Circular No. 220/2010/TT-BTC guiding the implementation of compulsory fire and explosion insurance regime

CIRCULAR

Guidelines for Implementing Compulsory Fire and Explosion Insurance

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

Pursuant to the Government Decree No. 35/2003/NĐ-CP dated April 4, 2003 detailing the implementation of certain provisions of the Law on Fire Prevention and Combating;

Pursuant to the Government Decree No. 130/2006/NĐ-CP dated November 8, 2006 on the compulsory fire and explosion insurance regime;

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

The Ministry of Finance issues guidelines for implementing the compulsory fire and explosion insurance regime as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the compulsory fire and explosion insurance regime for assets of premises with fire and explosion hazards; the responsibilities of insurance companies, premises required to purchase compulsory fire and explosion insurance in implementing the compulsory fire and explosion insurance regime.

Article 2. Applicability

1. Insurance companies, agencies, organizations, and individuals having premises with fire and explosion hazards as specified in Appendix 1 of the Government Decree No. 35/2003/NĐ-CP dated April 4, 2003 detailing the implementation of certain provisions of the Law on Fire Prevention and Combating (hereinafter referred to as Decree No. 35/2003/NĐ-CP) shall comply with the provisions of this Circular and other relevant laws.

2. In cases where agencies, organizations, and individuals having premises with fire and explosion hazards as specified in Appendix 1 of Decree No. 35/2003/NĐ-CP participate in other types of property insurance (including compulsory fire and explosion insurance), they must ensure compliance with the compulsory insurance premium rates for fire and explosion risks according to the Premium Schedule specified in Appendix 3 of this Circular.

3. For premises with special fire and explosion hazards not mentioned or inadequately covered in this Circular, insurance companies and policyholders may negotiate terms of insurance, premiums, and must report to the Ministry of Finance for monitoring and management.

Article 3. Assets Required to Participate in Compulsory Fire and Explosion Insurance

Assets required to participate in compulsory fire and explosion insurance include:

1. Houses, architectural works, and attached equipment;

2. Machinery and equipment;

3. Various goods, materials, and other assets.

These assets are insurable when their value can be quantified and recorded in the Insurance Contract.

Article 4. Definitions

In this Circular, the following terms are understood as follows:

1. Insurance company is a business entity licensed by the Ministry of Finance to operate non-life insurance.

2. Policyholder is an agency, organization, or individual owning, managing, or using premises with fire and explosion hazards and named in the Insurance Certificate.

3. Fire is a chemical reaction emitting heat and light due to ignition or any other cause.

4. Explosion is a chemical reaction causing the sudden release of gas and energy in large quantities, accompanied by sound and physical impact on surrounding objects, excluding:

a) Insured assets being destroyed or damaged by an explosion caused by steam boilers, water heaters, pressure vessels, machinery, or equipment where internal pressure is solely due to steam (and not from ignition by an external explosion source) if such boilers and equipment are owned or controlled by the policyholder.

b) Pressure vessels, machinery, or equipment or materials inside them being damaged or destroyed by an explosion of those materials (this exclusion does not apply in the case of oil fire and explosion insurance).

5. Premises with fire and explosion hazards are premises specified in Appendix 1 of Decree No. 35/2003/NĐ-CP.

6. Deductible amount is the amount that the policyholder must bear in each insurance event. The deductible amount is specified in Appendix 2 issued together with this Circular.

Chapter II

SPECIFIC PROVISIONS

Article 5. Compulsory Fire and Explosion Insurance Contract

The contents of the compulsory fire and explosion insurance contract are stipulated in Clause 2, Article 9 of Decree No. 130/2006/ND-CP dated November 8, 2006 of the Government on the compulsory fire and explosion insurance regime (hereinafter referred to as Decree No. 130/2006/ND-CP). Based on the signed insurance contract, the insurer may issue an insurance certificate to the insured party. The model of the insurance certificate is prescribed in Appendix 1 issued together with this Circular.

Article 6. Insurance Amount

1. The insurance amount is the market value in monetary terms of the property that must participate in compulsory fire and explosion insurance at the time of taking out insurance.

2. In cases where the market value of the property cannot be determined, the insurance amount shall be agreed upon by the parties. Specifically, as follows:

a. In the case where the insured object is property, the insurance amount is the monetary value based on the remaining value or the replacement value of the property at the time of taking out insurance, as agreed between the insurer and the insured party.

b. In the case where the insured object is goods (raw materials, semi-finished products, finished products), the insurance amount is the monetary value based on the declaration of the insured party.

Article 7. Insurance Validity

The validity of the insurance begins and ends according to the provisions of the insurance contract, except in cases where the insurance contract is terminated in accordance with the law.

Article 8. Cancellation of Insurance

1. The insurance contract will terminate partially for one or more items of property:

a) They are dismantled or moved outside the area or location specified in the insurance contract.

b) They are no longer under the ownership, management, or lawful use of the insured party.

2. The insurance contract may be canceled entirely in the following cases:

a) The insured party requests cancellation of the contract if during the term of the insurance contract, no insurance event has occurred. The insured party must notify the insurer in writing fifteen (15) days in advance. Within fifteen (15) days from the date of receipt of the cancellation notice, if the insurer does not express any opinion, the insurance contract is automatically canceled, and the insurer must refund eighty percent (80%) of the corresponding insurance premium for the cancellation period to the insured party.

b) The insurer unilaterally suspends the contract in accordance with the law.

Article 9. Rights of the Insured Party

1. To choose an insurer permitted to operate compulsory fire and explosion insurance to purchase compulsory fire and explosion insurance.

2. To request the insurer to explain and provide information related to the conclusion, performance, and termination of the compulsory fire and explosion insurance contract.

3. To request the insurer to compensate promptly, fully, and accurately as stipulated in the insurance contract.

4. To agree with the insurer on the contents of the insurance contract but not contrary to the provisions of the law.

5. To include the cost of purchasing compulsory fire and explosion insurance in the product cost or service cost for production and business establishments or to include it in the budget allocated by the state budget for administrative and public service units.

6. To initiate civil litigation against the insurer if the insurer fails to comply with the provisions of the insurance contract and relevant laws.

Article 10. Obligations of the Insured Party

1. Participate in mandatory fire and explosion insurance as prescribed by law.

2. Comply with legal provisions on fire prevention and fighting as stipulated in Clause 2, Article 13 of Decree No. 130/2006/NĐ-CP.

3. When requesting insurance, the insured party has the obligation to declare fully and truthfully all details related to the Insurance Contract as required by the insurance company.

4. Pay the insurance premium fully, according to the agreed time and method in the Insurance Contract and fulfill all other obligations as prescribed in the mandatory fire and explosion Insurance Contract.

5. Promptly notify the insurance company about factors that change the level of risk for adjustment of conditions and insurance premiums.

6. Cooperate with insurance companies during the implementation of the mandatory fire and explosion Insurance Contract.

7. In case of an insurance event, the insured party has the obligation:

a) To comply with legal provisions on fire reporting, firefighting, and participation in firefighting as stipulated in Article 23 of Decree No. 35/2003/NĐ-CP.

b) To immediately inform the insurance company to coordinate in handling the matter and to notify the insurance company in writing no later than three (03) working days from the date of the insurance event.

c) In cases where damage falls within the scope of insurance liability caused by a third party, the insured party has the responsibility to promptly inform the insurance company and complete necessary legal procedures to reserve the right to claim for the insurance company, assisting the insurance company in demanding compensation from the third party. In cases where damage is caused by someone acting intentionally, the insured party must immediately inform the criminal investigation agency.

d) To provide the insurance company with necessary information, submit invoices and accounting documents proving the damage together with a declaration of damage to the insurance company within the shortest possible time. The insurance company has the right to request the insured party to present property ledgers and accounting documents for inspection.

8. Apply preventive measures to limit losses as prescribed by law.

In case the insured party violates the obligations stipulated in this Article, the insurance company has the right to refuse partial or full compensation depending on the degree of fault of the insured party.

Article 11. Rights of the Insurance Company

1. Collect insurance premiums as prescribed in the Insurance Contract and not less than the mandatory fire and explosion insurance premium table specified in Appendix 3 issued along with this Circular.

2. Refuse to sell mandatory fire and explosion insurance when the insured party does not fully meet the conditions regarding fire prevention and firefighting as stipulated in Clause 2, Article 13 of Decree No. 130/2006/NĐ-CP.

3. Request the insured party to present accounting books and accounting documents for verification of the reported figures.

4. Refuse to settle claims for cases excluded from insurance liability as prescribed in Article 10 of Decree No. 130/2006/NĐ-CP and Article 16 of this Circular.

Article 12. Obligations of the Insurance Company

1. Implement fire and explosion insurance as prescribed by law.

2. Organize publicity on the mandatory fire and explosion insurance system; guide and facilitate the insured party's participation in insurance.

3. Sell mandatory fire and explosion insurance when the insured party has met the conditions regarding fire prevention and firefighting as stipulated in Clause 2, Article 10 of this Circular.

4. Fully explain to the insured party all information related to the rights and obligations of the insured party and the insurance company; provide the insured party with the content of the premium table, rules of mandatory fire and explosion insurance issued by the Ministry of Finance.

5. In case of an insurance event, the insurance company must closely cooperate with the insured party and relevant authorities to resolve the incident, collect necessary information to determine the cause and extent of damage caused by the insurance event.

6. When the compensation file is complete as prescribed in Article 17 of this Circular, the insurance company must settle compensation within the time limit prescribed in Article 18 of this Circular.

7. Coordinate with the Fire Prevention and Fighting Police Department and the insured party to implement the mandatory fire and explosion insurance system and prevent and limit losses for the insured premises.

8. Contribute funds to support fire prevention and firefighting activities as prescribed by law. The annual contribution amount is five percent of the total mandatory fire and explosion insurance premiums collected corresponding to the retained liability of the insurance company.

Within thirty (30) days from June 30 and December 31 each year, the insurance company is responsible for transferring the fund contribution for fire prevention and firefighting activities into the Temporary Holding Account of the Ministry of Public Security opened at the State Treasury Central Office and report the implementation status according to Appendix 5 and Appendix 6 issued along with this Circular and send it to the Ministry of Finance.

9. Prepare and submit statistical reports and business reports quarterly and annually as prescribed in Appendix 4 issued along with this Circular.

- Quarterly Report: At the latest thirty (30) days from the end of the quarter (including both hard copy and soft copy).

- Annual Report: At the latest ninety (90) days from the end of the year (including both hard copy and soft copy).

10. To fulfill other obligations as prescribed by law.

11. In case the insurance company violates the provisions of this Circular, it will be subject to administrative penalties as prescribed in Decree No. 41/2009/NĐ-CP dated May 5, 2009 of the Government on administrative penalties in the field of insurance business.

Article 13. Insurance Liability

The liability of the insurance enterprise in all cases shall not exceed:

1. The amount insured corresponding to each item of property and in total, not exceeding the total amount insured recorded on the Insurance Certificate at the time of the insured event.

2. The remaining amount insured after compensating for any loss, destruction, or damage occurring during the insurance period, except when the insurance enterprise has agreed to restore the amount insured after each compensation payment.

Article 14. Loss Appraisal

1. When an insured event occurs, the insurance enterprise or the organization authorized by the insurance enterprise will conduct a loss appraisal to determine the cause and extent of the loss. The cost of the loss appraisal shall be borne by the insurance enterprise.

2. In case the policyholder and the insurance enterprise cannot agree on the cause and extent of the loss, they may request an independent appraisal. If the parties cannot agree on requesting an independent appraiser, either party may request the court where the loss occurred or where the policyholder resides to appoint an independent appraiser. The conclusion of the independent appraiser shall be binding on the parties.

Article 15. Forms of Compensation

1. The policyholder and the insurance enterprise may agree on one of the following forms of compensation:

a) Repairing damaged property;

b) Replacing damaged property with other property;

c) Paying compensation money.

2. In case the insurance enterprise and the policyholder cannot agree on the form of compensation, the compensation shall be made in cash.

3. In case of compensation according to points b and c of Clause 1 of this Article, the insurance enterprise has the right to recover the damaged property after replacement or full compensation according to the market price of the property.

Article 16. Exclusion of Insurance Liability

1. The insurance enterprise is not obligated to compensate if the damage is caused by one of the following reasons:

a) Earthquake, volcanic eruption, or other natural disturbances.

b) Property self-fermenting or self-heating.

c) Property subjected to a process using heat.

d) Lightning striking directly onto insured property without causing fire or explosion.

đ) Nuclear weapon material causing fire or explosion.

e) Damage to machinery, electrical equipment, or parts of electrical equipment due to overload, overpressure, short circuit, self-heating, electric arc, or leakage due to any cause, including lightning.

g) Damage caused by the policyholder's intentional act of causing fire or explosion to claim compensation under the insurance contract.

h) Damage caused by the policyholder intentionally violating fire prevention and firefighting regulations resulting in fire or explosion.

i) Entrusted or consigned goods unless such goods are confirmed in the Insurance Certificate as being insured and the policyholder pays additional insurance premium as prescribed.

k) Money, precious metals, gems, securities, letters of guarantee, documents, manuscripts, business books, data stored in electronic computers, models, certificates, molds, drawings, design documents, unless these items are confirmed in the Insurance Certificate.

l) Explosives, unless confirmed as being insured in the Insurance Certificate.

m) Assets that, at the time of loss, are insured under a marine insurance policy or fall within the scope of liability under a marine insurance policy, except for losses exceeding the liability for compensation under the marine insurance policy.

n) Damage caused by fire or explosion to third parties.

o) Damage to data, software, and computer programs.

p) Damage caused by political, security, and social order incidents.

q) Other exclusions of insurance liability as provided by law or agreed upon by the parties.

2. For the above exclusions of insurance liability (except for the cases specified in Points g and h of Clause 1 of this Article), if the policyholder requires insurance and the insurance enterprise agrees to provide it, the parties may still conclude a supplementary insurance contract for those events.

Article 17. Documents for Claiming Compensation

1. The insured party's compensation claim.

2. Insurance contract.

3. Certificate of fire prevention and firefighting conditions or the record confirming fire prevention and firefighting conditions.

4. Appraisal report of the insurance company or the person authorized by the insurance company.

5. Appraisal report on the cause of damage by the Fire Prevention and Fighting Police or other competent authority, or evidence proving the damage.

6. Damage declaration form and documents proving the damage.

Article 18. Time Limit for Claiming Compensation and Payment of Compensation

1. The time limit for the insured party to claim compensation is one (01) year from the date of the insured event, except in cases of delay due to objective and force majeure reasons as stipulated by law.

2. The time limit for the insurance company to pay compensation is fifteen (15) days from the date of receiving all required documents.

In case of refusal to compensate, the insurance company must notify the insured party in writing of the reasons within fifteen (15) days from the date of receiving the complete compensation claim documents.

Article 19. Resolution of Disputes

Any disputes arising from the Insurance Contract, if not resolved through negotiation between the parties, shall be brought before the court where the defendant resides for resolution. The statute of limitations for initiating lawsuits related to this Insurance Contract is three (03) years from the date of dispute occurrence. Claims beyond this period will lose their validity.

Chapter III

IMPLEMENTATION

Article 20. Effectiveness and Responsibility for Implementation

1. This Circular takes effect from March 1, 2011, and replaces Decision No. 28/2007/QD-BTC dated April 24, 2007, issued by the Minister of Finance regarding the issuance of Rules and Premium Rates for Compulsory Fire and Explosion Insurance.

2. Ministries, ministerial-level agencies, government agencies, People's Committees of provinces and centrally governed cities, insurance companies, organizations, and individuals related to this matter are responsible for implementing this Circular.

3. During implementation, if any issues arise, please promptly report them to the Ministry of Finance for study and resolution./.