ORDER AND PROCEDURES FOR THE LICENSING OF INSURANCE LIMITED LIABILITY COMPANIES

In order to protect the legitimate interests of organizations and individuals participating in insurance and to accelerate the insurance business, the Law on Insurance Business was introduced in 2000. Therefore, the application for the licensing of insurance limited liability companies must comply with the law.

Under the law of Vietnam, the establishment of insurance limited liability companies in particular and the operation of insurance companies in general must comply with the development of Vietnam’s insurance and financial market. Thus, insurance business is one of conditional business lines and is subject to strict control of the Government.

WHAT ARE INSURANCE AND INSURANCE BUSINESS?

Everything in this world comes from demand. According to Maslow’s hierarchy of needs, apart from basic physiological needs, safety needs are also highlighted. In any era, people always look for ways to protect themselves and property against potential risks. There are many ways to deal with the risks that arise in everyday life: avoiding, accepting, controlling, and especially risk transferring. Thus, insurance is provided to help insurance buyers transfer risks through insurance contracts signed by the parties. The insurance buyer must pay insurance premiums and the insurance company must commit to compensating or paying money.

According to the Law on Insurance Business 2000 (amended and supplemented in 2010), insurance business means the operation carried out by insurance enterprises for the purpose of profit generation, whereby the insurance enterprises accept risks incurred by the insured on the basis of insurance premium payment by the insurance buyers so that the insurance enterprises shall pay the insurance money to the beneficiary or indemnify the insured when the insured events occur. Therefore, many more insurance limited liability have been established. Although the competition is increasing, we can not deny the development of insurance companies.

CONDITIONS AND LEVELS OF LEGAL CAPITAL FOR THE LICENSING OF INSURANCE LIMITED LIABILITY COMPANIES

CONDITIONS FOR CAPITAL CONTRIBUTING ORGANIZATIONS

When establishing an insurance limited liability company, the capital contributing members must be organizations and must satisfy the following conditions:

• For a foreign organization wishing to set up an insurance limited liability company:
• Being a foreign insurance enterprise which is permitted by a foreign competent agency to carry out business activities in the field which it intends to conduct in Vietnam or a subsidiary specializing in the offshore investment function of the foreign insurance enterprise and this subsidiary is authorized by the foreign insurance enterprise to contribute capital to establish an insurance enterprise in Vietnam;
• Having at least 10 years of experience in the field which it intends to conduct in Vietnam;
• Having total assets of at least USD 2 billion in the year preceding the year of submission of the License application dossier.
• For a Vietnamese organization wishing to set up an insurance limited liability company:
• Being an enterprise operating in the fields of finance, banking, insurance;
• Having total assets of at least VND 2000 billion in the year preceding the year of submission of the License application dossier.

Apart from the above-mentioned conditions, when establishing an insurance limited liability company, the capital contributing organization must meet the following conditions:

• An organization contributing capital to establish an insurance limited liability company must not belong to prohibited categories;
• An organization contributing capital to establish an insurance limited liability company must contribute capital in cash and must not use loans or investment trusts of other organizations or individuals for capital contribution;
• The organization contributing at least 10% of charter capital must have profitable business operations in the three preceding years before the year of submission of the License application dossiers and have no accumulated losses until the time of submission of the License application dossiers;
• The organization contributing capital in the business line requiring legal capital must ensure that owner’s equity minus legal capital at least equal to the amount of capital to be contributed;
• In case the organizations contributing capital to establish the insurance limited liability company are insurance enterprises, insurance brokerage enterprises, commercial banks, financial companies, securities companies, they must maintain and satisfy the financial safety conditions and be approved by the competent agencies to contribute capital according to the specialized law provisions;

LEGAL CAPITAL LEVELS FOR INSURANCE ENTERPRISES INTENDED TO BE ESTABLISHED

When establishing an insurance limited liability company, the enterprise must have contributed capital not less than the legal capital as prescribed by law, specifically as follows: Legal capital level of the non-life insurance enterprise:

• Non-life insurance business and health insurance: VND 300 billion;
• Non-life insurance business, health insurance and aviation insurance or satellite insurance: VND 350 billion;
• Non-life insurance business, health insurance, aviation insurance and satellite insurance: VND 400 billion.

Legal capital levels of life insurance enterprises:

• Life insurance business (excluding unit linked insurance, pension insurance) and health insurance: VND 600 billion;
• Life insurance business, health insurance and unit linked insurance or pension insurance: VND 800 billion;
• Life insurance business, health insurance, unit linked insurance and pension insurance: VND 1,000 billion.

Legal capital levels of health insurance companies: VND 300 billion.

APPLICATION DOSSIERS FOR THE ESTABLISHMENT OF INSURANCE LIMITED LIABILITY COMPANIES

(1) An application for a license, made according to a form provided by the Ministry of Finance; (2) The company’s Draft Charter; (3) A plan on the first 5 years’ operation suitable to the business field to be licensed, clearly stating the target market, distribution channel, method of setting aside technical reserves, reinsurance program, capital investment, business efficiency, and solvency of the insurance company; (4) A copy of the citizen or people’s identity card, passport or another lawful personal identification paper; judicial record, resumes and copies of diplomas and certificates of the persons expected to be appointed as company president or chairperson of the Members’ Council, director general, actuary or valuation and solvency actuary, and chief accountant of the insurance company; (5) A list of founding members or members whose capital contribution makes up 10% or more of the charter capital, enclosed with:

• A copy of the establishment decision, business registration certificate or another equivalent paper;
• The company’s charter;
• A decision of a competent person or body of the capital-contributing organization on this organization’s contribution of capital to establish the insurance company;
• The power of attorney and a copy of the citizen or people’s identity card, passport or another personal identification paper of the authorized representative of the capital-contributing organization;
• Audited financial statements of 3 consecutive years preceding the year of submission of the dossier. In case a foreign insurance business authorizes its subsidiary to contribute capital for establishing an insurance business in Vietnam, the financial statement of such subsidiary is also required;
• The foreign insurance business’s power of attorney for its subsidiary specializing in making offshore investment and its commitment to take joint responsibility with the subsidiary for the capital contribution and obligation to establish an insurance business in Vietnam;

(6) Rules, terms and premium rates for to-be-launched insurance products; (7) Certification by a bank licensed to operate in Vietnam of the charter capital amount deposited at a blocked account opened at the bank; (8) Cooperation contract; (9) The minutes of the meeting of capital contributors which record:

• Their agreement to contribute capital for the establishment of an insurance company;
• A list of founding members or members whose capital contribution makes up 10% or more of the charter capital;
• Their adoption of the draft charter of the company;

(10) A document of a competent authority of the country where the capital-contributing foreign organization’s head office is located which certifies that:

• The foreign organization is permitted to establish insurance businesses in Vietnam.
• The foreign organization is conducting the business lines expected to be conducted in Vietnam;
• The foreign organization is in a sound financial state and fully meets the management requirements in the country where its head office is located;
• The foreign organization has not committed any serious violation of the regulations on insurance business and other regulations of the country where its head office is located for 3 consecutive years preceding the year of submission of the dossier;

(11) A competent state agency’s document stating that the capital-contributing Vietnamese organization meets the conditions on financial safety and is permitted to contribute capital to establish insurance businesses under relevant specialized law; (12) The written commitments of capital contributors on their satisfaction of the licensing conditions; (13) The written authorization for an individual or organization to carry out licensing procedures on behalf of the capital contributors.

PLACE TO SUBMIT APPLICATION DOSSIERS FOR THE LICENSING OF INSURANCE LIMITED LIABILITY COMPANIES:

After preparing the above documents, enterprises shall go to the Ministry of Finance to carry out procedures for the licensing of insurance limited liability companies.

TIME LIMIT FOR THE RESOLUTION OF APPLICATION DOSSIERS FOR THE LICENSING OF INSURANCE LIMITED LIABILITY COMPANIES:

60 days from the date of receipt of full dossiers. 

PHAN LAW VIETNAM

Hotline: 1900.599.995 – 0794.80.88888

Email: info@phan.vn