Insurance Companies Amendment Act 1973

Authorisation of insurance companies

Margin of solvency and minimum paid up share capital required for authorisation

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• (1) The Secretary of State may by order amend section 62 of the Companies Act 1967 (hereafter referred to as " the Act of 1967 ") by substituting an amount specified in or to be determined in accordance with the order for any amount specified in or to be determined in accordance with subsections (1) to (4) of that section (margin of solvency and minimum paid up share capital required for authorisation of insurance company) whether as in force at the passing of this Act or as amended by a previous order under this subsection.

• (2) The power to make orders under subsection (1) above includes power to vary or revoke a previous order, and an order under that subsection may make different provision in relation to different cases or circumstances.

• (3) For the purposes of the said section 62 the value of any assets and the amount of any liabilities shall, subject to subsection (4) below, be determined in accordance with any applicable regulations made under section 32 below (hereafter referred to as " valuation regulations ")

• (4) For the purposes of the said section 62 the amount of the liabilities at any time of any long term business carried on by the company, society or body in question shall be taken to be—

• (a) an amount equal to the total amount at that time standing to the credit of the fund or funds maintained by the company, society or body in respect of its long term business; or

• (b) the amount of those liabilities at that time as determined in accordance with any applicable valuation regulations,

whichever is the greater.

No authorisation for insurance company under control etc of unfit persons

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• (1) The Secretary of State shall not issue under section 61 of the Act of 1967 an authorisation with respect to an incorporated company if it appears to him that any director, controller or manager of the company is not a fit and proper person to be a director, controller or manager of the company, as the case may be.

• (2) In this section " controller", in relation to a company, means—

• (a) a managing director of the company or of a body corporate of which it is a subsidiary ;

• (b) a chief executive of the company or of a body corporate, being an insurance company, of which it is a subsidiary;

• (c) a person—

• (i) in accordance with whose directions or instructions the directors of the company or of a body corporate of which it is a subsidiary (or any of them) are accustomed to act; or

• (ii) who, either alone or with any associate or associates, is entitled to exercise, or control the exercise of, one third or more of the voting power at any general meeting of the company or of a body corporate of which it is a subsidiary.

• (3) In this section " manager", in relation to a company, means a person (other than a chief executive) employed by the company who, under the immediate authority of a director or chief executive of the company—

• (a) exercises managerial functions ; or

• (b) is responsible for maintaining accounts or other records of the company,

not being a person whose functions relate exclusively to business conducted from a place of business outside Great Britain.

• (4) Subject to subsection (6) below, in this section " chief executive", in relation to a company or a body corporate of which it is a subsidiary, means a person employed by the company or body who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the whole of the insurance business of that company or body.

• (5) In this section " associate", in relation to any person, means—

• (a) the wife or husband or minor son or daughter of that person;

• (b) any company of which that person is a director;

• (c) any person who is an employee or partner of that person;

• (d) if that person is a company—

• (i) any director of that company ;

• (ii) any subsidiary of that company ;

• (iii) any director or employee of any such subsidiary;

and for the purposes of this subsection " son " includes stepson and adopted son, " daughter " includes step-daughter and adopted daughter and " minor ", in relation to Scotland, includes pupil.

• (6) In relation to a company incorporated outside Great Britain—

• (a) the reference in paragraph (a) of subsection (2) above to a managing director of the company includes a reference to a person who is a managing director of that company in respect of so much of its insurance business as is carried on within Great Britain; and

• (b) the reference in paragraph (b) of that subsection to a chief executive of the company includes a reference to a person employed by the company who, either alone or jointly with one or more other persons, is responsible (whether or not under the immediate authority of the directors) for the conduct of the whole of the insurance business carried on by the company within Great Britain but, if he is responsible also for the conduct of insurance business carried on by it elsewhere, only if there is no other person subordinate to him who is responsible for the conduct of the whole of the insurance business carried on by it within Great Britain.

• (7) The foregoing provisions of this section shall have effect in relation to a registered society or unincorporated body as they have effect in relation to an incorporated company.

Accounts and statements

Periodic actuarial investigation of company with long term business

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• (1) In subsection (1) of section 5 of the Insurance Companies Act 1958 (hereafter referred to as " the Act of 1958 ") references to an investigation into the financial condition of a company and to a valuation of its liabilities shall be construed as references to an investigation into its financial condition, and to a valuation of its liabilities, in respect of its long term business only; and in subsection (2) of that section the reference to a statement of a company's insurance business shall be construed as a reference to a statement of its long term business only.

• (2) The contents of any abstract or statement to be made under the said section 5 shall be such as may be prescribed.

• (3) For the purposes of any investigation to which the said section 5 applies the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations.

• (4) Any such investigation shall be made by the person who for the time being is the company's actuary under subsection (5) below.

• (5) Every insurance company to which the Act of 1958 applies which carries on long term business shall—

• (a) if it is carrying on such business at the passing of this Act, within one month of the passing of this Act, and

• (b) if it subsequently begins to carry on such business, within one month of its beginning to do so,

appoint an actuary as actuary to the company; and whenever an appointment under this subsection comes to an end the company shall as soon as practicable make a fresh appointment.

• (6) A company making an appointment under subsection (5) above shall within fourteen days serve on the Secretary of State a written notice stating that fact and the name and qualifications of the person appointed; and if an appointment under that subsection comes to an end the company shall within fourteen days serve on the Secretary of State a written notice stating that fact and the name of the person concerned.

Deposit of documents with Secretary of State

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• (1) The documents to which subsection (1) of section 8 of the Act of 1958 applies (documents required to be deposited with the Secretary of State) shall include any report of the auditor of the company made in pursuance of section 9 of the Act of 1958 but one of the copies of any such report deposited under that subsection shall be signed by the auditor and not by the persons mentioned in that subsection.

• (2) The documents to which the said subsection (1) applies shall also include a statement of the names and connection with the company of any persons who, during the period to which the other documents deposited under that subsection relate—

• (a) were authorised by the company to issue, or to the knowledge of the company have issued, any such invitation in relation to the company as is mentioned in subsection (1)(a) of section 43 below ; and

• (b) were connected with the company as provided by regulations under that section ;

and any such statement shall be deposited at the same time as the other documents required to be deposited under the said subsection (1).

• (3) The number of copies of any document required to be deposited under the said subsection (1) shall be five instead of four.

• (4) The persons by whom one copy of any such document except an auditor's report is required to be signed shall cease to include a manager of the company but—

• (a) shall include a chief executive, if any, of the company;

• (b) in the case of an abstract or statement under section 5 of the Act of 1958 shall include the actuary who made the investigation to which the abstract relates or by reference to which the statement was prepared;

and where any such copy is signed by a chief executive of the company it need not also be signed by the secretary.

• (5) Subsection (4) of the said section 8 (which relieves a company from complying with section 127 of the Companies Act 1948 if it complies with certain other requirements) shall cease to have effect.

• (6) The documents mentioned in subsection (6) of the said section 8 (printed copies of certain documents to be made available by a company to its shareholders and policy holders) shall include any such report or statement as is mentioned in subsection (1) or (2) above and the said subsection (6) shall apply also to—

• (a) a copy of any document supplied to the Secretary of State under subsection (2) of that section which relates to any of the documents last deposited under subsection (1) of that section;

• (b) a copy of any report deposited with any of those documents under subsection (3) of that section.

Periodic statements by company with prescribed class of business

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• (1) Every insurance company to which the Act of 1958 applies which carries on business of a class or description prescribed for the purposes of this section shall prepare, at such intervals and for such periods as may be prescribed, a statement of its business of that class or description.

• (2) The form and contents of any statement under this section shall be such as may be prescribed.

• (3) Regulations may, as respects such matters contained in a statement under this section 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 prescribed.

• (4) Five copies of any statement made under this section (with any certificate annexed thereto in pursuance of subsection (3) above) shall be deposited by the company with the Secretary of State within such period as may be prescribed, and one of those copies shall be a copy signed by the persons required to sign copies of statements under section 7 of the Act of 1958 which are deposited under section 8 of that Act.

• (5) The whole or any part of any document deposited under subsection (4) above 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.

Statements of transactions of prescribed class or description

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• (1) 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 for the purposes of this section; and every insurance company to which the Act of 1958 applies or subordinate company within the meaning of section 10 below of any such company which enters into an agreement or arrangement of a class or description so prescribed shall, 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.

• (2) Different classes or descriptions of agreements or arrangements may be prescribed for the purposes of this section in relation to companies of different classes or descriptions.

• (3) The whole or any part of any statement furnished to the Secretary of State under this section 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.

Assets and liabilities attributable to long term business

Separation of assets and liabilities attributable to long term business

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• (1) Where an insurance company to which the Act of 1958 applies carries on long term business of either or both classes—

• (a) the company shall maintain an account in respect of that class or, as the case may be, each of those classes of long term business ; and

• (b) the receipts of that class or, as the case may be, of each of those classes of business shall be entered in the account maintained for that class and shall be carried to and form a separate insurance fund with an appropriate name.

• (2) An insurance company to which the Act of 1958 applies which carries on long term business of either or both classes shall maintain such books of account and other records as are necessary for identifying—

• (a) the assets representing the fund or funds maintained by the company under subsection (1)(b) above (but without necessarily distinguishing between the funds if more than one); and

• (b) the liabilities attributable to that class or, as the case may be, each of those classes of long term business.

• (3) An insurance company to which the Act of 1958 applies which is carrying on long term business at the passing of this Act—

• (a) shall in accordance with regulations made for the purposes of this paragraph make arrangements, during the financial year of the company beginning next after the date on which the regulations are made, for identifying the assets and liabilities of the company as on the last day of that financial year which are attributable to its long term business ; and

• (b) shall not be subject to the provisions of subsection (2) above until the day after the end of that financial year.

• (4) Regulations made for the purposes of subsection (3)(a) above may make provision for requiring companies to furnish the Secretary of State with certificates of such matters relating to the making of the arrangements, signed by such persons, as may be prescribed.

Application of assets of company with long term business

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• (1) Subject to subsections (2) and (3) and to section 30(3) below, the assets representing the fund or funds maintained by an insurance company in respect of its long term business shall be applicable only for the purposes of that business.

• (2) Where the value of the assets mentioned in subsection (1) above is shown, by an investigation to which section 5 of the Act of 1958 applies or made in pursuance of a requirement imposed under section 18 below, to exceed the amount of the liabilities attributable to the company's long term business the restriction imposed by that subsection shall not apply to so much of those assets as represents the excess.

• (3) Nothing in subsection (1) above shall preclude 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.

• (4) Any mortgage or charge (including a charge imposed by a court on the application of a judgment creditor and, in Scotland, a charge imposed by way of diligence) shall be void to the extent to which it contravenes subsection (1) above.

• (5) For the avoidance of doubt it is hereby declared that money from a fund maintained by a company in respect of its long term business may not be used for the puposes of any other business of the company notwithstanding any arrangement for its subsequent repayment out of the receipts of that other business.

• (6) No insurance company to which the Act of 1958 applies, and no company of which any such insurance company is a subsidiary, shall 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.

Allocations to policy holders

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• (1) Where in the case of an insurance company to which the Act of 1958 applies—

• (a) there is an established surplus in which long term policy holders of any class are eligible to participate; and

• (b) an amount has been allocated to policy holders of that class in respect of the last preceding established surplus in which policy holders of that class were eligible to participate,

the company shall not apply assets representing any part of the surplus mentioned in paragraph (a) above for purposes other than those mentioned in section 8(1) above unless the company has allocated to policy holders of that class in respect of that surplus either an amount not less than the relevant minimum or, if the requirements of subsection (3) below have been complied with, the smaller amount specified in the notice served under paragraph (a) of that subsection.

• (2) Subject to subsections (6) and (7) below, the relevant minimum is an amount calculated by—

• (a) taking an amount which bears to the surplus mentioned in paragraph (a) of subsection (1) above the same proportion as the amount mentioned in paragraph (b) of that subsection bears to the surplus mentioned in that paragraph; and

• (b) deducting an amount equal to one half of 1 per cent. of the amount of the surplus mentioned in the said paragraph (a).

• (3) The requirements of this subsection are that the company—

• (a) has served on the Secretary of State a written notice stating that it proposes to make an allocation of an amount (specifying it) which is smaller than the relevant minimum; and