Nghị định 123/2011/ND-CP

DECREE

DETAILING A NUMBER OF ARTICLES OF THE LAW AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE LAW ON INSURANCE BUSINESS, AND AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE GOVERNMENT’S DECREE NO. 45/2007/ND-CP OF MARCH 27, 2007, DETAILING A NUMBER OF ARTICLES OF THE LAW ON INSURANCE BUSINESS

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the December 9, 2000 Law on Insurance Business;

Pursuant to the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Law on Insurance Business; At the proposal of the Minister of Finance,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree details a number of articles of the Law Amending and Supplementing a Number of Articles of the Law on Insurance Business, and amends and supplements a number of articles of the Government’s Decree No. 45/2007/ND-CP of March 27, 2007, detailing a number of articles of the Law on Insurance Business (below referred to as Decree No.45/2007/ND-CP).

Article 2. Subjects of application

1. This Decree applies to insurance business activities (including the provision of cross-border insurance services and insurance brokerage services in Vietnam), reinsurance business activities, insurance brokerage activities and insurance agency activities.

2. This Decree does not apply to social insurance, health insurance, savings deposit insurance and other types of uncommercial insurance provided by the State.

Chapter II

SPECIFIC PROVISIONS

Section 1: PROVISION AND USE OF CROSS-BORDER INSURANCE SERVICES

Article 3. Providers and users of cross-border insurance and insurance brokerage services

1. Providers of cross-border insurance and insurance brokerage services (below referred to as cross-border insurance services) are foreign insurance businesses and insurance brokerage businesses headquartered in countries with which Vietnam has signed commercial treaties covering an agreement on the provision of cross-border insurance services in Vietnam.

2. Users of cross-border insurance services are foreigners working in Vietnam and businesses established in Vietnam with over 49% of the charter capital owned by foreign investors.

3. Reinsurance, international maritime insurance, international aviation insurance, international reinsurance brokerage, consultancy, and risk estimation and evaluation services and indemnity settlement comply with current applicable laws and international practices.

4. Provisions on the provision and use of cross-border insurance services under this Decree are not applicable to life insurance and health insurance.

Article 4. Conditions for providing cross-border insurance services

A foreign insurance business or insurance brokerage business providing cross-border insurance services in Vietnam must satisfy the following conditions:

1. General conditions:

a/ Possessing a license for cross-border insurance operations expected to be provided in Vietnam granted by a competent insurance state management authority of the country in which the business is headquartered, and proving the business has been operating lawfully for at least 10 years counting to the time of providing cross-border insurance services in Vietnam;

b/ Having a document issued by a competent insurance state management authority of the country in which the business is headquartered permitting the business to provide cross-border insurance services in Vietnam and certifying that the business has committed no violations of regulations on insurance business or insurance brokerage and other laws of that country for 3 consecutive years preceding the year of providing cross-border insurance services in Vietnam.

2. Conditions on financial capacity:

a/ Having a total asset value equivalent to at least USD 2 billion, for foreign insurance businesses; and at least USD 100 million, for foreign insurance brokerage businesses, in the fiscal year preceding the year of providing cross-border insurance services in Vietnam;

b/ Being rated at least at “BBB+” by Standard & Poor’s or Fitch, “B++” by A.M.Best, “Baa1” by Moody’s, or equivalent rank of other experienced rating organizations, in the fiscal year before the year of providing cross- border insurance services in Vietnam;

c/ Making profits for 3 consecutive fiscal years preceding the year of providing cross-border insurance services in Vietnam.

3. Conditions on loss handling capacity:

a/ Depositing at least VND 100 billion at a licensed bank in Vietnam and having that bank’s letter of guarantee to make payment in case liabilities under cross-border insurance contracts in Vietnam exceed the compulsory deposit level. The deposit may be used only to fulfill commitments made with insurance buyers when the foreign insurance business becomes insolvent under a decision of a competent state management authority of the country in which the business is headquartered. The foreign insurance business may receive interests for its deposit under the agreement with the bank and withdraw the whole deposit upon termination of its liabilities under cross-border insurance service contracts in Vietnam;

b/ Having an indemnity settlement process which specifies procedures and order for loss handling and time limit for paying indemnities to insurance buyers in Vietnam. In all cases, the foreign insurance business or its authorized representative must be present in the place where a loss occurs within 48 hours after receiving the loss notice. The time limit for indemnity settlement complies with Article 29 of the Law on Insurance Business;

c/ A foreign insurance brokerage business shall buy insurance for professional liability for insurance brokerage for its provision of insurance brokerage services in Vietnam.

Article 5. Mode of cross-border insurance service provision in Vietnam

1. A foreign insurance business shall provide cross-border insurance services in Vietnam through a licensed insurance brokerage business in Vietnam.

2. A foreign insurance brokerage business providing cross-border insurance services shall act as a broker for foreign insurance businesses or licensed branches of foreign non-life insurance businesses in Vietnam.

Article 6. Responsibilities of a cross-border insurance service provider

1. To provide documents proving its eligibility for cross-border insurance service provision in Vietnam under Article 4 of this Decree to licensed foreign insurance businesses, foreign insurance brokerage businesses and branches of foreign non-life insurance businesses in Vietnam providing cross-border insurance services under Article 5 of this Decree.

2. Within 120 days after the end of a fiscal year, to send to the Ministry of Finance its financial statement of the preceding year certified by an independent audit organization and a written evaluation of its observance of law by a competent insurance state management authority of the country in which the business is headquartered.

3. To pay taxes and fulfill other financial obligations related to its cross- border insurance service provision in Vietnam under the current tax law.

Article 7. Responsibilities of stakeholders engaged in cross-border insurance service provision in Vietnam

Licensed foreign insurance businesses, insurance brokerage businesses and branches of foreign non-life insurance businesses in Vietnam providing cross-border insurance services under Article 5 of this Decree shall:

1. Keep documents proving that providers of cross-border insurance services in Vietnam joining them to provide these services satisfy the conditions specified in Article 4 of this Decree and provide these documents to functional agencies upon request.

2. Quarterly report to the Ministry of Finance on their provision of cross- border insurance services in Vietnam in the quarter within 30 days after the end of a quarter. The report form is provided by the Ministry of Finance.

Section 2: BRANCHES OF FOREIGN NON-LIFE INSURANCE BUSINESSES

Article 8. Legal status of branches of foreign non-life insurance businesses

A branch of a foreign non-life insurance business is a dependent unit of the foreign non-life insurance business and has no legal person status. The foreign non-life insurance business shall guarantee and be liable for all obligations and commitments of its branch in Vietnam.

Article 9. Conditions for obtaining a license for a branch of a foreign non- life insurance business

A foreign non-life insurance business wishing to establish a branch in Vietnam must satisfy the following conditions:

1. Conditions on the foreign non-life insurance business:

a/ Being headquartered in a country with which Vietnam has signed commercial treaties covering an agreement on establishment of branches of foreign non-life insurance businesses in Vietnam;

b/ Having lawfully run non-life insurance business in the country in which it is headquartered for at least 10 years counting to the time of submitting a license application dossier for a branch in Vietnam;

c/ Having a total asset value equivalent to at least USD 2 billion in the fiscal year before the year of submitting a license application dossier for a branch in Vietnam;

d/ Making profits for 3 consecutive fiscal years preceding the year of submitting a license application dossier for a branch in Vietnam;

e/ Having committed no serious violations of insurance business regulations and other laws of the country in which the business is headquartered for 3 consecutive years preceding the year of submitting a license application dossier for a branch in Vietnam;

f/ Being licensed for establishing a branch in Vietnam to conduct its licensed insurance operations; not being restricted to add capital to its branch in Vietnam; and being guaranteed to have its entire operation supervised by an insurance state management authority of the country in which the business is headquartered;

g/ The insurance state management authority of the country in which the business is headquartered has signed a cooperation agreement with the Vietnamese Ministry of Finance on management and supervision of activities of branches of foreign non-life insurance businesses in Vietnam;

h/ Having a written commitment to being liable for all obligations and commitments of its branch in Vietnam and a written authorization of the branch director to take responsibility before the law of Vietnam for all operations of the branch;

i/ Submitting a license application dossier under Article 10 of this Decree.

2. Conditions on a branch established in Vietnam:

a/ Having its allocated capital not lower than the legal capital set at Point a, Clause 1, Article 19 of this Decree;

b/ Having an organization and operation regulation conformable with law;

c/ Being established from lawful funding sources; not being established from loans or investment trust funds in any forms;

d/ Carrying out business activities in compliance with Article 10 of Decree No. 45/2007/ND-CP.

e/ Its managers’ professional qualifications and administration capacity meeting the conditions provided in Article 13 of Decree No. 45/2007/ND- CP;

f/ Having infrastructure facilities and information technology system meeting the Ministry of Finance’s requirements.

Article 10. License application dossier for a foreign non-life insurance business’s branch in Vietnam

1. Application for a license, made according to the form provided by the Ministry of Finance.

2. Operation plan for the first 5 years suitable to the business line to be licensed, specifying the mode of setting aside insurance reserve funds, reinsurance and capital investment programs, business effectiveness, solvency and economic benefits of the branch’s establishment, together with the processes for exploitation, assessment, indemnity, reinsurance, internal control, risk management, investment and financial management.

The Ministry of Finance shall detail the planning of first-five-year operation of branches of foreign non-life insurance businesses.

3. The foreign non-life insurance business’s charter (certified copy).

4. Draft organization and operation regulation of the branch signed by the investor’s authorized representative.

5. The foreign non-life insurance business’s license (certified copy).

6. Operation report and financial statements of 3 consecutive fiscal years preceding the year of applying for the branch establishment, certified by an independent audit organization (certified copy).

7. Written certification of the foreign non-life insurance business’s satisfaction of the conditions specified at Points e and f, Clause 1, Article 9 of this Decree, by the insurance state management authority of the country in which the business is headquartered. If such certification is not required by the law of the country in which the business is headquartered, evidence of this fact is required.

8. The foreign non-life insurance business’s written commitment and authorization made under Point h, Clause 1, Article 9 of this Decree.

9. Resumes, judicial records and certified copies of diplomas and certificates proving the capacity and professional qualifications of holders of managerial titles meeting the requirements provided in Article 13 of Decree No. 45/2007/ND-CP.

10. Written personal commitments to holding the managerial titles of the branch once it is licensed (for persons expected to be managers and administrators of the branch).

11. Insurance rules, terms, rates and commissions for insurance products to be sold.

12. Evidences proving infrastructure facilities and software systems meeting the Ministry of Finance’s requirements.

13. Certification of a licensed bank in Vietnam of the branch’s allocated capital deposited at a frozen account of that bank.

Article 11. Procedures for licensing branches of foreign non-life insurance businesses in Vietnam

1. A foreign non-life insurance business wishing to establish a branch in Vietnam shall submit to the Ministry of Finance 3 sets of license application dossiers at least one of which must be the original. Each set comprises one dossier in Vietnamese and one in a popular foreign language. Copies in Vietnamese and translations from the foreign language into Vietnamese must be certified by a Vietnamese notary office under the notarization law. The investor shall take responsibility for the accuracy of the license application dossier.

2. The time limit for licensing a foreign non-life insurance business’ branch complies with Article 65 of the Law on Insurance Business. The branch license granted by the Ministry of Finance is concurrently the business registration certificate.

3. The Ministry of Finance shall provide the order, procedures and contents for evaluating license application dossiers for branches of foreign non-life insurance businesses in Vietnam.

Article 12. Organization of branches and conditions on branch directors

1. A branch of a foreign non-life insurance business may not establish an affiliate in Vietnam.

2. The branch director must satisfy the conditions specified in Article 13 of Decree No. 45/2007/ND-CP and permanently reside in Vietnam during his/her office term.

Article 13. Activities of branches

1. A branch of a foreign non-life insurance business may operate in:

a/ Insurance and reinsurance business;

b/ Risk and loss prevention and reduction;

c/ Loss assessment;

d/ Agency for loss assessment, indemnity settlement, request for third party’s compensation;

e/ Financial investment under the parent company’s authorization.

2. A branch of a foreign non-life insurance business may provide only the foreign non-life insurance business’ licensed insurance operations and products in the country in which that business is headquartered.

Article 14. Fee for branch licensing

A licensed branch of a foreign non-life insurance business shall pay a fee under law.

Article 15. Post-licensing procedures for branches of foreign non-life insurance businesses

1. Within 30 days after obtaining a license, a branch of a foreign non-life insurance business shall publish on a central daily newspaper and a daily newspaper of the locality in which it is based for 3 consecutive issues the following information:

a/ Its name and address;

b/ Content, scope and term of operation;

c/ Allocated capital;

d/ Full name of its director;

e/ Serial number and date of its license;

f/ Licensed insurance business operations in Vietnam.

2. Within 12 months after obtaining a license, a branch of a foreign non-life insurance business shall complete formalities required by law for official operation. Past this time limit, if failing to start operation, it shall have its license withdrawn.

Article 16. Changes subject to the Ministry of Finance’s approval

1. A branch of a foreign non-life insurance business shall obtain the Ministry of Finance’s approval when:

a/ It changes its name;

b/ Its allocated capital in Vietnam changes;

c/ It changes its office address;

d/ Its content, scope or term of operation changed;

e/ It changes its director or actuarial specialists;

f/ It makes offshore investment;

g/ It is transferred;

h/ It is divided, split, merged or consolidated.

2. A dossier of request for a change comprises:

a/ Written request for approval of a change specified in Clause 1 of this Article;

b/ Written approval of the change specified in Clause 1 of this Article by a competent authority under the branch’s organization and operation regulation;

c/ Plan to increase or reduce the branch’s allocated capital made under the Ministry of Finance’s guidance, for the change under Point b, Clause 1 of this Article;

d/ Documentary evidence on the right to use the place (hired or owned by the branch) in which the branch will be based (certified copy), for the change under Point c, Clause 1 of this Article;

e/ Rules, terms and premium rates on new insurance products to be launched (if any); certified copies of diplomas and certificates and other evidences proving capacity, qualifications and experience of the person leading the implementation of new contents or scope of operation, for expansion of the content or scope of operation under Point d, Clause 1 of this Article; plans to settle insurance contracts in effect and obligations toward involved parties, for reduction of the content or scope of operation under Point d, Clause 1 of this Article;

f/ Judicial records; lawful personal certifications, diplomas and certificates proving the capacity and professional qualifications (certified copies); written commitment of replacing persons, for the change under Point e, Clause 1 of this Article;

g/ Documents proving the satisfaction of requirements under the law on offshore investment; diplomas and certificates (certified copies) proving the capacity and professional qualifications of the person in charge of offshore investment, for the change under Point f, Clause 1 of this Article;

h/ Documents proving the new investor’s satisfaction of the conditions specified in Article 9 of this Decree, for the change under Point g, Clause 1 of this Article;

i/ Plan on division, split, merger or consolidation; plans on division and settlement of contracts in effect with clients, debt obligations, obligations toward the State, and commitments made with employees, audited financial statements of 3 consecutive fiscal years preceding the year of consolidation or merger of organizations to be divided, split, merged or consolidated; judicial record, lawful personal certifications and diplomas and certificates (certified copies) proving the capacity and professional qualifications of the new manager of the branch of a foreign non-life insurance business, for the change under Point h, Clause 1 of this Article. The branch of a foreign non- life insurance business formed from such division, split, merger or consolidation may only operate in insurance business if it fully meets the conditions under this Decree and related legal documents.

3. A branch of a foreign non-life insurance business wishing to make a change specified in Clause 1 of this Article shall submit a dossier to the Ministry of Finance. Within 21 days after receiving a complete and valid dossier of request for approval of a change of a branch of a foreign non-life insurance business, the Ministry of Finance shall issue a written approval or disapproval of such change. In case of disapproval, it shall clearly state the reason.

4. Within 30 days after the Ministry of Finance approves a change specified in Clause 1 of this Article, a branch of a foreign non-life insurance business shall publish such change on a central daily newspaper and a daily newspaper of the locality in which the branch is based for 3 consecutive issues.

Article 17. Changes subject to notification to the Ministry of Finance

A branch of a foreign non-life insurance business shall send to the Ministry of Finance a notice of changes related to the foreign non-life insurance business, including:

1. Change of chairman of the Board of Directors or chief executive officer.

2. Change of name or address.

3. Division, split, merger or consolidation.

4. Transfer of 100% of capital.

Article 18. Insurance, reinsurance and other operations

Branches of foreign non-life insurance businesses shall comply with the law on insurance, reinsurance and other operations like non-life insurance businesses.

Article 19. Financial regime applicable to branches of foreign non-life insurance businesses

1. Management of capital of branches of foreign non-life insurance businesses:

a/ The legal capital of a branch of a foreign non-life insurance business is VND 200 billion;

b/ In the course of operation, a branch of a foreign non-life insurance business shall keep its equity not below the legal capital mentioned at Point a, Clause 1 of this Article;

c/ The allocated capital of a branch of a foreign non-life insurance business is the capital allocated by the non-life insurance business to its branch in Vietnam. The branch of a foreign non-life insurance business must have its allocated capital increased to match its scope of business operation. The Ministry of Finance shall specify the capital increase.

2. Management of deposited funds of branches of foreign non-life insurance businesses:

a/ Within 60 days after obtaining a license to operate in Vietnam, a branch of a foreign non-life insurance business shall deposit a portion of its allocated capital at a commercial bank in Vietnam;

b/ The deposited fund equals 2% of the allocated capital of the branch;

c/ The deposited fund enjoys interest under the agreement with the bank of deposit;

d/ Use of deposited funds complies with Clauses 3 and 4, Article 6 of the Government’s Decree No. 46/2007/ND-CP of March 27, 2007, on the financial regime applicable to insurance businesses and insurance brokerage businesses (below referred to as Decree No. 46/2007/ND-CP).

3. Branches of foreign non-life insurance businesses shall set aside insurance reserve funds under Articles 8 and 10 of Decree No.46/2007/ND-CP.

4. Investment funds of a branch of a foreign non-life insurance business come from:

a/ The branch’s equity;

b/ Idle capital from the branch’s insurance reserve funds;

c/ Other lawful sources under law.

5. Capital investment of a branch of a foreign non-life insurance business is similar to that of a non-life insurance business under Articles 12 and 13, and Clause 1, Article 14 of Decree No. 46/2007/ND-CP.

6. Solvency and solvency restoration of a branch of a foreign non-life insurance business comply with Article 15; Clause 1, Article 16; and Articles 17, 18 and 19 of Decree No. 46/2007/ND-CP.

7. Revenues and expenses of a branch of a foreign non-life insurance business comply with Articles 20, 21 and 22 of Decree No. 46/2007/ND- CP.

8. Profits of a branch of a foreign non-life insurance business comply with Articles 27, 29 and 30 of Decree No. 46/2007/ND-CP A branch’s transfer of profits or assets overseas complies with Vietnamese law.

9. A branch of a foreign non-life insurance business shall set aside 5% of its annual post-tax profit for compulsory reserves which are at most equal to 10% of the branch’s allocated capital.

Article 20. Accounting and reporting regimes applicable to branches of foreign non-life insurance businesses

1. Branches of foreign non-life insurance businesses shall implement the accounting regime and fulfill tax and other financial obligations under Vietnamese law.

2. Branches of foreign non-life insurance businesses shall implement the reporting regime under Article 34 of Decree No. 46/2007/ND-CP.

3. Branches of foreign non-life insurance businesses shall submit to the Ministry of Finance audited financial statements of foreign insurance businesses; and on-spot examination and other conclusions of insurance state management authorities of the countries in which the businesses are headquartered within 90 days after the end of a fiscal year.

Article 21. Inspection and examination of operations of branches of foreign non-life insurance businesses

1. Competent Vietnamese authorities shall inspect and examine operations of branches of foreign non-life insurance businesses in Vietnam under current law.

2. Insurance state management authorities of the countries in which the businesses are headquartered shall inspect and examine operations of branches of foreign non-life insurance businesses in Vietnam under the following regulations:

a/ Before an inspection or examination, the insurance state management authority of the country in which the business is headquartered shall notify its inspection or examination plan to the Ministry of Finance;

b/ After an inspection or examination, the insurance state management authority of the country in which the business is headquartered shall provide inspection or examination results to the Ministry of Finance.

Article 22. Dissolution and termination of operation of branches of foreign non-life insurance businesses

1. A branch of a foreign non-life insurance business dissolves or terminates its operation when:

a/ Upon expiry of its license, it does not apply for license extension or its license extension application is rejected;

b/ It terminates operation on its own;

c/ Its license is withdrawn;

d/ It is insolvent under the Ministry of Finance’s decision;

e/ The foreign non-life insurance business has its license withdrawn or expired or dissolves or goes bankrupt.

2. A dossier of request for dissolution or operation termination of a branch of a foreign non-life insurance business comprises:

a/ Application for dissolution or operation termination;

b/ Decision of a competent authority under the branch’s organization and operation regulation;

c/ Decision of a competent state agency, for the cases specified at Points a (for refusal of extension application), c, d and e, Clause 1 of this Article;

d/ Plan on settlement of insurance contracts still in effect, plan on settlement of obligations towards involved parties;

e/ The branch’s license.

3. A branch of a foreign non-life insurance business wishing to dissolve or terminate its operation in Vietnam shall send a dossier to the Ministry of Finance. Within 30 days after receiving a complete dossier of request for dissolution or operation termination of a branch of a foreign non-life insurance business, the Ministry of Finance shall issue a decision to dissolve or terminate the operation of that branch.

Section 3: BIDDING AND COMPETITION IN INSURANCE BUSINESS

Article 23. Subjects of bidding

When buying insurance for their assets or insurance for liability for their projects, assets or operations (except compulsory insurance for fire and explosion and compulsory insurance for civil liability of motor vehicle owners), investors of projects with 30% or higher of state capital and owners or users of assets of the State or state enterprises shall open bidding to select foreign insurance businesses or branches of foreign non-life insurance businesses to provide such insurance.

Article 24. Bidding forms, procedures and order

1. Based on estimates of insurance premiums, the subjects specified in Article 23 of this Decree shall select a form of bidding in compliance with the Bidding Law and the following regulations:

a/ For an insurance premium of less than VND 3 billion, the subjects specified in Article 23 of this Decree may apply competitive offering or contractor appointment if they fully satisfy the conditions under the Bidding Law. For insurance businesses, if the insurance premium is under VND 500 million, they may apply self insurance.

b/ For an insurance premium of VND 3 billion or higher, the subjects specified in Article 23 of this Decree shall apply open bidding if they fully satisfy the conditions under the Bidding Law.

2. Bidding procedures and order comply with current regulations.

Article 25. Conditions on bidders

1. A foreign insurance business or branch of a foreign non-life insurance business may bid for insurance service provision when it meets the following conditions:

a/ It is licensed to provide the insurance opened for bidding;

b/ It guarantees its solvency under law;

c/ Sources of its equity meet law-prescribed requirements;

d/ In case of reinsurance, it is required to have the reinsurer’s certification or evidence of the reinsurer’s acceptance of reinsurance for the portion exceeding the retained liability of the foreign insurance business or branch of a foreign non-life insurance business according to the insurance rules, terms and premium rates expected to be provided by the bidding foreign insurance business or branch of a foreign non-life insurance business. The foreign insurer assuming the prime responsibility for reinsurance and receiving 10% or higher of the total liability of each insurance contract must be rated at least “BBB+” by Standard &Poor’s or Fitch, “B++” by A.M.Best, “Baa1” by Moody’s or equivalent ranks of other experienced rating organizations in the fiscal year closest to the time of providing reinsurance;

e/ It does not violate other bidding regulations.

2. Foreign insurance businesses and branches of foreign non-life insurance businesses are not required to provide bidding securities and contract performance securities when bidding for insurance services.

Article 26. Competition in insurance business

Competition in insurance business must comply with the following provisions:

1. For compulsory insurance products specified in Article 8 of the Law on Insurance Business, foreign insurance businesses and branches of foreign non-life insurance businesses shall comply with the Ministry of Finance’s regulations on insurance conditions, premium rates and minimum insurance amounts.

2. Particular insurance products provided by the Government or decided by the Prime Minister comply with the Ministry of Finance’s guidance.

3. Life insurance products (of life insurance businesses) and health insurance products (of foreign insurance businesses and branches of foreign non-life insurance businesses) comply with insurance rules, terms and premium rates approved by the Ministry of Finance.

4. For non-life insurance products: Foreign non-life insurance businesses or their branches may proactively develop and apply insurance rules, terms and premium rates under Clause 4, Article 20 of Decree No. 45/2007/ND-CP In case insurance rules, terms and premium rates fail to guarantee financial safety under the regime applicable to foreign non-life insurance businesses and branches of foreign non-life insurance businesses and harm the interests of insurance buyers, the Ministry of Finance shall request foreign non-life insurance businesses and branches of foreign non-life insurance businesses to make appropriate adjustments.

Article 27. Operations of insurance businesses

1. Insurance businesses may operate under Clause 1, Article 60 of the Law on Insurance Business.

2. Life insurance businesses may not conduct non-life insurance operations and vice versa.

3. Life and non-life insurance businesses may conduct health insurance operations.

Section 4: FUND FOR PROTECTION OF THE INSURED

Article 28. Principles of management of the fund for protection of the insured

1. The fund for protection of the insured is subject to centralized management at the Vietnam Insurance Association and shall be accounted, managed and monitored separately for life insurance and non-life insurance. The fund for protection of the insured has its own bank account and may use the seal of the Vietnam Insurance Association.

2. The Vietnam Insurance Association shall monitor deductions by foreign insurance businesses and branches of foreign non-life insurance businesses for payment to the fund for protection of the insured; and manage and use the fund for protection of the insured effectively and properly under this Decree and other related laws.

3. The Ministry of Finance shall guide and supervise the management and use of the fund for protection of the insured.

Article 29. Payers to the fund for protection of the insured

Payers to the fund for protection of the insured include:

1. Insurance businesses;

2. Branches of foreign non-life insurance businesses.

Article 30. Levels of payment to the fund for protection of the insured

1. The level of payment to the fund for protection of the insured shall be announced annually by the Ministry of Finance but must not exceed 0.3% of the total retained premium revenues of original insurance contracts of insurance businesses and branches of foreign non-life insurance businesses.

2. Payments to the fund for protection of the insured shall be made until the fund reaches 5% of the total asset of non-life insurance businesses and branches of foreign non-life insurance businesses or 3% of life insurance businesses.

Article 31. Sources to form the fund for protection of the insured

The fund for protection of the insured is formed from the following sources:

1. Annual payments at a certain percentage of insurance premiums applicable to all insurance contracts. These payments shall be accounted as reasonable expenses when calculating enterprise income tax.

2. Profits from investment activities of the fund for protection of the insured.

3. The fund for protection of the insured’s balance of the previous year carried forward to the next year.

Article 32. Principles of use of the fund for protection of the insured

1. The fund for protection of the insured may be used when:

a/ An insurance business or a branch of a foreign non-life insurance business becomes insolvent and its measures to restore its solvency fail and it may use the fund for protection of the insured under the Ministry of Finance’s decision to terminate solvency restoration measures;

b/ The insurance business goes bankrupt and the fund for protection of the insured may be used from the time a judge issues a ruling to declare the insurance business’ bankruptcy.

2. The fund for protection of the insured shall be used separately for life and non-life insurance.

3. The fund for protection of the insured shall be used to pay insurance amounts, surrender values; pay indemnities; and refund premiums under insurance contracts at the request of an insolvent insurance business or branch of a foreign non-life insurance business or a bankrupt insurance business only once for each dossier of request for payment of insurance amounts or surrender values; or insurance indemnities; or for refund of insurance premiums.

Article 33. Spending of the fund for protection of the insured

The fund for protection of the insured shall be spent on:

1. Payment of insurance amounts, surrender values; and insurance indemnities; and refund of insurance premiums under an insurance contract which an insurance business or a branch of a foreign non-life insurance business is unable to pay at the time the Ministry of Finance issues a decision to terminate solvency restoration measures (for insolvent foreign insurance businesses or branches of foreign non-life insurance businesses) or at the time a judge issues a ruling to declare the insurance business’ bankruptcy (for bankrupt insurance businesses).

2. Expenses for management of the fund for protection of the insured, covering wages, allowances, procurement and repair of assets, services and other expenses shall be managed under the Ministry of Finance’s guidance.

Article 34. Procedures for requesting use of the fund for protection of the insured

1. Within 5 days after the Ministry of Finance decides to terminate solvency restoration measures (for insolvent foreign insurance businesses or branches of foreign non-life insurance businesses) or after results of liquidation of assets and debts are available (for bankrupt insurance businesses), an insurance business or a branch of a foreign non-life insurance business shall send to the Vietnam Insurance Association a request for use of the fund for protection of the insured enclosed with a dossier made according to the form guided by the Vietnam Insurance Association.

2. Within 30 days after receiving a written request for use of the fund for protection of the insured enclosed with a dossier under Clause 1 of this Article, the Vietnam Insurance Association shall decide to use the fund for protection of the insured and report implementation results to the Ministry of Finance.

Article 35. Responsibilities of foreign insurance businesses and branches of foreign non-life insurance businesses

1. To make deductions for payment to the fund for protection of the insured under the Ministry of Finance’s guidance.

2. To send their representatives to join the organization and management of the fund for protection of the insured at the Vietnam Insurance Association.

3. To send to the Vietnam Insurance Association requests for use of the fund for protection of the insured and dossiers under Clause 1, Article 34 of this Decree together with the Ministry of Finance’s decisions to terminate solvency restoration measures or judges’ rulings to declare insurance businesses’ bankruptcy.

Article 36. Responsibilities of the Vietnam Insurance Association

1. To manage and use, and take responsibility before law for its use and management of, the fund for protection of the insured; to audit the fund for protection of the insured under law.

2. To elaborate plans and decide on payment limits for each dossier of request for payment of insurance amounts or surrender values; payment of insurance indemnities; or refund of insurance premiums when an insurance business goes bankrupt or an insurance business or a branch of a foreign non-life insurance business becomes insolvent.

3. To pay insurance amounts or indemnities to the insured under this Decree.

4. To invest the fund for protection of the insured in Vietnam by buying government bonds or government-guaranteed corporate bonds or depositing at commercial banks in adherence to the principle of capital safety and investment efficiency.

5. To quarterly report to the Ministry of Finance on the management and use of the fund for protection of the insured.

Article 37. Responsibilities of the Ministry of Finance

1. To guide, direct, manage, examine and supervise the Vietnam Insurance Association in managing and using the fund for protection of the insured.

2. To guide foreign insurance businesses and branches of foreign non-life insurance businesses in making annual deductions for payment to and accounting of the fund for protection of the insured.

Section 5: INSURANCE BUSINESS AND INSURANCE BROKERAGE

Article 38. Licensing of joint-stock insurance companies and insurance brokerage companies

Organizations and individuals shall contribute capital to establish joint- stock insurance companies or insurance brokerage companies under Article 63 of the Law on Insurance Business, Articles 6 and 7 of Decree No.45/2007/ND-CP and the Ministry of Finance’s guidance.

Article 39. Licensing of limited liability insurance companies and insurance brokerage companies

1. Limited liability insurance companies and insurance brokerage companies shall be established under Article 63 of the Law on Insurance Business, Articles 6 and 7 of Decree No. 45/2007/ND-CP and the Ministry of Finance’s guidance.

2. A Vietnamese organization establishing a limited liability insurance or insurance brokerage company must satisfy the following conditions:

a/ It is a business operating in finance, banking or insurance;

b/ Its total asset value is equivalent to at least VND 2 trillion, for establishing single-member limited liability companies; or VND 1.5 trillion, for establishing limited liability companies with 2 or more members. This condition does not apply to organizations establishing limited liability insurance brokerage companies;

c/ It makes profits for 3 consecutive fiscal years preceding the year of applying for a license;

d/ It satisfies the conditions under Clause 1 of this Article.

Article 40. Legal capital required for health insurance businesses

The legal capital required for businesses operating only in health insurance is VND 300 billion.

Article 41. Licensing order and procedures

The Ministry of Finance shall guide the order and procedures for licensing insurance businesses and insurance brokerage businesses.

Article 42. Transformation of insurance businesses, insurance brokerage businesses

1. Insurance joint ventures provided in Clause 4, Article 59 of Law No.24/2000/QH10 on Insurance Business and insurance brokerage joint ventures may be transformed into limited liability companies with 2 or more members.

2. Wholly foreign-owned insurance businesses provided in Clause 5, Article 59 of the Law on Insurance Business and wholly foreign-owned insurance brokerage businesses may be transformed into single-member limited liability companies.

3. A transformed insurance business or insurance brokerage business under Clause 1 or 2 of this Article may take over the rights and legitimate interests of the former insurance business or insurance brokerage business and shall perform the obligations committed with insurance buyers by and other obligations of the latter. Transformation procedures comply with the Enterprise Law and the Ministry of Finance’s guidance.

4. An insurance business or insurance brokerage business which is not transformed under Clause 1 or 2 of this Article may continue operation under its license granted by the Ministry of Finance; and retain its registered name, seal, account and tax identification number. Its other rights and obligations comply with law.

Section 6: REINSURANCE BUSINESS

Article 43. Licensing of reinsurance businesses

1. Businesses operating in finance, banking and insurance may contribute capital to establish reinsurance businesses in the forms provided in Clause 2 or 3 of this Article.

2. Joint-stock reinsurance companies shall be established under Article 63 of the Law on Insurance Business, Articles 6 and 7 of Decree No. 45/2007/ND-CP Clause 4 of this Article, and the Ministry of Finance’s guidance.

3. Limited liability reinsurance companies shall be established under Article 39, and Clause 4, Article 43 of this Decree and the Ministry of Finance’s guidance.

4. Legal capital required for reinsurance businesses:

a/ VND 400 billion, for non-life reinsurance or health reinsurance business or non-life reinsurance and health reinsurance business;

b/ VND 700 billion, for life reinsurance business or life and health reinsurance business;

c/ VND 1.1 trillion, for life, non-life and health reinsurance business.

Article 44. Organization and operation of and financial regime applicable to reinsurance businesses

1. The organization and operation of reinsurance businesses comply with Articles 10, 11, 12, 13, 15, 16, 23, 24, 25, 26 and 27 of Decree No.45/2007/ND-CP and the Ministry of Finance’s specific guidance.

2. The financial regime for reinsurance businesses shall be applied to each type of reinsurance provided by the businesses (life, non-life and health reinsurance) under current regulations and the Ministry of Finance’s guidance.

SECTION 7: AMENDMENTS AND SUPPLEMENTS TO A NUMBER OF ARTICLES OF DECREE NO. 45/2007/ND-CP

Article 45. To amend and supplement Article 11 of Decree No.45/2007/ND-CP

1. To amend and supplement Points b and c, Clause 1, Article 11 as follows:

“b/ Administrators and managers satisfy the conditions provided in Clause 1, Article 13, and internal inspection and control systems satisfy the conditions provided in Article 15, of the Government’s Decree No.45/2007/ND-CP of March 27, 2007, detailing a number of articles of the Law on Insurance Business;

c/ Not being administratively sanctioned at VND 200 million or higher for violations of regulations on insurance business within 12 months counting to the time of dossier submission. Insurance businesses do not commit violations of regulations on solvency.”

2. To annul Point b, Clause 2 of Article 11.

Chapter III

IMPLEMENTATION PROVISIONS

Article 46. Effect

This Decree takes effect on February 15, 2012.

Article 47. Organization of implementation

1. The Minister of Finance shall guide the articles and clauses of this Decree as assigned; and guide other necessary contents of this Decree to meet state management requirements.

2. Ministers, heads of ministerial-level agencies, heads of government- attached agencies and chairpersons of provincial-level People’s Committees shall implement this Decree.-