LEGAL REGULATIONS ON THE ESTABLISHMENT AND OPERATION OF FOREIGN INSURANCE ENTERPRISE, FOREIGN INSURANCE BROKERAGE ENTERPRISES IN VIETNAM
In recent times, it can be seen that insurance has gradually become an important and essential service, because the role of insurance helps to ensure social and financial security for individuals and businesses. Insurance business in Vietnam is on a strong and positive development momentum. The insurance business market in Vietnam is attracting more and more investment attention from foreign insurance companies. In this article, DHT Law Firm would like to raise legal issues on the operation and establishment of foreign insurance enterprises and foreign insurance brokerage enterprises in Vietnam.
1. Overview of the insurance business
1.1. Business activities of foreign insurance enterprises
Insurance business activities of foreign insurance enterprises are activities of foreign insurance enterprises, branches of foreign non-life insurance enterprises, and mutual organizations providing micro-insurance accepting risks of the insured, on the basis of which the insurance buyer pays the premium, so that the insurance enterprises, branch of a foreign non-life insurance enterprises, or mutual organization providing micro-insurance shall compensate and pay insurance upon the occurrence of the insured event as agreed in the insurance contract.
1.2. The concept of foreign insurance enterprises and foreign insurance brokerage enterprises
1.2.1. Insurance enterprises and foreign insurance enterprises
According to Clause 17, Article 4 of the Law on Insurance Business 2022, an insurance enterprise is an enterprise that is established, managed and run in accordance with the Law on Insurance Business and other relevant laws to do business in the insurance, reinsurance and reinsurance cession sector.
Foreign insurance enterprise means an enterprise established and operating in a foreign country, under foreign law (not Vietnamese law), and operating in the insurance field.
1.2.2. Insurance brokerage enterprises and foreign insurance brokerage enterprises
According to Clause 21, Article 4 of the Law on Insurance Business in 2022, Insurance brokerage enterprise means an enterprise that is established, managed and run in accordance with the Law on Insurance Business and other relevant laws to do business in the insurance brokerage sector. These brokerage activities include:
+ Provide information about insurance types, conditions, terms, premiums, insurance enterprises to insurance buyers;
+ Advising the insurance buyer in risk assessment, selection of insurance types, conditions, terms, premium schedule, insurance enterprises;
+ Negotiate and arrange for the conclusion of an insurance contract between the insurance enterprise and the insurance buyer;
+ Perform other jobs related to the performance of the insurance contract at the request of the insurance buyer.
Foreign insurance brokerage enterprise means an enterprise established and operating in a foreign country, under foreign law (not Vietnamese law), and operating in the field of insurance brokerage.
1.3. Form of organization and operation of foreign insurance enterprises in Vietnam
Foreign insurance enterprises are allowed to operate in Vietnam in the form of Joint-stock companies and Limited liability companies. Foreign insurance enterprises and insurance brokerage enterprises may set up representative offices in Vietnam. Accordingly, representative offices are not allowed to do insurance business in Vietnam.
1.4. Types of insurance
Types of insurance as prescribed in the Law on Insurance Business 2022 include:
+ Life insurance is a type of insurance that covers the life or death of the insured.
+ Non-life insurance is a type of insurance for property damage and other losses or civil liability to a third person.
+ Health insurance is a type of insurance for the insured person's injury, accident, illness, disease or health care.
In addition, Vietnamese law also stipulates the type of compulsory insurance in the Law on Insurance Business. This is an insurance product aimed at protecting public interests, the environment and social safety. Compulsory insurance includes:
+ Compulsory insurance for civil liability of motor vehicle owners;
+ Compulsory fire and explosion insurance;
+ Compulsory insurance in construction investment activities;
+ Compulsory insurance prescribed in other laws meets the criteria for the purpose of protecting public interests, the environment and social safety.
1.5. Business sectors or activities of foreign insurance enterprises and foreign insurance branches in Vietnam
Insurers and foreign non-life insurers' branches can be involved in the following range or area of business activities:
+ Insurance business, reinsurance business, reinsurance transfer;
+ Manage funds and invest capital from insurance business activities;
+ Provide insurance auxiliary services;
+ Other activities directly related to insurance business activities.
Pursuant to the Law on Insurance Business 2022, insurance enterprises and branches of foreign non-life insurance enterprises are only permitted to conduct business in one type of insurance specified in Clause 1, Article 7 of the Law on Insurance Business 2022 (including life insurance, non-life insurance, and health insurance) except for the following cases:
+ Life insurance companies are involved in the health insurance sector;
+ Non-life insurance companies and foreign non-life insurance branches are involved in business of health insurance products, each of which has the maximum insurance term of 01 year, and casualty insurance products, each of which has the maximum insurance term of 01 year;
+ Health insurance enterprises trade in insurance products for the risk of death with the maximum insurance term of 01 year.
2. Conditions for issuance of establishment and operation licenses of foreign insurance enterprises and foreign insurance brokerage enterprises in Vietnam
2.1. Conditions for establishing a foreign insurance enterprise in Vietnam
Specifically, in Article 64 and Article 67 of the Law on Insurance Business 2022, conditions for establishment and operation of foreign insurance enterprises in Vietnam are as follows:
2.1.1. General conditions for establishing a foreign insurance enterprise in Vietnam
Conditions for founding shareholders or capital-contributing members
+ Entities and persons applying for business licenses or permits must have the rights of business incorporation and management in Vietnam under the Enterprise Law;
+ Entities applying for these licenses or permits need to have legal status and is operating in Vietnam; if each entity makes at least 10% of capital contribution, they must ensure that they generate profits within the most recent 03 consecutive fiscal years up to the time of submission of application packages for these licenses or permits, and must meet financial conditions in accordance with the Government’s regulations;
+ Insurers previously licensed for their establishment and operation in Vietnam that contribute capital to set up new insurance companies must generate business profits within the most recent 03 consecutive fiscal years up to the time of submission of application packages for these licenses and permits, and must meet the prudential ratio or the minimum required capital requirement specified herein.
Conditions for capital or assets
+ The amount of Vietnamese-dong contribution to the charter capital must not be less than the minimum required amount of charter capital under the Government’s regulations;
+ Founding shareholders and capital-contributing members shall not be allowed to contribute borrowed funds or funds or assets held in trust for other entities and persons for equity participation purposes.
Conditions for personnel
Any nominee for a Chairman of the Board of Directors or Chairman of the Members' Council, Director or General Director, legal representative or actuary in an entity applying for such business license and permit must meet managerial competency and qualification conditions and standards prescribed in Article 81 of the Law on Insurance Business 2022.
Conditions for business type
The business type is in accordance with the Law on Insurance Business 2022 and must have the draft charter conforming to the regulations of the Corporate Law.
2.1.2. Conditions for foreign insurance enterprises to establish branches in Vietnam
When establishing a branch in Vietnam, a foreign insurance enterprise must satisfy the following conditions:
+ Having its head office in a country where Vietnam and that country have signed international treaties, including an agreement on establishing a branch in Vietnam; the foreign insurance state management agency where the enterprise's head office is located has signed an international agreement with the Ministry of Finance of Vietnam on management and supervision of the branch's operations;
+ Having permission from the foreign insurance regulatory agency where the enterprise's head office is located to set up a branch in Vietnam to operate within the scope of insurance operations in which the enterprise is permitted to do business;
+ Having at least 07 years of experience in the field in which the license is proposed to be applied in Vietnam;
+ Having minimum total assets that satisfy the conditions specified at Point d, Clause 1 and Clause 3, Article 65 of the Law on Insurance Business 2022, such as having total assets of not less than USD 2 billion in the year immediately preceding the year of application submission for establishment and operation license;
+ Profitable business activities in the last 03 consecutive fiscal years up to the time of application submission and meeting financial conditions as prescribed by the Government;
+ Commitment to guarantee and take responsibility for all obligations and commitments of the foreign branch in Vietnam.
2.1.3. Conditions for branches of foreign insurance enterprises to be established and operated in Vietnam
Branches of foreign insurance enterprises to be established and operated in Vietnam must satisfy the following conditions:
+ Having capital granted in Vietnamese-dong and not less than the minimum amount prescribed by the Government;
+ The source of capital for the establishment of a branch is a lawful source, without using loan capital or investment trust capital in any form;
+ Having a branch director, actuaries expected to meet the conditions and standards on management capacity, experience, and professional expertise specified in Article 81 of the Law on Insurance Business 2022.
2.2. Conditions for establishing a foreign insurance brokerage enterprises in Vietnam
Conditions for establishing an insurance brokerage enterprises in Vietnam are specified in Article 133 of the Law on Insurance Business 2022, specifically as follows:
+ Having a form of organization and operation in accordance with the Law on Insurance Business 2022 and a draft charter in accordance with the provisions of the Law on Enterprises 2020.
+ Organizations established under foreign law that contribute capital to the establishment, purchase shares or contributed capital of 10% or more of the charter capital of an insurance brokerage enterprise must satisfy the following conditions:
+ Being an organization established under foreign law that is directly carrying out or has a subsidiary company performing insurance brokerage activities in the latest 05 consecutive years up to the time of submitting the application for a license to be successful; establishment and operation;
+ Get permission from a foreign competent authority to set up an insurance brokerage business in Vietnam and certify that there is no serious violation of the law on insurance brokerage of the country where the organization is located. for the latest 03 consecutive years up to the time of submitting the application for a license for establishment and operation.
Conditions for founding shareholders and capital-contributing members
+ Organizations and individuals have the right to establish and manage enterprises in Vietnam in accordance with the Enterprise Law 2020;
+ The organization has legal status, is operating legally and meets the financial conditions as prescribed by the Government.
Conditions for capital
+ The charter capital is contributed in Vietnamese-dong and is not less than the minimum amount prescribed by the Government;
+ Shareholders and capital-contributing members may not use borrowed capital or investment trust capital from other organizations or individuals to contribute capital.
Conditions for personnel
There must be a Chairman of the Board of Directors or Chairman of the Members' Council, a Director or General Director, a legal representative expected to meet the conditions and standards of management capacity, experience and expertise. professional services as prescribed in Article 138 of the Law on Insurance Business 2022.
The above is general information of Dai Ha Thanh Law Firm on the provisions of law related to the operation and establishment of foreign insurance enterprises and foreign insurance brokerage enterprises in Vietnam. Male. If you have any questions or problems, please contact us for professional legal advice.
