Decree No. 23/2018/ND-CP on Compulsory Fire and Explosion Insurance

DECREE

Provisions on Compulsory Fire and Explosion Insurance

Pursuant to the Law on Government Organization dated June 19, 2015;

Based on the Law on Insurance Business dated December 9, 2000 and the Law Amending and Supplementing Certain Articles of the Law on Insurance Business dated November 24, 2010; Based on the Law on Fire Prevention and Fighting dated June 29, 2001 and the Law Amending and Supplementing Certain Articles of the Law on Fire Prevention and Fighting dated November 22, 2013;

The Government issues this Decree to provide for compulsory fire and explosion insurance. Chapter I

At the proposal of the Minister of Finance;

This Decree provides for compulsory fire and explosion insurance:

h1. Conditions, premium rates; minimum amount of insurance.

GENERAL PROVISIONS

Article 1. Scope of Regulation

2. Collection levels, management and utilization of revenue from compulsory fire and explosion insurance for fire prevention and fighting activities.

3. Responsibilities of relevant ministries, agencies, and insurance enterprises in implementing compulsory fire and explosion insurance.

1. Organizations, entities, and individuals with premises posing risks of fire and explosion as specified in Appendix II issued together with Decree No. 79/2014/ND-CP dated July 31, 2014 of the Government detailing the implementation of certain articles of the Law on Fire Prevention and Fighting and the Law Amending and Supplementing Certain Articles of the Law on Fire Prevention and Fighting and any subsequent amendments, supplements, or replacements thereof.

2. Non-life insurance enterprises; branches of foreign non-life insurance enterprises in Vietnam (hereinafter referred to as "insurance enterprises").

Article 2. Applicability

This Decree applies to:

3. Other organizations, entities, and individuals related to compulsory fire and explosion insurance.

Article 3. Principles for Participation in Compulsory Fire and Explosion Insurance

1. Organizations, entities, and individuals specified in Clause 1 of Article 2 of this Decree (hereinafter referred to as "the insured party") must purchase compulsory fire and explosion insurance from insurance enterprises operating such business in accordance with the law.

2. The insured party and the insurance enterprise shall implement compulsory fire and explosion insurance in accordance with the conditions, premium rates, and minimum amount of insurance stipulated in this Decree.

In addition to participating in compulsory fire and explosion insurance under the conditions, premium rates, and minimum amount of insurance stipulated in this Decree, the insured party and the insurance enterprise may agree in the insurance contract to expand the scope of insurance coverage, increase the amount of insurance, and correspondingly supplement the premium rate. In this case, the insurance enterprise shall be responsible for separately delineating the compulsory fire and explosion insurance portion within the insurance contract.

3. The insurance enterprise has the right to refuse to sell compulsory fire and explosion insurance in the following cases:

a) The premises have not been inspected and approved for fire prevention and fighting in accordance with the law;

b) The premises do not have a safety inspection report for fire prevention and fighting from the Fire Prevention and Fighting Police Department or the inspection report has exceeded one year from the date of issuance to the date of purchasing compulsory fire and explosion insurance;

c) The premises are temporarily suspended or halted from operation due to violations of fire prevention and fighting regulations.

4. The insured party may include the cost of purchasing compulsory fire and explosion insurance in the product cost or service cost (for production and business premises) or in regular expenses (for administrative state agencies, public service units, political social organizations, and other organizations).

5. It is encouraged for organizations, entities, and individuals not required to purchase compulsory fire and explosion insurance under this Decree to purchase fire and explosion insurance based on agreements with insurance enterprises and in compliance with the law.

Chapter II

5. Encourage agencies, organizations, and individuals not subject to mandatory fire and explosion insurance under this Decree to purchase fire and explosion insurance based on agreement with insurance enterprises and in accordance with the provisions of the law.

hChapter II

SPECIFIC PROVISIONS

Section 1

CONDITIONS, INSURANCE FEES; MINIMUM INSURANCE AMOUNT

Article 4. Insured Object

1. The insured object for mandatory fire and explosion insurance is all assets of premises with fire and explosion risks, including:

a) Houses, buildings, and assets attached to houses and buildings; machinery and equipment;

b) Various types of goods and materials (including raw materials, semi-finished products, finished products).

2. The insured object and its location must be clearly recorded in the insurance contract and Insurance Certificate.

Article 5. Minimum Insurance Amount

1. The minimum mandatory fire and explosion insurance amount is the market value in monetary terms of the assets specified in Clause 1 of Article 4 of this Decree at the time of concluding the insurance contract.

2. In cases where the market value of the asset cannot be determined, the minimum mandatory fire and explosion insurance amount shall be agreed upon by the parties as follows:

a) For the assets specified in Point a of Clause 1 of Article 4 of this Decree: The insurance amount is the monetary value of the asset based on its remaining value or replacement value at the time of concluding the insurance contract;

b) For the assets specified in Point b of Clause 1 of Article 4 of this Decree: The insurance amount is the monetary value of the asset based on valid invoices or related documents.

Article 6. Scope of Insurance and Exclusions from Insurance Liability

1. Scope of Insurance

The insurance company shall fulfill the obligation to compensate for losses occurring to the insured objects specified in Clause 1 of Article 4 of this Decree arising from fire and explosion risks, except for the cases stipulated in Clause 2 of this Article.

2. Cases Excluded from Insurance Liability

a) For premises with fire and explosion risks specified in Clause 1 of Article 2 of this Decree (excluding nuclear facilities), the insurance company shall not be liable to compensate for insurance in the following cases:

- Earthquakes, volcanic eruptions, or other natural phenomena.

- Damage caused by political, security, and social order incidents.

- Assets burned or exploded pursuant to decisions of competent state authorities.

- Assets that ferment spontaneously or emit heat; assets affected by a process using heat.

- Lightning striking directly onto insured assets without causing fire or explosion.

- Nuclear weapon materials causing fire or explosion.

- Machinery, electrical equipment, or parts of electrical equipment damaged due to direct impact of overload, overpressure, short circuit, self-heating, electric arc, leakage current, or lightning strike.

- Damage caused by intentional acts of the insured party to ignite fires or explosions; or by intentionally violating fire prevention and firefighting regulations and directly causing fires or explosions.

- Damage to data, software, and computer programs.

- Damage caused by burning forests, shrubs, grasslands, or burning for the purpose of cleaning farmland or land.

b) For nuclear facilities: The insurance company and the policyholder shall agree on the cases excluded from insurance liability based on the approval of the reinsurer.

Article 7. Insurance Premiums and Deductibles

1. Insurance Premiums

The insurance premiums specified in Section I of Appendix II issued together with this Decree apply to premises with fire and explosion risks specified in Clause 1 of Article 2 of this Decree, specifically as follows:

a) For premises with fire and explosion risks (excluding nuclear facilities) with a total insurance amount of assets at one location under VND 10 trillion: The insurance premium specified in Clause 1 of Section I of Appendix II issued together with this Decree.

Based on the insurance premium specified herein, the insurance company and the policyholder may agree to increase the insurance premium applicable to each premise with fire and explosion risks according to the risk level of each premise and in accordance with the law.

b) For premises with fire and explosion risks with a total insurance amount of assets at one location of VND 10 trillion or more and nuclear facilities: The insurance company and the policyholder shall agree on the insurance premium in accordance with the law and based on the approval of the reinsurer.

2. Deductibles

The deductible is the amount that the policyholder must bear in each insurance event, as specified in Section II of Appendix II issued together with this Decree, specifically as follows:

a) For premises with fire and explosion risks (excluding nuclear facilities) with a total insurance amount of assets at one location under VND 10 trillion: The deductible specified in Clause 1 of Section II of Appendix II issued together with this Decree.

The insurance company and the policyholder shall agree in the insurance contract on the deductible applicable to each premise with fire and explosion risks based on the risk level and loss history of each premise;

b) For premises with fire and explosion risks with a total insurance amount of assets at one location of VND 10 trillion or more and nuclear facilities: The insurance company and the policyholder shall agree on the deductible based on the approval of the reinsurer.

Article 8. Insurance Compensation

1. Principles of Insurance Compensation

The insurance enterprise shall examine and settle insurance compensation in accordance with the laws on insurance business and the following principles:

a) The amount of insurance compensation for damaged property shall not exceed the insurance amount of that property (as agreed upon and recorded in the insurance contract or Insurance Certificate), minus the deductible amount specified in Clause 2, Article 7 of this Decree;

b) A maximum reduction of 10% of the insurance compensation amount in cases where the premises with fire or explosion risks fail to fully implement, within the prescribed time limit, the recommendations set out in the Fire Prevention and Fighting Safety Inspection Report issued by the Fire Prevention and Fighting Police Department, leading to increased damage when a fire or explosion occurs;

c) There shall be no responsibility for insurance compensation for additional amounts arising from fraudulent insurance activities as stipulated in the Penal Code.

2. Documents for Insurance Compensation

The documents for compulsory fire and explosion insurance compensation include the following:

a) A claim request letter from the insured party;

b) Documents related to the insured object, including: Insurance Contract, Insurance Certificate;

c) The latest Fire Prevention and Fighting Safety Inspection Report issued by the Fire Prevention and Fighting Police Department at the time of the insurance event (a copy);

d) An appraisal report by the insurance enterprise or a person authorized by the insurance enterprise;

đ) A conclusion or notification about the cause of the fire or explosion issued by the competent authority (a copy) or evidence proving the cause of the fire or explosion;

e) A loss declaration form and supporting documents for the loss.

The insured party is responsible for collecting and submitting to the insurance enterprise the documents specified in points a, b, c, đ, and e of Clause 2 of this Article. The insurance enterprise is responsible for collecting the documents specified in point d of Clause 2 of this Article.

Section 2

LEVELS OF COLLECTION, MANAGEMENT AND USE OF REVENUE FROM COMPULSORY FIRE AND EXPLOSION INSURANCE FOR FIRE PREVENTION AND FIGHTING ACTIVITIES

FROM COMPULSORY FIRE AND EXPLOSION INSURANCE FOR ACTIVITIES

FIRE PREVENTION AND FIGHTING

Article 9. Levels of Collection and Payment from Compulsory Fire and Explosion Insurance for Fire Prevention and Fighting Activities

1. The level of collection from insurance enterprises implementing compulsory fire and explosion insurance in a fiscal year is 1% of the total actual premiums collected from original insurance contracts in the immediately preceding fiscal year.

2. Insurance enterprises implementing compulsory fire and explosion insurance shall remit the amount specified in Clause 1 of this Article to the account of the Fire Prevention and Fighting Rescue and Search and Rescue Police Corps opened at the State Treasury Central Office according to the following deadlines:

a) Before June 30 each year: Remit 50% of the total amount specified in Clause 1 of this Article;

b) Before December 31 each year: Remit the remaining amount specified in Clause 1 of this Article.

Article 10. Management and Use of Revenue from Compulsory Fire and Explosion Insurance

1. The management and use of revenue from compulsory fire and explosion insurance must ensure transparency and compliance with the purposes as stipulated in this Decree and relevant laws.

2. Each year, the Ministry of Public Security shall prepare a budget for the collection and use of revenue from compulsory fire and explosion insurance for fire prevention and fighting activities and submit it to the Ministry of Finance in accordance with the law.

3. Revenue from compulsory fire and explosion insurance for fire prevention and fighting activities shall be used as follows:

a) To support the provision of firefighting equipment and devices for the Fire Prevention and Fighting Police Force. Expenditure on this item shall not exceed 40% of the actual revenue collected from compulsory fire and explosion insurance by insurance enterprises in the fiscal year;

b) To support the dissemination of laws, knowledge on fire prevention and firefighting, and compulsory fire and explosion insurance. Expenditure on this item shall not exceed 30% of the actual revenue collected from compulsory fire and explosion insurance by insurance enterprises in the fiscal year;

c) To support the Fire Prevention and Fighting Police Force in the following activities: Investigating the causes of fires; training, inspecting fire safety; supervising participation in compulsory fire and explosion insurance by premises with fire or explosion risks. Expenditure on this item shall not exceed 20% of the actual revenue collected from compulsory fire and explosion insurance by insurance enterprises in the fiscal year;

d) To reward achievements of organizations and individuals directly involved in or cooperating in fire prevention and firefighting work. Expenditure on this item shall not exceed 10% of the actual revenue collected from compulsory fire and explosion insurance by insurance enterprises in the fiscal year.

4. Any unused actual revenue from compulsory fire and explosion insurance for fire prevention and fighting activities at the end of the year for each item specified in Clause 3 of this Article shall be carried forward to the next year for continued use.

Section 3

RESPONSIBILITIES OF MINISTRIES, SECTORS AND INSURANCE ENTERPRISES IN IMPLEMENTING COMPULSORY FIRE AND EXPLOSION INSURANCEAUTHORITIES CONCERNED

 AND INSURANCE ENTERPRISES IN THE IMPLEMENTATION

AND THE IMPLEMENTATION OF COMPULSORY FIRE AND EXPLOSION INSURANCE

Article 11. Responsibilities of the Ministry of Finance

1. Promote and disseminate laws on compulsory fire and explosion insurance.

2. Inspect and supervise insurance enterprises in implementing compulsory fire and explosion insurance in accordance with this Decree.

3. Handle violations of laws on compulsory fire and explosion insurance by insurance enterprises.

Article 12. Responsibilities of the Ministry of Public Security

1. Coordinate with the Ministry of Finance to promote and disseminate laws on mandatory fire and explosion insurance.

2. Inspect and handle violations of laws on mandatory fire and explosion insurance by facilities that are hazardous for fire and explosion.

3. Announce the list of facilities that are hazardous for fire and explosion (excluding those related to national defense, security, and state secrets) no later than December 31 each year on the Ministry of Public Security's electronic portal.

Article 13. Responsibilities of ministries, ministerial-level agencies, and government agencies

Ministries, ministerial-level agencies, and government agencies within their respective duties and authorities shall be responsible for coordinating inspections, guidance, and implementation of mandatory fire and explosion insurance in accordance with this Decree.

Article 14. Responsibilities of People's Committees of provinces and centrally governed cities Party; Chapter

People's Committees of provinces and centrally governed cities shall be responsible for organizing the promotion and dissemination of this Decree, coordinating with the Ministry of Finance and the Ministry of Public Security to implement mandatory fire and explosion insurance, and applying preventive measures to limit losses caused by fires and explosions.

Article 15. Responsibilities of insurance enterprises

1. Prepare and submit to the Ministry of Finance reports on mandatory fire and explosion insurance as follows:

a) Operational reports:

Insurance enterprises must prepare and submit to the Ministry of Finance quarterly and annual operational reports (including both hard copies and soft copies) according to the forms prescribed in Appendix III and Appendix IV issued together with this Decree, specifically as follows:

- Quarterly report: No later than 30 days from the end of the quarter.

- Annual report: No later than 90 days from the end of the year.

b) Reports on revenue and payment from mandatory fire and explosion insurance for firefighting activities:

Insurance enterprises must prepare and submit to the Ministry of Finance reports (including both hard copies and soft copies) according to the form prescribed in Appendix V issued together with this Decree, specifically as follows:

- Six-month report: No later than July 31 each year.

- Annual report: No later than January 31 of the following fiscal year.

c) In addition to the reports specified in points a and b of this clause, insurance enterprises are responsible for preparing and submitting ad hoc reports upon request of the Ministry of Finance.

2. Annually, pay one percent of the total premiums actually collected from original insurance contracts in the preceding fiscal year for firefighting activities in accordance with Article 9 of this Decree.

hPart III

IMPLEMENTING PROVISIONS

Article 16. Transitional Provisions

Insurance contracts for mandatory fire and explosion insurance concluded before the effective date of this Decree shall continue to be implemented in accordance with the laws at the time of contract conclusion.

Article 17. Effective Date

1. This Decree takes effect from April 15, 2018.

2. This Decree replaces Decree No. 130/2006/NĐ-CP dated November 8, 2006 of the Government stipulating the system of mandatory fire and explosion insurance and Article 2 of Decree No. 46/2012/NĐ-CP dated May 22, 2012 of the Government amending and supplementing certain articles of Decree No. 35/2003/NĐ-CP dated April 4, 2003 detailing the implementation of certain provisions of the Law on Fire Prevention and Combating and Decree No. 130/2006/NĐ-CP dated November 8, 2006 of the Government stipulating the system of mandatory fire and explosion insurance.

3. Abolish Circular Joint No. 214/2013/TTLT-BTC-BCA dated December 31, 2013 of the Ministry of Finance and the Ministry of Public Security detailing the implementation of certain articles of Decree No. 130/2006/NĐ-CP dated November 8, 2006 and Decree No. 46/2012/NĐ-CP dated May 22, 2012 stipulating the system of mandatory fire and explosion insurance.

4. Abolish Circular No. 220/2010/TT-BTC dated December 30, 2010 of the Ministry of Finance guiding the implementation of the system of mandatory fire and explosion insurance.

Article 18. Responsibility for Implementation

Ministers, heads of ministerial-level agencies, heads of government agencies, Chairpersons of People's Committees of provinces and centrally governed cities, and entities subject to this Decree are responsible for its implementation./.