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Insurance Law Amended – Key Changes in the Insurance Regime of the Lao People's Democratic Republic

Insurance Law Amended – Key Changes in the Insurance Regime of the Lao People’s Democratic Republic

August 25, 2020

The Law on Insurance (amended) No. 78/NA dated 29 November 2019, (the “Amended Insurance Law”) came into effect on 14 April 2020, after it was promulgated by the President of the Lao PDR on 10 January 2020 and published in the Official Gazette on 30 March 2020. The Amended Insurance Law has effectuated several major changes to the insurance regulatory regime of the Lao PDR, including new provisions concerning life insurance products, insurance business operation and suspension measures, merger requirements, disclosure requirements, and dissolution and liquidation measures for insurance companies (including insurance brokers) registered and operating in the Lao PDR.

The Amended Insurance Law comprises 100 articles categorized into 11 parts and replaces the Law on Insurance (amended) No. 06/NA dated 21 December 2011.

We have summarized below the key changes under the Amended Insurance Law.

Life insurance products are now categorized and defined under the law

The Amended Insurance Law broadly categorizes life insurance products into three groups based on the nature of the financial risk associated with such products:

  1. Life insurance policies without dividends – Policyholders do not participate in the business or investments of their insurers and, therefore, are not entitled to receive any dividends out of the profits earned by the insurers. These policies are commonly referred to as “non-participating policies” in most civil law jurisdictions.
  2. Life insurance policies with dividends – These policies allow the policyholders to participate in the business operations of their insurers and receive dividends out of the insurers’ profits in accordance with the terms and conditions of their insurance contracts. These policies are commonly referred to as “participating policies” in most civil law jurisdictions.
  3. Life insurance policies with investment – This type of policy provides a hybrid option that combines life insurance and investment whereby a policyholder can opt to use part of the premium amount as insurance risk coverage and the rest as a direct investment in portfolios offered by the insurer as per his/her choice. This is similar to unit-linked insurance policies offered by life insurers in most jurisdictions.

The above insurance products can be provided by insurers in the following forms: (i) whole life insurance;(ii) term life insurance;(iii) endowment insurance; or (iv) annuity insurance. While the first three types were already stipulated under the previous insurance law, annuity insurance is a new addition.

The Amended Insurance Law allows a life insurer to offer additional types of policies provided that it obtains prior approval from the Ministry of Finance (the “MOF”). However, there is no such requirement specified in the Amended Insurance Law with respect to general insurance. In our experience, insurers need to apply for approval for each type of general insurance product prior to launching it in the market, and we expect that this will be the case going forward even under the new law.

There are new regulatory compliance requirements for both existing and new insurance business operators

Enterprise registration

As per the Amended Insurance Law, an insurer must be registered in the Lao PDR as a “limited company” or a “public company” to operate an insurance business (life insurance or general insurance business, with or without reinsurance services) in the Lao PDR. This means a prospective investor can no longer apply to set up an individual enterprise or a partnership enterprise to carry out a life insurance or general insurance business in the Lao PDR, which was permitted (but not preferred by investors) under the previous insurance law.


A big change under the Amended Insurance Law is that insurance companies are allowed to operate only one type of insurance business at a time (life insurance or general insurance, with or without reinsurance services). Per our knowledge, there are a few insurance companies in the Lao PDR that are currently providing both life insurance and general insurance services. The new licensing restriction comes as a major obstacle for these insurance providers, as they will now have to restructure their business operations to comply with the above licensing requirement.

It is noteworthy to point out that insurance business activity is categorized as a controlled business activity under the Decree on the Endorsement of the Controlled Business List and the Concession List of the Lao PDR No. 03/PM dated 10 January 2019. Therefore, a prospective investor must apply to the One-Stop-Service Office under the Ministry of Planning and Investment (the “MPI”) for an investment license before proceeding with registering and obtaining the abovementioned business operation license. However, currently, the MPI has suspended the issuance of investment licenses for new investments in the general and life insurance business sector following the Prime Minister’s Notice on Management of Insurance Business Operation in the Lao PDR No. 697 dated 17 May 2018. We understand that this measure was taken because of several existing market players who were providing similar insurance products in the Lao PDR; the MPI is likely to consider an investment proposal (on a case-by-case basis) if the prospective investor proposes the launch of an innovative insurance product that can benefit the public at large.

Insurance agencies or brokerages are not required to obtain an investment license. Thus, an investor can directly apply for a brokerage business license from the MOF provided it has already established a limited company in the Lao PDR.

Minimum registered capital

The minimum registered capital requirement has been significantly increased from the previous requirement of LAK16 billion (approx. US$1.8 million) to LAK30 billion (approx. US$3.35 million) for operating a life insurance or general insurance business in the Lao PDR. If the insurance company also provides reinsurance services, the minimum registered capital required is LAK60 billion (approx. US$6.7 million).

All insurance business operations must maintain the abovementioned minimum registered capital amount throughout their business operations in the Lao PDR. If any contribution to the registered capital of an insurance company is made in kind, the assets must be: (i) located in the Lao PDR; (ii) directly utilized in the business operations; and (iii) assessed by an asset valuation company approved by the MOF.


Under the previous insurance law, an amount equivalent to one-third (33.33%) of the minimum registered capital was required to be deposited with a commercial bank in the Lao PDR as security. However, under the Amended Insurance Law, this security deposit obligation has been replaced by a warranty obligation, whereby insurance companies must either maintain a cash fund of not less than 20% of their registered capital with a commercial bank in the Lao PDR (the deposit amount can be withdrawn or utilized only with the prior permission of the MOF), or obtain a guarantee from a financially stable commercial bank to cover the indemnity payment liabilities of the insurance company; the guarantee amount must be at least 20% of the insurance company’s registered capital.

Share transfer approval

Under the Amended Insurance Law, prior approval from the MOF is a requirement if a shareholder of an insurance or reinsurance company wishes to sell 50% or more of its shares in the company.

Merger approval and notification

If an insurance company wishes to enter into a merger transaction (which includes a takeover/acquisition transaction as per the definition of the term “Mergers” under the Law on Business Competition No. 60/NA dated 14 July 2015 (the “Competition Law”)), it must first obtain prior approval from the MOF. The decision will depend upon whether or not the contemplated merger transaction will adversely impact competition in the Lao insurance market. The MOF will work in conjunction with the competition regulatory authority (established pursuant to the Competition Law) to notify the public and invite opposing views/objections from policyholders and anyone doing business with the insurance company.

Although the Competition Law has been in force since 2016, there has been little or no development in the implementation of its regulatory provisions. The Lao Competition Commission was only established in 2019 and it has yet to issue any implementation decree or regulation to fill in the legislative gaps and provide the measures to put the provisions of the Competition Law into effect.

Financial and accounting requirements are now more stringent than under the previous legislation

Accounting, financial reporting, and mandatory disclosure

The Amended Insurance Law reiterates the requirement for insurance companies to prepare and maintain their accounting records, including financial statements, in accordance with the applicable accounting laws and regulations of the Lao PDR. All insurance companies must file their annual financial statements for a given year with the MOF on or before 30 March of the following year and obtain an annual accounting compliance certificate (this is in addition to the tax compliance certificate that must be obtained from the relevant tax authority following the annual tax audit in accordance with the Law on Tax Administration No.66/NA dated 17 June 2019). Furthermore, insurance companies must disclose the following information to the public by publishing it on their official website or any other mass media platform:

  1. Quarterly financial reports prepared as per Lao accounting standards and requirements
  2. Annual reports and the opinion of the auditor
  3. Any information that could assist the public to gain an insight into the reliability of the insurance companies

If an insurer is a member of a group, it must disclose information on all companies in its group, so that the public is able to gain an overall picture of the policies, business plan, and executive management; this extends to the financial reports of the companies in the group.

Loan approval

An insurance company must apply for approval from the MOF prior to borrowing from any domestic or offshore lender, or acting as a guarantor, or incurring any financial liability other than in its usual course of business. Furthermore, an insurance company cannot use its assets as collateral or assign any right or interest over its assets to another person without the prior approval of the MOF.

Note that these approvals are in addition to the existing requirement that any Lao registered company borrowing from an offshore lender has to apply for an offshore loan approval from the Bank of the Lao PDR prior to entering into a loan agreement

Use of actuaries

All insurance companies operating in the Lao PDR are now required to use actuaries to compute their insurance premiums, assess their insurance reserves and debt payment capacity level, and prepare risk assessment reports and other documents as required under the law.

The Amended Insurance Law is silent on the appointment criteria and process as well as the role, nature, and duties of actuaries. Per our understanding, the MOF is currently working on a specific regulation that will cover the aforementioned scope.

Other key provisions of the amended Insurance Law

  • Under the Amended Insurance Law, individuals are expressly excluded from carrying out an insurance brokerage business by themselves. Only legal entities that are duly incorporated in the Lao PDR and meet the investment requirements are permitted to operate an insurance brokerage business. Previously, both individuals and legal entities were allowed to operate insurance brokerage businesses in the Lao PDR.
  • If an insurance company is in financial distress or has breached any of its material obligations under an insurance contract, the MOF now has the right to require the company to transfer its rights and obligations (in part or in whole) under any insurance contracts to a competitor in order to safeguard the interest of the company’s policyholders, or alternatively, to force the company to enter into a reinsurance contract as may be deemed necessary by the MOF.
  • The Amended Insurance Law provides specific provisions that will govern the dissolution of an insurance company and the liquidation of its assets. These provisions will apply together with the general provisions on dissolution and liquidation of a company stipulated under the Law on Enterprise No. 46/NA dated 26 December 2013.

Existing insurance operators are allowed a grace period of three years to comply with the above regulatory requirements and other new or additional obligations under the Amended Insurance Law.

This article is intended to provide an overview of the new insurance legislation of the Lao PDR for general purposes only and therefore, the contents herein must not be construed as legal advice or as a substitute for legal advice for any specific matter or situation.

For more information on the regulatory changes in the Lao insurance sector, or for any other queries about the legal and regulatory environment in the Lao PDR, please feel free to contact us at the VDB Loi Laos office: Daodeuane Duangdara ([email protected]), Sornpheth Douangdy ([email protected]), Sibasish Mohapatra ([email protected]).


Sibasish is a lawyer qualified in India with specialization in business law and corporate matters. As a legal associate, he assists with research, analysis, and advice on Lao PDR and international laws and treaties, and their interpretation; as well as with drafting and reviewing commercial contracts and preparing a range of other legal documents, including legal opinions and letters of advice.

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