When Vietnam's new insurance law (dubbed "Law on Insurance Business 2022") takes effect next January, investors will only be able to operate insurance business in the form of joint stock companies and limited liability companies, points out the law firm Dentons LuatViet.
At present, the existing insurance law allows investors to engage in insurance business via four forms: (i) insurance joint-stock company, (ii) insurance limited liability company, (iii) insurance cooperative and (iv) insurance mutual.
In a brief on the new insurance law written by Mr Tran Duy Canh, the managing partner of Dentons LuatViet, based in Ho Chi Minh City, and Ms Tran Thi Ngoc Linh, senior partner based in Hanoi, say that the new law has some other notable points as follows:
Opening up the insurance sector to foreign investors
In order to fulfill the international commitments that Vietnam has entered into, the Law on Insurance Business 2022 affirms that foreign investors will be able to own up to 100% of the charter capital of insurance and reinsurance companies. The law also clearly stipulates that foreign non-life insurance companies and branches will only be allowed to be engaged in one of three sectors: life insurance, non-life insurance and health insurance, except in the following cases:
Non-life insurance companies operating in the health insurance sector;
Foreign non-life insurance enterprises and branches trading in health insurance products and casualty insurance products which have a maximum insurance term of one year; and
Health insurance companies engaged in the business of casualty insurance products that have a maximum insurance term of one year.
The authors add that investors should also refer to the detailed conditions in the Law on Insurance Business 2022 which are to be met for a licence to be granted to establish and operate a foreign branch.
Insurance brokers will not be allowed to carry out loss assessment activities for insurance policies for which they arranged the execution thereof. The party providing ancillary insurance services is also not entitled to assess the loss and facilitate the settlement of insurance claims when they are simultaneously the policyholders/ insured/beneficiaries. These regulations are set out to avoid the situation of "being the judge in one’s own case" in the settlement of insurance contracts.
The new insurance law was passed by the National Assembly in June 2022 and shall take effect from 1 January 2023.
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