After years of preparation and negotiation, Vietnam and the European Union have approved and ratified the EU - Vietnam Free Trade Agreement (“EVFTA”), which came into effect on 1 August 2020.
The EVFTA supplements and expands Vietnam's commitment to open its market for insurance and financial services that were primarily incorporated in the WTO Schedule of Commitments.
Generally, Vietnam maintains the level of most commitments in the WTO Schedule and Vietnam's domestic regulations regarding direct insurance, but expands market access commitments in terms of reinsurance.
Insurers and reinsurers should take into account the expanded commitments of Vietnam under the EVFTA for their business operations in Vietnam.
Please do not hesitate to contact us if you would like to know more about the following:
- Upcoming developments of the regulations related to the insurance business sector in Vietnam
- Specific opportunities and challenges, as well as legal and practical solutions for investment in the insurance business sector in Vietnam
- More specific implications for particular operations and players
The insurance business
As regards direct/original insurance business operations (life insurance, non-life insurance, health insurance), Vietnam's commitments under the EVFTA are generally similar to those incorporated in the WTO Schedule of Commitments, except for health insurance.
Particularly, under the WTO, health insurance is not included in the scope of Vietnam’s commitments. Under the EVFTA, the provision of health insurance services by foreign-invested life insurance companies in Vietnam is allowed. However, this change is not expected to significantly impact the operation of foreign-invested life insurers in Vietnam, since these insurers have already been permitted to underwrite and sell health insurance products under the domestic regulations (such as Law on Insurance Business and guiding legal documents).
The reinsurance business
In comparison with the WTO Schedule of Commitments and the domestic regulations, Vietnam has expanded its commitments for the reinsurance sector materially. For example:
- Vietnam permits service providers from other members of EVFTA to provide "retrocession services" to Vietnamese clients on a cross-border basis, without any market access restrictions.
- After three (3) years from the effective date of the EVFTA (around 1 August 2023), foreign reinsurance enterprises domiciled in an EVFTA contracting state may open a "branch" in Vietnam to engage in reinsurance activities.
A branch is a dependent unit of the offshore/foreign company which does not have the capacity of an independent legal entity and is only permitted to provide certain services that the foreign company is licensed to provide in its home jurisdiction. The foreign company takes full responsibility for all liabilities and commitments of the branch in Vietnam. Before the EVFTA, both the WTO Schedule of Commitments and Vietnam's domestic regulations only permitted foreign non-life insurers to open a branch in Vietnam to engage in non-life insurance business.