Purchasing Compulsory Fire And Explosion Insurance (“CFEI”) is not a new obligation. However, compared to the previous regulations, the Law on Fire Prevention, Firefighting, Rescue And Salvage 2024 and Decree No. 105/2025/ND-CP, which provides detailed guidance and implements several provisions of the Law (“Decree 105”) introduce specific amendments and supplements to this obligation. The key highlights are as follows.
Expansion of the facilities required to participate in CFEI
Under the new regulations, the number of facilities required to participate in CFEI has been significantly expanded from 18 to 44 groups of facilities, with the criteria thresholds substantially tightened (the minimum number of floors and floor area requirements have been reduced). The revised list also adds several categories of facilities that have recently been associated with serious fire incidents nationwide, such as facilities trading in flammable goods or hardly flammable, non-flammable goods in flammable packaging; residential premises combined with business activities; car and motorbike parking; car and motorbike showrooms, etc. In general, the legal provisions are being expanded in scope to more closely reflect issues arising in practice. The insured entities comprise the entirety of the facility’s property, including (i) houses, construction works and property attached thereto; machinery and equipment used for production or business activities; and (ii) goods and supplies (including raw materials, semifinished products and finished products).
Recently, fires occurring in apartments and residential premises combined with production or business activities have caused serious loss of life and property. In response to this reality, the law aims to tighten the CFEI requirements for these facilities, specifically as follows:
- Apartment buildings and collective residential buildings of 5 floors or more with a total floor area of at least 1,000 m²;
- Facilities providing food and beverage services or other business services as prescribed by law with a total floor area of at least 300 m²;
- Residential premises combined with business activities where a total area used for business activities of at least 200 m²;
- Multi-purpose buildings and mixed-use buildings, excluding residential premises combined with business activities, that have at least 3 floors or a total floor area of at least 500 m²;
- Car and motorbike parking, car and motorbike showrooms with a total floor area of at least 500 m².
Updates to Insurance Premiums
Except for nuclear facilities, fire-prone facilities or explosive facilities whose total insured value at a single location is VND 1,000 billion or more, the minimum insurance premium for facilities subject to CFEI is determined based on the minimum insurance amount multiplied by the minimum insurance premium rate. To align with the expanded list of facilities subject to purchase CFEI, Decree 105 has adjusted the minimum premium insurance rates accordingly. Facilities which are subject to higher insurance premiums due to elevated fire and explosion risks include traditional markets, wood processing and manufacturing facilities, karaoke bars, discotheques and nightclubs, etc., with the highest minimum premium rate reaching up to 0.5% per year.
In addition, the level of deduction and remittance of insurance enterprises selling CFEI has increased from 1% to 2% of the total actual premium revenue derived from original insurance contracts in the preceding fiscal year. This amount shall continue to be remitted directly into the account opened and managed by the Fire Prevention, Fighting, Rescue And Salvage Police Department under the Ministry of Public Security, as before.
Conclusion and Recommendations for Enterprises
In the context of multiple legal changes, facilities/enterprises must ensure that CFEI is purchased at the legally required premium rates, to avoid administrative fines of up to VND 15,000,000 for purchasing insurance at an incorrect premium and up to VND 50,000,000 for failure to purchase. Insurance enterprises are likewise required to the level of deduction and remittance in accordance with the regulations, thereby fulfilling their obligations to the State and avoiding penalties of up to VND 30,000,000 for under-remittance and up to VND 50,000,000 for non-remittance. The new regulations on participation in CFEI are expected to enhance the awareness and responsibility of facility owners, while strengthening the financial resources for compensating losses in the event of a fire or explosion.
