Insurance companies are governed by the companies Act 1985. In addition, they are affected by the Insurance Companies Act 1982.
Part I of the Insurance Companies Act 1982 imposes restrictions on the carrying on of certain classes of insurance business. Part II, which applies to all insurance companies whether established within or outside the United Kingdom carrying on insurance business in the United Kingdom, regulates insurance companies with regard to e g accounts, transfer of long term business, insolvency and winding up, and gives wide powers of intervention to the Secretary of State. Part III concerns the conduct of insurance business. Part IV deals with special classes of insurers. Supplementary provisions are contained in part V.
RESTRICTION ON CARRYING ON INSURANCE BUSINESS
1. Preliminary
Classification
For the purpose of the Insurance Companies Act 1982 insurance business is divided into:
a. ‘long term business i e insurance business of any of the classes specified in Schedule I to the Act of 1982; and
b. ‘general business’ i e insurance business of any of the classes specified in Part I of the Schedule 2 to that Act.
The effecting and carrying out of a contract whose principal object is within one class of insurance but which contains related and subsidiary provisions within another class or classes is taken to constitute the carrying on of insurance business of the first-mentioned class and no other if:
i the contract is one whose principal object is within any class of long term business but which contains subsidiary provisions relating to accident and sickness insurance if the insurer is authorized to carry on life and annuity insurance business; or
ii the contract is one whose principal object is within one of the classes of general business but which contains subsidiary provisions within another of those classes, not being credit or suretyship insurance business.
Restriction on carrying on insurance business
No person can carry on insurance business in the United Kingdom unless authorized to do so.
But this rule does not apply to:
i insurance business (other than industrial assurance business) carried on :
a. by a member of Lloyd; or
b. by a body registered under the enactments relating to friendly societies; or
c. by a trade union or employers’ association where the insurance business carried on by the union or association is limited to the provision for its members of provident benefits or strike benefits.
ii to industrial assurance business carried on by a friendly society registered under the enactments relating to such societies.
iii credit, suretyship, miscellaneous financial loss and legal expenses insurance if it is carried on solely in the course of carrying on, and for the purpose of, banking business.
iv general business consisting in the effecting and carrying out, by an insurance company that carries on no other insurance business, of contracts of such descriptions as may be prescribed by the insurer are exclusively or primarily benefits in kind.
Where authorization is required but not obtained, an innocent insured to whom a policy has been issued is entitled to enforce it. Whether it can be enforced by the insurer is unsettled.
2. Authorised insurance companies
Authorisation by Secretary of State
The Secretary of State may authorize a body to carry on in the United Kingdom such of the classes of insurance business specified in Schedules 1 or 2 to the Insurance Companies Act 1982, or such parts of those classes, as may be specified in the authorization.
An authorization may be restricted to industrial assurance business or to reinsurance business. A body may not carry on industrial assurance business unless the authorization expressly extends to such business.
An authorization may identify classes or parts of general business by referring to the appropriate groups specified in Part II of Schedule 2 to the Insurance Companies Act 1982.
On the issue to a body of an authorization under the above provisions, any previous authorization of that body lapses.
Existing insurance companies
A body which was immediately before 1 January 1982 auhorised to carry on in the United Kingdom insurance business of a class specified in Schedules 1 or 2 to the Insurance Companies Act 1981 (or part of such class) is authorized to carry on there business of the corresponding class specified in Schedules 1 or 2 to the Insurance Companies Act 1982 (or that part of such class).
A body may not carry on industrial assurance business unless:
i it was carrying on such business immediately before 1 January 1982; or
ii it was immediately before 28 January 1982 authorised to carry on such business under the Insurance Companies Act 1981, s 3.
3. Application for authorization
Submission of proposals
a the applicant has submitted to him such proposals as to the manner in which it proposes to carry on business, such financial forecasts and such other information as may be required on in accordance with regulations under the Insurance Companies Act 1982 and
b he is satisfied on the basis of that and any other information received by him that the application ought to be granted.
He must decide an application for an authorization within 6 months of receiving the information referred to above. If he refuses to issue the authorization he must inform the applicant in writing of the reasons for the refusal.
Combination of long term and general business
The Secretary of State must not authorize a body to carry both long term business and general business unless;
a. the long term insurance business is restricted to reinsurance; or
b. the body is at the time the authoriasation is issued lawfully carrying on in the United Kingdom both long term business and general business (in neither case restricted to reinsurance).
United Kingdom applicants
The Secretary of State must not issue an authorization to an applicant whose head office is in United Kingdom unless the applicant is :
a a company; or
b a registered society; or
c a body corporate established by royal charter or Act of parliament and already authorized to carry on insurance business (though not to the extent proposed in the application)
He must not issue an authorization to an applicant whose head office is in the United Kingdom if it has an issued share capital any part of which was issued after 28 january 1983 but is not fully paid up.
He must not issue an authorization to an applicant whose head office is in the United Kingdom if it appears to him that any director, controller, manager or main agent of the applicant is not a fit and proper person to hold the position held by him.
Applicants from other member States of the European Communities
The Secretary of State must not issue an authorization to an applicant whose head office is in a member State other than the United Kingdom unless the applicant has a representative who:
i is a person resident in the United Kingdom who has been designated as the applicant’s representative; and
ii is authorised to act generally and to accept service of any document on behalf of the applicant; and
iii is not an auditor, or a partner or employee of an auditor, of the accounts of any business carried on by the applicant.
The Secretary of State must not issue an authorization to an applicant whose head office is in a member State other than the United Kingdom if it appears to the Secretary of State that any relevant executive or main agent of the applicant is not a fit and proper person to hold the position held by him.
Where an applicant whose head office is in a member State other than the United Kingdom seeks an authorization restricted to reinsurance business:
a the Secretary of State must not issue the authorization unless he is satisfied that the applicant is a body corporate entitled under the law of that State to carry on insurance business there; and
b he must not issue the authorization if it appears to him that any person who is a direct, controller or manager or a person within the Insurance Companies Act 1981, s 8(4)(a) or (b), or main agent of the applicant is not a fit and proper person to hold the position held by him.
Applicants from outside the Community
The Secretary of State must not issue an authorization in repect of long term or general business to an applicant whose head office is not in a member State unless he is satisfied:
a that the applicant is the body corporate entitled, under the law of the place where its head office is, to carry on long term or, the case may be, general business there;
b that the applicant has in the United Kingdom assets of such value as may be prescribed; and
c that the applicant has made a deposit of such amount and with such person as may be prescribed.
Where the applicant seeks to carry to the business in the United Kingdom one or more other member States, and the Secretary of State and the supervisory authority in the other State or States agree, the Secretary of State must not issue an authorization in respect of long term or general business unless he is satisfied:
i that the applicant has in the member States concerned taken together assets of such value as may be prescribed; and
ii that the applicant has made a deposit of such amount and with such person as may be agreed between the Secretary of State and the other supervisory authority or authorities concerned.
The Secretary of State must not issue an authorization to an applicant whose head office is not in a member State unless the applicant has a representative who:
i is a person resident in the United Kingdom who has been designated as the applicant’s representative; and
ii is authorized to act generally, and to accept service of any document, on behalf of the applicant; and
iii is not an auditor, or a partner or employee of an auditor, of the accounts of any business carried on by the applicant.
The Secretary of State must not issue an authorization to an applicant whose head office is not in a member State if it appears to him that:
a the representative of the applicant or the individual representative, or
b any director, controller or manager of the applicant, or
c a main agent of the applicant is not a fit and proper person to hold the position held by him.
Regulations may make such provision as to deposits as appears to the Secretary of State to be necessary or expedient, including provision for the deposit of securities instead of money, and in relation to deposits with the Accountant General of the Supreme Court, provision applying (with or without modification) any of the provisions of the rules for the time being in force under the Administration of Justice Act 1982, s 38(7).
4 Withdrawal of authorization
Withdrawal in respect of new business
The Secretary of State may, at the request of the company or on the ground:
i that it appears to him that the company has failed to satisfy an obligation to which it is subject by virtue of the Insurance Companies Act 1982: or
ii that there exists a ground on which he would be prohibited from issuing an authorization to the company; or
iii that the company has ceased to be authorized to effect contracts of insurance, or contracts of a particular description, in a member State where it has its head office or where it has made a deposit, direct that an insurance company authorized to carry on business shall cease to be authorized to effect contracts of ay description specified in the direction.
After giving a direction otherwise than at the request of the company concerned the Secretary of State must inform the company in writing of his reasons for giving the direction.
A direction does not prevent a company from effecting a contract of insurance pursuance of a term of a subsisting contract of insurance.
Where a direction has been given in respect of a company which has its head office, or has made a deposit, in a member State other than the United Kingdom, the Secretary of State may revoke or vary the direction if after consultation with the supervisory authority in that member State he considers it appropriate to do so.
Except in the above case a direction of any insurance company may not be revoked or varied. But if the Secretary of State subsequently issues to the company an authorization to carry on insurance business of a class to which the direction relates, the direction ceases to have effect in relation to such business.
Notices of withdrawal
Before giving a direction otherwise than at the request of the company concerned the Secretary of State must serve on the company a written notice stating:
i that he is considering giving a direction and the ground on which he is considering it; and
ii that the company may, within the period of 1 month from the date of service of the notice make written representations to him and, if the company so requests, oral representations to an officer of the Department of Trade appointed for the purpose by him.
Before giving a direction in respect of a company on the ground that he would be prohibited by the Insurance Companies Act 1982, s 7(3), s8(2) or s 9(5) from issuing an authorization to the company the Secretary of State must serve on the person whose fitness is in question a written notice stating:
i that he is considering giving a direction on that ground; and
ii that the person on whom the notice is served may, within the period of 1 month from the date of the service of the notice, make written representations to him and, if that person so requests, oral representations to an officer to the Department of Trade appointed for the purpose by the Secretary of State.
Expect where the person whose fitness for the position concerned is in question is controller, the Secretary of State must consider any representations made in response to a notice under s 12 (2) before serving a notice under s 12(1).
A notice under s 12(1) or s 12(2) must give particulars of the ground on which the Secretary of State is considering giving a direction.
Where representations are made in response to a notice, the Secretary of State must take them into consideration before giving a direction.
Any notice to be served on a person may be served by post, and letter containing the notice is deemed to be properly addressed if it is addressed to that person at his last known residence or last known place of business in the United Kingdom.
After giving a direction the Secretary of State must publish notice of it in the London Gazette and in such other ways as appear to him to be expedient for notifying the public.
Final withdrawal of authorization
Where an insurance company ceases to carry on in the United Kingdom any insurance business, or insurance business of any class, the Secretary of State may direct that it shall cease to be authorized to carry on insurance business, or insurance business of that class.
If a body authorized to carry on insurance business of any class has not at any time carried on business of that class, and at least 12 months have elapsed since the issue of the authorization, the Secretary of State may direct that it shall cease to be authorized to carry on business of that class.
A direction is without prejudice to the subsequent issue of an authorization to carry on business of a class to which the direction relates.
5 Offences
A person who carries on business in contravention of Part I of the Insurance Companies Act 1982 is guilty of an offence.
A person who for the purpose of obtaining the issue of an authorization furnishes information which he knows to be false in a material particular or recklessly furnishes information which is false in a particular is guilty of an offence.
A person guilty of an offence is liable:
i on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or to both;
ii on summary conviction, to a fine not exceeding £1,000, or if it is greater, the prescribed sum within the meaning of the Magistrates’ Courts Act 1980, s 32.
REGULATION OF INSURANCE COMPANIES
In general, Part II of the insurance companies Act 1982 applies to all insurance companies, whether established within or outside the United Kingdom, which carry on business within the United Kingdom.
But part II does not apply to:
i any insurance company which is registered under the Acts relating to friendly societies,
ii a trade union or an employers association carrying on insurance business if the insurance business is limited to the provision for its members of provident benefits or strike benefits;
iii a member of Lloyd’s who carries on business of any class provided that he complies with the requirements set out in the Insurance Companies Act 1982, s 83 and applicable to business of that class;
iv a person by reason only that he carries on general business of class 14, 15, 16 or 17 in the course of carrying on, and for the purpose of, banking business;
v an insurance company whose insurance business restricted to general business consisting in the effecting and carrying out of contracts of such descriptions as may be prescribed, being contracts under which the benefits provided by the insurer are exclusively or primarily benefits in kind.
Part II contains provisions relating to:
a. restriction of business to insurance;
b. accounts and statements;
c. assets and liabilities attributable to long term business;
d. financial resources;
e. liabilities of unlimited amount;
f. powers of interventions;
g. transfers of long term business;
h. transfers of general business;
i. insolvency and winding up
j. changes of director, controller or manager;
k. change of main agent; and
l. Miscellaneous matters.
A restriction of business to insurance
An insurance company to which Part II of the Insurance Companies Act 1982 applies must not carry on any activities, in the United Kingdom or elsewhere, otherwise than in connection with or for the purpose of its insurance business.
B Accounts and statements
1 Annual accounts and balance sheets
Every insurance company to which Part II of the Insurance Companies Act 1982 applies must, with respect to each financial year of the company, prepare a revenue account for the year, a balance sheet as at the end of the year and a profit and loss account for the year or, in the case of a company not trading for profit, an income and expenditure account for the year.
The contents of the documents are such as may be prescribed, but regulations may provide for enabling information required to be given by such documents to be given instead in a note thereon or statement or report annexed thereto or may require there to be given in such a note, statement or report such information in addition to that given in the documents as may be prescribed.
Regulations may, as respects such matters stated in such documents or in statements or reports annexed thereto as may be prescribed, require there to be given by such persons as may be prescribed and to be annexed to the documents certificates of such matters as may be prescribed.
If a form is prescribed for any such document or as that in which information authorized or required to be given in a statement or report annexed to any such document is to be given or for a certificate to be so annexed, the document must be prepared, the information must be given or, as the case may be, the certificate must be framed, in that form.
2 Periodic actuarial investigation of company with long term business
Every insurance company to which Part II of the Insurance Companies Act 1982 applies which carries on long term business:
a. must, once in every period of 12 months, cause an investigation to be made into its financial condition in respect of that business by the time being is its actuary; and
b. when such an investigation has been made, or when at any other time an investigation into the financial condition of the company in respect of its long term business has been made with a view to the distribution of profits, or the results of which are made public, must cause an abstract of the actuary’s report of the investigation to be made.
For the purposes of any investigation the value of any assets and the amount of any liabilities must be determined in accordance with ay applicable valuation regulations.
The regulations may provide that for any specified purpose, assets or liabilities of any specified class or description must be left out of account or must be taken into account as only to a specified extend. They may make different provision in relation to different cases or circumstances.
The form and contents of any abstract or statement are such as may be prescribed.
3 Appointment of actuary by company with long term business
Every company to which Part II of the Insurance Companies Act 1982 applies must within one month of beginning to carry on long term business appoint an actuary as actuary to the company. When the actuary’s appointment comes to an end, the company must as soon as practicable make a fresh appointment.
A company must within 14 days of appointing an actuary serve on the Secretary of State a written notice stating that it has done so and giving the name and qualifications of the person appointed. If an appointment comes to an end, the company must within 14 days serve on the Secretary of State a written notice stating that fact and the name of the person concerned.
4 Annual statements
Classes of insurance business may be prescribed and every insurance company to which Part II of the Insurance Companies Act 1982 applies which carries on such business of a prescribed class must annually prepare prescribed statement of business of that class. If a form is prescribed for the statement, the statement must
be in that form.
5 Audit of accounts
The accounts and balance sheets of every insurance company to which Part II of the Insurance Companies Act 1982 applies must be audited in the prescribed manner by a person of the prescribed description. Regulations may apply to such companies the provisions of the Companies Act 1985 relating to audit, subject to such adaptations and modifications as may appear necessary or expedient.
6 Deposit of accounts with Secretary of State
Every account, balance sheet, abstract or statement, and any report of the auditor of the company must be printed. Five copies must be deposited with the Secretary of State within six months after the close of the period to which the account, balance sheet, abstract, statement or report relates.
But if in any case it is made to appear to the Secretary of State that a longer period not exceeding three months as he thinks fit.
At the same time as the accounts, balance sheet, abstract or statement are deposited, there must also be deposited with the Secretary of State five printed copies of a statement of the names and connection with the company of any persons who, during the period to which those documents relate:
a were authorizes by the company to issue, or to the knowledge of the company have issued, any invitation to another person to make an offer or proposal or to take any other step with a view to entering into a contract of insurance with the company; and
b were connected with the company as provided by regulations.
One of the copies of any document which is deposited except an auditor’s report must be a copy signed by such persons as may be prescribed.
One of the copies of an auditor’s report must be a copy signed by him. The Secretary of State must consider the documents deposited with him, and if any document appears to him to be inaccurate or incomplete, he must communicate with the company with a view to the correction of any such inaccuracies and the supply of deficiencies.
With every revenue account and balance sheet of a company there must be deposited any report on the affairs of the company submitted to the shareholders or policy holders in respect of the financial year to which the account and balance sheet relate.
Any person who causes or permits to be included in any document copies of which are required to be deposited with the Secretary of State a statement which he knows to be false in a material particular or recklessly causes or permits to be so included any statement which is false in a material particular, is guilty of an offence.
7 Right of shareholders and policy holders to receive copies of deposited documents
An insurance company must forward by post or otherwise to any shareholder or policy holder who applies for one:
a a printed copy of any account, balance sheet, abstract or statement, and of any report of the auditor of the company;
b a copy of any document supplied to the Secretary of State where it appears to him that the document originally submitted is in accurate or incomplete;
c a copy of any report on the affairs of the company submitted to the shareholders or policy holders in respect of the financial year to which the account and balance sheet relate.
If, in the opinion of the Secretary of State, the disclosure of information contained in:
a. a statement or report annexed to a revenue account, a balance sheet and profit and loss account (or, in the case of a company not trading for profit, an income and expenditure account); or
b. a statement by a company in connection with a prescribed class of business;
would be harmful to the business of the company or of any of its subsidiaries, the Secretary of State may dispense the company from complying with its obligation to forward a copy of the document containing the information to a shareholder or policy holder who applies for it.
8 Periodic statements by company with prescribed class of business
Every insurance company to which part II of the Insurance Companies Act 1982 applies which carries on business of a prescribed class or description must prepare at such intervals and for such periods as may be prescribed, a statement of its business of that class or description,
The form and contents must be such as may be prescribed. Regulations may, as respects such matters contained in a statement as may be prescribed, require there to be given by such persons as may be prescribed and to be annexed to the statement certificates of such matters and in such form as may be prescribes.
Five copies of any statement together with any certificate, where required, must be deposited by the company with the Secretary of State within such period as may be prescribed. One of the copies must be a copy signed:
i where there are more than two directors of the company, but at least two of those directors and where there are not more than two directors, by all the directors;
ii. by the chief executive, if any, of the company, or (if there is no chief executive) by the secretary.
The whole or any part of any document deposited may be deposited by the Secretary of State with the Registrar of companies, and may be published by the Secretary of State in such ways as he thinks appropriate.
Any person who causes or permits to be included in any document deposited with the Secretary of State a statement which he knows to be false in a material particular or recklessly causes or permits to be so included any statement which is false in a material particular, is guilty of an offence.
9 Statements of transactions of prescribed class or description
Classes or descriptions of agreements or arrangements appearing to the Secretary of State as likely to be undesirable in the interests of policy holders may be prescribed, and every insurance company to which Part II of the Insurance Companies Act 1982 applies or any ‘subordinate company’ of any such company which enters into an agreement or arrangement of a class or description so prescribed must, within such period as may be prescribed, furnish the Secretary of State with a statement containing such particulars of that agreement or arrangement as may be prescribed.
Different classes or descriptions of agreements or arrangements may be prescribed in relation to companies of different classes or descriptions.
The whole or any part of any statement furnished to the Secretary of State may be deposited by him with the Registrar of Companies and may be published by the Secretary of State in such ways as he thinks appropriate.
Any person who causes or permits to be included in any statement which he knows to be false in a material particular or recklessly causes or permits to be so included any statement which is false in a material particular, is guilty of an offence.
10 Companies from outside the Community
An insurance company to which Part II of the Insurance Companies Act 1982 applies whose head office is not in a member State must keep in the United Kingdom proper accounts and records in respect of insurance business carried on in the United Kingdom.
C Assets and liabilities attributable to long term business
1. Separation of assets and liabilities
Where an insurance company to which part II of the Insurance Companies Act 1982 applies carries on ordinary long term insurance business or industrial assurance business or both of those kinds of insurance business.
a. the company must maintain an account in respect of that business or, as the case may be, each of those kinds of insurance business.
b. the receipts of that business or, as the case may be, of each of those kinds of business must be entered in the account maintained for that business, and must be carried to and form a separate insurance fund with an appropriate name.
An insurance company to which Part II of Insurance Companies Act 1982 applies, which carries on ordinary long term insurance business or industrial assurance business or both of those kinds of business must maintain such accounting and other records as are necessary for indetifying.
a. the assets representing the fund or funds maintained by the company but without necessarily distinguishing between the funds if more than one ; and
b. the liabilities attributable to that business or, as the case may be, each of those kinds of business.
2 Application of assets of company with long term business
In general, the assets representing the fund or funds maintained by an insurance company in respect of its long term business:
a are applicable only for the purposes of that business; and
b must not be transferred so as to be available for other purposes of the company expect where the transfer constitutes reimbursement of expenditure borne by other assets (in the same or the last preceding financial year) in discharging liabilities wholly or partially attributable or long term business.
But where the value of such assets is shown by the periodic actuarial investigations of a company or by an investigation of a company or by an investigation made in pursuance of a requirement of an actuarial investigation required by the Secretary of State, to exceed the amount of the liabilities attributable to the company’s long term business, so much of the assets as represents the excess need not be applied for the purposes of its long term business.
Again nothing precludes an insurance company from exchanging, at fair market value, assets representing a fund maintained by the company in respect of its long term business for other assets of the company.
Any mortgage or change (including a charge imposed by a court on the application of a judgment creditor) is void to the extent that it contravenes the rule that the assets representing the fund or funds maintained in respect of the company’s long term business are applicable only for the purposes of that business.
Money from a fund maintained by a company in respect of its long term business must not be used for the purposes of any other business of the company notwithstanding any arrangement for its subsequent repayment out of receipts of that other business.
No insurance company to which part II of the Insurance Companies Act 1982 applies, and no company of which any such insurance company is a subsidiary, must declare a dividend at any time when the value of the assets representing the fund or funds maintained by the insurance company in respect of its long term business, as determined in accordance with any applicable valuation regulations, is less than the amount of the liabilities attributable to that business as so determined.
3 Allocations to policy holders
Where in the case of an insurance company to which Part II of the insurance Companies Act 1982 applies:
a there is an established surplus in which long term policy holders of any category are eligible to participate, and
b an amount has been allocated to policy holders of that category in respect of a previously established surplus in which policy holders of that category were eligible to participate.
the company cannot transfer to otherwise apply assets representing any part of the surplus unless the company has either allocated to policy holders of that category in respect of that surplus an amount not less than the relevant minimum or complied with the ‘requirements’ mentioned below and made to those policy holders any allocation of which notice is given.
The ‘requirements’ are that the company:
a has served on the Secretary of State a written notice that is purposes to make no allocation or an allocation of a specified amount which is smaller than the relevant minimum; and
b has published a statement approved by the Secretary of State in the London Gazette and in such other ways as he may have directed.
and that a period of not less than 56 days has elapsed since the date, or the last date, on which the company has published the statement mentioned above.
4 Restrictions on transactions with connected persons
Neither an insurance company to which part II of the Insurance Companies Act 1982 applies which carries on long term business nor a subordinate company must enter into certain transactions mentioned below:
a at a time when the aggregate to the value of the assets and the amount of the liabilities attributable to such transactions already entered into by the insurance company and its subordinate companies exceeds the prescribed company’s long term funds; or
b at any other time when the aggregate of the value of those assets and the amount of those liabilities would exceed that percentage if the transaction were entered into.
The transaction referred to above into which the insurance company (whether or not itself a subordinate company) must not enter are those in which:
a person connected with the insurance company will owe it money; or
b the insurance company acquires shares in a company which is a person connected with it; or
c the insurance company undertakes a liability to meet an obligation of a person connected with it or to help such a person to meet an obligation, if the right to receive the money would constitute a long term asset of the insurance company, the acquisition is made out of its long term funds or the liability would fall to be discharged out of those funds, as the case may be.
The transactions referred to above into which a subordinate company of any insurance company must not enter are where:
a the insurance company or a person connected with it will owe money to the subordinate company (not being money owed by the insurance company which can properly be paid out of its long term funds); or
b the subordinate company acquires shares in the insurance company or in a company which is a person connected with the insurance company; or
c the subordinate company undertakes a liability to meet an obligation of the insurance company or of a person connected with that company or to help the insurance company or such a person to meet an obligation.
A person is ‘connected with’ an insurance company if that person is not a subordinate company of the insurance company but:
a controls, or is a partner of a person who controls, the insurance company; or
b being a company, is controlled by the insurance company or by another person who also controls the insurance company; or
c is a director of the insurance company or the wife or husband or a minor son or daughter of such a director.
The value of any assets and the amount of any liabilities must be determined in accordance with any applicable valuation regulations.
Non-compliance by the company or subordinate company company with any of the above provisions does not make any transaction unenforceable as between the parties to it or make unenforceable any rights or liabilities in respect of property.
D Financial resources
Margins of Solvency
Every insurance company to which Part II of the Insurance Companies Act 1982 applies:
a whose head office is in the United Kingdom; or
b whose business is in the United Kingdom is restricted to reinsurance, must maintain a margin of solvency of such amount as may be prescribed by or determined in accordance with regulations.
Every insurance company to which Part II of the Insurance Companies Act 1982 applies whose head office is not in a member State must maintain:
a a margin of solvency, and
b a United Kingdom margin of solvency, of such amounts s may be prescribed by or determined in accordance with regulations made for the purpose.
An insurance company which has made a deposit in the United Kingdom must maintain:
a a margin of solvency, and
b a Community margin of solvency, of such amounts as may be prescribed by or determined in accordance with regulations made for the purpose.
An insurance company which fails to comply with the above provisions:
a must, at the request of the Secretary of State, submit to him a plan for the restoration of a sound financial position;
b must purpose modifications to the plan (or the plan as previously modified) if he considers it inadequate;
c must give effect to any plan accepted by him as adequate.
In the case of an insurance company which carries on both long term and general business it must maintain a separate margin of solvency, a separate United Kingdom margin of solvency and a Community margin of solvency in respect of the two kinds of business.
Failure to maintain minimum margin
If the margin of insolvency, the United Kingdom margin of solvency or the Community margin of solvency falls below such amount as may be prescribed by or determined in accordance with regulations made for the purpose, the company must at the request of the Secretary of State submit to him short-term financial scheme.
An insurance company which has submitted a scheme to the Secretary of State must purpose modifications to the scheme (or the scheme as previously modified) if he considers it inadequate, and must give effect to ay scheme accepted by him as adequate.
Companies supervised in other member States
An insurance company to which Part II of the Insurance Companies Act 1982 applies:
a whose head office is in a member State other than the United Kingdom, or
b which has made a deposit in such a member State
must secure that the value of the assets of the business carried on by it in the United Kingdom does not fall below the amount of the liabilities of that business, that value and amount being determined in accordance with any applicable valuation regulations.
Form and situation of assets
Regulations may make provision for securing that, in such circumstances and to such extent as may be prescribed, the assets of an insurance company to which Part II of the Insurance Companies Act 1982 applies must be maintained in such places as may be prescribed and the nature of the assets must be appropriate in relation to the currency in which the liabilities of the company are or may be required to be met.
Regulations made for the purposes specified above do not have effect in relation to the assets of an insurance company whose head office is in a member State so far as their value exceeds the amount of the liabilities of the business carried on by the company in the United Kingdom that value being determined in accordance with any applicable valuation regulations.
E Liabilities of unlimited amount
A contract entered into by an insurance company to which Part II of the Insurance Companies Act 1982 applies is void if:
a it is a contract under which the company undertakes a liability, the amount, or the maximum amount, of which is uncertain at the time when the contract is entered into; and
b it is not a contract of insurance or a contract of a class or description exempted by regulations to be made for the purpose.
F Powers of intervention
The Secretary of State has power to impose the following requirements in relation to an insurance company to which part II of the Insurance Companies Act 1982 applies.
a requirements about investments;
b maintenance of assets in the United Kingdom;
c custody of assets;
d limitation of premium income;
e actuarial investigations;
f acceleration of information required by accounting provisions’
g information and production of documents;
h protection of policy holders.
1 Grounds on which powers are exercisable
Any of the above powers are exercisable in relation to any insurance company to which Part II of the Insurance Companies Act 1982 applies on the following grounds:
a that the Secretary of State considers the exercise of the power to be desirable for protecting policy holders or potential policy holders of the company against the risk that the company may be unable to meet its liabilities or, in the case of long term business to fulfil the reasonable expectations of policy holders or potential policy holders; or
b that it appears to him:
i that the company has failed to satisfy an obligation to which it is subject by virtue of the Act;
ii that a company of which it is a subsidiary has failed to satisfy an obligation not to declare a dividend in certain circumstances ; or
iii that a subordinate company has failed to satisfy an obligation not to declare a dividend in certain circumstances or an obligation to furnish the Secretary of State with a statement concerning particulars of transactions of a prescribed class or description;
c that it appears to him that the company has furnished misleading or inaccurate information to him or for the purposes of any provision of the Act;
d that he is not satisfied that adequate arrangements are in force or will be made for the reinsurance of risks against which persons are insured by the company in the course of carrying on business, being risks of a class in the case of which he considers that such arrangements are required;
e that there exists a ground on which he would be prohibited from issuing an authorization with respect to the company if it were applied for;
f that it appears to him that there has been a substantial departure from any proposal submitted to him by the company in accordance with s 5.
g that the company has ceased to be authorized to effect contracts of insurance, or contracts of a particular description, in a member State where it has its head office or has made a deposit.
The powers conferred on the Secretary of State in relation to the maintenance of assets in the United Kingdom and the custody of assets are not exercisable in relation to an insurance company expect.
a where th e Secretary of State has given (and not revoked) a direction in respect of the company under s 11; or
b on the ground that it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is subject by virtue of ss 33 34 or 35; or
c on the ground that a submission by the company to the Secretary of State of an account or statement specifies as the amount of any liabilities of the company, an amount appearing to the Secretary of State to have been determined otherwise than in accordance with valuation regulations or, where no such regulations are applicable, generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies.
The power conferred on the Secretary of State to require the production of documents is also exercisable on the ground that he considers the exercise of that power to be desirable in the general interests of persons who are or may become policy holders of insurance companies to which Part II of the Insurance Companies Act applies.
Any power relating to:
i requirements about investments;
ii limitation of premium income;
iii actuarial investigations;
iv obtaining of information;
v protection of policy holders;
is also exercisable in relation to:
a any body in respect of which the Secretary of State has issued an authorization;
b any insurance company to which Part II of the Insurance Companies Act applies in the case of which a person has become a controller, if that power is exercised before the expiration of the period of 5 years beginning with the date on which the authorization was issued or that person become such a controller.
The power to impose requirements for the protection of policy holders is not exercisable in a case in which he considers that such protection cannot be appropriately achieved by the exercise of his other powers of intervention or by the exercise of those powers alone.
The Secretary of State must, when exercising any of his powers of intervention, state the ground on which he is exercising it.
(a) Requirements about investments
The Secretary of State may require a company:
a not to make investments of a specified class or description;
b to realize, before the expiration of a specified period (or such longer period as the Secretary of State may allow), the whole or a specified proportion of investments of a specified class or description held by the company when the requirement is imposed.
A requirement imposed by the secretary of State may be framed so as to apply only to investments which are (or, if made would be) assets representing a fund or funds maintained by the company in respect of its long term business or so as to apply only to other investments.
A requirement does not apply to the assets of a company so far as their value exceeds:
a in the case of a company whose head office is in a member State other than the United Kingdom or which has made a deposit in such a member State, the amount of the liabilities of the business carried on by the company in the United Kingdom;
b in any other case, the amount of the liabilities of the company;
that value and amount being determined in accordance with any applicable valuation regulations.
(b) Maintenance of assets in the United Kingdom
The Secretary of State may require that assets of a company of a value which at any time is equal to the whole or a specified proportion of the amount of its domestic liabilities must be maintained in the United Kingdom.
He may direct that for the purposes of any such requirement assets of a specified class or description must or must not be treated as assets maintained in the United Kingdom.
He may also direct that the domestic liabilities of a company, or such liabilities of any class or description, must be taken to be the net liabilities after deducting any part of them which is reinsured.
A requirement may be framed so as to come into effect immediately after the date on which it is imposed or so as to come into effect after the expiration of a specified period (or such longer period as the Secretary of State may allow).
In computing the amount of any liabilities all contingent and prospective liabilities must be taken into account, but not liabilities in respect of share capital.
The value of any assets and the amount of ay liabilities are to be determined in accordance with any applicable valuation regulations.
(c) Custody of assets
The Secretary of State may, in the case of a company on which a requirement to maintain assets of value equal to the whole or a specified proportion of the amount of its domestic liabilities in the United Kingdom has been imposed, impose an additional requirements that the whole or a specified proportion of the assets must be held by a person approved by him for the purposes of the requirement as trustee for the company.
Such a requirement may be framed so as to come into effect immediately after the day on which it is imposed or so as to come into effect after the expiration of a specified period (or such longer period as the Secretary of State may allow).
Assets of a company held by a person as trustee for a company are to be taken to be held by him in compliance with a requirement if, and only if, they are assets in whose case the company has given him written notice that they are to be held by him in compliance with such a requirement or they are assets into which assets in whose case the company has given him such written notice have, by any transaction or series of transactions, been transposed by him on the instructions of the company.
No assets held by a person as trustee for a company in compliance with a requirement must, so long as the requirement is in force, be released expect with the consent of the Secretary of State.
If a mortgage or charge is created by a company at a time where there is in force a requirement imposed on the company, being a mortgage or charge conferring a security on any assets which are held by a person as trustee for the company in compliance with the requirement, the mortgage or charge, to the extent that it confers such a security, is void against the liquidator and any creditor of the company.
(d) Limitations of premium income
a to be received by the company in consideration of the undertaking by it during a specified period of liabilities in the course of carrying on general business or any specified part of such business; or
b to be received by it in a specified period in consideration of the undertaking by the company during that period of liabilities in the course of carrying on long term business or any specified part of such business,
does not exceed a specified amount.
Such requirements may apply either to the aggregate premiums to be received or to the aggregate to those premiums after deducting any premiums payable by the company for reinsuring the liabilities in consideration of which the first-mentioned premiums are receivable.
(e) Actuarial investigations
The Secretary of State may require a company which carries on long term business:
a to cause the person who for the time being is its actuary to make an investigation into its financial condition in respect of that business, or any specified part of that business, as at a specified date;
b to cause an abstract of that person’s report of the investigation to be made; and
c to prepare a statement of its long term business or of that part of it as at that date.
For the purposes of ay investigation made in pursuance of such a requirement the value of any assets and the amount of any liabilities must be determined in accordance with valuation regulations.
The form and contents of any abstracts or statement made in pursuance of such a requirement must be the same as for an abstract or statement which is made in connection with the periodic actuarial investigation of the company.
Five copies of any abstract or statement made in pursuance of the requirement must be deposited by the company with the Secretary of State on or before such date as he may specify, and one of the copies must be a copy signed by the accuracy who made the investigation to which the abstract relates or by reference to which the statement was prepared.
Any person who causes or permits to be included in any abstract or abstract deposited with the Secretary of State a statement which he knows to be false in a material particular or recklessly causes or permits to be so included any statement which is false in a material particular is guilty of an offence.
(f) Acceleration of information required by accounting provisions
The Secretary of State may require that the account, balance sheet, abstract or statement by an actuary, and any report of the auditor of the company which are required to be deposited with him within the required period, to be deposited with him on or before a specified date before the end of that period and not earlier than one month after the date on which the requirement is imposed.
The Secretary of State may require any periodic statement by a company with the prescribed class of business required to be deposited with him by a company within a prescribed period to be deposited with him on or before the end of that period.
(g) Power to obtain information and require production of documents
The Secretary of State may require a company to furnish him, at specified times or intervals, with information verified in a specified matters being, if he so requires, information verified in a specified manner.
He may:
a require a company to produce, at such time and place as he may specify, such books or papers as he may specify; or
b authorize any person, on producing (if required so to do) evidence of his authority, to require a company to produce to him forthwith any books or papers which that person may specify.
The Secretary of State or a person auhorised by him has a similar power to require production of those books or papers from any person who appears to him to be in possession of them; but where any person from whom such production is required claims a lien on books or papers produced by him, the production shall be without prejudice to the lien.
The power conferred on the Secretary of State or a person authorized by him the require a company or other person to produce books or papers includes power:
a if the insurance-education or papers are produced:
i to take copies of them or extracts from ; and
ii to require that person, or any other person who is a present or past director, controller or auditor of, or is or was at any time employed by the company in question, to provide an explanation of any of them;
b if the books or papers are not produced, to require the person who was required to produce them to state, to the best of his knowledge and belief, where they are.
A statement made by a person in compliance with a requirement may be used in evidence against him.
Any person who in purported compliance with a requirement furnishes information which he knows to be false in a material particular or recklessly furnishes information which is false in a material particular, is guilty of an offence.
(h) Residual power to impose requirements for protection of policy holders
The Secretary of State may require a company to take such action as appears to him to be appropriate for the purpose of protecting policy holders or potential policy holders of the company against the risk that the company may be unable to meet liabilities or, in the case of long term business, to fulfill the reasonable expectations of policy holders or potential policy holders.
The above power must not be exercised in such a way as to restrict the company’s freedom to dispose of its assets except where it is exercised:
a after the Secretary of State has given a direction under s11;
b on the ground that it appears to him that the company has failed to satisfy an obligation to which it is subject by virtue of ss 33, 34 or 35; or
c where the ground for intervention arises out of the submission to him of an account or statement specifying, as the amount of any liabilities of the company, an amount appearing to him to have been determined otherwise than in accordance with valuation regulations or, where no such regulations are applicable, generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies.
2 Notice of proposed exercise of powers on ground of unfitness of director or manager
Before exercising with respect to a company any of his powers of invention on the ground that he would be prohibited from issuing an authorization to the company because of the unfitness of a person for the position held by him (not being that of controller of the company) the Secretary of State must serve on him a written notice stating:
a that the Secretary of State is considering exercising a power or powers of intervention and the ground on which he is considering the exercise of the power or powers; and
b that the person on whom the notice is served may, within the period of one month from the date of the service of the notice, make written representations to the Secretary of State and, if that person so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.
Unless the Secretary of State, after considering any such representations by the person served with a notice, decides not to exercise the power or powers in relation to which the notice was served, he must before exercising the power or powers serve on the company a written notice:
a containing the matters mentioned above; and
b specifying the power or powers which he proposes to exercise and, if the power or one of them concerns his residual power to impose requirements for the proction of policy holders, specifying the manner of its proposed exercise.
A notice must give particulars of the ground on which the Secretary of State is considering the exercise of the power or powers in question.
Where requirement imposed on a company in the exercise of any power or powers of intervention may be framed so as to come into effect after the expiration of a specified period (or such longer period as secretary of State may allow) unless before the expiration of that period the person whose fitness is in question has ceased to hold the position concerned.
3 Rescission, variation and publication of requirements
The Secretary of State may rescind a requirement which he has imposed if it appears to him that it is no longer necessary for the requirement to continue in force, and may frm time to time vary such requirement.
Where a requirement as to the custody of assets is imposed or any such requirement is rescinded or varied, the Secretary of State must forth with serve on the Registrar of Companies a written notice stating that fact, and:
i in the case of a notice of the imposition of a requirement, setting out the terms of the requirement;
ii in the case of a notice of the rescission of a requirement, identifying the requirement; and
iii in case of a notice of a variation of a requirement, identifying the requirement and setting out the terms of the variation.
A notice served on a Registrar of Companies is open to inspection, and a copy of it may be procured by any person on payment of such fee as the Secretary of State may direct.
Every document purporting to be certified by the Registrar of Companies to be a copy of such a notice is deemed to be copy of such a notice and must be received in evidence as if it were the original notice unless some variation between it and the original is proved.
4 Security of information
No information or document relating to a body which has been obtained under s44(2) to (4) may, without the previous consent of that body, be published or disclosed except to a competent authority, unless the publication or disclosure is required for the purposes specified in the Companies Act 1985, s 499 (1)(a) to (e).
5 Privilege from disclosure
A requirement imposed under s 44(2) to (4) must not compel the production by any person of a document which he would in an action in the High Court be entitled to refuse to produce on grounds of legal professional privilege or authorize the taking of possession of any such document which is in his possession.
6 Power of Secretary of State to bring civil proceedings
If from any information or document obtained under the Insurance Companies Act 1982 it appears to the Secretary of State that any civil proceedings ought in the public interest to be brought by an insurance company to which Part II of the Act applies, he may bring such proceedings in the name and on behalf of the company.
Where under a judgment given in such proceedings a sum is recovered in respect of a loss of assets representing a fund or funds maintained by the company in respect of its long term business, the Court must direct that the sum shall be treated for the purposes of the Act as assets of the fund or funds.
G Transfers of long term business
Where it is purposed to carry out a scheme under which the whole part of the long term business carried on in the United Kingdom by an insurance company to which Part II of the Insurance Companies Act 1982 applies is to be transferred to another body (whether incorporated or not), the transferor company or transferee company may apply to the Court, by petition, for an order sanctioning the scheme.
The Court must not determine an application unless the petition is accompanied by a report on the terms of the scheme by an independent actuary and the Court is satisfied that the following requirements have been complied with:
a a notice has been published in the London Gazette and, except where the Court has otherwise directed, in two national newspapers stating that the application has been made and giving the address of the offices at which, and the period for which, copies of the documents mentioned in para d below will be available;
b except where the Court has otherwise directed, a statement:
i setting out the terms of the scheme; and
ii containing a summary of the report mentioned above sufficient: to indicate the opinion of the actuary on the likely effects of the scheme on the long term policy holders of the companies concerned.
has been sent to each of those policy holders and to every member of those companies;
c a copy of the petition, of the report mentioned above and of any statement sent out has been served on the Secretary of State and a period of not less than 21 days has elapsed since the date of service;
d copies of the petition and of the report mentioned above have been open to inspection at offices in the United Kingdom of the companies concerned for a period of not less than 21 days beginning with the date of the first publication of the notice.
Each of the companies concerned must, on payment of such fee as may be prescribed by rules of Court, furnish a copy of the petition and of the report mentioned above to any person who asks for one at any time before the order sanctioning the scheme is made on the petition.
On any such petition, the Secretary of State and any person (including any employee of the transferor company or the transferee company) who alleges that he would be adversely affected by the carrying out of the scheme, are entitled to be heard.
The Court must not make an order sanctioning the scheme unless it is satisfied that the transferee company is, or immediately after the making of the order will be, authorized to carry on long term business of the class or classes to be transferred under the scheme.
No transfer must be carried out unless the scheme relating to it has been sanctioned by the Court.
Where the court makes an order sanctioning a scheme, it may, either by that order or by any subsequent order, make provision for all or any of the following matters:
a the transfer to the transferee company of the whole or ay part of the undertaking and of the property or liabilities of the transferor company;
b the allotting or appropriation by the transferee company of any shares,debentures, policies or other like interests in that company which under the scheme are to be allotted or appropriated by the company to or for any person;
c the continuation by or against the transferee company of any legal proceedings pending by or against the transferor company;
d the dissolution, without winding up, of the transferor company;
e such incidental consequential and supplementary matters as are necessary to secure that the scheme is fully and effectively carried out.
Where any such order provides for the transfer to property of liabilities, the property must be transferred to and vest in, and those liabilities must be transferred to and become the liabilities of, the transferee company. In case of any property, if the order so directs, it must be freed from any mortgage or charge which is by virtue of the scheme to cease to have effect.
Where a scheme is sanctioned by an order of the Court, the transferee company must, within ten days from the date on which the order is made or such longer period as the Secretary of State may allow, deposit two office copies of the order with him.
H Transfers of general business
Approval of transfer
Where it is proposed to execute an instrument by which an insurance company to which Part II of the Insurance Companies Act 1982 applies (the ‘transferor’) is to transfer to another body (the ‘transferee’) all its rights and obligations under such general polices, or general policies of such descriptions as may be satisfied in the instrument, the transferor may apply to the Secretary of State for his approval of the transfer.
The Secretary of State must not determine an application for a approval of the transfer unless he is satisfied that:
a a notice approved by him has been published in the London Gazette and, if he thinks fit, in two national newspapers which has been so approved; and
b except in so far has otherwise directed a copy of the notice has been sent to every affected policy holder and every person who claims an interest in a policy included in the transfer and has given written notice of his claim to the transferor; and
c copies of a statement setting out particulars of the transfer and approved by him have been available for inspection at one or more places in the United Kingdom for a period of not less than 30 days beginning with the date of the first publication of the notice.
The notice must include a statement that written representations concerning the transfer may be sent to the Secretary of State before a specified day, which must not be earlier than 60 days after the day of the first publication of the notice. The Secretary of State must not determine the application until after considering any representations made to him before the specified day.
The Secretary of State must not approve a transfer unless he is satisfied that:
a every policy included in the transfer evidences a contract which
i was entered into before the date of the application; and
ii imposes on the insurer obligations the performance of which will constitute the carrying on of insurance business in the United Kingdom; and
b the transferee is, or immediately after the approval, will be authorized to carry on in the United Kingdom insurance business of the appropriate class or classes;
and unless in his opinion the transferee’s financial resources and the other circumstances of the case justify the giving of his approval.
On determining an application the Secretary of State must:
a publish a notice of his decision in the London, Edinburgh and Belfast Gazettes and in such other manner as he may think fit, and
b send a copy of the notice to the transferor, the transferee and every person who made representations;
and if he refuses the application, he must inform the transferor and the transferee in writing of the reasons for his refusal.
Any notice or other document authorized or required to be given or served may, without prejudice to any other method of service, be served by posted. A letter containing the notice or other document is deemed to be properly addressed if it is addressed to that person at his last known address or last known place of business in the United Kingdom.
Effect of approval
An instrument giving effect to a transfer approved by the Secretary of State is effectual in law:
a to transfer to the transferee all the transferor’s rights and obligations under the policies included in the instrument, and
b if the instrument so provides, the continuation by or against the transferee of any legal proceedings by or against the transferor which relate to those rights or obligations,
notwithstanding the absence of any agreements or consents which would otherwise be necessary for it to be effectual in law for those purposes.
Expect in so far as the Secretary of State may otherwise direct, a policy holder whose policy is included in such an instrument is not bound by it unless he has been given written notice of its execution by the transferor or the transferee.
I Insolvency and winding up
I Winding up of insurance companies under Companies Act 1985
The Court may order the winding up, in accordance with the Companies Act 1985, of an insurance company to which Part II of the Insurance Companies Act 1982 applies.
The provisions of the Companies Act 1985 apply accordingly subject to the modification that the company may be ordered to be wound up on the petition of ten or more policy holders owning policies of an aggregate value of not less than £10,000.
Such a petition, however, must not be presented except by leave of the Court. Leave must not be granted until a prima facie case has been established to the satisfaction of the Court and until security for costs for such amount as the Court may think reasonable has been given.
2 Winding up on petition of Secretary of State
The Secretary of State may present a petition for the winding up, in accordance with the Companies Act 1985, of an insurance company to which Part II of the Insurance Companies Act 1982 applies on the ground that:
a the company is unable to pay its debts;
b the company has failed to satisfy an obligation to which it is subject by virtue of the Insurance Companies Act 1982; or
c the company being under an obligation imposed by the Companies Act 1985, s 221, with respect to the keeping of accounting records, has failed to satisfy that obligation or to produce records kept in satisfaction of that obligation and that the Secretary of State is unable to ascertain its financial position.
In any proceedings on a petition to wind up an insurance company presented by Secretary of State, evidence that the company was insolvent:
a at the close of period which:
i the accounts and balance sheet of the company last deposited; or
ii any date or time specified in a requirement as to actuarial investigations or as to the production of documents,
is evidence that the company continues to be unable to pay its debts, unless the contrary is proved.
If, in the case of an insurance company to which Part II of the Act applies, it appears to the Secretary of State that it is expedient in the public interest that the company should be wound up, he may, unless the company is already being wound up by the Court present a petition for it to be so wound up if the Court thinks it just and equitable for it to be so wound up.
Where a petition for the winding up of an insurance company to which Part II of the Act applies is presented by a person other than the Secretary of State, a copy of the petition must be served on him, and he is entitled to be heard on the petition.
3 Winding up of insurance companies with long term business
No insurance company to which Part II of the Insurance Companies Act 1982 applies carrying on long term business must be wound up voluntarily.
a the assets representing the fund or funds maintained by the company in respect of its long term business are only available for meeting the liabilities of the company attributable to that business;
b the other assets of the company are available only for meeting the liabilities of the company attributable to its other business.
Where under the Companies Act 1985, s 631(2) a Court orders any money or property to be repaid or restored to a company or any sum to be contributed to its assets, then, if and so far as the wrongful act which is the reason for the making of the order related to assets representing a fund or funds maintained by the company in respect of its long term business, the Court must include in the order a direction that the money, property or contribution must be treated for the purpose of the Insurance Companies Act 1982 as assets of that fund or those funds.
4 Continuation of long term business of insurance company in liquidation
The liquidator must, unless the Court otherwise orders, carry on the long term business of an insurance company to which Part II of the Act applies with a view to its being transferred as a going concern to another insurance company, whether an existing company or a company formed for that purpose. In carrying on that business the liquidator can agree to the variation of any contracts of insurance in existence when the winding up order is made, but he must not effect any new contracts of insurance.
If he is satisfied that the interests of the creditors in respect of liabilities of the company attributed to its long term business require the appointment of a special manager of the company’s long term business, he may apply to the Court.
The Court may on such application appoint a special manager of that business to act during such time as the Court may direct, with such powers, including any of the powers of a receiver or manager, as may be entrusted to him by the Court.
The Court may, if it thinks fit and subject to such conditions (if any) as it may determine, reduce the amount of the contracts made by the company in the course of carrying on its long term business.
The Court may, on the application of the liquidator, a special manager appointment under the above provisions, or the Secretary of State, appoint an independent actuary to investigate the long term business of the company, and to report to the liquidator, the special manager or the Secretary of State, as the case may be, on the desirability or otherwise of that business being continued ad on any reduction in the contracts made in the course of carrying on that business that may be necessary for its successful continuation.
5 Subsidiary companies
Where the insurance business or any part of the insurance business of an insurance company has been transferred to an insurance company to which Part II of the Act applies under an arrangement in pursuance of which the subsidiary company or its creditor has or have claims against the ‘principal company’, then if the principal company is being wound up by or under the supervision of the Court, the Court must order the subsidiary company to be wound up in conjunction with the principal company.
Further, the Court may by the same or subsequent order appoint the same person to be liquidator for the two companies, and make provision for such other matters as may seem to the Court necessary, with a view to the companies being wound up as if they were one company.
The commencement of the winding up of the ‘principal company’ is, except as otherwise ordered by the Court, the commencement of the winding up of the ‘subsidiary company’.
In adjusting the rights and liabilities of the members of the several companies between themselves, the Court must have regard to the constitution of the companies, and to the arrangements entered into between them, in the same manner as it has regard to the rights and liabilities of different classes of contributories in the case of the winding up of a single company, or as near thereto as circumstances admit.
Where any company alleged to be ‘subsidiary’ is not in process of being wound up at the same time as the ‘principal company’ to which it is subsidiary, the Court must not direct the ‘subsidiary company’ to be wound up unless, after hearing all objections (if any) that may be urged by or on behalf of the company against it being wound up, the Court is of opinion that the company is subsidiary to the ‘principal company’, and that the winding up of the company in conjunction with the ‘principal company’ is just and equitable.
An application may be made in relation to the winding up of any ‘subsidiary company’ in conjunction with a ‘principal company’ by any creditor, of or, person interested, in the ‘principal’ or ‘subsidiary company’,. Where a company stands in the relation of a principal to one company, and in the relation of a ‘subsidiary company’ to some other company, or where there are several companies standing in the relation of subsidiary companies to one principal company, the Court may deal with any number of such companies together or in separate groups, as it thinks most expedient, upon the principles mentioned above.
6 Reduction of contracts as alternative to winding up
In the case of an insurance company which has been proved to be unable to pay its debts, the Court may, if it thinks fit, reduce the amount of the contracts of the company on such terms and subject to such conditions as it thinks just, in place of making a winding up order.
The words ‘unable to pay debts’ have the same meaning as they have in the Companies Act 1985, ss 517 and 518. The mere evidence that a company has for the time being insufficient liquid assets to pay all its presently owing debts, whether or not repayment of such debts has been demanded, does not by itself prove inability on its part to pay its debts.
The word ‘contracts’ means insurance contracts and no others. The phrase ‘the amount of the contracts’ means the sum or sums payable under the contracts’, i e the sums prospectively payable under the company’s current insurance contracts.
But the Court has power to reduce the amount of any insurance contracts which have ripened into presently payable debts at a date later than the date of the presentation pf the winding up petition.
The fact that a scheme of reduction does not provide for strict equality between the various policy holders and, in particular, special provisions for reduction of excessive benefits, does not deprive the Court of jurisdiction to approve it.
The Court has jurisdiction to order a proposed reduction without directing meetings of policy holders or any further advertisements or communications with them.
7 Winding up rules
Rules may be made for determining the amount of the liabilities of an insurance company to policy holders of any class or description for the purpose of proof in a winding up and generally for carrying into effect the provisions of Part II of the Insurance Companies Act 1982 with respect to the winding up of insurance companies
The rules may also make provision for:
i the identification of the assets and liabilities falling within either paragraph of s 55(3) of the Insurance Companies Act 1982;
ii the apportionment between the assets falling within paragraphs (a) and (b) of s 55(3) of the Insurance Companies Act 1982 of the costs, charges and expenses of the winding up and of any debts of the company having priority under the Companies Act 1985, s 614;
iii the determination of the amount of liabilities of any description falling within either paragraph of the Insurance Companies Act 1982, s 55(3) for the purpose of the establishing whether or not there is any such excess in respect of that paragraph as of the Act.
iv the application of assets within paragraph (a) of s 55(3) for meeting the liabilities within that paragraph;
v the application of assets representing any such excess as is mentioned in s 55(4).
J Changes of director, controller or manager
1 Approval of proposed managing director, chief executive or principal United Kingdom executive of insurance company
No insurance company to which Part II Insurance Companies Act 1982 applies must appoint a person as managing director chief executive of the company unless:
a the company has served on the Secretary of State a written notice stating that it proposes to appoint that person to that position and containing such particulars as may be prescribed.
b either the Secretary of State has, before the expiration of the period of three months beginning with the date of service of that notice, notified the company in writing that there is no objection to that person being appointed to that position or that period has elapsed without the Secretary of State having served on the company a written notice of objection.
A notice served by a company must contain a statement signed by the person proposed to be appointed that it is served with his knowledge and consent. The Secretary of State may serve a notice of objection on the ground that it appears to him that the person proposed to be appointed is not a fit and proper person to be appointed to the position in question.
Before serving such a notice the Secretary of State must serve on the company and not that persona preliminary written notice stating:
a that the Secretary of State is considering the service on the company of a notice of objection on that ground; and
b that the company and the person may, within the period of one month from the date of service of the preliminary notice, make written representations to the Secretary of State and, if the company or that person so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.
The Secretary of State in not obliged to disclose to the company or to the person proposed to be appointed any particulars of the ground on which he is considering the service on the company of a notice of objection.
Where representations have been made, the Secretary of State must take them into consideration before serving the notice of objection.
In relation to an insurance company whose head office is in a member State other that United Kingdom is restricted to reinsurance, the above provisions have effect as if the references to a managing director or chief executive were references to a principal United Kingdom executive.
In relation to any other company whose head office is outside the United Kingdom the above provisions have effect as if the references to a chief executive included references to a principal United Kingdom executive.
2 Approval of person proposing to become controller of insurance company where s 60 does not apply
No person can become a controller of an insurance company to which Part II of the Insurance Companies Act 1982 applies otherwise than by virtue of an appointment in relation to which s 60 has effect unless:
a he has heard on the Secretary of State a written notice stating that he intends to become a controller of that company and containing such particulars as may be prescribed; and
b either the Secretary of State has, before the expiration of the period of three months beginning with the date of service of that notice, notified him in writing that there is no objection to his becoming a controller of the company or that period has elapsed without the Secretary of State having served on him a written notice of objection.
The Secretary of State may serve a notice of objection on the ground that it appears to him that the person concerned is not a fit and proper person to be a controller of the company.
But before serving such a notice the Secretary of State must serve on that person a preliminary written notice stating:
a that the Secretary of State is considering the service on him of a notice of objection on that ground; and
b that the person may, within the period of one month from the date of service of the preliminary notice, make written representations to the Secretary of State, and if that person so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.
The Secretary of State is not obliged to disclose to any person any particulars of the ground on which he is considering the service on him of a notice of objection.
Where representations are made, the Secretary of State must take them into considering before serving the notice of objection.
In relation to an insurance company whose head office is in a member State other than the United kingdom, excluding a company whose business in the United Kingdom is restricted, the above provisions do not apply.
3 Duty to notify change of director, controller or manager
A person who becomes or ceases to be a controller of an insurance company to which Part II of the Insurance Companies Act 1982 applies must, before the expiration of the period of seven days beginning with the day next following that on which he does so, notify the insurance company in writing of that fact and of such other matters as may be prescribed.
A person who becomes a director or manager of any such insurance company must, before the expiration of seven days beginning with the day next following that on which he does so, notify the insurance company in writing of such matters as may be prescribed.
An insurance company to which Part II of the Insurance Companies Act 1982 applies must give written notice to the Secretary of State of the fact that any person has become or has ceased to be a director, controller or manager of the company and of any matter of which any such person is required to notify the company.
The notice must be given before the expiration of fourteen days beginning with the day next following that on which that fact or matter comes to the company’s knowledge.
In relation to an insurance company whose head office is in a member State other than the United Kingdom, excluding a company whose business in the United Kingdom is restricted to reinsurance, the above provisions have effect as if the references to a director or manager were references to a principal United Kingdom executive, an employee within the Insurance Companies Act 1982, s8(4)(c) or an authorized United Kingdom representative.
In relation to any other insurance company whose head office is outside the United Kingdom the above provisions have effect as if the references to a director included references to a principal United Kingdom executive and to an authorized United Kingdom executive.
K Change of main agent
An insurance company to which Part II of the Insurance Companies Act 1982 applies must give written notice of the fact that any person has become or ceased to be a main agent of the company and, if a main agent is a body corporate or a firm, of the fact that any person has become or ceased to be a director of the body or partner of the firm.
The notice must be given before the expiration of the period of fourteen days beginning with the day next following that on which the change comes to the knowledge of the insurance company.
L Miscellaneous
1 Documents deposited with Secretary of State
The Secretary of State must deposit with the Registrar of Companies one copy of:
a any document deposited with the Secretary of State under s 22, including any document obtained under s 22(5);
b any document deposited with him under s 42(4) or s 50(4).
Any document deposited under the above provisions or under s 25(5) or s 26(3) with the Registrar of Companies is open to inspection and copies of it may be procured by any person on payment of such fees as the Secretary of State may direct.
Every document deposited with the Secretary of State and certified by the Registrar Companies to be a document so deposited is to be deemed to be a document so deposited.
Every document purporting to be certified by the certified by the Registrar of Companies to be a copy of a document so deposited is to be deemed to be deemed to be a copy of that document and shall be received in evidence as if it were the original document unless some variation between it and the original is proved.
2 Power to treat certain business as or as not being ordinary long term insurance business
The Secretary of State may, on the application of or with the consent of an insurance company to which Part II of the Insurance Companies Act 1982 applies, by order direct that for the purpose of certain provisions of the Ac
a business of a kind specified in the order, not being ordinary long term insurance business, shall be treated as being such business; or
b ordinary long term insurance business of a kind so specified shall be treated as not being such business.
An order may be subject to conditions and may be varied or revoked at any time by the Secretary of State.
3 Power to modify Part II of the Insurance Companies Act 1982 in relation to particular companies
The Secretary of State may, on the application or with the consent of an insurance company to which Part II of the Insurance Companies Act 1982 applies, by order direct that certain that certain provisions of the Act shall not apply to the company or shall apply to it with such modifications as may be specified in the order.
An order may be subject to conditions. It may be revoked at any time by the Secretary of State. He may at any time vary it on the application or with the consent of the company to which it applies.
4 Power to alter insurance company’s financial year
The Secretary of State may extend or shorten the duration of any financial year of any insurance company to which Part II of the Insurance Companies Act 1982 applies.
5 Service of notices
Any notice which is required to be sent to a policy holder may be addressed and sent to the person to whom notices respecting that policy are usually sent. Any notice so addressed and sent is deemed to be notice to the policy holder.
Where any person claiming to be interested in a policy has given to the company notice of his interest, any notice which is required to be sent to policy holders must also be sent to that person at the address specified by him in his notice.
Ay notice to be served by the Secretary of State under the Insurance Companies Act 1982, ss 46, 60 or 61, may be served by post, and a letter containing that notice is deemed to be property addressed if it is addressed to that person at his last known residence or last known place of business in the United Kingdom.
6 Offences under Part II of the Insurance Companies Act 1982
Various offences under Part II of the Act are set out in s 71.
CONDUCT OF INSURANCE BUSINESS
In connection with the conduct of insurance business, Part III of the Insurance Companies Act 1982 contains various provisions relating to: (1) insurance advertisements; (2) misleading; statements inducing persons to enter into contracts of insurance; (3) intermediaries in insurance transactions; (4) statutory notices in relation to ordinary long-term policies, and the right to withdraw from a transaction in respect of such policies; (5) linked long-term policies; and (6) capital redemption business.
1 Insurance advertisements
Regulations may be made as to the form and contents of insurance advertisements. They may make different provisions in relation to insurance advertisements of different classes or descriptions.
Any person who issues an insurance advertisement which contravenes the regulations is guilty of an offence. But a person who in the ordinary course of his business issues to the order of another person an advertisement which contravenes the regulations is not himself guilty of an offence if he proves that the matters contained in it were not, wholly or in part, devised or selected by him or by any person under his direction or control.
An advertisement issued by any person on behalf of or the order of another person is to be treated as an advertisement by that other person. Further, an advertisement inviting persons to enter into or to offer to enter into contracts with a person specified in the advertisement is presumed, unless the contrary is proved, to have been issued by that person.
2 Misleading statements
Any person who by any statement, promise or forecast which he knows to be misleading, false or deceptive, or by any dishonest concealment of material facts or by the reckless making (dishonestly or otherwise) of any statement, promise or forecast which is misleading, false or deceptive, induces or attempts to induce another person to enter into any contract insurance with an insurance company, is guilty of an offence.
3 Intermediaries in insurance transactions
Regulations may be made for requiring any person who:
a invites another person to make an offer or proposal or to take any other step with a view to entering into a contract of insurance with an insurance company; and
b is connected with that company as provided in the regulations, to give the prescribed information with respect to his connection with the company to the person to whom the invitation is issued.
Regulations may be made for requiring any person who, in the course of carrying on any business or profession, issues any such invitation in relation to an insurance company which is not an authorized insurer in respect of the contract in question, to inform the person to whom the invitation is issued that the company is not such an insurer.
Any person who contravenes the regulations is guilty of an offence.
4 Ordinary long-term insurance policies
(a) Statutory notice
No insurance company, whether established within or outside the United Kingdom, which carries on insurance business within the United Kingdom, and no member of Lloyd’s must enter into a contract the effecting of which constitutes the carrying on of ordinary long-term insurance business unless that company or member, as the case may be, either:
a has sent by post to the other party to the contract a statutory notice in relation to that contract; or
b does so at the time when the contract is entered into.
A ‘statutory notice’ is one which:
a contains such matters (and no others) and is in such form as may be prescribed and complies with such requirements (whether as to type, size, colour or disposition of lettering, quality or colour of paper, or otherwise) as may be prescribed for securing that the notice is easily legible; and
b has annexed to it a form of notice of cancellation of the prescribed description.
The Secretary of State may, on the application of any insurer, alter the requirements of any regulations so as to adapt them to the circumstances of the insurer or to any particular kind of contract proposed to be entered into by that insurer.
Any insurer who contravenes any of the provisions relating to a statutory notice is guilty of an offence. But no contract is invalidated by reason of the fact that the insurer has contravened the provisions relating to the statutory notice in relation to that contract.
(b) Right to withdraw from transaction
A person who has received a statutory notice in relation to a long term insurance policy may before the expiration of:
a the tenth day after that on which he received the notice; or
b the earliest day on which he knows both that the contract has been entered into and that the first or only premium has been paid,
whichever is the later, serve a notice of cancellation on the insurer.
A person to whom an insurer ought to have, but has not, sent a statutory notice may serve a notice of cancellation on the insurer. But if the insurer sends him a statutory notice before he has served a notice of cancellation, then his right to do so ceases.
A notice of cancellation may, but need not, be in the form annexed to the statutory notice and has effect if, however expressed, it indicates the intention of the person serving it to withdraw from the transaction in relation to which the statutory notice was or ought to have been sent.
Where a person serves a notice of cancellation, then if at the time when the notice is served the contract has been entered into, the notice operates so as to rescind the contract. In any other case the service of the notice operates as a withdrawal of any offer to enter into the contract which is contained in, or implied by, any proposal made to the insurer by the person serving the notice of cancellation and as notice to the insurer that any such offer is withdrawn.
Where a notice of cancellation operates to rescind a contract or as the withdrawal of an offer to enter into a contract:
a any sum which the person serving the notice has paid in connection with the contract (whether by way of premium or otherwise and whether to the insurer or to any person who is the agent of the insurer for the purpose of receiving that sum) is recoverable from the person serving the notice;
b any sum which the insurer has paid under the contract is recoverable by him from the person serving the notice.
(c) Service of notice of cancellation
A notice of cancellation is deemed to be served to the insurer if it is sent by post to any person specified in the statutory notice as a person to whom a notice of cancellation may be sent and is addressed to that person at an address so specified. Further, the notice of cancellation is deemed to be served on the insurer at the time when it is posted.
A notice of cancellation may, however, be served in any other way (whether by post or not) whether the notice is served on the insurer or on a person who is the agent of the insurer for the purpose of receiving such a notice.
Again, a notice which is sent by post to a person at his proper address is deemed to be served on him at the time when it is posted.
5 Linked long term policies
Regulations may be made in relation to ordinary long term policies which:
a are entered into by insurance companies, whether established within or outside the United Kingdom which carry on insurance business within the United Kingdom, or by members of Lloyd;s; and
b are contracts under which the benefits payable to the policy holder are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of the value of property of any description (whether or not so specified).
The regulations may make provision for:
a restricting the descriptions of property or the indices of the value of property by reference to which benefits under the contract may be determined;
b regulating the manner in which and the frequency with which property of any description is to be valued for the purpose of determining such benefits and the times reference is to be made for that purpose to the index of the value of property;
c requiring the insurers under the contracts to appoint valuers for carrying out valuations of property of any description for the purpose of determining such benefits (being valuers who comply with the prescribed requirements as to qualifications and independence from the insurer) and to furnish the Secretary of State with the prescribed information in relation to such appointments;
d requiring insurers under the contracts to furnish, in such manner and at such times or intervals as may be prescribed, such information relating to the value of the benefits under the contracts as may be prescribed, whether by sending notices to policy holders, depositing statements with the Secretary of State or the Registrar of Companies, publication in the press or otherwise;
e requiring insures under the contracts to furnish to the Secretary of State, in such manner and at such times or intervals as may be prescribed, such information certified in such manner as may be prescribed with respect to so much of their business as is concerned with the contracts or with any class or description of the contracts, and enabling the Secretary of State to publish such information in such ways as he thinks appropriate.
The regulations may, in relation to notices required to be sent to policy holders, impose requirements as to type, size, color or disposition of lettering, quality or color of paper, or otherwise for securing that such notices are easily legible.
6 Capital redemption business
Where an insurance company, whether established within or outside the United Kingdom, carries on in the United Kingdom capital redemption business in the case of which premiums in return for which a contracts is effected are payable in intervals of less than six months, the company must not give the holder of any policy issued after 2 December 1909, any advantage dependent on lot or chance.
SPECIAL CLASSES OF INSURERS
Part IV of the Insurance Companies Act 1982 concerns special classes of insurers including:
1 Industrial assurance companies; and
2 lloyd’s underwriters.
1 Industrial assurance companies
The provisions of the Insurance Companies Act 1982 are modified in their application to companies carrying on industrial assurance business.
2 Lloyd’s underwriters
(a) Requirements to be complied with
Certain requirements must be fulfilled by Lloyd’s underwriters with respect to the carrying to a trust fund all premiums and the audit of their accounts.
(b) Financial resources
Subject to such modifications as may be prescribed and any determination made by the Secretary of State in accordance with regulations, ss 32, 33 and 35 apply to the members of Lloyd’s taken together as they apply to an insurance company to which Part II of the Insurance Companies Act 1982 applies and whose head office is in the United Kingdom.
The power s conferred on the Secretary of State by ss 38 to 41, 44 and 45 are exercisable in relation to the members of Lloyd’s if there is a breach of an obligation imposed by virtue of the above provisions.
(c) Transfer of business
Sections 49 to 52 apply in relation to transfers to and from members of Lloyd’s if, and only if, the following conditions are satisfied:
a the transfer is not one where both the transferor and the transferee are members of Lloyd’s;
b the committee of Lloyd’s have by resolution authorized one person to act in connection with the transfer for the members concerned as transferor to transferee; and
c a copy of the resolution has been given to the Secretary of State.
(d) Statement of business by committee of Lloyd’s
The Committee of Lloyd’s must deposit every year with the Secretary of State a statement in the prescribed form summarizing the extent and character of the insurance business done by the members of Lloyd’s in the 12 months to which the statement relates.
Regulations may require the statement to deal separately with such classes or descriptions of business as may be specified.
When the statement is deposited such fee as may be prescribed must be paid to the Secretary of State.
SUPPLEMENTARY PROVISIONS
Part V of the Insurance Companies Act 1982 contains a number of supplementary provisions including those relating to:
1 valuation regulations;
2 criminal proceedings;
3 interpretation;
4 miscellaneous matters.
1 Valuation regulations
Regulations may be made with respect to the determination of the value of assets and the amount of liabilities in which the value or amount is required by any provision of the Insurance Companies Act 1982 to be determined in accordance with valuation regulations.
The regulations may provide that, for any specified purpose, assets or liabilities of any specified class or description must be left out of account or must be taken into account only to a specified extent.
Regulations may make different provision in relation to different cases or circumstances and for the purpose of different enactments.
2 Criminal proceedings
(a) Criminal liability directors
Where an offence under the Insurance Companies Act 1982 committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of any director, chief executive, manager secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he, as well as the body corporate, is guilty of that offence and liable to be proceeded against and punished accordingly.
(b) Criminal proceedings against unincorporated bodies
Proceedings foe an offence alleged to have been committed under the Insurance Companies Act 1982 by an unincorporated body must be brought in the name of that body and not in that of ay of its members. For the purposes of any such proceedings any rules of court relating to the service of documents have effect as if that body were corporation. A fine imposed on an unincorporated body on its conviction of an offence under the Act must be paid out of the funds of that body.
(c) Restriction on institution of proceedings
Proceedings in respect of an offence under the Insurance Companies Act 1982 must not be instituted expect by or with the consent of the Secretary of State, the Industrial Assurance Commissioner or the Director of Public Prosecutions.
(d) Summary proceedings
Summary proceedings for any offence under the Insurance Companies Act 1982 may be taken against any body corporate at any place at which it has a place of business and against any other person at any place at which he is for the time being.
Any information relating to an offence under the Act which is triable by a magistrates’ court may so be tried if it is laid at any time within three years after the commission of the offence and within 12 months after the date on which evidence sufficient, in the opinion of the Director of Public prosecutions, the Secretary of State or the Industrial Assurance Commissioner, as the case may be, to justify the proceedings comes to his knowledge.
3 Interpretation
A long list of words used in the Insurance Companies Act 1982 is given in s 96(1).
4 Miscellaneous matters
(a) Regulations and orders
The Secretary of State may make regulations under the Insurance Companies Act 1982 for any purpose for which regulations are authorized or required to be made under it. Regulations may make different provision for cases of different descriptions.
Any power conferred by the Act to make regulations is exercisable by statutory instrument.
(b) Annual report by Secretary of State
The Secretary of State must cause a general annual report of matters within the Insurance Companies Act 1982 to be laid before Parliament.