Decree No. 18/2005/NĐ-CP On the establishment, organization, and operation of mutual insurance organizations

DECREE OF THE GOVERNMENT

Regulations on establishment, organization, and operation
of mutual insurance organizations

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Insurance Business Law dated December 9, 2000;

At the proposal of the Minister of Finance,

DECREE:

PART I
GENERAL PROVISIONS

Article 1. Scope of application

This Decree stipulates the establishment, organization, and operation of mutual insurance organizations operating in the insurance business sector.

Article 2. Principles of organization and operation of mutual insurance organizations

Mutual insurance organizations shall be organized and operate according to the following principles:

1. A mutual insurance organization is an entity with legal personality established for the purpose of conducting insurance business aimed at mutual assistance and support among members who are organizations and individuals of Vietnam operating in the same field, profession, or residing in the same area and facing similar risks.

The name of a mutual insurance organization must clearly reflect its mutual nature and must include the phrase "Mutual Insurance," abbreviated as "MHTH."

2. Members of a mutual insurance organization are both the purchasers of insurance and the owners of the mutual insurance organization.

3. All members of a mutual insurance organization have the right to participate in management, inspection, and supervision of the organization's activities.

4. A mutual insurance organization bears responsibility for the results of its business operations within the scope of its capital and assets.

Article 3. Rights of mutual insurance organizations

Mutual insurance organizations have the following rights:

1. To possess, use, and dispose of property under their ownership.

2. To conduct insurance business activities in accordance with the provisions of the law.

3. To determine the level of insurance premiums that members must contribute; to accept or reject insurance according to the Charter of the mutual insurance organization and other relevant legal provisions.

4. To proactively choose insurance lines of business, areas of operation, scale, and organizational structure suitable for their needs.

5. To decide on income distribution and handling of losses of the mutual insurance organization according to the Charter of the mutual insurance organization and other relevant legal provisions.

6. Other rights as prescribed by law.

Article 4. Obligations of mutual insurance organizations

Mutual insurance organizations have the following obligations:

1. To operate within the scope, territory, and lines of business specified in the License for Establishment and Operation.

2. To comply with legal regulations on accounting and financial systems.

3. To preserve and develop business capital in accordance with the law.

4. To bear responsibility for debts and other financial obligations of the organization within the limits of the organization's assets.

5. To ensure the rights of members and fulfill commitments made to members of the mutual insurance organization.

6. To pay taxes and fulfill other financial obligations as prescribed by law.

7. Other obligations as prescribed by law.

PART II
MEMBERS

Article 5. Minimum number of members of mutual insurance organizations

1. The minimum number of members of a mutual insurance organization shall not be less than ten members.

2. In cases where the number of members of a mutual insurance organization is lower than the minimum number prescribed in Clause 1 of this Article, the mutual insurance organization must immediately report to the Ministry of Finance about the current situation, reasons, and measures to address the issue.

If a mutual insurance organization cannot increase its membership as approved by the Ministry of Finance, the Ministry of Finance will base its decision to terminate the organization's operations or convert the mutual insurance organization into another form of insurance enterprise as prescribed by law on the specific circumstances.

Article 6. Founding members of mutual insurance organizations

1. Founding members of mutual insurance organizations are organizations and individuals meeting the conditions prescribed by law, participating in establishing the mutual insurance organization, and committing to purchase insurance from the mutual insurance organization immediately after it receives the License for Establishment and Operation.

2. Founding members shall not enjoy any preferential treatment compared to other members of the mutual insurance organization unless otherwise provided in the Charter of the mutual insurance organization.

Article 7. Members of mutual insurance organizations

Organizations and individuals meeting the conditions to conclude insurance contracts as prescribed by law and having concluded insurance contracts with a mutual insurance organization are members of the mutual insurance organization.

Article 8. Rights of members of mutual insurance organizations

Members of mutual insurance organizations have the following rights:

1. To enjoy benefits according to insurance contracts concluded with the mutual insurance organization.

2. To benefit from the results of the mutual insurance organization's business operations as prescribed in the Charter of the mutual insurance organization.

3. To attend or authorize others to attend the General Meeting of Members of the mutual insurance organization; to nominate and vote for positions in the management body and other elected positions of the mutual insurance organization as prescribed in the Charter of the mutual insurance organization.

4. Other rights as prescribed by law.

Article 9. Obligations of members of mutual insurance organizations

Members of mutual insurance organizations have the following obligations:

1. To fulfill the obligations of the insured party as stipulated in the insurance contract and the law on insurance business.

2. To comply with the Charter, internal rules, and operational regulations of the mutual insurance organization and resolutions adopted at the General Meeting of Members.

3. To be responsible for debts and losses of the mutual insurance organization within the limit of insurance premiums paid to the mutual insurance organization.

4. Founding members of mutual insurance organizations must commit to purchasing insurance from the mutual insurance organization immediately after it receives the License for Establishment and Operation.

5. Other obligations as prescribed by law.

Article 10. Termination of member status in mutual insurance organizations

1. Member status in mutual insurance organizations terminates in any of the following cases:

a) The insurance contract between the member and the mutual insurance organization terminates or is transferred according to legal provisions;

b) The member of the mutual insurance organization is an individual who has died; or the member is an organization that has been dissolved, declared bankrupt, merged, consolidated, or ceased operations;

c) Other cases as prescribed in the Charter of the mutual insurance organization.

2. Unless otherwise provided in the Charter of the mutual insurance organization or in the insurance contract, founding members shall not unilaterally terminate their membership status within three years from the date the mutual insurance organization is granted the License for Establishment and Operation.

3. The settlement of rights and obligations towards members in cases stipulated in Clause 1 of this Article shall be carried out in accordance with the provisions of the Charter of the mutual insurance organization and the insurance contracts concluded with the mutual insurance organization.

CHAPTER III
LICENSE FOR ESTABLISHMENT AND OPERATION

Article 11. Issuance of the License for Establishment and Operation of Mutual Insurance Organizations

The issuance of the License for Establishment and Operation for mutual insurance organizations shall be carried out in accordance with the relevant provisions of the Law on Insurance Business and guiding documents. The Ministry of Finance shall provide specific guidance on matters related to the issuance of the License for Establishment and Operation of mutual insurance organizations.

Article 12. Contracts signed prior to the issuance of the License for Establishment and Operation

1. Founding members may conclude contracts for the establishment of a mutual insurance organization.

2. In case the mutual insurance organization is established, that organization shall be the successor to the rights and obligations arising from the contracts concluded under Clause 1 of this Article, unless otherwise agreed.

3. In case the mutual insurance organization is not established, the founding members shall be responsible for the performance of such contracts.

Article 13. Capital Contribution for the Establishment of Mutual Insurance Organizations

The capital for establishing a mutual insurance organization shall be contributed in cash or negotiable instruments convertible into cash deposited into a frozen account opened at a bank permitted to operate in Vietnam. The freezing of the account shall be lifted immediately upon issuance of the License for Establishment and Operation to the mutual insurance organization.

Article 14. Charter of the Mutual Insurance Organization

1. The Charter of the mutual insurance organization must comply with the provisions of this Decree and other relevant laws.

2. The Charter of the mutual insurance organization shall be drafted by the founding members when preparing to establish the mutual insurance organization and must bear the signatures of the founding members.

3. The Charter of the mutual insurance organization includes the following main contents:

a) The proposed name and location of the headquarters of the mutual insurance organization; the emblem of the mutual insurance organization (if any).

b) The purpose of establishing the mutual insurance organization;

c) Scope of business, geographical area of operation; duration of operation;

d) Determination of member status, rights and obligations of members of the mutual insurance organization;

đ) Voting mechanism of members;

e) Name, address, rights and obligations of founding members of the mutual insurance organization; legal representative;

f) Initial capital of the mutual insurance organization; methods of contribution, return of initial capital and related costs for establishing the mutual insurance organization;

g) Financial regulations; principles and bases for reducing insurance premiums; methods of distributing business results;

h) Organizational structure, management system, working regime of the General Assembly of Members, Board of Directors, Management Board, Supervisory Board; remuneration system for managers and executives; election procedures, decision-making processes; internal dispute resolution principles;

i) Other contents of the Charter of the mutual insurance organization agreed upon by members but not contrary to the provisions of the law.

4. The revocation, replacement, supplementation, or amendment of the Charter of the mutual insurance organization shall be decided by the General Assembly of all members.

Article 15. Branches, Representative Offices

The establishment of branches and representative offices of mutual insurance organizations shall be carried out in accordance with the applicable laws governing other types of insurance enterprises.

PART IV
ORGANIZATION, MANAGEMENT, AND OPERATIONS

Article 16. Organizational Structure and Management of Mutual Insurance Organizations

A mutual insurance organization consists of: The General Assembly of Members, Board of Directors, Director (General Director), and Supervisory Board.

Article 17. The General Assembly of Members of the Mutual Insurance Organization

1. The General Assembly of Members is the highest decision-making body of the mutual insurance organization. The General Assembly of Members of the mutual insurance organization includes: the founding assembly, annual general assembly, and extraordinary general assembly.

2. The founding assembly of the mutual insurance organization shall be held according to the following provisions:

a) Within the latest three months from the date the Ministry of Finance grants the License for Establishment and Operation, the founding members must convene the founding assembly of the mutual insurance organization with the participation of all founding members.

b) The founding assembly shall discuss and vote on the following basic issues:

- The Charter of the mutual insurance organization;

- The organizational structure and management of the mutual insurance organization.

c) Decisions adopted at the founding assembly shall only be valid if they are approved by all founding members and endorsed by the Ministry of Finance.

3. The annual general assembly convened by the Board of Directors shall be held at least once a year within three months from the end of the fiscal year.

4. An extraordinary general assembly of the mutual insurance organization shall be convened in the following circumstances:

a) An extraordinary general assembly convened by the Board of Directors or the Supervisory Board of the mutual insurance organization to decide on necessary issues exceeding the authority of the Board of Directors or the Supervisory Board as prescribed in this Decree and the Charter of the mutual insurance organization.

b) If at least one-third of the total number of members request the convening of the General Assembly and submit a valid petition to the Board of Directors or the Supervisory Board, then within fifteen days from the receipt of sufficient valid petitions, the Board of Directors must convene the General Assembly. If the Board of Directors fails to convene the Extraordinary General Assembly within this period, the Supervisory Board must convene it to resolve the issues raised in the petition.

Article 18. Chapter Program and Agenda of the Members' Congress

1. The convener of the Members' Congress must prepare the program and agenda for the meeting.

2. In cases of extraordinary congresses as stipulated in point b, Clause 4, Article 17 of this Decree, a group of members representing at least one-third (1/3) of the total number of members of the mutual insurance organization has the right to propose issues to be included in the congress agenda. Such proposals must be in writing and submitted to the mutual insurance organization no later than three (3) days before the opening date. The proposal must clearly state the names of supporting members and the content of the proposed issue.

3. The convener of the Members' Congress only has the right to reject proposals as provided in Clause 2 of this Article if any of the following circumstances occur:

a) The proposal is not submitted within the prescribed time limit or does not meet the required content.

b) The proposed issue is outside the decision-making authority of the Members' Congress.

c) Other circumstances specified in the Charter of the mutual insurance organization.

Article 19. Notice of Convocation of the Members' Congress

1. At least ten (10) days prior to the opening of the Members' Congress, the convener must send an invitation letter informing each member of the time and place of the meeting. The agenda of the congress and discussion materials serving as the basis for making decisions must accompany the invitation letter.

2. The Members' Congress shall only discuss and decide on issues listed in the congress agenda and newly arising issues when at least one-third (1/3) of the total number of members of the mutual insurance organization propose them.

Article 20. Rights to Attend the Members' Congress

1. Members may attend the Members' Congress either directly or by authorizing another person in writing.

2. In cases where an insurance contract is transferred during the period from the date of compiling the membership list to the opening date of the Members' Congress, the transferee has the right to attend the Members' Congress.

Article 21. Content of the Members' Congress

The Member Congress discusses and decides on the following matters:

1. Report on the results of business operations in the year of the mutual insurance organization, report on the activities of the Board of Directors, Management Board, and Supervisory Board.

2. Plan of operations, business and financial plan for the next year of the mutual insurance organization.

3. Return of capital, establishment of funds according to the provisions of the law, reduction of insurance premiums for members in the next fiscal year as proposed by the Board of Directors.

4. Decision on additional capital raising.

5. Election, removal of members of the Board of Directors and Supervisory Board.

6. Merger, division, consolidation, and dissolution of the mutual insurance organization.

7. Amendment and supplementation of the Charter of the mutual insurance organization.

8. Remuneration for members of the Board of Directors, Management Board, Supervisory Board, and other positions (if any) of the mutual insurance organization.

9. Other issues proposed in writing by the Board of Directors or by at least one-third (1/3) of the total number of members of the mutual insurance organization.

Article 22. Provisions on the Number of Participants and Voting at the Members' Congress

1. The Members' Congress of the mutual insurance organization must have the minimum number of participants as stipulated in the Charter of the mutual insurance organization. If the required number is not met, the congress must be temporarily postponed; the Board of Directors or the Supervisory Board must reconvene the congress. If the second convened meeting still fails to meet the required number of participants, the Members' Congress can proceed regardless of the number of attendees.

2. Decisions to amend the charter, merger, division, consolidation, and dissolution of the mutual insurance organization are adopted when at least three-quarters (3/4) of the total number of present members vote in favor. Decisions on other issues are adopted when more than half (1/2) of the total number of present members vote in favor.

3. Voting at the Members' Congress is conducted in accordance with the provisions of the Charter of the mutual insurance organization.

Article 23. Board of Directors of the Mutual Insurance Organization

1. The Board of Directors is the management body of the mutual insurance organization, having full authority to act on behalf of the mutual insurance organization to make decisions on all matters related to the purpose and interests of the mutual insurance organization, except for those matters within the jurisdiction of the Members' Congress.

2. The Board of Directors has the following rights and responsibilities:

a) Decide on the development strategy of the mutual insurance organization;

b) Propose to the Members' Congress to decide on reducing insurance premiums for members in the next fiscal year; decide or handle losses arising during the course of business;

c) Decide on investment plans;

d) Decide on market development strategies, marketing, and technology; approve purchase, sale, loan, lending contracts, and other contracts valued at or exceeding fifty percent (50%) of the total value of assets recorded in the accounting books of the mutual insurance organization or a lower ratio as specified in the Charter of the mutual insurance organization;

đ) Appoint, dismiss, and remove the Director (General Director) and other key managerial staff of the mutual insurance organization; decide on their salaries and other benefits;

e) Decide on organizational structure, internal management regulations of the mutual insurance organization; open, close branch offices, representative offices, and participate in capital contributions or share purchases of other enterprises;

f) Submit annual financial settlement reports to the Members' Congress;

g) Approve the program, agenda, and materials for the Members' Congress meetings, convene Members' Congress meetings, or carry out procedures to seek opinions for the Members' Congress to adopt decisions;

h) Propose restructuring, conversion of business form, or dissolution of the mutual insurance organization;

i) Other rights and responsibilities as prescribed by law and the Charter of the mutual insurance organization.

3. The Board of Directors adopts decisions through voting at meetings, soliciting opinions in writing, or other methods as prescribed in the Charter of the mutual insurance organization. Each member of the Board of Directors has one vote.

4. The Board of Directors shall consist of no more than eleven members. The term, criteria, specific number, election, and removal of Board of Directors members shall be regulated by the Mutual Insurance Organization's Charter. Members of the Board of Directors shall not concurrently serve as the Chief Accountant, Cashier of the Mutual Insurance Organization, nor shall they be the father, mother, wife, husband, son, daughter, brother, sister, or half-sibling of any other member.

Article 24. Chairman of the Board of Directors

1. The Board of Directors shall elect the Chairman of the Board of Directors from among its members. The Chairman of the Mutual Insurance Organization must be a person with reputation, professional ethics, and experience in insurance business operations. The appointment, change of the Chairman of the Mutual Insurance Organization must be approved by the Ministry of Finance. The Chairman of the Board of Directors may concurrently hold the position of Director (General Director) of the Mutual Insurance Organization, except where otherwise provided for in the Mutual Insurance Organization's Charter.

2. The Chairman of the Board of Directors has the following rights and responsibilities:

a) Develop the program and plan of activities of the Board of Directors;

b) Prepare the agenda, content, and documents for meetings; convene and chair meetings of the Board of Directors;

c) Represent the Board of Directors in signing resolutions and documents adopted by the Board of Directors; organize the adoption of decisions of the Board of Directors in other forms;

d) Monitor the implementation process of the Board of Directors' decisions;

đ) Chair the General Member Meeting;

e) Other rights and duties as prescribed in this Decree and the Mutual Insurance Organization's Charter.

3. In case the Chairman of the Board of Directors is absent or unable to perform assigned tasks, the member authorized by the Chairman of the Board of Directors shall perform the rights and duties of the Chairman of the Board of Directors. If there is no authorized person, the remaining members shall select one of them to temporarily assume the position of Chairman of the Board of Directors.

Article 25. Meetings of the Board of Directors

1. The Chairman of the Board of Directors has the right to convene meetings of the Board of Directors:

a) At least once every quarter, and extraordinary meetings may be convened if necessary;

b) Upon request of the Supervisory Board or other persons as stipulated in the Mutual Insurance Organization's Charter.

2. A meeting of the Board of Directors shall be held when at least two-thirds (2/3) of the total number of members are present. Resolutions of the Board of Directors shall be passed if approved by a majority of the attending members. In case of equal votes, the final decision shall belong to the side with the opinion of the Chairman of the Board of Directors.

3. Procedures for convening and organizing meetings of the Board of Directors shall be regulated by the Charter or internal management regulations of the Mutual Insurance Organization.

4. Meetings of the Board of Directors must be fully recorded in the minutes book. The Chairperson and Secretary shall jointly bear responsibility for the accuracy and truthfulness of the minutes of the Board of Directors' meetings.

Article 26. Removal, Dismissal, and Supplement of Board of Directors Members

1. Board of Directors members shall be removed in the following cases:

a) Losing or being restricted in civil capacity;

b) Resignation;

c) Other cases as prescribed in the Charter of the mutual insurance organization.

2. Board of Directors members shall be dismissed according to the decision of the General Assembly of Members.

3. In case the number of Board of Directors members decreases by more than one-third (1/3) compared to the number specified in the Mutual Insurance Organization's Charter, the Board of Directors must convene a General Assembly of Members within sixty (60) days to elect additional Board of Directors members.

In other cases, the nearest meeting of the General Assembly of Members will elect new members to replace those who have been removed or dismissed.

Article 27. Director (General Director) of the Mutual Insurance Organization

1. The Board of Directors shall appoint one of its members or another person as Director (General Director). The Chairman of the Board of Directors may concurrently hold the position of Director (General Director) of the Mutual Insurance Organization. In case the Mutual Insurance Organization's Charter does not provide that the Chairman of the Board of Directors is the legal representative, then the Director (General Director) shall be the legal representative of the Mutual Insurance Organization.

The Director (General Director) is responsible for daily operations of the Mutual Insurance Organization and is accountable to the Board of Directors for the performance of assigned rights and duties.

The Director (General Director) of the Mutual Insurance Organization must be a person with reputation, professional ethics, practical experience in managing business or state administration in insurance for at least three (3) years and must reside in Vietnam during their tenure.

The appointment, change of the Director (General Director) of the Mutual Insurance Organization must be approved by the Ministry of Finance.

2. The Director (General Director) shall have the following rights and duties:

a) Decide on all issues related to the daily operations of the Mutual Insurance Organization, including purchase, sale, loan, lending contracts, and other contracts valued under fifty percent (50%) of the total asset value recorded in the organization's accounting books;

b) Organize the implementation of Board of Directors' decisions;

c) Organize the implementation of business plans and investment schemes of the Mutual Insurance Organization;

d) Propose organizational structure arrangements and internal management regulations of the Mutual Insurance Organization;

đ) Appoint, remove, and dismiss managerial positions in the Mutual Insurance Organization, except for positions appointed, removed, or dismissed by the Board of Directors;

e) Determine salaries and allowances (if any) for employees in the Mutual Insurance Organization, including managerial staff within the authority of the Director (General Director);

f) Other rights and duties as prescribed by law, the Mutual Insurance Organization's Charter, and decisions of the Board of Directors.

Article 28. Obligations of Managers of the Mutual Insurance Organization

The Board of Directors, Director (General Director), and other managerial staff of the Mutual Insurance Organization within their scope of responsibility and authority shall have the following obligations:

1. To perform assigned rights and duties honestly and diligently for the benefit of the Mutual Insurance Organization and its members.

2. Shall not abuse position and authority, use the assets of the mutual insurance organization to gain personal profit for oneself or others; shall not transfer the assets of the mutual insurance organization to others; shall not disclose the secrets of the mutual insurance organization except with the approval of the Board of Directors.

3. When the mutual insurance organization fails to pay off all debts and other financial obligations due:

a) Shall notify the financial situation of the mutual insurance organization to all creditors;

b) Shall not increase salaries, nor pay bonuses to employees of the mutual insurance organization, including managers;

c) Shall be personally liable for damages caused to creditors due to non-compliance with the obligations stipulated in points a and b of this clause;

d) Shall propose measures to address financial difficulties of the mutual insurance organization;

4. Other obligations prescribed by law and the charter of the mutual insurance organization.

Article 29. Rights and Duties of the Supervisory Board

1. The mutual insurance organization must have a Supervisory Board consisting of three to five members elected by the General Assembly, at least one of whom must be a specialist in accounting. The Supervisory Board elects one member as Chairperson; the Chairperson of the Supervisory Board must be a member of the mutual insurance organization. The rights and duties of the Chairperson of the Supervisory Board are regulated by the Charter of the mutual insurance organization.

2. The Supervisory Board has the following rights and duties:

a) To check the legality and rationality in management, operation, accounting records, and financial reports;

b) To review the annual financial report of the mutual insurance organization; to inspect specific issues related to management and operation of the mutual insurance organization when deemed necessary or according to the decision of the General Assembly, upon request of members as stipulated in Clause 3, Article 21 of this Decree;

c) To regularly inform the Board of Directors about the results of operations; to consult with the Board of Directors before submitting reports, conclusions, and recommendations to the General Assembly;

d) To report to the General Assembly on the accuracy, truthfulness, and legality of record keeping, storage of documents, and accounting books, financial reports, and other reports of the mutual insurance organization; the truthfulness and legality in management and operation of business activities of the mutual insurance organization;

đ) To propose supplementary, amendment, and improvement measures for the organizational structure of management and operation of business activities of the mutual insurance organization;

e) Other rights and duties as prescribed by this Law and the Charter of the mutual insurance organization.

The inspection activities stipulated in points a and b of this clause shall not obstruct the normal operation of the Board of Directors, nor cause disruption in daily business operations of the mutual insurance organization.

Article 30. Persons Not Eligible to Be Members of the Supervisory Board

1. Members of the Board of Directors, General Director (Chief Executive Officer); spouse, parent, adoptive parent, child, adoptive child, sibling of members of the Board of Directors, of the General Director (Chief Executive Officer), Chief Accountant of that mutual insurance organization.

2. Persons currently being pursued for criminal responsibility or serving a prison sentence or deprived of their profession by the Court for committing smuggling, producing counterfeit goods, selling counterfeit goods, illegal business operations, tax evasion, deceiving customers, and other crimes as prescribed by law.

Article 31. Other Issues Related to the Supervisory Board

The term of office of the Supervisory Board, working system, and remuneration for members of the Supervisory Board are regulated by the Charter of the mutual insurance organization or decided by the General Assembly.

The Supervisory Board is responsible to the General Assembly for any violations causing damage to the mutual insurance organization while performing its duties.

CHAPTER V
FINANCE, ACCOUNTING, AND FINANCIAL REPORTS

Article 32. Statutory Capital

1. The statutory capital of the mutual insurance organization shall not be less than 10 billion VND. For mutual insurance organizations operating in the agricultural insurance sector, the statutory capital may be lower than the aforementioned level, implemented according to separate guidelines.

2. The Ministry of Finance shall provide detailed guidance on the statutory capital of the mutual insurance organization for each field and industry.

Article 33. Sources of Capital

The sources of capital for establishing a mutual insurance organization include:

1. Contributions from founding members.

2. Advance premiums from members;

3. Other lawful sources as prescribed by law.

Article 34. Deposit Guarantee

1. Within sixty days from the date of issuance of the license for establishment and operation, the mutual insurance organization must deposit a portion of its own capital with a commercial bank operating in Vietnam. The deposit guarantee earns interest as agreed with the depositing bank.

2. The amount of the deposit guarantee is 5% of the statutory capital.

Article 35. Provision for Business Operations

1. The mutual insurance organization must establish a provision for business operations from the premium income of each insurance business for the retained liability of the mutual insurance organization.

2. The provisions for business operations of the mutual insurance organization include:

a) Unearned premium reserve, used to compensate for liabilities that will arise during the validity period of the insurance contract in the following year;

b) Reserve for claims not yet settled, used to compensate for losses that have occurred but have not been claimed or have been claimed but not resolved by the end of the fiscal year;

c) Reserve for large fluctuations in losses, used to compensate when there is a significant fluctuation or large loss that the total retained premium income after setting aside unearned premium reserves and reserves for unsettled claims is insufficient to cover the compensation for the retained liability of the mutual insurance organization;

d) Other types of business operation reserves as guided by the Ministry of Finance.

3. The Ministry of Finance shall specify the levels and methods of establishing business operation reserves for mutual insurance organizations.

Article 36. Distribution of Business Results

1. Profit of a mutual insurance organization is the difference determined between total revenue and total expenses of the mutual insurance organization.

2. The profit of a mutual insurance organization shall be used for the following purposes:

a) Repaying loans for establishing the mutual insurance organization;

b) Establishing mandatory reserve funds and other funds as prescribed by law;

c) Serving as a basis to reduce insurance premiums for insurance contracts renewed in the next fiscal year;

d) Other purposes as stipulated in the Charter of the mutual insurance organization and relevant legal documents.

Article 37. Financial regime, accounting, reporting

The regulations on management, use of capital and assets, investment, solvency, revenue and expenses, mandatory reserve fund, accounting system, statistics, auditing, and financial reporting of mutual insurance organizations shall be implemented in accordance with Decree No. 43/2001/NĐ-CP dated August 1, 2001 of the Government on financial regimes for insurance enterprises and insurance brokerage enterprises and guidelines of the Ministry of Finance.

Chapter VI
STATE MANAGEMENT OF MUTUAL INSURANCE ORGANIZATIONS

Article 38. State management of mutual insurance organizations

1. The Ministry of Finance shall implement state management over the establishment, organization, and operation of mutual insurance organizations, including the following contents:

a) Guiding the implementation of legal documents on mutual insurance organizations; developing policies and systems related to mutual insurance organizations;

b) Issuing and revoking the License for establishment and operation of mutual insurance organizations;

c) Issuing, approving, and guiding the implementation of rules, terms, premium rates, and insurance commissions that mutual insurance organizations intend to apply;

d) Applying necessary measures to ensure that mutual insurance organizations meet financial requirements and fulfill commitments to policyholders;

đ) Assisting in training and building a team of managers and professionals in insurance for mutual insurance organizations;

e) Inspecting and supervising insurance business operations, compliance with financial regimes of mutual insurance organizations; resolving complaints and accusations and handling violations of law related to mutual insurance organizations;

2. Ministries, agencies at the level of ministries, and government agencies within their respective functions, tasks, and authorities shall have the responsibility to manage state affairs concerning the organization and activities of mutual insurance organizations in accordance with the law.

3. People's Committees at all levels within their respective functions, tasks, and authorities shall implement state management over the organization and activities of mutual insurance organizations in their localities in accordance with the law.

Article 39. Merger, division, consolidation, conversion of enterprise form, dissolution, bankruptcy of mutual insurance organizations

1. The merger, division, consolidation, conversion of enterprise form, and dissolution of mutual insurance organizations shall be carried out in accordance with relevant legal provisions.

2. Bankruptcy of mutual insurance organizations shall be conducted in accordance with the law on bankruptcy of insurance enterprises.

Article 40. Commendation and handling of violations

Rewards and penalties during the establishment, organization, and operation of mutual insurance organizations shall be implemented in accordance with Chapter VIII of the Insurance Business Law.

Chapter VII
IMPLEMENTING PROVISIONS

Article 41. Effectiveness of the Decree

1. This Decree shall take effect fifteen days after its publication in the Official Gazette.

2. For issues not covered by this Decree, applicable legal provisions on insurance business and related legal provisions shall be applied.

Article 42. Implementation guidance

The Minister of Finance within his/her functional, task, and authority scope shall be responsible for guiding this Decree.

The Ministers, Heads of ministerial-level agencies, Heads of government agencies, Chairpersons of People's Committees of provinces and centrally governed cities are responsible for implementing this Decree./.