Formulate a Decree detailing the Law on Insurance Business

Issuance of a Decree detailing the Law on Insurance Business when the Law takes effect to fill a legal gap. Photo: ST

On June 16, 2022, the 15th National Assembly passed the Law on Insurance Business at its third session (Law No. 08/2022/QH15), which will take effect from January 1, 2023.

As a matter of fact, a Decree detailing the Law on Insurance Business is expected to improve the legal framework on insurance business activities, ensuring conformity with the Party's guidelines and policies, and the State's policies; uniformity, consistency with the relevant legal system and in line with the development orientation and practical needs of the market. Furthermore, it is necessary to issue to fill the gap as soon as the Law on Insurance Business takes effect.

More importantly, the draft Decree clearly stipulates the management, supervision, inspection and examination of branches of foreign insurance companies in Vietnam.

Accordingly, the Ministry of Finance will coordinate with state management agencies in charge of foreign insurance by sharing management and supervision information for foreign branches in Vietnam in order to protect the legitimate rights and interests of relevant parties in insurance business activities and ensure the healthy and sustainable development of Vietnam's insurance market.

The sharing of information with the state management agency in charge of foreign insurance is carried out based on a written request. Contents of international cooperation agreements and information sharing with foreign insurance regulatory agencies must comply with regulations.

Regarding the inspection and examination of insurance business activities of foreign insurance branches in Vietnam, inheriting the provisions of Decree No. 73/2016/ND-CP guiding the Law on Insurance Business and the Law on Amendments, supplementing the insurance business law on the establishment, operation and financial management of insurance enterprises, foreign branches and insurance brokerage enterprises.

Furthermore, it is specified in the draft Decree regulating the Ministry of Finance of Vietnam in charge of inspecting and examining the operation of foreign branches in Vietnam in accordance with the law. In case the foreign insurance state management agency where the enterprise is headquartered conducts an inspection and examination of the operation of the foreign branch in Vietnam, it must notify the inspection and examination plan and inform the results to the Ministry of Finance.

Notably, given the Fund for the Protection of the Insured (FPI), the draft Decree devoted a whole chapter to specifying this content. Accordingly, payment may be spent on insurance payments, refunds, indemnifications, or insurance premiums under the provisions of the insurance contract signed by insolvent insurance companies, and foreign branches.

More importantly, the contract must be signed in parallel with the time of a decision on termination of measures to restore solvency (in the case of insolvency of insurance enterprises, foreign branches and insurance companies) or at the issuance of a decision declaring the insurance enterprise bankrupt (in the case of the insurance enterprise on the edge of bankruptcy).

This fund will also cover the shortfall between insurance assets and liabilities, as well as the lack of corresponding professional reserves for the insurers designated to receive the portfolio of insurance policies from the bankruptcy or insolvency of insurance enterprises.

The draft Decree also stipulates that the expenses for the management of the Fund for the Protection of the Insured may include salaries, allowances, and expenses for purchasing and repairing properties, service costs, and other expenses. The level of expenditure shall comply with the provisions of current law.