Thông tư 52/2016/TT-BTC

CIRCULAR

GUIDING THE IMPLEMENTATION OF UNIVERSAL LIFE INSURANCE PRODUCTS

Pursuant to the Law on insurance business No. 24/2000/QH10 dated 9/12/2000;

Pursuant to the Law amending and adding some Articles of Law on insurance business No. 61/2010/QH12 dated 24/11/2010;

Pursuant to the Decree No. 45/2007/ND-CP dated 27/3/2007 of the Government detailing the implementation of some Articles of the Law on insurance business;

Pursuant to the Decree No. 215/2013/ND-CP dated 23/12/2013 of the Government defining the functions, duties, power and organizational structure of the Ministry of Finance;

Considering the recommendations of the Director of Insurance supervisory authority Department,

The Minister of Finance issues the Circular guiding the implementation of universal life insurance products.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Circular guides the implementation of universal life insurance products in the operation of investment-linked insurance.

2. This Circular applies to the life insurers (hereafter referred to as insurers), insurance agents, insurance buyers and other organizations and individuals pertaining to the implementation of universal life insurance products in the territory of the Socialist Republic of Vietnam.

Article 2. Features of universal life insurance products

1. The structure of insurance premium and benefits are split between the risk insurance and the investment. The insurance buyers are flexible in determining the premium and the amount of insurance as agreed in the insurance contract.

2. The insurance buyers are entitled to all investment result from the universal life fund of insurers but not lower than the minimum investment rate of which the insurers make their commitments in the insurance contract.

3. The insurers can be entitled to the premiums paid by the insurance buyers as agreed in insurance contract.

Article 3. Universal life fund

The universal life fund is formed from the premium of universal life insurance contracts and belongs to the policyholder fund. The property of universal life fund is not divided but generally determined for all linked insurance contracts.

Article 4. Conditions for insurers to implement the universal life insurance products

When implementing the universal life insurance products, the insurers must meet the following conditions:

1. The solvency of insurers is larger than the minimum solvency of 100 billion dong.

2. Have suitable information technology system for prudent and effective management and control of universal life fund.

3. The universal life insurance products have been approved by the Ministry of Finance in accordance with the provisions in Article 20 of this Circular.

Chapter II

SPECIFIC PROVISIONS

Section 1. PRODUCT DESIGN

Article 5. Benefits of universal life insurance

1. The insurance benefits under the universal life insurance contract including the benefits of risk insurance and investment benefits.

2. Benefits of risk insurance:

a) The insurers and the insurance buyers shall make agreement on benefits of risk insurance but must ensure the minimum amount of insurance is not lower than 5 times of the periodical premium of the first year for the insurance contract with periodic payment of premium or not lower than 125% of premium for insurance contract with one-time payment of premium.

b) The provisions on minimum benefits in case of death do not apply to the additional premiums specified in Article 7 of this Circular.

c) The insurers can provide the insurance products complementary to the universal life insurance products. The mode of payment of premium to the complementary insurance products shall be agreed by the parties when signing contract.

3. Investment benefits: The insurance buyer shall receive the benefits from the investment result of universal life fund with the minimum investment rate specified in the insurance contract.

4. The insurer and the insurance buyer can agree upon on the contents and mode of payment of insurance benefits upon occurrence of insurance event in accordance with the provisions in Clause 2 and 3 of this Article.

Article 6. Fees

1. The insurers are only allowed to calculate the following fees:

a) The initial fee is all amounts which the insurers are allowed to deduct before the premium is allocated to the universal life fund.

b) The fee of risk insurance is the fee used to pay the benefits of risk insurance as committed in the insurance contract.

c) The fee of insurance contract management is the fee used to cover the expenses pertaining to the maintenance of insurance contract and provide information pertaining to the insurance contract for the insurance buyer.

d) The fee of fund management is used to pay the investment activities and manage the universal life fund. In any case, the investment rate paid to insurance buyer is not lower than the minimum investment rate as committed in the insurance contract.

dd) The fee of insurance contract cancellation is the fee calculated for the customers upon cancellation of contract before the maturity date to cover all relevant rational expenses.

e) Other fees (if any) must be approved in writing by the Ministry of Finance.

2. The insurers must calculate accurately, fairly and rationally the above fees to ensure the compliance with the technical base of the products approved by the Ministry of Finance and notify the insurance buyer upon contract signing.

3. The universal life insurance contract must specify the above fees including the maximum levels to be applied to the insurance buyer. The insurers must clearly and completely publicize all fees and the maximum level applied to the insurance buyer in the product introduction documentation and sale illustration documentation.

4. During the implementation of contract and within the maximum limit specified in the insurance contract, the insurers may change the percentage of applicable fees after informing and making agreement in writing with the insurance buyer at least three (03) months before the official time of change.

Article 7. Additional premium

1. In addition to the premium agreed upon in the insurance contract, the insurance buyer can make payment of additional premium to participate in the universal life fund.

2. All additional premium shall be invested in the universal life fund after deducting an initial premium.

3. In each contract year, the total additional premium must not exceed five (05) years of the premium of the first year for periodical premium payment contract.

Article 8. Surrender value

The surrender value of a universal life insurance contract is determined as the value of such contract in the universal life fund on the date of cancellation of insurance contract minus the fee of cancellation of insurance contract.

Article 9. Establishment and management of universal life fund

1. The insurer shall establish a universal life fund for all its universal life fund contracts. The universal life fund must be separated from the owner's fund and other insurer’s policyholder funds.

2. Within 60 days after the first universal life insurance contract is signed, the insurer must guarantee the total value of universal life fund must not be always lower than 50 billion dong.

3. Where the premiums allocated to the universal life fund do not meet the provisions specified in Clause 2 of this Article, the insurer shall use a part of owner's fund to form the initial property of the universal life fund and enjoy the result of investment in proportion to the amount contributed to the establishment of universal life fund. The insurer can be refunded a part or the whole of contributed amount if such refunding meets the provisions specified in Clause 2 of this Article.

4. The universal life fund is managed and used for investment in line with the financial regime applicable to the insurers.

5. The premium and the additional premium after their initial premiums are deducted must be invested in line with the objectives of the universal life fund within 60 days after the insurer receives the premiums.

Section 2. LIABILITY FOR INFORMATION DISCLOSURE OF INSURER

Article 10. Information on universal life insurance

1. The insurers must make accurate, complete and timely disclosure to the insurance buyer of information pertaining to the signed universal life insurance contract. The information provided for the insurance buyer must be in line with the universal life insurance products approved by the Ministry of Finance.

2. The insurance buyer has the right to require the insurer to provide all information and explain the terms and conditions to be aware of the relevant risks when signing universal life insurance contract.

3. The insurer shall publicize on its website the following documents:

a) Regulations and terms of insurance products approved by the Ministry of Finance;

b) Product introduction documentation;

c) Sale illustration documentation of typical cases;

d) Tình hình hoạt động của quỹ liên kết chung.

Operation reality of universal life fund.

Article 11. Documents introducing products

These documents are developed and used by the insurers and must be in accordance with the regulations of law and the following provisions:

1. The information in the product introduction documentation must be accurate, objective, and truthful and must be in line with the universal life insurance products approved by the Ministry of Finance.

2. In addition to the general provisions in the life insurance, the documentation introducing the universal life insurance products must have the following minimum information:

a) The investment policies, objectives and structure of property investment structure of universal life fund;

b) The maximum percentage and the rate of fee of risk insurance, fee of insurance contract management, fee of fund management, fee of cancellation of insurance contract and other fees.

c) The minimum investment interest committed to the insurance buyer for the premium allocated to invest in the universal life fund;

d) Basically and periodically determining the benefits of insurance contract from the universal life fund.

dd) Providing clear information to the insurance buyer that the signing of universal life insurance contract is a long-term commitment and the insurance buyer should not cancel the insurance contract because the fees which the insurance buyers must pay can be very high in the initial period of the contract.

Article 12. Sale illustration documentation

The sale illustration documentation must meet the regulations of law and the following regulations:

1. The sale illustration documentation of the universal life insurance products must be provided for the customers before signing the insurance contract and must have minimum information according to the Appendix I issued with this Circular.

2. The insurer must clearly explain to the insurance buyer about the benefits they can receive when signing insurance contract, including the benefits of risk insurance and the benefits received from the universal life fund.

3. The fees and maximum limits the insurance buyer must pay must be clearly indicated on the basis of separation between the premium for the benefits of risk insurance and other fees.

4. Where the universal life insurance contract has the complementary insurance benefits, the insurer must clearly explain in the sale illustration documentation and such complementary benefits and their effect on the insurance buyer.

5. The sale illustration documentation must be presented clearly and easy to understand.

Article 13. Insurance contract

The universal life insurance contract must be in line with the regulations of law and must have the following information:

1. The investment policies, objectives and structure of property investment of universal life fund.

2. The percentage, specific amount and maximum rate of fees pertaining to the universal life insurance contract are calculated for customers;

3. The percentage of allocation of premium for investment in the universal life fund;

4. The ways to determine the benefits of investment from the universal life fund;

5. The choices for the insurance buyer to change the risk benefits, percentage of premium allocated to the universal life fund and extension period of premium payment.

Article 14. Notification to the insurance buyer of contract status

Within 90 days from the end of financial year or contractual year, the insurer must give a written notice to the insurance buyer of the following contents:

1. The status of insurance contract includes the following information:

a) The benefits of risk insurance;

b) The redemption value at the beginning of reporting year;

c) The redemption value at the end of reporting year;

d) The fees incurred in detail in the year by the fee of risk insurance and other fees;

dd) The total premiums paid and the premium allocated to the universal life fund in the reporting year;

e) The investment result and investment rate from the fee of investment insurance in the universal life fund.

2. The operational result of universal life fund has the following contents:

a) The brief information on financial situation of universal life fund according to the Appendix II issued with this Circular.

b) The reality of operation of universal life fund in the last five (05) years or the actual existence time of the fund if the operational time of fund is less than five (05) years;

c) The details about investment benefits which were divided and shall be given to the insurance buyer in the reporting year.

d) The certification of independent audit company on the above information.

Section 3. SOLVENCY AND OPERATIONAL RESERVE

Article 15. Solvency

1. The insurers must always maintain their solvency in accordance with regulations of law.

2. The minimum solvency margin for the universal life contract is equal to 4% of operational reserve plus 0.3% of amount of risk insurance.

3. The solvency margin of the insurers must be higher than the minimum solvency margin by 100 billion dong.

Article 16. Operational reserve

1. The insurers must make their operational reserve as follows:

a) Reserve for insurance risk: is the amount larger than the provision calculated by the unearned cost method or the provision calculated by the cash flow method to meet all expenses in the future during the term of contract.

In which, the reserve calculated by the unearned cost method is by 100% of earned fee of risk insurance of universal life insurance contract.

b) Reserve for compensation is appropriated by the method of documentation with the provision calculated on the basis of statistics of amount of insurance to be paid for each dossier of compensation requirement from the insurer but unsettled by the end of financial year.

c) Reserve for the universal life part is done by the following method:

- The redemption value of universal life insurance contract, or:

- The value of account of universal life insurance contract.

The insurers shall evaluate and choose the method of operational reserve for the universal life part to guarantee the liabilities committed in the insurance contract.

The insurers must not change the method and grounds of reserve in the financial year. In case of change of method and grounds of reserve in the following financial year, the insurers must ensure the higher result of reserve with the written approval from the Ministry of Finance before application in accordance with the provisions in the Circular No. 125/2012/TT-BTC dated 30/7/2012 and the Circular No. 194/2014/TT-BTC dated 17/12/2014 of the Minister of Finance and the documents amending, adding or superseding the above-mentioned documents.

d) The resilience reserve: This reserve is used to guarantee the insurer’s commitment to the customers as agreed upon in the insurance contract upon major change of investment market.

2. The actuaries of the insurers shall determine the method, grounds and data of operational reserve to ensure the commitments to the insurance buyer by the principles and method of calculation widely recognized according to international practice.

Section 4. ANALYSIS OF CUSTOMER DEMAND AND REQUIREMENTS FOR INSURANCE AGENT AND INSURANCE COMMISSION

Article 17. Analysis of customer demand

Before signing the insurance contract, the insurers must analyze the demand of customers and have their confirmation on clear understanding of insurance products they plan to buy or are aware of benefits of insurance, investment and investment risks they may encounter when participating in universal life insurance and the fees the insurers may charge on them.

Article 18. Requirements for insurance agent

The insurance agent implementing the universal life insurance products must meet the following conditions:

1. Not violate the regulations of law on activities of insurance agent and agent’s professional ethics of the insurers.

2. Are provided with training from the insurer and receive the certificate of completion of training course on universal life insurance products.

3. Have at least three (03) months of experience in insurance agent activities or at least one (01) year of working in the field of finance, banking or insurance or graduate from college or higher education in the field of finance, banking or insurance.

Article 19. Insurance commission

The insurance commission for the universal life insurance products shall comply with regulations of law with the maximum percentage of commission the insurers are allowed to pay to the insurance agent for each insurance contract according to the Appendix III issued with this Circular.

Section 5. OTHER PROVISIONS

Article 20. Approval for insurance products

1. The insurers whose universal life insurance products must be approved by the Ministry of Finance before implementation.

2. The dossier for approving the universal life insurance product is made under regulations of law and is enclosed with the plan for implementation of universal life insurance products, including the following contents:

a) Summary of main content of universal life insurance products to be implemented;

b) The investment policies which the insurers plan to apply to the properties of universal life fund;

c) The grounds for allocating the premiums and expenses;

d) The contents of training of insurance agents on the universal life insurance products to be implemented;

dd) Information about the actuaries, investment specialist or other outsourcing services;

e) Information on qualifications, competence and professional experiences of officials responsible for investment.

g) Commitment is done in writing with the detailed explanation about the insurer’s meeting the conditions specified in Article 4 of this Circular.

Article 21. Obligations of insurers

1. Comply with the provisions of this Circular and other relevant regulations of law.

2. Issue the operational procedures for implementation of universal life insurance products in line with the insurers’ conditions, characteristics and operation charter.

3. Aggregate and make report on the reality of business of universal life insurance products under the current regulations of law.

4. Annually, the actuaries of the insurers shall assess the compliance with the provisions of this Circular of the insurers during the business of universal life insurance products.

Chapter III

EFFECT

Điều 22. Effect

1. This Circular takes effect from 01/06/2016

2. This Circular supersedes the Decision No. 96/2007/QD-BTC dated 23/11/2007 of the Minister of Finance on issuing the Regulation on implementation of universal life insurance products.

3. Any problem arising during the implementation of this Circular should be promptly reported to the Ministry of Finance for review and settlement./.

APPENDIX I

SALE ILLUSTRATION DOCUMENT
(Issued with Circular No. 52/2016/TT-BTC dated 21/3/2016 of the Ministry of Finance guiding the implementation of universal life insurance products)

I. BASIC INFORMATION

1. Information on enterprise:

- Name of enterprise                                                                   - License No.

- Business area                                                                           - Charter capital

- Head office                                                                                          - Contact address

                                                              (address, telephone, fax...)

2. Information on the insurance buyer or the insured

- Full name                                                                    - Age

- Sex                                                                             - Occupation

- ID/Passport No.

3. Information on insurance agent

- Full name                                                                    - Agent code

- Operating office

4. Information about insurance products, supplementary products (if any)

- Name of product                                                           - Duration of insurance

- Benefits of risk insurance                                             - Premium

II. DETAILED INFORMATION

1. Insurance benefits

The basic benefits are explained to the insurance buyer must be separated at least from the benefits guaranteed and unguaranteed benefits, specifically:

1.1. Benefits of risk insurance: GUARANTEED BENEFITS

- Benefits of death insurance: is the amount the insurer pays to the beneficiary in case of the death of the insured.

- Other benefits of risk insurance (if any)

- Benefits of supplementary insurance products (if any).

1.2. Investment benefits:

a) GUARANTEED BENFITS

- The benefits are based on the minimum investment rate committed to the insurance buyer.

b) UNGUARANTEED BENFITS

1.3. Other benefits (if any)

2. Mechanism of premium allocation:

- The insurer must clearly illustrate the premium rate allocated for the benefits of risk insurance and the benefits from the universal life fund.

- The insurer must clearly illustrate the fees specified in Article 6 of this Circular and the maximum limits to be applied, for example:

+ Initial fee

+ Fee of risk insurance

+ Fee of insurance contract management

+ Fee of fund management

+ Fee of cancellation of insurance contract

+ Other fees (if any)

3. Estimated investment rate

3.1. The insurers can use the investment rate to pay to the insurance buyer maximally equal to their average actual investment rate of the 05 last financial years (not exceeding 8%) to express the income fluctuation range of the universal life fund.

3.2. The insurer must clearly assert:

- The investment rate can increase or decrease

- In any case, the insurer must guarantee the minimum investment rate committed in the insurance contract.

III. ACTUAL ILLUSTRATION ON ALLOCALTION OF PREMIUM AND INSURANCE BENEFITS

APPENDIX II

OPERATION REALITY OF UNIVERSAL LIFE FUND
(Issued with Circular No. 52/2016/TT-BTC dated 21/3/2016 of the Ministry of Finance guiding the implementation of universal life insurance products)

I. PREMIUM AND VALUE OF UNIVERSAL LIFE FUND IN A YEAR

Total premiums paid in a year: …………………..

Premium allocated to the benefits of risk insurance: …………………..

Other relevant fees: …………………..

Total premium invested in the universal life fund: …………………..

Value of universal life fund at the beginning of year : …………………..

Value of universal life fund at the end of year: …………………..

Investment rate of universal life fund: …………………..

II. REPORT ON PROPERTY REALITY OF UNIVERSAL LIFE FUNDS

III. REPORT ON INCOME AND EXPENSES OF UNIVERSAL LIFE FUNDS

APPENDIX III

TABLE OF MAXIMUM COMMISSION PERCENTAGE APPLICABLE TO THE UNIVERSAL LIFE INSURANCE PRODUCTS
(Issued with Circular No. 52/2016/TT-BTC dated 21/3/2016 of the Ministry of Finance guiding the implementation of universal life insurance products)

Unit: %