Thông tư 125/2012/TT-BTC

CIRCULAR

ON GUIDING FINANCIAL REGIME APPLICABLE TO INSURERS, REINSURANCE BUSINESSES, INSURANCE BROKERS AND BRANCHES OF FOREIGN NON-LIFE INSURERS

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

Pursuant to the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Law on Insurance Business No.61/2010/QH12;

Pursuant to Decree No. 46/2007/ND-CP of the Government dated 27 March 2007 on the financial regime applicable to insurers and insurance brokers;

Pursuant to the Decree No. 123/2011/ND-CP of December 28, 2011, 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

Pursuant to Decree No.118/2008/ND-CP of the Government dated 27 November 2008 on functions, duties, powers and organizational structure of the Ministry of Finance;

At the proposal of the Director of insurance management and supervision Administration

The Minister of Finance promulgates Circular guiding the financial regime applicable to insurers, reinsurance businesses, insurance brokers and branches of foreign non-life insurers:

Chapter I

GENERAL PROVISIONS

Article 1. The scope and subject of application

This Circular guides the financial regime applicable to insurers, reinsurance businesses, insurance brokers and branches of foreign non-life insurers being established and operating legally in Vietnam

Article 2. Principle of financial management and supervision

The life or non-life insurers,health insurance businesses, reinsurance businesses, insurance brokers and branches of foreign non-life insurers are self-responsible for management, use of capital, supervision of financial operations, result of business and implementation of their obligations, commitments comply with provisions of law

Article 3. Interpretation of terms

The terms in this Circular are construed as follows:

1. The insurers mean life insurers, non-life insurers, health insurance businesses, reinsurance businesses, insurance brokers.

2. The insurance businesses mean life insurers, non-life insurers, and health insurance businesses.

3. The foreign branches mean branches of foreign non-life insurers.

4. The joint- stock insurance companies mean joint- stock life insurance companies, joint- stock non-life insurance companies, joint- stock health insurance companies, joint- stock reinsurance companies, joint- stock insurance broker companies.    

Chapter II

SPECIFIC PROVISIONS

Section 1. MANAGEMENT OF PAID-UP CHARTER CAPITAL, ALLOCATED CAPITAL, EQUITY

Article 4. Management of paid-up charter capital, allocated capital 

1. The paid-up charter capital, the allocated capital

1.1. The paid-up charter capital of insurers means the amount actually contributed by the owner to the charter capital of the enterprise.

1.2. The allocated capital of foreign branch means the amount actually allocated by the foreign non-life insurers to its branch in Vietnam.

2. After being granted a license for establishment and operation, the amount held in the escrow account at a bank shall be remitted to become paid-up charter capital (or the allocated capital).

3. The paid-up charter capital (or the allocated capital) must correspond with the operational contents, scope and geographical area of insurance businesses, insurance brokers, and foreign branches.

3.1. If the paid-up charter capital (or the allocated capital) is equal to its legal capital, the operational contents, scope and geographical area of insurance businesses, insurance brokers, foreign branches shall: 

a) Regarding the operational geographical area:  The insurance business shall be permitted to open a maximum of 20 branches and representative offices.

b) Regarding the operational scope:

- The non-life insurers, foreign branches shall be permitted to conduct business in primary insurance of all types of non-life insurance and health insurance except for aviation insurance and satellite insurance.

- The life insurers shall be permitted to conduct business in operations on life insurance and health insurance except for investment-linked insurance and pension insurance.

- The insurance brokers shall be permitted to conduct business in primary insurance broker or reinsurance broker.

3.2. In the case of extending the operational contents, scope and geographical area apart the operational contents, scope and geographical area specified in point 3.1, clause 3 of this Article, the insurance businesses, insurance brokers, foreign branches shall implement supplement of the paid-up charter capital (or the allocated capital) as follows:

a) With respect to every branch or representative office being opened more, the insurance business must add to the paid-up charter capital so that it is VND 10 billion more than the amount of its legal capital.

b) With respect to every type of insurance being expanded, the insurance businesses, foreign branches shall supplement the paid-up charter capital (or the allocated capital) as follows: 

- With respect to every type of aviation insurance or satellite insurance, non-life insurers, foreign branch must add to the paid-up charter capital (or the allocated capital) so that it is VND 50 billion more than the amount of its legal capital.

- With respect to type of investment-linked insurance, pension insurance, the charter capital supplement of life insurers shall comply with particular guiding documents of the Ministry of Finance.

c) The added charter capital level for insurance businesses conduct business in each insurance type specified in subsection b, point 3.2, clause 3 of this Article is not replaced for the added charter capital level for establishment of new branch or representative office specified in subsection a, point 3.2, clause 3 of this Article and vice versa.

d) With respect to the case of business in both primary insurance broker and reinsurance broker, the insurance broker must add to the paid-up charter capital so that it is VND 4 billion more than the amount of its legal capital.

4. The paid-up charter capital of reinsurance businesses shall not less than the legal capital level specified in clause 4, Article 43 of the Decree No. 123/2011/ND-CP The re-insurer being established, organized and operated before the effective day of this Circular and whose paid-up charter capital being less than the legal capital, it must implement supplement of the charter capital within twelve (12) months since this Circular takes effect.   

Article 5. MANAGEMENT OF EQUITY

1. During course of operation, the insurers, foreign branches must maintain the equity satisfying the principles as follows: 

a) The insurance businesses, insurance brokers, foreign branches must always maintain the equity at no less than the level specified in clause 3, Article 4 of this Circular;   

b) The reinsurance businesses paid-up must always maintain the equity at no less than the level of charter capital specified in clause 4, Article 43 of the Decree No. 123/2011/ND-CP.

2. Yearly, based on the audited financial statement, the insurers, foreign branches must re-assess the equity.  If the equity fails to meet regulation in clause 1 of this Article, the insurers, foreign branches must implement procedures for capital supplement as prescribed by law within six (06) months since the end day of financial year.

Section 2. INSURANCE RESERVES

Article 6. Objective of establishing insurance reserves

The insurance reserves are the amount which insurance businesses, reinsurance businesses, foreign branches must set aside for the objective of paying out its insurance liabilities determined in advance and arising from insurance contracts, reinsurance contracts which it has entered into.

Article 7. The establishing insurance reserves for non-life insurers, health insurance businesses and foreign insurers

1. The non-life insurers, health insurance businesses (hereinafter referred to as “non-life insurers”), foreign branches must establish insurance reserves as prescribed in Article 8 of the Decree No. 46/2007/ND-CP; and being confirmed by the actuary on insurance reserves and payment capacity of non-life insurers, foreign branches.

2. The non-life insurers, foreign branches shall be permitted to select and request the Ministry of Finance to approve method of establishing insurance reserves in accordance with the guidelines provided in clause 4 of this Article prior to application. With respect to the unearned premium reserve and the indemnity reserve, if non-life insurers, foreign branches apply a different method of establishing, they must be able to ensure a higher reserving result and must have written approval from the Ministry of Finance prior to application.

3. A non-life insurer or foreign insurer is not permitted to change its method of establishing insurance reserves in the same fiscal year. Where a non-life insurer or foreign insurer changes its method of establishing insurance reserves for the following fiscal year, it must propose to the Ministry of Finance which must provide written approval prior to application.

4. Methods of establishing insurance reserves:

4.1. Unearned premium reserve:

a) Method of establishing the reserve as a percentage of total premiums:

- In the case of insurance products for goods in transit by road, sea, river, rail and air:  equal to twenty- five per cent (25%) of the total retained premiums for this insurance product of the fiscal year.

- In the case of other insurance products:  equal to twenty- five per cent (50%) of the total retained premiums for these insurance products of the fiscal year.

b) Method of establishing the reserve in accordance with a coefficient of the term of insurance contracts:

- The 1/8 method: This method assumes that premium from all contracts arising in a quarter of the non-life insurer or foreign branch is evenly distributed to the months in that quarter, or put another way all insurance contracts in a specific quarter are assumed to be valid in the middle of that quarter.  The reserve for unearned premiums shall be calculated by the formula:

For example The reserve for unearned premiums at 31 December 2012 shall be calculated as follows:

In the case of insurance contracts with a term of one year and still effective at 31 December 2012:

In the case of insurance contracts with a term above one year: the proportion of unearned premiums under the above formula will have a denominator equal to the term of the insurance contract (calculated with the number of years) multiplied by 8. Therefore the reserve for unearned premiums at 31 December 2012 in the case of insurance contracts with a term of two years and still effective at 31 December 2012 shall be calculated as follows:

- The 1/24 method: This method assumes that premium from all contracts arising in a month of the non-life insurer or foreign branch is evenly distributed over the month, or put another way all insurance contracts in a specific month are assumed to be valid in the middle of that month. The reserve for unearned premiums shall be calculated by the formula:

For example The reserve for unearned premiums at 31 December 2012 shall be calculated as follows:

In the case of insurance contracts with a term of one year and still effective at 31 December 2012:

In the case of insurance contracts with a term above one year: The proportion of unearned premiums under the above formula will have a denominator equal to the term of the insurance contract (calculated with the number of years) multiplied by 24. Therefore the reserve for unearned premiums at 31 December 2012 in the case of insurance contracts with a term of two years and still effective at 31 December 2012 shall be calculated as follows:

- Methods of establishing premium reserve on a daily basis: This method may be applied to calculate a reserve for unearned premiums on insurance contracts with whatever term, by using the following comprehensive formula:

4.2. Indemnity reserve:

a) Method of establishing this reserve based on each claim file:   According to this method, a non-life insurer or foreign branch must establish two types of reserve:

- An indemnity reserve for payment of unresolved claims: made for each type of insurance product by the method of estimating the amount of pay-out for each claim for which the non-life insurer of foreign branch is liable, and notified or made but unresolved at the end of the fiscal year.

- A reserve for payment of losses which have arisen and for which the insurer is liable, but claims are not yet notified or made. This reserve must be established for each insurance product by the following formula:

In which:

Indemnity for losses arising in any one fiscal year shall be indemnity for losses actually paid out in the year plus the reserve for claims unresolved at the end of that fiscal year

The average delay in making claims shall be the average period from the date loss occurs until the date the non-life insurer or foreign branch receives notice of loss or a claim dossier (calculated as a number of days).

If the non-life insurer or foreign branch fails to have full figures for statistics to establish indemnity reserve for losses arising and for which the insurer is liable, but claims are not yet notified or made by the regulated formula, the insurer or foreign branch must establish under rate equal from 3% to 5% of total premium reserve for each insurance product.

b) Method of establishing an indemnity reserve in accordance with the coefficient of arising indemnity:

This method shall apply to establish an indemnity reserve for each product based on the principle of using data on indemnity in previous years in order to calculate coefficients of arising indemnity in order to forecast what the non-life insurer or foreign branch will have to pay out in the future. Therefore the non-life insurer or foreign branch must analyze past data to ensure that payment of indemnity over the years complies with fixed regulations and does not fluctuate abnormally.

For example: The indemnity reserve in accordance with the coefficient of arising indemnity for a specified product as at 31 December 2012:

- Step 1: Statistics on all indemnity pay-outs actually made up to 31 December 2012 and distributed to the year of the loss and to the year of payment are set out in the following table (the data in the table is for illustrative purposes only):

Unit: Million dong

According to the above statistical table on indemnity (see line for year 2005):

The actual indemnity pay-out in 2005 (first year of indemnity) for losses occurring in 2005 is 5,445 million dong.

The actual indemnity pay-out in 2006 (second year of indemnity) for losses occurring in 2005 is 3,157 million dong.

The actual indemnity pay-out in 2007 (third year of indemnity) for losses occurring in 2005 is 2,450 million dong.

And so on,

Statistics on indemnity in the following years for losses occurring in 2005 shall be calculated the same as above until there is no more indemnity arising. In this example, after year 2012 (eighth year of indemnity) there is no indemnity payable for losses occurring in 2005.

Statistics on indemnity for losses occurring in each year 2006 through to 2012 shall be calculated the same as for year 2005 above. The number of previous years for which statistics need to be kept will depend on the length of the period from the date the loss occurred until indemnity has been paid out in full. Normally liability insurance will have a greater number of such years than other insurance products.

- Step 2: Make the above table into a table of statistics on accumulated indemnity pay-outs, in which the accumulated indemnity pay-out of every year shall be total actual pay-outs of that year plus those of the previous years:

Unit: Million dong

According to the above statistical table on accumulated indemnity pay-outs (line for year 2005):

The accumulated indemnity pay-out in 2005 (first year of indemnity) for losses occurring in 2005 is 5,445 million dong.

The accumulated indemnity pay-out in 2006 (second year of indemnity) for losses occurring in 2005 is 3,157 million dong + 5,445 million dong = 8,602 million dong.

The accumulated indemnity pay-out in 2007 (third year of indemnity) for losses occurring in 2005 is 2,450 million dong + 8,602 million dong = 11,052 million dong.

- Step 3: Calculate the coefficient of arising indemnity over the years by dividing the accumulated indemnity pay-out for a later year by that of the previous year:

Unit: Million dong

Then calculate the average coefficient of indemnity from the first year to the second year, from the second year to the third year and so on, by calculating the average value of the coefficient in each column in the above table.

- Step 4: Use the average coefficient of indemnity calculated in step 3 above in order to calculate the accumulated indemnity pay-out of each year for losses occurring in 2005 up to 2012 (the figures in bold print below):

Unit: Million dong

According to the table (looking at the line for year 2012):

The accumulated indemnity pay-out in 2013 (second year of indemnity) for losses occurring in 2012 is 15,162 million dong x 1.625 = 24,638 million dong (1.625 is the average coefficient of indemnity from the first to the second year).

The accumulated indemnity pay-out in 2014 (third year of indemnity) for losses occurring in 2012 is 24,638 million dong x 1.236 = 30,453 million dong (1.236 is the average coefficient of indemnity from the second to the third year).

The accumulated indemnity pay-out in 2015 (fourth year of indemnity) for losses occurring in 2012 is 30,453 million dong x 1.163 = 35,417 million dong (1.163 is the average coefficient of indemnity from the third to the fourth year).

The accumulated indemnity pay-out for each year for losses occurring in years 2011, 2010 down to year 2005 shall be calculated the same as it was for year 2012.

- Step 5: Estimate the indemnity reserve:

The indemnity reserve as at 31 December 2012 shall be estimated by taking the total estimated pay- out for losses occurring in all years 2005 through to 2012, less total actual pay-outs for all such losses calculated up to 31 December 2012, in which:

The total estimated pay-out for losses occurring in all years 2005 through to 2012 is simply the accumulated indemnity pay-out for the eighth year of indemnity in the table above.

The total actual pay-outs for all losses occurring in all years 2005 through to 2012 calculated at 31 December 2012 is simply the accumulated indemnity figure for the year in the diagonally adjacent box in the table above.

Unit: million dong

Therefore, on the basis of the above statistical data on indemnity, the estimated indemnity reserve for insurance products being researched as at 31 December 2012 will be 58,469 million dong.

4.3. Indemnity reserve for large loss fluctuation

a) Establishing indemnity reserve for large loss fluctuation

- Annually, the non-life insurer or foreign branch must establish the indemnity reserve for large loss fluctuation, even case insurer or branch use (or not use) this reserve for large loss fluctuation in a fiscal year.

- The annually maximum establishment level is applied under rate from 1% to 3% of insurance premium reserve under each product.

- The establishment of reserve is performed until this reserve is equal 100% of retained premium in a fiscal year of non-life insurer or foreign branch

b) The use of indemnity reserve for large loss fluctuation:

- The indemnity reserve for large loss fluctuation is used for product occurring large loss fluctuation.

A product is considered as occurring large loss fluctuation when total retained premium in a fiscal year of such product after established for unearned premium reserve and indemnity reserve for unresolved claims is not enough to pay compensation for part of liability retained of insurer of branch for such product.

- The maximum amount being used from the indemnity reserve for large loss fluctuation (IRLLF) is calculated by the following formula:

5. In the period of six (06) months since the day this Circular takes effect, the non-life insurers must review method of establishing reserves and do produces for the approval of method of establishing reserves in order to apply to the future fiscal year as prescribed in article 7 and article 10 of this Circular.

Article 8. Establishing insurance reserves with respect to life insurers

1. Life insurers must establish insurance reserves in accordance with article 9 of Decree No. 46/2007/ND-CP which must be certified by their actuary.

2. Life insurers shall be permitted to select and request to the Ministry of Finance for approval of a method and basis of establishing insurance reserves in accordance with the guidelines provided in clause 4 of this article prior to application. If an enterprise applies a different method and basis of establishing insurance reserves, then it must be able to ensure a higher reserving result and must have written approval from the Ministry of Finance prior to application.

3. A life insurer is not permitted to change its method and basis of establishing insurance reserves in the same fiscal year. Where an insurer changes its method and basis of establishing insurance reserves for the following fiscal year, it must propose same to the Ministry of Finance which must provide written approval prior to application.

4. Method of establishing insurance reserves with respect to life insurer business in life insurance and health insurance (except for investment-linked insurance and pension insurance):

4.1. Actuarial reserves

a) The life insurer is entiled to actively select method of establish actuarial reserves for insurance contracts with term over 01 year in order to ensure the insurance liability in the future such as: the gross premium valuation method, net premium valuation method, net premium method adjusted by Zillmer or other methods under international practice

b) In all cases, the methods of establishing mathmatical reserves of life insurers must ensure result not less than reserve calculated under the method and basis below:

- Method of establishing: the net premium valuation method adjusted by the Zillmer coefficient of three (3) per cent of insured sums. The adjusted net premium used to calculate this reserve must not be higher than ninety (90) per cent of premium actually collected

- Basis of establishing reserves: the Mortality table CSO 1980, the maximum technical interest rate not exceeding eighty (80) per cent of the ten (10) year Government bond interest rate at the most recent date before establishing the reserve, and other technical basis in conformity with insurance benefits and rights committed with clients by life insurers for insurance product approved by the Ministry of Finance.

c) Actuarial reserves will be deemed equal to zero (0) if the result after calculations using the above- mentioned method and bases is a negative number.

4.2. Unearned premium reserve: is calculated on the gross premium under methods specified in point 4.1, clause 4, article 7 of this Circular and applied to only insurance contracts with the term of one (01) year or less than.

4.3. Indemnity reserve:

a) Indemnity reserve for unresolved claims: be establish under method each dossier with established level based statistic of payable insurance amount  for each dossier claim noticed or made to the life insurers but have not yet been resolved at the end of fiscal year

b) Indemnity reserve for losses arising for which the non-life insurer of foreign branch is liable but claims have not yet noticed or made: just apply to insurance contracts with the term of one (01) year or less than.

4.4. Profit distribution reserve including two kinds

a) Reserve for publicized profit

- For contracts dividing profit in cash:

- For contracts dividing profit in form of accumulated guarantee dividends:

b) Reserve for profit not yet publicized

Reserve for profit not yet publicized is current value of dividends going to be distributed for policyholders in the future aiming to ensure provisions in clause 2, Article 27 of this Circular, calculated by assets of policyholders' funds participating in profit distribution less debts of fund, support capital from owner and profit distributed in current year. Establishing this reserve must ensure principles:

- The rate of annual contribution of this reserve is not exceeding 10% of total surplus of policyholders' funds participating in profit distribution araising in such year.

- Total value of reserve to profit not yet publicized at any time is not exceeding 0.5% mutiplied by the average remaining time limit of contracts participating in profit distribution mutiplied by total liability level of policyholders' funds participating in profit distribution at such time.

4.5. Balance reserve: Annual contributions shall be one (1) per cent of the before-tax profit of the life insurer, made up until the time when this reserve is equal to five (5) per cent of the premiums collected in the fiscal year of an insurer.

5. Method of establishing insurance reserves apply to the investment-linked insurance and pension insurance complies with particular guiding documents of the Ministry of Finance.

Article 9. Establishing insurance reserves for reinsurance businesses

1. The reinsurance businesses conducting business in non-life reinsurance and health reinsurance must establish types of insurance reserve similart to non-life insurers as prescribed in Article 8 of the Decree No. 46/2007/ND-CP.

The reinsurance businesses conducting business in non-life reinsurance must establish types of insurance reserve similart to life insurers as prescribed in Article 9 of the Decree No. 46/2007/ND-CP.

2. The reinsurance businesses shall be permitted to select and request the Ministry of Finance to approve method of establishing insurance reserves in accordance with the guidelines provided in Article 7 of this Circular (for type of non-life re-insurance and health reinsurance), Article 8 of this Circular (for type of life re-insurance) prior to application. If reinsurance businesses apply a different method of establishing reserves, they must be able to ensure a higher reserving result and must have written approval from the Ministry of Finance prior to application.

3. The reinsurance businesses are prohibited to change method of establishing insurance reserves in a same fiscal year.  Where a re-insurer changes its method of establishing insurance reserves for the following fiscal year, it must propose to the Ministry of Finance which must provide written approval prior to application.

Article 10. Proceduces for approval of application (or modification) of methods of establishing insurance reserves

1. Before application (or modification) of methods of establishing insurance reserves, the insurers, re-inrurers, foreign branches shall send to the Ministry of Finance one (01) set of dossier to request for approval of application (or modification) of methods of establishing insurance reserves, including the following documents:

a) An written request for application (or modification) of methods of establishing insurance reserves, signed by the legal representative of the insurance businesses, reinsurance businesses, foreign branches including the following documents: In case of modification of methods of establishing insurance reserves,  it should clearly state the reason therefore.

b) Materials providing explanations, and illustrations on methods of establishing insurance reserves espected to apply, confirmed by the reserve and solvency margin actuary (for non-life insurers, reinsurance businesses, forein branches) of the actuary (for the life insurers) In case of modification of methods of establishing insurance reserves, the materials providing explanations must prove the new method of establishing giving the establishing result higher than the result of old method of establishing.

2. Within eleven (11) days, from the day receiving a full and valid dossier as prescribed in clause 1 of this Article, the Ministry of Finance shall give as written result on approval or refusal of the request for approval of application (or modification) of methods of establishing insurance reserves of the insurance businesses, reinsurance businesses, or foreign branches. In case of refusal, it should clearly state the reason therefore.

Section 3. FINANCIAL INVESTMENT

Article 11. The principles of investment

The financial investment operation of insurers, foreign branches must ensure the principles:

1. To obey provisions of law, be self-liable for investment operation, assurance of safety, effectiveness and liquidity.

2. It is prohibited to have loans for direct investment (or investment trust) in securities, real estates, contribute capital in other enterprises. 

3. It is prohibited to reinvest in any of the forms with shareholders (members) or related persons specified in the the Law on Enterprise, except for deposits at shareholders (members) being credit institutions.

4. The investment in the form of deposits at credit institutions (inclusive of credit institutions being shareholders, contributing members), the insurers, and foreign branches must select credit institutions under group 1 and group 2 under the ranking evaluation of the State bank.

5. To account separately for investments from owner's capital, idle capital from insurance reserves, and other legitimate source as prescribed by law; ensuring that the recording of invested assets is conducted uniformly.

6. The offshore investments must be approved by the Ministry of Finance before implementation.

Article 12. Investment of equity

1. The equity of the insurers and foreign branches are used as follows:

1.1. Being invested as prescribed in clause 1, Article 12 of the Decree No. 46/2007/ND-CP Article 11 of this Circular and guides specifying:

a) For construction and setting up technical infrastructure, equipment servicing business operation and covering expenses for business operation of the insurers, foreign branches.  

b) The remaining equity after used as prescribed in sub-section a. point 1.1,clause 1 of this Article may invest similar to the idle capitalfrom insurance reserves of theinsurers as prescribed by law, specifying as follows:

- The non-life insurers, reinsurance businesses, insurance brokers, foreign branches conduct investments as prescribed in clause 1, Article 14 of the Decree No. 46/2007/ND-CP;

- The life insurers conduct investments as prescribed in clause 2, Article 14 of the Decree No. 46/2007/ND-CP.

1.2. The insurers being granted the license for eatablishment and operation prior to the effective day of this Circular must conduct adjustment of investment portfolio from equity as prescribed in clause 1 of this Article within three (03) years from the effective day of this Circular.

2. The insurers, foreign branches are permitted to invest abroad as prescribed in clause 2, Article 12 of the Decree No. 46/2007/ND-CP and guides specifying as follows:

2.1. The insurers and foreign branches shall be permitted to make offshore investments of that part of equity which exceeds the legal capital level or the minimum solvency margin, whichever is the greater.

2.2. The offshore investments are permitted to conduct in only the following forms:

a) Establishment or capital contribution for establishment of insurers overseas; establishment of branches of insurers overseas;

b) Other offshore investments as prescribed by law.

2.3. The offshore investments of the insurers, foreign branches must comply with provisions of law on insurance business, law on offshore investment, law on foreign exchange control, be approved by the Ministry of Finance and made in the name of such enterprises, branches.  

2.4. The procedures for request of approval of conducting (or adjusting, terminating) offshore investments;

a) Before conducting (or adjusting, teminating) the offshore investments, the insurers, foreign branches must submit to the Ministry of Finance one (01) set of dossier of request, including the following materials:

- The written request signed by the legal representative of the insurer or foreign branch;

- The written approval of competent authorities under the organization and operational charter (for the insurer) or the organization and operational regulation (for the branch) on the insurer or branch conducts (or adjusts, terminates) the offshore investment;

- The materials providing explainations on conducting (or adjusting, terminating) offshore investments;

In case of conducting or adjusting offshore investment, the materials must state clearly: Objective of investment, form of investment, capital sources of investment, capital scale of investment, implementation schedule of investment, expectation of investment effectiveness, contract or written agreement with partner (if any).

In case of adjusting scale of investment capital sources and form of offshore investment, the materials must state clearly situation, result of investment, difficulties, advantages (if any) and plan on adjustment.

In case of termination of offshore investment, the materials providing explaination must state clearly reason of termination, result of investment, ability of invested capital recovery and the expected duration of investment termination.

b) Within twenty one (21) days, from the day or receiving a full and valid dossier, the Ministry of Finance shall have written answer for approval or refusal. In case of refusal, it should clearly state the reason therefore.

Article 13. Investment of idle capital from insurance reserves

1. The insurance businesses conduct investment of idle capital from insurance reserves as prescribed in Article 13 and Article 14 of the Decree No. 46/2007/ND-CP and ensure principles specified in clause 1, clause 3, clause 4 and clause 5, Article 11 of this Circular. 

2. The foreign branches conduct investments of idle capital from insurance reserves similar to the non-life insurers as prescribed by law.

3. The reinsurance businesses conduct investment of idle capital from insurance reserves as prescribed in clause 2 Article 44 of the Decree No. 123/2011/ND-CP and guides specifying:

a) For insurers business in both life reinsurance, non-life insurance and health reinsurance, they must account separately the idle capital from insurance reserves of each type of reinsurance;

b) The idle capital from insurance reserves of type of life reinsurance is conducted similar to the investment of idle capital from insurance reserves of life insurers as prescribed by law. The idle capital from insurance reserves of type of non-life reinsurance and health reinsurance is conducted similar to the investment of idle capital from insurance reserves of non-life insurers as prescribed by law.

Section 4. SOLVENCY OF INSURANCE BUSINESS ENTERPRISES, REINSURANCE ENERPRISE AND FOREIGN BRANCHES

Article 14. Solvency

1. The insurance business enterprise, reinsurance business enterprise and foreign branches maintain the solvency during the process of business operation under provisions in Article 15 of Decree No. 46/2007/ND- CP.

2. The insurance business enterprise, reinsurance business enterprise and foreign branches are in danger of losing the solvency when the solvency margin is lower than the minimum solvency margin

Article 15. Minimum solvency margin

1. The minimum solvency margin of the non-life insurance enterprises and foreign branches

a) The minimum solvency margin of the non-life insurance enterprises and foreign branches is the bigger number of the following calculation result:

25% of retained premiums at the time of the solvency margin calculation;

12.5% of total original insurance premiums and reinsurance premium at the time of calculation of solvency margin.

b) For insurance contracts of reinsurance assignment not meeting the conditions for reinsurance assignment as prescribed by the Finance Ministry, the minimum solvency margin is calculated by 100% of original insurance premium of those insurance contracts.

2. The minimum solvency margin of the life insurance enterprise:

a) For life insurance contract with validity of five (05) years or less shall be equal to the sum of 4% of insurance provision and 0.1% of the amount of risk insurance;

b) For life insurance contract with validity of five (05) years shall be equal to the sum of 4% of insurance provision and 0.3% of the amount of risk insurance;

The amount of risk insurance is the difference between the total premiums of the valid insurance contracts and total professional provision.

3. The minimum solvency margin of the reinsurance enterprise:

a) For the non-life and health reinsurance enterprises, the minimum solvency margin shall comply with provisions in Clause 1 of this Article.

b) For life reinsurance enterprises, the minimum solvency margin shall comply with provisions in Clause 2 of this Article.

c) For enterprises of all three types of life reinsurance, non-life reinsurance and health reinsurance, the minimum solvency margin shall be equal to the total minimum solvency margin for each type of business operation specified at Points a and b, Clause 3 of this Article.

Article 16. Solvency margin

1. The solvency margin of the insurance business enterprises, reinsurance enterprises and foreign branches is the difference between the property value and payable debts at the time of calculation of the solvency margin

2. The liquidity of the assets when calculating the solvency margin is determined as follows:

2.1. The assets are accepted the whole accounting value:

a) The amounts include cash, deposits at credit institutions (except the deposits prescribed at Item h, Point 2.3, Clause 2 of this Article), cash in transit, government bonds.

b) The properties corresponding to the insurance contracts of investment-linked insurance operation

2.2. The assets excluded a partial accounting value:

a) The invested assets (excluding investments prescribed in Item g, Point 2.3, Clause 2 of this Article):

- Guaranteed corporate bonds: eliminating 1% of accounting value;

- Non-guaranteed corporate bonds: eliminating 3% of accounting value;

- Listed stocks: eliminating 15% of accounting value;

- Non-listed stocks: eliminating 20% of accounting value;

- Investing in real estate used by the enterprise: eliminating 8% of the accounting value;

- Investing in real estate for lease, guaranteed commercial loans: eliminating 15% of the accounting value;

- Capital contributed to other enterprises except for insurance enterprise: eliminating 20% of the accounting value;

b) The receivables:

- Receivable of insurance premium and overdue reinsurance premium from ninety (90) days to less than 1 year after deducting provisions for corresponding bad debts as prescribed by the law: eliminating 30% ;

- Receivable of insurance premium and overdue reinsurance premium from one(01) year to less than two (02) years after deducting provisions for corresponding bad debts as prescribed by the law: eliminating 50% ;

c) Tangible fixed assets, intangible fixed assets are computer software and inventory: eliminating 25% of accounting value.

d) Other assets: eliminating 15% of

2.3. The assets are eliminated the entire of accounting value.

a) The contributed capital to establish insurance business enterprise, other reinsurance enterprises from the owner equity;

b) The assets corresponding to the reward fund and welfare (if any);

c) The unrecoverable debts prescribed by the law after deducting provisions for corresponding bad debts.

d) Intangible fixed assets other than computer software;

dd) Prepaid expenses, non-guaranteed loans are not guaranteed, the advances, equipment and office supplies, internal receivables;

e) Insurance premium receivable and reinsurance premium receivable overdue for more than two (02) years after deducting the provisions for corresponding bad debts as prescribed by the law;

g) The investment return to shareholders (members) contributing capital or related persons prescribed in Clause 17, Article 4 of the Enterprise Law, except for deposits at credit institutions;

h) The deposits at credit institutions do not fall in group 1 and group 2 according to the rating of the State Bank;

i) The investments in the assets exceed the limits prescribed by law.

3. Where the solvency margin of the insurance business enterprises, reinsurance enterprises and foreign branches is lower than the minimum solvency margin prescribed in Article 15 of this Circular, enterprises and branches must immediately apply the provisions of Article 78, Article 79 of the Law on Insurance Business and Article 19 of Decree No. 46/2007/ND-CP.

SECTION 5. REVENUES, EXPENSES OF INSURANCE BUSINESS ENTERPRISE , REINSURANCE ENTERPRISES AND FOREIGN BRANCHES

Article 17. Revenues, expenses of insurance business enterprise , reinsurance enterprises and foreign branches

1. Revenues from insurance business activities

a) For insurance business enterprises and foreign branches: Collecting original insurance premiums, reinsurance premium, commission of reinsurance assignment, fee of agent services including damage assessment, solution of compensation, requiring the third party to make compensation and treat compensated goods of 100%, collecting damage assessment fee regardless of assessment among members units of internal accounting in the same insurance business enterprise of independent accounting after deducting the amounts payable to reduce revenue such as insurance refunding, insurance premium reduction, reinsurance assignment premium, reinsurance premium refunding, reinsurance premium reduction, reinsurance assignment commission refunding.

b) For reinsurance enterprises: Collecting reinsurance premium, reinsurance assignment commission, fee of agent services including damage assessment, solution of compensation, requiring the third party to make compensation and treat compensated goods of 100%, collecting damage assessment fee after deducting the amounts payable to reduce revenue such as reinsurance assignment fee, reinsurance premium refunding, reinsurance assignment commission reduction.

2. Revenue from financing activities: Proceeds from investment activities, securities trading interests from security deposit funds and proceeds from other financial activities prescribed by law.

3. Income from other activities: Proceeds from sale or liquidation of fixed assets, the written-off bad debts now recovered, leading fee of the leading insurance companies in case of co-insurance and other receivables as prescribed by law.

Article 18. Principles to determine revenues of insurance business enterprises, reinsurance enterprises and foreign branches.

1. Revenues from insurance business activity is the amount receivable generated in the period and is defined by the following principles:

1.1. Insurance business enterprises and foreign branches shall account the original insurance premium into revenue when incurred insurance liability for the insurance buyers as follows:

a) When the insurance contracts are concluded between the insurance business enterprises and foreign branches and the insurance buyers have fully paid insurance premium.

b) There is evidence that the insurance contracts have been concluded and the insurance buyers have fully paid insurance premium.

c) The insurance contracts are concluded and the insurance business enterprises and foreign branches have agreed to let the insurance buyers to owe the premiums in the insurance contract. In this case, the insurance business enterprises and foreign branches still account into income the amount the insurance buyers owe although the premiums have not been paid yet. The specific circumstances include:

- Where the insurance business enterprises and foreign branches agree to let the insurance buyers extend premium debt, this must be made ​​into the insurance contract addendum during the time the insurance contract is still effective and before the date of the damage occurrence.

- Where the insurance business enterprises and foreign branches agree with the insurance buyer on periodical premium payment, the enterprises and branches shall account into income corresponding to the period or the periods of insurance premium has generated; not account into the income the undue premium that the buyer must pay due to as agreed upon.

- In any case, the time of premium debt shall not exceed the insurance period of the insurance contract. Particularly for the cargo insurance for customers with many insured shipments in the year and travel insurance for customers with a lot of traveling insured in the year. If the insurance business enterprises and foreign branches and insurance buyers have signed the principle insurance contracts (or the package insurance contract) on the way how to be insured and the payment method, the time limit for payment of the insurance contracts signed this month shall be no later than the 25th of the next month.

- In case the insurance buyers fail to pay sufficient insurance premiums or pay premium payment within the time limit agreed upon in the insurance contracts, then the insurance contracts shall be automatically terminated on the next coverage day as agreed in the insurance contract.

- The non-life insurance enterprise and foreign branches records reduction of revenues corresponding to the time the insurance contract does not result in the liabilities because the insurance buyers do not pay the premium as agreed upon premium debts.

For insurance contracts without agreement on the premium payment period, the insurance contracts shall not result in insurance liabilities and the insurance business enterprises and foreign branches must not account in the revenue.

1.2. In case of co-insurance, the business enterprises and foreign branches account into the income the original premium and are allocated in proportion to the co-insurance.

1.3. The insurance business enterprises, reinsurance enterprises, foreign branches account the reinsurance premium, reinsurance assignment commissions and other proceeds arising from reinsurance assignment operations when the payment for reinsurance is confirmed.

Where the insurance business enterprises, reinsurance enterprises and foreign branches have agreed with the reinsurance assignor on the periodical premium payment, it shall be accounted in the income corresponding to the period or periods of generated reinsurance premium, not account in the income the undue premium the reinsurance assignor has to pay.

1.4. For the remaining incomings: The insurance business enterprises, reinsurance enterprises, foreign branches shall account in the revenue as soon as the economic activity generates and there is evidence of acceptance of payment from the parties, regardless of whether having earned money or not.

1.5. For accounts payable to reduce revenues: The insurance business enterprises, reinsurance enterprises, foreign branches shall account in reduced income as soon as the economic activity generated, there is evidence of the parties’ acceptance, irrespective of whether the money spent or not.

2. Revenue from financing activities: accounting in the income as soon as economic activity generated, there is evidence of acceptance of payment of the parties, regardless of whether having earned money or not.

3. Income from other activities: accounting in the income when there is evidence of acceptance of payment of the parties, regardless of whether having earned money or not.

Article 19. Expenses of the insurance business enterprises, reinsurance enterprises and foreign branches

The expenses of the insurance business enterprises, reinsurance enterprises, foreign branches are accounts payable and deductible arising in the period including:

1. Expenses of insurance business operation:

a) The indemnity under the original insurance contract (for non-life insurance), premium payments (for life insurance), compensation payment under the reinsurance contract after deduction of amounts receivable to reduce revenue such as compensation for reinsurance assignment, compensation collected from a third party, collection from goods treated and compensated by 100%;

The payment of original insurance for non-life insurance enterprises and foreign branches must be in line with provisions in insurance contracts agreed upon between the parties and with evidence of damage occurrence;

The payment of premium for life insurance enterprises must be in line with provisions in insurance contracts agreed upon between the parties and with evidence of damage occurrence;

b) Setting aside the operation provision as prescribed in Article 7, 8 and 9 of this Circular.

c) Paying the insurance agent commission and reinsurance commission;

d) Paying insurance brokerage enterprises including: paying insurance brokerage commission and other expenditures as prescribed. In any case, the expenditures for insurance brokerage enterprises shall not exceed 15% of the premiums actually collected;

dd) Expenditure for damage assessment; survey, information gathering related to insurance events;

e) Expenditure for agent services including damage assessment, consideration for compensation and requiring the third party to make compensation.

g) Expenditure for treatment of damaged goods that have been compensated by 100%.

h) Expenditure for insurance agent:

- Expenditure for insurance agent management includes: expenditure for initial training and exam for agent certificate, for training to improve knowledge for the agent, for agent recruitment, agent rewards and agent support.

- For enterprises with non-life insurance and foreign branches, in any case, expenditure for agent rewards and agent support shall not exceed 50% of the insurance commission of the insurance contracts implemented in the fiscal year.

i) Expenditure for prevention and limitation of loss:

- Spending levels for the prevention and limitation of losses should not exceed 2% of the premiums actually collected in the fiscal year spent on measures to prevent or limit losses as prescribed in Clause 2, Article 25 of Decree 45 / 2007/ND-CP.

- Expenditure must be for the right purpose as prescribed by law and make sure to have all invoices, documents or evidence.

k) Expenditure for risk assessment of the insured including expenses for the collection of information, investigation and evaluation of the insured;

l) Compulsory deductions made in accordance with the regulations of the law on insurance business;

m) Other expenditures and deductions as prescribed by the law.

2. Expenses of financial activities

a) Expenses of investment operation as prescribed;

b) The payment to the insured on the investment income as committed in the life insurance contract.

c) Payment of loan interest and procedure fee;

d) Other expenditure and deduction as prescribed by law..

3. Other operation expenses:

a) Expenditure for sale and liquidation of fixed assets;

b) Expenses of the recovery of bad debt written off but now recovered.

c) Leading fee of the leading insurance companies in case of co-insurance (if the parties have written agreement on this expenditure.

d) Other expenditures and deductions as prescribed by the law.

Section 6. REVENUE AND EXPENSES OF INSURANCE BROKERAGE ENTERPRISE

Article 20. Revenue of the insurance brokerage enterprise

Revenue of the insurance brokerage enterprise is prescribed in the Article 24 of the Decree No. 46/2007/ND-CP including:

1. Revenue of the insurance brokerage activities includes: Proceeds from insurance brokerage commission, from cooperation activities with the other insurance brokerage enterprises for the implementation insurance brokerage and other proceeds as prescribed by law after deducting the accounts payable to reduce revenue such as: reduction of insurance brokerage commission, refunding of insurance brokerage commission.

2. Revenue from financial activities: Proceeds from deposit interests, interest on loans and other revenues and other financial activities prescribed by law.

3. Income from other activities: Proceeds from sale or liquidation of fixed assets; the written-off bad debts now recovered; other proceeds as prescribed by law.

Article 21. Principle to determine revenue of the insurance brokerage enterprise

1. Revenue of insurance brokerage operations:

a) Insurance brokerage enterprise shall account the insurance brokerage commission in the income when incurred insurance liability of the insurance business enterprise and foreign branches for the insurance buyers under the insurance contract, regardless of whether having earned money or not.

Where the insurance brokerage commission is paid by insurance premium payment period specified in the insurance contract, the insurance brokerage enterprises shall account it in the income corresponding to the period or the premium periods generated prescribed in the insurance contract.

b) For accounts payable to reduce the revenue prescribed in Clause 1, Article 20 of this Circular: accounting in the income reduction as soon as economic activity generated and there is evidence of acceptance from the parties, irrespective of whether the money spent or not.

2. Revenue from financial activities: accounting in the income as soon as economic activity generated, there is evidence of acceptance of payment from the parties, regardless of whether having earned money or not.

3. Income from other activities: accounting in the income when there is evidence of acceptance of payment from the parties, regardless of whether having earned money or not.

Article 22. Expenses of insurance brokerage enterprise

1. The expenses of insurance brokerage enterprise is prescribed in the Article 25 of the Decree No. 46/2007/ND-CP including:

a) Expenses of insurance brokerage activities: expenditure for insurance brokerage activities, for the cooperation with other insurance brokerage enterprises to perform the insurance brokerage activities, expenditure for buying the occupational liability insurance, other expenditures and deduction as prescribed by the law.

b) Expenses of financial activities: expenditure for banking procedure fee, loan interest payment and other expenditure for other financial activities as prescribed by law.

c) Expenses of other activities: expenditure for sale, liquidation of fixed assets; expenses of written-off bad debts now recovered; other expenditures as prescribed by law.

2. Expenditures of insurance brokerage enterprise generated in period must have invoice or valid documents.

3. Other than provisions in Clause 1 and 2 of this Article, the other expenses of the insurance brokerage enterprise (if any) shall comply with regulations of law.

Section 7. FUND SPLITTING AND SURPLUS DIVISION IN LIFE INSURANCE.

Article 23. Owner fund and contract owner fund splitting

1. Life insurance enterprises must be split and separately accounted the owner’s equity premiums source collected from the insurance buyer (hereinafter referred to as fund owners and contract owner fund).

2. The contract owner fund is split into the contract owner fund without interest division participation and the contract owner fund with interest division participation in conformity with the principles of enterprise fund splitting principles that have been registered with the Ministry of Finance. Depending on the requirement of the Ministry of Finance and the actual implementation of activities of life insurance enterprise, the contract owner funds can be split in more details.

3. The splitting and accounting of assets, capital resources, revenues, expenses and result of business and operation result of each fund must be fair, reasonable and objective.

4. The assets from the contract owner funds are used to meet the responsibilities and expenses related to the business transactions of those insurance contract owner funds. The insurance enterprise may not use assets of the contract owner funds to pay the fines for legal violations, breaches of contracts of insurance enterprises and advertising not in line with insurance products, expenditure for charity.

5. The transaction arising on assets, capital, revenues, and expenses directly related to any fund will be recorded for that fund.

Article 24. Principles to allocate the transaction arising on assets, capital, revenues, and expenses directly related to many funds

1. The determination of assets of the insurance contract owner fund and owner fund shall be done as follows:

a) The assets of the contract owner fund include the assets formed from operation provision and assets corresponding to the accounts payable allocated to the insurance contract owner fund.

b) The assets of the contract owner fund include the assets formed from the owner fund and fixed assets and unfinished capital construction works.

2. The determination of capital source of the insurance contract owner fund and capital source of owner fund shall be done as follows:

a) The capital source of the insurance contract owner fund includes:

- Insurance operation insurance except for provision to ensure the balance;

- Debts directly related to the insurance contract owner fund shall be allocated to the insurance contract owner fund on the basis of corresponding allocation criteria.

b) The capital source of the owner fund includes:

- Owner capital;

- Debts directly related to the owner fund shall be allocated to the owner fund on the basis of corresponding allocation criteria.

- Provision to ensure the balance;

3. Revenue of the insurance contract owner fund includes

- Revenue from insurance business activities;

- Revenue from the asset investment activities of the insurance contract owner fund;

- Other income directly related to the insurance contract owner fund shall be allocated to the insurance contract owner fund on the basis of corresponding allocation criteria.

4. Revenue of the owner fund includes:

- Revenue from the asset investment activities of the owner fund;

- Other income directly related to the owner fund or allocated to the owner fund on the basis of corresponding allocation criteria.

5. Expense of the insurance contract owner fund:

- Expenditure for premium, provision of insurance operation (except for provision to ensure the balance) and commission directly related to each insurance contract owner fund;

- Expenditure for damage, agent management, prevention and limitation of loss, evaluation of risk of insured and for salary;

- Expenses for asset investment activities of the insurance contract owner fund;

- Other expenses directly related to the insurance contract owner fund or the expenses of allocation to the insurance contract owner fund;

- Chi trích Quỹ bảo vệ người được bảo hiểm Expenses and deduction for protection of the insured;

- General expenses allocated to the contract owner fund;

- Other expenses and deduction as prescribed by the law.

6. The expenses of the owner fund include:

- General operation expenses are allocated to the owner fund on the basis of corresponding allocation criteria including the salary expense and salary payment, expense of advertising, salary, depreciation of fixed assets, office lease, office stationery and other expenses.

- Expenses and deduction for provision to ensure the balance;

- Expenses for the asset investment activities of the owner fund;

- Other expenses directly related to the owner fund or allocated to the owner fund on the basis of corresponding allocation criteria.

7. The allocation criteria of a number of general operation expenses.

7.1. The allocation criteria of a number of general operation expenses between the contract owner fund and owner fund.

a) Expenses of enterprise management: are allocated to the contract owner fund and owner fund according to the statistics of the serving time for each fund.

b) Expenses of financial activities: are allocated by the proportion of investment assets of each fund.

7.2. The allocation criteria of a number of expenses of general operation between the contract owner fund.

a) Expenses of enterprise management: are allocated by the proportion of total fee revenue of each contract owner fund.

b) Expenses of financial activities: are allocated by the proportion of investment assets of each fund.

c) Selling expenses are allocated according to the proportion of new fee revenue of each contract owner fund.

d) Direct expenses of insurance business activities:

- Expenses of assessment and issue of contract are allocated by new exploitation revenue.

- Expenses of assessment and premium payment are allocated in accordance with the original insurance premium.

Article 25. Responsibilities for management of contract owner fund and owner fund of the life insurance enterprise

1. Life insurance enterprise must determine the allocation principles of transactions arising on assets, capital sources, revenues and expenses related to each fund. Before applying the allocation principles or change of this allocation principle, the life insurance enterprises must submit the Ministry of Finance one (01) set of requesting dossier and must be approved by the Ministry of Finance.

Dossier to request the application (or change of application) of the allocation principles of transactions arising on assets, capital sources, revenues and expenses related to many funds including the following documents:

a) Documents to request the application of the allocation principles of transactions arising on assets, capital sources, revenues and expenses related to many funds with the signatures of the enterprise’s legal representative. In case of change of allocation principles, the reason must be clearly stated.

b) Documents explaining the allocation principles estimated to be applied with the certification of calculating expert of the enterprise.

Within thirty (30) days from the date of fully receiving valid dossier, the Ministry of Finance shall give written approval or disapproval for the enterprise’s proposal. In case of disapproval, the reason must be clearly stated.

2. The calculating expert of the life insurance enterprise shall guarantee the transactions related to a lot of funds that must be concentrated and allocated to each fund on the basis of fairness and rationality.

3. The life insurance enterprise shall make report on the splitting and maintenance of owner fund and contract owner fund under the Form No. 10-NT of this Circular with the certification of the independent auditing firm.

4. The legal representative, calculating expert and chief accountant of the life insurance enterprise shall take responsibility for the accuracy of data of the insurance contract owner fund, owner fund and division of interest to the insured.

Article 26. Deficit offset of contract owner fund

1. Where the contract owner fund is in deficit (assets value lower than liabilities level), life insurance enterprise should be responsible for supplementation from the owner funds to that contract owner fund the deficit. When that contract owner fund gains the surplus (the positive difference between assets and the fund liabilities), the enterprises shall be refunded a part of the whole amount of money previously supplemented but excluding the interests for the contract owner fund on the condition the refunding does not completed in part or full amount added before but not for the profits to fund holders, provided the reimbursement does not lead to deficits of that contract owner fund.

2. In case the life insurance enterprise maintains a lot of contract owner funds, the enterprise shall not be entitled to use the surplus of these contract owner funds to supplement other contract owner funds that are in deficit.

3. The life insurance enterprise must record in writing all transactions related to deficit offset from owner fund to the contract owner fund and refund from the contract owner fund to the owner fund. These transactions must be shown in the periodic fund splitting report with the certification of the calculating expert and chief accountant of the enterprise.

Article 27. Surplus division in life insurance

1. Where the insurance contract onwer fund with participation in interest division has surplus at the end of the fiscal year, the life insurance enterprise may use a part or the whole of the surplus to distribute it to the insurance contract owners of those contract owner funds and the owners after there is the approval of the calculating expert. The surplus of the contract owner fund remains undivided for the purpose of ensuring the stability of the surplus division in the future.

2. The life insurance enterprise can choose the method of surplus division of the contract owner fund in the form of cash payment to the contract owner, accumulative annuity payment or increase of insurance amount and submit it to the Ministry of Finance for approval. The method of surplus division of the contract owner fund must ensure the fairness between the contract owners. In any case, the life insurance enterprises shall ensure that all insurance contract owners receive no less than 70% of the total interests gained or the surplus difference between the actual surplus and assumptions about the mortality rates, investment interests and costs in case of any larger number. Any change in the method of surplus division ground of contract owner funds of the insurance enterprise must be approved by the Ministry of Finance.

3. The procedure for the approval of the method of surplus division of contract owner funds.

a) Before applying the method of surplus division of contract owner funds, the life insurance enterprise shall submit the Ministry of Finance one (01) set of dossier to request the approval of the method of surplus division including the following documents:

- Written proposal for the application (or change of application ) of the method of surplus division of contract owner funds with the signature of the legal representative of the insurance enterprise. In case of change of the method of surplus division, the reason must clearly stated.

- Documents explaining the method of surplus division estimated to be applied with the certification of calculating expert.

b) Within thirty (30) days from the date of fully receiving valid dossier prescribed at Point a, Clause 3 of this Article, the Ministry of Finance shall give written approval or disapproval for the enterprise’s proposal. In case of disapproval, the reason must be clearly stated.

Section 8. PROFITS AND PROFIT DISTRIBUTION

Article 28. Profits and profit distribution

1. Profits and profit distribution of insurance enterprises and foreign branches shall comply with the provisions of Chapter V of Decree No. 46/2007/ND-CP.

2. Insurance business enterprises, reinsurance enterprises and foreign branches are only permitted to distribute the remaining profits prescribed by law after meeting the provisions on payment capacity.

Section 9. FINANCIAL MANAGEMENT, INTERNAL AUDIT AND INDEPENDENT AUDIT

Article 29. Structure of charter capital of joint stock insurance company

1. The structure of charter capital of joint stock insurance company must ensure the following principles

1.1. One shareholder as an individual can own 10% charter capital maximally

1.2. One shareholder as an organization can own 20% charter capital maximally, except for the cases as follows:

a) Owning shares in order to restore the solvency of the insurance business enterprises and reinsurance enterprises in case of loss of solvency.

b) Owning state shares in the insurance business enterprises and reinsurance enterprises according to the restructuring roadmap.

c) Owning shares of the strategic shareholder as organization if that shareholder meets the following conditions:

- Having a total minimum assets equivalent to $ 2 billion in the year preceding the year as shareholders expected to hold over 20% of charter capital of the insurance enterprise;

- In three (03) consecutive years before the year expected to be a strategic shareholder whose business must be profitable and without accumulated losses;

- Having operation experience in the finance and banking and insurance sector of at least five (05) years to the year expected to be strategic shareholder;

- Not withdrawing capital from the insurance enterprise within three (03) years from the year expected to be strategic shareholder;

1.3. Shareholder and related persons of such shareholder may own a maximum of 20% of charter capital..

Person concerned as individual and organization having direct or indirect relationship with the shareholder in the cases prescribed in the Law on Enterprises.

1.4. Ownership percentage as prescribed at point 1.1, points 1.2 and 1.3, Clause 1 of this Article including the entrusted capital to other organizations and individuals to buy shares.

1.5. The founding shareholders must together own at least 50% of the common shares with offering right of the insurance enterprise. Within three (03) years from the date the insurance enterprise is granted the License of establishment and operation, the founding shareholders are only permitted to transfer their common shares to other founding shareholders after getting the approval from the Board of Directors. After three (03) years from the date the insurance enterprise is granted the License of establishment and operation, these restrictions shall be lifted.

2. Before the strategic shareholder implement the contribution of over 20% of charter capital specified in Item c, Point 1.2, Clause 1 of this Article, the insurance enterprise must submit one (01) set of requesting dossier to the Ministry of Finance and must get the approval from the Minister of Finance. The documents with signature, title and seal of foreign country in the dossier (if any) must be legalized by the consular office. Copies in Vietnamese and translations from foreign languages ​​into Vietnamese must be certified in accordance with regulations of the law. The insurance enterprise and strategic shareholders are responsible for the accuracy of the relevant documents.

Dossier includes the following documents:

a) Written request for a strategic shareholder approval signed by the legal representative of the insurance enterprise;

b) Documents of the competent authority under the provisions of the Charter on organization and operation of insurance enterprise on strategic shareholder approval;

c) Documents issued by the competent authority in accordance with regulations of the organization as a strategic shareholder approving the organization to contributeover 20% of charter capital of the insurance enterprise;

d) Financial statements audited of the organization as a strategic shareholder in three (03) years preceding the year expected to become a strategic shareholder of the insurance enterprise. Where the period since the end of the nearest fiscal year to the time of requesting dossier submission exceeds ninety (90) days, the additional quarterly reports to the latest quarter must be submitted;

dd) Certificate of business registration, License of establishment and operation of the organization as a strategic shareholder of the insurance enterprise (notarized copy);

e) Written undertaking not to withdraw capital from the insurance enterprise within three (03) years from the year expected to be a strategic shareholder;

g) Plan for cooperation or technical assistance for the insurance enterprise to implement the business activities during the capital contribution, in which describing the activities planned for deployment, implementation time, way of implementation, funding for implementation (if any) and expected results achieved.

Within twenty (21) days after receiving complete and valid dossier, the Ministry of Finance shall have the written approval or disapproval of the enterprise’s proposal. In case of refusal, the reason must be stated therefor. In case of approval, the Finance Ministry shall grant adjustment License to the enterprises as prescribed by law.

3. Within three (03) years from the effective date of this Circular, the insurance enterprises that have been granted license of establishment and operation in Vietnam must adjust the charter capital structure as stipulated in Clause 1 of this Article.

Article 30. Self-management role and supervision of insurance enterprises and foreign subsidiaries

1. The insurance enterprises and foreign branches must perform the self-management and supervision as prescribed in Clause 2, Article 36 of Decree No. 46/2007/ND-CP.

2. The development of self-management and supervision regulations, including the financial regulations, investment regulations, internal control and audit and the respective procedures of insurance enterprises and foreign branches must:

a) Comply with the current regulations of law on finance for foreign insurance enterprises and branches.

b) Control, limit and prevent financial risks for foreign insurance enterprises and branches, ensuring that the value of investment assets value to be commensurate with the responsibilities and risk characteristics of the enterprises and branches;

c) Clarify the responsibilities of enterprise’s manager and executive, branches, employees, agents concerned.

3. Specifying the form of disciplinary action upon violations.

a) The insurance enterprises and foreign branches must implement self-management and supervision regulations and periodically and irregularly inspect and supervise the implementation of these regulations within the enterprise.

b) The self-management and supervision regulations; the periodic and irregular reports monitoring the implementation of these regulation and the reports of handling of violations shall be kept with adequate documents to serve for the examination and inspection, management and supervision of enterprise.

Article 31. Internal audit

1. The insurance enterprises and foreign branches must perform the internal audit activities.

2. Basic principles of internal audit:

a) Independence: the internal audit activity must be independent from operation and operation activities of foreign insurance enterprises and branches;

b) Objectivity: The internal audit activities and internal auditors must ensure the objectivity, honesty, fairness and without prejudice upon the implementation of internal audit tasks;

c) Professionalism: internal auditors must have knowledge, qualifications and skill of internal audit as required , not concurrently holding other positions and the professional works of foreign insurance enterprises and branches;

3. Contents of operation of the internal audit include the review and evaluation:

a) Adequacy, effectiveness and efficiency of the internal inspection and control system.

b) Application, effectiveness and efficiency of the process of identification, measurement methods and risk management of the enterprise.

c) Management information systems and financial information systems.

d) Completeness, timeliness, honesty and the accuracy of accounting systems and financial statements

dd) Mechanisms to ensure compliance with the provisions of law and regulations on operation provision setting, investment and solvency of the enterprise, internal regulations, procedures, rules of operation, rules of professional ethics.

e) Making the other relevant contents related to the functions and tasks of internal audit.

g) The insurance enterprises and foreign branches to build the rules of professional ethics and maintain the rules of professional ethics in the implementation of internal audit work.

Section 10. REPORT REGULATION

Article 32. Responsibilities for preparing and submitting report

The insurance enterprises and foreign branches shall prepare and submit the financial statements, statistical reports, professional reports in accordance with current regulations of law.

Article 33. Reporting contents

1. Financial statement:

a) The insurance enterprises and foreign branches shall perform the financial settlement and fully observe the regulations on the financial statements, prepare and submit it to the State financial agency, statistical agencies, tax authorities reports in accordance with current regulations of law.

b) The financial statements, accounting balance sheet and report of business operation result, cash flow statement and explanation of financial statements in accordance with the regulations of law on accounting must be certified by the independent auditing organizations that are permitted to operate in Vietnam. Certification by an independent auditing organization should include key financial issues as follows:

- For foreign insurance enterprises and reinsurance enterprises and branches: Activities of receiving and assignment of reinsurance, operation provision setting, payment capacity, commissions, revenues, expenses, profits and profit distribution, investments from the owner’s equity, investment from operation provision, fixed assets and depreciation, receivables, liabilities payable, owner’s equity, cost of unfinished capital construction; fund splitting and surplus of contract owner funds for life insurance enterprises.

- For the insurance brokerage enterprise: revenues, costs, profits and profits distribution, investments, fixed assets and depreciation, receivables, liabilities, owner’s equity, cost of unfinished capital construction.

c) Quarterly and annually, the insurance enterprises and foreign branches shall prepare and submit financial statement to the Ministry of Finance together with the computer file.

2. Statistical reports, operation reports: insurance enterprises and foreign branches shall prepare and submit to the Ministry of Finance the statistical reports and professional reports monthly, quarterly and yearly and together with the computer file as follows:

a) For non-life insurance enterprises (including business enterprise specializing in health insurance) and foreign branches:

- Monthly operation report: Form 1-PNT

- Quarterly and yearly revenue report: Form No. 2-PNT

- Quarterly and yearly target report: Form No. 3-PNT

- Quarterly and yearly insurance compensation: Form No. 4-PNT

- Quarterly and yearly provision setting report:

+ Detailed report on professional provision: Form No. 5A-PNT

+ General report on professional provision: Form No. 5B-PNT

- Quarterly and yearly investment operation report:

+ Investment operation report from owner’s equity: Form No. 6A-PNT

+ Investment operation report from professional provision: Form No. 6B-PNT

- Quarterly and yearly solvency report: Form No. 7-PNT

- Yearly ASEAN report:  Form No. 8-PNT

- Quarterly and yearly report on insurance services provision activities across border: Form No. 9-PNT

b) For life insurance enterprises:

- Monthly operation report: Form No.1-NT

- Quarterly and yearly report on number of contracts and life insurance amount: Form No.2-NT

- Quarterly and yearly report on life insurance premium revenue: Form No. 3-NT

- Quarterly and yearly report on premium payment: Form No. 4-NT

- Quarterly and yearly report on life insurance contract cancellation: Form No. 5-NT

- Quarterly and yearly provision setting report:

+ Report on mathematical provision of life insurance: Form No. 6A-NT

+ Report on cost provision ineligible for life insurance: Form No. 6B-NT

+ Report on interest division provision: Form No. 6C-NT

+ Report on compensation provision setting: Form No. 6D-NT

+ Report on provision setting to ensure balance: Form No. 6E-NT

- Quarterly and yearly investment operation report:

+ Investment operation report from the owner’s equity: Form No. 6E-NT

+ Report on investment operation from professional provision: Form No. 7A-NT

- Quarterly and yearly solvency report: Form No. 8-PNT

- Yearly ASEAN report: Form No. 7-NT

- Report on fund splitting and interest division: Form No.10-NT

- Quarterly and yearly report on insurance services provision activities across border: Form No. 11-NT

c) For reinsurance enterprises:

- Quarterly and yearly report on reinsurance revenue: Form No. 1-TBH

- Quarterly and yearly report on compensation and premium payment of reinsurance enterprise: Form No. 2-TBH

- Quarterly and yearly report on professional provision: under the Forms of non-life insurance enterprises (for the operations of non-life insurance and health reinsurance), under the Forms of life insurance enterprises (for the operations of life insurance)

- Quarterly and yearly investment operation report:

+ Investment operation report from owner’s equity: Form No. 6A-PNT

+ Report on investment activities from professional provision: Under the Forms of non-life insurance enterprises (for non-life reinsurance operation and health reinsurance), under the Forms of life insurance enterprise (for life reinsurance operation)

- Quarterly and yearly solvency report: Form No.3-TBH

d) For insurance brokerage enterprises:

- Quarterly and yearly insurance brokerage operations: Form No. 1-MGBH.

- Quarterly and yearly report on insurance services provision activities across border: Form No. 2-MGBH

- Investment operation report from owner’s equity: Form No. 6A-PNT

3. In addition to the financial statements, statistical reports, business report prescribed in Clause 1 and Clause 2 of this Article, the Ministry of Finance may require the insurance enterprises and foreign branches to make additional report on the operation situation, the financial situation of enterprises and branches to serve the statistics and market analysis.

Article 34. Time limit for report submission.

1. Monthly report: The insurance business enterprises and foreign branches must prepare and submit it to the the Ministry of Finance within fifteen (15) days from the end date of month.

2. Quarterly report: The insurance business enterprises and foreign branches must prepare and submit it to the the Ministry of Finance within thirty (30) days from the end date of quarter.

3. Yearly report: The insurance business enterprises and foreign branches must prepare and submit it to the the Ministry of Finance within ninety (90) days from the end date of fiscal year.

Article 35. Examination of implementation of financial regulations

1. The State management agency of insurance business shall inspect the implementation of financial regulations of the insurance enterprises and foreign branches in the following forms:

a) Periodical or irregular inspection;

b) Inspection of each special subject as required by the financial management work.

2. Board of Directors (Board of members, President of company), General Director (Director) of insurance enterprises and foreign branches are responsible for explaining the relevant financial issues associated on the requirement of the state management agencies upon performing functions as prescribed by law.

3. Insurance enterprises and foreign branches are responsible for the accuracy and truthfulness of financial statements, statistical reports, their professional reports.

4. Insurance enterprises and foreign branches violating financial regulations of the State shall be sanctioned as prescribed by law.

Section 11. INFORMATION DISCLOSURE

Article 36. Information disclosure

Annually, the insurance enterprises and foreign branches shall implement the public information disclosure under the following provisions:

1. Publicly announcing on the website of the insurance enterprise and foreign branches the entire contents of the audited financial statements of enterprises and branches together with the opinions of the independent audit organization.

2. Publicly announcing on a central and a local newspaper at the place where the insurance enterprises and foreign branches have their headquarters in three consecutive issues of information include: Annual Report (Form 1-CBTT) and summary financial statement (Form No. 2-CBTT). When publicly announcing, there must be the opinion of the independent auditing organization.

3. In addition to the public forms as prescribed in Clause 1 and Clause 2 of this Article, the insurance enterprises and foreign branches may decide to publicize the information in the form of publications, written notice to the state management, press conference; on the local and central radio and television station.

4. The publication of information specified in Clause1 and 2 of this Article shall be done within one hundred twenty (120) days after the end date of the fiscal year. Within ten (10) days from the date publication of information specified in Clause 2 of this Article, the insurance enterprise and foreign branches must submit the originals or copies of published information to the Ministry of Finance.

5. The publication of information should be promptly and accurately as prescribed by law. Where the information contents are changed, the order and procedures must be done as prescribed in Clause 1, 2 and 4 of this Article together with reasons.

6. The public companies shall perform the information announcement in conformity with current regulations and provisions in this Circular.

Chapter III

IMPLEMENTATION ORGANIZATION

Article 37. Effect

1. This Circular takes effect on October 1, 2012.

2. This Circular shall supersede Circular No. 156/2007/TT-BTC 20/12/2007 guiding the implementation of Decree No. 46/2007/ND-CP dated 03/27/2007 of the Government stipulating the financial regulations for insurance enterprises and insurance brokerage enterprises and Article 2 of Circular No. 86/2009/TT-BTC dated April 28, 2009 of the Ministry of Finance.

3. Any problem arising in the course of implementation should be promptly reported to the Ministry of Finance for consideration and settlement