Vietnam's insurance market
has grown rapidly in recent years and continues to be considered a promising
market. In particular, the country's demographic and economic development is
expected to fuel further demand for insurance services both in the non-life and
life sectors. In the last decade, Vietnam's insurance sector has been
transformed from a State-owned monopolist sector to a more open industry with
both domestic and foreign insurers as new entrants. Vietnam's international
commitments under its WTO accession concessions (with Vietnam's WTO accession
having taken effect in January 2007) and bilateral and multilateral market
access arrangements (such as the ASEAN Framework Agreement on Services,
Bilateral Trade Agreement with the US, and other bilateral and multilateral
agreements) have helped to gradually liberalise this sector of the economy
further. Notably, from 1 July 2011, foreign insurers are permitted to provide
cross-border insurance services to the Vietnamese market. Also, from 1 July
2011, non-life foreign insurers are permitted to set up branches in Vietnam.
The liberalisation of the
country's insurance industry has offered numerous investment opportunities to
foreign insurers. Currently about 58 insurance companies are operating in
Vietnam, among these 29 non-life insurers, 15 life insurers, 12 insurance
brokers and 2 re-insurance companies. The non-life insurance market is still
largely dominated by domestic insurers. There are about 11 foreign-invested
non-life insurers out of a total of 29. With respect to life insurance,
foreign- invested insurers make up 14 of the 15 life insurers, clearly
dominating the market. Regarding brokerage services, seven domestic and five
foreign-invested companies are operating in this area, with foreign firms
making up more than 80% of the market for brokerage services. The number of
Vietnamese reinsurance companies increased to two reinsurers in 2011 with a new
player - PVI Re (PetroVietnam Reinsurance) - in addition to Vietnam National
Reinsurance Corporation (VinaRe), both of which are domestic companies.
Foreign participation in the
Vietnamese insurance market still faces various regulatory challenges. For
example, the requirement that the foreign applicant must demonstrate USD2
billion in asset backing limits smaller (and, possibly, newer) entrants. In
addition, Vietnamese law also requires that a foreign investor setting up a
presence in Vietnam be an actual operator of insurance business when the
foreign investor may prefer to hold the investment under a holding company.
Vietnam's insurance sector
and the establishment and
operations of insurance
companies and insurance brokers are
governed by the following
main legal documents:
•
Law on Insurance Business No. 24/2000/QH10 dated 9 December 2000
(as amended by Law No. 61/2010/QH12 dated 24 November 2010) (“Law on Insurance
Business”);
•
Decree No. 45/2007/ND-CP by the Government dated 27 March 2007
providing guidelines for the implementation of a number of articles of the Law
on Insurance Business (“Decree 45”);
•
Decree No. 46/2007/ND-CP by the Government dated 27 March 2007 on
the financial regime for insurers and insurance brokers (“Decree 46”);
•
Decree No. 41/2009/ND-CP by the Government dated 5 May 2009 on
penalties for administrative breaches in the insurance business sector (“Decree
41”);
•
Decree No. 123/2011/ND-CP by the Government dated 28 December 2011
providing regulations for the implementation of the Law on Insurance Business
and amending Decree 45 ("Decree 123");
•
Decision No. 193/QD-TTg by the Prime Minister dated 15 February
2012 on the strategy for development of Vietnam's insurance market in the
period 2011-2020 ("Decision 193");
•
Decision No. 96/2007/QD-BTC by the Ministry of Finance dated 23
November 2007 issuing regulations on underwriting universal life insurance
(“Decision 96”);
•
Circular No. 124/2012/TT-BTC by the Ministry of Finance dated 30
July 2012 providing guidelines for the implementation of Decree 45 and Decree
123 (“Circular 124”);
•
Circular No. 125/2012/TT-BTC by the Ministry of Finance dated 30
July 2012 on the financial regime applicable to insurers, reinsurers, insurance
brokers and branches of foreign non-life insurers (“Circular 125”); and
•
Circular No. 135/2012/TT-BTC by the Ministry of Finance dated 15
August 2012 guiding the provision of unit-linked insurance products (“Circular
135”).
The Ministry of Finance
("MoF") is the regulator of the insurance industry and its authority
includes the issuance of establishment and operating licences for insurers and
insurance brokers as well as the supervision of their operations. The Insurance
Supervisory Authority (“ISA”, which is part of MoF) assists the MoF in
supervising the insurance business and market in Vietnam.
On 15 February 2012, the
Prime Minister issued Decision 193 setting out the strategy for the development
of Vietnam's insurance market for the period until 2020. Decision 193 formulates
an increase of insurance industry's revenue to 23% of GDP in 2015 and 3-4% of
GDP in 2020 and directs the MoF and ISA to comply with all principles on
insurance management and supervision issued by the International Association of
Insurance Supervisors (“IAIS”).
Vietnam's Law on Insurance
Business generally divides insurance business into three (3) categories: (i)
life insurance, (ii) non-life insurance and (iii) health insurance. An insurer
is not permitted to simultaneously carry out life and non-life insurance
business. However, a life insurer may concurrently provide personal accident
and health care insurance as a supplement to its life insurance operations. In
addition, an insurance company is required to operate within the scope of
activities set out in its establishment and operation licence as granted by the
MoF.
Permitted life insurance
products include whole life insurance, pure endowment insurance, term life
insurance, endowment insurance, annuity insurance, investment linked insurance
and pension insurance. Life insurers must comply with insurance regulations,
clauses and premium scales ratified by the MoF when providing life insurance
products and personal accident and health care insurance ancillary to life
insurance products.
In addition to traditional
life insurance protection, investment linked insurance is a new field in the
Vietnamese insurance industry allowed by the MoF since 2007. Investment linked
insurance combines basic life insurance protection with an investment vehicle.
Under Vietnamese law, there are two policy types of investment linked
insurance, namely universal life insurance and unit-linked insurance.
•
Put simply, with universal life insurance, premiums from
policy-owners form an indivisible universal life fund and policy-owners share
in the results from investments made from such fund, provided that the return
must not be less than the minimum investment rate which the insurer undertakes
in the insurance contract.
•
With respect to unit-linked insurance, premiums from policy-owners
may be separated into different unit-linked funds with different investment
targets. Unit-linked funds are divided into equal units. Policy-owners of
unit-linked insurance may decide to invest their insurance premiums to purchase
certain units of the unit-linked funds and enjoy the investment benefits as
well as incur the investment risk from the unit-linked funds chosen.
Different from traditional
life insurance products where customers' premiums are invested in safe channels
such as treasury bonds, premiums from investment-linked insurance are funnelled
into possibly more profitable (and riskier) channels such as the securities
market or real estate. Therefore, the development of investment-linked products
tends to follows closely the growth of available investment channels. With its
recent introduction of legislation on open- ended funds effective from 1 March
2012 (and first licences for these having recently been issued), Vietnam
attempts to provide additional channels to grow the securities market. A number
of life insurers have launched investment-linked insurance products (eg
Prudential, Manulife, AIA etc.) and investment-linked insurance may continue to
grow as the Vietnamese become more familiar with the combination between
insurance and investment and more confident in the sustainability and
sustainable growth of investment channels (securities, real estate, etc.)
while, at the same time, becoming more willing to accept additional risks and
volatility for their investments.
Non-life insurance products
include property insurance and damage insurance, insurance for goods in transit
by road, sea, river, rail and air, aviation insurance, motor vehicle insurance,
fire and explosion insurance, marine hull and ship owner's civil liability
insurance, public liability insurance, credit and financial risks insurance,
business loss insurance and agriculture insurance.
Vietnamese law sets out
certain forms of compulsory insurance in respect of which (i) the MoF
promulgates the applicable insurance regulations, clauses, premium scales and
minimum sums insured and (ii) a licensed insurer must not refuse to underwrite.
Current compulsory insurance
includes:
|
a)
|
Civil
liability insurance for motor vehicle owners;
|
|
b)
|
Civil
liability insurance for aviation carriers to passengers;
|
|
c)
|
Professional
indemnity insurance for legal consultancy activities;
|
|
d)
|
Professional
indemnity insurance for insurance brokers; and
|
|
e)
|
Fire and
explosion insurance.
|
Although Vietnamese law
provides for certain other mandatory professional liability insurance in
certain industries (e.g. construction, securities, fund management, auditing,
asset evaluation, notary etc.), those are not categorised as compulsory
insurance as the MoF does not control the standard terms and conditions as well
as premium scales and minimum sums insured of these insurances and a licensed
insurer is not obliged to accept underwriting them.
For non-compulsory products,
non-life insurers may adopt and implement their own insurance regulations,
clauses and premium scales and are not required to obtain prior MoF approval
for these. However, the MoF may also request a non-life insurer to cease
underwriting products, where their rules, terms and conditions and premium
rates fail to ensure the financial safety of a non-life insurer or the rights
of policyowners, and request the insurer to make specific amendments to such
policies and their terms.
Effective from 1 July 2011,
Vietnam's Law on Insurance Business recognises health insurance as a new subset
of insurance products which includes: personal accident insurance, medical
expenses insurance and health care insurance. Insurance regulations, clauses
and premium scales of health care insurance products must be ratified by the
MoF. Prior to 1 July 2011, these were categorised as nonlife insurance
generally and could therefore be provided separately either by non-life
insurers or by life insurers as part of a life insurance package. In the latter
scenario, the life insurers aim to provide a comprehensive insurance coverage
that includes a main insurance product, such as whole life insurance, plus a
rider such as accident insurance or dependent support. This continues to be
permitted under the new classification.
In Vietnam, an insurer is
only permitted to retain a maximum liability on each risk or on each loss at no
more than 5% of its equity. The maximum level of retention of liability
applicable to a reinsurer is 10% of its equity. An insurer or reinsurer must
therefore cede the portion of liability exceeding the applicable thresholds to
other insurers or reinsurers. Having said this,
insurers may only transfer
part of the liability which they have insured to one or more “reinsurers”,
including to other insurers or overseas (re-)insurers. This is to avoid
potential abuse by reinsurers to earn reinsurance commission while the original
insurers are actually incapable of underwriting the direct insurance. Any
regular insurer may accept to reinsure part of the liability for which another
insurer has accepted insurance, as may proper reinsurers.
Foreign insurers are
permitted to provide unrestricted crossborder reinsurance services. However,
ceding reinsurance to overseas reinsurers may not be implemented on more
favourable conditions than those for ceding reinsurance to domestic reinsurers.
When accepting to reinsure liability of a Vietnamese insurer, a foreign leading
reinsurer and foreign reinsurers of more than 10% of the total liability under
the policy must have at least a “BBB+” rating by S&P or Fitch, a “B++”
rating byA.M.Best, ora“Baa1” rating by Moody's, or they must have been granted
equivalent ratings in the most recent fiscal year. If an insurer is reinsured
by an overseas company of the same group which does not have any of the above
mentioned credit ratings, the insurer must submit to the MoF a written
confirmation by the insurance regulator of the home country of such reinsuring
group company certifying that such reinsuring group company ensures its
solvency in the fiscal year preceding the year of receiving reinsurance.
Insurers may distribute
their products directly, via insurance agents and insurance brokers, via
tendering or other channels consistent with the law. Insurers in Vietnam tend
to use multichannel distribution strategies, including agents, bancassurance,
and telemarketing. Bancassurance has developed rapidly in Vietnam since 2007
and more insurance companies are using bancassurance to expand their market
share. The MoF is in the process of drafting a Circular which aims to set out
the first legal framework for bancassurance activities.
AGENTS
The agency model has been
and will continue to be a major distribution channel in Vietnam especially
given the distribution challenges posed by the country's geography and
infrastructure.
Under authorisation granted by
an insurance company, insurance agents may offer and sell insurance, arrange
for the conclusion of insurance contracts, collect premiums, deal with claims
for indemnity and pay insurance proceeds upon occurrence of insured events and
undertake other activities related to the performance of an insurance contract.
Agents comprise corporate agents and individual agents.
•
An individual agent is required to have a practising certificate
issued by a training establishment (e.g. the Association of Vietnam Insurers,
insurance companies or
•
training entities) approved by the MoF. The MoF also provides
mandatory guidelines for the necessary program, contents and form of training
required to obtain these certificates.
•
Corporate agents are duly incorporated companies under Vietnamese
law and must employ duly licensed individual agents who directly perform agency
services.
Vietnamese law prohibits
officers and staff of an insurer from acting as insurance agents for the same
insurer. In addition, insurance agents tend to be exclusive agents as agents
(both corporate and individual) of one insurer and may not simultaneously act
as agents for other insurers, unless their principal approves.
Insurers operating in
Vietnam must comply with the maximum permissible rates of insurance agency
commissions set out by the MoF, for example: 5% - 20% for non-life insurance,
5%- 40% for life insurance or 20% for health insurance depending on specific
scenarios.
Insurance brokers must be
licensed by the MoF and only enterprises may act as brokers. Brokers provide
information on types of insurance, policy terms and premiums, and general
information on insurance enterprises to insurance buyers. Brokers may also help
the insurance buyers to assess and manage risk, select suitable insurance
products, and negotiate and enter into insurance contracts. Normally a broker
represents the insurance buyer but receives its commission payment from the
insurance company.
Brokerage services are most
commonly utilised in non-life insurance such as liability insurance, personal
accident and health insurance, property insurance, or general liability
insurance. In practice, local insurance buyers tend to be not fully aware of
the role insurance brokers. In particular, small and medium-sized businesses in
Vietnam tend to contact insurance companies directly.
The maximum insurance
brokerage commission for each insurance service arranged by a broker must not
exceed 15% of the actual insurance premium collectible by the insurance
company.
Under Vietnam's current WTO
commitments (and other international agreements providing for most-favoured
nation status), Vietnam is more clearly required to permit foreign- invested
insurance companies to operate in Vietnam and the pace of approvals has picked
up (although it can still take from 2-3 years before the MoF issues the
relevant approval for foreign-invested insurers). Since 1 January 2008, 100%
foreign-invested general insurers may apply to engage in statutory insurance business,
including motor vehicle third party liability, insurance in construction and
installation,
insurance for oil and gas
projects, and insurance for projects and construction works of high danger to
public security and the environment. As mentioned earlier, starting 1 July
2011, foreign insurers are permitted to provide cross-border services into the
Vietnamese market and non-life foreign insurers are permitted to set up
branches in Vietnam. With an aim to fulfil Vietnam's international undertakings
in the insurance sector, the Prime Minister's Decision 193 has set out a plan
until 2015 to supplement and replace or issue new legal instruments guiding the
Law on Insurance Business, aimed at simplifying and reducing administrative
procedures; and to make these legal instruments consistent with the
developmental status of the insurance market and with international standards
on insurance management and supervision, ensuring publicity, transparency and
equality for all entities participating in the market.
Legal entities
Foreign insurers and brokers
may establish a 100% foreign- owned insurance company or cooperate with a local
insurer in the form of a joint venture enterprise. In a number of instances,
foreign investors have established joint ventures with local partners as a
means to significantly reduce red tape for the establishment and to facilitate
the distribution of their products. As noted above, there are currently 14
foreign- invested life insurance companies (including 3 joint ventures and 11
wholly foreign-owned companies), 11 foreign-invested non-life insurance
companies (including 3 joint ventures and 8 wholly foreign-owned companies),
and 5 wholly foreign- invested insurance brokerage companies operating in
Vietnam.
Representative
offices or branches
An alternative way of
achieving a presence in Vietnam is the establishment of a representative office
or a branch. Under local law, a representative office does not constitute a
"business" entity, which means that it is prohibited from engaging in
profit-generating activities. Accordingly, foreign insurers have usually not
shown much interest in setting up a representative office if they wish to
expand their activities in Vietnam, although representative offices have proved
useful during the licensing process. Under Vietnam's WTO commitments, foreign
insurers are permitted to establish in Vietnam as a branch of an overseas
insurer for non-life insurance business from 2012 onward. This commitment has
been reflected in recent amendments to the Law on Insurance Business which have
already anticipated this requirement so that, starting 1 July 2011, non-life
foreign insurers are permitted to set up branches in Vietnam. As no commitment
on life insurance branches has been made, the establishment of life insurance
branches is subject to local legislation only. There is no explicit prohibition
on the establishment of a life insurance branch by a foreign insurer; however,
as far as reported, no branches of foreign life insurance companies have been
established to date.
Cross-border
supply
Foreign insurance
enterprises may provide insurance to foreign-invested enterprises in Vietnam
(with more than 49% foreign-owned capital) and foreigners working in Vietnam.
In order for an insurer or an insurance broker to provide crossborder
insurance or insurance brokerage services, it must satisfy certain conditions
such as:
•
Its head office must be in a country with which Vietnam has
already signed international trade agreements regarding the supply of cross-border
insurance into Vietnam (e.g. a WTO member);
•
Having lawfully operated for at least 10 years and not violated
insurance regulations for at least three years before providing cross-border
service into Vietnam;
•
Being licensed by the insurance regulator of its home country to
provide such services;
•
Providing cross-border insurance services in Vietnam through an
insurance brokerage enterprise licensed in Vietnam; and
•
Other conditions regarding the minimal asset backing (USD2 billion
applicable to offshore insurers or USD100 million applicable to offshore
brokers), credit rating (at least a “BBB+” rating by S&P or Fitch, a “B++”
rating by A.M.Best, or a “Baa1” rating by Moody's or equivalent ratings),
profitable operations in the last three years, security deposit of at least
VND100 billion (about USD50 million) with a Vietnam-incorporated bank, etc.
Investment conditions
A foreign insurer
establishing an insurance company or an insurance brokerage company must
satisfy certain conditions: notably, (i) have 10 years' experience in insurance
operations; (ii) have assets of at least USD2 billion in the year prior to the
year of lodging the application file (for an insurance company); (iii) have
been profitable for a period of three consecutive years prior to the year of
lodging the application file and (iv) receive the approval of the insurance
regulator of the home country of the foreign insurer.
In addition to these, to set
up a non-life branch, a foreign insurer must satisfy a number of additional
conditions, such as (i) such insurer must be head-quartered in a jurisdiction
with which Vietnam has signed commercial treaties that allow the establishment
of branches of foreign non-life insurance businesses in Vietnam and (ii)the
insurance regulator of the home country of the foreign insurer has signed a
cooperation agreement with the MoF in relation to the management and
supervision of the activities of branches of foreign non-life insurance
businesses in Vietnam.
Capital and solvency
requirements
The minimum levels of “legal
capital” applicable to various insurance activities are set out below:
|
Activities
|
Legal capital
|
|
Non-life
insurance (excluding aviation and satellite insurance) and/or health
insurance
|
VND300 billion
(approximately USD15 million)
|
|
Additional capital
required for aviation insurance and satellite insurance
|
plus VND50
billion (approximately USD2.5 million) for each type of insurance
|
|
Life insurance
(including health insurance, but excluding investment linked insurance and
pension insurance)
|
VND600 billion
(approximately USD30 million)
|
|
Additional
capital required for unit-linked insurance
|
plus VND200
billion (approximately USD10 million)
|
|
Additional
capital required for pension insurance
|
subject to
guidance from the MoF
|
|
Reinsurance
(non-life and/or health insurance)
|
VND400 billion
(approximately USD20 million)
|
|
Reinsurance
(life or life and health insurance)
|
VND700 billion
(approximately USD35 million)
|
|
Reinsurance
(all types of insurance)
|
VND1,100
billion (approximately USD55 million)
|
|
Non-life
branches
|
VND200 billion
(approximately USD10 million)
|
|
Insurance
brokerage (direct insurance or reinsurance)
|
VND4 billion
(approximately USD200,000)
|
|
Insurance
brokerage (direct insurance and reinsurance)
|
VND8 billion
(approximately USD400,000)
|
|
Additional
capital required for insurance companies with more than 20 branches and
representative offices
|
plus VND10
billion (approximately USD500,000) for each additional branch or
representative office
|
In Vietnam's context, the
term “legal capital” refers to the minimum amount of registered and paid-up
capital that the investors (members in a limited liability company and
shareholders in a joint stock company) are required to contribute as owner's
equity to the company before such company may commence commercial operations.
Depending on the insurer's requirements, the charter capital may be further
increased and/or its operations may additionally be funded by debt.
In addition to the legal
capital requirement, insurers must use a part of their paid-up charter capital
to pay a security deposit into a commercial bank operating in Vietnam at 2% of
the applicable legal capital. An insurer may only use its security deposit to
meet undertakings to policy-owners when it is insolvent and upon written
approval of the MoF. Once used, the insurer is obliged to pay an additional
security deposit equivalent to the amount used within 90 days.
In general, an insurer
operating in Vietnam is required to:
•
Continuously maintain its paid-up charter capital (owner's capital)
at no less than the legal capital;
•
Set up premium reserves (for paying out its insurance liabilities
determined in advance and arising from insurance contracts which it has entered
into);
•
Always maintain its solvency at no less than the minimum solvency margins
set out by law;
•
Contribute 5% of after-tax profits annually to establish its
compulsory reserve fund (to be maintained up to 10% of the charter capital);
and
•
Make contributions to the policy-owner protection fund maintained
centrally at the Association of Vietnamese Insurers ("AVI"). The fund
is to protect insured persons in the event that the insurer becomes insolvent
or bankrupt. Contribution for this fund is announced by the MoF annually but
does currently not exceed 0.3% of total premium revenue from primary insurance
contracts of an insurer. Contributions are made until the accumulated fund
amounts to 5% of total assets of a general insurer or to 3% in the case of a
life insurer.
An insurer may make investments
from its (i) equity, (ii) so- called “idle capital” (akin to premium reserves
minus funds for regular pay-outs), and (iii) any other lawful sources of funds.
Vietnamese law requires that investments from each source be accounted for
separately. An insurer is expressly prohibited from:
•
Borrowing loans for direct investments or entrusted investments in
securities, real estate, or capital contribution to other enterprises; and
•
Reinvesting in any form in its shareholders or its affiliated
persons/entities, except for deposits with shareholders being credit
institutions.
Investments
from owner's capital
Subject to the MoF's prior
approval, insurers are allowed to make offshore investments from its equity
which exceeds the legal capital level or the minimum solvency margin. At
present, such offshore investment can only be made to set up offshore insurance
companies or an offshore insurance branch. Some Vietnamese non-life insurers
have initiated the trend of investing offshore, like Post and Telecommunications
Joint Stock Insurance Corporation (“PTI”), which invested in the Laos insurer
Lane Xang Assurance Public Insurance Joint Stock Company in 2011) or Bank for
Investment and Development of Vietnam's Insurance Company (“BIC”), which
invested in the Laos-based Laos-Vietnam Insurance Joint Venture in 2008 and in
the Cambodia-based Cambodia- Vietnam Insurance Company Plc in 2009.
With respect to domestic
investment, insurers may invest their surplus equity (i.e. after ensuring their
infrastructure costs and operational expenses) as follows:
|
|
Type of
Transaction
|
Limitation on
investment
|
|
Non-life insurers/ Health
insurers/ reinsurers/ brokers/ Non-life branches
|
1)
|
Purchase of
Government bonds or Government- guaranteed bonds of enterprises, or deposits
with credit institutions
|
Unlimited
|
|
2)
|
Purchase of
shares, unsecured bonds of enterprises, and capital contribution in other
enterprises
|
Not to exceed 35%
of idle capital from insurance reserves
|
|
3)
|
Real estate
business and lending
|
Not to exceed 20%
of idle capital from insurance reserves
|
|
Life insurers
|
1)
|
Purchase of
Government bonds or Government- guaranteed bonds of enterprises, or deposits
with credit institutions
|
Unlimited
|
|
2)
|
Purchase of
shares, unsecured bonds of enterprises, and capital contribution in other
enterprises
|
Not to exceed 50%
of idle capital from insurance reserves
|
|
3)
|
Real estate
business and lending
|
Not to exceed 40%
of idle capital from insurance reserves
|
Premium investment
As seen in other emerging
markets, for example China, restrictions on premium investments can present a
major challenge. Due to foreign exchange restrictions, insurers are in practice
limited to investing their premiums onshore. Insurers may only invest their
“idle capital” (akin to premium reserves minus funds for regular pay-outs) as
follows:
|
|
Type of
Transaction
|
Limitation on
investment
|
|
Non-life insurers/ Health
insurers/ reinsurers/ brokers/ Non-life branches
|
1)
|
Purchase of
Government bonds or Government- guaranteed bonds of enterprises, or deposits
with credit institutions
|
Unlimited
|
|
2)
|
Purchase of
shares, unsecured bonds of enterprises, and capital contribution in other
enterprises
|
Not to exceed 35%
of idle capital from insurance reserves
|
|
3)
|
Real estate
business and lending
|
Not to exceed 20%
of idle capital from insurance reserves
|
|
Life insurers
|
1)
|
Purchase of
Government bonds or Government- guaranteed bonds of enterprises, or deposits
with credit institutions
|
Unlimited
|
|
2)
|
Purchase of
shares, unsecured bonds of enterprises, and capital contribution in other
enterprises
|
Not to exceed 50%
of idle capital from insurance reserves
|
|
3)
|
Real estate
business and lending
|
Not to exceed 40%
of idle capital from insurance reserves
|
Reinsurance companies
conducting business in life reinsurance, non-life reinsurance and health
reinsurance must conduct separate cost accounting for investments made from
idle capital from insurance reserves for each type of reinsurance. Idle capital
from insurance reserves of reinsurers may be invested separately and subject to
the same limitations applicable to each type of life reinsurance, non-life
reinsurance and health reinsurance. Presently, the two main investment channels
include deposits at local or foreign- invested banks and trading in government
bonds. Although the private bond market has recently seen increased activity,
Vietnam's stock market and real estate markets remain extremely volatile. Of
note, a number of (both local and foreign-invested) insurance companies have
established their own fund management arms.
M&A challenges
As an alternative (or in
addition, for that matter) to setting up a new company, foreign insurers may
acquire shares/equity in existing insurance companies in Vietnam. Foreign
investors can also purchase shares in a listed/unlisted company or in an
“equitised” (akin to privatised) State-owned insurer. Under local law, every
transaction that involves 10% or more of the charter capital of a target
insurance company (whether by way of an acquisition or an increase of
capital/subscription) is subject to the prior approval of the MoF.
If acquiring capital
contributions in an existing insurer which operates in the form of a limited
liability company, foreign investors can acquire up to 100% of an existing
insurance company. For example, in late 2005, Australia's QBE Insurance Group
Ltd. bought Allianz General Insurance (Vietnam) Co. Ltd. from German insurer
Allianz AG and from the International Finance Corporation to convert the
company into QBE Insurance (Vietnam) Co. Ltd. In 2007, Japanese Dai-ichi Life
Insurance successfully acquired the entire capital contributions in Bao Minh
CMG, a joint venture between local Bao Minh Joint Stock Company and Australian
Colonial Mutual Life, converting it into a wholly foreign-owned life insurance
company.
If acquiring shares in an
existing shareholding insurance company, the following foreign ownership caps
will apply:
•
The maximum shareholding by an individual shareholder is limited
to 10% of the charter capital of the target company;
•
The maximum shareholding by an institutional shareholder is
limited to 20% of the charter capital of the target company; and
•
The maximum shareholding owned by a shareholder and related
persons/affiliates in aggregate is limited to 20% of the charter capital of the
target company.
An institutional shareholder
may own more than 20% of the shares of a shareholding insurance company in the
following cases:
a)
Ownership of shares for the purpose of restoring the solvency of
an insurer and re-insurer in case of insolvency;
b)
Ownership of shares by the State in an insurer or reinsurer in
accordance
with a restructuring plan; or
