Method and basis for setting aside health insurance reserves in Vietnam

Method and basis for setting aside health insurance reserves in Vietnam (Image from Internet)

1. Method and basis for setting aside health insurance reserves in Vietnam

The Method and basis for setting aside health insurance reserves in Vietnam according to Article 43 Decree 46/2023/ND-CP are as follows:

- Mathematical Reserves:

Mathematical reserves are applied to insurance contracts with a term of over 1 year to ensure the commitments made when an insurance event occurs in the future. Insurance companies, reinsurance companies, and foreign branches in Vietnam are allowed to proactively choose the provisioning method such as: Gross Premium Method, Net Premium Method, and other methods according to international practices.

- Unearned Premium Reserve: Calculated according to the methods specified in Clause 1 Article 39 Decree 46/2023/ND-CP, applicable to insurance contracts with a term of up to 1 year.

- Claim Reserve:

+ Provisioning method for claim reserve based on statistical data of submitted claim files;

+ Provisioning method for claim reserve based on loss ratio.

- Balance Reserve:

+ For health insurers, life insurers, it is provisioned based on the percentage of pre-tax profit of the life insurer, reinsurance company, and foreign branch of the reinsurance company engaging in life insurance business;

+ For non-life insurers, foreign branches in Vietnam, reinsurance companies engaging in health insurance business: Annual provisioning based on the percentage of retained premiums of non-life insurers, reinsurance companies, and foreign branches in Vietnam.

2. Application and procedures for registration of the method of setting aside technical reserves in Vietnam

The application and procedures for registration of the method of setting aside technical reserves in Vietnam according to Article 45 Decree 46/2023/ND-CP are as follows:

- Insurance companies, reinsurance companies, and foreign branches in Vietnam are not allowed to change the provisioning method during the financial year. In case of changing the provisioning method in the next financial year, insurers, reinsurance companies, and foreign branches in Vietnam must propose and obtain approval from the Ministry of Finance before implementation.

- The dossier for registering or proposing a change in the provisioning method, basis for insurance operations includes the following documents:

+ Registration or change document of the provisioning method, basis for insurance operations using the form prescribed in Appendix IX issued with Decree 46/2023/ND-CP;

+ Explanatory documents and illustrations about the provisioning methods, bases for insurance operations expected to apply, confirmed by an actuary. In case of changing the provisioning method, explanatory documents must prove that the new method reflects insurer's responsibility more accurately and comprehensively than the old method.

- Within 30 days from the date of receipt of a valid dossier, the Ministry of Finance will issue a written approval. In case of refusal, the Ministry of Finance must explain the reasons in writing.

- Insurance companies, reinsurance companies, and foreign branches in Vietnam with provisioning methods, bases that do not comply with this Decree must register again with the Ministry of Finance within 6 months from the signing date of Decree 46/2023/ND-CP, applicable to the financial year from January 1, 2023. This regulation does not apply to reserves for the general linked portion.

- Within 1 year from the effective date of Decree 46/2023/ND-CP, life insurers must review and register with the Ministry of Finance the provisioning method for the general linked portion ensuring the reserve value as prescribed by Decree 46/2023/ND-CP.

- For health insurance contracts with a term of over 1 year that have arisen before the effective date of Decree 46/2023/ND-CP, non-life insurers are allowed to continue provisioning using the Net Premium Method as approved by the Ministry of Finance.

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE