I. CHARTER CAPITAL

1. The provisions on charter capital of insurance enterprises and insurance brokerage enterprises shall comply with Article 5 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises.

2. Contributed charter capital of insurance enterprises and insurance brokerage enterprises is the amount of charter capital actually contributed by owners to the enterprises.

3. Where insurance enterprises or insurance brokerage enterprises, which had been established, organized and operating before the effective date of the Insurance Business Law, have a charter capital level lower than the legal capital level prescribed in Article 4 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises, they must elaborate plans for making sufficient additions to their charter capital within three years, and report them to the Ministry of Finance.

If, after three years, insurance enterprises or insurance brokerage enterprises still fail to make sufficient additions to the contributed charter capital as prescribed, they shall be considered as failing to satisfy the financial requirements and the Ministry of Finance may withdraw their establishment and operation licenses under the provisions at Point f, Clause 1, Article 68 of the Insurance Business Law.

II. ESCROW AMOUNTS

1. The escrow depositing by insurance enterprises shall comply with Article 6 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises.

2. Where the escrow amounts of insurance enterprises are lower than the levels set in Clause 2, Article 6 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises, such insurance enterprises shall have to supplement the escrow amounts as prescribed.

3. Where the escrow amounts of insurance enterprises are higher than the levels set in Clause 2, Article 6 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises, such insurance enterprises may readjust their escrow amounts to the prescribed levels.

III. INSURANCE OPERATION RESERVES

1. Insurance operation reserves are amounts which must be deducted by enterprises in order to cover pre-determined insurance liabilities arising from the signed insurance contracts.

2. Insurance enterprises must make deductions to set up adequate insurance operation reserves for each insurance operation and each insurance contract corresponding to their retained liability proportion.

3. For non-life insurance business enterprises:

3.1. Non-life insurance business enterprises must set up various insurance operation reserves as provided for in Article 8 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises.

3.2. Non-life insurance business enterprises may opt for method of making deductions to set up non-life insurance operation reserves under the guidance at Point 3.4, Clause 3, Section III of this Circular or other methods of making deductions for setting up operation reserves suitable to their business activities but must register the deduction method with the Ministry of Finance before application.

3.3. In a fiscal year, non-life insurance business enterprises must not change the method of making deductions to set up insurance operation reserves. Where they shift to another method for the subsequent fiscal year, they must re-register it with the Ministry of Finance by December 1 of the current fiscal year at the latest.

3.4. The method of making deductions for setting up non-life insurance operation reserves:

a/ The reserve for premiums not yet earned:

- The method of making deductions according to a percentage of total insurance premiums:

+ For insurance of cargoes transported by land, sea, river, railway and air: An amount equal to 17% of total insurance premiums of this insurance operation, retained in the fiscal year.

+ For other insurance operations: An amount equal to 40% of total insurance premiums of these insurance operations retained in the fiscal year.

- The method of making deductions according to co-efficients of insurance contract durations:

+ For insurance of cargoes transported by land, sea, river, railway and air: To apply a co-efficient of 1/8.

Vx+t = (S + B) x Ax+t:n-t - (P x äx+t:n-t)

in which:

x is the age group of the insured persons eligible for insurance

t is the effective duration of the insurance contract, starting from the time of its signing

n is the term of the insurance contract

Vx+t is the insurance premium reserve in the (t)th contractual year

S is the insurance sum

B is the divided profit already publicized for the (t)th contractual year

Ax+t:n-t , äx+t:n-t are standard functions reflecting the indexes of insurance sums and periodical times of insurance permium payment

P is the net insurance premium, equal to
(S x Ax:n) : äx:n

Vx+t = (S x Ax+t:n-t) + (RE x äx+t:n-t) - (P� x äx+t:n-t)

in which:

x is the age group of the insured persons eligible for insurance

t is the effective duration of the insurance contract, starting from the time of its signing

n is the term of the insurance contract

Vx+t is the insurance premium reserve in the (t)th contractual year

S is the insurance sum

RE is the supposed expenses of the renewed contractual year to be included in the insurance premiums

Ax+t:n-t , äx+t:n-t are standard functions reflecting the indexes of insurance sums and periodical times of insurance permium payment

P� is the gross insurance premium.

b/ The reserve of premiums not yet earned applicable to contracts of a term of under one year:

This reserve shall apply only to insurance contracts involving periodical premium payments and be calculated according to the following formula:

The remaining duration of the
The insurance permium payment period
The reserve = periodical x ���������������
premium The total duration of the insurance
premium payment period

The remaining duration of the premium payment period and the total duration of the premium payment period shall be calculated in months or days; if calculated in months, the remaining duration of the premium payment period shall be rounded down.

c/ The compensation reserve: To be set up by the dossier-based method with the deduction levels calculated on the basis of sums of insurance payable for each dossier of claim already filed with the insurance enterprises but not yet settled by the end of each fiscal year.

d/ The profit-sharing reserve: To be applicable only to contracts involving shared profits which are accumulated through the insurance contractual years and calculated according to the following formula:

The profit- The total profit shared The accumulated value of the profit
sharing = to the contract owner + shared to the contract owner in the previous
reserve in the fiscal year fiscal years but not yet paid thereto

e/ The balance assurance reserve: To be set up and added annually till it is equal to 5% of the insurance premiums collected by an insurance enterprise in the fiscal year. The annual deduction level is 1% of the pre-tax profit of each insurance enterprise.

IV. CAPITAL INVESTMENT

The insurance enterprises shall invest their capital under the provisions in Section 3, Chapter II of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises.

V. SOLVENCY OF INSURANCE ENTERPRISES

1. The insurance enterprises must maintain their solvency throughout the process of their insurance business activities under the provisions of Article 14 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises.

2. An insurance enterprise is in danger of losing its solvency when its solvency limit is lower than the minimum one.

3. The minimum solvency limit:

a/ The minimum solvency limit of a non-life insurance business enterprise is equal to 20% of the total amount of insurance premiums actually retained at the time of determination of the solvency limit.

For example: At the time of determination of its solvency limit, insurance enterprise A, which conducts non-life insurance business, has VND 1,000 billion as total amount of actually retained insurance premiums. Its minimum solvency limit would be VND 1,000 billion x 20% = VND 200 billion.

b/ The minimum solvency limit of life insurance business enterprises:

- For life insurance contracts with a term of 10 years or under, it is equal to the sum of 4% of the insurance operation reserve plus 0.1% of the insurance amount at risk;

- For life insurance contracts with a term of over 10 years, it is equal to the sum of 4% of the insurance operation reserve plus 0.3% of the insurance amount at risk.

For example: At the time of determination of its solvency limit, insurance enterprise B, which is engaged in life insurance business, has:

+ VND 200 billion as operation reserve for life insurance contracts with a term of 10 years or under.

+ VND 20,200 billion as total insurance amount of life insurance contracts with a term of 10 years or under.

+ VND 300 billion as operation reserve for life insurance contracts with a term of over 10 years.

+ VND 50,300 billion as total insurance amount of life insurance contracts with a term of over 10 years.

The minimum solvency limit of insurance enterprise B would be: (4% x VND 200 billion) + 0.1% (VND 20,200 billion - VND 200 billion) + (4% x VND 300 billion) + 0.3% (VND50,300 billion - VND 300 billion) = VND 8 billion + VND 20 billion + VND 12 billion + VND 150 billion = VND 190 billion.

4. The solvency limit of an insurance enterprise is the difference between the asset value and the payable debts of the enterprise.

VI. TURNOVER AND EXPENDITURES OF INSURANCE ENTERPRISES

1. Turnover:

1.1. Turnover of an insurance enterprise consists of revenues as specified in Article 19 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises, including:

a/ Turnover from insurance business activities: Collected principal insurance premiums, charges for re-insurance acceptance; collected commissions for re-insurance ceding, collected charges for agency services including loss assessment, consideration and payment of compensations, request of indemnification by a third party, handling of 100% compensated goods; collected charges for loss assessment, excluding the assessment requested among internal accounting member units within the same independent accounting insurance enterprise, subtracting the to be-spent amounts for revenue reduction such as refunded insurance premiums, reduced insurance premiums charges for re-insurance ceding, refunded charges for re-insurance acceptance, reduced charges for re-insurance acceptance; refunded commissions for re-insurance ceding; reduced commissions for re-insurance ceding.

b/ Turnover from financial activities: Revenues from investment activities as specified in Section 3, Chapter II of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises; revenues from the sale and purchase of securities; collected interests on escrow amounts; revenues from the lease of assets; reimbursed balance of the reserve for decrease in the securities prices and revenues from other financial activities as provided for by law.

c/ Incomes from other activities: Proceeds from the sale and liquidation of fixed assets; recovered bad debts which had been written off; collected fines on contractual breaches and other revenues as provided for by law.

1.2. The principles for determination of turnover:

a/ Turnover from insurance business activities, which consists of collectible money amounts arising in the period, shall be determined according to the following principle:

- Insurance enterprises shall account collected principal premiums in their incomes when their insurance liabilities arise toward the insurance buyers under the provisions of Article 15 of the Insurance Business Law.

- For the remaining revenues: Insurance enterprises shall account them in their incomes right after the economic activities arise and there is evidence of acceptance of payment by the involved parties, regardless of whether or not they have been collected.

- For amounts to be spent in order to reduce revenues: Insurance enterprises shall account them as income decrease immediately after the economic activities arise and there is evidence of acceptance of payment by the involved parties, regardless of whether or not they have been paid.

b/ Turnover from financial activities means the collectible amounts arising in the fiscal year.

c/ Incomes from other activities mean all proceeds from the sale of goods and the provision of services after subtracting (-) decreased amounts in the prices of sold goods or returned sold goods (if they are accompanied with valid vouchers), which the customers accept to pay, regardless of whether or not they have been collected.

1.3. The insurance enterprises� revenues arising in the period must be accompanied with valid invoices or vouchers and fully accounted in their turnover.

2. Expenditures:

2.1. The insurance enterprises� expenditures, which are payable and deductible amounts arising in the period as specified in Article 20 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises, include:

2.1.1. Expenditures on business insurance activities:

a/ Compensation paid for principal insurance, for non-life insurance, paid insurance, for life insurance; compensation paid for re-insurance acceptance when insured events occur as committed in insurance contracts or re-insurance contracts, subtracting collectible amounts in order to reduce expenses such as collected compensations for re-insurance transfer, indemnities collected from third parties, collected goods which have been already handled and compensated 100%;

b/ Deductions for setting up the operation reserves as provided for in Section III of this Circular;

c/ Paid insurance commissions as provided for at Point 3, Section II of the Finance Ministry�s Circular No. 71/2001/TT-BTC of August 28, 2001 guiding the implementation of the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law;

d/ Expenses for loss assessment under the provisions of Article 26 of the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law;

e/ Expenses for agency services, including loss assessment, consideration and payment of compensations, request of indemnification by third parties;

f/ Expenses for handling of 100% compensated goods;

g/ Expenses for management of insurance agents;

h/ Expenses for risk and loss prevention and restriction as provided for in Section VIII of the Finance Ministry�s Circular No. 71/2001/TT-BTC of August 28, 2001 guiding the implementation of the Government�s Decree No. 42/2001/ND-CP of August 1, 2001 detailing the implementation of a number of articles of the Insurance Business Law;

i/ Expenses for assessment of risks of insurance subjects, including expenses for gathering of information on, investigation and evaluation of, insurance subjects;

j/ Salaries, wages, bonuses, severance allowances and amounts of wage or salary nature according to the relevant law provisions applicable to each type of enterprise;

k/ Social insurance and health insurance payable according to law provisions;

l/ Other expenses according to the relevant law provisions applicable to each type of enterprise.

2.1.2. Expenditures on financial activities, which are amounts to be spent in the fiscal year, include:

a/ Expenses for investment activities as provided for in Section 3, Chapter II of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises;

b/ Interests paid to life insurance contract owners as committed in the signed insurance contracts;

c/ Expenses for the lease of assets;

d/ Banking fees and loan interests;

e/ Deductions for the reserve for decrease in the securities prices.

f/ Other expenses as provided for by law.

2.1.3. Expenditures on other activities, which are amounts to be spent in the fiscal year, include:

a/ Expenses for the sale and liquidation of fixed assets;

b/ Expenses for the recovery of already-forgiven bad debts which are now recoverable;

c/ Fines for contractual breaches;

d/ Other expenses as prescribed by law.

2.2. Insurance enterprises must not account into their expenditures the following amounts:

a/ Fines payable by collectives and individuals for their law violations;

b/ Expenses for capital construction investment, procurement of fixed assets, allowances for laborers meeting with difficulties, donations for organizations and individuals according to the relevant law provisions applicable to each type of enterprise;

c/ Public service expenses, rewards, welfare expenses, regular and irregular difficulty allowances, and other expenses covered by other funding sources;

d/ Other unreasonable expenses as prescribed by law.

VII. TURNOVER AND EXPENDITURES OF INSURANCE BROKERAGE ENTERPRISES

1. Turnover

Turnovers of insurance brokerage enterprises as prescribed in Article 22 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises, include:

1.1. Turnover from insurance brokerage activities, consisting of collectible amounts arising in the period.

1.2. Turnover from financial activities, consisting of collectible amounts arising in the fiscal year.

1.3. Incomes from other activities, consisting of all proceeds from the sale of goods and the provision of services after subtracting (-) the decreased amounts of the prices of sold goods, returned sold goods (if they are accompanied with valid vouchers), which the customers accept to pay, regardless of whether they have been collected or not.

2. Expenditures

2.1. The insurance brokerage enterprises� expenditures consist of payable amounts arising in the period as prescribed in Article 23 of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises.

2.2. The insurance brokerage enterprises� expenditures arising in the period must be accompanied with valid invoices or vouchers.

VIII. PROFITS AND DISTRIBUTION OF PROFITS

Profits and distribution of profits of insurance enterprises and insurance brokerage enterprises shall comply with the provisions of Chapter V of the Government�s Decree No. 43/2001/ND-CP of August 1, 2001 prescribing the financial regime for insurance enterprises and insurance brokerage enterprises.

IX. THE REPORTING REGIME

Insurance enterprises and insurance brokerage enterprises shall have to make and send financial statements, statistical reports and operation reports according to current law provisions.

1. Financial statements:

1.1. Insurance enterprises and insurance brokerage enterprises shall carry out final financial settlement and observe all regulations on financial statements, make and send financial statements to the State�s finance offices, the statistic offices and tax offices according to current law provisions.

1.2. Accounting balance sheets as well as reports on business operation results and monetary circulation must be certified by independent auditing organizations licensed to operate in Vietnam.