Circular No. 101/2012/TT-BTC dated June 20, 2012 of the Ministry of Finance providing some financial issues related to insurers and re-insurers implementing pilot agricultural insurance under the Prime Minister’s Decision No. 315/QD-TTg of March 1, 2011, on pilot agricultural insurance during 2011-2013

THE MINISTRY OF FINANCE

Circular No. 101/2012/TT-BTC of June 20, 2012, providing some financial issues related to insurers and re-insurers implementing pilot agricultural insurance under the Prime Minister’s Decision No. 315/QD-TTg of March 1, 2011, on pilot agricultural insurance during 2011-2013

Pursuant to the 2000 Law on Insurance Business, the Law Amending and Supplementing a Number of Articles of the Law on Insurance Business, and their guiding documents;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to the Prime Minister’s Decision No. 315/QD-TTg of March 1, 2011, on pilot agricultural insurance during 2011-2013;

At the proposal of the director of the Insurance Management and Supervision Department,

The Minister of Finance promulgates the Circular to provide some financial issues related to insurers and re-insurers selected to implement pilot agricultural insurance under the Prime Minister’s Decision No. 315/QD-TTg of March 1, 2011, on pilot agricultural insurance during 2011-2013 (Decision No. 315/QD-TTg).

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular provides some financial issues related to insurers and re-insurers implementing pilot agricultural insurance under Decision No. 315/QD-TTg as follows:

1. Making out agricultural insurance premium receipts of insurers;

2. Expenses of insurers and re-insurers participating in pilot agricultural insurance;

3. Accounting revenues from and expenses for pilot agricultural insurance activities of co-insurers;

4. Handling annual losses of pilot agricultural insurance activities of insurers and re-insurers.

Article 2. Subjects of application

Insurers and re-insurers selected to implement pilot agricultural insurance under decisions of the Ministry of Finance and other organizations and individuals related to pilot agricultural insurance under Decision No. 315/QD-TTg shall comply with the provisions of this Circular and relevant provisions of law.

Chapter II

SPECIFIC PROVISIONS

Article 3. Agricultural insurance premium receipts of insurers

1. Insurers may print, issue and use agricultural insurance premium receipts in accordance with law.

2. An agricultural insurance premium receipt contains the following details:

Total insurance premium under an insurance contract, including:

- Premium amount supported by the state budget;

- Premium amount paid by the insurance buyer.

The total insurance premium payable by the insurance buyer to be written in figures and words in a receipt is the insurance premium payable by the insurance buyer.

Article 4. Expenses of insurers

For sale expense, management expense, insurance commission, support expense and remuneration for pilot agricultural insurance, insurers may use no more than 35% of agricultural insurance premium revenues, in which:

1. Insurance commission for insurance agents, support amount and remuneration for pilot agricultural insurance activities: Insurers may pay these amounts not exceeding 20% of agricultural insurance premium revenues.

In which, insurers may pay support amount and remuneration for the following:

- Support amount for operations of the steering committees at all levels in the localities where pilot agricultural insurance is implemented: meetings, public information and training for farmer households.

- Remuneration to staff directly engaged in pilot agricultural insurance at levels based on their efforts and collected insurance premiums.

Before deciding on specific support amounts and remuneration for operations and staff to suit local practical conditions, insurers shall seek opinions of heads of the steering committees for agricultural insurance in provinces and cities under Decision No. 315/QD-TTg.

2. Sale expense and management expense for pilot agricultural insurance activities: Insurers may pay, account and allocate these expenses to their management expenses for pilot agricultural insurance and finalize them not exceeding 15% of agricultural insurance premium revenues.

Article 5. Management expense and sale expense for pilot agricultural insurance activities of re-insurers

Re-insurers may pay management expense and sale expense and account and allocate these expenses not exceeding 3.5% of pilot agricultural re-insurance premium revenues.

Article 6. Principle of co-insurance

1. When entering into a co-insurance contract with an insurance buyer, co-insurers may jointly sign or authorize one of them to sign the contract (principal insurer).

2. In case of authorization of one insurer to sign an insurance contract, co-insurers shall sign a co-insurance agreement. This agreement must clearly define the responsibilities and interests of these insurers and state that the time of arising of insurance liability of the principal insurer toward the insurance buyer is also the time of arising of insurance liability of co-insurers toward the insurance buyer. The principal insurer shall take responsibility before law for the commitments stated in the insurance contract toward the insurance buyer.

Article 7. Accounting of revenues and expenses of co-insurers

1. Accounting of revenues

a/ In case the co-insurers all sign the insurance contract, when collecting insurance premiums, each of these insurers shall issue an insurance premium receipt to the insurance buyer in proportion to its liability.

b/ In case co-insurers authorize one of them to act as principal insurer to collect insurance premium:

- When collecting insurance premium, the principal insurer shall make out an insurance premium receipt for the insurance buyer, which does not show other co-insurers.

- Based on the proportions of liability in the co-insurance agreement, the principal insurer shall account as its revenue the premium amount in proportion to its liability. The premium amounts in proportion to the liability of other co-insurers must be accounted as amounts collected for others.

- Periodically as determined in the co-insurance agreement, the principal insurer shall make and send statements of insurance premium revenues to other co-insurers.

- Upon receiving the statement of insurance premium revenues and insurance premiums from the principal insurer, co-insurers shall issue receipts to the principal insurer, clearly stating the receipt of premium collected by the principal insurer (name, address and tax identification number of the enterprise) according to the statement of insurance premium revenues (number and date of the statement). This receipt serves as a basis for co-insurers to account their revenues.

2. Accounting of expenses

a/ When paying expenses related to an insurance contract, insurers shall account these expenses according to receipts bearing their respective name, address and tax identification number. In case co-insurers authorize one of them to act as the principal insurer to pay all expenses related to the insurance contract, the latter shall take responsibility for all of these expenses. The principal insurer shall account all arising expenses, then summarize them and allocate to co-insurers, and recover money amounts to be accounted as reduced expenses.

b/ Expenses shall be allocated as follows:

- For commissions, support amount, remuneration, management expense and sale expense, the principal insurer shall allocate them to other co-insurers at rate not exceeding 35% of original insurance premium revenues of co-insurers, with commission, support amount and remuneration not exceeding 20% and management expense and sale expense not exceeding 15% of original insurance premium revenues.

- Expenses paid directly for insurance business (indemnities, assessment expense, expense for loss prevention and limitation and risk assessment before accepting insurance, etc.) must be allocated in proportion to the liabilities stated in the co-insurance agreement and actually paid expenses.

- The principal insurer shall arrange re-insurance for the whole liability of the insurance contract. Re-insurance fee and revenues and expenses for re-insurance cession must be allocated to co-insurers in proportion to their liabilities stated in the co-insurance agreement.

c/ Periodically as stated in the co-insurance agreement,  the principal insurer shall make and send statements of expenses to other co-insurers. Upon receiving the confirmations of co-insurers, the principal insurer shall issue receipts to co-insurers. These receipts serve as a basis for co-insurers to account their expenses and the principal insurer to account its reduced expenses.

Article 8. Handling of annual losses in pilot agricultural insurance activities

1. Insurers and re-insurers shall separately monitor annul losses in their pilot agricultural insurance activities.

2. In a fiscal year, insurers and re-insurers suffering losses in pilot agricultural insurance activities may account these losses into their general business results. If suffering overall losses due to losses in pilot agricultural insurance activities, they may carry forward losses to subsequent years in accordance with law.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 9. Effect

1. Other issues related to the financial and accounting regimes applicable to insurers and re-insurers implementing pilot agricultural insurance comply with current laws.

2. This Circular takes effect on August 6, 2012, and applies to agricultural insurance contracts entered into under Decision No. 315/QD-TTg and  the Ministry of Finance’s Circular No. 121/2011/TT-BTC of August 17, 2011, guiding a number of articles of Decision No. 313/QD-TTg.

3. Insurers and re-insurers selected to implement pilot agricultural insurance shall manage revenues and expenses in a strict, economical and efficient manner. Any problems and difficulties arising in the course of implementation should be promptly reported to the Ministry of Finance for consideration and settlement.-

For the Minister of Finance
Deputy Minister
TRAN XUAN HA