Many insurance companies actions are more carefully controlled

DNHN - The modified Insurance Commercial Law more rigorously regulates insurance businesses' business and investment rights. The insurance sector is anticipated to benefit from this.

The modified Law on Insurance Business is implemented in the spirit of more autonomy for insurers in their business operations, with regulatory authorities serving as supervisors and fostering openness. Insurance market transparency and healthy development At the same time, allowing insurers more liberty will allow them to be more proactive and efficient in their commercial operations. 

Capital is one of the major variables impacting insurance firms' business operations. Instead of the previous flat scale, the law on insurance business (amended) has classified each type of capital of insurance enterprises and reinsurance enterprises in the course of business activities; Additional requirements that insurance and reinsurance businesses maintain an adequate ratio of capital to ensure capital commensurate with the size and risk level of the underlying risk groups.

Changes in capital management models, according to Ms Nguyen Thu Ha - Head of Analysis, SSI Research, may put pressure on capital raising at some insurance companies. However, these laws provide a 5-year transition time to provide a buffer between the legal structure and practical execution (2023 - 2027). 

Previously, insurance firms were permitted to engage in real estate with up to 10-20% of idle cash from supplying insurance companies and non-life insurance; however, this is no longer the case. The new insurance business legislation expressly says that insurance firms are not permitted to participate in real estate except by purchasing stock in publicly traded real estate companies. Certificates of public money, securities

Insurers are not permitted to actively run real estate enterprises, but they are permitted to acquire, invest in, and possess the real estate for use as a business, workplace, or warehousing facility that will directly assist professional operations.

The revised law also states that insurance companies are not permitted to borrow to invest in securities; they are not permitted to invest in precious metals and gems; and they are not permitted to invest in derivatives or derivatives contracts, except for derivatives listed to hedge the risks arising from insurance contracts.

"It should be noted that the new Law prevents insurers from directly engaging in real estate businesses, but not from investing in real estate stocks or renting out a portion of their corporate offices. The company is not completely operating." - said Ms Nguyen Thu Ha.

Currently, insurance firms, particularly those in the non-life sector, have a countrywide network of branches/points of sale. Their properties are frequently used as corporate offices. They may also lease out a piece of the property that is still under construction. As a result, this new legislation has little influence on insurers' bottom lines.

Ms Ha further stated that not being permitted to participate in real estate is following Articles 1 and 10 of the Real Estate Business Law. Individuals and organizations that wish to engage in real estate must first form a real estate investment firm.

As a result, insurance companies are not permitted to invest directly in real estate. The parent firm and its subsidiaries will be able to directly undertake real estate investment and business if they are a legal entity with a registered license. Whether or not their environment is in the insurance sector, business registration includes the sphere of real estate business.

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