New regulations on compulsory fire and explosion insurance from September 6, 2023

On September 6th, the Government issued Decree 67/2023/ND-CP regulating mandatory insurance for vehicle owners, mandatory fire and explosion insurance, and mandatory insurance in investment and construction activities, effective from September 6th, 2023.

Quy định mới về bảo hiểm cháy nổ bắt buộc từ ngày 6/9/2023

New regulations on mandatory fire and explosion insurance effective from September 6, 2023. (Source: TVPL)

Decree 67/2023/ND-CP contains many regulations related to mandatory fire and explosion insurance, for example:

Scope of mandatory fire and explosion insurance

Insurance companies are responsible for compensating for damages to the insured object arising from fire or explosion risks, except in cases where insurance liability is excluded as stipulated.

Exclusions from mandatory fire and explosion insurance coverage.

- Cases excluding insurance liability for facilities with fire and explosion hazards as stipulated by fire prevention and fighting laws (excluding nuclear facilities): Insurance companies are not liable for compensation in the following cases:

+ Earthquakes, volcanic eruptions, or other natural disasters.

+ Damage caused by political events, security issues, and disruptions to social order and safety.

+ Property that is burned or blown up by decision of a competent state authority.

+ Property that ferments or generates heat on its own; property that is subjected to a heat-based treatment process.

+ Lightning strikes the insured property directly but does not cause fire or explosion.

+ Nuclear weapons materials cause fires and explosions.

+ Machinery, electrical equipment, or parts of electrical equipment damaged due to direct impact from overload, overvoltage, short circuit, self-heating, electrical arcing, or leakage current from any cause, including lightning strikes.

+ Damage caused by the insured's intentional arson or explosion; or due to intentional violation of fire prevention and fighting regulations that directly caused the fire or explosion.

+ Damage to data, software, and computer programs.

+ Damage caused by burning forests, bushes, grasslands, or burning for the purpose of clearing fields or land.

- Exclusions from insurance liability for nuclear facilities: The insurance company and the policyholder agree on the exclusions from insurance liability based on the approval of the reinsurance company.

Mandatory fire insurance premium and deductible rates

(1) For facilities with fire and explosion hazards (excluding nuclear facilities) with a total insured amount of assets at one location under VND 1,000 billion: Insurance premiums and deductibles are specified in Clause 1, Section I, Appendix II and Clause 1, Section II, Appendix II issued with Decree 67/2023/ND-CP.

Based on the risk level of the insured object, insurance companies are allowed to adjust insurance premiums up or down by a maximum of 25% of the premium amount.

In cases where, in the immediately preceding fiscal year, the insured object directly caused the amount of original insurance compensation paid to exceed the original premium revenue of mandatory fire and explosion insurance, based on data confirmed by the insurance company's actuaries and verified by an independent auditing organization, when renewing the insurance contract, the insurance company and the policyholder may agree on a premium rate and deductible that ensures the insurance company's solvency.

(2) For facilities with fire and explosion hazards with a total insured amount of assets at one location of VND 1,000 billion or more (excluding nuclear facilities):

Insurance companies and policyholders may agree on the insurance premium and deductible based on evidence provided by the leading foreign insurance company or organization receiving reinsurance. The leading foreign insurance company or organization receiving reinsurance and the foreign insurance company or organization receiving reinsurance of 10% or more of the total liability of each reinsurance contract must comply with the regulations in Clause 9, Article 4 of Decree 67/2023/ND-CP. In all cases, the insurance premium must not be lower than the insurance premium corresponding to VND 1,000 billion multiplied by 75% of the premium rate stipulated in Clause 1, Section I, Appendix II issued with Decree 67/2023/ND-CP.

(3) For core facilities: The insurance enterprise and the insurance buyer may agree on the rules, terms, premiums and insurance deductibles based on evidence proving that the foreign insurance enterprise or organization leading the reinsurance confirms that it accepts reinsurance in accordance with the rules, terms, premiums and insurance deductibles that the insurance enterprise or organization provides to the insurance buyer. The foreign insurance enterprise or organization leading the reinsurance and the foreign insurance enterprise or organization receiving reinsurance from 10% of the total liability of each reinsurance contract must comply with the provisions of Clause 9, Article 4 of Decree 67/2023/ND-CP.

Principles of mandatory fire and explosion insurance compensation

Insurance companies shall review and settle insurance claims in accordance with the laws on insurance business and the following principles:

- When a loss occurs, the insured must immediately notify the insurance company through all means of communication. Subsequently, within 14 days from the date of the loss, for facilities with fire and explosion hazards, a written notification must be sent to the insurance company.

- The insurance compensation amount for damaged property shall not exceed the insured amount of that property (as agreed upon and stated in the insurance contract or insurance certificate) minus the insurance deductible as stipulated in Clause 3, Article 28 of Decree 67/2023/ND-CP.

- A maximum reduction of 20% in insurance compensation will be applied if a facility with fire and explosion hazards fails to fully and promptly implement the recommendations in the fire safety inspection report of the competent police authority, leading to increased losses in the event of a fire or explosion.

Mandatory fire and explosion insurance claim file

The required documents for a fire and explosion insurance claim include the following:

- The insurance policyholder's claim request document.

- Documents related to the insured object, including: Insurance contract, Insurance certificate.

- A copy of the fire safety inspection report from the competent police authority at the time closest to the time of the insured event.

- Assessment report from the insurance company or a person authorized by the insurance company.

- A written conclusion or notification from the competent authority regarding the cause of the fire or explosion (copy) or other evidence proving the cause of the fire or explosion.

- A damage assessment report and supporting documents.

The policyholder is responsible for collecting and submitting to the insurance company the documents stipulated in Clauses 1, 2, 3, 5, and 6 of Article 29 of Decree 67/2023/ND-CP. The insurance company is responsible for collecting the documents stipulated in Clause 4 of Article 29 of Decree 67/2023/ND-CP.

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