Insurance Companies Act 1974

Publication Date:January 01, 1974
 
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Insurance Companies Act1974

1974 CHAPTER 49

An Act to consolidate, with certain exceptions, the provisions of the Insurance Companies Acts 1958 to 1973.

[31st July 1974]

Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

I Restriction on Carrying on Insurance Business

Part I

Restriction on Carrying on Insurance Business

Preliminary

Preliminary

S-1 Classes of insurance business relevant for Part I.

1 Classes of insurance business relevant for Part I.

(1) The classes of insurance business relevant for the purposes of this Part of this Act are—

(a ) ordinary long-term insurance business

(b ) industrial assurance business

(c ) liability insurance business

(d ) marine, aviation and transport insurance business

(e ) motor vehicle insurance business

(f ) pecuniary loss insurance business;

(g ) personal accident insurance business;

(h ) property insurance business.

(2) In this Act ‘long term business’ means insurance business of either or both of the classes mentioned in paragraphs (a ) and (b ) of subsection (1) above and includes, in relation to any insurance company, insurance business carried on by the company as incidental only to any such class of business; and ‘general business’ means insurance business not being long term business.

Authorised insurers

Authorised insurers

S-2 Persons permitted to carry on insurance business.

2 Persons permitted to carry on insurance business.

(1) No person shall carry on in Great Britain insurance business of a class relevant for the purposes of this Part of this Act, other than industrial assurance business, except—

(a ) a body corporate which is authorised under section 3 below to carry on business of that class

(b ) an unincorporated body of persons which is authorised under that section to carry on business of that class, being a body which immediately before 3rd November 1966 was carrying on insurance business (whether of that class or not) in Great Britain;

(c ) a member of Lloyd's, or of any other association of underwriters approved for the purposes of this Part of this Act by the Secretary of State;

(d ) a body registered under the Acts relating to friendly societies; or

(e ) a trade union or employers' association (within the meaning of the Trade Union and Labour Relations Act 1974 ) where me insurance business carried on by the union or association is limited to the provision for its members of provident benefits or strike benefits.

(2) No person shall carry on in Great Britain industrial assurance business except—

(a ) a body corporate which is authorised under section 3 below to carry on such business; or

(b ) a society registered under the Friendly Societies Act 1896 , being a friendly society within the meaning of that Act.

(3) Subsection (1) above shall not preclude any person from carrying on pecuniary loss insurance business if he carries it on solely in me course of carrying on, and for the purposes of, banking business.

(4) The Acts mentioned in subsection (1)(d ) above include Acts of me Parliament of Northern Ireland and Measures of the Northern Ireland Assembly, and the reference in subsection (2)(b ) above to the Friendly Societies Act 1896 includes a reference to that Act as it applies to Northern Ireland and to any enactment of the Parliament of Northern Ireland or Measure of the Northern Ireland Assembly re-enacting that Act with or without modifications.

S-3 Authorisations.

3 Authorisations.

(1) A body corporate and, subject to subsection (2) below, an unincorporated body of persons shall be authorised to carry on in Great Britain insurance business of a class relevant for the purposes of this Part of this Act if either—

(a ) it was carrying on in Great Britain insurance business of that class immediately before 3rd November 1966 (and was not then carrying on business in contravention of section 2(1) of the Insurance Companies Act 1958 ); or

(b ) it is authorised by the Secretary of State to carry on insurance business of that class.

(2) An unincorporated body of persons shall not be authorised under either paragraph of subsection (1) above to carry on industrial assurance business and no such body shall be authorised under paragraph (b ) of that subsection to carry on insurance business of any other class unless it was carrying on in Great Britain insurance business (whether of that class or not) immediately before 3rd November 1966.

S-4 Margin of solvency required for authorisation.

4 Margin of solvency required for authorisation.

(1) Subject to section 8 below, the Secretary of State shall not issue an authorisation under section 3(1)(b ) above (hereafter referred to as ‘an authorisation’) in respect of any body unless he is satisfied—

(a ) in a case in which the body is, when the authorisation is applied for, carrying on (whether within or outside Great Britain) general business and has completed its first financial year, that the value of its assets exceeds the amount of its liabilities by the relevant amount;

(b ) in any other case, that it has assets whose value amounts (after deduction, if it has liabilities, of the amount thereof) to not less than 50,000.

(2) For the purposes of subsection (1)(a ) above the relevant amount is, subject to subsection (3) below, in each of the cases set out in the first column of the following Table, the amount specified in relation to that case in the second column of that Table.

Table

Case Relevant Amount

1. The general premium income of the body in its last preceding financial year did not exceed 250,000.

50,000.

2. The said income in that year exceeded 250,000 but did not exceed 2,500,000.

One fifth of the said income in that year.

3. The said income in that year exceeded 2,500,000.

The aggregate of 500,000 and one tenth of the amount by which the said income in that year exceeded 2,500,000.

(3) In the case of a body whose last preceding financial year was not a period of twelve months (other than a body which has not completed its second financial year and whose first financial year was a period of less than twelve months) subsection (2) above shall have effect—

(a ) with the substitution for each number specified in the Table (other than 50,000 and 500,000) of a number equal to the product derived by multiplying the number so specified by the relevant fraction; and

(b ) with the substitution for each fraction specified in that Table of a fraction equal to the quotient derived by dividing the fraction so specified by the relevant fraction;

and for the purposes of this subsection the relevant fraction is a fraction whose numerator is the number of days in the body's last preceding financial year and whose denominator is 365.

(4) For the purposes of this section—

(a ) in computing the amount of the liabilties of a body, all contingent and prospective liabilities shall be taken into account but not liabilities in respect of share capital; and

(b ) the general premium income of a body in any year shall be taken to be the net amount, after deduction of any premiums paid by the body for reinsurance, of the premiums received by the body in that year in respect of all insurance business other than long term business.

(5) For the purposes of this section the value of any assets and the amount of any liabilities shall, subject to subsection (6) below, be determined in accordance with any applicable regulations made under section 78 below (hereafter referred to as ‘valuation regulations’), and subsection (4)(a ) above shall have effect subject to any such regulations made by virtue of subsection (2) of that section.

(6) For the purposes of this section the amount of the liabilities of the long term business of a body at any time 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 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.

S-5 Paid up share capital required for authorisation.

5 Paid up share capital required for authorisation.

5. Subject to section 8 below, the Secretary of State shall not issue an authorisation in respect of any body corporate (other than a registered society) which has a share capital unless the amount paid up thereon is 100,000 or more.

S-6 Reinsurance arrangements required for authorisation.

6 Reinsurance arrangements required for authorisation.

6. The Secretary of State shall not issue an authorisation in respect of any body unless he is satisfied, as regards each class of risks against which, in the course of carrying on business, the body insures or proposes to insure persons—

a ) that adequate arrangements are in force, or will be made, for the reinsurance of risks of that class against which persons are, or are to be, insured by the body in the course of carrying on business; or
b ) that it is justifiable not to make arrangements for that purpose.
S-7 No authorisation for body under control etc. of unfit persons.

7 No authorisation for body under control etc. of unfit persons.

(1) The Secretary of State shall not issue an authorisation in respect of any body (‘the relevant body’) if it appears to him that any director, controller or manager of that body is not a fit and proper person to be a director, controller or manager of that body, as the case may be.

(2) In this section ‘controller’, in relation to the relevant body, means—

(a ) a managing director of the relevant body or of a body corporate of which it is a subsidiary

(b ) a chief executive of the relevant body or of a body corporate, being an insurance company, of which it is a...

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