Insurance enterprises must set aside amounts for each type of risk

14:01, 11/07/2024

This is the content stipulated in Circular 50/2017/TT-BTC guiding the implementation of Decree 73/2016/ND-CP detailing the implementation of the Law on Insurance Business and the Law amending and supplementing a number of articles of the Law on Insurance Business.

According to Circular 50, insurance enterprises and foreign branches must calculate the retention level for each type of insurance and each type of risk; the retention level must ensure:

- The maximum retention liability per risk or per individual loss does not exceed 10% of the owner's equity.- In cases where insurers or foreign branches cede reinsurance as designated by the insured, the maximum designated reinsurance rate is 90% of the insurance liability.

Additionally, when calculating the retention level, insurers and foreign branches must consider the following factors:

- Legal regulations on solvency;- Operational capacity;- Financial capability;- The willingness to accept risk of the insurer or foreign branch;- Arrangements for protecting against large and catastrophic risks;- Balancing business operation results;- Constituent elements of the insurance contract portfolio;- Trends in the domestic and international reinsurance market.

Refer to the related regulations in Circular 50/2017/TT-BTC effective from July 1, 2017.

- Thanh Lam -

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