THE GOVERNMENT -----	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ----------
No. 46/2007/ND-CP	Hanoi, March 27, 2007

DECREE

ON FINANCIAL REGIME FOR INSURERS AND INSURANCE BROKERS

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated 25 December 2001; Pursuant to the Law on Insurance Business dated 9 December 2000;

On the proposal of the Minister of Finance;

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1. Governing scope

1. This Decree regulates the financial regime applicable to insurers and insurance brokers established, organized and operating pursuant to the Law on Insurance Business.

2. This Decree shall not apply to mutual insurers.

Article 2. Principles of financial management and supervision

Insurers and insurance brokers shall have financial autonomy, shall assume self-responsibility for managing and supervising their financial activities and for the results of their business operation, and shall perform their obligations and fulfil their undertakings in accordance with law.

Article 3 State administrative body

The Ministry of Finance shall exercise State administration of finance and shall provide guidelines on and inspect implementation of the financial regime by insurers and insurance brokers in accordance with law.

Chapter II

MANAGEMENT AND USE OF CAPITAL AND ASSETS

Section 1. LEGAL CAPITAL, CHARTER CAPITAL, SECURITY DEPOSITS AND MANAGEMENT OF ASSETS

Article 4. Legal capital

1. Levels of legal capital of insurers:

(a) Non-life insurance business: three hundred billion (300,000,000,000) Vietnamese dong;

(b) Life insurance business: six hundred billion (600,000,000,000) Vietnamese dong.

2. Level of legal capital of insurance brokers: four billion (4,000,000,000) Vietnamese dong.

Article 5. Charter capital

1. The charter capital of an insurer or insurance broker means the capital contributed or committed to contribute within a specified period by members and recorded in the charter of the enterprise.

2. Insurers and insurance brokers must, throughout the course of their operation, constantly maintain their paid-up charter capital at a level not less than the legal capital level stipulated in article 4 of this Decree and must supplement their charter capital analogous with the contents, scope and geographical area of their business operation. The Ministry of Finance shall provide specific regulations on the level of supplementary charter capital.

3. When an insurer or insurance broker changes its charter capital, it shall be required to submit a request application and an explanatory statement to the Ministry of Finance. The Ministry of Finance shall be responsible for notifying in writing its approval or refusal to approve within thirty (30) days from the date of receipt of a request application and valid file. In a case of refusal, the Ministry of Finance must provide a written explanation of its reasons.

4. Insurers which were established, organized and operating prior to the date of effectiveness of this Decree and have charter capital less than the level of legal capital stipulated in article 4 of this Decree must supplement their charter capital to the stipulated level within three years from the date of effectiveness of this Decree.

Article 6. Security deposits

1. Insurers must use a part of their paid-up charter capital to pay a security deposit into a commercial bank operating in Vietnam within sixty (60) days from the date of issuance of their establishment and operating licence. A security deposit shall bear interest in accordance with the agreement reached with the bank into which it is paid.

2. The rate of security deposits of insurers shall be equal to two (2) per cent of the legal capital stipulated in article 4.1 of this Decree.

3. An insurer may only use its security deposit to meet undertakings to purchasers of insurance when its solvency is inadequate and upon written approval of the Ministry of Finance. An insurer shall be responsible for paying an additional security deposit equivalent to the amount used within ninety (90) days from the date of use of the security deposit.

4. Insurers may withdraw the whole amount of their security deposit upon termination of their operation.

5. Insurers which were established, organized and operating prior to the date of effectiveness of this Decree and have an amount of security deposit less than the amount stipulated in clause 2 of this article must supplement their security deposit to ensure it is at the stipulated level within thirty (30) days from the date of effectiveness of this Decree.

Article 7. Other provisions on management and use of capital and assets

Insurers and insurance brokers must comply with provisions of other relevant laws on management and use of capital and assets in addition to the provisions of this Decree.

Section 2. INSURANCE RESERVES

Article 8. Insurance reserves for non-life insurance

1. A non-life insurer must establish an insurance reserve for each type of insurance product with respect to that part of liability retained by the insurer.

2. Insurance reserves shall include:

(a) An unearned premium reserve to be used to pay claims arising in subsequent years during the effective period of contracts of insurance;

(b) An outstanding claim reserve to be used to pay claims for losses for which the insurer is liable, irrespective of whether a claim has been lodged or not, which are unresolved at the expiry of the financial year;

(c) A large loss fluctuation reserve, to be used to pay claims when there are large fluctuations in losses or when large losses occur and the total premiums retained for the financial year after deduction of the unearned premium reserve and the outstanding claim reserve are insufficient to pay claims on that part of the liability retained by the insurer.

Article 9. Insurance reserves for life insurance

1. A life insurer must establish an insurance reserve for each contract of life insurance with respect to that part of liability retained by the insurer.

2. Insurance reserves shall include:

(a) An actuarial reserve which is the difference between the current value of the sum insured and the current value of premiums earned in the future to be used for payment of the insurance proceeds in respect of liabilities undertaken upon occurrence of an insured event;

(b) An unearned premium reserve to be used to pay insurance proceeds arising in subsequent years during the effective period of contracts of insurance;

(c) A compensation reserve for payment of insurance proceeds upon occurrence of insured events which remain unsettled at the expiry of the financial year;

(d) A profit distribution reserve for payment of profits agreed by the insurer with purchasers of insurance in the contracts of insurance;

(dd) A balance reserve for payment of insurance proceeds upon occurrence of an insured event resulting from material increase in the mortality rate or technical interest rate.

3. The Ministry of Finance shall provide specific regulations on insurance reserves for investment linked contracts.

Article 10. Level of deductions and method of deduction to establish reserves

The Ministry of Finance shall provide specific regulations on the level of deductions and the method of deduction for establishing the insurance reserves stipulated in articles 8 and 9 of this Decree.

Section 3. INVESTMENT OF CAPITAL

Article 11. Investment capital sources

Investment capital sources of an insurer and of an insurance broker shall comprise:

1. Owner's capital.

2. Idle capital from insurance reserves.

3. Other legal sources as stipulated by law.

Article 12. Investments from owner's capital

1. Investments from owner's capital must be safe, effective and of a liquid nature in accordance with guidelines of the Ministry of Finance.

2. Insurers and insurance brokers shall be permitted to make offshore investments in accordance with law of that part of owner's capital which exceeds the legal capital level or the minimum solvency margin, whichever is the greater.

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