Vietnam’s Industrial Parks Part 11: Non-life insurance

Part 11: Non-life insurance

For manufacturers operating in Vietnam, it is common practice to obtain non-life insurance in advance. A wide variety of insurance products are available in Vietnam to cover natural disasters such as fires and lightning, liability accidents, and damage occurring during construction. This article outlines the types of insurance available in Vietnam and the related procedures.

Types of insurance

Depending on the insurer, examples of insurance products for businesses include the following:

1. 1. Marine cargo insurance
   This insurance covers raw materials, products, and other goods during transportation. It generally provides coverage for all basic foreseeable risks; however, depending on the trade terms, insurance coverage may not be included.
2. 2. Construction insurance
   This insurance covers a wide range of construction-related risks, including damage to the construction works, temporary facilities, existing property, and liability compensation for contractors.
3. 3. Liability insurance
   This insurance covers claims arising from a company’s facilities, manufactured products or services, and claims for damages brought by shareholders. Covered payments include compensation for damages such as court-awarded amounts or settlements, as well as litigation-related costs and attorney fees.
4. 4. Motor vehicle insurance and marine hull insurance
   Motor vehicle insurance covers various losses arising from the ownership, use, or management of vehicles used in construction projects. Marine hull insurance covers damage incurred by vessels engaged in construction work during the project period.
5. 5. Cyber insurance
   This insurance has attracted increasing attention in recent years. It covers losses resulting from unauthorized access leading to personal data breaches, costs for system restoration due to data deletion, and business interruption losses caused by cyber incidents. Vietnam is ranked as the 18th most affected country globally in terms of cyberattacks, and second in Southeast Asia for malware attacks, making cyber insurance particularly important.

In addition, for individuals working at companies in Vietnam, insurance products such as workers’ compensation insurance for occupational accidents and medical insurance for injuries and illnesses are also available.

Insurance placement

In Vietnam, regulations are in place to protect the domestic insurance industry, restricting direct placement with foreign insurers. As a result, insurance cannot be arranged in advance in Japan. Companies must therefore identify and contract with local agents or fronting companies overseas. Typical placement methods include:

1. 1. Placement through subsidiaries or agents of Japanese insurers
   If a Japanese insurance company has a subsidiary in Vietnam or has partnered with a major local agent, insurance can be arranged through them. This allows companies to receive insurance services similar to those in Japan, often with Japanese-language support.
2. 2. Fronting arrangements
   Under a fronting arrangement, a Vietnamese insurance company issues the policy, while a Japanese insurer assumes a substantial portion of the risk through reinsurance. In practice, the insured receives insurance services from the Japanese insurer, reducing the burden compared to dealing directly with foreign insurers.

To arrange specific coverage, companies must submit questionnaires along with required documents, which vary by insurance type.

Claims procedures

Although procedures vary by insurer and policy, the basic processes are as follows:

1. 1. Cargo insurance
   First, the insurer must be notified and the details of the accident reported. Since a surveyor will inspect the damage, it is necessary to preserve the condition of the goods and prevent further loss. Both internal and external inspections of the cargo should be conducted, and any abnormalities should be noted in the delivery documents. Insurance claims can be filed by submitting the documents designated by the insurer.
   
2. 2. Liability insurance
   The insurer must be notified promptly when an incident occurs, with a detailed explanation of the circumstances. Required information includes the date and time of the incident, its cause, and, if there are injured parties, their names, addresses, injuries, and claims. Until the surveyor arrives, the site should be preserved, further damage prevented, and negotiations with affected parties initiated. The claims process is completed upon submission of the required documents.

Although these are overseas policies, there are no insurance products unique to Vietnam; the basic structure is largely the same as in Japan. However, differences in language can lead to misunderstandings in policy interpretation. As many Japanese insurers have subsidiaries in Vietnam, it is advisable to consult with insurers in advance to confirm the coverage and policies appropriate for your business.