By Ms Anna Tipping, Partner, Norton Rose Fulbright (Asia) LLP with content contributed by:Mr Antoine Fontaine, Partner of Bun & Associates, Cambodia, and Mr Luu Tien Ngoc, Partner of Vision & Associates, Vietnam
Vietnam, Cambodia and Laos are all members of ASEAN. ASEAN Vision 2020 has the goal of creating a stable, prosperous and highly competitive ASEAN Economic Region in which there is a free flow of goods, services and investments, a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities.
Many people assume that this will result a framework similar to that which exists in Europe which allows ‘freedom of establishment’ and ‘freedom of services’ as between member states. However that is not the case.
Limitations to the removal of all restrictions
While the ASEAN Economic Community (AEC) blueprint requires members from 2015 to remove substantially all restrictions on the financial services sector and allow ASEAN equity participation of at least 70%, this is subject to the following limitations:
• all measures for the financial services sector will be subject to prudential measures and balance of payment safeguards as provided for under the WTO General Agreement on Trade in Services
• the policy of liberalisation should take place with due respect for national policy objectives and the level of economic and financial sector development of the individual members
• “pre-agreed flexibilities” can be maintained by each member country
Each member has the opportunity to “opt out” of harmonisation for national policy reasons in each of the following areas relevant to insurance: cross-border supply; consumption abroad and commercial presence. Most have
Each of Cambodia, Lao PDR and Vietnam allow for 100% foreign equity participation, so meet the AEC requirement. While Lao PDR has no restrictions on cross-border supply, other than for compulsory classes, Cambodia and Vietnam each has significant “pre-agreed flexibilities”.
Cambodia does not permit cross border supply other than for marine, aviation and transport insurance. There are no restrictions on reinsurance. Cambodia permits its citizens to purchase insurance offshore.
Lao PDR permits cross-border supply of insurance and reinsurance (other than compulsory insurance) without restriction. Citizens are permitted to purchase insurance offshore.
Vietnam permits cross border supply of insurance only to enterprises with foreign invested capital, foreigners working in Vietnam, reinsurance and international maritime transport and international commercial aviation and goods in international transit. Insurance brokers are permitted to operate on a cross-border basis. There is no restriction on persons in Vietnam sourcing insurance or insurance services offshore.
However, offshore insurers must satisfy certain criteria in order to sell insurance products directly to customers in Vietnam.
The key conditions include: having been licensed to offer insurance products and having operated for at least 10 years; maintaining an investment grade credit rating; being profitable and having not violated the relevant insurance regulations in the last three fiscal years; maintaining assets of US$2 billion or more for offshore insurers, and of $100 million or more for offshore brokers; and maintaining a deposit of VND100 billion (US$5 million) or more at a bank licensing in Vietnam.
Additionally, offshore insurers may only provide cross-border insurance services in Vietnam through an insurance brokerage company licensed to operate in Vietnam.
Furthermore, although life insurance is included in the above categories of cross-border supply, the guidance for the provision of life insurance on a cross-border basis is not discussed in the implementing Decree which has led to an uncertainty of whether offshore insurers may supply life insurance on a cross-border basis, notwithstanding its inclusion in the WTO commitments.