Insurance business means an insurance enterprise's acceptance of risk in consideration of a sum of money paid by the secured in order that the insurance enterprise shall compensate or make an insurance payment to it when a risk covered by the insurance ma terializes.

Insurance business may include reinsurance business and insurance broking.

In this decree the following concepts shall have the meanings ascribed to them as follows:

• 1.Insurance enterprise includes State enterprises, share-holding companies, mutual insurance companies, insurance joint venture companies, branches of foreign insurance organizations and insurance companies with one hundred (100) per cent foreign owned ca pital operating in Vietnam.
  • 1.1 Mutual insurance company means a company conducting insurance business for its members on the principles of mutual benefit and non profit.

  • 1.2 An insurance joint venture company is one which is formed on the basis of capital contributions made by a Vietnamese party and a foreign party.

  • 1.3 A branch of a foreign insurance organization means that part of a foreign insurance organization which is operating in Vietnam.

  • 1.4 A foreign insurance company with one hundred (100) per cent foreign-owned capital means an insurance company which is established in Vietnam with one hundred (100) per cent capital owned by a foreign insurance company.
• 2. The Vietnam National Reinsurance Company is a State owned enterprise and legal entity specializing in the business of re-insurance.

• 3. An insurance broking organization includes State owned enterprises, share-holding companies, limited liability companies, private enterprises, insurance broking joint venture companies, branches of foreign insurance broking organizations and insurance broking companies with one hundred (100) per cent foreign owned capital.
  • 3.1 An insurance broking joint venture company means an insurance broking company established in Vietnam on the basis of capital contributions made by both a Vietnamese party and a foreign party.

  • 3.2 A branch of a foreign insurance broking company means that part of a foreign insurance broking organization which is operating in Vietnam.

  • 3.3 An insurance broking company with one hundred (100) per cent foreign owned capital is an insurance broking company established in Vietnam with one hundred (100) per cent capital owned by a foreign insurance broking company.
• 4. An insurance agent is an individual qualified in accordance with article 19 of this Decree acting as an insurance agent.

This Decree applies to insurance enterprises, insurance broking organizations and insurance agents, but does not apply to health insurance which is issued in conjunction with Decree No. 299-HDBT of the Council of Ministers (now the Government) and social insurance which is issued in conjunction with Decree No.43-CP of the Government dated 21 June 1993.

An insurance enterprise shall be responsible for the operation of its agents.

The State shall protect the legitimate rights and interests of the insured.

Insurance enterprises and insurance broking organizations which wish to conduct insurance business in Vietnam must be granted by the Ministry of finance a certificate of satisfaction of the qualifications and conditions required for conducting insurance b usiness.

An insurance enterprise may reinsure for other insurance enterprises.

In cases where an insurance enterprise reinsures for an insurance organization abroad, the former must reinsure part of the liability under that reinsurance contract with the Vietnam National Reinsurance Company in accordance with the detailed guidelines issued by the Ministry of finance.

Regulations governing the organization and activities of the Vietnam National Reinsurance Company shall be stipulated by the Ministry of finance

The kinds of insurance which are permitted to be conducted are as follows:

• 1. Life insurance

• 2. Voluntary health insurance and personal accident insurance.

• 3. Property insurance and loss insurance.

• 4. Cargo insurance covering land, marine, fluvial, railway, and air transportation.

• 5. Hull insurance and civil liability for ship owners.

• 6. Co-insurance.

• 7. Aviation insurance.

• 8. Automobile insurance.

• 9. fire insurance.

• 10. Credit insurance and financial risk insurance.

• 11. Business loss insurance.

• 12. Agriculture insurance.

• 13. Other insurance which shall be stipulated by the Ministry of finance.

• 1. Apart from the insurance services stated in article 7 of this Decree, an insurance enterprise is permitted to conduct the assessment, inspection, calculation for loss distribution and act as agent in the assessment and settlement of compensation.

• 2. An insurance enterprise is permitted only to conduct these services in accordance with the manner and conditions set out in the certificate granted by the Ministry of finance of satisfaction of the qualifications and conditions required for conducting insurance business.

An insurance enterprise must lodge a security deposit with a bank which is permitted to operate in Vietnam.

The insurance enterprise shall be entitled to receive the interest on the money so deposited. The Ministry of finance shall stipulate the amount of money to be deposited as a security deposit.

In its operations, an insurance enterprise must always ensure its payment ability and establish technical reserves sufficient to fulfill its commitments to its insurers.

Insurance enterprises and an insurance broking enterprises shall deduct 5% from their net profits annually and establish a compulsory reserve fund until such time as the fund reaches the equivalent of 10% of its chartered capital. In the case of branches of foreign insurance organizations and insurance broking organizations such funds must reach the equivalent of 10% of the level of capital stipulated in article 22 of this Decree.

• 1. Insurance enterprises and insurance broking organizations may invest surplus capital in accordance with provisions of the law.

• 2. The technical reserves referred to Article 10 of this Decree shall only be invested in Vietnam in the following areas:
  • 2.1 Purchasing public bonds and State treasury bonds;

  • 2.2 Trading in real estate;

  • 2.3 Purchasing securities (stocks, bonds etc.);

  • 2.4 Contributing as capital to joint ventures;

  • 2.5 Providing loans in accordance with the Ordinance on Banks, Credit Cooperatives and financial Companies dated 23 May 1990.

  • 2.6 Interest earning deposits with banks, credit organizations or the State treasury.

Insurance joint venture companies, insurance broking joint venture companies, branches of foreign insurance companies and foreign insurance broking companies, and insurance companies with one hundred (100) per cent foreign owned capital shall be entitled to transfer abroad the following:

• 1. The profit remaining after deduction has been made for the establishment of compulsory or voluntary funds and reserve amounts which are stated in their charter and for the fulfillment of financial obligations to the Government in accordance with the laws.
• 2. Assets remaining after liquidation.

In their operations, insurance enterprises and insurance broking organizations must obtain in writing the approval of the Ministry of finance of any changes to the following:

• 1. Name and Charter;

• 2. Any reduction or increase in chartered capital;

• 3. Any change of principal office or branch office;

• 4. Any opening or closing of branches;

• 5. Any change in the content of the Certificate of satisfaction of qualifications and conditions required for conducting insurance business.

State administration in respect of insurance business includes:

• 1. formulating and submitting to authorized State bodies, policies and laws concerning the conduct of insurance business.

• 2. formulating and issuing regulations on the qualifications and conditions necessary for the conduct of insurance business.

• 3. The granting and withdrawal of the Certificate of satisfaction of qualifications and conditions required for conducting insurance business.

• 4. Monitoring and inspecting the observance of regulations and rules concerning insurance business.

• 5. Responsibility for international relations regarding insurance business.

The Government shall uniformly conduct state administration in respect of insurance business. The Ministry of finance is the Government body in charge of conducting state administration in respect of insurance business and performing the specific duties stipulated in this Decree.

The Certificate of satisfaction of qualifications and conditions required for conducting insurance business shall be granted by the Ministry of finance which, in so doing, shall take into account the following:

• 1. In respect of a Vietnamese organization.
  • 1.1 The objectives and areas of activity must be clear;

  • 1.2 The chartered capital must be not less than the legal capital stipulated in Article 22 of this Decree;

  • 1.3 The form of business organization must accord with the provisions of Article 2 of this Decree;

  • 1.4 Its headquarters must be suitable for its business activities.

  • 1.5 Its managers must have proper qualifications in management and the professional skills appropriate to the insurance business;

  • 1.6 Whether the type of insurance services for which the economic organization is applying is necessary for the national economy.

  • 2. In respect of insurance joint venture companies and insurance broking companies, apart from the conditions stipulated in Paragraph 1 of this Article, parties to the joint venture must also be economic organizations which are operating lawfully and w hich are in a sound financial position.

  • 3. Where branches of foreign insurance organizations, foreign insurance broking organizations, insurance companies with one hundred (100) per cent foreign owned capital and insurance broking companies with one hundred (100) per cent foreign owned capi tal are operating in Vietnam then, apart from the conditions stipulated in paragraph 1 of this Article, the foreign insurance and foreign insurance broking companies must also be organizations which are operating lawfully in their original countries and w hich are in a sound financial position.

Documents submitted with the application for a Certificate shall include:

• 1. In respect of Vietnamese economic organizations:
  • 1.1. An application for the certificate which clearly states the name proposed to be used in commercial transactions, the address of the principal office, chartered capital, method of capital contribution, the scope and projected duration of operation, the objectives of the operation and the types of service intended to be offered.

  • 1.2. The rules, conditions, insurance clauses, fee schedules and insurance commissions to be applied in respect of the specified insurance services proposed to be conducted.

  • 1.3. A business plan for at least the first 5 years, in which it is clearly stated the fee rates, commission rates for each kind of service, proposed compensation, projections on the development and scope of operations, method of calculating insurance and technical reserve to be established.

  • 1.4. A charter concerning the organization and its activities;

  • 1.5. The documents and qualifications disclosing the qualifications of the members of the Board of Management and the manager.

  • 1.6. Any other documents required by the Ministry of finance for the purpose of clarifying any issues relating to the documents required above.
• 2. In respect of insurance joint venture companies and insurance broking joint venture companies, apart from the provisions of paragraph 1 of this article, the following legally certified documents must also be filed:
  • 2.1. The charter of the foreign party to the joint venture;

  • 2.2. License of operation of the foreign party in its country of origin;

  • 2.3. The joint venture contract;

  • 2.4. The balance sheets, profit and loss statements and annual reports on the operations of the parties to the joint venture for the preceding three years.
• 3. In respect of branches of insurance organizations, of insurance-broking organizations, insurance companies and insurance broking companies with one hundred percent foreign owned capital, apart from the provisions of paragraph 1 of this Article, the following legally certified documents must also be filed:
  • 3.1. The license for operation in the country of origin of the insurance organization or insurance broking organization;

  • 3.2. A letter of authorization in favor of the manager in Vietnam.

  • 3.3. The balance sheets, profit and loss statements and annual reports of the foreign insurance or foreign insurance broking organization for the preceding three years in its country of origin.

An insurance agency shall be established pursuant to an agency contract signed with an insurance enterprise. An individual acting as an insurance agent must meet the following requirements:

• 1. Be a Vietnamese citizen and reside in Vietnam.

• 2. Have a senior high school degree or higher degree.

• 3. Not have been subject to criminal prosecution or have served a criminal sentence or be mentally unsound.

The charter governing the organization and operation of an insurance enterprise or an insurance-broking organization must contain the following details:

• 1. The name and address of the principal office or branch office.

• 2. The content and scope of operations.

• 3. The duration of operation.

• 4. The Chartered capital and method of capital contribution.

• 5. Its organizational structure and proposed management.

• 6. The representative of the insurance enterprise or insurance-broking enterprise

• 7. Principles concerning finance and accounting standards.

• 8. Conditions for dissolution and procedures for dissolution.

• 9. Procedure for charter's amendment.

• 1. Within 90 days from the date of receipt of the application, fully documented, for the certificate, the Ministry of finance shall decide whether to grant to the certificate. In the event of refusal, the applicant, the body authorized to grant the inve stment license (where the applicant is a foreign enterprise) and the State body authorized to set up the insurance business in Vietnam must all be informed of the reasons for that refusal.

• 2. Insurance organizations and an insurance-broking organizations must pay a fee for the issue of the certificate which is equal to two (2) per cent of the prescribed capital as stipulated in Article 22 of this Decree and which shall be no less than 10 m illion Vietnamese Dong.
  

  The application fee shall be paid in two stages: fifty (50) per cent upon filing the application for the Certificate, and fifty (50) per cent upon receipt of the Certificate. In cases where the Certificate is not granted or the insurance organization or insurance-broking organization withdraws its application, the initial fifty (50) per cent shall be forfeited.

• 3. Upon the issue of the Certificate by the Ministry of finance, the insurance organization or insurance-broking organization must carry out the procedures necessary for establishment and business registration and apply for an investment license (in resp ect of foreign enterprises) in accordance with the provisions of the law.

The legal capital of an insurance enterprise or an insurance-broking enterprise shall be as follows:

• 1. 20 billion Vietnamese dong or US$ 2 million in respect of a Vietnamese insurance enterprise or insurance joint venture company.

• 2. US$5 million in respect of a branch of a foreign insurance organization or an insurance company with one hundred (100) per cent foreign owned capital.

• 3. One (1) billion Vietnamese dong or US$100,000 in respect of a Vietnamese insurance broking organization or insurance-broking joint venture company.

• 4. US$ 300,000 in respect of a branch of a foreign insurance broking organization or insurance-broking company with one hundred (100) per cent foreign owned capital.

An insurance enterprise or an insurance-broking organization shall, prior to its commencement of business, cause to be published in local newspapers details of its certificate.

The Ministry of finance may withdraw the Certificate of an insurance enterprise or insurance-broking enterprise in the following cases:

• 1. Where the insurance enterprise does not meet all of the conditions set-out in its Certificate or does not commence operations within 12 months from the date of issue thereof.

• 2. Where the insurance enterprise is not able to satisfy the conditions for its operation.

• 3. Where the insurance enterprise has insufficient funds to fulfill commitments to its policy holders.

• 4. In addition, the Certificate issued to a branch of foreign insurance organization or an insurance-broking organization in Vietnam shall be withdrawn where the Certificate of the foreign insurance organization or insurance-broking organization granted in its country of origin is withdrawn.

The financial year of an insurance enterprise and insurance-broking enterprise shall commence on 1 January and end on 31 December of each year. In cases where the financial year is different from that provided in this article, the approval of the Ministr y of finance must be obtained.

In cases where insurance enterprises simultaneously conduct life and non-life insurance, separate accounts for each type of insurance business shall be maintained.

• 1. Insurance enterprises and insurance-broking enterprises must apply accounting standards in accordance with the provisions and regulations of Vietnam. Any application of another system of accounts must be approved by the Ministry of finance.

• 2. A balance sheet and a profit and loss statement of each insurance enterprise or insurance-broking enterprise must be maintained.

• 3. Insurance enterprises and insurance-broking enterprises must fulfill their financial obligations to the State in accordance with the law.

Within 90 days of the end of each financial year, insurance enterprises and insurance-broking organizations must file with the Ministry of finance the following documents.

• 1. An annual report on their operations.

• 2. A balance sheet.

• 3. A profit and loss statement.

• 4. All other documents clarifying the above documents as required by the Ministry of finance.

The Ministry of finance may request an insurance enterprise or insurance-broking organization to report on, and may conduct an inspection of, their operations at any time. Such inspections shall not interfere with the normal operations of the insurance e nterprise or insurance broking enterprise.

Where the financial situation of an insurance enterprise deteriorates to the point that there is a danger of a default in payment of policy holders occurring, the Ministry of finance may recommend to the insurance enterprise that it consolidate its busine ss and take appropriate measures to restore its financial situation. The Ministry of finance shall withdraw the Certificate of an insurance enterprise if in its opinion the enterprise can not be restored to its original position.

The dissolution or winding up of an insurance enterprise or an insurance-broking organization must be conducted promptly.

In the event of dissolution, winding up, liquidation, separation or merger of an insurance enterprise or an insurance-broking organization it must report to, and be subject to the supervision of, the Ministry of finance.

Insurance enterprises and insurance-broking organizations shall be subject to the supervision of, and inspection by, the Ministry of finance. Such inspection shall be conducted in accordance with the Ordinance on Inspection and other legal provisions.

• 1. Insurance enterprises, insurance-broking organizations or insurance agents which breach the provisions of their Certificates or any other provision in this Decree shall be dealt with by administrative penalty or prosecuted for criminal responsibility in accordance with the seriousness of their offense.

• 2. In cases where the breaches seriously infringe upon the interests and rights of the insured, then in addition to the measures stipulated in paragraph 1 of this article, the Ministry of finance may take the following measures:
  • 2.1. Require an increase in the assets of the insurance enterprise.

  • 2.2. Impose restrictions on the scope and sphere of its operations.

  • 2.3. Require an authorized state body to freeze its assets.

  • 2.4. Require the insurance organization to change its manager, or the members of its Board of Management.

This decree shall take effect as from 1 January 1994. Previous provisions inconsistent with this Decree are hereby repealed.

The Minister of the Ministry of finance shall be responsible for guiding the implementation of this Decree.

Ministers, Heads of Department at ministerial level, Heads of Departments under the Government and Chairmen of the people's committees of provinces and cities under central authority shall be responsible for the implementation of this Decree.