Licensing conditions of mutuals providing microinsurance products in Vietnam

Licensing conditions of mutuals providing microinsurance products in Vietnam (Internet image)

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

1. Characteristics of microinsurance products in Vietnam

A microinsurance product shall have the following basic characteristics:

- It must be concise, easy to understand; needs to involve streamlined or simplified actuarial procedures; or requires no actuarial service.

- It merely includes insurance benefits to meet basic demands for protection against life, health and property risks for participants in coverage plans that last no more than 05 years;

- The sum insured per an insurance contract and annual costs of coverage for each insured person in a contract shall not exceed the maximum limit specified in the Government’s regulations.

(Article 144 of the Law on Insurance Business 2022)

2. Entities providing microinsurance products in Vietnam

- Entities providing microinsurance products, including:

+ Insurance companies, branches of foreign non-life insurance companies established and operated in Vietnam;

+ Mutuals providing microinsurance products that are established and operated in Vietnam.

- The Government shall impose detailed regulations on procedures and processes for issuance, reissuance, revision, modification, withdrawal or revocation of business licenses or permits, or termination of services offered by mutuals providing microinsurance products.

- The Ministry of Finance shall be vested with authority to issue, reissue, revise, modify, withdraw or revoke business licenses or permits, or terminate services offered by mutuals providing microinsurance products.

(Article 146 of the Law on Insurance Business 2022)

3. Mutuals providing microinsurance products in Vietnam

- Mutuals providing microinsurance products can only provide microinsurance products for their own members. Members participating in insurance plans must be both owners of mutuals providing microinsurance products and policyholders.

- Insurance contracts between mutuals providing microinsurance products and members participating in insurance plans must conform to general regulations on insurance contracts, life insurance contracts, health insurance contracts and property insurance contracts prescribed in Chapter II of the Law on Insurance Business 2022.

(Article 148 of the Law on Insurance Business 2022)

4. Licensing conditions of mutuals providing microinsurance products in Vietnam

- Conditions of a founding member, including:

+ If that member is a person, he/she must be a Vietnamese citizen having full civil capacity and a member of the entity proposing establishment of the mutual providing microinsurance products;

+ If that member is an entity, it must be the representative of that member as per law.

- The amount of Vietnamese-dong contribution must not be less than the minimum limit under the Government’s regulations.

- Any nominee for a Chairperson of the Managing Board, Director or General Director, legal representative or actuary of microinsurance products must meet the conditions and standards under the Government’s regulations.

- A plan to offer microinsurance products that is in place must allow for the number of members and the network of the mutual to be established.

- The available draft charter must be in line with business objectives of the mutual providing microinsurance products and conform to the Government’s regulations.

- The available information technology system must be appropriate; can give support for or track activities of specific microinsurance contracts; can help in financial and accounting matters related to microinsurance.

(Article 148 of the Law on Insurance Business 2022)

5. Principles of operation of mutuals providing microinsurance products in Vietnam

- Mutuals providing microinsurance service shall practise their financial autonomy and bear sole responsibility before law within the scope of property formed from rendering of microinsurance services.

- Mutuals providing microinsurance products shall be responsible for managing and supervising performance; complying with regulations on financial regimes in order to ensure financial security, successful implementation of obligations and commitments to members participating in insurance, concerned entities and persons under law.

- Mutuals providing microinsurance products shall be responsible for carrying out risk management practice in order to effectively control risks arising from offering microinsurance products.

- All of profits earned from offering microinsurance products by mutuals providing microinsurance products can be accessible to serve the interest of members participating in insurance plans by means of reduction in insurance premiums, increase in insurance benefits of the insured, support for members and assistance in accomplishment of other objectives as per the charters of mutuals providing microinsurance products.

- The Government shall impose detailed regulations on operation, organization, risk management, operations, disclosure of information, financial, accounting and financial reporting regimes of mutuals providing microinsurance products.

(Article 150 of the Law on Insurance Business 2022)

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