Market overview
Member of IAIS? Yes, Vietnam became member of IAIS in 2007.
Global regulators, bodies and legislation applicable to country
The project “ComFrame” was set up by the Internationally Active Insurance Groups (IAIG, related to IAIS) to establish regulatory framework with mandatory standards. It came into effect at the end of 2019. Vietnam, as a member of the IAIS, has to comply with its regulations.
As a member of the WTO and WHO, Vietnam must also comply with regulations of these organizations with respect to insurance. In its bilateral / multilateral agreements such as Korea – Vietnam FTA, EU- Vietnam FTA, Hong Kong – ASEAN FTA, ASEAN- China FTA, ASEAN – Australia – New Zealand FTA, CPTPP and EU-Vietnam Free Trade Agreement, commitments on insurance are also binding on Vietnam.
In addition, Vietnam is a member of the OECD, which issues guidelines and good practices of non-binding nature for member countries.
Domestic
The Ministry of Finance is in charge of the state regulation on insurance business. In addition, on February 12, 2009, the Ministry of Finance (MOF) issued Decision No. 288/QD-BTC to establish the Insurance Supervisory Authority (ISA) under the MoF. The ISA will assist the Minister of the MOF to regulate insurance business nationwide; directly govern and supervise insurance business activities and services related to insurance business in accordance with law. Currently, the role of the ISA is regulated under Decision 1799/QD-BTC issued on 11 September 2017.
In June 2009, Insurance Research and Training Centre (IRTC) under the ISA was established according to Decision No. 1379/QD-BTC. The IRTC is tasked with organizing scientific study and training on insurance and insurance market.
Laws and relevant court decisions/judgements
The following laws and regulations mainly govern insurance business in Vietnam:
• Law on Insurance Business No. 08/2022/QH15 issued by the National Assembly on June 16, 2020(Law on Insurance Business);
• Decree No. 46/2023/ND-CP on guiding the implementation of the Law on Insurance Business issued by the Government on July 1, 2023 (Decree 46);
• Decree No. 98/2013/ND-CP on administrative sanctions on insurance business and lottery business issued by the Government on August 28, 2013 (Decree 98) as amended by Decree 48/2018/ND-CP dated March 21, 2018 (Decree 48) and Decree 80/2019/ND-CP dated November 1, 2019 (Decree 80);
• Circular No. 195/2014/TT-BTC on guiding the assessment and classification of insurance companies issued by the Ministry of Finance on December 17, 2014 (Circular 195) as amended by Circular 89/2020/TT-BTC dated November 11, 2020 (Circular 89);
• Decision No. 1826/QD-TTg of the Prime Minister on approving the Plan on “Restructuring the securities market and insurance companies” on December 28, 2012 (Decision 1826).
Key rules and requirements
Senior management responsibilities
• Promulgation of legal instruments and implementing guidelines on insurance business; formulation of strategies, policies, master planning and specific plans for the development of the Vietnamese insurance market;
• Issuance and withdrawal of licenses for establishment and operation insurers and insurance brokers, and of licenses for establishment of representative offices of foreign insurers and foreign insurance brokers in Vietnam;
• Promulgation, ratification and guiding the implementation of insurance regulations, provisions, scales of premiums and commissions;
• Supervision of insurance business activities via professional activities, financial status, enterprise management, risk management and compliance with the law on insurers and brokers; application of necessary measures to ensure that insurers satisfy the financial requirements and fulfil their undertakings to purchasers of insurance;
• Organization of provision of information on the status of the insurance market and market forecasts;
• International cooperation in the area of insurance;
• Consent for overseas operations of insurers and insurance brokers;
• Administration of the operations of representative offices of foreign insurers and foreign insurance brokers in Vietnam;
• Organization of the formation and training of a workforce of insurance management personnel and insurance professional experts; and
• Inspection and checks of insurance business activities; resolution of complaints and denunciations, and dealing with breaches of the laws on insurance business.
Whistle-blowing rules
There are no such rules specifically for the insurance sector.
Foreign ownership limit in an existing shareholding insurance company
Foreign investors are entitled to own shares or contributed capital up to 100% of charter capital of insurance enterprises and reinsurance enterprises.
Capital reserve requirements
Reserve funds
Insurers and insurance brokers must establish a compulsory fund to supplement their charter capital and ensure their solvency. Appropriations for the compulsory reserve fund shall be made annually at 5% of after-tax profits. The maximum amount of compulsory reserve fund is equivalent to 10% of the charter capital of the insurance enterprise or issued capital of the foreign branch.
In addition to this compulsory reserve fund, insurers and insurer brokers may establish other reserve funds from their after-tax profits of the fiscal year as determined in their charter. It is noted that after-tax profits may be shared among shareholders but only after 5% of such profits is contributed to the compulsory reserve fund as provided above.
Insurance reserves
Insurance reserve means an amount of money which an insurer must set aside to pay for its insurance liabilities determined in advance and arising from the insurance policies which it has entered into.
Insurance reserve must be established for each type of insurance product or insurance policy with respect to that part of liability retained by the insurer or foreign branch. Specific amount contributed for insurance reserve is provided in Circular 50. Insurance companies are entitled to choose methods of and basis for setting insurance reserves but must seek prior approval from the MOF for implementation such insurance reserve methods / basis.
Security deposit
Insurers must pay a security deposit into a commercial bank operating in Vietnam in an amount of 2% of the minimum requirements of charter capital or allocated capital as specified for each type of insurance company (for example, a health insurance company must pay a security deposit of VND15 billion or $630,000 equivalent) at the time of establishment of an insurance company, reinsurance company or foreign branch in Vietnam. An insurance enterprise or foreign branch may only use its security deposit to meet undertakings to purchasers of insurance when its solvency is inadequate and upon written approval of the MOF. The whole amount of their security deposit can only be withdrawn upon termination of their operation.
Product specific legislation
Relevant advisory documentation or other requirements, including tax
Life
Minimum requirements of charter capital
• For life insurance business (excluding unit linked insurance and retirement insurance) and health care insurance business: VND750 billion
• Life insurance business and unit linked insurance business or retirement insurance business: VND1,000 billion
• Life insurance business, unit linked insurance business and retirement insurance business: VND1,300 billion.
Qualifications of the appointed actuary
• Having the right to manage an enterprise in accordance with the Law on Enterprises;
• Not being subject to an administrative penalty for a breach in the insurance business sector, not have been disciplined in the form of dismissal for a breach of internal rules for 03 consecutive years before the time of appointment; not have been prosecuted by a competent authority as prescribed by law at the time of being elected or appointed.
• Having undergone training as an appointed actuary, and have at least 10 years’ work experience as an appointed actuary in the life insurance or health insurance sector and have at least 5 years’ work experience from the time of becoming a fellow of one of the Associations of Actuaries which are widely recognized internationally such as the Institute of Actuaries of England; the Society of Actuaries of the USA; the Institute of Actuaries of Australia; the Canadian Institute of Actuaries; or be a member of another Association of Actuaries which is an official member of the International Associations of Actuaries; or have at least five years’ work experience as an appointed actuary in the life insurance or health insurance sector from the time of becoming a fellow of one of the above associations. In case of an appointed actuary approved by the MOF before the effective date of Decree 46, the above-mentioned qualification in this paragraph will not be applicable.
• Not having committed any breach of the professional ethics of actuaries.
• Being an employee of the life insurer or health insurer.
• Being resident in Vietnam during the term of office.
Permitted scope of business
• Insurance business, reinsurance business, reinsurance transfer;
• Managing funds and invest capital from insurance business activities;
• Providing auxiliary insurance services;
• Life insurance enterprises are not allowed to do health insurance business/non-life insurance business except for the case of life insurance enterprises implementing health insurance business;
Insurance reserve
Insurance reserve for life insurance companies includes: actuarial reserve, unearned premium reserve, compensation reserve, profit distribution reserve, committed interest rate reserve and balance reserve.
Investment activities
Insurance enterprises, reinsurance enterprises, and foreign branches in Vietnam are not allowed to implement the following investment activities:
• Investment in real estate business, except in the following cases: acquiring stocks of real estate businesses listed on the securities market, fund certificates of public funds; purchasing, investing in or owning real property used as business offices, locations or treasure vaults for direct uses for their insurance business; leasing out unoccupied business establishments under their control or management; seizing real property by managing or disposing of mortgage bonds, or recovering loans secured by real property within 03 years from the lien date;
• Investment in precious metals, jewels;
• Investment in intangible fixed assets, except those used for commercial and business purposes;
• Investment in derivatives or derivative contracts, except those listed as provisions for risks arising from insurance, reinsurance policies and portfolios of stocks that insurance companies, reinsurance companies or foreign branches in Vietnam are holding.
Outbound investment
Insurance enterprises and reinsurance enterprises are allowed to make outbound investment with regards to the owner’s equity in excess of the required charter capital and idle capital from insurance reserves of insurance policies with interests linked to foreign investment indexes and signed insurance policies with foreign organizatons/individuals, the outbound investment from the said owner’s equity shall only be allowed for the following forms and restrictions:
• Establishing or contributing capital for the establishment; contribution of capital, acquisition of shares of insurers, reinsurers in foreign countries; establishing branches or representative offices, and other forms of commercial presence of insurers and reinsurers abroad without any restriction;
• Restrictions on indirect outbound investment:
– Purchase of government bonds, treasury bills, promissory notes: No restriction;
– Bonds, treasury bills, promissory notes issued by issuers rated by international credit rating agencies like Standard & Poor’s, Moody’s Investors Service and Fitch Ratings: Up to 50% of outbound investment amount;
– Purchase of listed shares, listed fund certificates: Up to 15% of outbound investment amount;
Non-life insurance
Minimum requirements of charter capital
• For non-life insurance business (excluding aviation insurance business and satellite insurance business) and health insurance: VND400 billion
• For non-life insurance business (including aviation insurance business or satellite insurance business) and health insurance: VND450 billion
• For non-life insurance business, including aviation insurance business and satellite insurance business and health insurance: VND500 billion
Qualifications of an appointed actuary regarding reserves and solvency of non-life insurer
• Having the right to manage an enterprise in accordance with the Law on Enterprises;
• Not have been subject to an administrative penalty for a breach in the insurance business sector, not have been disciplined in the form of dismissal for a breach of internal rules for 03 consecutive years before the time of appointment; not have been prosecuted by a competent authority as prescribed by law at the time of being elected or appointed.
• Been an Associate of the Associations of Actuaries being an official member of the International Associations of Actuaries; or have at least 5 years’ work experience in non-life insurance sector and have proof of passing at least 2 exam of one of the following Associations: Institute of Actuaries of England; the Society of Actuaries of the USA; the Institute of Actuaries of Australia; the Canadian Institute of Actuaries or proofs of passing exams in an actuarial training course or program recognized by the above associations as equivalent to 2 exams of the Association.
After 3 years from the effective date of this Decree, the Appointed Actuary of a non-life insurer, reinsurer, or foreign branch in Vietnam must be at least an Associate of an actuary association which is an official member of International Actuarial Association and does not break the code of ethics for actuarial services in insurance.
After 5 years from the effective date of this Decree, the Appointed Actuary of a non-life insurer, reinsurer, or foreign branch in Vietnam must be a Fellow, who has been trained in non-life insurance of an actuary association which is an official member of International Actuarial Association and does not break the code of ethics for actuarial services in insurance.
• Be an employee at the insurer, reinsurer, or foreign branch in Vietnam.
• Be resident in Vietnam during the term of office.
Permitted scope of business
• Insurance business, reinsurance business, reinsurance transfer;
• Managing funds and invest capital from insurance business activities;
• Providing auxiliary insurance services;
• Non-life insurance enterprises are not allowed to implement life insurance business/health insurance business except for health insurance products with a term of 01 year or less and insurance products for death risks with a term of 01 year or less
Insurance reserve
Insurance reserve for non-life insurance companies includes unearned premium reserve, claim reserve, and large loss fluctuation reserve.
Investment activities and Outbound investment
Same as life insurance
Reinsurance
Minimum requirements of charter capital
• For non-life reinsurance business or both non-life reinsurance business and health reinsurance business: VND500 billion;
• For life reinsurance business or both life reinsurance business and health reinsurance business: VND900 billion;
• For business in all three types of life reinsurance, non-life reinsurance and health reinsurance, VND1,400 billion.
Qualifications of an appointed actuary regarding reserves and solvency of reinsurer
Same as in non-life insurance.
Permitted scope of business
Reinsurance companies and foreign reinsurance branches can be involved in the following range or area of business activities:
• Reinsurance, reinsurance cession sector;
• Management of funds and investment of funds generated from rendering reinsurance services;
• Other activities directly related to reinsurance services.
Insurance reserve
• For non-life reinsurance: unearned premium reserve, claim reserve, and large loss fluctuation reserve;
• For life reinsurance: actuarial reserve, unearned premium reserve, compensation reserve, profit distribution reserve, committed interest rate reserve and balance reserve;
• For health reinsurance: actuarial reserve, unearned premium reserve, compensation reserve, and balance reserve.
Investment activities and Outbound investment
Same as life insurance and non-life insurance
Investment management and markets
Overview of relevant regulation affecting insurers’ investment portfolios, including Asset Liability Management (ALM)
An insurance enterprise can make investment from its equity, idle capital from insurance reserves and other lawful sources.
In addition to rules of domestic investment of idle capital from insurance reserves as mentioned above for each type of insurance business, the following principles apply:
• Ensure safety, liquidity and efficiency; compliance with prevailing regulations and self-responsibility rules applied to investment activities;
• Insurance reserves may be used as investments in Vietnam only, except for idle capital from insurance reserves of insurance policies with interests linked to foreign investment indexes and signed insurance policies with foreign organizatons/individuals
• It is prohibitory that borrowed funds are used for investment and fiduciary investment in securities, real estate business or contribution of capital to other enterprises;
• It is prohibitory that investment accounting for 30% of the portfolio of investments in companies belonging to the same group of companies having mutual ownership relationship is made. This prohibition shall not apply to deposits made at credit institutions and outward investment funds existing in the form of establishment of companies or establishment of foreign branches in the receiving foreign countries;
• Investments made in return for those of shareholders or members contributing capital or persons associated with these shareholders or members contributing capital are not allowed, except in case of deposits made at transaction offices of shareholders or members that are credit institutions;
• Purchase of corporate bonds issued to serve certain purposes of restructuring of loans of issuing companies is not allowed;
• In case of fiduciary investments, trustees must be licensed to perform fiduciary investment activities falling within the scope of fiduciary investment.
An insurance enterprise may also make offshore investment but only to set up offshore insurance company or an offshore insurance branch. Such offshore investment must be approved by the MOF.
Enforcement and investigation
Rules of regulatory investigation
In order to carry out the specialized inspection of insurance business, competent authorities can hire independent audit bodies, consulting companies or specialists to assess and give professional comments on several matters that are alleged to cause any impacts on inspectees’ safety and health where necessary.
Complaints procedure
There is no specific rule on complaints handling procedures in insurance enterprises. Instead, such rules are as indicated in the insurance policies and must follow relevant regulations of the Civil Code and economic agreements.
Complaints on administrative decisions will be handled according to laws on complaints and denunciations, which are applied for all sectors.
Redress, including Ombudsman service
Depending on the nature and seriousness of violations, the violators may be subject to administrative sanctions (warnings, monetary fines, suspension of operation, remedies) or criminal penalty. In case of causing damages, they must compensate according to Vietnam laws.
Insurance mediation compensation schemes
As indicated in the insurance policy. The insured person has maximum one year to claim for indemnity from the date of occurrence of the insured event. Upon occurrence of such insured event, the insurer must pay the indemnity with the time-limit stated in the insurance policy. If there is no statement in the contract, the time-limit is 15 days from the date of receipt of a complete and proper application requesting payment of indemnity.
Life and health care insurance
The insurer can pay insurance premiums on a one-off basis or in installments according to the time limit and approach agreed upon in an insurance policy.
Property insurance
Property underinsurance policy: the insurer is only responsible to indemnify in accordance with the ratio of the sum insured to the market value of the insured property at the date of entering the contract.
Property overinsurance policy: the insurer is responsible to indemnify for lossess in proportion to the market value at the time of occurrence and repay the insured the amount of premiums already paid in advance in proportion to the amount of insurance in excess of the market value of the insured property.
Double insurance policies
Upon occurrence of the insured event, each insurer is only responsible to indemnify in accordance with the ratio of the agreed sum insured to the total sum insured under all insurance contracts which the purchaser of the insurance has entered into. The total sum of indemnity payable by all the insurers will not exceed the value of the actual property damage.
Liability insurance policies
The limit of liability is the amount of money that an insurer is bound to pay to the insured under terms and conditions of the insurance policy.
Insolvency and policy-holder protection
Relevant resolution regime?
There is no separate insolvency regime for insurers. Instead, the Law on Bankruptcy which deals with bankruptcy and insolvency in all sectors will apply.
The general procedure to handle bankruptcy cases is as follows:
• Filing the petition to the court to commence bankruptcy procedures (by creditors, employees, grass-root trade union, legal representative of the company, shareholders, Chairman of the Board of Management, etc.)
• The court will start the procedures for handling of the request for declaring bankruptcy and declare that the insurance company or reinsurance company is bankrupt without resort to any meeting of creditors to be held and business recovery actions to be taken.
• Management and liquidation of assets are conducted by a liquidator or company that is appointed by the court and specializes in the management and liquidation of assets.
Data protection
There is no separate rule governing data protection in the insurance sector in Vietnam. Instead, Vietnam’s data protection laws are scattered in many legislations, which include the Civil Code, the Penal Code, the Law on Cyber Information Security, the Law on Information Technology, the Law on Telecommunications, the Law on Consumer Protection, the Law on E-Transactions, cybersecurity law and relevant Decrees guiding implementation of the mentioned laws.
These laws include provisions to prevent, detect, stop and address spam, computer viruses and cyber-attacks, and protect information exchanged in cyberspace.
There is no consistent definition of “personal information” in Vietnam laws. General speaking, personal information could be any information that could be used to identify a specific person, including information on payment transactions.
Organisations processing personal information must take appropriate management and technical measures to protect personal information that they have collected and stored and ensure that the personal information is not lost, stolen, disclosed, modified or destroyed without consent.
Depending on the nature of violations of data protection policies, administrative fines (warning, monetary fine) and possible remedial measures or criminal penalties might apply.
Corporate governance
Managers and executives of insurance company or reinsurance company are:
• Chairperson of the Managing Board, Member of the Managing Board; Chairperson of the Board of Members, Member of the Board of Members;
• Director or General Director, Vice Director or Deputy General Director, Legal Representative;
• Chief Accountant, Director of a branch, Head of a representative office, Head of an operations department and the like under the Company’s Charter.
Managers and executives of a foreign branch are:
• Director, Deputy Director;
• Chief Accountant, Head of an operations department and the like under the rules and regulations on organization and operation of foreign branches in Vietnam.
Allocation of these people must follow the below principles:
• Chairperson of the Managing Board, Chairperson of the Board of Members or Member of the Managing Board, Member of the Board of Members of an insurance company or reinsurance company cannot concurrently hold the post as the Member of the Managing Board or the Member of the Board of Members of another insurance company or reinsurance company in the same life insurance, non-life insurance, health insurance or reinsurance sector in Vietnam.
• Director or General Director of an insurance company, reinsurance company or foreign branch in Vietnam cannot concurrently work for another insurance company, reinsurance company or foreign branch in the same life insurance, non-life insurance, health insurance or reinsurance sector in Vietnam.
• Director or General Director, Director of a branch or Head of a representative office of an insurance company or reinsurance company can hold only one more post like the Director of a branch or the Head of a representative office or the Head of an operations department in the same insurance company or reinsurance company. The Director of a foreign branch in Vietnam is the legal representative and can hold only one more post as the Head of an operations department of that branch.
• Meanwhile, the Actuary, Head of the risk management department or Head of the compliance department of an insurance company, reinsurance company or foreign branch in Vietnam shall not be allowed to hold any other executive post at the same host entity; shall not be allowed to concurrently work for any other insurance company, reinsurance company or foreign branch in Vietnam. The Actuary must perform the duties assigned by the Minister of Finance.
• The Head of the Supervisory Board or the Controller shall not be allowed to hold any other executive post at the same host entity. The Head of the Supervisory Board cannot concurrently hold another post as the Controller or manager of any other insurance company or reinsurance company operating in Vietnam.
• The Chief Accountant, Head of the internal audit department in an insurance company, reinsurance company or foreign branch in Vietnam shall not be allowed to hold any other post in the same host entity; shall not be allowed to concurrently work for any other insurance company, reinsurance company or foreign branch in Vietnam.
Financial crime prevention
Member of FATF? On FATF blacklist?
Not a member of FATF and not blacklisted.
Dr. Oliver Massmann is a partner and General Director in Duane Morris Vietnam LLC