Conditions for establishing a life insurance company in Vietnam

As society develops, the need to accumulate finances and protect oneself against risks is increasing. Therefore, many people have been learning about life insurance. Therefore, companies doing business in this field are also increasing. A life insurance company is a type of insurance company, so it must meet all conditions when establishing an insurance company as prescribed. So what are the conditions for establishing a life insurance company?

Legal bases

• Schedule of commitments Vietnam in WTO.
• Insurance Business Law 2022.
• Decree No. 46/2023/ND-CP details the implementation of a number of articles of the Law on Insurance Business.

What is life insurance?

Pursuant to Clause 13 Article 4 of the Law on Insurance Business 2022 stipulates the concept of life insurance as follows: “Life insurance is a type of insurance in case the insured lives or dies.”

Thus, life insurance is a type of insurance provided by insurance companies to protect customers’ finances against risks related to health and life. In addition, life insurance can also be considered as a form of savings with a stable interest rate.

Basic types of life insurance in Vietnam

Currently on the market there are many types of life insurance, based on the coverage of insurance, life insurance can be classified into the following types:

• Term insurance: in case the insurance is completed until a certain term agreed in the contract, the insurance company will pay the insurance premium.
• Death insurance: in case the insured dies within a certain period specified in the contract, the enterprise shall pay the insurance premium to the beneficiary.
• Whole life insurance: in case the insured dies at any time from the effective time of the insurance policy, the insurance company must pay the insurance premium to the beneficiary.
• Mixed insurance: a combination of term insurance and term insurance.
• Periodic payment insurance: cases where the insured lives to a certain term; The insurance company must then make periodic payments to the beneficiary as agreed earlier in the insurance contract.
• Investment-linked insurance: designed in the form of sharing interest, fees and insurance benefits separately into two parts: insurance and investment.
• Pension insurance: in case the insured reaches a certain age, the insurance company pays according to the agreement in the insurance contract.

Market access conditions for insurance business in Vietnam

Vietnam’s commitments in international treaties

Based on Section 7 of Vietnam’s WTO commitments on financial services, it can be seen that when Vietnam joined the WTO, Vietnam committed to open the market for foreign investors to access the market for life insurance services in Vietnam for sub-sectors:  life insurance except health insurance.

Vietnam’s commitments to open insurance ancillary services in the CPTPP are similar to commitments in the WTO. Accordingly, Vietnam shall develop principles of provision and use of insurance services in accordance with current laws, international practices and international commitments to Vietnam; expanding the target of foreign investors, allowing financial groups to conduct insurance business; simplify conditions for licensed insurers in Vietnam who want to establish new insurance businesses. Currently, in the two exceptions, Vietnam’s commitments do not have any barriers to accessing the insurance market within the framework of the CPTPP.

Conditions for establishing a life insurance company in accordance with Vietnamese law

Conditions on legal capital

The first thing to establish an insurance business company is to meet the conditions for legal capital as prescribed. Pursuant to the provisions of Article 133 of the Law on Insurance Business in 2022 on legal capital when establishing a life insurance company as follows:

• Charter capital shall be contributed in Vietnamese Dong and not lower than the minimum level prescribed by the Government;
• Shareholders and capital-contributing members are not allowed to use loans or investment trust capital of other organizations or individuals to participate in capital contribution.

Pursuant to Article 35 of Decree No. 46/2023/ND-CP stipulating the minimum charter capital of life insurance enterprises:

• Life insurance business (except unit-linked insurance, pension insurance) and health insurance: VND 750 billion;
• Insurance business as prescribed at Point a of this Clause and unit-linked insurance or pension insurance: VND 1,000 billion;
• Insurance business as prescribed at Point a of this Clause, unit-linked insurance and pension insurance: VND 1,300 billion.

Conditions on shareholders and members contributing capital to establish in Vietnam

Pursuant to Point a, Clause 1, Article 64 of the Law on Insurance Business in 2022 stipulates conditions for shareholders and capital-contributing members to establish:

• Organizations and individuals have the right to establish and manage enterprises
• The organization has legal status, is operating legally; in case of contributing 10% or more of charter capital, it must do business profitably in the last 03 consecutive financial years up to the time of submitting the application for a license and satisfy the financial conditions prescribed by the Government;
• Insurers and reinsurance enterprises that have been granted establishment licenses and operate in Vietnam contribute capital to establish insurance enterprises or new reinsurance enterprises must do business profitably in the last 03 consecutive financial years up to the time of submitting the application for a license and meet the capital adequacy ratio as prescribed by the Law this.

For Vietnamese organizations

• Having total assets not less than VND 2,000 billion in the year preceding the year of submitting the application for a license.

For foreign organizations

A member contributing capital to establish a life insurance limited liability company must be an organization and meet the following conditions:

• Being a foreign insurer permitted by a competent authority of a foreign country to conduct business in the field planned to be conducted in Vietnam or a subsidiary specializing in performing outward investment functions of a foreign insurance enterprise authorized by a foreign insurance enterprise to contribute capital to establish an insurance enterprise in Vietnam;
• At least 7 years of experience in the field expected to be conducted in Vietnam
• Have total assets equivalent to at least US$2 billion in the year preceding the year in which the license application is submitted
• Not seriously violating the legal provisions on insurance business activities of the country where the enterprise is headquartered within 03 years preceding the year of submitting the application for a license

General conditions of personnel

• Have the right to manage the enterprise under the Enterprise Law;
• Not be sanctioned for administrative violations in the field of insurance business, not be disciplined in the form of dismissal for violating internal processes for 03 consecutive years before the time of appointment
• Not be prosecuted by competent agencies in accordance with law at the time of being elected or appointed.

Having a dossier of application for an establishment and operation license according to regulations

According to Article 134 of the Law on Insurance Business 2022 stipulates the dossier of application for a license to establish and operate an insurance brokerage enterprise as follows:

• A dossier of application for an establishment and operation license includes:
• A written request for an establishment and operation license;
• Draft company charter;
• The operation plan for the first 5 years, clearly stating the contents of activities expected to be implemented;
• Curriculum vitae, criminal record cards, copies of diplomas and certificates proving the capacity, professional and professional qualifications of the person who is expected to be appointed as the Chairman of the Board of Directors or the Chairman of the Members’ Council, the Director or General Director, the legal representative;
• The level of capital contribution and method of capital contribution, the list of founding organizations and individuals or members, shareholders expected to contribute 10% or more of charter capital and documents proving the satisfaction of the conditions for shareholders and members to contribute established capital; capital conditions; personnel conditions.

If you want to establish a life insurance company, please contact Viet An Law Firm for the best support!