Decree No. 73/2016/ND-CP on the details of the implementation of the Law on Insurance Business and amendments to certain articles of the Law on Insurance Business On 1 July 2016, the Government issued Decree 73/2016/ND-CP on the details of the implementation of the Law on Insurance Business and amendments to certain articles of the Law on Insurance Business. The new Decree took effect from 1 July 2016, and replaced Decree 45/2007/ND-CP dated 27 March 2007, Decree 123/2011/ND-CP dated 28 December 2011, Decree 68/2014/ND-CP dated 9 July 2014 and Decree 46/2007/ND-CP dated 27 March 2007. The notable changes introduced by Decree 73 are summarised as follows: New requirements for licensing for insurance enterprises, foreign branches and insurance broker enterprises • Capital contributions must be in form of cash and it is not permissible to use capital from borrowings, or the investment trust funds of other organisations or individuals for capital contributions • Investors that are organisations contributing 10% or more of the charter capital are required to have conducted a profitable business for three (3) consecutive years before the year of licence submission and to have not incurred cumulative losses prior to the submission of the licence application • Investors that are organisations contributing the charter capital and operating in sectors that require a legal capital must undertake that their owners’ equity less the minimum legal capital is at least equal to the amount of capital to be contributed • Vietnamese corporate investors contributing capital in an insurance limited company must operate in Finance, Banking and Insurance sector and must have total assets of at least VND2,000 billion • Where an insurance joint stock company is established, there must be at least two founding shareholders being organisations, together holding at least 20% of the shares in the incorporated company, and the founding shareholders must hold at least 50% of the shares for three years from the licence date • New conditions for non-life foreign insurers to set up a foreign branch in Vietnam are stipulated in Decree 73 For an insurance company applying for implementation of pension insurance, unit-link insurance or universal life insurance, certain conditions are applied, including requirements for solvency margin and voluntary pension funds. Legal capital Decree 73 stipulates details of legal capital requirements for insurance businesses providing aviation or satellite insurance, unit-linked or pension insurance. Legal capital for foreign branches, reinsurance enterprises and insurance broker enterprises is also regulated in detail in Decree 73. Operation and organisation of insurance enterprises, foreign branches and insurance broker enterprises Qualifications and standard requirements for executives, members of boards of management, members of member councils, chief supervisors, supervisors, heads of internal audit, general directors, deputy general directors, chief accountants, heads of representative offices, directors of branches, heads of business departments, appointed actuaries, brokers are regulated in detail in Decree 73. Insurance enterprises, foreign branches and insurance broker enterprises must conduct internal audits annually. Decree 73 stipulates that the results of the internal audit and internal controls must be prepared in writing and filed accordingly. For reinsurance activities, the maximum level of retained liability per risk or per individual loss does not exceed 10% of equity. In the case of reinsurance designated by the insured, the maximum reinsurance ratio is 90% of the total liability. Financial regime for insurance enterprises, foreign branches and insurance broker enterprises Management of owners’ equity: Assessment of owners’ equity should be done quarterly. If the owners’ capital does not meet regulatory requirements, insurance enterprises have to carry out procedures to supplement their capital within six months from the end of the quarter. Decree 73 includes guidance on technical reserves for health insurance, and reinsurance. Decree 73 stipulates restrictions of investments from owners’ equity which are similar to those of banks e.g. not allowed to reinvest in any form to shareholders (except in the case of deposits at credit institution shareholders). Investment rates in real estate using idle funds from technical reserves have been reduced by half to 10% for non-life insurance and to 20% for life insurance and health insurance. The method of distribution surplus in life insurance is stipulated in Decree 73 and it must be approved by the Ministry of Finance before it is applied. Guidance on the minimum solvency rates for unit link insurance, universal life insurance and pension funds are stipulated in Decree 73. Payment limitation of the Policyholder protection fund is stated in Decree 73 which is 90% of the liability, but not more than VND200 million/insured/contract for life insurance and health insurance, 80% of the liability but not more than VND100 million/insured/contract for non- life insurance. Cross-border insurance services Cross-border insurance services can be provided to i) foreign owned enterprises incorporated in Vietnam that are at least 49% owned by foreign investors and (ii) expatriates who are working in Vietnam. To provide cross-border insurance services in Vietnam, a foreign insurance enterprise must meet certain conditions on financial ability and loss- resolving ability. One of the important conditions is that total assets must be at least US$2 billion for insurance enterprises and US$100 million for insurance broker enterprises.