VCN – The Insurance Supervisory Authority Department (Ministry of Finance) has just sent a document on implementing risk management to non-life insurance enterprises, reinsurance enterprises, and branches of foreign non-life insurance enterprises.
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| Illustrative Photo: Internet |
According to the document, based on the provisions of the Law on Insurance Business in 2022, Circular No. 70/2022/TT-BTC dated November 16, 2022, of the Ministry of Finance, the Insurance Supervisory Authority requires the following non-life insurance enterprises, reinsurance enterprises, branches of foreign non-life insurance enterprises to strictly comply with the provisions of the law on risk management and internal control and audit.
Accordingly, the authority requires insurance enterprises to develop a risk management system to effectively identify, measure, evaluate, report and control risks arising from business activities and risk management of enterprises must meet the requirements as prescribed by law.
In particular, the management agency noted that businesses must organize risk management with three independent lines of defence: units performing daily operation activities; units in charge of risk management, compliance audit and other control units; and the internal audit department.
Along with that, insurers need to identify key risks such as insurance risk, market risk, operational risk, counterparty risk (including legal risk and fraud risk), liquidity risk and other risks assessed by insurers from the operations; monitor the risk status and give a timely assessment, early warning of the possibility of violating the risk limits to limit the risks to ensure safety in operations; make internal reports on risk monitoring and send them to relevant individuals and units.
The regulator also requires non-life insurers to control the implementation of operational processes according to the respective risk limits, test the endurance according to regulations, and take measures to prevent, minimize and promptly handle risks to ensure compliance with risk limits.
In addition, the Insurance Supervisory Authority requires insurance businesses to implement internal control activities following the law, including setting up professional processes, internal control processes, standards of professional ethics and practice in compliance with the principles and requirements as prescribed by law.
On the other hand, insurance businesses must comply with the legal provisions on investment specified in the Law on Insurance Business 2022 and other legal regulations; In which, it is noted, the insurance business is not allowed to invest more than 30% of the investment capital in companies in the same group of companies with mutual ownership relationship and re-invest in any form for shareholders and capital contributors following the Law on Enterprises, except for deposits at shareholders and members being credit institutions.
The document also clearly states that the outsourcing must abide by the law on outsourcing according to the provisions of Article 90 of the Law on Insurance Business 2022.
The insurance businesses should note that: Developing procedures for outsourcing, risk management and internal control for outsourcing activities and taking measures to prevent, reduce and handle risks arising from outsourcing, especially risks related to the legitimate rights and interests of the insurance buyer and the insured; suspending, adjusting or terminating outsourcing activities in case outsourcing activities are found to adversely affect the legitimate rights and interests of the insurance buyer or the insured; offering a backup plan to ensure smooth business operations in case the outsourcing service provider is unable to perform or fails to perform its responsibilities for outsourcing activities properly committed in the outsourcing contract.
The regulatory agency also emphasized that the insurance businesses must inspect and supervise the implementation of insurance agency contracts, evaluate the quality of insurance agents’ advice and introduction of insurance products and their employees in the organization of insurance agency activities as prescribed at Point e, Clause 1, Article 128 of the Law on Insurance Business in 2022.
On the other hand, the regulatory agency must inspect and supervise the revenues and expenses of the insurance businesses to ensure compliance with tax laws, insurance business laws and other relevant laws.
The document of the Insurance Supervisory requires that the Board of Directors, the Board of Members, Directors General, the legal representatives, and relevant units of the insurance enterprise are responsible for following the provisions of the Law on Insurance Business 2022 and relevant legal provisions, take responsibility for the effective management and supervision of operations; perform obligations and commitments to the insurance buyer, relevant organizations and individuals and the State following the law as prescribed in Article 108 of the Law on Insurance Business 2022.
By Huong Diu/ Huyen Trang