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Sunday, November 19, 2017

Draft circular to classify insurance companies

Updated: 16:29’ - 28/06/2014

Insurance companies would be divided into four categories based on four groups of supervisory indicators if a draft circular recently proposed by the Ministry of Finance is approved.

Accordingly, supervisory indicators, including qualitative and quantitative indicators, would be divided into four groups.

The first group consists of indicators involving capital and solvency capacity. Professional operation indicators constitute the second one. The third group includes indicators on financial investment and asset quality, while the fourth one consists of those on the compliance with regulations on organization and operation of insurance companies.

Based on these indicators, insurance companies would be divided into four groups.

The first group consists of insurance businesses that meet requirements on the minimum solvency margin and have no indicators subject to intensified control. The second one includes companies that reach the law-prescribed solvency margin ratio but have one supervisory indicator placed under intensified control. The third group includes insurance companies prone to insolvency, while the last one consists of group-3 insurance businesses that are unable to restore their liquidity and placed under special control.

The draft paper also provides measures to be taken after insurance businesses are classified. For example, group-4 companies would be required to apply a series of measures prescribed in Article 80 of the Law on Insurance Business, Clause 3, Article 19 of Decree No. 46/2007/ND-CP, for insurance businesses, or Clause 6, Article 19 of Decree No. 123/2011/ND-CP, for branches of foreign insurance companies. After these measures are taken, if these insurance companies still fail to restore their liquidity, they would proceed with bankruptcy or dissolution and closure procedures in accordance with law.-


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