Q1: Can you tell us about any significant regulatory changes to the insurance industry in the last 12 months (e.g. Decree no. 46/2023/ND-CP)? How have the changes affected the insurance industry?

A1:

In the last 12 months, Vietnam witnesses the adoption of the following major legal documents:

Decree 21/2023/ND-CP on microinsurance: This decree establishes a legal framework for political-social organizations, social organizations, professional organizations, and cooperatives to establish supportive organizations to provide microinsurance to their members. This type of insurance facilitates insurance participation for low-income individuals who have limited access to conventional insurance products offered by insurance companies, contributing to the implementation of social security policies;

Decree 46/2023/ND-CP replaces Decree No. 73/2016/ND-CP and introduces several new provisions affecting the insurance industry, including: Expanding the regulatory scope to include insurance enterprises, state management agencies responsible for insurance business activities, as well as policyholders and beneficiaries; apart from non-life insurance, it also covers property insurance, cargo insurance, and other damage insurance;

Decree 67/2023/ND-CP on compulsory civil liability insurance of motor vehicle owners, compulsory fire and explosion insurance, compulsory insurance for construction investment activities;

Circular 67/2023/TT-BTC guides Decree 67/2023/ND-CP, supplements regulations on insurance sales through banks; it prohibits banks from selling investment-linked insurance along with loans.

Q2: How would you describe the voluntary implementation of IFRS17 in Vietnam so far?

A2:

According to a survey conducted by the Ho Chi Minh City Stock Exchange and Deloitte Vietnam in December 2020, more than 50% of the surveyed enterprises have either adopted IFRS or are planning to convert to IFRS. The practical experience of enterprises currently applying IFRS also demonstrates that adopting international accounting standards is quite complex in terms of time, implementation costs, as well as the expenses associated with training personnel and preparing software systems. In fact, the majority of enterprises require up to 12 months to complete the transition. Additionally, there are certain challenges when implementing IFRS in Vietnam. Firstly, the complexity of the IFRS system poses a significant challenge. Secondly, many core provisions throughout the entire VAS accounting system differ substantially from IFRS. Thirdly, there are difficulties related to the level of expertise of personnel.

The voluntary implementation off IFFRS 17 in Vietnam has both positive and negative aspects:

Positive: The implementation can lead to an improvement in the quality of financial reporting by enterprises through enhanced transparency, increased comparability, and providing information for users of financial statements to make management, operation and investment decisions. It allows for the comparision of the financial position and performance of enterprises across countries. Moreover, financial statements prepared on the same standardized system provide Vietnamese enterprises with opportunities to attract investment capital.

Negative: According to a PwC report, the implementation may required more time due to a shortage of human resources, technology and time constrains.

Q3: How is the Insurance Supervisory Authority (ISA) approaching regulation of InsurTechs and digital-only insurers? What are some challenges?

A3:

The 2022 Law on Insurance Business includes a provision regulating the application of information technology in insurance activities.

Licensing and Compliance Monitoring: InsurTechs and digital-only insurers are often subject to licensing requirements and ongoing compliance monitoring by the ISA.

The challenges are:

  • Traditional insurance regulations may not adequately address the unique characteristics and risks associated with InsurTechs and digital-only insurers.
  • The digitalization of insurance processes may also lead to challenges related to transparency, disclosure, and fair treatment of consumers, requiring regulators to ensure adequate consumer protection measures are in place.
  • InsurTechs and digital-only insurers may face operational risks related to technological failures, system outages, or inadequate risk management practices.

Q4: What insurance regulatory changes is ISA looking at over the coming 12 months?

A4:

In the next 12 months, we expect that ISA will soon adopt the following documents:

Draft amendments to Decree 102/2021/ND-CP regarding administrative fines for violations in the insurance business sector;

Draft amending and supplementing Circular No 20/2022/TT-BYT on the list, rates and conditions for payment for pharmaceutical, biological products, and marked substances within the scope covered by health insurance participants.

Q5: How does ISA plan to strengthen supervision of Vietnam's insurance industry?

A5:

Implementing a risk-based supervision approach allows the ISA to prioritize its supervisory efforts based on the level of risk posed by insurance companies.

Enhanced Regulatory Framework: The ISA may work on enhancing the regulatory framework governing the insurance industry by updating existing regulations and introducing new guidelines .

Enhanced Collaboration and Information Sharing: Collaboration with other regulatory authorities, industry associations, and international organizations can enhance the effectiveness of supervision efforts.

Please do not hesitate to contact Dr. Oliver Massmann at omassmann@duanemorris.com if you have any questions. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.