Decree No. 119/2015/ND-CP dated November 13, 2015 of the Government prescribing compulsory insurance in construction investment activities

DECREE

Prescribing compulsory insurance in construction investment activities[1]

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the December 9, 2000 Law on Insurance Business;

Pursuant to the November 24, 2010 Law Amending and Supplementing a Number of Articles of the Law on Insurance Business;

Pursuant to the June 18, 2014 Law on Construction;

At the proposal of the Minister of Finance,

The Government promulgates the Decree prescribing compulsory insurance in construction investment activities.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

This Decree provides the responsibility to participate in compulsory insurance, conditions for implementation of compulsory insurance, minimum insurance sums, principles for determination of insurance premium levels, and state management of compulsory insurance in construction investment activities.

Article 2.Subjects of application

This Decree applies to:

1. Project owners and contractors (in case work insurance premiums are already included in contractual prices).

2. Consultancy contractors.

3. Construction contractors.

4. Non-life insurance enterprises, branches of foreign non-life insurance enterprises (below referred to as insurance enterprises), and reinsurance enterprises.

5. Other agencies, organizations and individuals involved in compulsory insurance in construction investment activities.

Article 3.Principles for participation in compulsory insurance in construction investment activities

1. Insurance enterprises, reinsurance enterprises, and foreign inward reinsurance enterprises and organizations must satisfy the conditions for implementation of compulsory insurance in construction investment activities as prescribed in Section 2, Chapter II of this Decree.

2. Insurance enterprises shall provide compulsory insurance in construction investment activities when insurance buyers fully meet the construction capacity conditions specified in the Law on Construction and relevant provisions of law.

3. Project owners, consultancy contractors, and construction contractors (below referred to as insurance buyers), and insurance enterprises shall implement compulsory insurance in construction investment activities according to responsibility, insurance premium levels and minimum insurance sums prescribed in this Decree and guided by the Ministry of Finance.

4. Expenses for purchase of compulsory insurance in construction investment activities must comply with the following regulations:

a/ For underway work insurance: The insurance charges shall be included in the total construction investment amount;

b/ For construction investment consultancy professional liability insurance: The insurance charges shall be included in consultancy product costs;

c/ For insurance for workers on construction sites: The insurance charges shall be included in business and production expenses.

5. Apart from compulsory insurance in construction investment activities according to responsibility, insurance premium levels and minimum insurance sums prescribed in this Decree, insurance buyers can participate in insurance with higher responsibility, insurance premium levels and insurance sums on the basis of agreement with insurance enterprises and in accordance with law. Additional expenses for insurance purchase (if any) must comply with Clause 4 of this Article.

6. Contractors shall participate in civil liability insurance for third parties under Clause 3, Article 9 of the Law on Construction Law and the guidance of the Ministry of Finance.

7. Organizations and individuals not obliged to participate in compulsory insurance under this Decree are encouraged to buy compulsory insurance in construction investment activities on the basis of agreement with insurance enterprises and in accordance with relevant provisions of law.

Chapter II

SPECIFIC PROVISIONS

Section 1

RESPONSIBILITY TO PARTICIPATE IN COMPULSORY INSURANCE IN CONSTRUCTION INVESTMENT ACTIVITIES

Article 4.Entities obliged to buy compulsory insurance in construction investment activities

1. Except for works related to national defense, security and state secrets, project owners or contractors, if work insurance premiums are already included in contractual prices, shall buy underway work insurance for:

a/ Works and work items which affect the community safety, as specified in Appendix II to the Government’s Decree No. 46/2015/ND- CP of May 12, 2015, on quality management and maintenance of construction works, and amending, supplementing or replacing documents (if any);

b/ Construction investment works which greatly affect the environment and are on the list of projects subject to environmental impact assessment as specified in Appendices II and III to the Government’s Decree No. 18/2015/ND-CP of February 14, 2015, providing environmental protection master plan, strategic environment assessment, environment impact assessment and environmental protection plan, and amending, supplementing or replacing documents (if any);

c/ Works with special technical requirements and complicated construction conditions as prescribed by the law on construction and relevant laws.

2. Consultancy contractors shall buy construction investment consultancy professional liability insurance for jobs of construction survey and construction design of construction works of grade II or higher grade.

3. Construction contractors shall buy insurance for workers on construction sites.

Article 5.Insurance duration

1. Underway work insurance duration is a specific time span, counting from the date of starting to the date of finishing the construction time, based on documents issued by authorities with investment decision competence (including adjustment and supplementation, if any), and written in insurance contracts.

2. Investment construction consultancy professional liability insurance duration is counted from the date of performing the consultancy job through the work warranty time prescribed by law.

3. The insurance duration for workers on construction sites is counted from the date of starting the construction on the construction sites through the work warranty time prescribed by law. The determination of the specific insurance duration for workers is based on labor contracts.

Article 6.Scope of insurance, exclusion of insurance liability

1. Scope of insurance

a/ For underway work insurance: Insurance enterprises shall pay indemnities for losses caused to construction works which arise from all risks, except the losses mentioned in Clause 2 of this Article;

b/ For construction investment consultancy professional liability insurance: Insurance enterprises shall pay as indemnities to the construction investment consultancy contractors the money amounts to be indemnified by the consultancy contractors for losses incurred by third parties and relevant expenses as provided by law, which arise from the performance of construction investment consultancy jobs, except the losses mentioned in Clause 2 of this Article;

c/ For insurance for workers on construction sites: Insurance enterprises shall pay as indemnities the construction contractors the money amounts to be indemnified by the construction contractors to workers who are injured or die due to labor accidents or occupational diseases covered by insurance liability.

2. Exclusion of insurance liability

Insurance enterprises are not responsible for paying indemnities for:

a/ Losses arising from intentional acts;

b/ Non-accidental losses;

c/ Losses impossible to be evaluated in money;

d/ Catastrophic losses;

dd/ Losses arising in cases where insurance buyers have no interests likely to be insured.

3. The Ministry of Finance shall guide the implementation of Clauses 1 and 2 of this Article.

Section 2

CONDITIONS FOR IMPLEMENTATION OF COMPULSORY INSURANCE IN CONSTRUCTION INVESTMENT ACTIVITIES

Article 7.Conditions on insurance enterprises and reinsurance enterprises

To implement compulsory insurance in construction investment activities, insurance enterprises and reinsurance enterprises shall satisfy the following conditions:

1. Their establishment and operation licenses indicate the property and damage insurance and liability insurance operation (for insurance enterprises) or non-life reinsurance operation (for reinsurance enterprises).

2. They fully meet the conditions on financial capacity, and qualifications of their professional officers as provided by the Law on Insurance Business and guiding documents.

Article 8.Conditions on foreign inward reinsurance enterprises and organizations

In case of offshore reinsurance, insurance enterprises and reinsurance enterprises shall provide reinsurance for foreign inward reinsurance enterprises or organizations that satisfy the following conditions:

1. They are lawfully operating under the laws of the countries where their head offices are located.

2. They are ranked at least “BBB” by Standard & Poor’s or “B” by A.M Best, or have equivalent rankings by other organizations with ranking functions and experience in the fiscal year preceding the year of inward reinsurance.

Article 9.Levels of retention

In order to ensure the financial safety of insurance enterprises and reinsurance enterprises and guarantee the interests of insurance buyers, based on their respective financial capacity and risk appraisal results, insurance enterprises and reinsurance enterprises shall decide to provide compulsory insurance or inward reinsurance in construction investment activities as follows:

1. The compulsory level of retention on each risk or each separate loss does not exceed 10% of the equity.

2. If insurance enterprises provide outward reinsurance as designated by the insured (fronting), the designated reinsurance rate must not exceed 90% of the insured liability level.

Section 3

MINIMUM INSURANCE SUMS, PRINCIPLES FOR DETERMINATION OF INSURANCE PREMIUM LEVELS

Article 10.Minimum insurance sums

1. For underway work insurance: The minimum insurance sum is the full value of a completed work which, however, must not be lower than the total value of the construction contract, including the adjusted or added value (if any).

2. For construction investment consultancy professional liability insurance: The minimum insurance sum equals the value of the consultancy or design contract.

3. For insurance for workers on construction sites: The minimum insurance sum is VND 100 million/person/case. The specific indemnities for workers who are injured or die due to labor accidents or occupational diseases must comply with the guidance of the Ministry of Finance.

Article 11.Principles for determination of insurance premium levels

Insurance premium levels for compulsory insurance products in construction investment activities shall be determined on the basis of statistical data, which must ensure the solvency of insurance enterprises and correspond to insurance conditions, scope of insurance and minimum insurance sums as guided by the Ministry of Finance.

Chapter III

STATE MANAGEMENT OF COMPULSORY INSURANCE IN CONSTRUCTION INVESTMENT ACTIVITIES

Article 12.Responsibilities of the Ministry of Finance

1. To promulgate insurance rules and regulations and insurance premium levels for the following compulsory insurance products:

a/ Underway work insurance;

b/ Construction investment consultancy professional liability insurance;

c/ Insurance for workers on construction sites.

2. To guide the implementation of reporting and statistical regimes and financial regimes applicable to insurance enterprises and reinsurance enterprises upon the implementation of compulsory insurance in construction investment activities.

3. To assume the prime responsibility for, and coordinate with the Ministry of Construction, related ministries and sectors and provincial-level People’s Committees in, guiding and popularizing the implementation of compulsory insurance in construction investment activities in accordance with this Decree.

4. To manage, supervise, inspect, examine, settle complaints and denunciations, and administratively sanction insurance enterprises and reinsurance enterprises that violate the regime of compulsory insurance in construction investment activities in accordance with law.

Article 13.Responsibilities of the Ministry of Construction

1. To promulgate within its competence regulations providing guidance on works with special technical requirements and complicated construction conditions.

2. To guide the estimation of insurance expenses in construction investment expenses.

3. To coordinate with the Ministry of Finance and related ministries and sectors in guiding and popularizing the implementation of compulsory insurance in construction investment activities.

4. To assume the prime responsibility for, and coordinate with functional agencies in, examining, inspecting, settling complaints and denunciations, and administratively handling insurance buyers that violate the regime of compulsory insurance in construction investment activities in accordance with law.

Article 14.Responsibilities of ministries and sectors

1. To coordinate with the Ministry of Construction in promulgating within their competence regulations providing guidance on works with special technical requirements and complicated construction conditions.

2. To coordinate with the Ministry of Finance and related ministries and sectors in guiding and popularizing the implementation of compulsory insurance in construction investment activities.

3. Ministries, ministerial-level agencies and government-attached agencies shall organize the examination, guidance and implementation of compulsory insurance in construction investment activities under their respective management in accordance with this Decree.

Article 15.Responsibilities of provincial-level People’s Committees

Provincial-level People’s Committees shall organize the popularization and dissemination of this Decree, coordinate with the Ministry of Finance and the Ministry of Construction in organizing the implementation of compulsory insurance in construction investment activities, and apply measures to prevent and limit losses.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 16.Transitional provision

Contracts for insurance in construction investment activities which are signed before the effective date of this Decree must continue to comply with regulations effective at the time of their signing.

Article 17.Effect

This Decree takes effect on February 10, 2016.

Article 18.Responsibility for organization of implementation

1. The Ministry of Finance shall assume the prime responsibility for, and coordinate with related ministries and sectors in, organizing the implementation of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, and related organizations and individuals shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN TAN DUNG