Circular No. 101/2013/TT-BTC guiding the management and use of the Fund for the Protection of Insured Persons

CIRCULAR

Guidelines for the management and use of the Fund to protect insured persons

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Pursuant to the Insurance Business Law No. 24/2000/QH10 dated December 9, 2000;

Pursuant to the Law Amending and Supplementing Certain Provisions of the Insurance Business Law No. 61/2010/QH12 dated November 24, 2010;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 123/2011/NĐ-CP dated December 28, 2011 detailing and guiding the implementation of certain provisions of the Law Amending and Supplementing Certain Provisions of the Insurance Business Law and amending and supplementing certain provisions of Decree No. 45/2007/NĐ-CP dated March 27, 2007 of the Government detailing and guiding the implementation of certain provisions of the Insurance Business Law;

At the proposal of the Director of the Department of Management and Supervision of Insurance;

The Minister of Finance issues this Circular guiding the management and use of the Fund to protect insured persons.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides the contribution, use; organization of management and operation; financial accounting of the Fund to protect insured persons (hereinafter referred to as the "Fund") and the responsibilities of related units as prescribed in Decree No. 123/2011/NĐ-CP dated December 28, 2011 detailing and guiding the implementation of certain provisions of the Law Amending and Supplementing Certain Provisions of the Insurance Business Law and amending and supplementing certain provisions of Decree No. 45/2007/NĐ-CP dated March 27, 2007 of the Government detailing and guiding the implementation of certain provisions of the Insurance Business Law.

Article 2. Applicability

The objects subject to this Circular include:

1. Insured person.

2. Insurance company, including: non-life insurance company, specialized health insurance company (hereinafter referred to as "non-life insurance company"); life insurance company.

3. Branch of foreign non-life insurance company (hereinafter referred to as "foreign branch").

4. Vietnam Insurance Association.

5. Related organizations and individuals.

Article 3. Principles of Fund Management

1. The Fund to protect insured persons shall be centrally managed at the Vietnam Insurance Association and separately accounted for, managed, and monitored for life insurance and non-life insurance.

2. The Fund to protect insured persons shall have its own account at commercial banks and use the seal of the Vietnam Insurance Association.

3. The Fund to protect insured persons shall be strictly managed, used for specific purposes, and comply with laws on insurance business, relevant legal documents, and provisions of this Circular.

Chapter II

SPECIFIC PROVISIONS

Section 1

CONTRIBUTION TO THE FUND

Article 4. Contribution Rate to the Fund

1. The maximum amount contributed to the Fund shall not exceed 0.3% of the total premium income retained from original insurance contracts in the preceding fiscal year of the insurance company, foreign branch. The specific contribution rate to the Fund shall be announced in writing by the Ministry of Finance before April 30 each year.

2. Contributions to the Fund shall continue until the scale of the Fund in the non-life insurance sector reaches 5% of the total assets of non-life insurance companies, foreign branches, and the scale of the Fund in the life insurance sector reaches 3% of the total assets of life insurance companies in the preceding fiscal year.

Article 5. Time Limit for Contribution to the Fund

1. By June 30 each year, insurance companies, foreign branches shall pay 50% of the amount required to contribute to the Fund for the preceding fiscal year.

2. By December 31 each year, insurance companies, foreign branches shall pay the remaining 50% of the amount required to contribute to the Fund for the preceding fiscal year.

Section 2

USE OF THE FUND

Article 6. Principles for Payment from the Fund

1. The Fund shall be used to pay insurance money, return value; pay insurance compensation; refund insurance premiums according to the agreement in the insurance contract in cases where the insurance company or foreign branch loses its ability to pay, or the insurance company goes bankrupt.

2. The Fund shall only make payments for original insurance contracts and shall make a single payment for each claim application for insurance money, return value; insurance compensation; refunding insurance premiums.

3. In cases where an insurance contract is transferred from an insurance company or foreign branch that has lost its ability to pay, or an insurance company that has gone bankrupt, to another insurance company or foreign branch, the amount paid by the Fund according to the limit specified in Article 7 of this Circular shall be directly transferred to the receiving insurance company or foreign branch.

4. In cases where an insurance company or foreign branch loses its ability to pay, the Fund shall only pay the difference between the amount the insurance company or foreign branch must pay under the insurance contract and the amount the insured receives from the insurance company or foreign branch.

5. In cases where an insurance company goes bankrupt, the Fund shall only pay the difference between the amount the insurance company must pay under the insurance contract and the amount the insured receives according to the provisions of the law on bankruptcy.

6. In cases where the insured has a debt obligation to the insurance company or foreign branch according to the agreement in the insurance contract and the provisions of the law, the Fund shall only pay the difference between the amount the insured receives according to the limit specified in Article 7 of this Circular and the amount the insured still owes the insurance company or foreign branch.

Article 7. Limit of Payment from the Fund

1. For life insurance contracts, the Fund shall pay a maximum of 90% of the liability of the life insurance company but not exceeding 200 million VND/insured person/contract. The liability of the life insurance company corresponding to each case is defined as follows:

a) For contracts where an insurance event has occurred but the insurance benefit has not yet been paid, the liability of the insurance company is the insurance benefit agreed upon in the insurance contract.

b) For savings contracts with return value and still valid, the liability of the insurance company corresponds to the return value of the contract at the time the competent state agency announces the insurance company's loss of ability to pay or bankruptcy.

c) For purely protective contracts without return value and still valid, the liability of the insurance company corresponds to the portion of the premium already paid for the remaining period of the insurance contract.

d) For investment-linked insurance contracts still valid, the liability of the insurance company corresponds to the account value of the customer at the time the competent state agency announces the insurance company's loss of ability to pay or bankruptcy.

đ) In cases where a life insurance contract involves multiple insured persons, the maximum payment limit of the Fund stipulated in points a, b, c, and d of Clause 1 of this Article shall apply to each insured person, except in cases where there is a different agreement between the insured persons and the insurance company in the insurance contract.

2. For health insurance contracts:

a) The Fund shall pay a maximum of 90% of the liability of the insurance company or foreign branch but not exceeding 200 million VND/insured person/contract.

b) In cases where a health insurance contract involves multiple insured persons, the maximum payment limit of the Fund stipulated in point a of Clause 2 of this Article shall apply to each insured person, except in cases where there is a different agreement between the insured persons and the insurance company or foreign branch in the insurance contract.

3. For non-life insurance contracts:

a) For compulsory civil liability insurance contracts for motor vehicle owners, the Fund shall pay a maximum of the liability of the insurance company or foreign branch within the scope of insurance as prescribed by current laws.

b) For other types of insurance contracts as prescribed by law, the Fund shall pay a maximum of 80% of the liability of the insurance company or foreign branch but not exceeding 100 million VND/contract.

Article 8. Procedures for Using the Fund

1. Insurance enterprises and foreign branches shall be responsible for submitting to the Vietnam Insurance Association one (01) set of documents including the following:

a) A request document for using the Fund;

b) The decision of the Ministry of Finance regarding the termination of measures to restore payment capability (in cases where insurance enterprises or foreign branches lose their payment capability) or a confirmation document on the asset distribution plan of the insurance enterprise that has been completed (in cases where the insurance enterprise goes bankrupt);

c) A statistical list of insured persons according to the model prescribed in Appendix 1 issued together with this Circular and the claim payment request documents, refund value; indemnity payment; premium refund according to the insurance contract that the insurance enterprise or foreign branch cannot pay; amounts receivable from reinsurance indemnity assignments; third-party recoveries at the time when the Ministry of Finance makes a decision to terminate the application of measures to restore payment capability (in cases where insurance enterprises or foreign branches lose their payment capability) or at the time when the asset distribution plan of the enterprise has been completed (in cases where the insurance enterprise goes bankrupt).

2. Within thirty (30) days from the date of receiving complete files as stipulated in Clause 1 of this Article, the Management Board of the Fund and the Executive Board of the Fund shall be responsible for performing the following tasks:

a) The Executive Board of the Fund shall examine the claim payment request documents, refund value; indemnity payment; premium refund of the insurance enterprise or foreign branch to accurately determine the amount to be paid;

b) The Executive Board of the Fund shall develop a payment plan for insurance payments, refund value; indemnity payment; premium refund to be submitted to the Management Board of the Fund for approval and reported to the Ministry of Finance before implementation;

c) The Executive Board of the Fund shall publicly announce the payment to insured persons in daily newspapers (at least in one central newspaper or one local newspaper where the main office, branches, and transaction locations of the insurance enterprise or foreign branch are located) in three (03) consecutive issues in Vietnamese, simultaneously posting the list of recipients at the main office, branches, transaction locations of the insurance enterprise or foreign branch and the website of the Vietnam Insurance Association, insurance enterprise, and foreign branch. The announcement must clearly state the location, time, and method of payment from the Fund;

d) The Executive Board of the Fund shall implement payments according to the approved plan by the Management Board of the Fund. In cases where it authorizes a commercial bank established and operating legally in Vietnam to make payments, the Management Board of the Fund must sign an authorization contract with the bank in accordance with the provisions of the law. The authorization contract must clearly specify the responsibilities of the bank in using the funds transferred by the Management Board of the Fund for payment in accordance with regulations;

đ) The Management Board of the Fund shall report to the Ministry of Finance the results of implementing the payment to insured persons;

3. Recipients of insurance payments, refund value; indemnity payment; premium refund from the Fund must meet the following conditions:

a) Their names must be listed in the statistical list attached to the file which has been decided to be paid by the Management Board of the Fund;

b) They must have documents proving their legitimate rights to the payment amounts from the Fund, including: identity card, insurance contract, power of attorney for receiving money (if any).

4. The statute of limitations for initiating claims for payment from the Fund is three (03) years, counted from the date of the payment decision. The procedures and formalities shall be carried out in accordance with the provisions of the law.

PART 3

MANAGEMENT AND OPERATION OF THE FUND

Article 9. Organization, management, and operation of the Fund

1. The management and operational structure of the Fund includes:

a) The Management Council of the Fund;

b) The Fund Management Board;

c) The Supervisory Board of the Fund.

2. The management and operational structure of the Fund shall have duties, powers, and operating mechanisms as prescribed in Articles 10, 11, and 12 of this Circular.

Article 10. The Management Council of the Fund

1. The Management Council of the Fund is established by the Ministry of Finance and consists of the following components:

a) Chairman of the Management Council of the Fund: The Chairman of the Vietnam Insurance Association;

b) Members of the Management Council of the Fund include:

- Representative of the leadership of the Insurance Management and Supervision Department - Ministry of Finance;

- Representatives of the leaders of three (03) life insurance companies and three (03) non-life insurance companies, foreign branches with market shares ranked first (01) to third (03) on the Vietnamese insurance market at the time of the decision to establish the Management Council of the Fund.

2. The term of office for members of the Management Council of the Fund is three (03) years and may be reappointed.

3. Duties and powers of the Management Council of the Fund

a) To be responsible under the law and before the Minister of Finance for the management, operation, and use of the Fund;

b) To decide on the establishment of the Fund's Executive Board, the Fund's Supervisory Board, and the appointment and removal of members of the Executive Board and the Supervisory Board after obtaining approval from the Ministry of Finance;

c) To issue the Operating Regulations of the Management Council of the Fund, the Executive Board, and the Supervisory Board after receiving approval from the Ministry of Finance;

d) To issue the Management and Usage Regulations of the Fund, the Investment Regulations of the Fund, and other related activity regulations after obtaining approval from the Ministry of Finance;

đ) To approve plans for managing idle capital investment, budget estimates for income and expenditure, financial reports, activity reports, and work plans of the Fund;

e) To centrally manage the Fund's revenue, supervise the collection of Fund payments according to the provisions of the Law on Insurance Business and related implementing regulations;

g) To perform tasks as stipulated in point b, point d, and point đ of Clause 2, Article 8 of this Circular;

h) To carry out statistical reporting as prescribed in Clause 1, Article 19 of this Circular;

i) To organize regular or spot checks on the management and use of the Fund;

k) To be subject to inspection and supervision by the Ministry of Finance in the performance of its duties and powers.

4. Operating mechanism of the Management Council of the Fund

a) The Management Council of the Fund operates according to the Operating Regulations prescribed in point c, Clause 3 of this Article;

b) For general issues related to insurance companies and foreign branches: The Management Council of the Fund examines and decides according to the duties and powers prescribed in Clause 3 of this Article;

c) For issues related to life insurance companies: The Chairman of the Management Council of the Fund, the representative of the leadership of the Insurance Management and Supervision Department - Ministry of Finance, and members of the Management Council of the Fund who are representatives of the leaders of the three life insurance companies specified in point b, Clause 1 of this Article examine and decide according to the duties and powers prescribed in Clause 3 of this Article;

d) For issues related to non-life insurance companies and foreign branches: The Chairman of the Management Council of the Fund, the representative of the leadership of the Insurance Management and Supervision Department - Ministry of Finance, and members of the Management Council of the Fund who are representatives of the leaders of the three (03) non-life insurance companies and foreign branches specified in point b, Clause 1 of this Article examine and decide according to the duties and powers prescribed in Clause 3 of this Article.

Article 11. Management Board of the Fund

1. The Management Board of the Fund shall consist of the following components:

a) Chairman of the Management Board of the Fund: The Deputy Chairman of the Vietnam Insurance Association;

b) Vice-Chairman of the Management Board of the Fund: The General Secretary of the Vietnam Insurance Association;

c) Members of the Management Board of the Fund shall include representatives of three (03) life insurance companies and three (03) non-life insurance companies, foreign branches with market shares ranked fourth (04) to sixth (06) on the Vietnamese insurance market at the time of establishment of the Management Board of the Fund.

2. The term of office for members of the Management Board of the Fund is three (03) years and may be reappointed.

3. Duties and powers of the Management Board of the Fund

a) To be responsible under the law and before the Management Council of the Fund for managing, operating, using, settling payments, and finalizing accounts of the Fund in accordance with the provisions of the law and resolutions and decisions of the Management Council of the Fund;

b) To provide all required documents to the Management Council of the Fund and the Supervisory Board of the Fund; prepare documents for meetings of the Management Council of the Fund;

c) To develop management and usage plans for the Fund, idle capital investment plans, budget forecasts, financial reports, activity reports, and work plans of the Fund for review and approval by the Management Council of the Fund;

d) To collect files from insurance companies and foreign branches to exercise third-party claims rights and collect reinsurance indemnities according to the provisions of the law;

đ) To perform financial accounting tasks of the Fund in accordance with the provisions of the law;

e) To centralize the Fund's revenue, urge insurance companies and foreign branches to remit the Fund in accordance with the Law on Insurance Business and related guiding documents;

g) To carry out other tasks as stipulated in point a, point b, point c, and point d of Clause 2 of Article 8 of this Circular;

h) To utilize the organizational structure of the Vietnam Insurance Association during its operations;

i) To be subject to inspection and supervision by the Management Council of the Fund, the Supervisory Board of the Fund, and competent state agencies in the performance of its duties;

k) To perform other tasks assigned by the Management Council of the Fund.

4. Operation Mechanism of the Management Board of the Fund

a) The Management Board of the Fund operates in accordance with the Working Regulations stipulated in point c of Clause 3 of Article 10 of this Circular;

b) For general issues related to life insurance companies, non-life insurance companies, and foreign branches: The Management Board of the Fund examines and decides according to the duties and powers specified in Clause 3 of this Article;

c) For issues related to life insurance companies: The Chairman of the Management Board of the Fund, the Vice-Chairman of the Management Board of the Fund, and members of the Management Board of the Fund who are representatives of the three (03) life insurance companies specified in point c of Clause 1 of this Article examine and decide according to the duties and powers specified in Clause 3 of this Article;

d) For issues related to non-life insurance companies and foreign branches: The Chairman of the Management Board of the Fund, the Vice-Chairman of the Management Board of the Fund, and members of the Management Board of the Fund who are leaders of the three (03) non-life insurance companies and foreign branches specified in point c of Clause 1 of this Article examine and decide according to the duties and powers specified in Clause 3 of this Article.

Article 12. Supervisory Board of the Fund

1. The Supervisory Board of the Fund shall consist of the following components:

a) Chairman of the Supervisory Board of the Fund: A representative of one (01) insurance company, foreign branch elected by insurance companies, foreign branches and appointed by the Management Board of the Fund.

b) Members of the Supervisory Board of the Fund include representatives of three (03) life insurance companies, three (03) non-life insurance companies, foreign branches with market share ranking seventh (07) to ninth (09) on the Vietnamese insurance market at the time of establishing the Supervisory Board of the Fund.

2. The term of office for members of the Supervisory Board of the Fund is three (03) years and may be reappointed.

3. Duties and powers of the Supervisory Board of the Fund

a) To be responsible to the Management Board of the Fund for supervising all activities of the Fund;

b) To inspect and monitor compliance with laws and resolutions, decisions of the Management Board of the Fund; report to the Management Board of the Fund on the results of inspection and monitoring and propose measures to address issues;

c) To compile evaluations quarterly and annually and advise the Management Board of the Fund on the financial situation of the Fund;

d) To conduct inspections and supervision of the management and use of the Fund according to the requirements of the Management Board of the Fund;

đ) To perform other tasks assigned by the Management Board of the Fund.

4. Working Mechanism of the Supervisory Board of the Fund

a) The Supervisory Board of the Fund operates under the Rules of Operation stipulated in point c, Clause 3, Article 10 of this Circular;

b) For general issues related to insurance companies and foreign branches: The Supervisory Board of the Fund has the right to examine and decide according to the duties and powers specified in Clause 3 of this Article;

c) For issues related to life insurance companies: The Chairman of the Supervisory Board of the Fund and members of the Supervisory Board of the Fund who are representatives of three (03) life insurance companies as stipulated in point b, Clause 1 of this Article shall examine and decide according to the duties and powers specified in Clause 3 of this Article;

d) For issues related to non-life insurance companies and foreign branches: The Chairman of the Supervisory Board of the Fund and members of the Supervisory Board of the Fund who are representatives of three (03) non-life insurance companies, foreign branches as stipulated in point b, Clause 1 of this Article shall examine and decide according to the duties and powers specified in Clause 3 of this Article.

Article 13. Approval Procedures of the Ministry of Finance

1. The Management Board of the Fund must obtain written approval from the Ministry of Finance before implementing the following tasks:

a) Deciding to establish the Executive Board of the Fund, the Supervisory Board of the Fund; appointing and dismissing members of the Executive Board of the Fund, the Supervisory Board of the Fund;

b) Issuing Rules of Operation of the Management Board of the Fund, the Executive Board of the Fund, the Supervisory Board of the Fund; Investment Rules of the Fund; Rules of Management and Use of the Fund and other relevant operational rules;

c) Approving the investment delegation plan of the Fund as provided for in Clause 3, Article 16 of this Circular.

2. Application Documents

The Management Board of the Fund must submit to the Ministry of Finance one (01) set of application documents for approval including the following documents:

a) Request letter signed by the Chairman of the Management Board of the Fund;

b) Documents and materials about individuals participating in the Executive Board of the Fund, the Supervisory Board of the Fund (in cases stipulated in point a, Clause 1 of this Article), including:

- Letter from the organization where the individual works deciding to appoint that individual to participate in the Executive Board of the Fund, the Supervisory Board of the Fund;

- Curriculum vitae of the individual confirmed by the organization appointing that individual to participate in the Executive Board of the Fund, the Supervisory Board of the Fund.

c) Draft Rules proposed for approval (in cases stipulated in point b, Clause 1 of this Article);

d) Proposed investment delegation plan, including analysis and evaluation and documents proving the capacity of the organization receiving the investment delegation; responsibilities and obligations of the parties in implementing the investment delegation; investment portfolio structure and expected investment returns (in cases stipulated in point c, Clause 1 of this Article).

3. Within thirty (30) days from the date of receipt of complete documents as stipulated in Clause 2 of this Article, the Ministry of Finance will reply in writing regarding approval or refusal of approval. In case of refusal of approval, the Ministry of Finance will clearly explain the reasons.

Section 4

FINANCE ACCOUNTING

Article 14. Revenues of the Fund

The revenues of the Fund include:

1. Annual contributions to the Fund from insurance companies and foreign branches.

2. Reimbursement income from reinsurance assignments.

3. Claims recovered from third parties.

4. Income from the Fund's investment activities.

5. Income from the liquidation of fixed assets of the Fund.

6. Other revenues as prescribed by law.

Article 15. Expenditures of the Fund

1. The expenditures of the Fund include:

a) Payment for insurance benefits, return value; payment for insurance claims; refunding insurance premiums according to the agreement in the insurance contract in case the insurance company or foreign branch loses its ability to pay, or the insurance company goes bankrupt;

b) Operating costs for investment activities from idle funds of the Fund according to the prescribed regulations;

c) Management expenses of the Fund including allowances, purchasing and repair costs, service fees, and other related expenses for management and utilization of the Fund according to the prescribed regulations. The maximum expenditure shall not exceed 0.5% of the total amount actually contributed to the Fund annually.

2. The expenditures specified in Clause 1 of this Article shall be implemented according to specific expenditure standards and regulations stipulated in the Regulation on Management and Utilization of the Fund.

Article 16. Investment from Idle Funds of the Fund

1. Investments from idle funds of the Fund must ensure safety, efficiency, and capital preservation principles.

2. Idle funds from the Fund can only be invested in Vietnam in the following areas:

a) Purchasing government bonds without quantity limits;

b) Purchasing corporate bonds guaranteed by the Government with a maximum limit not exceeding 5% of the total idle funds of the Fund at one enterprise and not exceeding 10% of the total idle funds of the Fund;

c) Depositing money at commercial banks established and legally operating in Vietnam with a maximum limit not exceeding 10% of the total idle funds of the Fund at one commercial bank and not exceeding 50% of the total idle funds of the Fund. Commercial banks where the Fund deposits money must be banks with sound financial conditions, effective operations, and high liquidity according to the Fund Investment Regulations.

3. The Management Board and the Executive Board of the Fund directly implement investment activities or entrust them to organizations permitted to engage in financial investment business, ensuring financial safety according to relevant laws and having more than five (05) years of experience to carry out investment activities.

Article 17. Financial Reports of the Fund

1. The fiscal year of the Fund runs from January 1st to December 31st of each calendar year.

2. The annual financial report of the Fund must be audited by an independent auditing organization.

Article 18. Accounting of the Fund

1. Accounting work of the Fund is carried out in accordance with accounting laws and must ensure separate tracking for life insurance and non-life insurance sectors.

2. Life insurance companies contribute to the Fund in the life insurance sector; non-life insurance companies and foreign branches contribute to the Fund in the non-life insurance sector.

3. Principles for allocating assets, revenues, and expenditures between the life insurance and non-life insurance sectors:

a) Assets, revenues, and expenditures corresponding to each sector will be recorded separately for that sector;

b) Assets, revenues, and expenditures serving common activities will be allocated to each sector based on the contribution structure (revenues) of the life insurance and non-life insurance sectors in the Fund.

Article 19. Statistical reporting work

1. The Fund Management Board shall be responsible for:

a) Submit to the Ministry of Finance the annual financial report of the Fund with the confirmation of an independent auditing organization according to the form prescribed in Appendix 3 attached hereto before March 31 of the following fiscal year;

b) Report to the Ministry of Finance on the investment operation situation according to the form prescribed in Appendix 2 attached hereto no later than thirty (30) days from the end of each quarter.

2. Within ninety (90) days from the end of the fiscal year, insurance companies and foreign branches shall submit to the Vietnam Insurance Association the annual financial report audited in accordance with the law and the premium income report for the fiscal year according to the form prescribed in Appendix 4 (for non-life insurance companies and foreign branches) or Appendix 5 (for life insurance companies).

Chapter III

IMPLEMENTING PROVISIONS

Article 20. Implementation Provisions

1. This Circular takes effect from September 15, 2013.

2. During the implementation process, if there are any difficulties, they should be reported promptly to the Ministry of Finance for study and resolution./.