Decision No. 1235-TC/QÐ/TCNH on compulsory reinsurance

Pursuant to …;

ON COMPULSORY REINSURANCE

THE MINISTER OF FINANCE

Pursuant to Decree No. 178-CP dated October 28, 1994 of the Government stipulating the functions, tasks, and organizational structure of the Ministry of Finance;
Pursuant to Decree No. 100-CP dated December 18, 1993 of the Government on insurance business;
Considering the current situation of the Vietnamese insurance market;
Based on the proposal of the Director of the Department of Banking Finance and Financial Institutions;

DECISION:

Article 1.

Insurance enterprises operating in Vietnam (original insurance enterprises) shall be responsible for compulsorily reinsuring the National Reinsurance Corporation of Vietnam a portion of their liability arising from insurance operations that require reinsurance.

Article 2.

The compulsory reinsurance ratio for the National Reinsurance Corporation of Vietnam shall be set at 30% of the value of insurance exceeding the retention level of the original insurance enterprise; For convenience in implementation by insurance enterprises and to align with international practices regarding compulsory reinsurance, it is now agreed to convert this to 20% of the value of the original insurance policy and to apply it on a per-contract basis.

In cases where insurance or compulsory reinsurance is required according to the designation of foreign insurance participants, the compulsory reinsurance ratio shall be calculated based on the share of responsibility of the insurance enterprise in the original insurance contract.

Article 3.

The National Reinsurance Corporation of Vietnam shall be responsible for accepting compulsory reinsurance from original insurance enterprises at a minimum level as prescribed in Article 2.

Article 4.

The rights and obligations of the National Reinsurance Corporation of Vietnam concerning each risk related to the compulsory reinsurance contract will commence and terminate concurrently with the original insurance contract of the insurance enterprises.

Article 5.

After arranging the compulsory reinsurance contract, all insurance enterprises (including the National Reinsurance Corporation of Vietnam) must prioritize voluntary reinsurance for domestic insurance enterprises before arranging reinsurance contracts abroad. In necessary cases, proof of such prioritization must be provided to the competent state management agency.

Article 6.

The commission rate for compulsory reinsurance is defined as follows:

- For fixed-term reinsurance contracts (excluding aviation insurance): The compulsory reinsurance commission rate shall be applied according to the table of compulsory reinsurance commission rates issued together with this Decision.

- For temporary reinsurance contracts and aviation insurance: The compulsory reinsurance commission rate equals the tax rate plus 85% of the reinsurance commission rate (after deducting the tax rate) of the same type of service on the international market.

Article 7.

The payment of reinsurance premiums, reinsurance commissions, and reinsurance indemnities related to the compulsory reinsurance liability between the insurance enterprise and the National Reinsurance Corporation of Vietnam shall be conducted quarterly based on the statistical report of the original insurance enterprise and through offsetting within ten days from the date of receipt of the notification as stipulated in the reinsurance contract.

Official payments will be made according to the annual settlement figures of the original insurance enterprise approved by the competent authority.

Article 8.

Other provisions in the compulsory reinsurance contract between the original insurance enterprise and the National Reinsurance Corporation of Vietnam shall be agreed upon based on the original insurance contract but shall not contravene the provisions of this Decision.

Article 9.

9.1.

In case of intentional non-compliance with the compulsory reinsurance transfer as prescribed in Article 1, the original insurance enterprise must pay the compulsory reinsurance premium to the National Reinsurance Corporation of Vietnam while still bearing the responsibility under the compulsory reinsurance contract.

9.2. In case of intentional non-compliance with the compulsory reinsurance acceptance as prescribed in Article 3, the National Reinsurance Corporation of Vietnam must bear the responsibility under the compulsory reinsurance contract and shall not receive the compulsory reinsurance premium.

9.3. In case the original insurance enterprise or the National Reinsurance Corporation of Vietnam fails to comply with the payment deadlines, they shall be subject to a penalty for late payment as stipulated by the State Bank of Vietnam.

Article 10.

This Decision takes effect from the date of signature and applies to insurance policies generated from January 1, 1996, replacing Decision No. 1314/TC/QĐ/TCNH dated December 21, 1994. The Director of the Department of Banking Finance and Financial Institutions, the General Director of the Capital Management and Asset Management General Department at State-Owned Enterprises, the Head of the Ministry's Office, the Directors of insurance enterprises, and the heads of relevant units are responsible for implementing this Decision.

TABLE OF COMMISSION RATES

FOR COMPULSORY REINSURANCE APPLICABLE TO FIXED-TERM REINSURANCE CONTRACTS