CIRCULAR

ON PROVIDING GUIDELINES FOR IMPLEMENTATION OF DECREE 42/2001/ND-CP OF THE GOVERNMENT DATED 1 AUGUST 2001 PROVIDING DETAILED REGULATIONS FOR IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE LAW ON INSURANCE BUSINESS

Pursuant to the Law on Insurance Business 24/2000/QH10 dated 9 December 2000;
Pursuant to Decree 42/2001/ND-CP of the Government dated 1 August 2001 providing detailed regulations for implementation of a number of articles of the Law on Insurance Business;
Pursuant to Decree 77/2003/ND-CP of the Government dated 1 July 2003 on functions, duties, powers and organizational structure of the Ministry of Finance;

The Ministry of Finance provides the following specific guidelines:

I. ESTABLISHMENT AND OPERATION OF INSURERS AND INSURANCE BROKERS

1. Application file for issuance of licence for establishment and operation:

1.1 An application file in accordance with article 64 of the Law on Insurance Business shall comprise:

1.1.1 An application form for issuance of a licence prepared in the sample form in Appendix 1 to this Circular and signed by the legal representative of, or the person authorized by, the investor;

...

...

...

1.1.3 List, curriculum vitae and notarised data about company managers and operators proving their ability, skills and professional qualifications;

1.1.4 Levels of capital contribution, list of organizations and individuals owning 10% or more of the charter capital, and financial and other information on such organizations and individuals;

1.1.5 Rules, terms and conditions, premium rates, and insurance commission scales for the insurance products proposed to be provided;

1.1.6 For an insurance broking enterprise, an application file for issuance of a licence shall not contain item 1.1.5 above, and the operational plan for the first five years of a broker shall not include methods of establishing professional reserves, a reinsurance program, investment capital nor [data proving] solvency of the enterprise.

1.2. In addition to the documents stipulated in clause 1.1 above and depending on the type of enterprise proposed to be established, the application for issuance of a licence must include the following data:

1.2.1 For a State owned insurer or insurance broker:

(a) Draft charter of the enterprise containing the principal items as stipulated in the Law on Enterprises and its implementing guidelines;

(b) Letter from the body which made the decision on establishment of the enterprise, agreeing to it conducting insurance business or insurance broking business;

(c) Explanatory statement of the capital sources funding the establishment of the insurance enterprise or insurance broking enterprise, certified by the competent body.

...

...

...

(a) Draft charter of the enterprise containing the principal items as stipulated in the Law on Enterprises and its implementing guidelines;

(b) Minutes of meeting of the investors on the establishment of a shareholding insurance company, shareholding insurance broking company, limited liability insurance broking company, private insurance broking enterprise or insurance broking partnership;

(c) Certification by the competent body of the legal capacity of the investors and founding shareholders:

- If the investor is a legal entity, it must lodge a notarised copy of the decision on establishment of the enterprise, the business registration certificate, and the investment licence (if any);

- If the investor is an individual he must lodge his curriculum vita in the form stipulated by law.

(d) Certification of the legality of the funding sources for establishing the company:

- If the investor is a legal entity, it must lodge audited financial statements for the 3 most recent years;

- If the investor is an individual he must lodge bank certification of the balance in his deposit account, or a term deposit certificate with at least six months of the term remaining (from the date of lodging the application file), or a certificate of a deposit account in the investor's own name. Files and documents on land and housing shall not be used to prove an investor's financial capacity and ability to contribute capital;

(dd) Power of attorney to the investors' representative;

...

...

...

1.2.3 For an insurance enterprise or insurance broking enterprise with 100% foreign owned capital:

(a) Draft charter of the insurer with 100% foreign owned capital containing the principal items stipulated in the Law on Foreign Investment in Vietnam and its implementing guidelines;

(b) Charter of the foreign investor;

(c) Operational licence of the foreign investor;

(d) Letter of confirmation from a competent foreign body:

- Permitting the foreign investor to establish an enterprise with 100% foreign owned capital in Vietnam; and if the regulations of the country where the foreign investor has its head office do not require such a letter of approval, then there must be evidence confirming this;

- Confirming the foreign investor is permitting to conduct the type of insurance business proposed to be conducted in Vietnam;

- Confirming the foreign investor is in a healthy financial state and satisfies the regulatory requirements of his own country.

1.2.4 For a joint venture insurance enterprise or insurance broking enterprise:

...

...

...

(b) Charter of the joint venture enterprise containing the principal items stipulated in the Law on Foreign Investment in Vietnam and its implementing guidelines;

(c) Charter of the foreign party to the joint venture;

(d) Operational licence of the foreign party to the joint venture;

(dd) Letter of confirmation from the authorized foreign body:

- Permitting the foreign investor to establish a joint venture insurance enterprise in Vietnam; and if the regulations of the country where the foreign investor has its head office do not require such a letter of approval, then there must be evidence confirming this;

- Confirming the foreign investor is permitting to conduct the type of insurance business proposed to be conducted in Vietnam;

- Confirming the foreign investor is in a healthy financial state and satisfies the regulatory requirements of his own country.

(e) Letter from the authorized body permitting the Vietnamese party to contribute capital to the joint venture;

(g) Explanatory statement of the sources funding the Vietnamese party, certified by the competent body.

...

...

...

2. Procedures for receiving and dealing with applications for a licence:

2.1. An application file for issuance of a licence shall be received and checked by the Ministry of Finance on the following bases:

2.1.1 The requisite number of sets and the requisite number of documents to be included in the file;

2.1.2 The validity of the application for the licence;

2.1.3 The documents certifying legal entity status and financial status of the investor.

2.2. Within a time-limit of sixty (60) days from the date of receipt of a complete application file for issuance of a licence from an investor, the Ministry of Finance shall make a decision to issue or to refuse to issue a licence. In the case of refusal, the Ministry of Finance shall provide a written explanation.

During evaluation of an application file for issuance of a licence, and within a time-limit of fifteen (15) working days from the date of receipt of a complete application file as stipulated in clause 2.1 above, the Ministry of Finance may send a notice to the investor to amend or add to the file where it considers it necessary.

The investor shall provide amendments or additions within a time-limit of thirty (30) working days from the date of receipt of such request from the Ministry of Finance. If the investor fails to complete the file as required within the time-limit for providing amendments and additions to the application file for issuance of a licence, including any extension thereof, the application file shall no longer be valid for consideration.

2.3. A licence shall be issued in the sample form in Appendix 2 (attached to this Circular).

...

...

...

3.1. An application for issuance of a licence shall be evaluated on the following bases:

3.1.1 Law on Insurance Business and its implementing guidelines;

3.1.2 Other relevant laws.

3.2. An application for issuance of a licence shall be evaluated with respect to the following:

3.2.1 Evaluation of legal entity status and financial status of the investor by reference to:

(a). Document establishing the enterprise and the organizational and operational charter of the enterprise (where the investor is a legal entity) or the document proving legal entity status (where the investor is an individual);

(b). Audited financial statements for the preceding three consecutive years (where the investor is a currently operating legal entity), including revenue, asset value, and annual profit; the ability of the investor to raise capital, and evidence from banks of balances in deposit accounts of the investor (where the investor is an individual); assistance from the head company (if any);

(c). Capital levels, amount of deductions for insurance reserves and other reserve funds in accordance with regulations; investment activities, and business plan of the insurance enterprise or insurance broking enterprise proposed to be established.

3.2.2 Evaluation of consistency of establishing the insurance or insurance broking enterprise with socio-economic planning and interests:

...

...

...

(b). Consistency shall be considered on the basis of the following specific items:

-. Ensuring the healthy development of the insurance market;

-. Requirements of the national economy for the types of insurance products proposed to be marketed;

-. Consideration of the ability to develop the potential of domestic insurance and the ability of the domestic market to retain premiums; the ability to create jobs;

-. Process of integration and development of commercial relationships between Vietnam and other countries.

3.2.3 Evaluation of insurance products in application for issuance of a licence:

(a). Whether the regulations, terms and conditions, and premium scales which have been drafted are consistent with the current provisions of the law, whether they are economically and technically feasible, and whether they are consistent with Vietnamese socio-economic conditions, customs and practices;

(b). Development of new insurance products which insurers currently operating in the market are unable to provide shall be encouraged.

4.. Fees for issuance of licence:

...

...

...

5. Amendment of or addition to licence:

The procedures for approving changes under article 69 of the Law on Insurance Business shall be specifically implemented as follows:

5.1. Changing the name of an enterprise:

An insurer or insurance broker wishing to change the name of its enterprise shall forward to the Ministry of Finance an application for a change of name signed by the legal representative of, or person authorized by, the enterprise and the written confirmation of the change of name from the competent body or person having authority of the enterprise.

5.2. Increasing or decreasing charter capital of an insurer or insurance broker:

An insurer or insurance broker wishing to increase or decrease charter capital of the enterprise shall forward to the Ministry of Finance the following:

5.2.1 Explanatory statement of the increase or decrease in charter capital, bearing the signature of the legal representative of, or person authorized by, the enterprise and specifying the amount of the increase or decrease, the reasons for it, the plan for use of capital, and the period within which it is proposed to be implemented;

5.2.2 The written approval of the competent body or person having authority of the enterprise of the increase or decrease in the charter capital;

5.2.3 Explanatory statement of the financial sources used for increase in capital, in the case of increase in charter capital.

...

...

...

5.3.1 An application file for the opening of a branch or representative office of an insurer or insurance broker shall be implemented in accordance with the provisions in articles 11 and 12 of Decree 42/2001/ND-CP of the Government dated 1 August 2001 providing detailed regulations for implementation of a number of articles of the Law on Insurance Business.

5.3.2 An application file for the opening of an overseas branch or representative office of an insurer or insurance broker shall be implemented in accordance with the provisions of the laws relating to investment overseas.

5.3.3 An application file for the termination of a branch or representative office of an insurer or insurance broker shall comprise:

-. Application requesting termination of operation;

- Report on status of operation of the branch or representative office in the preceding three years. Where the branch or representative office has not been operating for three years, a report on the status of operation from the time of commencement of operation shall be required;

- Responsibilities and matters arising out of the termination of operation.

5.4. Changing the location of a head office, branch or representative office of an insurer or insurance broker:

An insurer or insurance broker wishing to change the location of its head office, branch or representative office shall forward to the Ministry of Finance an application file for change of the location of its head office, branch or representative office signed by the legal representative of, or person authorized by, the enterprise.

5.5. Changing the area, scope or duration of operation:

...

...

...

5.6. Transferring shares or capital contribution share:

An application for the transfer of shares or capital contribution share amounting to ten (10) per cent or more of the charter capital shall be prepared in one set and submitted to the Ministry of Finance, and shall comprise the following documents:

5.6.1 Application for the transfer of shares or capital contribution share amounting to ten (10) per cent or more of the charter capital, signed by the legal representative of, or person authorized by, the enterprise. The application shall specify the number and value of the shares, the proportion of capital contribution to be transferred, and the reasons for the transfer;