insurer fails to apply the appropriate remedial measures within a reasonable time- limit
as proposed by
the
appointed actuary
to overcome financial
difficulties, then
the
appointed actuary shall be responsible to pass onto the Ministry of Finance a copy of the
above-mentioned report so that the Ministry of Finance may deal with the matter.
2. An appointed actuary must satisfy the following standards:
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2.2.
Have good professional ethics, not have committed any breach of professional conduct of actuaries, and
not
be subject to
criminal prosecution
for
any
crime relating
to his
profession;
2.3. Be
a staff
member
of the insurance enterprise
or of
a company providing
actuarial consultancy, or practise
independently as an individual actuary.
3. An appointed actuary may not concurrently hold one of the
following positions:
3.1. General director;
3.2. Chief accountant;
3.3. Member of the board of management.
4. Procedures for approval of appointed actuaries:
4.1.
The
board of management of a life insurance enterprise, or the general director (director) where
there is
no board of
management,
shall
be responsible to
assign an
appointed actuary to carry out the work stipulated in clause 1 above. The Ministry of Finance must provide prior approval in writing of an appointed actuary.
4.2. An application file for approval of an
appointed actuary shall
comprise:
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4.2.2 Evidence,
curriculum
vita and
data
about
the
proposed
appointed actuary
proving his
ability and professional
qualifications;
4.2.3 Notarised
copy of a certificate
proving
membership
of a recognised
Association
of Actuaries.
5. Procedures for approval of a change in the appointed actuary:
If
an insurance
company changes
its
appointed actuary,
it must
forward
the
Ministry of
Finance an application file for approval
of
the change, comprising:
5.1.
Written request to the Ministry of Finance to relieve the current appointed actuary and to
approve a new appointed actuary, signed by the chairman of the board of management or by the general director (director) where there is no board of management;
5.2. Evidence, curriculum vita and data about the proposed new appointed actuary proving his ability and professional
qualifications;
5.3. Notarised
copy of a certificate
proving the proposed new
appointee's
membership
of a recognised Association
of Actuaries.
6. Cessation of status as appointed actuary:
The
status of
a person as appointed
actuary shall
automatically
cease
in the following circumstances:
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6.2. Written request from the insurance enterprise for a change in the appointed actuary;
6.3.
Within a time-limit
of fifteen (15) days from
the
date
of receipt of
a complete file
as prescribed
above, the Ministry of
Finance shall provide
written
approval. In
the
case of refusal, the Ministry of Finance shall provide a written explanation.
7. The provisions on appointed actuaries shall apply as from 1 January
2006.
IV.
REINSURANCE ACTIVITIES
1.
Insurers
shall arrange compulsory
reinsurance
as provided
in article
22 of
Decree 42/2001/ND-CP
of the Government dated 1 August
2001
providing detailed
regulations for implementation of a number of articles of the
Law on Insurance Business.
The list of products which must be reinsured shall comprise:
1.1. Property insurance and damage insurance;
1.2. Insurance for goods in transit by road, sea, river, rail and air;
1.3. Aviation insurance;
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1.5. Hull insurance and ship owner's civil liability insurance.
2.
Insurance commissions shall be paid by Vinare to insurers which compulsorily cede part of their liability, in
accordance with Appendix 6 to this Circular.
3.
Reinsurance business activities:
3.1. When insurers arrange
reinsurance overseas, they may only arrange reinsurance with a reinsurance company which satisfies the
following conditions:
3.1.1 The company has financial capacity and operational experience in the
market;
3.1.2
At
the time of arranging reinsurance overseas, the company is classified at least "BBB" by
Standard & Poor's, "B++" by
A. M. Best, "Baa"
by Moody's or
achieves
an equivalent
classification result.
If reinsurance is arranged with the parent company overseas or with another company in the group which does not have the credit rating prescribed in this clause, then the insurer
must report this to the Ministry of Finance.
3.2. Insurers may
only retain the maximum liability for each
risk or
each loss up to
10% of owner's equity, and liability in excess of such
10%
must be reinsured.
V. INSURANCE AGENTS
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1.1.
Any insurance agent training establishment wishing to organize insurance agency training
must forward a written request to the Ministry of Finance for approval of the program for
insurance agency training in accordance with the provisions of article 31.3 of Decree 42/2001/ND-CP.
1.2. Issuance of certificates of training as insurance agent:
1.2.1
Only
insurance
agent training establishments
which have
been permitted to
operate
by the Ministry of Finance shall have the right to issue certificates of training as an insurance
agent. People
issued
with a certificate
must have completed
a program
for
training insurance agents and must have passed an exam for the
issuance of such certificates.
1.2.2 Certificates of
training as
insurance
agent
shall
be issued
in the uniform
sample form
(Appendix 7 to this Circular).
1.3.
Annually,
at the latest by
30 January of
the
following
year,
insurance agent
training establishments shall
forward
to the Ministry of
Finance reports (in the sample form in
Appendix 8)
on the number
of training
courses held, the number
of agents trained, and
the number of certificates of training as insurance agent issued in the year.
Quarterly, no later than the fifteenth day of the first month of the following quarter, insurers shall forward
to the Ministry of
Finance
lists of insurance
agents of the insurer (in the sample form in Appendix 9 to this Circular).
2. Rights and obligations
of
insurers and insurance agents:
2.1.
The rights and
obligations
of insurers in
administration
of insurance activities,
and
the
rights and obligations of
insurance agents shall be as stipulated in articles 29 and 30 of
Decree 42/2001/ND-CP of the Government
dated 1 August 2001 providing
detailed regulations for implementation of a number of articles of the Law on Insurance Business.
2.2.
Insurers shall be prohibited from signing an
insurance agency contract with an individual
with whom another insurer has compulsorily terminated his agency contract for a serious breach of
the
law and of the
agency contract, for three
years from
the
date
of such
termination.
When
an insurer
compulsorily
terminates an
agency
contract
for
the
above-mentioned
reason, such insurer shall
notify
the
Vietnam Insurance Association
so that
the
Association may in turn notify all other insurers.
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3.1.
To
provide false information or false advertising about contents, scope of operation of the insurer, and
insurance conditions and
terms,
thereby
harming the legal rights and
interests of purchasers of insurance;
3.2. To prevent purchasers of insurance providing information or incite them not to declare all details, as relevant to insurance contracts;
3.3. To compete for clients by obstruction, coercion, enticement or threats to staff or clients of other insurers, insurance agents or brokers;
3.4. To
promote
clients by unlawful
means by promising to
provide them with
a reduction or refund of premiums or other benefits which are not provided by the insurer;
3.5. To
incite purchasers of
insurance to
rescind
current
insurance contracts
in order
to purchase new ones.
4. Supervision
by the
Ministry
of Finance of
the
activities
of insurers
and
of the
Vietnam
Insurance Association in training and employing insurance agents:
4.1. Insurers and the Vietnam Insurance Association shall be responsible before the law for all of their activities in training and employing insurance agents;
4.2.
The
Ministry of Finance may conduct periodical or one-off inspections of insurers or of the Vietnam Insurance Association
of their recruitment, training, management and use
of insurance agents.
The
above
inspections
must not interfere with
the
normal activities of
insurers
or the Vietnam Insurance Association.
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VI. INSURANCE BROKERS
1. Principles in insurance broking activities:
Insurance
brokers shall only be
permitted
to advise on, or
to offer to
parties purchasing insurance,
the
insurance regulations, terms and conditions, and
premium
scales which have
been issued or
approved by
the
Ministry of Finance,
or which
an insurer has registered with the Ministry of Finance.
2. Payment
of premiums and payment
of insurance indemnity through
insurance
brokers:
2.1. An insurer may authorize an insurance broker to collect premiums or to pay indemnity or insurance proceeds.
2.2.
Where an insurer authorizes an insurance broker to collect premiums, the responsibility of
the
purchaser of
insurance
to pay
the
premium
shall be
fully
discharged when the purchaser pays the premium in accordance with the agreement in the insurance contract to the insurance broker.
Where an insurer authorizes an insurance broker to collect premiums and the purchaser of
insurance
pays the premium
in accordance
with the agreement
in the insurance
contract,
the broker shall be responsible to
pay
the above premium to the insurer within
the
period agreed
by the insurer
and the insurance
broker. Where
no agreement
on period for payment is made, the broker shall be responsible to pay the above premium to
the
insurer at the earliest time, but within seven days of receipt at the latest.
2.3.
Where an insurer authorizes an insurance broker to pay insurance proceeds or indemnity, the insurer
shall remain liable to
the insured person or to the beneficiary for the amount that the insurer is liable to pay to such insured person or beneficiary.
2.4.
Where an insurer authorizes an insurance broker to pay insurance proceeds or indemnity, the insurance broker shall be responsible to pay such sum to the insured person or to the
beneficiary immediately upon receipt of such sum by the broker from the insurer.
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3.1. To prevent purchasers of insurance providing information or incite them not to declare all details, as relevant to insurance contracts;
3.2. To promote clients by promising to provide them with unlawful benefits in order to induce
them to enter into an insurance contract;
3.3. To
induce
purchasers of
insurance to
rescind current insurance contracts in
order to
purchase new ones.
VII.
REPRESENTATIVE OFFICES OF FOREIGN INSURERS AND FOREIGN INSURANCE BROKERS IN VIETNAM
1. Application file for issuance of licence for establishment of representative
office:
1.1. A foreign insurer or a foreign insurance broker wishing to establish a representative office
in
Vietnam shall forward to the Ministry of Finance a file as stipulated in article 110 of the Law on Insurance Business.
1.2.
An application
to establish
a representative
office
in Vietnam shall bear the signature
of the chairman of the board of management or person authorized by the foreign insurer or
foreign insurance broker and shall be in the sample form in Appendix 10 to this Circular.
1.3. Licences for establishment of
a representative office of
a foreign
insurer
or broker
in Vietnam shall be issued in the sample form in Appendix 11 to this Circular.
1.4.
Within a time-limit of thirty (30) days from the date of receipt of a complete application file
for
issuance
of a licence for
establishment of
a representative office,
the
Ministry of Finance
shall notify the enterprise of its approval or refusal of approval of the request of
the
enterprise.
In case of
non-approval,
written
reasons must be
provided. In
case
of approval, the Ministry
of Finance
shall
issue a licence
for
establishment
of a representative office of a foreign insurer or insurance broker in Vietnam.
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2. Reports on operations by
representative offices:
2.1. Representative
offices of
foreign
insurers or
foreign
insurance
brokers
in Vietnam
shall
provide six-monthly and annual reports on their operations to the Ministry of Finance and to the people's committee of the province or city where they have opened their offices.
Reports for the first six months of the year must be forwarded prior to 30 July, and annual
reports prior to 1 March of the following year.
2.2. Contents of reports:
2.2.1 Organizational structure
of the representative
office,
its
personnel,
and
the
number of
Vietnamese and
foreigners respectively working in the office;
2.2.2 Main activities:
(a)
Marketing
activities;
(b)
Relationship between
the
representative office and
Vietnamese
insurers, brokers
and economic organizations;
(c) Consultancy activities, training activities;
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2.2.3 Direction of activities to be
taken in the immediate future.
2.3 In necessary cases, the Ministry of Finance may require a representative office to provide
a random report in addition to the above periodical reports, or to provide information or to explain issues relating to its activities.
3. Change in contents of a licence:
3.1.
If a representative office wishes to change any of the following listed details in its licence for establishment,
the foreign insurer or broker shall forward a request to the Ministry of Finance for an amendment to
its licence:
3.1.1 A change of name or a change of nationality of the foreign insurer or insurance broker, or a change of name of the representative office;
3.1.2 A change in the operational items of the representative office.
Within
a time-limit
of seven days
from
the
date of
receipt
of a written
request
from a foreign insurer or broker, the Ministry of Finance shall notify the enterprise of its approval or
refusal of
approval
of the request of
the
enterprise. In
case of non-approval, written reasons must be provided.
3.2.
In the case
of an
increase or decrease
in the number
of foreigners
working
in a representative office or change of address of a representative office, the foreign insurer or
insurance
broker
must provide immediate
written notification thereof to
the
Ministry of Finance.
4. Extension of operation of a representative office:
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4.1.1
An application
for
extension of
the
representative office
signed
by the chairman
of the board of
management of, or
the
person
authorized
by the foreign
insurer
or foreign insurance broker;
4.1.2 Licence for establishment and
operation
of the foreign insurer or foreign insurance broker;
4.1.3 Copy licence for establishment of the representative office plus any previous decision on
extension of operation;
4.1.4 Summarised
report on operation of the representative
office in the preceding three years;
4.1.5 Financial
statements for the two most recent years
of the foreign
insurer or
foreign
insurance broker;
4.1.6 Name and curriculum vita of the proposed new head of the representative office if there is to be a change
of head.
4.2 Within a time-limit of thirty (30) days from the date of receipt by the Ministry of Finance of a complete file requesting
extension of
operation
a representative office,
the
Ministry of
Finance shall notify the foreign enterprise of its approval or refusal to approve the request of the enterprise.
In the case of refusal to approve, written reasons must be provided.
5. Termination of operation of a representative office:
5.1. The
operation
of a representative office
shall
be terminated
in the following
circumstances:
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5.1.2 When the operation of the foreign insurer or foreign
insurance broker is terminated;
5.1.3 When there is a decision revoking or rescinding the licence by the competent State body in
accordance with the law of Vietnam.
5.2
In the cases prescribed
in clauses 5.1.1
and
5.1.2
above, the foreign
insurer
or foreign insurance broker
shall notify the
Ministry of Finance thirty (30) days
prior
to the date
of termination of operation of the representative office, and shall hand in the original licence for establishment
of the representative
office plus
any other
licences and decisions
relating to
operation of the representative office.
Within a time-limit of seven (7) days, the Ministry of Finance shall approve termination of
operation of the representative office, and notify the agencies which were sent a copy of the licence for establishment of the representative office.
5.3. In
the
cases prescribed in
clauses 5.1.3 above, the Ministry
of Finance shall
send the foreign insurer or foreign insurance broker the decision revoking or rescinding the licence at
least
thirty
(30)
days
prior
to the date operations must be
terminated, and shall
also
notify
the
agencies
which were
sent a copy of the
licence for establishment
of the representative office.
VIII.
PROCEDURES AND APPLICATION FILES FOR ASSIGNMENT OF
INSURANCE
CONTRACTS
1. Assignment of insurance contracts:
1.1.
During the process of its operation, an insurer may assign all insurance contracts within
one or a number
of insurance
products
(hereinafter abbreviated as
an assignment) to
another insurer licensed to operate in Vietnam in accordance with Section 3 of Chapter III
of
the Law on Insurance Business.
1.2. An
assignment must
comply
with the principle
that
it shall not adversely
affect
the
interests of purchasers of insurance after the assignment has been carried out.
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2.1.
For
an insurance enterprise which
is assigning
(hereinafter referred
to as
assignor enterprise): the assignor enterprise shall forward to the Ministry of Finance an application,
specifying the reasons for assignment, and enclosing the following documents:
2.1.1 Assignment plan, specifying:
(a)
Name and address of
the
insurance enterprise to
which the assignment
will
be made (hereinafter referred to
as assignee enterprise);
(b)
Type of insurance product and number of insurance contracts to be assigned;
(c) Method
of assigning the funds,
insurance reserves and claims relating
to the insurance
contracts being assigned;
(d)
Estimated period for carrying out the assignment;
(dd) Detailed explanation from the assignee enterprise on how it proposes to satisfy financial
requirements after the assignment;
(e)
Contract of assignment between the assignor enterprise and the assignee enterprise, with the following major items:
(g)
Object being assigned;
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(i)
Rights and obligations of the assignor and the assignee;
(k)
Dispute resolution.
2.1.2 Undertakings from the
assignee ensuring
the interests of purchasers of insurance under
the
assigned insurance contracts after the assignment take effect.
2.2. Within a time-limit of fifteen (15) days from the date of approval by the Ministry of Finance
of
an application for assignment, the assignor enterprise shall:
2.2.1 Publish a notice of assignment in five consecutive issues of two central newspapers with the following main items:
(a)
Names and addresses of the assignor enterprise and the
assignee enterprise;
(b)
Type of insurance product and number of insurance contracts to be assigned;
(c) Estimated period for carrying out the assignment;
(d)
Address
for
resolving claims and problems
of purchasers of
insurance related
to the assignment.
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2.2.3
A purchaser of insurance shall be entitled to rescind its insurance contract within a time-
limit of fifteen (15) days from the date of receipt of the notice of assignment, with the time-
limit to
be calculated
from the date
of the stamp of
the
post office. If
a purchaser of
insurance rescinds its insurance contract, the assignor enterprise must refund to it, in the case of non-life insurance, the proportion of premium received which is equivalent to the remaining period of the insurance contract, after deducting reasonable related expenses; or
in the case
of life insurance, insurance
premiums
already paid by
the
purchaser of
insurance, after deducting reasonable related expenses.
2.3.
As from the date
of written
approval by
the
Ministry of Finance of
the
application
for
assignment,
the
assignor
enterprise
shall
not
continue to
enter into
new
insurance contracts for the type of insurance product which is being assigned.
2.4. Within
sixty (60) days
from the date of
approval by
the
Ministry of Finance
of the assignment plan, the assignor enterprise shall
transfer to the assignee enterprise:
2.4.1 All of
the
insurance contracts
which are
currently effective and are
included in
the
assignment plan approved by the Ministry of Finance;
2.4.2 All of
the
unresolved claims
files
relating to the insurance product
which is
being assigned;
2.4.3
All of the assets, funds and insurance reserves for the insurance contracts being assigned and
all of the unresolved
claims
files
relating to
the
insurance
product which is
being assigned.
3. Approval of application for assignment of insurance contracts:
3.1.
Within a time-limit of thirty (30) days from the date of receipt of a complete application, the Ministry of Finance shall notify the enterprise in writing of its approval or non-approval of the assignment, or request amendments of or additions to the application file.
In
the latter case,
the
assignor enterprise must
submit an amended
file
to the Ministry of
Finance
within
a time-limit
of fifteen (15) days
from
the
date
of receipt of the request, and
upon expiry of this period the Ministry of Finance shall have the right to refuse to approve the assignment
application, and
if the Ministry
of Finance
refuses
it shall provide a written explanation of its reasons.
3.2.
If the Ministry
of Finance approves the assignment, it
shall issue to
the
assignor enterprise an
amended licence
(in
the
sample form in
Appendix 3 to
this
Circular), consistent with the insurance products in which it continues to conduct business.
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4.1.
An assignee
enterprise shall
be responsible to
co-ordinate with
the
assignor in
drafting
the assignment plan, in valuing the assets relating to the funds and insurance reserves for
the
insurance
contracts
being assigned,
and
in reaching agreement
on the date
for
the
assignment plan to take effect.
4.2.
As from the date
on which
the
assignment plan
officially takes effect,
the
assignee
enterprise shall be liable to discharge all obligations in the insurance contracts which have
been assigned, strictly in
accordance with
the
terms
and conditions which were entered
into between the assignor and purchasers of insurance, including liability to resolve claims
made which
remain unresolved.
The
assignee enterprise shall have the right to receive
all assets
relating to
the
funds and
insurance
reserves
for
the
assigned insurance
contracts and to use them to discharge all obligations arising from the assigned insurance contracts.
IX. PREVENTION AND LIMITATION OF LOSS
1.
Insurers shall deduct no more than two per cent of insurance premiums actually retained in
a fiscal year in order to expend on
measures to prevent and limit loss as stipulated in
article 25.2 of Decree 42/2001/ND-CP.
2. Expenses
for
measures
to prevent and limit loss
shall be made in accordance
with currently
applicable regulations on
financial management
of enterprises
and other relevant laws.
X. ORGANIZATION OF IMPLEMENTATION
1.
This Circular shall be of full force
and effect fifteen
days after the date of its publication in
the
Official Gazette.
2.
This Circular
shall replace Circular 71-2001-TT-BTC of
the Ministry of Finance dated 28
August 2001 implementing
Decree
42/2001/ND-CP of the Government dated 1 August
2001 providing detailed regulations for implementation of a number of articles of the Law on Insurance Business.
3.
Any
problems
or difficulties
during implementation should
be reported
promptly to
the
Ministry of Finance for its consideration and resolution.
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FOR THE MINISTER OF FINANCE
DEPUTY MINISTER
Le Thi Bang Tam
LIST OF APPENDICES
1.
Sample form: Application for Issuance
of Licence
for
Establishment and
Operation
of Insurer or Insurance Broker.
2.
Sample form: Licence for Establishment and Operation of Insurer or Insurance
Broker.
3.
Sample form: Amended Licence.
4.
List
of Maximum Rates
of Insurance
Commission Applicable to
Non-Life Insurance Products.
5.
List of Maximum Rates of Insurance Commission Applicable to Life Insurance Products.
6.
List
of Compulsory
Reinsurance
Products and
Rates
of Commission for Compulsory Reinsurance.
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8.
Report and List of Insurance Agents.
9.
Report on Activity of Training of Insurance Agents.
10.
Sample form: Application
for
Issuance of
Licence
for
Establishment of
Representative Office of Foreign Insurer or Insurance Broker.
11.
Sample form:
Licence
for
Establishment
of Representative
Office of
Foreign
Insurer
or Insurance Broker.
12.
Sample form: Application for Registration of Insurance Product.
APPENDIX 4
LIST OF MAXIMUM RATES OF INSURANCE COMMISSION
APPLICABLE TO NON-LIFE INSURANCE PRODUCTS
No.
Product
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1
Personal accident and health care insurance
12
2
Property insurance and
damage insurance
5
3
Construction and installation
insurance
5
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Insurance
for
goods
in transit by
road, sea,
river, rail and air
6
5
Hull
insurance
and shipowner's civil
liability insurance for seagoing and river-sea vessels
5
6
Hull
insurance
and shipowner's civil
liability insurance for river vessels and fishing
vessels
10
7
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4
8
Aviation insurance
0.5
9
Motor vehicle insurance
5
10
Voluntary fire and explosion insurance
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11
Credit and financial risks insurance
5
12
Business damage insurance
10
13
Agriculture insurance
10
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Compulsory insurance products:
(a)
Car owner's civil
liability insurance
5
(b)
Motorcycle owner's civil liability insurance
12
(c) Air carrier's
civil liability
insurance
with respect
to passengers
3
(d)
Professional
indemnity insurance
for
legal consultancy activities
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(e)
Professional
indemnity insurance
for
insurance brokers
3
(f)
Fire and explosion insurance
8
APPENDIX 5
LIST OF MAXIMUM RATES OF INSURANCE COMMISSION
APPLICABLE TO LIFE INSURANCE PRODUCTS
I.
FOR INDIVIDUAL LIFE INSURANCE PRODUCTS:
A. Where
each insurance product
is separate: Life insurance commission shall be
applicable in accordance with the following table:
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Life
insurance product
Maximum
commission rate calculated on total premium
Method
of paying premium periodically
Method
of paying total premium in lump
First
year of contract
Second
year of contract
Following
years of contract
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1.
Death benefit insurance
40
20
15
15
2.
Endowment insurance
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-
Insured term up to 10 years
15
5
5
5
-
Insured term over 10 years
20
5
5
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3.
Combined insurance:
-
Insured term up to 10 years
25
7
5
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-
Insured term over 10 years
40
10
10
7
4.
Whole of life insurance
30
20
15
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5.
Periodical payments insurance
15
10
7
7
B.
Where insurance products are combined: Life insurance commission shall be
calculated on the basis of the total amounts of commission for the separate
insurance products listed above.
II.
FOR GROUP LIFE INSURANCE PRODUCTS: THE MAXIMUM RATE OF COMMISSION SHALL BE 50%
OF THE EQUIVALENT RATE APPLICABLE TO THE INDIVIDUAL LIFE INSURANCE PRODUCT OF
THE SAME TYPE.
APPENDIX 6
RATES OF COMMISSION FOR COMPULSORY REINSURANCE
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Compulsory
reinsurance product
Rate
of commission for compulsory reinsurance (%)
1.
Property insurance and damage insurance:
-
Group of insurance products of construction and installation, etc
26
-
Group of petroleum insurance products
15
-
Group of other insurance products servicing investment projects
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2.
Insurance for goods in transit by road, sea, river, rail and air
20
3.
Aviation insurance
90%
of rate of reinsurance commission for service of same kind on international market
4.
Fire and explosion insurance
27
5.
Hull insurance and shipowner's civil liability insurance:
-
Hull cargo insurance
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-
Shipowner's civil liability insurance
15
With
respect to fire and explosion insurance products and the group of insurance
products for construction and installation, etc, the Vietnam National
Reinsurance Company and insurers shall agree on rates of commission on net
profits calculated for the fiscal year.
2.
For contracts temporarily reinsured:
The
commission rate for compulsory reinsurance shall be 90% of the rate of
reinsurance commission for the service of the same kind on the international
market.
APPENDIX 12
SAMPLE FORM: APPLICATION FOR REGISTRATION OF
INSURANCE PRODUCT
SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
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To:
The Ministry of Finance
Pursuant to the Law on Insurance Business and its
implementing guidelines, (name of insurer) hereby applies for registration of an
insurance product(name of insurance product) containing these principal items:
1.
Name of insurance product (commercial name plus any product symbols).
2. Type of insurance (specify) as prescribed in paragraph
of the licence for establishment and operation (or certificate of satisfaction
of all standards and conditions for insurance business) Number issued to the
insurer by the Ministry of Finance.
3.
Main contents of the insurance product (summarise the main contents):
-
Object insured;
-
Scope of insurance; terms and conditions;
-
Conditions on exclusion of liability;
-
Duration of insurance, time when liability arises, time when liability
terminates.
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OPINION OF MINISTRY OF FINANCE
GENERAL DIRECTOR (DIRECTOR)
Signature and seal