Engaging Insurance Business and Insurance Related Business in the Lao PDR
Currently, the insurance business is not a competitive business in the Lao PDR as there are only 6 insurance companies operating within the Lao PDR, i.e. Assurances Generales du Laos, Champa, Lao-Viet Insurance Co., Mitsui Sumitomo: MSIG Insurance (Lao) Com, Ltd., PCT Asia (formerly Insee Insurance Co. Ltd.), and Toko Assurance Co. Ltd.According to the law on Investment Promotion No.02/NA, dated 8 July 2009, the insurance business is listed as a concession business. Therefore, any application in relation to an establishment of an insurance company or insurance broker must be submitted to Ministry of Planning and Investment (the “MPI”) for consideration.
The relevant legislations applicable to the insurance business and insurance related businesses include:
- Presidential Edict on Fees and Service Charges No. 03/PO, dated 19 November 2008 (“Presidential Edict on Fees and Service Charges”);
- Law on Insurance No. 06/NA, dated 21 December 20 (“Law on Insurance”);
- Law on Investment Promotion No. 02/NA, dated 8 July 2009 (“Law on Investment Promotion”); and
- Decree on Law Implementation of Law on Investment Promotion No.119/PM, dated 20 April 2011 (“Decree on Implementation of Law on Investment Promotion”).
It is worth noting that the promulgation of the Decree on Law Implementation of the Law on Insurance is in the process of drafting as informed by the Director General of the International Cooperation Department, Ministry of Finance. The Decree was initially planned to be considered by the National Council in November of2012. However, due to a revision request by the investors, the final draft of the Decree was delayed. Nevertheless, the promulgation of such Decree is expected soon.
Relevant Authorities
As mentioned above, the insurance business is listed as a concession business according to the Law on Investment Promotion. Therefore, the authority responsible for the establishment of an insurance company and the issuance of a concession certificate will be the MPI. However, the authority that controls the operations of an insurance business and is responsible for the issuance of insurance operating licenses is the International Cooperation Department, Ministry of Finance.
Type of Insurance
According to the Law on Insurance, there are two types of insurance: Life insurance and non-life insurance. Life insurance means insurance that relates to risk guarantees for the lifetime of the buyer or of the insured person when death occurs. Non-life insurance is insurance that relates to property, civil liability against third persons and all other insurance which is not life insurance.
Compulsory insurance and voluntary insurance are the two types of non-life insurance. Regarding compulsory insurance, the law requires specific types of businesses or activities to arrange an insurance contract with minimum protection as stipulated by law. Voluntary insurance is insurance that allows the buyer to choose the type and scope of insurance, as well as the limit of the amount of insurance according to each premium of the insurance provided by an insurer.
Establishment of Insurance Company
According to the Law on Insurance, any person who wishes to establish and operate the insurance business in the Lao PDR must submit an application along with other documents required by law to the one-stop service center of the MPI. After the application and other documents are fully submitted, the MPI will forward such application along with all other documents to the International Cooperation Department, Ministry of Finance, requesting for an opinion. When all qualifications have been considered, the International Cooperation Department will submit its opinion to the MPI. If there are no objections or dissents, the MPI will issue a concession certificate for the insurance company that is requesting establishment.
After a concession certificate has been issued, the insurance company will still be unable to operate its business until an operating license has been issued by the International Cooperation Department, Ministry of Finance. In this regard, the investor must submit an application and all other required documents to the Ministry of Finance for consideration. After all documents have been submitted, the Ministry of Finance will take approximately 45 days to consider the application and then notify the investor the result.
When an operating license has been issued, the insurance company will then be allowed to operate its business. It is worth noting that currently there is only one type of operating license applied to both life insurance and non-life insurance businesses. However, according to the Director General of the International Cooperation Department, Ministry of Finance. There is support for operating licenses to be separated in the future, one for life insurance businesses and another for non-life insurance businesses. This may be included in the draft Decree on Law Implementation of the Law on Insurance.
Apart from this, the insurance company requesting establishment must have a minimum registered capital of not less than 16 billion kip which must be maintained throughout its entire operation. In addition, two-thirds of its registered capital must be paid to one of the banks located in the Lao PDR in order to deposit guarantees.
Notification must then be made to the International Cooperation Department, Ministry of Finance regarding such deposit.
Limitation and Proportion of Foreign Investors
According to the Law on Investment Promotion and the Law on Insurance, there is no limitation prohibiting foreign investors from investing in the insurance business. In addition, it has been confirmed that no such limitation in the draft of the Decree on Law Implementation of the Law on Insurance as well. Therefore, foreign investors may invest in the insurance business and set up an insurance company under Lao law.
In addition, there is also no limitation as to the proportion of foreign investors investing in the insurance business. Consequently, it can be said that an insurance company established under Lao law can either be a 100% foreign owed company or a joint venture. According to the current statistics on insurance companies established under Lao law, 3 insurance companies have 51% foreign ownership, 1 insurance company has 80% foreign ownership and 1 company has 100%domestic ownership.
Agents
The sale of insurance in the Lao PDR can also be carried out by agents. As specified in Article 77 of the Law on Insurance, agents of an insurance company can be either an individual or a juristic person. For an individual agent, the law specifies the following requirements:
- Having Lao nationality and having domicile in the Lao PDR;
- Being over 18 years of age;
- Passing the training on insurance activities;
- Having never been sentenced to imprisonment for an intentional act; and
- Being healthy.
For a juristic person, such juristic person acting as an agent of an insurance company must be properly established under Lao law.
In this regard, in order for a person to be an agent of an insurance company, the law does not require him/her to be approved by the relevant authority. However, an insurance company must provide the International Cooperation Department, Ministry of Finance, with the list of its agents specifying the names and qualifications of each individual.
Other Businesses in Connection with Insurance Business
Insurance Broker Company:
Apart from insurance companies, foreign investors may also invest in an insurance business through an insurance broker company. The process of establishment and other requirements are the same as those of the insurance company.
Representative Office of Foreign Insurance Company:
A foreign insurance company may also establish its representative office in accordance with the Law on Insurance. Such foreign insurance companies, however, must have at least 5 years’ experience in the insurance business and must associate with the Lao authority for its establishment.
Branch Office of Foreign Insurance Company:
A foreign insurance company is prohibited under Lao law from establishing a branch office in the Lao PDR if there is no establishment of a parents company under Lao law. In the case that such foreign company wishes to operate the insurance business in the Lao PDR, an insurance company is required to be established under Lao law first.
Mr. Rawat Chomsri, Partner
Email: rawat@siampremier.com
Ms. Natchar Leedae, Advisor
Email: natchar@laopremier.com
Ms. Salin Thewphaingam, Advisor
Email: salin@laopremier.com