Effective as of 1 March 2017, Circular No. 3291 provides new detailed guidelines on compulsory insurance products in construction and investment projects, including: insurance for construction work during the construction period, insurance for investment and construction consultancy professional liability, and insurance for workers doing building work on construction sites. It also provides for the implementation of insurance for civil liability for third parties. Circular No. 329 aims to improve the effectiveness in the implementation of these types of insurance products, as well as to improve the support from the insurance market to cover risks for infrastructure construction projects in Vietnam. Specifically, Circular No. 329 outlines regulations on the terms and conditions, premiums, financial regimes and reporting regimes for those compulsory products, as well as provide for standardized templates of policy documents.
Specific implications for general/ non-life insurers
While Circular No. 329 imposes an obligation on local non-life insurers to sell compulsory insurance products, investors and contractors can select any qualified non-life insurers to purchase the products from. Local non-life insurers must meet the conditions set out in Decree No. 119 and the Law on Insurance Business to provide compulsory construction insurance products. Also, in order for an offshore re-insurer to receive compulsory construction insurance ceded from a local insurer in Vietnam, that offshore re-insurer must have a minimum rating of "BBB" by Standard & Poor's, "B++" by A.M. Best, or an equivalent rating from another experienced and accredited rating institution in the latest fiscal year of re-insurance.
In terms of financial regimes, Circular No. 329 requires that local non-life insurers separately account for insurance premiums revenue, commissions, indemnity, and other expenses related to these compulsory insurance products. In addition, local non-life insurers must prepare and submit reports on these operations on a quarterly and annual basis.
Although Circular No. 329 clarifies that it does not have any retroactive effect on the existing insurance policies that have been executed prior to 1 March 2017, since Circular No. 329 introduces various new guidelines and standardized requirements, local non-life insurers may need to review and update their existing templates of related policy documents to comply with Circular No. 329.
Specific implications for investors and contractors
Circular No. 329 requires investors and contractors to purchase the compulsory insurance products when participating in infrastructure construction projects in Vietnam.
As policyholders, investors and contractors must also comply with the requirements under Circular No. 329, including:
- provide sufficient information to the insurer, accurately complete the proposal form and facilitate assessment of risks by the insurer;
- fully pay premiums by the due date and via proper method under the insurance policy;
- notify the insurer of cases that may give rise to a claim during the term of the insurance policy;
- apply risk control and prevention measures and implement reasonable recommendations provided by the insurer and consulting contractors;
- apply necessary safety measures and strictly comply with the laws on occupational safety;
- authorize the insurer to request the third party to reimburse the indemnity which the insurer has indemnified for damage to the insured as a consequence of the third party's fault (i.e., authorize the insurer to exercise subrogation); and
- cooperate with the State authorities in the implementation of these compulsory insurance.