Client Alert Vietnam’s New Circular on Universal Life Insurance Products Provided by Life Insurers Recent developments Effective from 1 June 2016, Circular No. 521 makes some amendments to the rules on universal life insurance products provided by life insurers. Circular No. 52 particularly amends the previous regulations enacted on 23 November 2007 under Decision No. 962 (the “Previous Rules”). Circular No. 52 ameliorates certain conditions for insurance agents selling universal life insurance products for life insurers, which is aimed to help life insurers to expand their distribution channels. It also provides for new guidelines on setting up professional operation reserves. Specific amendments under Circular No. 52 (a) Requirements of insurance agents Under the Previous Rules, for a life insurer to sell universal life insurance products, its insurance agents must have at least six (6) months of experience as life insurance agents, or two (2) years working experience in finance, banking or insurance, or have a college degree or higher in finance, banking or insurance. Circular No. 52 eases this requirement by reducing the six (6) consecutive months of experience to three (3) as life insurance agent, and reducing the two (2) years of working in such field to one (1) year. In terms of required training period for agents, under the Previous Rules, insurance agents must be trained intensively for at least 24 hours on the sales of the universal life insurance products. However, Circular No. 52 also modifies this requirement by removing the minimum training time of 24 hours and only requires that the insurance agents must be trained and certified by their insurers for completion of the training on this type of products. Accordingly, under Circular No. 52, the requirements for insurance agents to be permitted to sell universal life insurance products will comprise of: • Have not violated the law on the operation of insurance agents and the rules on insurance agent occupational ethics; 1 Circular No. 52/2016/TT-BTC of the Ministry of Finance dated 1 March 2016 guiding the implementation of universal life insurance products (“Circular No. 52”). 2 Decision No. 96/2007/QD-BTC of the MOF dated 23 November 2007 on the regulations for implementation of universal life insurance products (“Decision No. 96”). Insurance Vietnam Baker & McKenzie (Vietnam) Ltd. 12th Floor, Saigon Tower 29 Le Duan Blvd District 1 Ho Chi Minh City Socialist Republic of Vietnam Tel: +84 8 3829 5585 Fax: +84 8 3829 5618 Baker & McKenzie (Vietnam) Ltd. Hanoi Branch Office Unit 1001, 10th Floor Indochina Plaza Hanoi 241 Xuan Thuy Street Cau Giay District, Hanoi Socialist Republic of Vietnam Tel: +84 4 3825 1428 Fax: +84 4 3825 1432 April 2016 2 Vietnam | April 2016 Should you wish to obtain further information or want to discuss any issues raised in this alert with us, please contact: Fred Burke +84 8 3520 2628 firstname.lastname@example.org Dang Chi Lieu +84 4 3936 9341 email@example.com Oanh H. K. Nguyen +84 8 3520 2629 firstname.lastname@example.org www.bakermckenzie.com This client alert provided by Baker & McKenzie (Vietnam) Ltd. is intended to provide our clients, and other interested parties, with an overview of the recent legal changes in the relevant area for information purposes only. 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In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. ©2016 Baker & McKenzie (Vietnam) Ltd. All rights reserved. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. • Have been trained on universal life insurance products and have been issued training completion certificates; and • Have at least three (3) months of experience as life insurance agents, or one (1) year working experience in finance, banking or insurance, or have a college degree or higher in finance, banking or insurance. (b) Setting up of professional operation reserves Circular No. 52 provides for new guidelines on the setting up of professional operation insurance reserve by life insurers, specifically: For insurance risk reserve, it is either (i) the reserve calculated by unearned premium method or (ii) the reserve calculated by cash flow method, whichever is larger, and used to cover all future expenses throughout the term of the policy. In this regard, Circular No. 52 clarifies further that the reserve calculated by unearned premium method is equal to 100% of collected risk insurance premiums of the universal life insurance policies. For professional operation reserve for the universal life linking portion, Circular No. 52 provides that it can be implemented according to either (a) surrender value, or (b) account value, of the universal life insurance policy. Under the Previous Rules, only the surrender value of the policy in the universal life fund is used. In addition, Circular No. 52 requires that: • the insurers are responsible for assessing and selecting their method for professional operation reserve for the universal life linking portion, ensuring their completion of the responsibilities which have been committed under the insurance policies; and • during a fiscal year, the insurers are not permitted to change their method and the basis for the professional operation reserve for the universal life linking portion. If a change is proposed for the next fiscal year, the insurers must ensure that the reserve is higher than the previous year and the insurer must obtain an approval letter from the Ministry of Finance before the proposed change is effected.