Circular No. 135/2012/TT-BTC guides the implementation of unit-linked insurance products.

CIRCULAR

Guidelines for Implementing Unit-linked Insurance Products

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Pursuant to the Law on Insurance Business 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;

The Minister of Finance hereby promulgates this Circular amending and supplementing some articles of Circular No. 124/2012/TT-BTC dated July 30, 2012 of the Ministry of Finance guiding the implementation of certain provisions of Decree No. 45/2007/NĐ-CP dated March 27, 2007 of the Government detailing the implementation of certain provisions of the Insurance Business Law and Decree No. 123/2011/NĐ-CP dated December 28, 2011 of the Government detailing the implementation of certain provisions of the Law amending and supplementing some articles of the Insurance Business Law (hereinafter referred to as "Circular No. 124/2012/TT-BTC") and Circular No. 125/2012/TT-BTC dated July 30, 2012 of the Ministry of Finance guiding the financial regime for insurance companies, reinsurance companies, insurance brokerage companies and branches of foreign non-life insurance companies (hereinafter referred to as "Circular No. 125/2012/TT-BTC").

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

Pursuant to the 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;

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

The Minister of Finance issues this Circular guiding the implementation of unit-linked insurance products.

PART I

GENERAL PROVISIONS

Article 1. Object and scope of regulation

This Circular stipulates the implementation of unit-linked insurance products by life insurance businesses (hereinafter referred to as insurance businesses) and related organizations and individuals within the territory of the Socialist Republic of Vietnam.

Article 2. Unit-linked Insurance

Unit-linked insurance is a life insurance product under investment-linked insurance business and has the following characteristics:

1. The structure of insurance premiums and insurance benefits is separated between the risk protection portion and the investment portion. The policyholder is flexible in determining the insurance premium and the amount of insurance according to the terms of the insurance contract.

2. The policyholder has the right to choose to invest their insurance premiums to purchase units of unit-linked funds established by the insurance business, thereby enjoying all investment results and bearing all investment risks from the selected unit-linked funds corresponding to the invested insurance premiums. The purchase and sale of fund units can only be conducted between the insurance business and the policyholder.

3. The insurance business receives fees paid by the policyholder according to the terms of the insurance contract.

Article 3. Explanation of Terms

1. A unit-linked fund is a fund formed from the insurance premiums of the policyholder for unit-linked insurance contracts and is part of the policyholder's insurance fund.

2. Units of a unit-linked fund are assets of the unit-linked fund divided into equal parts.

3. The selling price is the price of one unit of a unit-linked fund when the insurance business sells to the policyholder.

4. The buying price is the price of one unit of a unit-linked fund when the insurance business buys from the policyholder.

5. The valuation date is the day the insurance business conducts the determination of the buying and selling prices of the units of the unit-linked fund.

6. The next valuation date is the valuation date immediately following the day the insurance business receives a request to buy or sell units of the unit-linked fund from the policyholder.

Article 4. Conditions for Insurance Businesses Implementing Unit-linked Insurance Products

When implementing unit-linked insurance products, insurance businesses must meet the following conditions:

1. The solvency margin of the insurance business must be greater than the minimum solvency margin by two hundred billion (200) Vietnamese dong. The subscribed charter capital must exceed the statutory capital requirement by two hundred billion (200) Vietnamese dong or more.

2. An information technology system suitable for managing and controlling unit-linked funds prudently and effectively.

3. The insurance business must have the ability to value assets and units of unit-linked funds objectively and accurately at least once a week and publicly announce the buying and selling prices of fund units to the policyholder.

4. Agents selling unit-linked insurance products must be recruited and trained to meet the requirements set forth in Articles 34 and 35 of this Circular.

5. The unit-linked insurance product must be approved by the Ministry of Finance.

Chapter II

SPECIFIC PROVISIONS

Section 1

Product Provisions

Article 5. Unit-linked Insurance Products

1. Insurance enterprises must comply with the provisions of this Section and relevant laws when designing unit-linked insurance products.

2. The name of the unit-linked insurance product and the unit-linked fund must be clear, appropriate to the nature of the product, investment objectives for each unit-linked fund's assets, and ensure that the policyholder can distinguish it from other products.

3. The minimum term of the unit-linked insurance contract is ten years.

4. The language used in documents and information related to unit-linked insurance products shall be Vietnamese. For product introduction materials and sales illustration materials, the font used shall be Times New Roman, with a minimum size of 12 points, or another equivalent font size, and must comply with the provisions of this Circular.

Article 6. Benefits of Unit-linked Insurance

1. The insurance benefits under a unit-linked insurance contract must include risk protection benefits and investment benefits. Depending on the agreement between the insurance enterprise and the policyholder, the insurance enterprise may design additional insurance benefits. The policyholder cannot choose to participate only in investment benefits without participating in risk protection benefits.

2. Risk protection benefits: The insurance enterprise and the policyholder agree on the risk protection benefits but must ensure the minimum benefit in the event of the insured person's death as follows:

a) For contracts with a single premium payment: VND 50,000,000 or 125% of the single premium payment, whichever is higher;

b) For contracts with periodic premium payments: VND 50,000,000 or five (05) times the annual premium payment, whichever is higher;

c) The insurance enterprise may provide death benefits lower than the minimum level specified above for insured persons aged sixty (60) or older, but not less than VND 50,000,000;

d) The provision regarding the minimum benefit in the event of death does not apply to additional premiums stipulated in Clause 8 of this Circular;

đ) The insurance enterprise may offer supplementary insurance products for unit-linked insurance products. The method of paying insurance premiums for supplementary insurance products will be agreed upon by both parties when concluding the contract.

3. Investment benefits: The policyholder has the right to choose to invest insurance premiums into unit-linked funds established by the insurance enterprise, to enjoy all investment results and bear all investment risks from the selected unit-linked funds corresponding to the portion of the insurance premium invested.

4. The insurance enterprise and the policyholder may agree on the content and method of payment of insurance benefits in the event of an insured event as prescribed in Clauses 2 and 3 of this Article.

Article 7. Premiums

1. Insurance enterprises are only permitted to charge the types of fees specified below:

a) Initial fee is the total amount of money that the insurance enterprise is allowed to deduct before the insurance premium is allocated to unit-linked funds;

b) Risk protection premium is the amount charged to pay for risk protection benefits as committed in the insurance contract;

c) Contract management fee is the amount charged to cover costs related to maintaining the insurance contract and providing information related to the insurance contract to the policyholder;

d) Fund management fee is used to pay for activities related to managing unit-linked funds;

đ) Fund switching fee is the amount the policyholder must pay to the insurance enterprise when transferring investment assets between unit-linked funds. The policyholder has the right to switch unit-linked funds free of charge for the first switch in each contract year;

e) Policy cancellation fee is the amount charged to the customer when canceling the contract before its expiration date to cover reasonable related expenses;

g) Other types of fees (if any) must be approved in writing by the Ministry of Finance.

2. Insurance enterprises must calculate the aforementioned fees accurately, fairly, and reasonably, consistent with the product approved by the Ministry of Finance, and notify the policyholder at the time of concluding the contract.

3. The unit-linked insurance contract must clearly specify the maximum fees applicable to the policyholder. Insurance enterprises must publicly disclose all types of fees, methods of determining, and rates of the maximum fees applicable to the policyholder in product introduction materials and sales illustration materials.

4. During the contract period and within the maximum limits agreed upon in the insurance contract, the insurance enterprise may change the rates of the applicable fees after notifying the policyholder and the Ministry of Finance in writing at least three (03) months prior to the effective date of the change.

Article 8. Additional Insurance Premiums

1. In addition to the regular basic insurance premium agreed upon in the insurance contract, the insured may pay additional premiums to purchase units of the linked fund.

2. After deducting the initial fee, the additional insurance premium will be invested into the corresponding linked fund according to the insured's designation and used to purchase fund units at the selling price determined on the next valuation date following the payment of the additional premium.

3. Within each year of the contract, the total amount of additional insurance premiums paid shall not exceed ten (10) times the first-year premium for periodic payment contracts or shall not exceed the initial premium for single-payment contracts.

Article 9. Linked Fund for Single-Payment Insurance Contracts

For single-payment unit-linked insurance contracts, the insurer is responsible for designing an insurance product ensuring that the insured's insurance premium can only be used to purchase units of a fund with an investment ratio in the form of bank deposits, government bonds, and other fixed-income securities not less than sixty percent (60%) of the total value of the linked fund.

Article 10. Surrender Value

The surrender value of a unit-linked insurance contract is determined based on the purchase price of the unit-linked fund units on the next valuation date immediately following the cancellation of the insurance contract, minus the cancellation fee.

Article 11. Approval of Implementation of Insurance Products

1. The insurer must obtain written approval from the Ministry of Finance before implementing a unit-linked insurance product.

2. The application for permission to implement a unit-linked insurance product includes:

a) An application for approval of the unit-linked insurance product according to the model attached in Appendix I of this Circular;

b) A plan and explanation of the implementation plan for the unit-linked insurance product over the next three (03) years, including the following contents:

- Analysis of the insurance market situation, financial market, and customer needs;

- Forecast of the market over the next three (03) years;

- Summary of the main content of the proposed unit-linked insurance product to be implemented, including information such as the target market of the product, insurance benefits, investment benefits, minimum insurance amount;

- The area expected to implement the unit-linked insurance product;

- Expected business results of the insurer and the unit-linked insurance product over the next three (03) years, including contents about revenue, expenses, profit, solvency of the insurer and the linked fund;

- Explanation of technical facilities ensuring the implementation of the unit-linked insurance product, including: Information technology system; accounting system; selection, training, and management process of agents distributing the unit-linked insurance product; content and training program for agents about the proposed unit-linked insurance product, list and file of training staff for unit-linked insurance agents, method of managing distribution agents of the unit-linked insurance product;

- Linked funds, analysis methods, and data sources, investment policies that the insurer plans to apply to assets within each linked fund;

- Basis for allocating insurance fees and costs among linked funds;

- Plan of the insurer for handling linked funds in the following cases: customers request insurance money when an insured event occurs; customers request termination of the contract prematurely; customers request withdrawal of part of the premium, advance from the surrender value, maturity of the contract; customers request conversion of linked funds; linked funds are incorrectly valued and other cases as stipulated in the rules and terms of the proposed product to be approved by the Ministry of Finance;

c) Written commitment accompanied by detailed explanations regarding the insurer's compliance with the conditions specified in Article 4 of this Circular;

d) Rules, terms, and premium tables of the proposed unit-linked insurance product to be implemented;

đ) Technical basis of the proposed unit-linked insurance product to be implemented, clearly stating formulas, methods, and technical explanations used to calculate premiums and reserve provisions for the proposed unit-linked insurance product;

e) Product introduction materials, sales illustration materials, insurance application forms, insurance certificate forms, and other documents that customers must fill out and sign when purchasing insurance;

g) Certificates proving the qualifications, capabilities, and professional experience of members of the Investment Committee;

h) Certificates and licenses proving the capability and qualifications of the head of the department implementing the unit-linked insurance product.

3. The application for approval of the unit-linked insurance product must have the signature of the legal representative and the actuary of the insurer.

4. In the case where the insurer applies for permission to implement a new unit-linked insurance product outside of those already approved, the application for approval of the new unit-linked insurance product does not include the documents specified in point b, g, and h of Clause 2 of this Article, except in cases where these documents have changed since the last time the unit-linked insurance product was approved by the Ministry of Finance.

Section 2

Contracting of Unit-Linked Insurance Contracts

Article 12. Analysis of Customer Insurance Participation Needs

1. Prior to entering into an insurance contract, the insurance company must conduct an analysis of the customer's insurance participation needs and capabilities to advise customers on suitable insurance products and insurance amounts that match their current financial situation and future financial needs.

2. The insurance company must develop a customer need analysis template and a set of questions to assess the customer's risk tolerance level in investment. Based on the information provided by the customer when answering these questions, the insurance company must determine the customer's risk tolerance level, at a minimum, according to five (05) customer groups: Conservative Investment Group; Relatively Conservative Investment Group; Balanced Investment Group; Relatively Risky Investment Group and Risky Investment Group. Customers must sign to confirm the assessment of their investment risk tolerance level.

3. Customers must sign to confirm their understanding of the insurance product they intend to purchase, clearly recognizing the insurance benefits, investment benefits, potential investment risks, and fees charged by the insurance company.

4. The insurance company has the responsibility to check the provision of information and advice on unit-linked insurance products to customers, ensuring compliance with legal regulations and internal procedures of the company for the implementation of unit-linked insurance products.

Article 13. Insurance Contract

The unit-linked insurance contract must comply with legal provisions and include the following information:

1. Rights and mechanisms linking those rights to the performance results of the chosen unit-linked fund;

2. Objectives and investment policies of the unit-linked fund;

3. Unit-linked funds selected by the insured party and the allocation ratio of insurance premiums to purchase units of the unit-linked fund;

4. Ratios, specific amounts, maximum levels, and methods of calculating fees related to the unit-linked insurance contract;

5. Methods and periodic valuation of unit-linked fund units;

6. Options for the insured party to change risk benefits, the allocation ratio of insurance premiums into the unit-linked fund, insurance premiums, switching between unit-linked funds, and premium payment extension periods;

7. Clearly stipulate the circumstances under which the insurance company is permitted to apply the following measures to protect and enhance the rights of the insured party:

a) Closing the unit-linked fund to convert assets into a new unit-linked fund with the same investment objectives;

b) Changing the name of the unit-linked fund;

c) Splitting or merging existing unit-linked fund units;

d) Suspending the valuation of unit-linked fund units and transactions related to the insurance contract in cases where the securities exchange in which the unit-linked fund invests is temporarily suspended from trading;

đ) Other measures as required by competent state authorities and legal provisions. When implementing measures as stipulated in points a, b, c, and đ of Clause 7 of this Article, the insurance company must report to the Ministry of Finance and notify the insured party in writing at least three (03) days prior to implementation.

Article 14. Rights and Obligations of the Insurance Purchaser

1. Rights of the Insurance Purchaser:

a) Request the insurance company to provide full information and explain the conditions and terms of the unit-linked insurance contract to understand related risks before concluding the contract;

b) Have a minimum period of twenty-one (21) days from the date of receiving the insurance contract to consider the conditions and terms of the insurance contract. During this free consideration period, if the insurance purchaser requests to cancel the insurance contract, the insurance company must return the entire amount of premiums paid after deducting any medical/health check-up costs (if applicable);

c) Suspend payment of premiums after the agreed period during which the insurance contract becomes effective according to the insurance contract. After the customer suspends premium payments, the insurance contract continues to maintain its validity, and risk insurance fees, management contract fees will be deducted from the customer's account value monthly;

d) Withdraw part or all of the account value of the contract according to the agreement in the insurance contract;

đ) Convert unit-linked funds by transferring part or all of the units' values of the insurance contract from one unit-linked fund to another unit-linked fund at the allocation ratio requested by the insurance purchaser;

e) Change the investment ratio in unit-linked funds according to the agreement in the insurance contract. The change applies to premiums already paid after the request for change and according to the ratio approved by the insurance company;

g) Change the insurance amount according to the provisions of the insurance contract, except when the insurance contract is in a suspended premium payment period. An increase or decrease in the insurance amount only takes effect in the following year of the insurance contract after the insurance purchaser's request is approved;

h) Change the premium according to the provisions of the insurance contract. An increase or decrease in the premium becomes effective after approval by the insurance company. In all cases, reducing the premium cannot be lower than the minimum premium rate stipulated by the insurance company;

i) Terminate the insurance contract prematurely according to the agreement in the insurance contract;

k) Restore the effectiveness of the insurance contract within two (02) years from the date the most recent insurance contract became ineffective;

l) Receive annual reports related to the insurance contract, unit-linked funds, and other relevant information as prescribed by law;

m) Other rights prescribed in the rules and product terms of the unit-linked insurance approved by the Ministry of Finance;

2. Obligations of the Insurance Purchaser:

a) Fully and truthfully declare information as required by the insurance company in the insurance application form;

b) Carefully read product introduction materials, sales illustration materials, and sign the documents provided by the insurance company;

c) Pay premiums according to the agreement in the insurance contract;

d) Other obligations agreed between the insurance company and the insurance purchaser as prescribed in the rules and product terms of the unit-linked insurance approved by the Ministry of Finance.

Article 15. Rights and Obligations of Insurance Enterprises

1. Rights of insurance enterprises:

a) Collect premiums as prescribed in Article 7 of this Circular;

b) Select fund management companies and supervisory banks to manage unit-linked funds;

c) Other rights as provided by current laws.

2. Obligations of insurance enterprises:

a) Fulfill commitments as agreed upon in the unit-linked insurance contract;

b) When the account value of the customer is insufficient to pay for the next month's risk premium and contract management fee, the insurance enterprise must notify the customer about the status of the insurance contract;

c) Record fully, accurately, promptly, and clearly all information related to each customer regarding the conclusion and performance of the unit-linked insurance contract;

d) Other obligations as provided by current laws.

Section 3

Establishment and Management of Unit-Linked Funds

Article 16. Unit-Linked Funds

1. Insurance enterprises must establish at least two (02) unit-linked funds with different investment objectives for each unit-linked insurance product.

2. Insurance enterprises must ensure that assets formed from unit-linked funds must be separated and managed independently from the owner's fund, other contract owner funds, and between unit-linked funds of the insurance enterprise.

3. Within sixty (60) days from the date of the first unit-linked insurance contract being concluded, the insurance enterprise must ensure that the total value of unit-linked funds is always not less than one hundred (100) billion Vietnamese dong.

4. In cases where the insurance premium allocated to the unit-linked fund does not meet the provisions of Clause 3 of this Article, the insurance enterprise must use part of the owner's fund to form assets of the unit-linked fund and enjoy investment results corresponding to the amount contributed to establishing the unit-linked fund. The insurance enterprise may be refunded a portion or the entire amount contributed if such refund complies with the provisions of Clause 3 of this Article.

5. Insurance premiums and additional premiums after deducting initial fees must be invested in accordance with the objectives of the unit-linked fund within a period not exceeding sixty (60) days from the date the insurance enterprise receives the insurance premium.

6. In all cases, the unit-linked fund must be managed and used for investment in accordance with its objectives, investment policies, and financial regulations applicable to insurance enterprises.

Article 17. Objectives of Unit-Linked Funds

1. The operational objectives of unit-linked funds must be clear and detailed so that the policyholder can objectively assess the actual operation of the unit-linked fund as well as the nature of the assets within the unit-linked fund and the risks that the unit-linked fund may encounter.

2. Insurance enterprises must ensure that unit-linked funds are invested in accordance with announced objectives and comply with investment limits as prescribed by law and stipulated in Article 18 of this Circular.

3. The objectives and methods of allocating investment assets of unit-linked funds must be fully and clearly disclosed in product introduction materials and insurance contracts.

Article 18. Investment Limits for Unit Linked Funds

1. The investment portfolio of unit linked funds must be consistent with the objectives and investment policies stipulated in the rules, terms, and technical basis of the product approved by the Ministry of Finance.

2. The structure of the investment portfolio of unit linked funds must ensure compliance with the following conditions:

a) Each unit linked fund shall not invest more than ten percent (10%) of the total value of circulating securities of an issuer, except government bonds.

b) Each unit linked fund shall not invest more than twenty percent (20%) of the total assets of the fund in circulating securities of an issuer, except government bonds.

c) Assets of unit linked funds shall not be directly invested in real estate, gold, silver, precious metals, or gemstones.

d) Each unit linked fund shall not invest more than thirty percent (30%) of the total assets of the fund in companies within the same corporate group or related company group.

e) Investments shall not be made in securities investment funds or shares of securities investment companies established and operating in Vietnam.

3. The investment structure of unit linked funds may deviate but shall not exceed fifteen percent (15%) from the investment limits set forth in Clause 2 of this Article. Such deviations must result from changes in the value of investment assets and legitimate payments of unit linked funds. In such cases, the unit linked fund shall not invest in assets that have already deviated, and within three (03) months from the date of deviation occurrence, the insurance company must request the fund management company to adjust the investment portfolio to comply with the investment limits set forth in this Article. The insurance company must notify the Ministry of Finance in writing and disclose information to policyholders regarding the causes of the deviations, corrective measures, and results of the corrections.

4. In case the deviations are due to the insurance company or the fund management company's failure to comply with the investment limits prescribed in this Article or the objectives and investment policies of the unit linked fund stated in the technical basis, the insurance company must request the fund management company to adjust the investment portfolio within fifteen (15) days from the date of deviation occurrence.

5. The insurance company shall be responsible for compensating losses caused to policyholders and unit linked funds in the following cases:

a) Failure to comply with the investment objectives and policies stipulated in the rules, terms, and technical basis of the product approved by the Ministry of Finance; or

b) Investing in restricted assets or exceeding investment limits as prescribed in this Article.

6. The compensation amount for policyholders and unit linked funds shall be determined based on actual losses incurred. In cases where investment activities under Clause 5 of this Article generate profits, the insurance company must allocate all profits to the unit linked fund.

Article 19. Valuation of Unit Linked Funds

1. The insurance company must value the assets of unit linked funds at least once a week, according to market value or fair value (in the absence of market value) of the assets in the investment portfolio of the unit linked fund.

2. The determination of the net asset value of unit linked funds must comply with the principles stipulated in Article 18 and Article 19 of Circular No. 183/2011/TT-BTC dated December 16, 2011, issued by the Ministry of Finance guiding the establishment and management of open-ended funds and any subsequent amendments, supplements, or replacements thereof.

3. A supervisory bank established and legally operating in Vietnam shall approve the determination of the net asset value of unit linked funds.

4. The insurance company shall bear full responsibility in case of errors in valuing the units of unit linked funds and must compensate policyholders and unit linked funds for losses arising from the purchase and sale of fund units due to valuation errors as follows:

a) Reaching or exceeding 0.25% of the net asset value in the case of stock investments;

b) Reaching or exceeding 0.75% of the net asset value in the case of bond investments;

c) Reaching or exceeding 1.00% of the net asset value in the case of other asset investments.

5. The compensation amount for policyholders and unit linked funds from the purchase and sale of fund units in case of errors in valuing the units of unit linked funds shall be determined as follows:

a) In the case of undervaluation of the fund, the compensation amount for policyholders and unit linked funds shall be determined as follows:

- If the premium was allocated to purchase fund units before the time of valuation error and sold during the period of valuation error: The compensation amount for policyholders shall be determined based on the degree of error and the number of fund units sold by the policyholder;

- If the premium was allocated to purchase fund units during the period of valuation error and continued to hold after the period of valuation error: The insurance company shall be responsible for compensating the unit linked fund, the compensation amount shall be determined based on the degree of error and the number of fund units purchased by the policyholder and still held after the period of valuation error.

b) In the case of overvaluation of the fund, the compensation amount for policyholders and unit linked funds shall be determined as follows:

- If the premium was allocated to purchase fund units before the time of valuation error and sold during the period of valuation error: The insurance company shall be responsible for compensating the unit linked fund, the compensation amount shall be determined based on the degree of error and the number of fund units sold by the policyholder during the period of valuation error;

- If the premium was allocated to purchase fund units during the period of valuation error and continued to hold after the period of valuation error: The compensation amount for policyholders shall be determined based on the degree of error and the number of fund units purchased by the policyholder and still held after the period of valuation error.

c) All compensation costs for the insurance buyer and the unit-linked fund shall not be accounted for as expenses of the unit-linked fund of the insurance enterprise.

6. The insurance enterprise must submit a report on the remediation plan for pricing errors of the unit-linked fund to the Ministry of Finance no later than three (03) working days from the date of discovering the error. Within fifteen (15) working days from the date of receipt of the report by the Ministry of Finance, the insurance enterprise must compensate for any resulting losses to the insurance buyer and the unit-linked fund.

Article 20. Determination of Sale and Purchase Prices for Units of Unit-Linked Funds

1. The sale and purchase prices for units of unit-linked funds shall be determined based on the net asset value of each unit of the unit-linked fund on the next valuation date, after the insurance enterprise receives a request to buy or sell units of the unit-linked fund. The difference between the selling price and the buying price of a unit of a unit-linked fund shall not exceed five percent (5%) of the selling price.

2. The net asset value of each unit of the unit-linked fund equals the total value of assets in the unit-linked fund minus related liabilities, divided by the total number of units of the unit-linked fund.

Article 21. Process for Selling and Purchasing Units of Unit-Linked Funds

1. The insurance buyer has the right to purchase additional units or sell back units of the unit-linked fund to the insurance enterprise. The purchase or sale of additional units of the unit-linked fund may be carried out through an insurance agent or directly by the insurance buyer with the insurance enterprise at its headquarters, branch, representative office, or customer service center.

2. The insurance buyer shall execute the purchase of additional units of the unit-linked fund when meeting the following conditions:

a) The insurance contract of the insurance buyer remains valid and the amount requested for additional purchase complies with the provisions of Clause 3, Article 8 of this Circular;

b) There is a request form for purchasing additional units of the unit-linked fund according to the model provided by the insurance enterprise, specifying the amount desired to purchase additional units of the unit-linked fund, the percentage into each unit-linked fund, and signing the request form for purchasing additional units of the unit-linked fund.

3. The insurance buyer shall execute the sale of units of the unit-linked fund when meeting the following conditions:

a) The insurance contract of the insurance buyer remains valid and the number of units of the fund intended for sale meets the minimum amount requirement set by the insurance enterprise for the sale of units of the unit-linked fund by the insurance buyer;

b) There is a request form for selling units of the unit-linked fund according to the model provided by the insurance enterprise, specifying the number of units of the unit-linked fund intended for sale or the percentage into each unit-linked fund intended for sale, and signing the request form for selling units of the unit-linked fund.

4. The insurance enterprise shall process requests for purchasing additional or selling back units of the unit-linked fund on the next valuation date. The purchase or sale price of units of the unit-linked fund shall be determined in accordance with the provisions of Article 20 of this Circular.

5. The account value under the unit-linked insurance contract of the insurance buyer shall change according to the request for purchasing additional or selling back units of the unit-linked fund, calculated from the time the insurance enterprise determines the purchase or sale price and completes the purchase or sale of units of the unit-linked fund according to the request of the insurance buyer.

6. The insurance enterprise shall not refuse the insurance buyer's request to purchase additional or sell back units of the unit-linked fund when the insurance buyer has met the conditions stipulated in Clauses 2 and 3 of this Article.

Article 22. Investment Council

1. Insurance enterprises must establish an Investment Council to carry out the following activities:

a) Approve the investment regulations, policies, and procedures for each unit-linked fund on the most cautious basis to ensure the safety of assets of the unit-linked fund and be consistent with the investment objectives and strategies of each unit-linked fund announced to customers. Any changes in the investment regulations, policies, and procedures of each unit-linked fund must be approved by the Investment Council before implementation;

b) Decide on closing a unit-linked fund to convert assets into a new unit-linked fund with the same investment objectives; change the name of the unit-linked fund; split or merge existing unit-linked funds or cease valuing unit-linked fund units and transactions related to insurance contracts in special cases specified in the insurance contract to ensure the interests of the policyholder;

c) Approve the selection of investment assets in accordance with the investment limit provisions set forth in Article 18 of this Circular;

d) Other tasks as required by competent state agencies and as stipulated by law.

2. The Investment Council must have at least three (03) members, including:

a) One (01) member who is a calculation specialist of the insurance enterprise;

b) One (01) member holding a Chartered Financial Analyst (CFA) certificate or equivalent qualification and having at least three (03) years of experience managing open-ended fund or unit-linked fund operations;

c) One (01) member who is a lawyer, specialized in law in the field of investment.

3. The Investment Council must hold regular quarterly meetings and may convene extraordinary meetings upon request of the insurance enterprise. Decisions of the Investment Council are adopted through voting at direct meetings, teleconferences, internet, or other audiovisual means, or by written ballot.

Article 23. Fund Management Company

1. When implementing unit-linked insurance products, insurance enterprises must entrust a fund management company with experience in managing member funds to conduct investments of unit-linked fund assets according to the investment limits, objectives, and strategies of each unit-linked fund and current laws.

2. The fund management company must separately manage the investment assets from the unit-linked fund of the insurance enterprise from other funds of the insurance enterprise and other clients. The fund management company shall not use the assets of the unit-linked fund for any transaction or purpose other than those specified in the insurance enterprise's trust agreement.

3. At least weekly or shorter intervals agreed upon in the trust agreement and prior to the next valuation date, the fund management company has the responsibility to provide information and values of investment assets to the insurance enterprise, coordinate with the supervisory bank and the insurance enterprise to periodically assess the net asset value of the unit-linked fund and the net asset value per unit of the unit-linked fund, and report on the investment portfolio, valuation, and operational status of the unit-linked fund in accordance with this Circular and Circular No. 183/2011/TT-BTC dated December 16, 2011 of the Ministry of Finance guiding the establishment and management of open-ended funds and the trust agreement between insurance enterprises and fund management companies.

The insurance enterprise is responsible for reconciling the investment amounts of the fund management company with the bank custody account, ensuring that the total balances of individual accounts and the net asset value of the unit-linked fund are always in agreement at each point in time.

4. The fund management company is liable for any errors or losses caused by incorrect valuation under the insurance enterprise's trust agreement for managing the unit-linked fund.

Article 24. Supervisory Bank

1. Insurance enterprises must use a supervisory bank to perform the following tasks:

a) Deposit assets of unit-linked funds in accordance with Circular No. 183/2011/TT-BTC dated December 16, 2011, issued by the Ministry of Finance on establishing and managing open-ended funds;

b) Monitor the management of assets of unit-linked funds by insurance enterprises or fund management companies authorized by insurance enterprises in compliance with investment limits, investment objectives set by insurance enterprises, and current laws at all times. In case of discovering violations of legal provisions and investment trust contracts, the supervisory bank must immediately report to the Ministry of Finance (Insurance Management and Supervision Department) and notify the fund management company within twenty-four (24) hours from the time of discovery, while requesting the implementation of corrections or activities to mitigate the consequences of such violations within the prescribed timeframe;

c) Monitor and ensure the legality, and only pay from the fund's assets for expenditures that comply with legal provisions and the fund's investment objectives;

d) Cooperate with insurance enterprises and fund management companies to periodically review net asset values, value unit-linked funds, net asset value per unit of unit-linked funds, ensuring these values are calculated accurately and in compliance with legal provisions;

đ) Monitor the organization and evaluation of results of consolidation, merger, dissolution, liquidation of unit-linked fund assets in cases where insurance enterprises are permitted to apply such measures;

2. Assets of unit-linked funds deposited with the supervisory bank registered under the name of the insurance enterprise are owned by the unit-linked fund, not by the supervisory bank or the fund management company. The supervisory bank may not use the assets of the unit-linked fund to settle its own debts or those of third parties;

3. The supervisory bank has the responsibility to establish and retain for a period of ten (10) years records and documents in both paper and electronic data file formats to confirm compliance in the investment activities of fund management companies and insurance enterprises compared to the unit-linked fund investment objectives and legal provisions. These documents must be provided upon written request by the Ministry of Finance;

Section 4

Disclosure of Information of Insurance Enterprises

Article 25. Product Introduction Documents

Product introduction documents compiled and used by insurance enterprises must comply with legal provisions and the following requirements:

1. Information in product introduction documents must be accurate, objective, complete, truthful, and consistent with approved unit-linked insurance products by the Ministry of Finance;

2. In addition to general life insurance regulations, product introduction documents for unit-linked products must include the following minimum information:

a) Introduce basic characteristics of unit-linked insurance products;

b) Types of existing unit-linked funds of insurance enterprises, investment policies of each unit-linked fund, types of investment assets, investment asset allocation ratios of each fund, and nature of investment risks;

c) Benefits under unit-linked insurance contracts will fluctuate based on the performance of unit-linked funds, and affirm that the policyholder will enjoy all investment results and bear all investment risks from selected unit-linked funds corresponding to the contract value in the funds;

d) Situations where insurance enterprises may temporarily suspend sales or repurchase units of unit-linked funds;

đ) Allocation ratio of insurance premiums to purchase units of unit-linked funds, calculation methods, and maximum initial fees, fund management fees, risk insurance fees, contract management fees, and other fees. The above information must be accompanied by illustrative examples of how insurance premiums are allocated to purchase units of unit-linked funds;

e) All guaranteed benefits for policyholders must be clearly stated, including death benefits, maturity benefits, and contract cancellation rights. For non-guaranteed benefits, insurance enterprises must clearly inform policyholders;

g) Basis and periodic valuation of assets of unit-linked funds;

h) Performance results of existing unit-linked funds over the last five (5) fiscal years, or the entire period since establishment and operation if shorter than five (5) years. Insurance enterprises must clearly state that this information is past performance for reference purposes and does not guarantee future performance of unit-linked funds. Past investment results used for reference must be consistent with the linked unit products and funds being introduced;

i) Clear information for policyholders to know that entering into a unit-linked insurance contract is a long-term commitment, and policyholders should not cancel the insurance contract due to high cancellation fees payable early in the contract term;

k) Information warning policyholders to comply with insurance contract provisions to ensure their rights and interests.

Article 26. Sales Illustration Materials

Sales illustration materials must comply with legal regulations and the following provisions:

1. Sales illustration materials for unit-linked insurance products must be provided to customers before concluding the insurance contract and must contain minimum information as set out in Appendix II of this Circular.

2. Insurance enterprises must clearly explain to the policy buyer the benefits that the customer may receive upon entering into the insurance contract, including risk insurance benefits and potential benefits from unit-linked funds, even in cases where the income of the unit-linked fund is negative.

3. The actual investment rate of each unit-linked fund must be calculated annually and may differ for each unit-linked fund. Actual investment rates are calculated based on the net profit of the unit-linked fund over the last five years or the actual operating period if the fund has not been operational for five years. Insurance enterprises must clearly inform the policy buyer about the listing of investment rates without considering the difference between purchase and sale prices or other additional fees that may be charged to the policy buyer. Insurance enterprises shall not illustrate investment benefits longer than twenty years.

4. Fees and maximum limits that the policy buyer must pay must be clearly stated, distinguishing between insurance premiums for risk insurance benefits and other fees.

5. In cases where the unit-linked insurance contract includes supplementary insurance benefits, insurance enterprises must clearly present these supplementary benefits and their impact on the policy buyer in the sales illustration materials.

6. Sales illustration materials must be presented clearly, easily understood, and not create unrealistic expectations for the policy buyer regarding the amount that can be received.

Article 27. Disclosure of Information to Policy Buyers

1. Insurance enterprises have the responsibility to accurately, fully, and promptly disclose to policy buyers all information related to concluded unit-linked insurance contracts. The information provided to the policy buyer must be consistent with the unit-linked insurance product approved by the Ministry of Finance.

2. Insurance enterprises have the responsibility to publish on their own websites the following documents:

a) Rules and terms of the insurance product approved by the Ministry of Finance;

b) Product introduction materials;

c) Sales illustration materials for typical cases;

d) Operation status of unit-linked funds;

đ) Unit price of unit-linked funds as stipulated in Articles 19 and 20 of this Circular.

Article 28. Notification to Policy Buyers About Contract Status

Within ninety (90) days from the end of the fiscal year or contract year, insurance enterprises must notify in writing the policy buyer about the following contents:

1. The status of the unit-linked insurance contract including the following information:

a) Quantity and value of units held at the beginning of the reporting year;

b) Total premiums paid and the amount allocated to purchase units during the reporting year;

c) Details of each fee charged to the customer during the year;

d) Quantity and value of units purchased and sold during the reporting year;

đ) Amounts withdrawn by the customer from the contract account balance, any loans taken from the insurance contract (if any);

e) Unit price, quantity, and value of units at the end of the reporting year;

g) Risk insurance benefits and return values at the beginning of the reporting year;

h) Risk insurance benefits and return values at the end of the reporting year.

2. Performance results of each unit-linked fund that the policy buyer holds units in, including the following contents:

a) Summary financial information of the unit-linked fund according to the model in Appendix III of this Circular;

b) Analysis of the performance of the unit-linked funds, including the following contents:

- Investment objectives of the unit-linked funds and asset allocation at the reporting date;

- Changes in investment objectives (if any) and limitations of the unit-linked fund during the year;

- Analysis of the operation of the unit-linked fund over the past five years regarding the net investment rate of the unit-linked fund or the actual operating period if the fund has not been operational for five years;

- Related expenses payable concerning the unit-linked fund and expenses incurred during the year;

- Details of dividends distributed and expected to be distributed during the reporting year; impacts on the net asset value per unit of the unit-linked fund before and after dividend distribution;

- Prospective assessment of investments and planned investment policies of the unit-linked fund, listing some typical cases affecting this assessment;

- Indicators related to investment areas in which the unit-linked fund invests;

- Confirmation by an independent auditing company of the above information.

Article 29. Publication of Unit Investment Fund Prices

1. Insurance enterprises must regularly publish weekly on at least one central newspaper and their website the following contents:

a) The selling price per unit of the unit investment fund;

b) The buying price per unit of the unit investment fund;

c) The net asset value per unit of the unit investment fund.

2. The information publication according to Clause 1 of this Article must be consistent with the pricing period of the unit investment fund of the insurance enterprise and must be carried out on the next working day after the valuation date. Insurance enterprises must ensure that customers can access on their website information about the unit fund values of the three (03) preceding years.

Article 30. Provisions on Information and Advertising of Unit-linked Insurance Products

1. Insurance enterprises may provide information and advertise unit-linked insurance products in accordance with the provisions of the law and shall be responsible for the information they provide.

2. Insurance enterprises, organizations, and individuals related thereto shall not advertise or provide information about unit-linked insurance products before such products have been approved by the Ministry of Finance.

3. Advertising materials must be presented in Vietnamese, easy to understand, unambiguous, and not misleading; information must be truthful, objective, accurate, and up-to-date to the nearest point in time. Specialized concepts and terms must be fully annotated.

4. Advertising materials must clearly state that the unit-linked investment fund is not a financial instrument with fixed income or guaranteed profit. Advertising and product introduction materials for unit-linked insurance products shall not imply that the value of investments always increases; they shall not commit to or forecast positive future investment results of the unit-linked investment fund.

5. Insurance enterprises and insurance agents shall not compare with the intent to advertise and guarantee that the investment results of one unit-linked investment fund are better than another unit-linked investment fund or those of other insurance enterprises.

6. When using third-party opinions, reviews, or ranking results for advertising and introducing unit-linked insurance products, insurance enterprises and related organizations must ensure:

a) Opinions, reviews, or ranking results must be reliable, objective, based on real comparisons, data, and events;

b) Opinions, reviews, or ranking results must be publicly announced or conducted publicly by recognized financial information and statistical service providers;

c) Clearly cite the source including the name of the document, the name of the publishing organization, and the publication date;

d) Ranking results shall not exceed one year (12 months) from the date the unit-linked insurance product was ranked or awarded.

7. Information and advertising about unit-linked insurance products shall not imply that state management agencies guarantee the content of the information and advertising, as well as the investment objectives and strategies, assets, unit fund value, profitability, and risk level of the unit-linked investment fund. Insurance enterprises shall not use the name, symbol, image, status, reputation, or customer thank-you letters of state management agencies or officials and civil servants of these agencies for advertising, introducing, or promoting the sale of unit-linked insurance products.

8. Information and advertising materials about unit-linked insurance products must be printed in bold, clear, and larger font size than other contents in the publication with the following warnings:

a) Customers need to read carefully the product introduction materials, sales illustration materials, rules, and terms before purchasing unit-linked insurance products and pay attention to the fees of the product;

b) Unit-linked insurance products are different from traditional insurance products, customers bear all investment risks corresponding to the premium paid according to the type of risk of the chosen unit-linked investment fund;

c) The account value of the customer's insurance contract may change depending on market conditions, and customers may suffer losses on the premiums paid in case of investment losses;

d) Information about past performance of the unit-linked investment fund (if available) is only for reference and does not mean that these funds will generate profits for customers in the future.

Section 5

Payment Capacity, Business Reserve, and Reporting System

Article 31. Solvency Capacity

1. Insurance enterprises must always maintain solvency capacity in accordance with the provisions of the law.

2. The minimum solvency margin for unit-linked insurance contracts shall be equal to 1.5% of the business reserve plus 0.3% of the amount of risk coverage.

3. The solvency margin of the insurance enterprise must exceed the minimum solvency margin by two hundred (200) billion Vietnamese dong.

Article 32. Establishment of Business Reserves

1. The insurance company must establish an operational reserve as follows:

a) Mathematical reserves, including:

- Insurance risk reserve: the larger amount between the reserve calculated according to the unearned premium method or the reserve calculated according to the cash flow method to cover all future expenses throughout the term of the contract.

- Unit-linked business reserve is the total of the following items:

+ The total number of investment units held by the policyholder on the valuation date multiplied by the purchase price of the fund unit on the valuation date;

+ The total premiums received from the policyholder on the valuation date after deducting the fees charged to the policyholder that remain to be used to purchase fund units but have not yet been executed.

b) Claim reserve: established on a case-by-case basis, the level of which is determined based on statistical data of the amounts payable for claims reported to the insurance enterprise but unresolved by the end of the fiscal year.

c) Solvency resilience reserve: this reserve is used to ensure the insurance enterprise's commitment to customers as agreed upon in the insurance contract when there is significant market volatility.

d) Other reserves approved by the Ministry of Finance.

2. The actuary of the insurance enterprise is responsible for determining the appropriate methods and bases for establishing business reserves in compliance with widely recognized principles and calculation methods according to international practices.

Article 33. Responsibilities of Insurance Enterprises and Reporting System

1. Insurance enterprises operating unit-linked insurance products must comply with the provisions of this Circular and other relevant laws.

2. Based on this Circular and other relevant laws, insurance enterprises shall establish operational procedures for implementing unit-linked insurance products suitable to their conditions, characteristics, and operational regulations.

3. The actuary is responsible for evaluating the insurance enterprise's compliance with the provisions of this Circular during the operation of unit-linked insurance products. The actuary's evaluation report must be submitted to the Ministry of Finance within five (05) working days from the end of the month. In cases where violations by the insurance enterprise are discovered, the actuary must report to the Ministry of Finance within three (03) working days from the date of discovery.

4. Monthly, insurance enterprises must compile information on the operation of unit-linked insurance products to report to the Ministry of Finance in accordance with the form prescribed in Appendix IV issued together with this Circular.

5. Quarterly, insurance enterprises must submit reports to the Ministry of Finance on the establishment of business reserves for unit-linked insurance products in accordance with the form prescribed in Appendix V issued together with this Circular.

6. Insurance enterprises are responsible for cooperating and reporting the actual implementation of unit-linked insurance products according to the requirements of the Ministry of Finance.

Chapter 6

Insurance Agents, Commissions, and Distribution

Article 34. Requirements for insurance agents for unit-linked insurance products

1. To implement unit-linked insurance products, insurance enterprises must ensure the selection of insurance agents who meet the following conditions:

a) Not violating the professional ethics rules of insurance agents as stipulated by the insurance enterprise during their practice as insurance agents;

b) Possessing a certificate to sell unit-linked insurance products in accordance with the provisions of the law. This provision does not apply to insurance agents who have met the standards and been used by the insurance enterprise to sell unit-linked insurance products before this Circular takes effect.

c) Meeting one of the following experience requirements:

- Being an insurance agent and having at least one (01) year of continuous experience in agency activities;

- Being an insurance agent, having at least six (06) months of continuous work experience in the financial, banking, and insurance sectors, and possessing a securities specialty certificate issued by the State Securities Commission; or

- Being an insurance agent, having at least six (06) months of continuous experience in agency activities and holding a college degree or higher in the financial, banking, and insurance sectors.

2. Insurance enterprises shall be responsible for any losses or damages caused by the activities of their insurance agents according to the terms agreed upon in the insurance agency contract.

Article 35. Training Program for Unit-Linked Insurance Agents

1. In addition to general knowledge about insurance agencies, the training program for unit-linked insurance agents must include the following contents:

a) General knowledge about the financial market;

b) Basic knowledge about investment;

c) The content of unit-linked insurance products that the insurance enterprise is permitted to operate;

d) Insurance business laws regarding unit-linked insurance products;

đ) Skills in selling unit-linked insurance products;

e) Practical advice and sales of unit-linked insurance products.

2. The training time for the unit-linked insurance agent training program is regulated as follows:

a) For trainees with a securities specialty certificate issued by the State Securities Commission, the minimum training time is twenty-four (24) hours;

b) For trainees with academic qualifications or work experience in the financial, banking, and insurance sectors, the minimum training time is twenty-eight (28) hours;

c) For other participants, the minimum training time is forty (40) hours;

d) In addition to the initial training time required to obtain a certificate to sell unit-linked insurance products as stipulated in points a, b, and c of Clause 2 of this Article, the regular quarterly training time for unit-linked insurance agents is eight (08) hours.

Article 36. Insurance Commission

The insurance commission for unit-linked insurance products shall be implemented in accordance with the provisions of the law with the maximum commission rate that the insurance enterprise is allowed to pay to insurance agents for each insurance contract as specified in Appendix VI of this Circular.

Article 37. Operational Guidelines

When implementing unit-linked insurance products, insurance enterprises must issue a manual on operational guidelines for unit-linked insurance products, monitor and manage the implementation of this manual, ensuring the following requirements:

1. The manual must be attached to the code of conduct for distributing unit-linked insurance products to ensure that improper actions do not occur in the distribution of unit-linked insurance;

2. Customer insurance application files must include documentation proving that the customer has read, received advice, and understood the chosen unit-linked insurance product;

3. Including the process and requirements for cross-checking the advice results provided by the insurance enterprise for unit-linked insurance contracts;

4. Including the operational procedures related to the distribution of unit-linked insurance products, task allocation, responsibilities, and coordination between departments and units within the insurance enterprise during the distribution of unit-linked insurance products;

5. Including internal checks and controls over the implementation of unit-linked insurance products in accordance with the law;

6. Including uniform regulations on the calculation of fund unit prices;

7. Including regulations on the responsibility for enhancing customer awareness about unit-linked insurance products. Customers participating in unit-linked insurance products must understand the characteristics of the risks of the product, the terms, fees, conditions, and clauses of the insurance contract.

Article 38. Distribution of Unit-Linked Insurance Products

Insurance agency distributing unit-linked insurance products must perform the following tasks:

1. Comply with legal regulations governing insurance agency activities, insurance agency contracts signed with insurance companies, and ethical guidelines issued by insurance companies.

2. Provide advice according to procedures that have been guided and other procedures issued by insurance companies. During the advisory process for customers, insurance agencies must conduct customer information analysis including the customer's needs and financial capacity, assess the customer's risk tolerance level, and provide suitable product recommendations based on these assessments.

3. Insurance agencies must ensure that all customers are clearly informed about the benefits of the product, understand the specific risks of the chosen product before signing the insurance application form; there must be documentation proving that customers have received comprehensive advice, understand the chosen insurance product, and that this product is appropriate for their needs and financial capacity.

4. Insurance agencies must report to insurance companies the results of customer consultations, including basic customer information and financial capacity for insurance participation; simultaneously, they must narrate the insurance advisory process. This report is part of the insurance application form.

5. Insurance agencies shall not influence or encourage customers to replace or cancel existing insurance contracts to enter into unit-linked insurance contracts.

Chapter III

IMPLEMENTATION

Article 39. Supervision and Handling of Violations

1. Insurance companies, insurance agencies, organizations, and individuals related to the business of unit-linked insurance products are subject to supervision by the Ministry of Finance (Insurance Management and Supervision Department) in accordance with legal provisions.

2. The Insurance Management and Supervision Department is responsible for quarterly evaluations of the implementation of unit-linked insurance products; coordinating with relevant units to report to the Minister of Finance for amendments and supplements to this Circular to align with practical circumstances.

3. Insurance companies, insurance agencies, organizations, and individuals related to violations will be handled in accordance with legal provisions.

Article 40. Effective Date

1. This Circular takes effect from October 1, 2012.

2. This Circular replaces Decision No. 102/2007/QĐ-BTC dated December 14, 2007 of the Minister of Finance on the issuance of the Implementation Regulations for Unit-Linked Insurance Products.

3. Within twelve (12) months from the date this Circular takes effect, insurance companies that have implemented unit-linked insurance products under Decision No. 102/2007/QĐ-BTC shall fulfill all provisions of this Circular.

4. In the course of implementation, if there are difficulties or obstacles, they should promptly reflect them to the Ministry of Finance for consideration and resolution./.