On 22 June 2026, the Government officially promulgated Decree No. 220/2026/ND-CP amending and supplementing a number of provisions of Decree No. 67/2023/ND-CP ("Decree 67") dated 6 September 2023 on compulsory motor vehicle owners' civil liability insurance, compulsory fire and explosion insurance, and compulsory insurance in construction investment activities (the "Decree 220").
In this article, ATA Legal Services highlights the key amendments introduced under Decree 220 that are expected to have a direct impact on legal compliance and risk management during the construction phase, particularly for project owners and construction contractors.
1. Additional Obligations of Policyholders
Decree 220 introduces new obligations regarding the minimum sum insured under insurance contracts and the policyholder's duty to notify changes in the construction value, specifically:
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The minimum sum insured must be expressly stipulated in the insurance contract;
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Where an adjustment to the construction value results in a change to the minimum sum insured, the policyholder must notify the insurer within five (05) working days from the date such adjustment is made, or within such other period as agreed under the insurance contract.
These amendments are intended to ensure that the insured amount remains commensurate with the actual value of the construction works, thereby reducing the risk of under-insurance and minimizing potential disputes in the event of an insured occurrence.
2. Expansion of Insurance Exclusions
With respect to losses arising from natural or physical phenomena such as decay, corrosion and scaling, Decree 220 significantly broadens the scope of the insurance exclusions compared to Decree 67:
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Under Decree 67, these exclusions applied only to construction works with a value of less than VND 1,000 billion and were subject to additional conditions relating to installation works.
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Decree 220 extends these exclusions to all construction works falling within its scope, regardless of the value of the project or any accompanying conditions.
Accordingly, from 1 July 2026, the above exclusions will apply uniformly to all construction works governed by the Decree, without being subject to project value thresholds or other qualifying conditions as previously required.
In practice, project owners and contractors should carefully review the scope of insurance coverage and implement appropriate risk management measures for losses falling outside the scope of indemnity.
3. Amendments to the Insurance Premium Determination Mechanism
3.1. Premium Discounts Prohibited for Projects Located in High Natural Disaster Risk Areas
Decree 220 provides that insurers are prohibited from applying premium rates lower than the prescribed rates in the following circumstances:
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Construction works located in areas classified as having a high risk of natural disasters, including flash floods, landslides, land subsidence caused by heavy rainfall or flooding, and water currents; or
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Where the insurer has incurred an underwriting loss in its property insurance business for three (03) consecutive financial years.
This amendment is intended to ensure that insurance premiums accurately reflect the level of risk associated with each project while enhancing the financial soundness of insurers.
3.2. Specific Rules on Premiums and Deductibles for Nuclear Power Plants
Recognising the exceptionally high-risk nature of nuclear power plants, Decree 220 introduces specific provisions governing the calculation of compulsory insurance premiums and deductibles applicable to such projects.
Given the unique and highly hazardous characteristics of nuclear power plants, the State permits insurers and policyholders to determine premiums, policy terms and conditions based on international market practices, supported by evidence of overseas reinsurance arrangements, rather than applying the standard domestic premium schedules or insurance rules, which may not adequately accommodate such risks.
3.3. Tightening the Limits on Premium Adjustments
Both Decree 67 and Decree 220 allow insurance premiums to be increased or reduced by up to 25% from the standard premium rate depending on the risk profile of a particular project. However, Decree 220 introduces two notable changes:
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Removal of the exception permitting adjustments exceeding the 25% cap: Under Decree 67, where insurance claims exceeded premium income due to the policyholder's fault, the parties were permitted to agree on a premium exceeding the 25% cap. Decree 220 abolishes this exception entirely, making the 25% cap applicable in all cases.
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Introduction of mandatory risk assessment procedures: Insurers are now required to establish risk assessment procedures based on clear evaluation criteria, certified by their internal actuaries and subject to annual review. Previously, insurers had greater discretion in adjusting premiums without a standardized assessment process.
These amendments aim to standardize risk assessment practices, improve transparency in premium determination, and ensure greater consistency in market implementation.
3.4. Premium Calculation Where the Construction Period Is Extended
Where the construction period or the warranty period is extended beyond that specified in the investment decision as of the date of execution of the insurance contract, the policyholder and the insurer are required to enter into a written agreement on the insurance premium applicable to the extended period, based on:
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The premium under the professional liability insurance policy for construction consultancy in effect at the time of execution of the insurance contract ("Professional Liability Insurance Contract"); and
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The ratio between the extended period and the original term of the Professional Liability Insurance Contract at the time of execution.
By prescribing a standardized method for calculating premiums during extension periods, Decree 220 seeks to enhance transparency, prevent arbitrary premium increases by insurers, and ensure uninterrupted insurance coverage throughout the construction process.
4. Updates to Compulsory Insurance Premiums and Deductibles Applicable to Construction Works
Decree 220 also revises and supplements the categories of facilities posing fire and explosion risks under Appendix II concerning compulsory fire and explosion insurance premiums and deductibles, aligning them with the classification of construction works under Decree No. 105/2025/ND-CP guiding the Law on Fire Prevention, Firefighting and Rescue 2024.
Furthermore, Appendix III on compulsory insurance premiums and deductibles applicable to construction works during the construction period has been comprehensively replaced. Key amendments include:
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Scope of application: Most construction works subject to compulsory insurance are now Grade II construction works or above, except for certain special categories such as ports, harbours and hydraulic structures.
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Addition of railway infrastructure: Underground railway (Metro) projects are newly included with an insurance premium rate of up to 5.9% of the construction value, significantly higher than the 4.0% rate applicable to other railway projects.
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Introduction of compulsory deductibles for construction works with an insured value of VND 1,000 billion or more, as follows:
| Insured Value | Type M Deductible (Natural Disaster Risks) | Type M Deductible (Other Risks) | Type N Deductible (Natural Disaster Risks) | Type N Deductible (Other Risks) |
|---|---|---|---|---|
| VND 1,000 billion or more | Minimum VND 700 million or 5% of the loss, whichever is greater | Minimum VND 200 million or 5% of the loss, whichever is greater | Minimum VND 1 billion or 5% of the loss, whichever is greater | Minimum VND 400 million or 5% of the loss, whichever is greater |
Accordingly, enterprises, project owners and construction contractors should proactively review and update the applicable insurance premiums and deductibles based on the type, grade and classification of their construction works to ensure full compliance with the new regulatory requirements.
Decree 220 takes effect on 1 July 2026. Insurance contracts executed before 1 July 2026 that remain valid and effective shall continue to be performed in accordance with their existing terms. However, where such contracts are amended or supplemented after the effective date, the amended provisions must comply with Decree 220.
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