Decree 46/2023/ND-CP guiding the implementation of the Law on Insurance Business and notable contents

Decree 46/2023/ND-CP is an important piece of legislation that provides guidance on the implementation of the Law on Insurance Business. Enacted in the year 2023, this decree aims to streamline and regulate the insurance industry in order to protect the interests of policyholders and enhance the overall efficiency and transparency of the sector. Notable contents of this decree include provisions related to the establishment and operation of insurance businesses, licensing procedures, financial requirements, obligations of insurers, as well as consumer protection measures. Moreover, the decree offers detailed guidelines on each of these aspects, ensuring transparency and compliance within the insurance industry. Additionally, by outlining these key aspects, Decree 46/2023/ND-CP plays a crucial role in shaping the insurance landscape in Vietnam. Furthermore, it serves to promote trust and stability within the industry, ultimately benefiting both insurers and consumers alike.

Information collection for the insurance business database

Decree 46 regulates the collection of information to establish the insurance business database (Insurance Database) in detail.

The Insurance Database will comprise the following five (5) groups of information.

(i) Insurance enterprises, reinsurance enterprises, foreign branches, insurance brokerage enterprises, mutual microinsurance organisations, and foreign representative offices in Vietnam, such as information about the establishment and operation licence; licence for establishment of foreign representative offices in Vietnam, financial situation and operational activities; and information about managers and controllers, etc.;

(ii) The policyholders, the insureds, and the insured objects, such as the number of the insureds, the number of insurance policies, the number of claims and the total amount of indemnification, etc.;

(iii) About insurance agents, such as reports on training and using insurance agents, etc.;

(iv) Information about the examination and issuance of insurance certificates, insurance auxiliary certificates and insurance brokerage certificates, such as personal authentication information of individuals who obtain the certificates, names of the certificates, names of training institutions, etc.; and

(v) Lastly, information about the management, supervision and administrative sanctions in the insurance sector, such as names of individuals/organisations that have been imposed administrative sanctions, reference numbers of administrative sanction decisions, dates of the decisions, measures and levels of sanctions, etc.

Stricter minimum charter capital and required capital conditions for insurance enterprises.

Obtaining an establishment and operation licence (Establishment Licence) in the insurance sector requires charter capital as one of the key requirements. Decree 46 increases both the minimum charter capital required for insurance market participants and the required minimum capital for branches of insurance companies, compared to Decree 73.

Insurance enterprises, reinsurance enterprises, branches of foreign non-life insurance enterprises, and insurance brokerage enterprises that were established and operating before July 1, 2023 must comply with Decree 46 by increasing their capital to meet the minimum charter capital or required capital by January 1, 2028, if they do not currently meet those requirements.

New requirement for the transfer of shares or contributed capital 

Previously, the transfer of shares or contributed capital accounting for 10% or more of the charter capital was only required to be approved under Decree 73. However, Decree 46 now requires the Ministry of Finance (MOF) to approve any transfer of shares or contributed capital that results in shareholders or members owning either 10% or more of the charter capital or less than 10% of the charter capital. This implies that the MOF intends to manage the change of shares/capital contribution of all major shareholders and members, regardless of whether they increase or reduce the ownership ratio to more or less than 10%. As a result, this requirement will create more administrative steps for major shareholders and members.

The standards is setting higher for managerial and operational positions

The requirements for the positions of head of compliance control and head of internal audit are outlined in Decree 46, which establishes more stringent criteria. As per this decree, these positions are required to meet the following standards:

(i) Clause 1, Article 81 of the New Law sets out the general conditions, which state that individuals: 

+ have the right to manage enterprises in accordance with the Law on Enterprises; and 

+ have not received administrative sanctions in the insurance business field or have been dismissed due to a violation of internal procedures for three (3) consecutive years before the appointment, or have been prosecuted by a competent agency as prescribed by law at the time of election or appointment (General Conditions).

(ii) For the position of head of internal audit:

• The candidate must possess a university degree or higher in insurance. Ortherwise they should have a university degree or higher in economics, finance, banking, business administration, law, accounting, or auditing. Additionally, it is necessary for them to hold an insurance certification issued by a lawfully established domestic or foreign insurance training institution. It is important to note that this condition will be effective within 1 year from the effective date of Decree 46.

• The candidate must have at least three (3) years of direct work experience in insurance, finance, banking, accounting, and auditing.

(iii) For the positions of head of risk management and head of compliance control:

• Firstly, the head of risk management must have a university degree or higher in risk management and insurance actuary. Otherwise they should possess a university degree or higher in insurance, economics, finance, banking, business administration, law, accounting, or auditing. Moreover, they should have training certificates in risk management or insurance actuary issued by lawfully established domestic or foreign training institutions.

• Secondly, the head of compliance control must have a university degree or higher in insurance. Otherwise, they should possess a university degree or higher in economics, finance, banking, business administration, law, accounting, and auditing, and have an insurance certification issued by lawfully established domestic/foreign insurance training institutions.

• Both positions require at least three (3) years of direct work experience in insurance, finance, and banking.

Stricter management for insurance agency organisations

In addition to the requirements stated in Clause 2, Article 125 of the New Law, credit institutions and foreign branches must fulfill the following additional criteria:

+ A dedicated department must be established to handle insurance agency activities.

+ The head of this department must have:

i. at least three (3) years of experience in finance, banking, and insurance, along with a university degree or higher in insurance. 

ii. Alternatively, they must have a university degree or higher in another field and hold an insurance certificate as specified by the regulations of the MOF.

+ Each branch of the credit institution must employ:

i. at least three (3) trained employees who possess insurance agency certificates suitable for the types of insurance products offered by the institution.

ii. Additionally, each transaction office must have at least one (1) trained employee with an insurance agency certificate appropriate for the offered insurance products.

+ An adequate information technology system must be in place to ensure the timely and accurate provision of information. This information is related to insurance contracts distributed through the credit institutions.

+ There must be a process to inspect and supervise the quality of insurance agency activities.

This process should ensure that employees strictly adhere to the rules of insurance agents. It should also cover authorized contents in agency contracts and other relevant laws. It should also allow insurance enterprises and foreign branches in Vietnam to participate in the quality inspection. Additionally, they should be involved in the supervision of agency activities. Furthermore, it must include measures for handling violations committed by employees during agency activities.

+ Each branch and transaction office must establish a separate transaction counter or desk exclusively for insurance agency activities.

This area should be distinct from other transaction areas and professional activities of the credit institutions and foreign bank branches. For organizations acting as insurance agencies, they must employ at least three (3) employees directly involved in insurance agency activities. They must also have a process in place to monitor compliance with the principles of insurance agency activities. Finally, organizations acting as insurance agencies are given a transitional period of one (1) year from the effective date of Decree 46 to meet the above conditions.

Conclusion

Decree 46 has brought about notable alterations to streamline the provision and utilization of cross-border insurance services. Specifically, it states that foreign enterprises and foreigners employed in Vietnam are now considered eligible users of such services. Additionally, the decree emphasizes the importance of ensuring equal access and treatment for both domestic and foreign entities when it comes to cross-border insurance. In contrast, the former Decree 73 restricted the availability of cross-border insurance products to only domestically established enterprises with over 49% foreign investment and foreigners working in Vietnam. This signifies that now all foreign entities. Irrespective of their foreign ownership ratio, have the right to utilize cross-border insurance products.

HMLF is always available to offer assistance in understanding the procedures with authorities.

Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
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