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

Date: 11/13/2015

 
THE GOVERNMENT
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THE SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
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No. 119/2015/ND-CP
Hanoi, November 13, 2015
DECREE
PROVIDING FOR COMPULSORY INSURANCE FOR CONSTRUCTION INVESTMENT ACTIVITIES
Pursuant to the Law on Government Organization dated December 25, 2001;
Pursuant to the Law on Insurance Business dated December 9, 2000;
Pursuant to the Law on amendments to the Law on Insurance Business dated November 24, 2010;
Pursuant to the Law on Construction dated June 18, 2014;
After considering the request of the Minister of Finance,
The Government hereby introduces this Decree that stipulates the compulsory insurance for construction investment activities.
Chapter I
GENERAL PROVISIONS
Article 1. Scope of application
This Decree shall provide for responsibilities for participation in a compulsory insurance program, conditions for sale or purchase of compulsory insurance, sum assured, rules of determination of insurance premiums and governmental authority to regulate compulsory insurance for construction investment activities.
Article 2. Applicable entities
This Decree shall apply to:
1. Project owners, contractors (if construction insurance premiums are included in the contractual price).
2. Consultancy service contractor.
3. Engineering construction contractors.
4. Non-life insurance enterprises, branches of foreign non-life insurance enterprises (hereinafter referred to as insurance enterprises), reinsurance enterprises.
5. Other agencies, organizations and individuals relating to compulsory insurance for construction investment activities.
Article 3. Rules of participation in compulsory insurance for construction investment activities
1. Insurance enterprises, reinsurance enterprises, reinsurance assuming enterprises, and foreign reinsurance assuming organizations, must meet regulatory conditions for sale of compulsory insurance for construction investment activities as defined in Section 2 Chapter II hereof.
2. An insurance enterprise shall provide compulsory insurance for their construction investment activities on conditions that an insurance buyer fully meets regulatory requirements relating to construction investment capability as stipulated by the Construction Law and other relevant laws and regulations.
3. Project owners, consultancy service contractors and engineering construction contractors (hereinafter referred to as insurance buyer), and insurance enterprises, shall sell and purchase compulsory insurance for construction investment activities under regulations on liabilities, insurance premiums and sums assured referred to in this Decree and instructions set out by the Ministry of Finance.
4. Costs paid for purchase of compulsory insurance for construction investment activities shall comply with the following regulations:
a) With respect to construction insurance which is valid during a construction period: Insurance premiums shall be included in the construction investment outlay;
b) With respect to professional liability insurance for construction investment consultancy: insurance premiums shall be included in the cost price of provision of consultancy service;
c) With respect to employees working at construction sites: Insurance premiums shall be included in production and business costs.
5. In addition to participating in compulsory insurance for construction investment activities under regulations on liabilities, insurance premiums and sums assured laid down in this Decree, insurance buyers are able to participate in insurance with liabilities, insurance premiums and sums assured which are higher on the basis of arrangements with insurance enterprises and in compliance with laws and regulations. Additional costs that may be incurred by buying insurance (if any) shall be consistent with paragraph 4 of this Article.
6. A contractor shall participate in civil liability insurance as a third party in accordance with paragraph 3 Article 9 of the Construction Law and under the direction of the Ministry of Finance.
7. Organizations or individuals that do not belong to entities required to participate in compulsory insurance under the provisions of this Decree shall buy compulsory insurance for their construction investment activities on the basis of arrangements with insurance enterprises and in compliance with relevant laws and regulations.
Chapter II
SPECIFIC PROVISIONS
Section 1. LIABILITIES FOR PARTICIPATION IN COMPULSORY INSURANCE FOR CONSTRUCTION INVESTMENT ACTIVITIES
Article 4. Entities required to buy compulsory insurance for construction investment activities
1. Except for construction works related to national defence, security and state secret, project owners or contractors that fall within the case in which construction insurance premiums have been included in the contractual price must buy construction insurance which is valid during the construction period with respect to the following construction works:
a) Construction projects or project items which have certain impacts on public safety as stipulated by Appendix II of the Government’s Decree No. 46/2015/ND-CP dated May 12, 2015 on construction quality management and maintenance and written amendments, modifications or substitutions (if any);
b) Construction projects having significant environmental impacts that belong to the list of projects subject to environmental impact assessment under the provisions of the Appendix II and III of the Government's Decree No. 18/2015/ND-CP dated February 14, 2015 on the scheme for environmental protection, strategic environmental assessment, environmental impact assessment and the plan for environmental protection in association with written amendments, modifications or substitutions (if any);
c) Construction projects which have particular technical specifications and are subject to complicated construction requirements in accordance with laws on construction and other relevant legislation.
2. Consultancy service contractors must buy professional liability insurance for provision of construction consultancy service with respect to the work of construction surveying and design for construction projects ranked II or higher.
3. Engineering construction contractors must buy insurance policies for employees working at construction sites.
Article 5. Insurance validity period
1. The validity period of construction insurance during the construction progress means the specific time period from the opening date to the closing date of construction activities with reference to the investment decision (even including any modification or amendment if possible) issued by a competent authority and agreed upon in an insurance contract
2. Professional liability insurance for construction consultancy service shall be valid from the date on which agreed construction consultancy service is rendered to the date on which the warranty term of construction works ends in accordance with laws.
3. Insurance for employees working at construction sites shall be valid from the date on which they start performing their work to the date on which the warranty term of construction works ends in accordance with laws. The determination of specific validity period of insurance for employees working at construction sites shall be consistent with their employment contracts.
Article 6. Scope of insurance coverage and denial of coverage
1. Scope of insurance coverage
a) With respect to insurance for works in progress: An insurance enterprise shall perform its duty to provide insurance cover against losses, claims or damages that may arise from all risks, except for losses referred to in paragraph 2 of this Article.
b) With respect to professional liability insurance for construction investment consultancy: An insurance enterprise shall pay a construction consultancy contractor sums as an insurance cover which such contractor has its duty to provide a damage against losses or claims for a third party and pay related statutory costs incurred from provision of a construction consultancy service, except for losses or damages stipulated in paragraph 2 of this Article;
c) With respect to insurance for employees working at construction sites: An insurance enterprise shall be liable to pay a construction contractor sums as an insurance cover which such contractor has its duty to provide damages for these employees who suffer injury or death caused by work accidents or occupational diseases that fall within the scope of insurance coverage.
2. Denial of coverage
Insurance enterprises shall not have duties to pay insurance cover against the following losses or damages
a) Those that arise from intentional acts;
b) Those which are not incidental ones;
c) Those which are not quantified by monetary amounts;
d) Catastrophic losses or damages;
dd) Those that arise from the case in which insurance buyers have no insurable interests.
3. The Ministry of Finance shall provide guidance on implementation of paragraph 1 and 2 of this Article.
Section 2. CONDITIONS FOR SALE OR PURCHASE OF COMPULSORY INSURANCE FOR CONSTRUCTION INVESTMENT ACTIVITIES
Article 7. Conditions with respect to insurance enterprises and reinsurance enterprises
Insurance enterprises and reinsurance enterprises shall be allowed to sell compulsory insurance for construction investment activities provided that they meet the following conditions:
1. Hold permits for establishment and operation in which property and loss insurance, liability insurance (with respect to insurance enterprises), and non-life reinsurance (with respect to reinsurance enterprises), are licensed.
2. Meet requirements as to financial capability and professional competence of staff members as prescribed by the Law on Insurance Business and other instructional documents.
Article 8. Conditions with respect to reinsurance assuming enterprises or foreign reinsurance assuming organizations
As for outbound reinsurance activities, insurance enterprises and reinsurance enterprises must provide reinsurance for reinsurance assuming enterprises and foreign reinsurance assuming organizations that meet the following conditions:
1. Legally operating within the territory of the country where these enterprises' main offices are located.
2. Attain the minimum rank of “BBB” accredited by Standard & Poor’s or “B++” accredited by A.M.Best or the equivalent ranks accredited by other organizations that have competence and experience in rating in the financial year closest to the reinsurance assuming year.
Article 9. Retained liability
In order to ensure the financial safety for insurance enterprises and reinsurance enterprises and interests offered to insurance buyers, in reliance on financial capability and risk assessment result, insurance enterprises and reinsurance enterprises shall decide to provide compulsory insurance or reinsurance for construction investment activities as follows:
1. Retained liability per each risk or single loss or damage shall not exceed 10% of the owner’s equity.
2. If an insurance enterprise cedes reinsurance under a fronting arrangement, the maximum rate of such reinsurance cession is 90% of total insurance coverage.
Section 3. SUM ASSURED, RULES OF DETERMINATION OF INSURANCE PREMIUM
Article 10. Sum assured
1. With respect to insurance for works in progress: The sum assured is the full value of construction works upon completion but shall not be allowed to be lower than total construction contract value, including the value subject to amendments or revisions (if any).
2. With respect to professional liability insurance for construction investment consultancy: The sum assured equals consultancy and design contract value.
3. With respect to insurance for employees working at construction sites: The sum assured equals VND 100 million/policyholder/case. The specific coverage provided for employees that suffer injury or death caused by work accidents or occupational diseases shall be governed under the direction of the Ministry of Finance.
Article 11. Rules of determination of insurance premiums
Insurance premiums paid for compulsory insurance for construction investment activities must be determined by consulting statistical data and payment capacity of insurance enterprises and must be consistent with the guidance on insurance conditions, scope of insurance coverage and sum assured provided by the Ministry of Finance.
Chapter III
GOVERNMENTAL AUTHORITY TO MANAGE COMPULSORY INSURANCE FOR CONSTRUCTION INVESTMENT ACTIVITIES
Article 12. Responsibilities of the Ministry of Finance
1. Issue rules and regulations on insurance and insurance premiums which apply to the following compulsory insurance products:
a) Insurance for construction works in progress;
b) Professional liability insurance for construction consultancy service;
c) Insurance for employees working at construction sites.
2. Provide guidance on implementation of reporting, statistical and financial policies for insurance enterprises and reinsurance enterprises during their sale of compulsory insurance for construction investment activities.
3. Take charge of and collaborate with the Ministry of Construction, relevant Ministries and industry authorities and People’s Committees of centrally-affiliated cities and provinces in providing guidance on and encouraging participation in compulsory insurance for construction investment activities as stipulated by this Decree.
4. Manage, supervise, inspect, examine and handle complaints, accusations, and impose penalties for administrative violations of insurance enterprises, reinsurance enterprises that commit violations against regulations on compulsory insurance for construction investment activities in accordance with laws.
Article 13. Responsibilities of the Ministry of Construction
1. Issue regulations and provide guidance, within its jurisdiction, relating to construction projects which have particular technical specifications and complicated construction conditions.
2. Provide guidance on the method of inclusion of insurance costs in construction investment costs.
3. Cooperate with the Ministry of Finance, relevant Ministries and industry authorities in providing guidance on and encouraging participation in compulsory insurance for construction investment activities.
4. Take charge of and collaborate with competent authorities in examining, inspecting and handle complaints, accusations, and impose penalties for administrative violations with respect to insurance buyers that commit violations against regulations on compulsory insurance for construction investment activities in accordance with laws.
Article 14. Responsibilities of Ministries and industry authorities
1. Collaborate with the Ministry of Construction in issuing regulations and providing guidance, within their jurisdiction, relating to construction projects which have particular technical specifications and complicated construction conditions.
2. Cooperate with the Ministry of Finance, relevant Ministries and industry authorities in providing guidance on and encouraging participation in compulsory insurance for construction investment activities.
3. Ministries, ministerial-level agencies, and governmental bodies, shall be responsible for carrying out examination of, providing guidance on and implementation of regulations on compulsory insurance for construction investment activities within their jurisdiction under the provisions of this Decree.
Article 15. Responsibilities of People’s Committees of centrally-affiliated cities and provinces
Carrying out dissemination of this Decree and collaborate with the Ministry of Finance and the Ministry of Construction in implementing policies on compulsory insurance for construction investment activities and applying contingency measures and measures to mitigate losses or damages.
Chapter IV
IMPLEMENTARY PROVISIONS
Article 16. Transitional provisions
Insurance contracts for construction investment activities which have been underwritten before entry into force of this Decree shall be continued in accordance with laws as at the contract-underwriting date.
Article 17. Effect
This Decree shall enter into force from February 10, 2016.
Article 18. Responsibilities for implementation
1. The Ministry of Finance shall take charge of and collaborate with relevant Ministries, industry authorities in implementing this Decree.
2. Ministers, Heads of Ministerial-level agencies, Heads of governmental bodies, Presidents of People’s Committees of centrally-affiliated cities and provinces, and related organizations or individuals, shall be responsible for enforcing this Decree./.
 
 
 
PP. THE GOVERNMENT
THE PRIME MINISTER
(Signed and sealed)




Nguyen Tan Dung
(This translation is for reference only)
 



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