Circular No. 194/2014/TT-BTC amending and supplementing certain 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 some provisions of the Insurance Business Law and Decree No. 123/2011/NĐ-CP dated December 28, 2011 of the Government detailing the implementation of some provisions of the Law Amending and Supplementing Certain Provisions of the Insurance Business Law and Circular No. 125/2012/TT-BTC dated July 30, 2012 of the Ministry of Finance guiding the financial regime for insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, and branches of foreign non-life insurance enterprises.

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

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 and

of the Government detailing the implementation of certain provisions of the Insurance Business Law

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

Pursuant to the Insurance Business Law 2000; the Law amending and supplementing some articles of the Insurance Business Law 2010;

Pursuant to Decree No. 45/2007/NĐ-CP dated March 27, 2007 of the Government detailing the implementation of certain provisions of the Insurance Business Law;

Pursuant to Decree No. 46/2007/NĐ-CP dated March 27, 2007 of the Government regulating the financial regime for insurance companies and insurance brokerage companies;

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 some articles of the Insurance Business Law and amending and supplementing some articles 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;

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Pursuant to Decree No. 68/2014/NĐ-CP dated July 9, 2014 of the Government amending and supplementing some articles 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;

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").

Article 1. Amending and supplementing some articles of Circular No. 124/2012/TT-BTC

1. Supplementing Clause d Point 1.2 Clause 1 Article 5 as follows:

“d) The provisions at Clause a, b and c Point 1.2 of this Clause shall not apply to insurance brokerage joint stock companies.”

Pursuant to Decree No. 215/2013/NĐ-CP dated December 23, 2013 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

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

2. Amending Clause 7 Article 7 as follows:

“7. Evidence proving the right to use the proposed main office location and branch locations of the enterprise (if any).”

3. Amending Clause 3 Article 11 as follows:

“3. Within sixty (60) days from the date of receipt of a complete and valid application from the investor, the Ministry of Finance shall issue a License for establishment and operation for insurance enterprises and foreign branches according to the model prescribed in Appendix 2 attached hereto.”

4. Supplementing Clause g Clause 2 Article 12 as follows:

“g) Establishing infrastructure, equipment, and information technology software meeting the requirements for corporate management and state administration over insurance business activities.”

5. Amending Clause 2 Article 13 as follows:

“2. Within fourteen (14) days from the date of receipt of a complete set of documents as stipulated in Clause 1 of this Article, the Ministry of Finance shall issue an Adjusted License according to the model prescribed in Appendix 7 attached hereto. In case of refusal, the Ministry of Finance must provide reasons in writing.”

6. Amending Point c Clause 1 and Point b Clause 2 Article 15 as follows:

a) Amending Point c Clause 1 as follows:

“c) Within fourteen (14) days from the date of receipt of a complete and valid application as stipulated in Point b Clause 1 of this Article, the Ministry of Finance shall issue a written approval or rejection. In case of rejection, the Ministry of Finance must provide reasons. In case of approval, the Ministry of Finance shall issue an Adjusted License according to the model prescribed in Appendix 7 attached hereto.”

b) Amending Point b Clause 2 as follows:

“b) Within fourteen (14) days from the date of receipt of a complete and valid application as stipulated in Point a of this Clause, the Ministry of Finance shall issue a written approval or rejection. In case of rejection, the Ministry of Finance must provide reasons. In case of approval, the Ministry of Finance shall issue an Adjusted License according to the model prescribed in Appendix 7 attached hereto.”

7. Amending Clause 2 Article 16 as follows:

“2. Within fourteen (14) days from the date of receipt of a complete and valid application as stipulated in Clause 1 of this Article, the Ministry of Finance shall issue a written approval or rejection. In case of rejection, the reasons must be explained.”

8. Amending Clause 5 Article 17 as follows:

“5. Within fourteen (14) days from the date of receipt of a complete and valid application as stipulated in Clause 3 of this Article (for insurance companies) and Clause 4 of this Article (for foreign branches), the Ministry of Finance shall issue a written response regarding the approval or rejection of the company's or foreign branch's request. In case of rejection, the reasons must be provided. In case of approval, the Ministry of Finance shall issue an Adjusted License according to the model prescribed in Appendix 7 attached hereto.”

9. Amending Clause 3 Article 21 as follows:

“3. Within fourteen (14) days from the date of receipt of a complete and valid application as stipulated in Clause 2 of this Article, the Ministry of Finance shall issue a written approval or rejection. In case of rejection, the reasons must be provided. If the Ministry of Finance does not respond within the above period, the request for changing the Chairman, General Director (Director) of the insurance company, or changing the General Director (Director) of the foreign branch shall be deemed approved.”

10. Amending and supplementing Clause 4 Article 28 as follows:

“4. Having a minimum of three (03) years of experience working in the insurance field.”

11. Amending Clause 4 Article 32 as follows:

“3. Within fourteen (14) days from the date of receiving complete and valid files as prescribed in Clause 2 of this Article, the Ministry of Finance shall issue a document to approve or refuse approval. In case of refusal, the Ministry of Finance must clearly state the reasons. If beyond the said period the Ministry of Finance does not issue a response, the request for changing the Chairman, General Director (Director) of an insurance company, or changing the General Director (Director) of a foreign branch shall be deemed approved by default.”

10. Amend and supplement Clause 4 of Article 28 as follows:

“4. Having a minimum of three (03) years of work experience in the insurance sector.”

11. Amend Clause 4 of Article 32 as follows:

"4. Within seven (07) days from the date of receiving complete and valid files as prescribed at point b Clause 1 or point b Clause 2 of this Article, the Ministry of Finance shall issue a document to approve or reject the appointment or change of actuarial experts of life insurance companies. In case of rejection, the Ministry of Finance must clearly state the reasons. If the Ministry of Finance does not issue a response within the above period, the appointment or change of actuarial experts of life insurance companies shall be deemed approved."

12. Amend and supplement Article 34 as follows:

"Article 34. Standards and use of actuarial experts for reserve calculation and solvency of non-life insurance companies, health insurance companies, and foreign branches

1. Standards for actuarial experts for reserve calculation and solvency:

a) Being a fellow of the Institute of Actuaries that is a member of the International Actuarial Association; or

b) Having a minimum of five (05) years of experience working in the non-life insurance sector (for non-life insurance companies and foreign branches) or in the health insurance sector (for health insurance companies), and holding a minimum of two certificates issued by one of the following Institutes: The Institute of Actuaries of the United Kingdom, The Institute of Actuaries of Scotland, The Society of Actuaries in the United States, The Institute of Actuaries of Australia, The Canadian Institute of Actuaries;

c) Not being subject to criminal liability for offenses related to their duties;

d) Not having violated the code of conduct for actuaries (for the case where the actuarial expert for reserve calculation and solvency of non-life insurance companies, health insurance companies, and foreign branches is a fellow of the Institute of Actuaries that is a member of the International Actuarial Association).

2. Forms of using actuarial experts for reserve calculation and solvency:

Non-life insurance companies, health insurance companies, and foreign branches may use actuarial experts for reserve calculation and solvency in the following forms:

a) Using employees of non-life insurance companies, health insurance companies, and foreign branches;

b) Hiring actuarial experts from organizations providing actuarial services;

c) Hiring or utilizing actuarial experts from investors, parent companies, or companies within the same group of non-life insurance companies, health insurance companies, and foreign branches.

3. As of January 1, 2016, non-life insurance companies, health insurance companies, and foreign branches must use actuarial experts for business reserve calculation and solvency who meet the standards prescribed in Clause 1 of this Article."

13. Amend and supplement Clause 1 of Article 35 as follows:

"1. Non-life insurance companies, health insurance companies, and foreign branches shall submit to the Ministry of Finance one (01) set of registration files for actuarial experts for business reserve calculation and solvency, including the following documents:

a) In the case of using employees of non-life insurance companies, health insurance companies, and foreign branches:

- A registration application for actuarial experts for business reserve calculation and solvency signed by the Chairman or General Director (Director) of non-life insurance companies, health insurance companies, and foreign branches;

- Academic credentials, certificates (certified copies), and curriculum vitae of the person proposed to be appointed as an actuarial expert for business reserve calculation and solvency of non-life insurance companies, health insurance companies, and foreign branches;

- Criminal record (original) of the person proposed to be appointed as an actuarial expert for business reserve calculation and solvency of non-life insurance companies, health insurance companies, and foreign branches;

- Certificate of membership status (certified copy) and a confirmation letter from the Institute of Actuaries regarding non-violation of the code of conduct for actuaries (original) up to the time of proposed appointment in the case of being a member of the Institute of Actuaries;

- Employment contract (certified copy) or principle agreement (original) signed between non-life insurance companies, health insurance companies, and foreign branches and the person proposed to be appointed as an actuarial expert for business reserve calculation and solvency.

b) In the case of hiring actuarial experts from organizations providing actuarial services:

- Documents prescribed from the first bullet point to the fourth bullet point of point a Clause 1 of this Article;

- Principle agreement (original) on service provision signed between non-life insurance companies, health insurance companies, and foreign branches and organizations providing actuarial services;

- Business license of the organization providing actuarial services (certified copy).

c) In the case of hiring or utilizing actuarial experts from investors, parent companies, or companies within the same group of non-life insurance companies, health insurance companies, and foreign branches:

- Documents prescribed in point a Clause 1 of this Article;

- Agreement or approval document (original) allowing non-life insurance companies, health insurance companies, and foreign branches to hire or utilize actuarial experts from investors, parent companies, or companies within the same group of non-life insurance companies, health insurance companies, and foreign branches."

14. Supplement Clause 2 of Article 37 as follows:

"2. In the case of non-life insurance enterprises, health insurance enterprises, and foreign branches jointly insuring one insured object, the insurance contract must clearly specify the name of the leading non-life insurance enterprise, health insurance enterprise, or foreign branch, and the proportionate share of each non-life insurance enterprise, health insurance enterprise, or foreign branch in the joint insurance. The enterprises and foreign branches jointly insuring must bear joint responsibility for the commitments in the insurance contract with the policyholder."

15. Amend Clause 5 of Article 39 as follows:

"5. The approval period for life insurance products and health insurance products"

Within twenty-one (21) days from the date of receiving complete valid files as stipulated in Clause 3 of this Article, the Ministry of Finance shall issue a document to approve or reject approval. In the event of rejection, the Ministry of Finance must clearly state the reasons."

16. Amend and supplement Clause 2 of Article 40 as follows:

"2. In the case where the results of operating insurance business of a type of insurance business incur losses for two (02) consecutive fiscal years and affect the rights of the policyholder, the non-life insurance enterprise or foreign branch must immediately report to the Ministry of Finance on the current situation, causes, and remedial measures for that type of insurance business and implement according to the requirements of the Ministry of Finance."

17. Supplement Point 3.6 of Clause 3 and Clause 6 of Article 41 as follows:

a) Supplement Point 3.6 of Clause 3 as follows:

"3.6. The maximum commission for insurance contracts under the suretyship insurance business is ten percent (10%)."

b) Supplement Clause 6 as follows:

"6. Life insurance enterprises shall unify the payment levels of commissions and management fees for agents between agents currently working at the enterprise and those recruited from other life insurance enterprises."

18. Amend and supplement Article 49 as follows:

"Article 49. Training, Examination, and Issuance of Insurance Agent Certificates

1. Insurance agent training institutions shall conduct insurance agent training in accordance with Articles 31 and 32 of Decree No. 45/2007/NĐ-CP dated March 27, 2007, detailing certain provisions of the Law on Insurance Business.

2. The Ministry of Finance (Insurance Management and Supervision Department) shall directly or cooperate with insurance agent training institutions to organize examinations and prepare examination questions in compliance with current laws on insurance business and approve the results of insurance agent certificate examinations.

3. Based on the examination results of insurance agent certificates approved by the Ministry of Finance (Insurance Management and Supervision Department), insurance agent training institutions shall issue insurance agent certificates in the form prescribed in Appendix 12 issued together with this Circular.

4. Insurance enterprises and foreign branches shall issue cards to their insurance agents. The insurance agent card must clearly indicate the agent's full name, agent code, and photograph. Insurance agents are responsible for wearing the card while performing insurance agency activities."

19. Amend Clause 3 of Article 57 as follows:

"3. Within seven (07) days from the date of receiving complete valid files as stipulated in Clause 2 of this Article, the Ministry of Finance shall issue the Adjusted License in the form prescribed in Appendix 20 issued together with this Circular. In the event of rejection, the Ministry of Finance shall issue a written response stating the reasons."

20. Amend Clause 4 of Article 59 as follows:

"4. Within fourteen (14) days from the date of receiving complete files for extension of operations, the Ministry of Finance shall issue a document to approve or reject approval. In the event of rejection, the reasons must be explained."

21. Repeal Clause 6 of Article 4.

22. Repeal Article 48.

Article 2. Amending and supplementing some articles of Circular No. 125/2012/TT-BTC

1. Amending and supplementing subitem a of point 3.1 and subitem a of point 3.2 Clause 3 Article 4 as follows:

a) Amending and supplementing subitem a of point 3.1 as follows:

“a) Regarding the scope of operation: Insurance companies are allowed to open branches within the territory of Vietnam.”

b) Amending and supplementing subitem a of point 3.2 as follows:

“a) In the case of opening a branch outside the territory of Vietnam, insurance companies must comply with the provisions of Clause 2 Article 12 of this Circular.”

2. Amending and supplementing Clause 3 and the second bullet point of subitem b of point 4.1 Clause 4 Article 8 as follows:

c) Amending and supplementing Clause 7 as follows:

“3. Life insurance companies shall not change the method and basis for setting up reserves for insurance business operations during the fiscal year. In the event of changing the method and basis for setting up reserves for insurance business operations for the next fiscal year, life insurance companies must request and obtain approval in writing from the Ministry of Finance before implementation.

In cases where there is a risk of insolvency or significant fluctuations in mortality rates, technical interest rates, the Ministry of Finance may require or permit, upon the request of life insurance companies, changes to the method and basis for setting up reserves for insurance business operations as appropriate.”

b) Amending and supplementing the second bullet point of subitem b of point 4.1 Clause 4 as follows:

“- Basis for setting up: The CSO1980 mortality table, maximum technical interest rate not exceeding eighty percent (80%) of the average government bond interest rate for a ten-year term issued in the six (06) months immediately preceding the reserve establishment date, and other technical bases consistent with the benefits guaranteed by life insurance companies in approved insurance products. If there are no ten-year government bonds issued in the six (06) months immediately preceding the reserve establishment date, then the interest rate of the most recent ten-year government bond issued prior to the reserve establishment date shall be used.”

3. Amending the first bullet point of subitem b of point 1.1 Clause 1 and subitem b of point 2.4 Clause 2 Article 12 as follows:

a) Amending the first bullet point of subitem b of point 1.1 Clause 1 as follows:

“- Non-life insurance companies, health insurance companies, reinsurance companies, and foreign branches shall implement investments in accordance with Clause 1 Article 14 of Decree No. 46/2007/NĐ-CP;”

b) Amending subitem b of point 2.4 Clause 2 as follows:

“b) Within fourteen (14) days from the date of receiving complete and valid documents, the Ministry of Finance shall issue a written response regarding approval or rejection. In the case of rejection, the reasons must be clearly stated.”

4. Amending and supplementing item c and adding items d and đ of point 1.1 Clause 1 Article 18 as follows:

a) Amending and supplementing item c as follows:

“c) When the insurance contract has been concluded, non-life insurance companies, health insurance companies, and foreign branches shall agree with the policyholder on the payment period for insurance premiums (including extension periods). The payment period for insurance premiums must be specified in the insurance contract, specifically as follows:

- For a single premium payment: The payment period for insurance premiums shall not exceed thirty (30) days from the effective date of the insurance contract. In cases where the insurance period is less than thirty (30) days, the payment period for insurance premiums shall not exceed the insurance period.

Non-life insurance companies, health insurance companies, and foreign branches shall recognize revenue from insurance premiums that the policyholder must pay according to the insurance contract when the insurance contract becomes effective.

- For periodic premium payments: The payment period for the first installment of insurance premiums shall not exceed thirty (30) days from the effective date of the insurance contract. This provision does not apply to subsequent installments.

Non-life insurance companies, health insurance companies, and foreign branches shall recognize revenue from the first installment of insurance premiums when the insurance contract becomes effective and only recognize revenue from subsequent installments when the policyholder has paid the agreed-upon insurance premiums.

- If the policyholder fails to pay the full insurance premium within the payment period, the insurance contract will automatically terminate upon expiration of the payment period.

If no insured event occurs within the payment period, non-life insurance companies, health insurance companies, and foreign branches shall be entitled to revenue from insurance premiums corresponding to the payment period, and shall reduce revenue corresponding to the period during which the insurance contract does not generate liability for insurance coverage.

If an insured event occurs within the payment period, non-life insurance companies, health insurance companies, and foreign branches shall have the obligation to compensate for insurance claims and pay insurance proceeds and are permitted to collect the full amount of insurance premiums due according to the insurance contract.

- For cargo transportation insurance for customers with multiple shipments covered by insurance in a year and travel insurance for customers with multiple trips covered by insurance in a year, if non-life insurance companies, health insurance companies, and foreign branches and the policyholder have signed a principle insurance contract (or blanket insurance contract) specifying the manner of participation in insurance and payment methods, the payment period for insurance contracts signed in the current month shall not be later than the twenty-fifth (25th) day of the following month.”

b) Adding item d as follows:

“d) When the insurance contract has been concluded and non-life insurance companies, health insurance companies, and foreign branches agree to allow the policyholder to owe insurance premiums. The debt must be stipulated in the insurance contract and can only be applied when the policyholder provides collateral or a guarantee for the payment of insurance premiums.”

In the case where insurance fees are secured by collateral, non-life insurance enterprises, health insurance enterprises, foreign branches, and the insured party shall act in accordance with the provisions of the law on secured transactions.

In the case where insurance fees are guaranteed by payment guarantees, the organization providing such payment guarantees must have the function of providing guarantee services and must have a payment guarantee contract for insurance fees.

c) Supplement paragraph đ as follows:

“đ) When the insurance contract has been concluded and the life insurance enterprise agrees with the insured party on the payment of insurance premiums according to the periods specified in the insurance contract, the life insurance enterprise shall record revenue from the corresponding premium amount for each period or multiple periods that have already occurred, without recording revenue from premiums that have not yet reached their due date as agreed upon in the insurance contract.”

5. Amend and supplement the second bullet point of Point h Clause 1 Article 19 as follows:

“- Rewards and support for non-life insurance agents and health insurance agents corresponding to insurance contracts developed within the fiscal year shall not exceed 50% of the commission rate for each type of insurance business as stipulated in Points 3.1, 3.3, and 3.4 Clause 3 Article 41 Circular No. 124/2012/TT-BTC.”

6. Add Section 7a following Section 7 as follows:

SEPARATION OF OWNERSHIP CAPITAL AND INSURANCE PREMIUMS IN NON-LIFE INSURANCE AND HEALTH INSURANCE

Article 27a. Responsibilities of non-life insurance enterprises, health insurance enterprises, and foreign branches

1. As of January 1, 2016, non-life insurance enterprises, health insurance enterprises, and foreign branches must separate ownership capital from insurance premiums collected from insured parties. Specifically as follows:

a) Track revenues and expenses from insurance operations separately for each type of insurance business.

b) Record and track investments from ownership capital and idle funds from reserve accounts separately.

c) Track revenues and financial activity expenses related to investments from ownership capital and idle funds from reserve accounts separately.

d) Revenues and expenses directly related to any activity of non-life insurance enterprises, health insurance enterprises, and foreign branches shall be recorded directly for that activity. Common revenues and expenses must be allocated reasonably and consistently.

2. The Board of Directors (Board of Members, Company Chairman) is responsible for establishing regulations and principles for allocating common revenues and expenses as stipulated in Point d Clause 1 of this Article and supervising the implementation of these regulations and principles.

3. Quarterly, non-life insurance enterprises, health insurance enterprises, and foreign branches are responsible for reporting to the Ministry of Finance on the implementation of the separation of ownership capital and insurance premiums as prescribed in Clause 1 of this Article.

7. Supplement Point 1.6 Clause 1 Article 29 as follows:

“1.6. The provisions at points 1.1, 1.2, 1.3, and 1.4 of this clause shall not apply to joint-stock insurance brokerage companies.”

8. Repeal paragraph c of Point 3.2 Article 4.

9. Repeal Clause 4 Article 11.

Article 3. Implementation Organization

1. This Circular takes effect from February 1, 2015.

2. Any difficulties encountered during implementation should be promptly reported to the Ministry of Finance for consideration and resolution.