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