The insurance sector can be considered as the "goose that lays golden eggs ", generating significant profits and strongly contributing to the development of the economy. Therefore, the laws on insurance are also increasingly focused on developing and completing to create the legal frameworks for the purpose of state management, ensuring maximum benefits between the parties in the insurance business relationship.

Thus, insurance companies as well as organizations and individuals involved in insurance relationships should not miss the new contents of the new Law on Insurance Business Law, which was passed by the National Assembly in this June and shall take effect from 1 January 2023 (“Law on Insurance Business 2022”). The Law on Insurance Business 2022 has some notable points as follows:

Regarding the general organization and operation of insurance enterprises

Currently, the law allows investors to do insurance business via four forms: (i) insurance joint-stock company, (ii) insurance limited liability company, (iii) insurance cooperative and (iv) mutual insurance organizations. When the Law on Insurance Business 2022 takes effect, investors will only be able to perform insurance business via the form of joint stock companies and limited liability companies.

In addition, insurance brokers will not be allowed to carry out loss assessment activities for contracts that they arranged the execution. The party providing ancillary insurance services is also not entitled to assess the loss and facilitation for settlement of insurance claims when they are simultaneously the policyholders/ insured/beneficiary. These regulations are set out to avoid the situation of "being the judge in one’s own case" in the settlement of insurance contracts in practice.

Opening the insurance sector for foreign investors in Vietnam

In order to fulfill the international commitments that Vietnam entered into, the Law on Insurance Business 2022 has affirmed that foreign investors will be able to own up to 100 percent of the charter capital of insurance and reinsurance enterprises. The law also clearly stipulates that foreign non-life insurance enterprises and branches will only be allowed to involve in one of three sectors: life insurance, non-life insurance and health insurance, except for the following cases:

1. Non-life insurance companies operating in the health insurance sector;
2. Foreign non-life insurance enterprises and branches trading in health insurance products and casualty insurance products which have the maximum insurance term of one year; and
3. Health insurance companies trading in business of casualty insurance products which have the maximum insurance term of one year.

If not falling into the above cases, foreign investors need to consider these limitations when investing in Vietnam. Investors should also refer to the detailed conditions to be granted a license to establish and operate a foreign branch in the Law on Insurance Business 2022.