comparative analysis of selected insurance law provisions (philippines, singapore and vietnam)

Comparative Analysis of Selected Insurance Law Provisions

(Philippines, Singapore and Vietnam)

1

Areas of Study

1. Meaning of Insurance2. Insurance Regulation3. The Contract of Insurance/What May Be Insured4. Insurable Interest5. Misrepresentation6. Insurance Policy/Contract7. Compulsory Insurance8. Mutual Benefit Associations (MBAs)9. Types of Insurance10. Laws and Adjudication11. Right to Subrogation12. Licensing Requirements13. Capital Requirements14. Annual Fees15. Cancellation, Appeal and Effects of Cancellation of License16. Minimum Solvency Requirements17. Inspections and Investigations18. Establishment of Specific Funds by Insurers and Allocation of Surplus19. Reporting of Financial Documents20. Alternative Dispute Resolution (ADR)21. Limitation Period 2

3

Areas of Study

(excerpts)

PHILIPPINES(Insurance Code of the

Philippines)

Insurance Commission

SINGAPORE(Chapter 24: Insurance Law)(Chapter 142: Insurance Act)

Monetary Authority of Singapore

VIETNAM(Law on Insurance

Business)

Ministry of Finance

1 Meaning of Insurance

Section 2 – (1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided.

Section 2d – In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefore, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

Chapter 24.1.1 – Insurance, which involves the allocation and spread of risk, is an extremely important part of a country’s financial sector. It transfers the risk undertaken by an individual or an organization in a particular activity onto a company that is paid to assume that risk (known as the insurer).

By taking out an insurance policy on that activity, the individual or organization (known as the insured) is able to pass on the risk of an adverse event occurring. The risk of future losses appears to be borne by the insurer, but by charging a fee or premium for this service, the insurer is effectively spreading the loss amongst all those who pay for the privilege. Nevertheless, the aim of insurance would be achieved – no individual has to bear the risk of loss himself.

Chapter 1 Article 3.1 – Insurance business means the operation carried out by insurance enterprises for the purpose of profit generation, whereby the insurance enterprises accept risks incurred by the insured on the basis of insurance premium payment by the insurance buyers so that the insurance enterprises shall pay the insurance money to the beneficiary or indemnify the insured when the insured events occur.

4

Areas of Study

(excerpts)


Philippines)




VIETNAM(Law on Insurance Business)

Ministry of Finance

2 Insurance Regulatio

n

Section 414 – The Insurance Commissioner shall have the duty to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code, and shall, notwithstanding any existing laws to the contrary, have sole and exclusive authority to regulate the issuance and sale of variable contracts as defined in section two hundred thirty-two and to provide for the licensing of persons selling such contracts, and to issue such reasonable rules and regulations governing the same.

Chapter 24.1.11 – The Singapore Government closely regulates the carrying on of insurance business. The actual regulatory authority appointed to oversee the insurance industry is the Monetary Authority of Singapore. The Insurance Act lays down the various provisions which regulate insurance business and seeks primarily to protect the insuring public from being left without insurance coverage by failed companies and unscrupulous businesses.

Chapter 24.1.12 – The regulation of insurance is thus important to instill confidence in the public and to ensure that minimum standards are met in this industry. In that way, the regulation of insurance refers to the authorities’ control over the actions and activities of insurers, whereas the legal principles derived from the different sources of law govern the insurance relationship between the parties to the insurance contract.

Article 121 – (1) The Government shall exercise the uniform State management of insurance business.

(2) The Finance Ministry shall take responsibility to the Government for the implementation of State management over the insurance business.

(3) The ministries, ministerial-level agencies and agencies attached to the Government shall, within the scope of their respective tasks and powers, exercise the State management over insurance business according to the provisions of law.

(4) The People's Committees at all levels shall, within the scope of their respective tasks and powers, exercise the State management over insurance business in the localities according to the provisions of law.

The responsibilities of the Ministry of Finance for the state management of insurance business is laid out in Article 46 of Decree 42.

5

Areas of Study

(excerpts)


Philippines)





Business)

Ministry of Finance

3 The Contract

of Insurance/ What May

Be Insured

Section 3 – Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor's estate or the minor's father, mother, husband, wife, child, brother or sister.

The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy. All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner, unless otherwise provided for in the policy.

Chapter 24.2.10 – In general, an insured who lacks capacity to contract may be a minor, or a person who was mentally unsound or intoxicated at the time of contracting. The problem that an insurer faces should it contract with a minor is that the contract may be unenforceable against the minor. In most cases, this involves the non-payment of premiums by the under-aged insured, which the insurer would be unable to enforce.

The common law age of majority in Singapore is 21 years. Despite this, section 58 of the Insurance Act (IA) states that anyone above the age of ten shall be treated as a contracting party with full capacity, subject to the proviso that a person under 16 years of age needs the written consent of his parent or guardian. This provision enables minors to enter into insurance contracts without the problems of minority hanging over them.

Article 31 – Objects of person insurance contracts:

(1) The objects of person insurance contracts shall be the human age, life, health and accidents

(2) The insurance buyers may only buy insurance for the following persons:

a) The insurance buyers themselves

b) Their spouses, children and/or parents

c) Their blood brothers and sisters; person with ties of fostering and financial support

d) Other persons, if the insurance buyers have the interests that can be insured

6

Areas of Study

(excerpts)


Philippines)





Business)

Ministry of Finance

4 Insurable Interest

Section 10 – Every person has an insurable interest in the life and health: (a) Of himself, of his spouse and of his children(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest (c) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and (d) Of any person upon whose life any estate or interest vested in him depends.Section 14 – An insurable interest in property may consist in: (a) An existing interest(b) An inchoate interest founded on an existing interest; or (c) An expectancy, coupled with an existing interest in that out of which the expectancy arises.Section 100 and 101 deals with the insurable interest involving ships.

Chapter 24.3.6 – In the absence of a statutory definition, the meaning of insurable interest is derived largely from case law. It is generally accepted that the insured must show that he would suffer financially by the loss of a legal right or the assumption of a legal obligation/liability on the death of the life insured. So a creditor has insurable interest in his debtor’s life because the creditor loses his right of action against the debtor on the latter's death.

Chapter 24.3.13 – Insurable interest in non-life insurance means a right in the property, or a contractual right, which may be lost upon the happening of an adverse event which affects the insured’s possession or enjoyment of the property.

Article 3.9 – Insurable interests mean the rights to ownership, the rights to possession, the right to use, the property rights; the rights and obligations to foster and provide financial support for insured objects.

Article 3.10 – Insured events mean objective events mutually agreed upon by the parties or prescribed by law upon the occurrence of which the insurance enterprises shall have to pay the insurance money to the beneficiaries or pay indemnities to the insured.

7

Areas of Study(excerpts)


Philippines)





Business)

Ministry of Finance

5 Misrepresentation

Section 111 – If a representation by a person insured by a contract of (marine) insurance, is intentionally false in any material respect, or in respect of any fact on which the character and nature of the risk depends, the insurer may rescind the entire contract.

Section 231(b) – A provision that gives the insurer the right to declare the policy void because the insured has been rejected for insurance, unless such right be conditioned upon a showing by the insurer that knowledge of such rejection would have led to a refusal by the insurer to make such contract.

Chapter 24.4.18 – An insurer may avoid the contract of insurance if it was induced to enter into it by a misrepresentation of a material fact, made by the insured before the contract was entered into. As such, misrepresentations are usually made by the insured when completing the proposal form. Apart from the added element of materiality which arguably limits the insured’s liability for his false statements, the legal principles here are similar to that under general contract law. As a means of avoiding the contract, it is usually considered less important than the doctrine of non-disclosure and has often been subsumed by it as a result.

Nevertheless, it is different from non-disclosure as misrepresentation focuses on the untruth of statements made by the insured whereas non-disclosure deals with the insured’s silence. It is usual for the insurer to plead both grounds of avoidance since the duty to answer questions correctly on a proposal form is also part of the insured’s duty of good faith.

Article 19.2 – Insurance enterprises may unilaterally suspend the performance of insurance contracts and collect the premiums to the time of suspending the performance of the insurance contracts when the insurance buyers commit one of the following acts:

a) Intentionally supplying untruthful information with a view to entering into insurance contracts in order to be paid with the insurance money or the indemnities.

b) Failing to fulfill the obligations to supply information to the insurance enterprises as provided for at Point c, Clause 2, Article 18 of this Law.

8

Areas of Study

(excerpts)


Philippines)


SINGAPORE(Chapter 24: Insurance Law)

(Chapter 142: Insurance Act)



Business)

Ministry of Finance

6 Insurance Policy/Contra

ct

Section 49 – The written instrument, in which a contract of insurance is set forth, is called a policy of insurance.Section 50 – The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein.Section 51 – A policy of insurance must specify:(a) The parties between whom the contract is made(b) The amount to be insured except in the cases of open or running policies(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined(d) The property or life insured(e) The interest of the insured in property insured, if he is not the absolute owner thereof(f) The risks insured against; and(g) The period during which the insurance is to continue.

Chapter 24.2.1 – The general principles of contract law apply to the insurance contract with respect to its formation. For example, the contract need not be in writing and oral contracts are acceptable. However, there are statutory requirements of writing for certain types of insurance contracts such as motor insurance, marine insurance and life insurance. It is also standard practice amongst insurers to issue a policy document with the result that oral insurance contracts are seldom found.

Chapter 24.2.2 – Given that the ordinary legal rules apply, the four legal elements that are essential to create a binding contract are offer, acceptance, consideration, and intention to create legal relations.

Chapter 24.2.3The offer may be made by either the insured or the insurer –, although it is usually the insured who makes it.

Chapter 24.2.4 – Once agreement has been established, consideration must be shown to support the agreement.

Article 12 – Insurance Contracts(1) An insurance contract is the agreement reached between the insurance buyer and an insurance enterprise whereby the insurance buyer shall have to pay premiums while the insurance enterprise shall have to pay insurance money to the beneficiary or the indemnity to the insured upon the occurrence of the insured event.

(2) Types of insurance contract shall include: a) Person insurance contractsb) Property insurance contractsc) Civil liability insurance contracts.

Article 14 – The insurance contracts must be made in writing. The evidence of conclusion of insurance contracts shall be the insurance certificates, insurance applications, telegrams, telexes, faxes and other forms prescribed by law.

9

Areas of Study

(excerpts)


Philippines)





Business)

Ministry of Finance

7 Compulsory Insurance

Section 375 – The Commissioner shall furnish the Land Transportation Commissioner with a list of insurance companies authorized to issue the policy of insurance or surety bond required by this chapter. (As amended by Presidential Decree No. 1814).

Section 376 – The Land Transportation Commission (now as Land Transportation Office) shall not allow the registration or renewal of registration of any motor vehicle without first requiring from the land transportation operator or motor vehicle owner concerned the presentation and filing of a substantiating documentation in a form approved by the Commissioner evidencing that the policy of insurance or guaranty in cash or surety bond required by this chapter is in effect. (As amended by Presidential Decree No. 1455).

R.A. 10022, known as the Migrant Workers and Overseas Filipinos Act of 1995, also requires mandatory insurance coverage for all OFWs deployed by recruitment and manning agencies (Section 23).

Chapter 24.6.9 – The Motor Vehicles (Third Party Risks and Compensation) Act (Cap 189, 2000 Rev Ed) makes it compulsory for motorists to insure against liability for causing death or personal injury to other road users. The injured victim is not a party to the insurance contract. But under the Motor Vehicles (3rd Party Risks and Compensation) Act, he is granted an enforceable right to claim damages from the insurer if he first obtains judgment against the motorist. The issue arises as to whether the injured victim of a road accident is able to claim if the motorist had committed a traffic offence (such as drunken driving or causing death by a rash or negligent act). The objective of compulsory motor insurance is the protection of victims of road accidents and public policy tends to operate in favor of the injured victim because compensation of the injured victim is stronger policy consideration than deterrence.

Article 8 - The compulsory insurance means a type of insurance for which the conditions, premium rates and minimum insurance sum are prescribed by law for compulsory implementation by both the organizations or individuals participating in insurance and the insurance enterprises. The compulsory insurance shall only apply to a number of insurance types for the purpose of protecting the public interests and social safety. The compulsory insurance shall include: a) Motorized vehicle owners' civil liability insurance, insurance of air carriers' civil liability toward passengers b) Professional liability insurance for legal consultancy operations c) Insurance brokerage enterprises’ professional liability insuranced) Fire and explosion insuranceDepending on the socio-economic development demands of each period, the Government shall submit to the National Assembly Standing Committee other types of compulsory insurance for its prescription.

10

Areas of Study

(excerpts)


Philippines)





Business)

Ministry of Finance

8 Mutual Benefit

Associations (MBAs)

Section 390 – Any society, association or corporation, without capital stock, formed or organized not for profit but mainly for the purpose of paying sick benefits to members, or of furnishing financial support to members while out of employment, or of paying to relatives of deceased members of fixed or any sum of money, irrespective of whether such aim or purpose is carried out by means of fixed dues or assessments collected regularly from the members, or of providing, by the issuance of certificates of insurance, payment of its members of accident or life insurance benefits out of such fixed and regular dues or assessments, but in no case shall include any society, association, or corporation with such mutual benefit features and which shall be carried out purely from voluntary contributions collected not regularly and or no fixed amount from whomsoever may contribute, shall be known as a mutual benefit association within the intent of this Code.

Chapter 191 – Mutual Benefit Organisations Act(2) In this Act, unless the context otherwise requires — “benefit” means the payment made by a mutual benefit organisation for the relief or maintenance of the members or subscribers or on birth or death in accordance with the rules of the mutual benefit organisation; “mutual benefit organisation” or “organisation” means any organisation which by its objects and rules either as the principal object or as an ancillary object makes provision by voluntary subscriptions of the members thereof or subscribers thereto with or without the aid of donations for (a) the relief or maintenance of the members or subscribers (and their beneficiaries; i.e. husband, wife, child, parents)(b) the payment of money on the birth of a member’s or subscriber’s child or on the death of a member or subscriber (and their beneficiaries; i.e. husband, wife, child, parents)(c) the relief or maintenance of the members or subscribers when unemployed or when in distressed circumstances.

Article 70 – Mutual support insurance organizationsThe mutual support insurance organizations are those having the legal person status, which are established to conduct insurance business for the purpose of providing mutual support and assistance among members. The members of mutual support insurance organizations are the owners and the insurance buyers too.Article 71 – Members of mutual support insurance organizations: (1) Vietnamese organizations and citizens aged full 18 years or older, who have full capacity for civil acts, that operate in the same field, the same occupation and have the demand for insurance may all join in founding the mutual support insurance organizations in the capacity as the founding members. (2) Only organizations and individuals that enter into insurance contracts with mutual support insurance organizations can become members of the mutual support insurance organizations.

11

Areas of

Study(excerpt

s)


Philippines)





Business)

Ministry of Finance

9 Types of

Insurance

Section 99 – Marine Insurance(2) "Marine protection and indemnity insurance," meaning insurance against, or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterwaysSection 167 – Fire InsuranceInsurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policiesSection 174 – Casualty Insurance (written by Non-Life Insurance Companies) Casualty insurance is insurance covering loss or liability arising from accident or mishapSection 175 – SuretyshipA contract of suretyship is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligeeSection 179 – Life InsuranceLife insurance is insurance on human lives and insurance appertaining thereto or connected therewith. (180) An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life

Chapter 24.1.4 – Marine Insurance refers to all the types of insurance that deal with maritime risks. This is a very specialized category which is usually governed by the marine insurance legislation of the relevant country. Non-marine Insurance refers to all other types of insurance that do not involve maritime risks.Chapter 24.1.6 – Life Policies may be obtained on one’s own life, or on another’s, subject to the need for an insurable interest. Where the policy insures the life of another, the term used to describe that person is “life insured.”Chapter 24.1.7 – Non-life insurance denotes all types of insurance that do not have a life as the subject matter of the policy. These range from fire insurance over property to motor insurance to insurance against legal liability. The insurance statutes would refer to non-life insurance as general insurance business.Chapter 24.1.9 – First Party Insurance refers to insurance that is taken up by an insured on his own life or property, and under which he, or his beneficiaries, will make a claim for loss suffered. Third Party Insurance insures against one’s potential liability to make payment to a third party who succeeds in a legal action. It is also known as liability insurance.

Article 7 – Types of Insurance Operation1. Life insurance shall include: (a) Whole life insurance(b) Endowment insurance(c) Term insurance (d) Combined insurance (e) Annuity(f) Other life insurance operations prescribed by the Government.2. Non-life insurance shall include: (a) Health insurance and human accident insurance(b) Property insurance and damage insurance(c) Land, marine, river, railway and air cargo transport insurance(d) Aviation insurance(e) Motorized vehicle insurance(f) Fire and explosion insurance(g) Hull insurance and ship-owners' civil liability insurance(h) Common liability insurance(i) Credit insurance and financial risks insurance(j) Business loss insurance(k) Agricultural insurance(l) Other non-life insurance operations prescribed by the Government3. The Finance Ministry shall make a detailed list of insurance products.

12

Areas of Study

(excerpts)


Philippines)


SINGAPORE(Chapter 24: Insurance

Law)(Chapter 142: Insurance

Act)



Business)

Ministry of Finance

10

Laws and Adjudicati

on

The Insurance Code of the Philippines is American in origin; having been principally patterned on the Civil Code of California. The following laws are currently related to the insurance business:1.) Insurance Code 1978 (PD 1460 which superseded PD 612)2.) Special laws, and partly the provisions of the Civil Code, namely Articles 749 and 2012 on void donations, Article 2011 on the applicability of the Civil Code, Articles 22021-2027 on life annuities, and article 2186 on compulsory motor vehicle liability insurance3.) Property Insurance Law (RA 656 as amended by PD 245) which deals with government property4.) Article 2011 of the Civil Code states that if the Insurance Code does not specifically provide for a particular matter in question, the provisions of the Civil Code regarding contracts shall govern. As to the hierarchy of laws, therefore, insurance contracts are governed primarily by the Insurance Code and subsidiarily by the Civil Code. In case of conflict, the Insurance Code will apply.

Note: The 1978 Insurance Code is currently being amended in the Philippine Congress.

In Singapore, the following laws impinge on the insurance business:

1.) Insurance Law (Chapter 24)

2.) Insurance Act (Chapter 142)

3.) Financial Advisors Act

4.) Insurance (Amendment) Act 2001

5.) Insurance (Exemption) Regulations 2002

6.) Insurance (Exemption and Provisions Applicable for Direct Life Insurers) Regulations 2002

7.) Insurance (Protection and Indemnity Clubs) Regulations 2002

8.) Insurance (Amendment) Act (Commencement) (No. 2) Notification 2002

In Vietnam, the following laws deal with the insurance business:

1.) Law No. 24/2000/QH10 (a.k.a. Law on Insurance Business)

2.) Decree No. 42/2001/ND-CP

3.) Decree No. 43/2001/ND-CP

4.) Circular No. 71/2001/TT-BTC

13

Areas of Study

(excerpts)

PHILIPPINES(Insurance Code of

the Philippines)





Ministry of Finance

11

Right to Subrogati

on

Section 416 – With leave of the Commissioner, an insurer or surety may file a third-party complaint against its reinsurers for indemnification, contribution, subrogation or any other relief, in respect of the transaction that is the subject matter of the original action filed with the Commissioner.The Right of Subrogation attaches upon payment by the insurer of the insurance claims by the assured. As subrogee, the insurer steps into the shoes of the assured and may exercise only those rights that the assured may have against the wrongdoer who caused the damage. [G.R. No. 168402, August 06, 2008 - ABOITIZ SHIPPING CORPORATION, PETITIONER, VS. INSURANCE COMPANY OF NORTH AMERICA, RESPONDENT].

Chapter 24.8.3 – Subrogation literally means the substitution of one person for another. The purpose of subrogation is to prevent the unjust enrichment of the insured. There are two aspects to subrogation.Chapter 24.8.4 – First, the insured cannot make a profit from his loss and for any profit he does make, he is accountable to his insurer who has indemnified him. In this respect, the insured is considered to have been more than indemnified for a loss when he recovers his loss from the insurer and receives payment of compensation from a third party as well.Chapter 24.8.5 – Secondly, the insurer who has indemnified the insured has the right to step into the shoes of the insured and in his name enforce any legal right of recourse available to the insured, including a right of action against the third party who caused the loss. The insured's right of action usually involves suing a third party, who is liable to pay damages in tort or for breach of contract, for having caused the loss. The cause of action still belongs to the insured and the insurer is subject to any defenses that the third party may have against the insured. The insured has a duty to assist the insurer in enforcing these claims.

The Law permits subrogation except in the case of personal insurance, such as life insurance, labor accident insurance, and medical insurance (Article 17 Section 1a to g). After paying the insurance proceeds to the insured, the enterprise has the right to claim compensation from responsible third parties for the amount it has paid out to the insured. The insured must provide the enterprise with all of the necessary information and evidence so that the enterprise can exercise its legal right of subrogation. Recognition of the insurance enterprise’s right to collect compensation is authorized by a letter from the insured authorizing the insurance enterprise to collect from third parties. When a responsible third party has paid damages to the insured, but the damages are lower than the value of the insurance policy, the insurance enterprise need only pay the insured the difference between the policy value and the damages already paid by the third party. The Law on Insurance Business does not address the enterprise’s right of refusal, but it does note that if the insured declines to authorize the enterprise, or waives, fails to reserve, or otherwise loses the right to request third party compensation, the enterprise may deduct the indemnity payable to the insured.

14

Areas of Study

(excerpts)


Philippines)Insurance Commission




Ministry of Finance

12

Licensing Requireme

nts

Section 187 – A certificate of authority (CA) from the Insurance Commission is required before an insurance company can transact any insurance business in the Philippines.

Under Section 184 of the Insurance Code, the term “insurer” or “insurance company” includes all individuals, partnerships, associations or corporations; including government owned or controlled business but excludes mutual benefit associations.

The Code further provides that a person, partnership or association of persons can only transact an insurance business as an agent of a person or corporations authorized to do the business of insurance in the Philippines unless possesses capital and asset required of an insurance corporation and invested likewise.

Insurance Act: Section 3

(1) Subject to this Act, no person shall carry on any class of insurance business in Singapore as an insurer unless the person is registered by the Authority under this Act in respect of that class of business.

(2) Any person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $30,000 or to imprisonment for a term not exceeding 3 years or to both and, in the case of a continuing offence, to a further fine of $2,000 for every day during which the offence continues after conviction.

In Singapore, a certain procedure is required before the submission of formal application by the new applicant: (1) submit its business plan for the Authority’s assessment; and (2) meets the Authority to discuss the proposed insurance operation.

Thereafter, the applicant would formally be able to apply to the Authority using the prescribed application form and a reply will be obtained within 1 month from the date on which a complete application has been received. A letter of in-principle approval specifies the condition that the applicant must accept before it can carry on insurance business in Singapore.

Article 62 – Competence to grant establishment and operation licenses1. The Finance Ministry shall grant establishment and operation licenses to insurance enterprises according to the provisions of this Law and other relevant law provisions.2. The granting of establishment and operation licenses to insurance enterprises must be in line with the planning and plans on orientation for the development of insurance market and the financial market of Vietnam.

Article 63 – Conditions for being granted the establishment and operation licenses1. Having the contributed legal capital not being lower than the legal capital amount prescribed by the Government2. Having the dossiers of application for establishment and operation licenses made according to the provisions in Article 64 of this Law.3. Having types of enterprise and charters compatible with the provisions of this Law and other law provisions4. The administrative and executive personnel have the capabilities for management, insurance profession and operation.

15

Areas of Study

(excerpts)


Philippines)




Act)



Ministry of Finance

13

Capital Requireme

nts

Php175 million (US$4.1 million)

To increase to Php250 million (US$5.9 million) on December 31, 2012 (Pursuant to DO 27-06 & IMC No. 10-2006)

(all exchange rates as of Sept. 6, 2012)

SG$5 million (US$4 Million)For life and non-life insurers carrying on only one type of insurance business

SG$10 million (US$8 million)For life and non-life insurers carrying on more than one type of insurance business

SG$25 million (US$20 million)Professional Reinsurer

Financial resources of the insurer are not less than the sum of the aggregate risk requirement of all insurance funds established and maintained by the insurer under the Act.

VND600 billion (US$28.3 million)Life Insurance Companies

VND300 billion (US$14.1 billion)Non-Life/General Insurance

16

Areas of Study

(excerpts)


Philippines)




Act)



Ministry of Finance

14

Annual Fees

Payment for the issuance or renewal of CAs, licenses and certificates of registration is made to the Insurance Commissioner under Section 417(1) of the Insurance Code as may be prescribed.

Such CA expires on the last day of June each year and shall be renewed annually if the company is continuing to comply with the provisions of the said Code and other related laws as well as to the jurisdiction and supervision of the Commissioner.

Section 11 – Annual Fees

(1) Every registered insurer shall pay to the Authority such annual fees as may be prescribed.

(2) The Authority may prescribe different annual fees for different classes of insurance business or for different types of registered insurers.

(3) The Authority may exempt wholly or in part any registered insurer from the payment of the annual fees prescribed under this section.

Article 66 – Licensing fee

The insurance enterprises which are granted the establishment and operation licenses shall have to pay the licensing fees according to the provisions of law.

The current fee as stipulated in Article 7 of Decree 42/2001 is 0.1% of the legal capital of the applicant.

17

Areas of Study

(excerpts)


Philippines)




Act)



Ministry of Finance

15

Cancellation, Appeal

and Effects of

Cancellation of

License

The Insurance Code of the Philippines has provisions whereby the Commissioner has powers to suspend or revoke CAs granted to insurance companies, their officers and agents.

Under Section 247, the effect of the revocation of the CA is such that no new business can thereafter be conducted by such company or for such company by its agents in the Philippines until and unless its authority to do business is restored by the Insurance Commissioner.

Section 299 additionally provides that the Commissioner has to satisfy himself as to the competence and trustworthiness of the license applicant and shall have the right to suspend and revoke any license in his discretion.

The Singapore Act provides that the Monetary Authority of Singapore (MAS) shall, after giving the insurer notice of its intention to cancel the registration, call upon the insurer to show cause to the Authority why its registration should not be cancelled (Insurance Act Section 12 (3)(b).

Through this mechanism, the insurer is provided with an opportunity to persuade the Authority before decision for cancellation is made.

The effect of cancellation under the Insurance Act Section 13 provides that the insurer shall cease to carry on in Singapore the said insurance business from the date of cancellation.

Article 51 of Decree 42/2001 states that The Ministry of Finance can impose the following sanctions:

a.) Warning

b.) Temporary suspension of operation

c.) Restricting the contents, scope and geographical area of operation

d.) Withdrawing license

The decisions to deal with the breaches must be made in writing to the violators and relevant bodies and shall be made public.

Article 126 of the Law of Insurance Business provides for appeals to the Ministry of Finance or to the courts.

18

Areas of Study

(excerpts)


Philippines)





Business)

Ministry of Finance

16

Minimum Solvency

Requirements

Insurance companies must always maintain a margin of solvency in an excess of the value of its admitted assets excluding its paid-up capital (for domestic insurer) or security deposits (for foreign insurer) over the amount of its liabilities, unearned premiums and reinsurance reserves in the Philippines by at least:

a.) For life insurance companies – two (2) per mille of the total amount of its insurance in force as of the preceding calendar year (with the exception of term insurance)

b.) For other insurance companies – 10% of the total amount of its net premium written during the preceding calendar year (Section 194)

Section 18(2) of the Singapore Act provides that the Authority (MAS) will prescribe different margins of solvency (MOS) for different classes of insurance business.

Insurers are required to establish and maintain a separate fund for:

1. Each class of insurance business related to Singapore policies which is referred to as the Singapore Insurance Fund (SIF); and

2. For each class of insurance fund related to off-shore policies known as the Offshore Insurance Fund (OIF)

Insurers are required to maintain a Solvency Margin for each insurance fund as well as the Company Solvency Margin (CSM). The CSM is stipulated as a fixed amount, which is determined by the type of insurers (life or non-life only, composite or captive).

For life business, the SIF solvency margin is determined based on liabilities and sum insured at risk. OIF has to maintain assets not less than liabilities of the fund.

For non-life business, SIF solvency margin and OIF solvency margin are determined based on net premiums or loss reserves.

Article 15 of Decree 43/2001 states that for non-life insurance companies, the minimum solvency margin shall be equal to 20% of the retained premiums at the time of determining the solvency margin.

As for life insurance companies, the minimum solvency margins for insurance contracts with a term of 10 years or less should be 4% technical reserves plus 0.1% of the net amount at risk and for contracts for terms over 10 years, the margins should be 4% technical reserves plus 0.3% of net amount at risk.

All jurisdictions, with Singapore ahead of the rest, are now moving towards a risk-based supervision. In the Philippines, a pertinent RBC provision is being proposed to replace the MOS.

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Areas of Study

(excerpts)


Philippines)





Business)

Ministry of Finance

17

Inspections and

Investigations

The Commissioner shall require every insurance company doing business therein to keep its books, records, accounts and vouchers in such manner that he or his authorized representatives may readily verified its annual statements and ascertain whether the company is solvent (Section 245).

The Authority in Singapore may for the purpose of performing its functions inspect the books, accounts and other documents of any registered insurer.(Section 40.1a)

The Authority may also institute an investigation into the whole or any part of the business carried out in Singapore (Section 40.1b). It also has the powers to enter any premises of the insurer at all reasonable times (Section 40.1c).

The Authority has moved towards a risk-based supervision as opposed to a rule-based supervision. The frequencies of supervision are determined by the size and the risk underwritten by the insurer.

Financial inspection for insurance enterprises may be conducted no more than once a year and extraordinary inspections are only permitted when there are signs of violation of the laws by the insurance enterprises. (Article 122)

In all three jurisdictions, the insurance regulators conduct on-site and off-site inspections and examinations of the entities they regulate to ensure that they observe sound and prudent practices compliant with the insurance laws, rules and regulations.

The powers of the insurance regulators are broad which are defined in their respective laws. 21

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Areas of Study

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Ministry of Finance

18

Establishment of

Specific Funds by Insurers

and Allocation of Surplus

The security funds set up in accordance with the Insurance Code consists of all payments made to the fund by insurance companies authorized to do business in the Philippines.

Payments made by life insurance companies (Life Account) shall be treated separately from those made by non-life insurance companies (Non-Life Account) and shall be held and administered by the Commissioner. The Life Account shall be utilized exclusively for disbursements of life insurance companies, while the Non-Life Account shall be utilized for the disbursements of non-life insurance companies (Section 366).

The Fund shall be used to pay allowed claims against an insurance company which are unpaid by reason of insolvency.

Under Section 17 of the Singapore Insurance Act, every registered insurer is required to establish and maintain a separate insurance fund for each class of insurance business in relation to its Singapore policies and off-shore policies respectively.

The use of the term “off-shore policy” in the Singapore Act is equivalent to the term “foreign policy” under the Malaysian Act since both terms refer to policies other than local policies.

All insurance enterprises and insurance brokerage enterprises shall establish a compulsory reserve fund to be added to the charter capital and to ensure solvency to be derived annually at a rate of 5% of after tax profits.

The enterprises are free to establish any additional voluntary reserve funds from their after tax profits. (Article 97)

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Areas of Study

(excerpts)


Philippines)


SINGAPORE(Chapter 24: Insurance Law)

(Chapter 142: Insurance Act)



Ministry of Finance

19

Reporting of

Financial Document

s

Insurance companies must terminate its calendar period on the 31st of December annually. It must submit its financial report with a sworn statement by the chief officer of the insurance company (indicating the financial condition and methods of doing business of insurance companies are conducted) before the 30th of April of next year (Section 223).

The Insurance Commissioner within 30 days after the recipient of the annual reports must publish in two (2) national newspapers of general circulation (1 in English and in Filipino), a full synopsis or the approved financial statement of the company (Section 49 of Non-Life Insurance Act & Section 45 of the Life Insurance Act).

The registered insurer has to submit audited accounts for each accounting period to the Authority as per Sections 36(1) and 36(3).

All insurers registered under the Act in respect of life business are required, once in a period of 12 months, to have actuarial investigations made by an actuary into the financial condition of its life insurance business and lodge with the Authority the actuary’s report pertaining to the said business (Section 37(1).

Companies incorporated outside Singapore, the audit required is only in relation to the business for which an insurance fund is maintained under the Act (Section 36(9).

In Article 31 Decree No.43/2001/ND-CP, the fiscal year of insurance enterprises and insurance brokerage enterprises shall commence on the 1st of January and end on 31st of December and for the first year of operations, it will commence from the date of the issue of the license and end on 31st of December of the same year.

Article 32 of Decree No. 43/2001/ND-CP requires the insurance enterprises to submit all required regular and ad hoc financial statements, statistics reports and operational reports in accordance with the provisions of the laws and guidance of the Ministry of Finance (MoF). It also requires that the annual financial statements to be audited and certified by legally-operated independent auditing company in Vietnam before submission to the MoF.

Article 33 of Decree No.43/2001/ND-CP requires that the insurance enterprises make public their financial statements with 120 days of the end of the fiscal year.

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Areas of Study

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Business)

Ministry of Finance

20

Alternative

Dispute Resolution (ADR)

Arbitration laws allow voluntary arbitration between parties to a contract.

In addition, in respect of dispute resolution through mediation, the Insurance Commissioner has powers to decide on matters up to a certain amount. However, this avenue is seldom used.

The Insurance Dispute Resolution Organization (IDRO) was set up by the insurance industry as an alternative and independent channel for resolving disputes. It acts as a one-stop service center to insurance-related inquiries and complaints. It replaces and embraces the functions of the Insurance Ombudsman Bureau and the Tribunal for Motor Third Party Property Damage Claims.The board of IDRO comprises of representatives from the Consumers’ Association of Singapore (CASE), the Automobile Association of Singapore (AAS), the General Insurance of Singapore (GIA) and the Life Insurance Association of Singapore (LIA) and chaired by a retired Supreme Court Judge.The limits of IDRO’s jurisdiction are as follows:- Up to $100,000 Singapore Dollars for insurance disputes between insured’s and insurers for both life and general insurance matters- Up to $50,000 Singapore Dollars for third party claims- Up to $10,000 Singapore Dollars for claims relating to market conduct and service standards.In the case of any dispute, insurance companies are bound by IDRO’s findings whilst the consumer is at liberty to pursue other resolution options at their discretion.

There are no specific provisions on Alternative Dispute Resolutions in Law of Insurance Business.

There are statutory rules limiting the time within which civil actions must be brought in respect for claims arising from death or personal injury. However, it is apparent that periods stipulated vary based on the types of claim and applicable jurisdiction.

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Areas of Study

(excerpts)


Philippines)




Act)



Business)

Ministry of Finance

21

Limitation Period

Claims relating to bodily injuries must be made within 6 months from the date of the accident; otherwise the claim will be deemed waived.

The Insurance Code also provides provisions for action on suit for recovery of damage due to injury to be brought with the Insurance Commissioner or the Courts. However, this action must be filled within 1 year from denial of the claim. (Section 384)

The Limitation Act (Chapter 163) provides that an action shall not be brought after the expiration of 3 years for such claims.

Vehicle owners must make their claims within 1 year from the date of the accident.

Decision 23/2003/OB-BTC also provides that the statute of limitation for initiating lawsuits regarding the insurance compensation is 3 years from the date the insurance enterprise pays or refuses to pay the indemnity.

THANK YOU26

comparative analysis of selected insurance law provisions (philippines, singapore and vietnam)

Documents

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