Conditions for sale or purchase of compulsory insurance for construction investment activities in Vietnam

Conditions for sale or purchase of compulsory insurance for construction investment activities in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Conditions for sale or purchase of compulsory insurance for construction investment activities in Vietnam

1.1. Conditions with respect to insurance enterprises and reinsurance enterprises

According to Article 7 of Decree 119/2015/ND-CP, insurance enterprises and reinsurance enterprises shall be allowed to sell compulsory insurance for construction investment activities provided that they meet the following conditions:

- Hold permits for establishment and operation in which property and loss insurance, liability insurance (with respect to insurance enterprises), and non-life reinsurance (with respect to reinsurance enterprises), are licensed.

- Meet requirements as to financial capability and professional competence of staff members as prescribed by the Law on Insurance Business and other instructional documents.

1.2. Conditions with respect to reinsurance assuming enterprises or foreign reinsurance assuming organizations

According to Article 8 of Decree 119/2015/ND-CP, as for outbound reinsurance activities, insurance enterprises and reinsurance enterprises must provide reinsurance for reinsurance assuming enterprises and foreign reinsurance assuming organizations that meet the following conditions:

- Legally operating within the territory of the country where these enterprises' main offices are located.

- Attain the minimum rank of “BBB” accredited by Standard & Poor’s or “B++” accredited by A.M.Best or the equivalent ranks accredited by other organizations that have competence and experience in rating in the financial year closest to the reinsurance assuming year.

2. Rules of participation in compulsory insurance for construction investment activities in Vietnam

Specifically, in Article 3 of Decree 119/2015/ND-CP (amended in Decree 20/2022/ND-CP), the rules of participation in compulsory insurance for construction investment activities in Vietnam include:

- Insurance enterprises, reinsurance enterprises, reinsurance assuming enterprises, and foreign reinsurance assuming organizations, must meet regulatory conditions for sale of compulsory insurance for construction investment activities as defined in Section 2 Chapter II of Decree 119/2015/ND-CP.

- An insurance enterprise shall provide compulsory insurance for their construction investment activities on conditions that an insurance buyer fully meets regulatory requirements relating to construction investment capability as stipulated by the Construction Law and other relevant laws and regulations.

- Project owners, consultancy service contractors and engineering construction contractors (hereinafter referred to as insurance buyer), and insurance enterprises, shall sell and purchase compulsory insurance for construction investment activities under regulations on liabilities, insurance premiums and sums assured referred to in Decree 119/2015/ND-CP and instructions set out by the Ministry of Finance.

- Costs paid for purchase of compulsory insurance for construction investment activities shall comply with the following regulations:

= With respect to construction insurance which is valid during a construction period: Insurance premiums shall be included in the construction investment outlay;

= With respect to professional liability insurance for construction investment consultancy: insurance premiums shall be included in the cost price of provision of consultancy service;

= With respect to employees working at construction sites and compulsory third-party civil liability insurance: Insurance premiums shall be included in production and business costs

- In addition to participating in compulsory insurance for construction investment activities under regulations on liabilities, insurance premiums and sums assured laid down in Decree 119/2015/ND-CP, insurance buyers are able to participate in insurance with liabilities, insurance premiums and sums assured which are higher on the basis of arrangements with insurance enterprises and in compliance with laws and regulations.

Additional costs that may be incurred by buying insurance (if any) shall be consistent with paragraph 4 of Article 3 of Decree 119/2015/ND-CP.

- A contractor shall participate in civil liability insurance as a third party in accordance with paragraph 3 Article 9 of the Construction Law and under the direction of the Ministry of Finance.

- Organizations or individuals that do not belong to entities required to participate in compulsory insurance under the provisions of Decree 119/2015/ND-CP shall buy compulsory insurance for their construction investment activities on the basis of arrangements with insurance enterprises and in compliance with relevant laws and regulations.

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