Friendly Societies (Insurance Business) Regulations 1994
| Jurisdiction | UK Non-devolved |
| Citation | SI 1994/1981 |
1994 No. 1981
FRIENDLY SOCIETIES
The Friendly Societies (Insurance Business) Regulations 1994
Made 20th July 1994
Laid before Parliament 1st August 1994
Coming into force 1st September 1994
The Friendly Societies Commission, being a Department designated for the purposes of section 2(2) of the European Communities Act 19721in relation to the authorisation of the carrying on by friendly societies of insurance business and the regulation of such business and its conduct and in relation to anything supplemental or incidental to such matters2, in exercise of the powers conferred by that section and, with the consent of Treasury, in exercise of the powers conferred upon it by section 45(1) and (2), 46(1), (3), and (8), 48(1), (2), (6), and (7), 49(1), 56(1), (2) and (5) and 121(3) of the Friendly Societies Act 19923and of all other powers enabling it in that behalf, hereby makes the following Regulations:
PART I
PRELIMINARY
Citation and commencement
1. These Regulations may be cited as the Friendly Societies (Insurance Business) Regulations 1994, and shall come into force on 1st September 1994.
Interpretation: general
2.—(1) In these Regulations, unless the context otherwise requires—
“the 1982 Act” means the Insurance Companies Act 19824;
“the 1992 Act” means the Friendly Societies Act 1992;
“the 1987 Regulations” means the Friendly Societies (Long Term Insurance Business) Regulations 19875;
“the 1994 Regulations” means the Insurance Companies Regulations 19946;
“authorisation” has the same meaning as it has in Part IV of the 1992 Act by virtue of section 32(9) of that Act, and “authorised” shall be construed accordingly;
“cede” and “cession”, in relation to reinsurance, include retrocede and retrocession;
“the Commission” means the Friendly Societies Commission established by section 1 of the 1992 Act;
“deposit back arrangement”, in relation to any contract of reinsurance, means an arrangement whereby an amount is deposited by the reinsurer with the cedant;
“guarantee fund” has the meaning given in regulation 5(1) below;
“implicit items” has the meaning given by regulation 8(3) below and “implicit item” shall be construed accordingly;
“insurance company” means a person or body of persons (whether incorporated or not) carrying on insurance business other than a friendly society;
“linked long term contract” means a contract of the kind referred to in section 56(1) of the 1992 Act;
“mathematical reserves” means the provision made by a society to cover liabilities (excluding liabilities which have fallen due and liabilities arising from deposit back arrangements) arising under or in connection with contracts for long term business;
“minimum guarantee fund” has the meaning given in regulation 5(2) below;
“premium” includes a contribution in respect of an insurance benefit and the consideration for the granting of an annuity;
“required margin of solvency” has the meaning given in regulation 4(2) below;
“Schedule” means Schedule to these Regulations;
“society” means a society which is either an incorporated friendly society or a registered friendly society;
“the Stock Exchange” means the International Stock Exchange of the United Kingdom and the Republic of Ireland Limited;
“zillmerising” has the meaning given by regulation 10(7) below.
(2) Unless the context otherwise requires, expressions used in these Regulations which are defined in section 116, 117, 119 or in any other provision of the 1992 Act shall have the same meanings as they have for the purposes of that Act.
(3) Any reference in these Regulations to a financial year or preceding financial year of a friendly society shall be construed—
(a)
(a) in the case of a registered friendly society or an incorporated friendly society which was not formerly a registered friendly society, in accordance with section 118 of the 1992 Act; and
(b)
(b) in the case of an incorporated friendly society which was formerly a registered friendly society, as referring to a period of 12 months ending with 31st December during which period the friendly society was or is—
(i) a registered friendly society;
(ii) an incorporated friendly society; or
(iii) registered as an incorporated friendly society; or
as referring to such shorter period than 12 months ending with the date as at which the incorporated friendly society makes up its final accounts.
PART II
MARGINS OF SOLVENCY
Application: Part II
3.—(1) This Part of these Regulations applies to a society to which section 48 of the 1992 Act applies.
(2) Subject to regulation 62 below, a society which is—
(a)
(a) an incorporated friendly society, or
(b)
(b) an authorised registered friendly society,
is prescribed for the purposes of section 48(1)(c) of the 1992 Act.
Required margin of solvency
4.—(1) The margin of solvency of a society is the excess of the value of its assets over the amount of its liabilities determined in accordance with Parts IV and V of these Regulations.
(2) Subject to paragraphs (3) to (5) below, the margin of solvency to be maintained by a society to which this Part of these Regulations applies pursuant to section 48 of the 1992 Act (referred to in these Regulations as “the required margin of solvency”) shall be determined—
(a)
(a) with respect to a society which carries on long term business, in accordance with Schedule 1; and
(b)
(b) with respect to a society which carries on general business, by taking the greater of the two sums resulting from the application of the two methods of calculation set out in Schedules 2 and 3 respectively.
(3) For a contract to which section 117(4) of the 1992 Act applies, the required margin of solvency shall be determined by taking the aggregate of the results arrived at by applying—
(a)
(a) in the case of so much of the contract as is within any class of long term business, the appropriate method prescribed by Schedule 1 for that class; and
(b)
(b) in the case of so much of the contract as is within general business class 1 or 2, the method of calculation set out in Schedule 2 (excluding paragraphs 7, 8 and 9).
(4) Where a society carries on long term business and owing to the nature of that business more than one margin of solvency is produced in respect of that business by the operation of this Part of these Regulations, the margins in question shall be aggregated as regards the society in order to arrive at its required margin of solvency for long term business.
(5) Where a society carries on both long term and general business and is accordingly required to maintain separate margins of solvency in respect of the two kinds of business—
(a)
(a) these Regulations shall apply for determining the margin of solvency for each kind of business separately; and
(b)
(b) assets other than those representing the funds maintained by the society in respect of its long term business, if they are not included among the assets covering the liabilities and the margin of solvency relating to the society’s general business, may be included among the assets taken into account in covering the liabilities and the margin of solvency for the society’s long term business.
Guarantee fund and minimum guarantee fund
5.—(1) Subject to paragraphs (2) and (3) below, one-third of a required margin of solvency (being, in the case of long term business, the required margin of solvency determined in accordance with regulation 4(4) above) shall constitute the amount (“the guarantee fund”) prescribed for the purposes of section 49(1) of the 1992 Act.
(2) In the case of a society which is—
(a)
(a) an incorporated friendly society; or
(b)
(b) a registered friendly society to which section 37(2) or (3) of the 1992 Act applies, the guarantee fund shall not be less than an amount (“the minimum guarantee fund”) arrived at in accordance with regulation 6 for long term business and regulation 7 for general business respectively.
(3) In the case of long term business, items that are not implicit items must be at least large enough to cover either the minimum guarantee fund or 50 per cent. of the guarantee fund, whichever is the greater.
Minimum guarantee fund: long term business
6.—(1) In the financial year during which a society is first authorised under section 32 of the 1992 Act to carry on long term business, the minimum guarantee fund shall be the amount in column 2 of the table below, which corresponds to the society’s annual contribution income in respect of that business in the last preceding financial year, as shown in column 1 of the table
Contribution Income (in ECU) |
Minimum Guarantee Fund (in ECU) |
1,000,000 or less |
100,000 |
1,000,001-1,500,000 |
200,000 |
1,500,001-2,000,000 |
300,000 |
2,000,001-2,500,000 |
400,000 |
2,500,001-3,000,000 |
500,000 |
3,000,001 or more |
600,000 |
but where a society had no annual contribution income in respect of long term business in the last preceding financial year or has not been in existence long enough to have a preceding financial year, the minimum guarantee fund shall be an amount of 100,000 ECU.
(2) In any subsequent financial year during which a society continues to be authorised to carry on long term business, the minimum guarantee fund shall be the greater of either—
(a)
(a) the amount in column 2 of the table in paragraph (1) above that corresponds to the society’s annual contribution income in respect of long term business in the last preceding financial year; or
(b)
(b) the amount of the minimum guarantee fund required to be maintained by the society in the last preceding financial year,
providing that if the amount referred to in subparagraphs (a) and (b) above is the same, the minimum guarantee fund shall be that amount.
(3) Where a society obtains authorisation under section 32 of the 1992 Act to carry on long term...
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