Regulations on reinsurance activities

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According to Decree No. 73/2016/NĐ-CP, insurance companies and foreign insurance branches can only transfer a part of their insurance obligations in a contract to another or other domestic and foreign insurers and foreign branches.

The decree also states that the rate of retained obligations on each individual risk or loss must not exceed 10% of the owner. If insurers and foreign branches are requested to transfer reinsurance by consumers, the maximal rate of reinsurance will be 90% of the insurance obligations.

 

Insurance firms and foreign branches can assume reinsurance obligations from other insurers who have taken insurance obligations. When assuming reinsurance, insurers and foreign branches have to evaluate the risks in order to make sure that they are within the firms’ solvency, and do not assume reinsurance for the risks which have already been transferred to reinsurers.  

 

The Ministry of Finance is responsible for instructing the assumption and transfer of reinsurance as well as the rate of retention for insurers, reinsurers and foreign branches.

 

The decree stipulates that foreign reinsurers have to be operating legally and meet the full requirements on solvency as regulated by the law of the countries where they are headquartered.

 

Leading reinsurers and the companies assuming reinsurance of from 10% of total obligations of each reinsurance contract must be at least rated “BBB” by Standard & Poor’s or Fitch, “B++” by A.M.Best and “Baal” by Moody’s, or equivalent ratings of other experienced rating organizations in the closest financial year to the moment of transferring reinsurance contracts.  

 

If insurance obligations are transferred to a parent company headquartered overseas or subsidiaries in the same group which do not have credit ratings as mentioned above, insurers, reinsurers and foreign branches have to submit to the Finance Ministry a document of the insurance management agency in foreign countries where the reinsurance company is headquartered, confirming the company’s solvency in the closest financial year to the year of assuming reinsurance.