Article 1.- Scope of application

1. This Decree provides for the financial regime applicable to insurance enterprises and insurance brokerage enterprises established, organized and operating under the provisions of the Law on Insurance Business.

2. This Decree does not apply to mutual insurance organizations.

Article 2.- Financial management and supervision principles

Insurance enterprises and insurance brokerage enterprises enjoy financial autonomy, take accountability for management and supervision of their financial activities and business results, and fulfill their obligations and commitments in accordance with law.

Article 3.- State management agencies

The Ministry of Finance shall perform the state management of finance of, guide and inspect the implementation of the financial regime applicable to, insurance enterprises and insurance brokerage enterprises in accordance with law.

Article 4.- Legal capital

1. The legal capital of an insurance enterprise is specified as follows:

a/ For a non-life insurance business enterprise: VND 300,000,000,000;

b/ For a life insurance business enterprise: VND 600,000,000,000 .

2. The legal capital of an insurance brokerage enterprise is VND 4,000,000,000.

Article 5.- Charter capital

1. Charter capital of an insurance enterprise or insurance brokerage enterprise is a capital amount contributed or committed by its members or shareholders to contribute in a given period of time, and is indicated in the charter of that insurance enterprise or insurance brokerage enterprise.

2. In the course of operation, an insurance enterprise or insurance brokerage enterprise shall always maintain its contributed charter capital at a level not lower than the legal capital specified in Article 4 of this Decree and supplement that charter capital corresponding to the enterprise's business activities, scope and areas. The Ministry of Finance shall specify the supplementary charter capital level.

3. If wishing to adjust its charter capital, an insurance enterprise or insurance brokerage enterprise shall send a written request enclosed with explanations to the Ministry of Finance. Within 30 days after receiving the request and a valid dossier, the Ministry of Finance shall reply in writing its approval or disapproval. In case of disapproval, the Ministry of Finance shall give a written explanation.

4. An insurance enterprise established, organized and operating before the effective date of this Decree which has a charter capital lower than the legal capital specified in Article 4 of this Decree shall, within 3 years after this Decree takes effect, increase its charter capital to the specified level.

Article 6.- Deposit

1. Within 60 days after being granted the establishment and operation license, an insurance enterprise shall use part of its contributed charter capital for making a deposit at a commercial bank operating in Vietnam. The deposit shall bear interest according to an agreement reached with the bank where such deposit is made.

2. The level of deposit of an insurance enterprise is equal to 2% of the legal capital specified in Clause 1, Article 4 of this Decree.

3. An insurance enterprise may only use the deposit to fulfill its commitments towards insurance buyers when their solvency falls short, and such use is approved in writing by the Ministry of Finance. Within 90 days after using the deposit, the insurance enterprise shall supplement the used deposit amount.

4. An insurance enterprise may withdraw the whole deposit upon termination of its operation.

5. An insurance enterprise established, organized and operating before the effective date of this Decree which makes a deposit at a level lower than that specified in Clause 2 of this Article shall, within 30 days after this Decree takes effect, increase its deposit to the specified level.

Article 7.- Other regulations on capital and asset management and use

Apart from the provisions of this Decree, insurance enterprises and insurance brokerage enterprises shall also abide by regulations on capital and use management and use in accordance with relevant laws.

Article 8.- Operational reserves for non-life insurance

1. A non-life insurance business enterprise shall make deductions for setting up a reserve for each insurance operation for its retained liability.

2. Operational reserves include:

a/ Unearned premium reserve, which is used to indemnify liability likely to arise in the effective duration of an insurance contract in the subsequent year;

b/ Reserve for indemnities to unsettled claims, which is used to cover losses incurred under insurance liability for which claims have not yet been made or have been made but remain unsettled by the end of a fiscal year;

c/ Reserve for indemnities to great fluctuations of loss, which is used to pay indemnities when large fluctuations of loss or great losses occur but the total premium retained in a fiscal year after making deductions for setting up unearned premium reserve and the reserve for indemnities to unsettled claims is insufficient to pay indemnity for the retained liability of the insurance enterprise.

Article 9.- Operational reserves for life insurance

1. A life insurance business enterprise shall make deductions for setting up an operational reserve for each life insurance contract for its liability.

2. Operational reserves include:

a/ Mathematical reserve, which is the difference between the present value of the insurance sum and the present value of future premiums, and is used to pay the insurance sum for the committed liabilities upon the occurrence of an insured event;

b/ Unearned premium reserve, which is used to pay the insurance sum likely to arise in the effective duration of an insurance contract in the subsequent year;

c/ Indemnity reserve, which is used to pay the insurance sum upon the occurrence of an insured event which remains unsettled by the end of a fiscal year.

d/ Interest sharing reserve, which is used to pay the interest agreed by the insurance enterprise and the insurance buyer in the insurance contract;

e/ Balance reserve, which is used to pay the insurance sum upon the occurrence of an insured event due to big changes in mortality rates or technical interest rates.

3. Operational reserves for linked investment shall be set up under the Finance Ministry's guidance.

Article 10.- Levels and methods of deduction for setting up operational reserves

The Ministry of Finance shall specify the levels and methods of deduction for setting up operational reserves provided for in Articles 8 and 9 of this Decree.

Article 11.- Investment capital sources

Investment capital sources of an insurance enterprise or insurance brokerage enterprise include:

1. Own capital.

2. Idle capital from operational reserves.

3. Other lawful sources as provided for by law.

Article 12.- Investment with own capital

1. Investment with own capital must ensure the capital's safety, efficiency and liquidity under the Finance Ministry's guidance.

2. Insurance enterprises and insurance brokerage enterprises may invest offshore in accordance with law their own capital amounts exceeding the legal capital level or the minimum solvency margin, which is larger.

Article 13.- Idle capital from operational reserves

1. An insurance enterprise's idle capital from operational reserves is the total operation reserve minus the sums used by the enterprise to pay regular insurance indemnities in a period, for non-life insurance, or pay regular insurance sums in a period, for life insurance.

2. A sum of money used by a non-life insurance business enterprise to pay regular insurance indemnities in a period must not be lower than 25% of the total operational reserve and may be deposited at credit institutions operating in Vietnam.

3. A sum of money used by a life insurance business enterprise to pay regular insurance sums in a period must not be lower than 5% of the total operational reserve and may be deposited at credit institutions operating in Vietnam.

Article 14.- Investment with idle capital from operational reserves

An insurance enterprise may directly or through entrustment invest idle capital from its operational reserves defined in Clause 1, Article 13 of this Decree. It may invest in Vietnam only in the following domains:

1. For a non-life insurance business enterprise:

a/ Purchase of government bonds or corporate bonds with underwriting or deposits at credit institutions in unrestricted amount;

b/ Purchase of corporate shares or bonds without underwriting, or capital contribution to other enterprises with 35% or less of idle capital from operational reserves;

c/ Real estate business or loan provision with 20% or less of idle capital from operational reserves.

2. For a life insurance business enterprise:

a/ Purchase of government bonds or corporate bonds with underwriting or deposits at credit institutions in unlimited amount;

b/ Purchase of corporate shares or bonds without underwriting, or capital contribution to another enterprise with 50% at most of idle capital from operational reserves;

c/ Real estate business or loan provision with 40% at most of idle capital from operational reserves.

Article 15.- Solvency

1. An insurance enterprise shall always maintain its solvency throughout the course of its insurance business operation.

2. An insurance enterprise shall be considered solvent when it fully makes deductions for setting up operational reserves and maintains a solvency margin not lower than the minimum solvency margin specified in Article 16 of this Decree.

Article 16.- Minimum solvency margin

1. The minimum solvency margin of a non-life insurance business enterprise is the greater of the following two amounts:

a/ 25% of the total insurance premium actually retained at the time of calculation of the solvency margin;

b/ 12.5% of the total principal insurance premium and reinsurance premium at the time of calculation of the solvency margin.

2. The minimum solvency margin of a life insurance business enterprise:

a/ For life insurance contracts with a term of 5 years or less, it is the total of 4% of the operational reserve and 0.1% of the insurance sum at risk;

b/ For life insurance contracts with a term of over 5 years, it is the total of 4% of the operational reserve and 0.3% of the insurance sum at risk.

Article 17.- Solvency margin of an insurance enterprise

The solvency margin of an insurance enterprise is the difference between the value of assets and payable debts of that enterprise at the time of calculation of the solvency margin. Assets used for calculation of the solvency margin of an insurance enterprise must be liquid. Assets which shall be wholly or partly excluded upon calculation of the solvency margin of an insurance enterprise shall comply with the Finance Ministry's guidance.

Article 18.- Danger of insolvency

An insurance enterprise shall be considered being in danger of insolvency when its solvency margin is lower than the minimum solvency margin.

Article 19.- Restoration of solvency

1. When facing the danger of insolvency, an insurance enterprise shall immediately and proactively apply measures to restore its solvency by itself and, at the same time, report to the Finance Ministry on its actual financial status, causes of that danger and plans on solvency restoration.

2. If an insurance enterprise cannot restore its solvency by itself, the Finance Ministry may request the enterprise to restore its solvency through the following measures:

a/ Supplementing its own capital;

b/ Reinsuring; narrowing business activities, scope and areas; suspending some or all activities of the enterprise;

c/ Consolidating the enterprise's organizational apparatus and replacing manager(s) or administrator(s) of the enterprise;

d/ Transferring the insurance contracts;

e/ Other measures.

3. If an insurance enterprise cannot restore its solvency at the request of the Finance Ministry as provided for in Clause 2 of this Article, it shall be put under the state of special control. The Finance Ministry shall decide to set up a solvency control board to take solvency restoration measures in accordance with Article 80 of the Law on Insurance Business.

Article 20.- Turnover of an insurance enterprise

Turnover of an insurance enterprise is the collectible sum of money arising in a period and includes:

1. Revenue from insurance business activities, which is the collectible sum of money arising in a period after subtracting payable sums for reducing revenues arising in that period:

a/ Collectible sums of money arising in a period include:

- Principal insurance premium;

- Reinsurance undertaking charge;

- Reinsurance cession commission;

- Charge for agency services, including loss assessment, indemnity consideration, or request for a third party's compensation, handling of cargo eligible for 100% indemnity;

- Charge for loss assessment, excluding on-behalf survey between internal cost-accounting member units within the same independent cost-accounting insurance enterprise.

b/ Payable sums for reducing revenues arising in a period include:

- Reimbursed insurance premium;

- Reduced insurance premium;

- Reinsurance cession charge;

- Reimbursed reinsurance undertaking charge;

- Reduced reinsurance premium;

- Reimbursed reinsurance cession commission;

- Reduced reinsurance cession commission.

2. Turnover from financial activities:

a/ Revenue from investment activities as provided for in Section 3, Chapter II of this Decree;

b/ Revenue from securities purchase and sale;

c/ Revenue being deposit interest;

d/ Revenue from asset lease;

e/ Other revenues as provided for by law.

3. Revenues from other activities:

a/ Revenue from sale or liquidation of fixed assets;

b/ Bad debts which have been written off but are now recovered;

c/ Other revenues as provided for by law.

Article 21.- Expenses of an insurance enterprise

Expenses of an insurance enterprise are payable or deductible sums of money arising in a period, including:

1. Insurance business expenses, which are payable or deductible sums of money arising in a period after subtracting collectible sums to reduce expenses arising in that period:

a/ Payable or deductible sums of money arising in the period include:

- Principal insurance indemnities, for non-life insurance; insurance sums, for life insurance;

- Reinsurance indemnities;

- Deductions for setting up operational reserves;

- Insurance commission;

- Loss assessment expense;

- Charge for agency services, including loss assessment, consideration for payment of indemnities, or claim for a third party's compensation;

- Expense for handling of cargo eligible for 100% indemnity;

- Expense for management of insurance agents;

- Expense for risk and loss prevention and mitigation;

- Expense for assessment of risks of the insured;

- Other expenses and deductions as provided for by law.

b/ Collectible sums for reducing expenses arising in a period include:

- Reinsurance cession indemnity;

- The third party's compensation under claims;

- Proceeds from the disposal of cargo eligible for 100% indemnity.

2. Expenses for financial activities:

a/ Expenses for investment activities as provided for in Section 3, Chapter II of this Decree;

b/ Investment income payable to insurance buyers as committed in life insurance contracts;

c/ Asset lease expenses;

d/ Banking fees, loan interests;

e/ Other expenses and deductions as provided for by law.

3. Expenses for other activities:

a/ Expense for sale or liquidation of fixed assets;

b/ Expense for recovery of bad debts which have been written off but are now recovered;

c/ Other expenses and deductions as provided for by law.

Article 22.- Other regulations on turnover and expenses of an insurance enterprise

Apart from the provisions of Articles 20 and 21 of this Decree, other turnover amounts and expenses of an insurance enterprise are as stipulated by law.

Article 23.- Separation of own capital from insurance premiums in life insurance

Life insurance business enterprises shall separate own capital from insurance premiums collected from insurance buyers under the Finance Ministry's guidance.

Article 24.- Turnover of an insurance brokerage enterprise

Turnover of an insurance brokerage enterprise is the collectible sum of money arising in a period and includes:

1. Turnover from insurance brokerage activities:

a/ Insurance brokerage commissions after subtracting reimbursed or reduced insurance brokerage commission amounts;

b/ Other revenues as provided for by law.

2. Turnover from financial activities:

a/ Revenue from securities purchase and sale;

b/ Deposit interests or loan interests;

c/ Asset rental;

d/ Other revenues as provided for by law.

3. Incomes from other activities:

a/ Proceeds from sale or liquidation of fixed assets;

b/ Bad debts, which have been written off but are now recovered;

c/ Other revenues as provided for by law.

Article 25.- Expenses of an insurance brokerage enterprise

Expenses of an insurance brokerage enterprise are payable or deductible sums of money arising in a period, including:

1. Expenses for insurance brokerage activities:

a/ Expense for insurance brokerage activities;

b/ Expense for purchase of occupational liability insurance;

c/ Other expenses and deductions as provided for by law.

2. Expenses for financial activities:

a/ Asset lease expenses;

b/ Bank fees, loan interests;

c/ Other expenses and deductions as provided for by law.

3. Expenses for other activities:

a/ Expense for sale or liquidation of fixed assets;

b/ Expense for recovery of bad debts which have been written off but are now recovered;

c/ Other expenses and deductions as provided for by law.

Article 26.- Other regulations on turnover and expenses of an insurance brokerage enterprise

Apart from the provisions of Articles 24 and 25 of this Decree, other turnover amounts and expenses of an insurance brokerage enterprise are as stipulated by law.

Article 27.- Profit of an insurance enterprise

1. Profit earned in a year is the business result of an insurance enterprise, including profit from insurance business activities, profit from financial activities and profit from other activities.

2. Profit of an insurance enterprise is the difference between the total turnover and the total expenses of that enterprise.

Article 28.- Profit of an insurance brokerage enterprise

1. Profit earned in a year is the business result of an insurance brokerage enterprise, including profit from insurance brokerage business activities, profit from financial activities and profit from other activities.

2. Profit of an insurance brokerage enterprise is the difference between the total turnover and the total expenses of that enterprise.

Article 29.- Obligations towards the state budget

Insurance enterprises and insurance brokerage enterprises shall fulfill their obligations towards the state budget in accordance with law.

Article 30.- Profit distribution

After paying enterprise income tax as provided for by law and making deductions for setting up the compulsory reserve fund, insurance enterprises and insurance brokerage enterprises may distribute the remaining profit in accordance with law.

Article 31.- Compulsory reserve fund

An insurance enterprise or insurance brokerage enterprise shall deduct 5% of its annual after-tax profit for setting up the compulsory reserve fund. That fund is at most equal to 10% of the enterprise's charter capital.

Article 32.- Accounting regime

Insurance enterprises and insurance brokerage enterprises shall make full records on initial documents, update accounting books and report their economic and financial activities in an adequate, timely, truthful, accurate and objective manner.

Article 33.- Fiscal year

A fiscal year of an insurance enterprise or insurance brokerage enterprise starts on January 1 and ends on December 31 of the same calendar year. The first fiscal year of an insurance enterprise or insurance brokerage enterprise starts on the date it is granted the establishment and operation license and ends on the last day of the same year.

Article 34.- Financial statements

1. Insurance enterprises and insurance brokerage enterprises shall prepare and send regular and irregular financial statements, statistical reports and operational reports in accordance with current provisions of law and the guidance of the Finance Ministry.

2. An annual financial statement of an insurance enterprise or insurance brokerage enterprise shall be audited by an independent audit institution lawfully operating in Vietnam, which shall certify major financial matters as provided for in this Decree, before being submitted to the Finance Ministry.

Article 35.- Internal audit

Insurance enterprises and insurance brokerage enterprises shall conduct internal audit of their financial activities.

Article 36.- Financial administration of enterprises

1. Insurance enterprises and insurance brokerage enterprises shall conduct financial administration according to the principles and standards set by the Finance Ministry.

2. Insurance enterprises and insurance brokerage enterprises shall elaborate, implement, and supervise the implementation of, financial regulations, investment regulations, control and internal audit regulations, and relevant processes and procedures.

Article 37.- Disclosure of financial statements

1. Insurance enterprises and insurance brokerage enterprises shall disclose their financial statements in accordance with law.

2. Disclosed information must be conformable with information in the insurance or insurance brokerage enterprise's financial statement already audited and certified by an independent audit institution.

Article 38.- Financial examination and inspection

The Ministry of Finance shall examine and inspect the observance of the financial regulations by insurance enterprises and insurance brokerage enterprises.

Article 39.- Effect of the Decree

1. This Decree takes effect 15 days after its publication in "CONG BAO."

2. This Decree replaces the Government's Decree No. 43/2001/ND-CP of August 1, 2001, providing for the financial regime applicable to insurance enterprises and insurance brokerage enterprises.

Article 40.- Organization of implementation

1. The Minister of Finance shall guide the implementation of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies and presidents of provincial/municipal People's Committees shall implement this Decree.