With an eye to strengthening competitiveness and better protect customers, state-owned insurance companies must now increase legal capital under a recent decree issued by the government.
Decree 46/2007/ND-CP issued March 27 specifies that legal capital for non-life insurers is now VND70 billion, up from VND30 billion previously and for a life insurer from VND140 billion to VND600 billion.
Meanwhile the capital for an insurance broker remains unchanged at VND4 billion.
Those businesses with a lower registered capital established before the new decree comes into effect April 10 must meet the new requirement within three years.
Sixty days after receiving an operating license, insurers have to deposit a sum equivalent to 2% (down from 5%) of their new legal capital at a commercial bank in Vietnam.
Insurance companies are also permitted to use reserve funds to invest in Vietnam directly or through authorized investment institutions, but cannot exceed 35% of reserve volume.
The Ministry of Finance will require insurers to send financial reports and statistics periodically, do an internal audit, and open up their books to the public.
The government has also issued Decree 45/2007-ND-CP requiring overseas insurance company that establishes a wholly-foreign insurance company in Vietnam or form a joint venture must receive a permit from relevant authorities in their home country to operate in Vietnam.
Foreign insurers must also have been operating profitably in their home country for three years, and legally for at least 10 years, with assets of at least US$2 billion. And the capital for an insurance broker remains unchanged at VND4 billion.
The Ministry of Finance will be responsible for licensing insurers, insurance brokerages and reinsures.
Within 30 days from obtaining permission, foreign-invested insurers must publicly disclose information for five consecutive days in national and local daily newspapers.
The published information must include the license number, address of headquarters, branches and rep-offices; type of insurance services and products offered.
Vietnam’s insurance premium revenues are targeted to reach $4 billion, or 4.2% of the country's gross domestic product (GDP) in 2010, up from VND15 trillion ($943.4 million), or 2.03% of the GDP in 2005.
A fast-growing economy, low insurance penetration, and sound legal framework have resulted in an influx of new players in the sector, said the Vietnam Insurance Association, adding competition for clients was bound to increase significantly.
According to a foreign insurance company in Vietnam, the new capital requirements are easy to manage for overseas businesses and should serve to better protect customers.
Source: Thanh Nien equity fund vietnam
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