Legislating insurance activities of economic groups

Vietnam must supplement regulations on the formation and operation of insurance companies affiliated to State-owned economic group to ensure a corporate financial health.

This is the proposal of the Vietnam Economic Commission quoted on the preliminary valuation report on amended Insurance Business Law submitted by the Government to the National Assembly Standing Committee on August 23.

Bidding insurance products

According to the law project valuation agency, many State-owned corporations and economic groups established their own insurance companies to insure their own enterprises. This weakens the competitiveness or results to unfair competition.

Especially, if the risks happen, holding corporations and economic groups will suffer damage, failing to guarantee the healthy corporate finance.

Therefore, the amended law should be added regulations on the establishment and operation of such a kind of insurance company, said Ha Van Hien, Chairman of the Vietnam Economic Commission.

The evaluation report also proposes adding regulations on corporate governance, aiming to limit self-interested insurance business.

Finance Minister Vu Van Ninh points out insurance products of economic group-affiliated insurance companies are only confined to such groups, leading to divided insurance market and failing to ensure unhealthy competition conditions. But, the Tendering Law has no provisions on insurance products.

Therefore, the Law on Insurance Business will be added provisions on biding of insurance products, and that the Government shall specify this issue, Minister Ninh said.

However, Chairman of the National Assembly Finance and Budget Committee Phung Quoc Hien said many supported the inclusion of this content as well as regulations on competition and fund establishment needs to be specified in the law instead of authorising the Government to specify.

In a response to worries by other deputies, Minister Ninh said there is a regulation that State-owned economic groups are not allow to invest more than 20 percent of chartered capital in securities, insurance companies and banks to minimize risks.

National Assembly Deputy Chairman Nguyen Duc Kien emphasised that the draft law needs to have provisions to break the boundary and barrier created by economic groups to facilitate their own insurance companies to insure their affiliates, aiming to create an equal playing field for insurance companies in general.

Insurance for insurance business

How to ensure the interests of the insured was a hot dispute throughout the meeting.

Finance Minister Ninh said current laws have no provisions to protect the interests of the insured in case insurers encounter financial difficulties. According to the draft law, insurers must create a fund to protect the insured. The Government will be assigned to specify detailed regulations on establishment, management and use of this fund.

Displeased with that explanation, Chairwoman of the National Assembly Judiciary Committee, Le Thi Thu Ba, said that many provisions of the bill are still very simple. She asked for “insurance for insurance companies.”

A leader of the National Assembly Economic Commission added if the insured protection fund is managed by the insurance company, it may not work well. As the fund is not cash but asset, risks will cause the loss of asset, so it must be managed by other agencies.

According to a report by the Government, apart from the above contents, many will be amended and supplemented, including providing cross-border insurance services and insurance classification, etc.

All amendments and supplements include three groups of issues related to 15 articles out of a total 129 articles of the existing law. The Government has also proposed bringing this bill to law from January 1, 2011.

Mr Nguyen Duc Kien noted the bill is planned to be approved by the next meeting of the National Assembly this year. (VNE)

Tags: Vietnam companies, Vietnam enterprises, Vietnam state-owned firms