Can insurance businesses cede reinsurance?

According to the provisions of Clause 4, Article 4 of the Law on Insurance Business 2022 Reinsurance cession is the activity of an insurance enterprise, reinsurance enterprise, foreign branch in Vietnam transferring part of the reinsurance responsibility to another insurance enterprise, reinsurance enterprise, foreign branch in Vietnam, foreign insurance enterprise, foreign reinsurance enterprise, foreign insurance organization on the basis of payment of reinsurance cession fee.

Whether an insurance enterprise can cede reinsurance is according to the provisions of Clause 1, Article 63 of the Law on Insurance Business 2022 as follows:

Activities of insurance enterprises, reinsurance enterprises, foreign branches in Vietnam

1. Activities of insurance enterprises and branches of foreign non-life insurance enterprises include:

a) Insurance business, reinsurance business, reinsurance concession;

b) Managing funds and investing capital from insurance business activities;

c) Providing auxiliary services insurance;

d) Other activities directly related to insurance business activities.

According to the above regulations, insurance enterprises can operate reinsurance operations.

Is the insurer allowed to reinsure the entire liability it has insured?

Whether the insurance enterprise is allowed to reinsure the entire insured liability, according to the provisions of Clause 1 Article 33 Circular 67/2023/TT-BTC as follows:

Reinsurance, cession of reinsurance

1. Insurance enterprises, reinsurance enterprises, and foreign branches in Vietnam may reinsure or cede partial reinsurance but may not reinsure or cede reinsurance to the entire insured liability or reinsurance in an insurance contract or reinsurance contract for one or more domestic and foreign insurance enterprises or reinsurance enterprises, foreign insurance organizations accepting reinsurance, or other foreign branches in Vietnam.

Accordingly, insurance enterprises are not allowed to reinsure the entire liability that has been insured in an insurance contract.

Who approves the reinsurance program of the insurance company?

The person approving the reinsurance ceding program of the insurance enterprise is specified inPoint a Clause 1 Article 34 Circular 67/2023/TT-BTC as follows:

Manage reinsurance and reinsurance programs

1. Approval of reinsurance and reinsurance ceding programs:

a) To ensure safety and efficiency in reinsurance business activities, the Board of Directors (Board of Members) or General Director (Director) of insurance enterprises, reinsurance enterprises, and Directors of foreign branches in Vietnam are responsible for approving reinsurance and reinsurance cession programs in accordance with the financial capacity, business scale of the enterprise, branch and current legal regulations; Review, evaluate, and adjust reinsurance and reinsurance programs on an annual basis or when market conditions change;

b) The reinsurance and reinsurance program includes the following main contents:

– Determine the risk-taking ability of insurance enterprises, reinsurance enterprises, and foreign branches in Vietnam;

– Determine the retention level appropriate to the accepted insurance risk, the limits on the retention level per unit of risk and the maximum level of protection from foreign insurance enterprises and organizations receiving reinsurance;

– Identify the types and methods of reinsurance most suitable for managing accepted risks;

– Methods, standards, and procedures for selecting foreign insurance enterprises and organizations to receive reinsurance, including how to assess the level of risk and financial safety of foreign enterprises and insurance organizations receiving reinsurance;

– List of foreign enterprises and insurance organizations expected to receive reinsurance, paying attention to diversification and ranking of underwriters reinsurance;

– Methods of using deposits of foreign insurance enterprises and organizations receiving reinsurance (if any);

– Managing accumulated risks for specific fields, geographical regions and types of products;

– Methods of controlling reinsurance and reinsurance cession programs including reporting and internal control systems set.

Thus, the Board of Directors (Board of Members) or General Director (Director) of the insurance enterprise is responsible for approving the reinsurance program in accordance with the financial capacity, business scale of the enterprise and current legal regulations.