DECREE No DECREE No. 42/2001/ND-CP OF AUGUST 1, 2001 DETAILING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE LAW ON INSURANCE BUSINESS THE GOVERNMENT Pursuant to the September 30, 1992 Law on Organization of the Government; Pursuant to the December 9, 2000 Law on Insurance Business; At the proposal of the Finance Minister, DECREES: Chapter I GENERAL PROVISIONS Article 1.- Scope of application 1. This Decree details the implementation of a number of articles of the Law on Insurance Business. 2. This Law applies to insurance business, reinsurance business, insurance brokerage and insurance agency activities conducted by insurance enterprises, insurance brokerage enterprises and insurance agents. 3. This Decree does not apply to social insurance, health insurance, deposit insurance and other types of insurance which are provided by the State and bear a non-commercial nature. Article 2.- The State�s policies towards the insurance program in service of the objectives of agricultural, forestry and fishery development 1. The State shall adopt mechanisms and polices on financial support for organizations and individuals participating in insurance. 2. The State shall give technical support for insurance enterprises in researching into and developing insurance products; create conditions for insurance enterprises to be established, broaden the contents, scopes and geographical areas of their operation. 3. The State shall adopt other preferential treatment policies according to law provisions. Article 3.- The State�s policies towards State-run insurance enterprises 1. The State shall guarantee the provision of adequate charter capital for the enterprises� operation. 2. The State shall invest various resources for the performance of insurance operations in service of the target programs on socio-economic development. 3. The State shall adopt other preferential treatment policies according to law provisions. Article 4.- Principles for participation in insurance 1. Organizations and individuals that have insurance needs may only participate in insurance at insurance enterprises operating in Vietnam. 2. Organizations and individuals that have insurance needs may participate at insurance enterprises that have no head-offices in Vietnam in the following cases: a/ Insurance enterprises which are operating in Vietnam have not yet provided those types of insurance products that organizations and individuals wish to participate in insurance; b/ It is so provided for by international agreements which the Vietnamese Government has signed or acceded to. 3. Insurance contracts that are concluded between Vietnamese organizations or individuals and insurance enterprises that have no head-offices in Vietnam and in contravention of the provisions of Clause 2 of this Article shall be considered invalid. Article 5.- Insurance products 1. The Ministry of Finance shall base itself on the types of insurance operation specified in Article 7 of the Law on Insurance Business to publicize a detailed list of insurance products. 2. Insurance enterprises may deal in the insurance products prescribed in their establishment and operation licenses, according to the insurance regulations, terms and premium tables, which have been registered with or have been approved and promulgated by, the Ministry of Finance. Article 6.- Compulsory insurance 1. Insurance enterprises licensed to deal in compulsory insurance must not refuse to sell compulsory insurance. 2. Organizations and individuals subject to compulsory insurance shall be obliged to participate in compulsory insurance. Chapter II INSURANCE ENTERPRISES Section I. ESTABLISHMENT AND OPERATION OF INSURANCE ENTERPRISES Article 7.- Fees for granting of establishment and operation licenses of insurance enterprises Insurance enterprises which are granted establishment and operation licenses shall have to pay a licensing fee; the fee level per licensing is equal to 0.1% of the insurance enterprises� legal capital. Article 8.- Procedures to be completed before insurance enterprises can inaugurate their operation 1. Within 12 months as from the date they are granted establishment and operation licenses, insurance enterprises must complete the necessary procedures according to law provisions to inaugurate their operation. Past this time limit, if insurance enterprises fail to commence their operation, their licenses shall be withdrawn. 2. Within 30 days after being granted establishment and operation licenses, insurance enterprises must publish for five consecutive issues of the central dailies and the dailies of the localities where they base their head offices the following principal contents: a/ The names and addresses of their head office, branch(es) and/or representative office(s); b/ The content, scope and duration of operation; c/ The charter capital level and the amount of already contributed charter capital; d/ The full name of the enterprise�s legal representative; e/ The serial number and the date of granting of the establishment and operation license; f/ Insurance products that the enterprise is permitted to deal in. Article 9.- Sending of notices on the granting, withdrawal, amendment and/or supplement of establishment and operation licenses Where the Ministry of Finance grants or withdraws establishment and operation licenses, gives approval for insurance enterprises to change one of the contents specified in Clause 1, Article 69 of the Law on Insurance Business, it shall immediately send written notices thereon, together with the copies of establishment and operation licenses, decisions to withdraw establishment and operation licenses, or decisions to approve the amendment and/or supplement to establishment and operation licenses, to the provincial-level business registration offices in the localities where the concerned enterprises base their head offices, branches or representative offices. Article 10.- Organizational forms of operation of insurance enterprises Insurance enterprises may be organized and operate in the following forms: 1. For State-run insurance corporations: a/ The head offices of the Corporations; b/ The head offices of member units; c/ Representative offices. 2. For other State-run insurance enterprises, joint-stock insurance companies and foreign-invested insurance enterprises: a/ The head offices of the companies; b/ Branches; c/ Representative offices. 3. The opening of overseas branches and/or representative offices of Vietnamese insurance enterprises must be approved by the Ministry of Finance and comply with relevant law provisions. Article 11.- Branches of insurance enterprises 1. Branches of insurance enterprises are dependent units of insurance enterprises, operate under the provisions of this Decree and are prescribed in the charters of insurance enterprises. Insurance enterprises shall take responsibility for all activities of their branches. 2. Insurance enterprises may open branches outside the provinces or centrally-run cities where they base their head offices in order to carry out activities prescribed in their establishment and operation licenses. 3. A dossier of application for opening of a branch consists of: a/ The application for opening of a branch; b/ A report evaluating the situation of the enterprise�s operation in the previous fiscal year; c/ A report on the survey of insurance demand in the locality where the insurance enterprise intends to open a branch; d/ The branch�s business plan for the three years to come, clearly stating the contents and scope of operation, insurance products planned for business; the proposed organizational apparatus, personnel and location of the branch; e/ The CV, diploma(s) and certificate(s) of the branch�s manager. 4. Within 30 days after receiving complete dossiers, the Ministry of Finance must reply in writing whether it accepts or refuses to accept the dossiers. In case of refusal, the Ministry of Finance must clearly explain in writing the reasons therefor. Article 12.- Representative offices of insurance enterprises 1. Representative offices are dependent units of insurance enterprises and not allowed to conduct any business activities. 2. Insurance enterprises may open representative offices outside the provinces or centrally-run cities where they base their head offices or branches. 3. A dossier of application for opening a representative office consists of: a/ An application for opening of a representative office; b/ Documents explaining the necessity to open the representative office, its operation contents and location; c/ The CV, diploma(s) and certificate(s) of the chief of the representative office. 4. Within 30 days after receiving complete dossiers, the Ministry of Finance must reply in writing whether it accepts or refuses to accept the dossiers. In case of refusal, the Ministry of Finance must clearly explain in writing the reasons therefor. Article 13.- Changes of the operation contents, scopes and duration 1. Where insurance enterprises wish to change their operation contents, scopes and/or duration prescribed in their establishment and operation licenses, they shall have to send written requests for amendments and/or supplements to their licenses to the Ministry of Finance. 2. Where insurance enterprises wish to expand their operation contents and/or scopes prescribed in their establishment and operation licenses, they shall have to enclose the rules, terms and premium tables of their insurance products planned for business; and the business plans, clearly stating the customers� demand, market forecasts, expected business results and technical and material foundations. 3. Within 30 days after receiving the insurance enterprises� written requests for supplements and/or amendments to their establishment and operation licenses, the Ministry of Finance must reply the insurance enterprises whether it accepts or refuses to accept such requests. In case of refusal, it must clearly explain in writing the reasons therefor. 4. In cases where the Ministry of Finance gives its approval for the enterprises to change one of the contents prescribed in Article 69 of the Law on Insurance Business, the insurance enterprises shall announce such approved content on the newspapers under the provisions of Clause 2, Article 8 of this Decree. Article 14.- Chairmen of the Managing Boards, general directors (directors) 1. Chairmen of the Managing Boards of insurance enterprises must be those who have professional prestige and ethics as well as experiences in insurance business activities. 2. General directors (directors) of insurance enterprises must be those who have professional prestige and ethics, at least three years� practical experiences in business management or State management over insurance and must reside in Vietnam during their working time. 3. The appointment or change of chairmen of the Managing Board, general directors (directors) of insurance enterprises must be approved by the Ministry of Finance, except for cases where chairmen of the Managing Board and general directors of State-run insurance enterprises are appointed by the Prime Minister. 4. Within 30 days after receiving written requests of insurance enterprises, the Ministry of Finance must reply insurance enterprises whether it accepts or refuses to accept such requests. In case of refusal, the Ministry of Finance must clearly explain in writing the reasons therefor. Section 2. INSURANCE EXPLOITATION Article 15.- Sale of insurance 1. Insurance enterprises may invite customers to participate in insurance according to the contents and scopes of their operation prescribed in their establishment and operation licenses. The invitation of customers to participate in insurance may be effected directly or through their representatives. 2. Insurance enterprises must not press organizations and individuals to purchase insurance in any form. Article 16.- Sale of insurance through insurance agents and insurance brokers 1. Insurance enterprises may authorize insurance agents to sell insurance products. 2. Insurance brokerage enterprises shall guide and counsel customers to participate in insurance at the latter�s requests. 3. Insurance brokerage enterprises and insurance agents shall have the obligations: a/ To honestly explain information on insurance products to enable insurance buyers to clearly understand insurance products they intend to buy; b/ Not to disclose nor supply information that may damage the legitimate rights and interests of the insurance buyers. 4. Insurance brokerage enterprises and insurance agents must not exert any influence that makes the insurance buyers to supply distorted information or refuse to supply necessary information to insurance enterprises. Article 17. - Insurance through the form of bidding 1. The purchase and sale of insurance may be effected through the form of bidding. 2. The organization of bidding must comply with the following regulations: a/ Ensuring publicity and that bid-soliciting conditions be generally applied to all insurance enterprises participating in bidding; b/ Insurance enterprises� bids must clearly indicate the insurance conditions, insurance durations, insurance regulations, insurance premiums and other regulations as required by bidding documents; c/ Bases for bid consideration include bidding documents, insurance premium offer and other related care services. 3. Bidding procedures shall comply with the provisions of law. Article 18.- Insurance regulations, terms and premium tables 1. The Ministry of Finance shall promulgate insurance regulations, terms and premium rates as well as the minimum insurance amount for each type of compulsory insurance. 2. For products of life insurance, health insurance and human accident insurance, insurance enterprises shall have to abide by the insurance regulations, terms and premium tables approved by the Ministry of Finance. 3. For other insurance products, insurance enterprises must register with the Ministry of Finance the insurance regulations, terms and premium tables under the latter�s guidance before they can apply them. 4. Where insurance enterprises conclude insurance contracts at variance with the regulations, terms and/or premium tables already promulgated or approved by, or registered with, the Ministry of Finance, they shall have to compensate damage incurred by the insurance buyers and the insurance buyers shall not have the responsibility to pay insurance premiums. Article 19.- Procedures for approval of insurance products 1. For those types of insurance products with their regulations, terms and premium tables approved by the Ministry of Finance as prescribed in Clause 2, Article 18 of this Decree, insurance enterprises must send to the Ministry of Finance written requests enclosed with the following documents: a/ Insurance regulations, terms, premium tables and commissions of insurance products planned for business; b/ Formulas, methods and explanations of the bases for premium calculation, and professional reserves of insurance products planned for business. 2. Within 30 days after receiving complete dossiers, the Ministry of Finance must reply in writing whether it accepts or refuses to accept such dossiers. In case of refusal, the Ministry of Finance must explain in writing the reasons therefor. Article 20.- Insurance commissions 1. Insurance enterprises may only pay insurance commissions from the actually collected amount of insurance premiums at the insurance commission rates set by the Ministry of Finance for each type of insurance operation. 2. Subjects entitled to insurance commissions include: a/ Insurance brokerage enterprises; b/ Insurance agents. 3. Insurance commissions must not be paid to the following subjects: a/ Organizations and individuals that are not permitted to conduct insurance agency and insurance brokerage activities in Vietnam; b/ Organizations and individuals that directly buy insurance, except for cases where insurance agents buy life insurance for themselves; c/ Officials and employees of insurance enterprises. Section 3. REINSURANCE ACTIVITIES Article 21.- Reinsurance Insurance enterprises may accept reinsurance for other insurance enterprises by effective mode and must ensure liabilities already committed to the insurance buyers. Article 22.- Compulsory reinsurance 1. In cases of reinsurance for overseas insurance enterprises, insurance enterprises must reinsure at a rate of 20% liabilities of the already concluded insurance contracts at Vietnam National Reinsurance Company. The reduction of compulsory reinsurance rates shall accord with international agreements which Vietnam has signed or acceded to. 2. The rights and obligations of Vietnam National Reinsurance Company for every risk related to compulsory reinsurance acceptance contracts shall commence and terminate at the same time with original insurance contracts of insurance enterprises. 3. The Ministry of Finance shall prescribe the list of reinsurance operations and compulsory reinsurance commissions. Article 23.- Assignment of reinsurance Insurance enterprises may assign part of liability they have accepted to insure to one or several other insurance enterprises but must not assign the entire liability already accepted in an insurance contract to other insurance enterprises in order to enjoy reinsurance commission. Article 24.- Acceptance of reinsurance Insurance enterprises may accept to reinsure liabilities which other insurance enterprises have accepted to insure. When accepting reinsurance, insurance enterprises must assess risks in order to ensure suitability with their financial capability. Section 4. OTHER ACTIVITIES OF INSURANCE ENTERPRISES Article 25.- Prevention and restriction of damage 1. Insurance enterprises may apply preventive measures to ensure safety for the insured objects when it is so agreed by the insurance buyers or competent State bodies. 2. Measures to prevent and restrict damage include: a/ Organizing propaganda and education; b/ Financing and providing means and material support so as to prevent and restrict risks; c/ Supporting the construction of projects for the purpose of preventing and mitigating risks for the insured objects. 3. Insurance enterprises may deduct part of the actually collected amount of insurance premiums according to regulations of the Ministry of Finance for applying measures to prevent and restrict damage. Article 26.- Expertise of damage 1. The damage expertise shall comply with the provisions of Article 48 of the Law on Insurance Business. The expertising agencies shall be responsible for their expertise results. 2. The damage expertise must be honest, objective, scientific, timely and accurate. 3. The damage expertise results must be reflected in the expertise records. Article 27.- Transfer of insurance contracts 1. The transfer of insurance contracts shall comply with the provisions of Articles 74, 75 and 76 of the Law on Insurance Business. 2. Where insurance enterprises transfer the whole insurance contracts for one or several insurance operations, they must send written requests to the Ministry of Finance for amendments and/or supplements to their establishment and operation licenses. Chapter III INSURANCE AGENTS, INSURANCE BROKERAGE ENTERPRISES Section 1. INSURANCE AGENTS Article 28.- Principles for insurance agency activities 1. Organizations and individuals that conduct insurance agency activities must meet all conditions for agency activities as provided for in Article 86 of the Law on Insurance Business and must sign insurance agency contracts under the provisions of Article 87 of the Law on Insurance Business. 2. Officials and employees of insurance enterprises must not work as insurance agents for their insurance enterprises. 3. Organizations and individuals must not work concurrently as insurance agents for other insurance enterprises unless they get the approval thereof from the insurance enterpri

Decree 42/2001/NĐ-CP