The Friendly Societies Act 1992 (Amendment) Regulations 1994

• (a) give the notice and certificate referred to in sub–paragraph (2)(b) above to the supervisory authority in the member State in which the society intends to provide insurance; or

• (b) refuse to give either or both of those documents.

• (6) The Commission shall, within the period of one month referred to in sub–paragraph (5) above, notify the society–

• (a) that it has given the notice and certificate referred to in sub–paragraph (2)(b) above to the supervisory authority in the member State in which the society intends to provide insurance, stating the date on which it did so; or

• (b) that it has refused to give either or both of those documents, stating the reasons for the refusal.

• (7) The Commission shall not refuse to give the notice referred to in sub–paragraph (2)(b) above unless, having regard to the insurance to be provided in the member State, it appears to it that the criteria of prudent management would not or might not continue to be fulfilled in respect of the society.

6

• (1) A friendly society to which section 37(2) or (3) above applies shall not change the requisite details of the provision of insurance in a member State other than the United Kingdom unless the requirements of this paragraph have been complied with in relation to its making of the change.

• (2) The requirements of this paragraph are–

• (a) that the society has given a notice to the Commission stating the details of the proposed change;

• (b) that the Commission has sent to the supervisory authority in the member State in which the insurance is provided a notice in accordance with sub–paragraph (4)(a) below.

• (3) In the case of a change occasioned by circumstances beyond the society’s control, the requirements of this paragraph are that the society shall as soon as practicable give a notice to the Commission stating the details of the change.

• (4) The Commission shall, as soon as practicable after receiving a notice under sub–paragraph (2)(a) above either–

• (a) give notice to the supervisory authority in the member State in which the insurance is provided informing it of the proposed change; or

• (b) refuse to give such notice.

• (5) The Commission shall, as soon as practicable after making a decision under sub–paragraph (4) above, notify the society–

• (a) that it has given the notice referred to in that sub–paragraph, stating the date on which it did so; or

• (b) that it has refused to give the notice, stating the reasons for the refusal.

• (6) The Commission shall not refuse to give the notice referred to in sub–paragraph (4)(a) above unless, having regard to the proposed change, it appears to it that the criteria of prudent management would not or might not continue to be fulfilled in respect of the society.

Requisite details for purposes of paragraphs 5 and 6

7

The requisite details for the purposes of paragraphs 5 and 6 above are–

• (a) the member State in which the insurance is to be provided;

• (b) the nature of the risks or commitments which the society proposes to cover in that State; and

• (c) in the case of a society which intends to cover health insurance risks, the technical bases which will be used for calculating premiums in respect of such risks.

Requirement to notify cessation of business etc.

8

A friendly society to which section 37(2) or (3) above applies which has ceased–

• (a) to carry on insurance business through an overseas branch in a member State other than the United Kingdom; or

• (b) to provide insurance in such a member State,

shall as soon as practicable notify the Commission in writing that it has done so.

PART II — FRIENDLY SOCIETIES PROVIDING INSURANCE IN EFTA STATES

Notification to Commission

9

• (1) Where a friendly society to which section 37(2) or (3) above applies intends to provide insurance in an EFTA State, it shall before doing so notify the Commission of its intention.

• (2) The notification shall indicate–

• (a) the EFTA State in which the insurance is to be provided;

• (b) the EEA State in which the establishment through which the risks or commitments will be covered is situated (“the EEA State of establishment”); and

• (c) the nature of the risks or commitments which the society proposes to cover.

• (3) Where the society intends to provide insurance in more than one EFTA State, the information specified above may be contained in a single notification but must be set out separately in relation to each such State.

• (4) Where–

• (a) a friendly society to which section 37(2) or (3) above applies has duly notified the Commission of its intention to provide insurance in an EFTA State; and

• (b) the society subsequently intends to extend its activities to risks or commitments the nature of which was not indicated in the notification,

it shall before doing so comply with sub-paragraphs (1) to (3) above in relation to those risks or commitments.

Issue of certificates by Commission

10

• (1) A friendly society to which section 37(2) or (3) above applies which intends to provide insurance in an EFTA State may apply to the Commission for a certificate–

• (a) attesting that the society possesses for its activities as a whole the minimum solvency margin calculated in accordance with the relevant provisions;

• (b) indicating the classes of business which the society is authorised to carry on in the United Kingdom;

• (c) stating that the Commission does not object to the society providing the insurance; and

• (d) attesting that the society’s authorisation to carry on business in the United Kingdom, issued in accordance with Article 7(1) of the relevant Directive, enables the society to carry on business outside the EEA State of establishment.

• (2) If it appears to the Commission that a certificate applied for under sub–paragraph (1) above ought to be issued, it shall issue the certificate accordingly.

• (3) If the Commission refuses to issue a certificate, it shall inform the society in writing of its decision and of the reasons for it.

• (4) In sub–paragraph (1) above “the relevant Directive” and “the relevant provisions” means respectively–

• (a) if the society intends to cover risks, the first general insurance Directive and Articles 16 and 17 of that Directive;

• (b) if the society intends to cover commitments, the first life Directive and Articles 19 and 20 of that Directive.

PART III — FRIENDLY SOCIETIES PROVIDING INSURANCE IN THE UNITED KINGDOM THROUGH OVERSEAS BRANCHES IN OTHER EEA STATES

11

• (1) Where a friendly society to which section 37(2) or (3) above applies intends to provide insurance in the United Kingdom, it shall before doing so notify the Commission of its intention.

• (2) The notification shall indicate–

• (a) the EEA State in which is situated the overseas branch through which the society intends to provide insurance in the United Kingdom; and

• (b) the nature of the risks or commitments which the society proposes to cover in the United Kingdom.

• (3) Where the EEA State in which is situated the overseas branch through which the society intends to provide insurance in the United Kingdom is an EFTA State, the notification shall be accompanied by a certificate, issued by the supervisory authority in that State, which–

• (a) indicates the classes of insurance business which the society has been authorised to undertake through that branch;

• (b) states that the authority does not object to the society providing insurance in the United Kingdom; and

• (c) where the society intends to provide long term insurance in the United Kingdom, confirms that all the commitments which the society intends to cover fall within the classes of insurance business which the society has been authorised to undertake through that branch.

• (4) The society shall notify the Commission in writing if–

• (a) it changes either of the details notified to the Commission under sub–paragraph (2) above; or

• (b) it ceases to provide insurance in the United Kingdom.

PART IV — SUPPLEMENTAL

Offences

12

• (1) A friendly society to which section 37(2) or (3) above applies commits an offence if–

• (a) it carries on insurance business in a member State other than the United Kingdom in contravention of paragraph 1 above;

• (b) in contravention of paragraph 2 or 3 above, it changes the requisite EC details or, as the case may be, the requisite UK details of an overseas branch established by it in such a member State;

• (c) it provides insurance in such a member State in contravention of paragraph 5 above;

• (d) in contravention of paragraph 6 above, it changes the requisite details relating to the provision of insurance in such a member State; or

• (e) it makes default in complying with, or with a requirement imposed under, any other provision of this Schedule.

• (2) A person commits an offence if he causes or permits to be included in a notification sent to the Commission under paragraph 1, 2, 3, 5 or 6 above a statement which he knows to be false in a material particular or recklessly causes or permits to be so included a statement which is false in a material particular.

• (3) A person committing an offence under this paragraph shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

Interpretation

13

• (1) In this Schedule–

• (a) references in Part I to the provision of insurance in a member State other than the United Kingdom are references to the covering (otherwise than by way of reinsurance) of a risk or commitment situated in that member State through an establishment in another member State;

• (b) references in Part II to the provision of insurance in an EFTA State are references to the covering (otherwise than by way of reinsurance) of a risk or commitment situated in that EFTA State through an establishment in another EEA State;

• (c) references in Part III to the provision of insurance in the United Kingdom are references to the covering (otherwise than by way of reinsurance) of a risk or commitment situated in the United Kingdom–

• (i) through an establishment in another member State; or

• (ii) through an establishment in an EFTA State.

• (2) In sub–paragraph (1)(b) and (c)(ii) above–

• (a) references to a risk are references to a risk falling within head B of Schedule 2 to this Act (general business), other than class 1, so far as it relates to accidents at work; and

• (b) references to a commitment are references to a commitment falling within head A of Schedule 2 to this Act (long term business), other than class VII.

• (3) In this Schedule “health insurance risks”, in relation to a member State, means risks falling within class 2 of Schedule 2 to this Act (sickness) where–

• (a) insurance contracts covering those risks serve as a partial or complete alternative to the health cover provided by the statutory social security system in that State; and

• (b) the law of that State requires such contracts to be operated on a technical basis similar to life assurance in accordance with all the conditions listed in the first sub–paragraph of Article 54(2) of the third general insurance Directive.

SCHEDULE 3 — [SCHEDULE 13C TO 1992 ACT]

Information before contract of long term insurance

1

• (1) Subject to sub–paragraph (2) below, this paragraph applies to a contract entered into by a friendly society to which section 37(2) above applies the effecting of which constitutes–

• (a) the carrying on in the United Kingdom of long term business which is not reinsurance business; or

• (b) the provision there of long term insurance.

• (2) This paragraph does not apply to a contract entered into by an authorised person the effecting of which constitutes the carrying on in the United Kingdom of investment business; and in this sub–paragraph expressions which are also used in the Financial Services Act 1986[^f00017] have the same meanings as in that Act.

• (3) Before entering into a contract to which this paragraph applies, the society shall furnish the other party to the contract in writing with the information required by sub–paragraph (4) below.

• (4) The information required by this sub–paragraph is–

• (a) the name and legal form of the society;

• (b) a statement that the society’s registered office is the United Kingdom and, where appropriate, the member State in which is situated the overseas branch through which the contract is to be entered into;

• (c) the address of the society’s registered office and, where appropriate, the address of the overseas branch through which the contract is to be entered into;

• (d) a definition of each benefit and option;

• (e) the term of the contract and the means by which it may be terminated;

• (f) the method of paying premiums and the duration of the payments;

• (g) the method of calculating bonuses and the distribution of bonuses;

• (h) an indication of surrender and paid–up values and the extent to which such values are guaranteed;

• (i) an indication of the premiums for each benefit, whether a main or supplementary benefit;

• (j) in the case of a contract for a unit–linked policy, a definition of the units to which benefits are linked and an indication of the nature of the underlying assets;

• (k) information as to the following, namely–

• (i) the arrangements with respect to the period within which the other party may cancel the contract;

• (ii) the tax arrangements applicable to the contract or any policy to be effected by it;

• (iii) the arrangements for handling any complaints concerning the contract, whether by the other party or any other person who is a life assured or beneficiary; and

• (iv) any compensation or guarantee arrangements which will be available if the society is unable to meet its liabilities under the contract; and

• (m) whether the parties to the contract are entitled to choose the law applicable to the contract and–

• (i) if so, the law which the society proposes to choose; and

• (ii) if not, the law which will be so applicable.

• (5) Any information required by sub–paragraph (4) above shall be furnished in English except that, where the other party to the contract so requests, it may instead be furnished in an official language of a member State other than the United Kingdom.

Information during contract of long term insurance

2

• (1) This paragraph applies where a friendly society to which section 37(2) above applies has, on or after 1st September 1994, entered into a contract the effecting of which constitutes–

• (a) the carrying on in the United Kingdom of long term business which is not reinsurance business; or

• (b) the provision there of long term insurance.

• (2) If during the term of the contract there is any change in the information required by paragraphs (a) to (j) of paragraph 1(4) above, the society shall inform the other party to the contract in writing of the effect of the change.

• (3) If the contract provides for the payment of bonuses, the society shall, at least once in every calendar year except the first, inform the other party to the contract in writing of the amount of any bonus–

• (a) which has become payable under the contract, and

• (b) of which that party has not been previously informed under this sub–paragraph.

• (4) There is a sufficient compliance with sub–paragraph (3) above if the society furnishes the other party to the contract with such information as will enable him to determine the amount of any such bonus as is mentioned in that sub–paragraph, or if the society informs that party of–

• (a) the rates of bonus which have been declared since that party was previously informed under this sub–paragraph; and

• (b) the total value of the benefits (including bonuses) which have accrued under the contract.

• (5) In this paragraph “bonus” does not include a bonus the amount of which is specified in the contract.

Information before contract of general insurance

3

• (1) This paragraph applies to a contract entered into by a friendly society to which section 37(3) above applies if–

• (a) the effecting of the contract constitutes–

• (i) the carrying on in the United Kingdom of general business which is not reinsurance business; or

• (ii) the provision there of general insurance; and

• (b) the risk which is covered by the contract is situated in the United Kingdom.

• (2) Before entering into a contract to which this paragraph applies, the society shall, if the other party to the contract is an individual, inform that party in writing–

• (a) of any arrangements which exist for handling complaints concerning the contract including, where appropriate, the name and address of any body which deals with complaints from any party to the contract;

• (b) that the existence of a complaints body does not affect any right of action which any party to the contract may have against the society; and,

• (c) as to whether the parties to the contract are entitled to choose the law applicable to the contract and–

• (i) if so, of the law which the society proposes to choose; and

• (ii) if not, of the law which will be so applicable.

• (3) If the information required by sub–paragraph (2) above is furnished otherwise than in writing before the time when the contract is entered into, there is a sufficient compliance with that sub–paragraph if it is also furnished in writing as soon as practicable after that time.

4

• (1) This paragraph applies to a contract entered into by a friendly society to which section 37(3) above applies if the effecting of the contract constitutes the provision in the United Kingdom of general insurance.

• (2) Before entering into a contract to which this paragraph applies, the society shall inform the other party to the contract in writing of the member State in which is situated the establishment which will cover the risks; and any document issued to that party by the society shall also contain that information.

• (3) If the information required by sub–paragraph (2) above is furnished otherwise than in writing before the time when the contract is entered into, there is a sufficient compliance with that sub–paragraph if it is also furnished in writing as soon as practicable after that time.

• (4) Any relevant document issued by the society in relation to a contract to which this paragraph applies shall state the address of the establishment through which the risk is to be covered.

• (5) In this paragraph “relevant document”, in relation to a contract to which this section applies, means any proposal, policy, rules or other document which, or statements contained in which, will or may bind the other party to the contract.

Supplemental

5

A friendly society which fails to comply with any provision of this Schedule shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

SCHEDULE 4 — CONFIRMATION BY COMMISSION OF TRANSFERS OF ENGAGEMENTS

Application for confirmation

1

• (1) After sub–paragraph (1) of paragraph 6 of Schedule 15 to the 1992 Act (application for confirmation) insert–

(1A) Where an application for confirmation of a transfer is made by a friendly society to which section 37(2) or (3) above applies and either– (a) as regards any policy included in the proposed transfer, a member State other than the United Kingdom is the State in which the risk or commitment is situated; or (b) as regards any EFTA policy included in the proposed transfer, an EEA State other than the United Kingdom is the State in which the risk or commitment is situated, the society shall also; if the Commission so directs publish the notice in two national newspapers in that State.

• (2) In sub–paragraph (3) of that paragraph, for paragraph (b) substitute–

(b) stating– (i) the addresses of the offices of the society, and (ii) where the society is directed in accordance with sub–paragraph (1A) above to publish a notice of the application in two national newspapers in a State other than the United Kingdom, the address of such place in that State as the Commission directs, - at which copies of the report shall be available for inspection for a period of not less than 21 days beginning with the date of the first publication of the notice; and

Confirmation: general

2

In paragraph 13 of that Schedule (confirmation: general), after sub–paragraph (2) insert—

(3) This paragraph and paragraph 14 below do not apply to any transfer of engagements to which paragraph 15 or 15A below applies.

Confirmation: general business

3

For paragraph 15 of that Schedule (confirmation: general business) substitute—

(15) (1) This paragraph applies to any transfer of engagements (other than contracts of reinsurance) where– (a) the effecting of the engagements constituted the carrying on of general business; (b) the transferor is a friendly society to which section 37(3) above applies; and (c) the transferee is– (i) a friendly society to which section 37(2) or (3) above applies; (ii) a UK company; (iii) an EC company; (iv) a non–EC company whose head office is in an EFTA State; (v) a Swiss general insurance company; or (vi) an insurance company whose margin of solvency is required to be supervised in accordance with Article 25 or 26 of the first general insurance Directive. (2) The Commission shall not confirm the transfer unless– (a) it is satisfied that the transferee is, or will be immediately after the approval– (i) authorised under section 32 above to carry on, or (ii) authorised under section 3 or 4 of the Insurance Companies Act 1982[^f00018] to carry on, or (iii) authorised in accordance with Article 6 of the first general insurance Directive to carry on in an EEA State other than the United Kingdom, general business of the class or classes to be transferred; (b) it is also satisfied that every policy included in the transfer evidences a contract which was entered into before the date of the application; (c) the relevant authority certifies that the transferee possesses the necessary margin of solvency after taking the proposed transfer into account; and (d) where the establishment from which the policies are to be transferred is situated in a member State other than the United Kingdom, the Commission is satisfied– (i) that the supervisory authority in that member State has been consulted about the proposed transfer; and (ii) either that the authority has responded or that the period of three months beginning with the consultation has elapsed. (3) Where, as regards any policy (other than an EFTA policy) which is included in the proposed transfer, the risk is situated in a member State other than the United Kingdom, the Commission shall not confirm the transfer unless it is satisfied– (a) that the supervisory authority in that member State has been notified of the proposed transfer; (b) either that the authority has consented to the transfer or that the authority has not refused its consent to the transfer within the period of three months beginning with the notification. (4) Where the establishment of the transferee to which the policies are to be transferred is situated in the United Kingdom and, as regards any EFTA policy included in the proposed transfer, an EEA State other than the United Kingdom is the State in which the risk is situated, the Commission shall not confirm the transfer unless it is satisfied that– (a) the transferee either fulfils the conditions in Articles 13 to 16 of the second general insurance Directive in that EEA State; and (b) the supervisory authority in that EEA State agrees to the transfer. (5) Where the establishment of the transferee to which the policies are to be transferred is situated in an EEA State other than the United Kingdom and, as regards any EFTA policy included in the proposed transfer, an EEA State other than the United Kingdom is the State in which the risk is situated, the Commission shall not confirm the transfer unless– (a) where the EEA State in which the establishment is situated is also the State in which the risk is situated, it is satisfied that the supervisory authority in that EEA State agrees to the transfer; (b) where the United Kingdom is the State in which the risk is situated, it is satisfied that the transferee is not precluded by Schedule 2F to the Insurance Companies Act 1982 from covering the risk; and (c) where an EEA State other than the United Kingdom or the EEA State in which the establishment is situated is the State in which the risk is situated, it is satisfied that– (i) the transferee either fulfils the conditions in Articles 13 to 16 of the second general insurance Directive in the EEA State in which the risk is situated; (ii) the law of that State provides for the possibility of such a transfer; and (iii) the supervisory authority in that State agrees to the transfer. (6) In this paragraph “the relevant authority” means– (a) if the transferee is a friendly society to which section 37(2) or (3) above applies, the Commission; (b) if the transferee is a United Kingdom company, the Secretary of State; (c) if the transferee is an EC company, the supervisory authority in its home State; (d) if the transferee is a non–EC company whose head office is in an EFTA State, the supervisory authority in that EFTA State; (e) if the transferee is a Swiss general insurance company, the supervisory authority in Switzerland; (f) if the transferee is an insurance company whose margin of solvency is required to be supervised in accordance with Article 25 or 26 of the first general insurance Directive, the Secretary of State or other supervisory authority responsible for the supervision.

Confirmation: long term business

4

For paragraph 15A of that Schedule (confirmation: long term business) substitute–

(15A) (1) This paragraph applies to any transfer of engagements (other than contracts of reinsurance) where– (a) the effecting of the engagements constituted the carrying on of long term business; (b) the transferor is a friendly society to which section 37(3) above applies; and (c) the transferee is– (i) a friendly society to which section 37(2) or (3) above applies; (ii) a UK company; (iii) an EC company; (iv) a non–EC company whose head office is an EFTA State; or (v) an insurance company whose margin of solvency is required to be supervised in accordance with Article 29 or 30 of the first life Directive. (2) The Commission shall not confirm the transfer unless– (a) it is satisfied that the transferee is, or will be immediately after the making of the confirmation– (i) authorised under section 32 above to carry on, or (ii) authorised under section 3 or 4 of the Insurance Companies Act 1982 to carry on, or (iii) authorised in accordance with Article 6 of the first life Directive to carry on in an EEA State other than the United Kingdom, long term business of the class or classes to be transferred; (b) the relevant authority certifies that the transferee possesses the necessary margin of solvency after taking the proposed transfer into account; and (c) where the establishment from which the policies are to be transferred is situated in a member State other than the United Kingdom, the Commission is satisfied– (i) that the supervisory authority in that member State has been consulted about the proposed scheme; and (ii) either that the authority has responded or that the period of three months beginning with the consultation has elapsed. (3) Where, as regards any policy (other than an EFTA policy) which is included in the proposed transfer, a member State other than the United Kingdom, is the State in which the commitment is situated, the Commission shall not confirm the transfer unless it is satisfied– (a) that the supervisory authority in that member State has been notified of the proposed scheme; and (b) either that the authority has consented to the scheme or that the authority has not refused its consent to the scheme within the period of three months beginning with the notification. (4) Where the establishment of the transferee to which the policies are to be transferred is situated in the United Kingdom and, as regards any EFTA policy included in the proposed transfer, an EEA State other than the United Kingdom is the State in which the commitment is situated, the Commission shall not confirm the transfer unless it is satisfied that– (a) the transferee either fulfils the conditions in Articles 11, 12, 14 and 16 of the second life Directive in that EEA State; and (b) the supervisory authority in that EEA State agrees to the transfer. (5) Where the establishment of the transferee to which the policies are to be transferred is situated in an EEA State other than the United Kingdom and, as regards any ETFA policy included in the proposed transfer, an EEA State is the State in which the commitment is situated, the Commission shall not confirm the transfer unless– (a) where the EEA State in which the establishment is situated is also the State in which the commitment is situated, it is satisfied that the supervisory authority in that EEA State agrees to the transfer; (b) where the United Kingdom is the State in which the commitment is situated, it is satisfied that the transferee is not precluded by Schedule 2F to the Insurance Companies Act 1982 from covering the commitment; and (c) where an EEA State other than the United Kingdom or the EEA State in which the establishment is situated is the State in which the risk is situated, it is satisfied that– (i) the transferee fulfils the conditions in Articles 11, 12, 14 and 16 of the second life Directive in the EEA State which is the State in which the commitment is situated; (ii) the law of that State provides for the possibility of such a transfer; and (iii) the supervisory authority in that State agrees to the transfer. (6) In this paragraph “the relevant authority” means– (a) if the transferee is a friendly society to which section 37(2) or (3) above applies, the Commission; (b) if the transferee is a UK company, the Secretary of State; (c) if the transferee is an EC company, the supervisory authority in its home State; (d) if the transferee is a non–EC company whose head office is in an EFTA State, the supervisory authority in that EFTA State; (e) if the transferee is an insurance company whose margin of solvency is required to be supervised in accordance with Article 29 or 30 of the first life Directive, the Secretary of State or other supervisory authority responsible for the supervision.

Rights of policy holders

5

After paragraph 16 of that Schedule insert—

(16A) (1) This paragraph applies where the Commission confirms a transfer in accordance with paragraph 15 above and either– (a) as regards any policy included in the transfer, a member State other than the United Kingdom is the member State in which the risk is situated; or (b) as regards any EFTA policy included in the transfer, and EEA State other than the United Kingdom is the EEA State in which the risk is situated. (2) The Commission shall direct that– (a) notice of its decision, and of the execution of any instrument giving effect to the transfer, shall be published in the member State or, as the case may be, the EEA State in which the risk is situated; and (b) the notice shall specify the period during which the policy holder may exercise any right to cancel the policy; and the instrument shall not bind the policy holder if either such a notice is not so published or the policy holder exercises any such right during the period so specified. (3) The law of the member State or, as the case may be, the EEA State in which the risk is situated shall determine– (a) whether the policy holder has a right to cancel the policy; and (b) the conditions applicable to any such right.

6

After paragraph 16A of that Schedule insert—

(16B) (1) This paragraph applies where the Commission confirms a transfer in accordance with paragraph 15A above and either– (a) as regards any policy included in the transfer, a member State other than the United Kingdom is the State in which the commitment is situated; or (b) as regards any EFTA policy included in the transfer, an EEA State other than the United Kingdom is the State in which the commitment is situated. (2) The Commission shall direct that– (a) notice of the making of any order, or the execution of any instrument, giving effect to the transfer shall be published in the member State or, as the case may be, the EEA State which is the State in which the commitment is situated; and (b) the notice shall specify the period during which the policy holder may exercise any right to cancel the policy; and the instrument or order shall not bind the policy holder if either such a notice is not so published or the policy holder exercises any such right during the period so specified. (3) The law of the member State or, as the case may be, the EEA State which is the State in which the commitment is situated shall determine– (a) whether the policy holder has a right to cancel the policy; and (b) the conditions applicable to any such right.

Supplemental

7

For paragraph 18 of that Schedule (interpretation) substitute—

(18) (1) In this Part of this Schedule expressions used which are defined in the Insurance Companies Act 1982 but are not defined for the purposes of this Part of this Schedule have the same meaning as they have for the purposes of that Act. (2) In this Part of this Schedule– - “policy” means a contract (other than a contract of reinsurance) the effecting of which by a friendly society to which section 37(2) or (3) above applies constituted the carrying on of insurance business of any class; - “policy holder” means a member whose contract with such a society is a contract the effecting of which by the society constituted the carrying on of insurance business (other than reinsurance business) of any class; - “relevant requirement”, with reference to this Act or the rules of a friendly society, means a requirement of this Part of this Act or of any rules prescribing the procedure to be followed by the society in approving or effecting an amalgamation or transfer of engagements or its conversion into a company. (3) A policy which evidences a contract of direct insurance is an “EFTA policy” for the purposes of this Part of this Schedule if– (a) it covers a risk or commitment in an EFTA State and the transferee is a friendly society to which section 37(2) or (3) above applies, a UK or EC company or a non– EC company whose head office is in an EFTA State; or (b) it covers a risk or commitment situated in a member State and the transferee is a non–EC company whose head office is in an EFTA State.

Signed

In witness whereof the common seal of the Friendly Societies Commission is hereunto fixed, and is authenticated by me, a person authorised under paragraph 13 of Schedule 1 to the Friendly Societies Act 1992, on 21st July 1994.

Michael Cook — Secretary to the Commission

Explanatory note

(This note is not part of the Regulations)

These Regulations, which come into force on 1st September 1994, make amendments to the Friendly Societies Act 1992 (``the 1992 Act'') and revoke regulations 2(2), 4 and 5 of the Friendly Societies (Amendment) Regulations 1993 (S.I. 1993/2519).

The Regulations, which apply to societies to which section 37(2) or (3) of the 1992 Act applies (``Directive societies''), give effect to the relevant provisions of–

• (a) the Third Life Directive (that is, Council Directive 92/96/EEC on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC (O.J. No. L360, 9.12.92, p.1); and

• (b) the Third Non–Life Directive (that is, Council Directive 92/49/EEC on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/ 357/EEC (O.J. No. L228, 11.8.92, p.1)).

The Regulations also give further effect to the relevant provisions of the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 (O.J. L1, 3.1.94, p.3) as adjusted by the Protocol signed at Brussels on 17th March 1992 (O.J. L1, 3.1.94, p.572) (“the EEA Agreement”).

Part I of the Regulations makes provision for the citation, commencement and extent of the Regulations and contains interpretation provisions.

Part II amends section 1 of the 1992 Act to ensure that the Friendly Societies Commission (“the Commission”), which is a statutory body, has all the functions (and powers) required under the Life and Non–Life Directives.

Part III makes changes to the authorisation process. Regulation 4 ensures that the authorisation granted to a Directive society is valid for the whole of the UK. (Any restriction on the authorisation of a Directive society therefore ceases to have effect.) Any Directive society will, by virtue of its authorisation under section 32 of the 1992 Act, be able to establish a branch or provide insurance in another member State without requiring further authorisation in the host member State.

Regulation 5 amends section 34 of the 1992 Act (grant of unconditional or conditional authorisation) to ensure the Commission cannot grant authorisation unless, inter alia, it is satisfied that any controller of a Directive society is a fit and proper person to be such a controller. A definition of controller is set out in section 55A of the 1992 Act inserted by regulation 14.

Regulations 6 and 7 make minor amendments to the Commission’s powers to withdraw authorisation to ensure compliance with the Directives.

Part IV makes changes to Part V of the 1992 Act. Regulation 9 inserts section 49A requiring a Directive society to secure the adequacy of assets covering the liabilities of its insurance business. Regulation 10 inserts section 49B requiring such a society to ensure the adequacy of premiums payable under its long term insurance contracts. Minor changes are made to section 48 (margins of solvency), section 50 (criteria of prudent management), section 52 (application to court) to ensure compliance with the Directives and the EEA Agreement. Regulation 13 inserts section 52A which gives the Commission power to obtain, on specified grounds, an injunction (or, in Scotland, an interdict) to prohibit a Directive society from disposing of assets to the value of the liabilities of its business in the European Community. Regulation 14 inserts section 55A and Schedule 13A which provide for supervision of persons who propose to become, become or cease to become controllers of Directive societies.

Regulation 15 substitutes a new provision for section 57 of the 1992 Act which with new Schedule 13B sets out the requirements to be met by a Directive society intending to establish an overseas branch in another member State, or to provide insurance in any member State or EEA State through an establishment in another State. Regulation 15(3) and (4) contain transitional provisions for any Directive society lawfully carrying on business through an overseas branch in another member State or providing insurance in another such State prior to the coming into force of the Regulations — such a society is treated as if it had complied with the new requirements. Regulation 16 substitutes a new provision for section 57A of the 1992 Act which requires the Commission to notify any supervisory authority of another EEA State of any measures it intends to take or has taken in relation to a Directive society in certain circumstances. Regulations 17 to 20 extend the powers of the Commission to obtain information including a power to enter certain premises to obtain information. Regulation 18 ensures that the Commission may not disclose confidential information relating to a Directive society unless it is in accordance with the Third Directives to do so.

Part V inserts new sections 67A—67D and Schedule 13C requiring a Directive society to furnish specified information to potential members or members. Regulation 21 inserts section 67A and Schedule 13C requiring a Directive society carrying on insurance business to furnish a potential member with specified information before any contract of long term or general insurance, and to furnish a member with information during the term of contract of long term insurance. Regulation 22 inserts section 67B which requires a Directive society, in certain circumstances, to send a potential member a statutory notice setting out that person’s right to cancel a contract of long term insurance within 14 days. (The form of the statutory notice is set out in regulation 52 of the Friendly Societies (Insurance Business) 1992 Regulations (S.I. 1994/1981.) There are six exemptions from the requirement to send a statutory notice in section 67B(7) — one of these is where the long term business concerned is also investment business within the meaning of the Financial Services Act 1986 (c. 60). Regulations 23 and 24 insert sections 67C and 67D which supplement the member’s right to cancel a contract.

Part VI deals with transfers of engagements. Regulations 25 to 28 amend the existing transfer provisions to ensure compliance with the Directives and the EEA Agreement. The main changes are to transfers of engagements concerning members who are resident in another member State or EEA State.

Part VII supplements the new provisions by inserting a series of new definitions in the 1992 Act.

A review of the cost of compliance with these Regulations has been undertaken and the resulting compliance cost assessment may be purchased from the Secretary, Friendly Societies Commission, 15 Great Marlborough Street, London W1V 2AX.

Footnotes

[^f00001]: S.I. 1992/3197.

[^f00002]: 1972 c. 68.

[^f00003]: 1992 c. 40.

[^f00004]: S.I. 1993/2519.

[^f00005]: S.I. 1994/1981.

[^f00006]: 1972 c. 68.

[^f00007]: 1986 c. 60.

[^f00008]: O.J. L1, 3.1.94, page 3.

[^f00009]: O.J. L1, 3.1.94, page 572.

[^f00010]: O.J. L228, 11.8.92, page 1.

[^f00011]: O.J. L228, 16.8.73, page 3.

[^f00012]: O.J. L172, 4.7.88, page 1.

[^f00013]: O.J. L360, 9.12.92, page 1.

[^f00014]: O.J. L63. 13.3.79, page 1.

[^f00015]: O.J. L330, 29.11.90, page 50.

[^f00016]: 1982 c. 50.

[^f00017]: 1986 c. 60.

[^f00018]: 1982 c. 50.