The Government of Vietnam recently released a draft decree (Draft Decree) providing regulations on agricultural insurance products (including insurance for plants, animals and aquaculture). Following a multi-year pilot period beginning in 2011, the Government has introduced the Draft Decree to regulate agricultural insurance products and encourage more local nonlife/general insurers to underwrite and sell these products. The Draft Decree has an overarching goal of contributing to social safety and promoting agricultural developments in Vietnam.
The Draft Decree applies only to non-life insurers who underwrite and sell agricultural insurance products. Under the Draft Decree, the sale of these products is optional and voluntary rather than compulsory for the onshore non-life insurers.
Implications for local non-life insurers
1. Requirements for Index-Based Insurance (IBI) products
Under the Draft Decree, non-life insurers can take the initiative to underwrite the terms & conditions and premiums for agricultural insurance products. However, if a non-life insurer opts to underwrite an index-based agricultural insurance (IBI)1 product, the insurer must apply the guidelines under this proposed decree. Specifically, the insurer must specify: the value of insured property, the index to be covered, the basis for determination of the covered index, and the method of determining the indemnification / insurance proceeds, under the terms & conditions and/or premium of the IBI.
2. Regulatory notification requirements
Under the Draft Decree, before selling an agricultural insurance product, a non-life insurer must serve written notice on the Ministry of Finance ("MOF") proposing to sell the agricultural insurance product. The insurer must enclose the following documents with the notice letter:
- the terms and conditions;
- the insurance premium rate, and
- the formula, method and illustration/explanation of the calculation of premiums; and
- operational reserves that have been certified by the insurer's actuary.
3. Periodic reporting requirements
Under the Draft Decree, insurers selling agricultural insurance products must prepare and submit to the MOF: (i) reports on specific operations/activities on a monthly, quarterly and annual basis, and (ii) reports on sales/business operation results on a quarterly and annual basis.
Additionally,The MOF may require supplemental reports from insurers on their operations and financial status, to monitor the implementation of their agricultural insurance portfolio.
The Draft Decree provides other detailed guidelines on technical requirements for agricultural insurance policies, how to record revenues and expenses of insurers for these products, as well as a support policy on premiums to policyholders who are producers of agricultural products.
The Draft Decree is set to take effect from 1 January 2018. It is, therefore, likely that the Government will officially issue this proposed decree soon.