Can an Insurance Enterprise Cede Reinsurance?

Short answer: Yes. An insurance enterprise may cede reinsurance (transfer part of its insurance liability to another enterprise) under the Law on Insurance Business 2022. This is a core risk management tool of the insurance industry. The key principle: ceding reinsurance does not change the liability of the insurance enterprise toward insurance buyers — clients still claim their rights from the enterprise that signed the contract with them.

Legal basis

• Law on Insurance Business 2022 (No. 08/2022/QH15) — reinsurance;
• Decree 46/2023/ND-CP providing detailed guidance.

What is reinsurance?

• The insurance enterprise (the ceding party) transfers part of its risks and liabilities to another enterprise (the reinsurer);
• The reinsurer may further cede reinsurance to a third party;
• A reinsurance contract is a contract independent of the original insurance contract.

Conditions for ceding reinsurance

• The reinsurer must be an insurance enterprise or reinsurance enterprise licensed to operate;
• For overseas reinsurance: the foreign reinsurer must meet prescribed conditions (credit ratings…);
• Reinsurance cessions must comply with the limits and ratios set by the Ministry of Finance to ensure financial safety.

Principles of liability

• The ceding enterprise remains fully liable to insurance buyers under the original insurance contract;
• Insurance buyers have no direct relationship with the reinsurer (unless otherwise agreed);
• Reinsurance disputes are resolved between the ceding party and the reinsurer.

Management notes

• Build a reinsurance program suited to the risk appetite and solvency margin;
• Assess the financial capacity and ratings of reinsurers, especially for overseas reinsurance;
• Report reinsurance activities to the Ministry of Finance under the reporting regime.

If you need to determine the right approach for your specific situation, you should discuss it with a lawyer in advance for a review of your documents and advice on the course of action.

For quick advice, you can contact a lawyer at 0966.475.966.

Related articles

• Dossier for splitting a reinsurance enterprise
• What conditions must the merger of insurance enterprises satisfy?
• Conditions for licensing the establishment of an insurance enterprise