Asia Pacific Insurance

Vietnam

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Insurance Regulatory Landscape and Key Considerations for M&A Transactions
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Insurance Regulatory Landscape and Key Considerations for M&A Transactions Start Comparison
Who is the main regulator with oversight of insurance companies?

Insurance Supervisory Authority under the Ministry of Finance (MOF)

Are there foreign ownership limitations for insurance companies? Are there shareholding caps on individuals and/or corporate bodies for insurance companies? If in the affirmative, is this encapsulated within statute or a matter of policy?
No. However, in a joint stock insurance company must have at least two corporate shareholders that together hold 20% of total shares of the insurance company, and those shareholders must satisfy the same financial requirements as those applying to corporate investors in an insurance joint venture or limited liability company (LLC).
Can an insurance company carry on a composite business (i.e., life and non-life)? Is this encapsulated in statute or a matter of policy?

No (a matter of law).

Are there other conditions imposed by the regulator in doing an M&A transaction?

A foreign investor of a 100% foreign-invested insurance company or an insurance joint venture company must meet a number of requirements:

  • Have permission from a competent authority in its home country to carry out an insurance business
  • Having at least seven years of experience of operation in the relevant areas of insurance to be conducted in Vietnam
  • Have a minimum total value of assets equivalent to USD2 billion in the year immediately preceding the year the application for issuance of a license is submitted 
  • Must not have committed any serious violation of regulations on insurance business activities of the country where its headquarters is located within three consecutive years immediately preceding the year the application for issuance of a license is submitted
Is dispensation given for fulfillment of these conditions and in what circumstances?

Generally, no or on a case-by-case basis.

Is there a single presence policy and is it imposed under statute or policy? Is dispensation given and what criteria will the regulator consider?

No.

What approvals are required for a foreign entity to take a stake in an insurer? Is there a distinction between a share deal or an asset deal?

Share deal

The MOF's approval is required for a stake of 10% or more of a Vietnamese insurance company.

Asset deal

Asset deals are not common in Vietnam. MOF approval is required for the transfer.

How long will regulatory approvals typically take for a share deal versus an asset deal?

Share deal

By law, the timelines combined are around three months, but in reality, from three to six months, depending on the size of the stake and negotiation of involved parties.

For the establishment of a new insurance company, by law, the combined timelines are around three months, but in reality the entire process may take six to 12 months or more, depending on whether there are multiple investors/shareholders and the negotiation of involved parties.

Asset deal

For an asset deal, the transfer of insurance policies from the seller to the purchaser will be required. By law, the combined timelines are around four months for the transfer of insurance policies. In reality, the entire process may be longer, depending on the actual situation and the asset involved.

How open is the regulator to private equity participation in an insurer?
There is no clear statutory restriction. However, the MOF would generally favor a strategic investor over a private equity investor. Generally, private equity players will not meet the foreign shareholder criteria.
Is there a financial holding company concept (FHC) or other equivalent status? What are the implications?

There is no FHC concept for insurance companies.

What are the typical modes of distribution for insurance companies?

Agencies, bancassurance (as a special form of agencies), brokers' direct sales and digital channels

Is bancassurance a popular mode of distribution? What approvals are required? What are the main parameters in negotiating a bancassurance agreement?

Yes, bancassurance is a popular mode of distribution. The bank must obtain the approval from the State Bank of Vietnam for its insurance agency business. The bank’s employees who directly conduct insurance agent activities must be trained and issued insurance agent certificates.

The salient terms are:

  • Exclusivity
  • Term and termination of the agreement
  • Products to be distributed
  • Commissions and other payments
  • Confidentiality
  • Data privacy and data provision between the parties for the bank's customer data
  • The insurer’s training for the bank’s sale staff
What are the top challenges in closing an insurance M&A transaction (share deal versus asset deal)?

Share and asset deals

  • Identifying the right target, which can be difficult or time-consuming given that publicly available and reliable sources of information are limited
  • Obtaining regulatory approvals by the MOF as the insurance regulator for completion of deals can be time-consuming, especially when acquiring a 10% stake or more
  • Conditions and requirements applicable to acquirers can be cumbersome
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