Construction Insurance in Vietnam: Law, FIDIC Clause 18 and Lenders

Updated: 22 October 2026 · IVLF Advisors

When a crane collapses, a basement floods or a typhoon strips a half-finished façade, the first question is rarely who is at fault. It is who has insured the loss, and whether the policy actually responds. Gaps in construction insurance Vietnam programmes, such as a policy that excludes the very event that occurred or a lender that is not named as an insured, are among the costliest and most avoidable problems on a project.

This article sets out how the 2025 Law on Construction, Decree 210/2026/NĐ-CP and the FIDIC 1999 edition allocate insurance, and what foreign investors, lenders and contractors should settle before work starts. What a programme must cover differs between an airport terminal, a petrochemical plant and a hotel.

Construction insurance Vietnam: the legal framework

Insurance in construction operates on two levels. The first is statutory: certain insurances are compulsory under Vietnamese law. The second is contractual: the parties decide who buys which policy, for what cover and for whose benefit.

Article 20(1) of Decree 210/2026/NĐ-CP (“Decree 210”), which replaced Decree 50/2021/NĐ-CP as the main implementing text on construction contracts, provides that compulsory insurance follows Article 10 of the Law on Construction No. 135/2025/QH15 (the “Law on Construction”) and the detailed decree on insurance. It adds that the contract allocates the responsibility for buying insurance between the parties. The detailed insurance decree is Decree 220/2026/NĐ-CP. Limits, premium rates and coverage lists are not stated here and depend on the current text of that decree.

The official government summary of Decree 210/2026 is a useful companion when reading the contract-level rules.

What compulsory construction insurance Vietnam rules require

The compulsory list depends on the type of work and the party concerned, and it is set by the Law on Construction and its implementing decree rather than by the contract. The text of the law is available on hethongphapluat.com. Foreign sponsors should obtain a written confirmation from their broker or counsel, for each project, of which policies are compulsory, who must buy them and which insurers are eligible.

Compulsory cover is a floor, not a programme, and a sound construction insurance Vietnam plan is built from the contract upward. Project agreements and loan documents usually require much more, such as physical damage, third-party liability and delay cover, and those requirements come from the contract, not from the statute.

Foreign contractors: the Decree 212 insurance duties

Foreign contractors need a separate view of construction insurance Vietnam duties, because the licence regime adds obligations that a locally incorporated contractor may not face in the same form.

Foreign contractors operating under a construction activity licence face their own duties. Article 48 of Decree 212/2026/NĐ-CP (“Decree 212”) lists the obligations of a foreign contractor in Vietnam, including insurance. It requires the contractor to buy:

• professional liability insurance, for consulting work;
• property and goods insurance, for procurement work; and
• the various insurances applicable to construction work.

The same article also covers the operating office, tax registration, labour, customs and inspection of imported equipment. Insurance is therefore only one item in a wider compliance list, and a missed policy can be treated as a regulatory failure as well as a contractual one. Article 49 reminds employers and main contractors of their own duties towards foreign contractors, which makes insurance evidence a point for the owner’s checklist too.

A foreign contractor that works through a Vietnamese joint venture or subcontractor must still make sure that the chain of insurance is consistent. Our article on subcontracting in Vietnamese construction projects explains how responsibility for subcontractors flows up the contract chain, and insurance should follow the same logic.

Insurance in FIDIC clause 18 (1999 edition)

For projects built on international forms, insurance in FIDIC clause 18 is the usual reference point. The points below are drawn from the text of the FIDIC 1999 edition (Silver Book). The 2017 second edition exists and differs; this article does not describe it.

Sub-Clause	Cover	Key terms (1999 edition, Silver Book text)	Watch-out
18.1 General	All policies	The “insuring Party” buys each policy; contractor-bought policies need insurers and terms approved by the employer; evidence and policy copies due within the periods in the Particular Conditions.	Particular Conditions must state the periods and the insurer standards.
18.2 Works and equipment	Physical loss or damage	Works, Plant, Materials and Contractor’s Documents insured for not less than full reinstatement cost, including demolition, debris removal, professional fees and profit; equipment at full replacement value. Joint names; in force until the Taking-Over Certificate, with extended cover until the Performance Certificate.	Cover for certain employer’s-risk events applies only if a deductible amount is stated in the Particular Conditions.
18.3 Third parties	Injury to persons and damage to property	Insures each party’s liability for loss, damage or injury arising from the contractor’s performance, until the Performance Certificate. Limit per occurrence is as stated in the Particular Conditions.	If no amount is stated in the contract, Sub-Clause 18.3 does not apply.
18.4 Personnel	Contractor’s staff	Contractor insures liability for injury, sickness, disease or death of its personnel; the employer is indemnified under the policy; a subcontractor may insure its own staff, but the contractor stays responsible.	Check consistency with compulsory cover under Vietnamese law.

Two features of the table deserve attention. First, under Sub-Clause 18.1, if the insuring party fails to maintain a required policy, the other party may buy the cover and recover the premiums, and the contract price is adjusted. Second, if the insuring party fails to keep in force an insurance that was available, any money that should have been recoverable is payable by that party. Insurance failures therefore become direct financial exposure.

Allocating who buys what

In an EPC or turnkey contract, the contractor usually buys the works and third-party policies, and the employer buys cover for its own interests, such as delay in start-up. On other forms and on smaller projects, the employer may be the insuring party. The Particular Conditions should state the allocation line by line, since Decree 210 Article 20(1) leaves the allocation to the parties.

Core policies in a construction insurance Vietnam programme

A typical construction insurance Vietnam programme combines several policies. The descriptions below reflect general market practice and actual policy wordings vary.

Policy	Protects against	Usually bought by	Lender interest
Contractors all risks insurance (CAR)	Physical loss of or damage to the works during construction	Contractor (or employer, if agreed)	Loss payee or co-insured status; security assignment
Third-party liability insurance	Injury or property damage to others	Contractor, in joint names	Adequate limit; no gaps with neighbouring property risk
Professional indemnity insurance	Design and consultancy errors	Designer or design-build contractor	Limit and claims-made renewal terms
Delay in start-up insurance	Lost revenue or debt service when an insured loss delays completion	Employer or project company	Debt-service cover; named beneficiary
Marine cargo insurance	Loss of goods and equipment in transit	Seller, contractor or employer, per delivery terms	Coverage for long-lead items
Workers’ and personnel cover	Injury to site personnel	Each employer of personnel	Compliance with compulsory rules

Contractors all risks and third-party liability

Contractors all risks insurance responds to physical loss or damage to the works, and it is the policy lenders care about most. The key negotiating points are the sum insured, the deductibles for natural catastrophe risks, and the exclusion of defective design, materials or workmanship, which FIDIC Sub-Clause 18.2 permits for the defective part itself while requiring cover for other parts damaged as a direct result. Many markets also use standard defect-exclusion wordings with different levels of cover; the exact wording must be reviewed policy by policy.

Third-party liability insurance protects against claims by neighbours, passers-by and others. On dense urban sites in Vietnam, where excavation and piling affect adjacent buildings, the limit per occurrence and the treatment of vibration and settlement should be examined carefully.

Professional indemnity and delay cover

Where the contractor takes design responsibility, as in EPC and design-and-build, professional indemnity insurance matters, and Decree 212 Article 48 expressly refers to professional liability cover for foreign consulting contractors. Such policies are usually written on a claims-made basis, so renewal, retroactive dates and run-off periods need attention long after the works end.

Delay in start-up insurance is a market-practice cover that responds to revenue or debt-service loss following an insured physical loss. It is typically the employer’s or the project company’s policy, and lenders often require it for revenue-generating projects. It depends on a valid physical damage claim, so it must be aligned with the CAR terms.

Practical issues: insurers, claims and lenders

Lenders and sponsors judge a construction insurance Vietnam programme by how it responds on the worst day, not by the number of policies on the schedule.

Several recurring issues arise in every financing.

• Local versus offshore insurers. Vietnamese insurance-business rules may restrict placing cover on Vietnam-based risks with non-licensed insurers, although reinsurance abroad is common. Confirm the position with a broker and counsel before the programme is placed.
• Joint names and waiver of subrogation. FIDIC provides joint-name cover for works and third-party risks; make sure the policy wording gives each insured separate protection.
• Insurer approval. Under Sub-Clause 18.1, contractor-bought policies need the employer’s approval of insurers and terms; set objective standards, such as a minimum financial strength rating, in the Particular Conditions.
• Uninsurable events. If cover ceases to be available on commercially reasonable terms, Sub-Clause 18.2 provides a notice and payment mechanism after one year from the Base Date. Agree who bears this market risk.
• Claims handling. Appoint one party to manage claims, apply proceeds only to rectifying the loss, and keep records of every notice. Late notification is a frequent cause of declined claims.

Insurance and the defects and warranty period

The insurance programme must also cover the period after completion. Under FIDIC Sub-Clause 18.2, the works policy is maintained until the Performance Certificate for loss caused by events before taking-over and for damage during defects work. In Vietnamese law, Article 20(2) of Decree 210 deals separately with warranty and the security for it, and the detailed warranty rules sit in other decrees. Our article on construction warranty and defects liability in Vietnam explains how those obligations interact with the insurance cover.

The aim is to avoid a hidden gap, for example a policy that expires at taking-over while the contractor still carries liability during the defects period.

Claims on the ground: a hypothetical illustration

Consider a hypothetical (ví dụ minh họa) mid-rise project in a coastal province. A storm damages temporary works and a partly completed façade, and floodwater enters the basement. The contractor notifies the insurer late, because the site team assumed the broker would do it. The insurer also points to a deductible for natural catastrophe losses and an exclusion for the defective part of the works.

The employer, meanwhile, asks whether the loss falls within its own risks under the contract, and whether time and money are due. The answers depend on three documents read together: the contract’s risk allocation, the policy wording and the lender’s insurance covenant. If the Particular Conditions did not state the deductible amount, or if the policy was not in joint names, each party may argue that the other bears the loss.

The practical lessons are simple. Name a single claims coordinator, set notice periods in the contract that match the policy conditions, record the event with photographs and dated logs, and keep the insurer informed of any material change to the works, as Sub-Clause 18.1 requires.

Checklist before financial close

A short pre-closing review of construction insurance Vietnam documents usually repays the effort many times over.

1. Confirm the compulsory insurances for the project and the responsible party under the current Vietnamese rules.
2. Map each FIDIC or contract insurance obligation to a named policy, insurer, limit and deductible.
3. Check that third-party limits are stated in the Particular Conditions, so Sub-Clause 18.3 applies.
4. Agree joint-name, loss-payee and assignment arrangements with the lenders.
5. Align policy periods with the contract programme, including extension of time and the defects period.
6. Obtain broker’s certificates and policy copies within the periods the contract requires.

How Construction Insurance Vietnam Applies Across Project Types: Infrastructure, Industry, Energy and Real Estate

Insurable risks change sharply with the asset, so a standard programme should be tailored by sector.

Infrastructure and transport

Expressways, ports, metro lines, high-speed rail stations and airport terminals are often State-owned or PPP, so the public investment rules often apply; the classification depends on the funding source of each project. Major programmes such as the North–South high-speed railway (about 1,541 km from Hanoi to Ho Chi Minh City) and the Long Thành International Airport phase 1 terminal (commercial operation expected from 24 December 2026, per press reports) involve tunnelling, bridges, systems installation and heavy third-party exposure, so third-party liability limits and the interface between civil and systems policies deserve attention.

Heavy industry and factories

Steel, petrochemical and cement plants carry fire, explosion and commissioning risks. For construction insurance Vietnam purposes, delay in start-up cover and testing-period extensions matter because lenders tie debt service to the operation date.

Renewable energy and power

Solar, wind (including offshore), grid and gas-to-power projects face weather, marine and equipment transport perils. The answer is fact-specific: the insured, loss payee and business-interruption cover must follow the ownership, financing and offtake structure. Offshore works need marine cargo and vessel-related cover that a land-based form may exclude.

Real estate and mixed-use

Hotels, resorts, urban areas and mixed-use complexes concentrate third-party and neighbouring-property risk, and sales or opening dates make delay cover valuable. Insurance usually follows the parties’ agreement and the statutory minimum, rather than a public-sector template.

Sector	Typical contract or risk feature	What to check
Expressway, rail station, airport terminal	Public or PPP elements likely; large third-party exposure	Liability limits; interface between civil and systems policies
Steel, petrochemical, cement, factory	Private; fire and commissioning risk	Delay in start-up cover; testing-period extension
Solar, wind, grid, gas-to-power	Fact-specific; marine and weather perils	Offshore and transit cover; loss payee
Hotel, resort, urban area	Private; neighbouring-property and sales risk	Third-party cover; delay and handover dates

These examples are illustrative only. Whatever the sector, the policy wording, not the sector label, decides whether the loss is paid.

Conclusion

A sound approach to construction insurance in Vietnam treats the statute as the floor, the contract as the allocation tool and the policy wording as the final test. Foreign contractors must also meet Decree 212 duties, and FIDIC clause 18 is useful only if the Particular Conditions fill its blanks.

Your practical next step on construction insurance Vietnam exposure is to list every insurance obligation in your contract beside the policy that satisfies it. Any obligation without a matching policy, limit or named beneficiary is a gap to close before work or drawdown proceeds.

Frequently Asked Questions

Is construction insurance mandatory in Vietnam?

Some insurances are compulsory under the Law on Construction and its implementing decree. Confirm the current list and responsible party for each project.

Who must buy the insurance?

Decree 210 leaves allocation to the contract. FIDIC 1999 has an “insuring Party” for each cover, usually the contractor for works and liability policies.

What must foreign contractors insure?

Under Decree 212 Article 48: professional liability for consulting, property and goods cover for procurement, and construction insurances for works.

Does FIDIC require third-party cover?

Sub-Clause 18.3 requires it only if the Particular Conditions state a limit per occurrence; otherwise the sub-clause does not apply.

Do lenders require special terms?

Typically yes: joint insured or loss-payee status, security assignment and delay-in-start-up cover, per the finance documents.

Disclaimer: this article provides general information, not legal advice for a specific matter. It reflects the law as of 22 October 2026. Statements of market practice are general and vary by project.