Insurance Companies Regulations 1981

Publication Date:January 01, 1981
 
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1981No. 1654

INSURANCE

The Insurance Companies Regulations 1981

19thNovember1981

1stDecember1981

1stJanuary1982

Regulations 24 to 27

1stApril1982

Regulations 54 to 64

1stOctober1982

ARRANGEMENT OF REGULATIONS

PART I

PRELIMINARY

Regulation

1. Citation and commencement.

2. Interpretation: general.

PART II

MARGINS OF SOLVENCY

3. Interpretation: Part II.

4. Margins of solvency: determination.

5. Long term classes I and II.

6. Long term classes III and VII.

7. Long term classes IV and VI.

8. Long term class V.

9. Guarantee fund and minimum guarantee fund.

10. Valuation.

11. Implicit items: future profits.

12. Implicit items: zillmerising.

13. Implicit items: hidden reserves.

PART III

DEPOSITS

14. Interpretation: Part III.

15. Making and amount of deposit.

16. Direction etc by the Secretary of State.

17. Permitted securities.

18. Investment.

19. Disposal of surplus.

20. Cessation of business etc.

21. Effect of direction etc.

22. Application of rules under s.7 of the Administration of Justice Act 1965.

PART IV

BENEFITS IN KIND, MAIN AGENTS, MATCHING, LOCALISATION, AUTHORISATION AND CHANGE OF CONTROL

23. Benefits in kind.

24. Main agents: exceptions.

25. Matching.

26. Localisation.

27. Exclusions from regulations 25 and 26.

28. Margin of solvency of external company: location of assets.

29. Authorisation: submission of information.

30. Authorisation: UK assets of external company.

31. Particulars of proposed managing director, chief executive or principal UK executive.

32. Particulars of persons proposing to become controller.

33. Notification by person becoming or ceasing to be controller.

34. Notification by person becoming principal UK executive.

35. Notification by person becoming director or authorised UK representative.

36. Notification by person becoming manager or employee within s.8(4)(c) of the 1981 Act.

PART V

VALUATION OF ASSETS

37. Interpretation: Part V.

38. Application: Part V.

39. Shares in and debts due or to become due from dependants.

40. Valuation of assets and liabilities of dependants for the purposes of regulation 39.

41. Debts and other rights.

42. Land.

43. Equipment.

44. Unlisted securities.

45. Unit trusts.

46. Listed investments.

47. Life interests, reversionary interests etc.

48. Other assets.

49. Assets to be taken into account only to a specified extent.

PART VI

DETERMINATION OF LIABILITIES

50. Interpretation: Part VI.

51. Application: Part VI.

52. Long term and general business.

53. Relevant co-insurance operations: general business.

54. Long term liabilities.

55. Nature and term of assets.

56. Avoidance of future valuation strain.

57. Valuation of future premiums.

58. Acquisition expenses.

59. Rates of interest.

60. Rates of mortality and disability.

61. Expenses.

62. Options.

63. Contracts not to be treated as assets.

64. No credit for profits from voluntary discontinuance.

PART VII

ADVERTISEMENTS, INTERMEDIARIES, NOTICES OF LONG TERM POLICIES, LINKED CONTRACTS AND REVOCATIONS

65. Contents of advertisements.

66. Contents of advertisements: statement of capital.

67. Intermediaries: connected persons.

68. Invitation by connected person.

69. Cases excepted from regulation 68.

70. Notice of long-term contract.

71. Exemptions from regulation 70.

72. Linked contracts.

73. Revocations.

SCHEDULES

Schedule 1 —General business solvency margin: first method of calculation (premium basis).

Schedule 2 —General business solvency margin: second method of calculation (claims basis).

Schedule 3 —Minimum guarantee fund.

Schedule 4 —Information to be submitted: long term business.

Schedule 5 —Information to be submitted: general business.

Schedule 6 —Forms (change of control etc).

Schedule 7 —Value of dependants.

Schedule 8 —Assets to be taken into account only to a specified extent.

Schedule 9 —Relevant co-insurance operations.

Schedule 10 —Statutory notice (non-linked contracts).

Schedule 11 —Statutory notice (linked contracts).

Schedule 12 —Notice of cancellation.

Schedule 13 —Permitted links.

Schedule 14 —Revocations.

The Secretary of State, in exercise of his powers under sections 26A(a), 26A(2), 26A(3), 26B(1), 26D(1), 52, 53, 54, 62(1) and (2), 64(1) and (2), 65(2) and (5), 68(1), (2)(a), (5) and (6), 78, 85(1) and 86 of the Insurance Companies Act 1974(a) and sections 2(5), 5(1)(a), 7(6), 9(1)(b) and (c) and (7) and 16 of the Insurance Companies Act 1981(b), hereby makes the following Regulations:—

PART I

PRELIMINARY

Citation and commencement

1. These Regulations may be cited as the Insurance Companies Regulations 1981 and shall come into operation—

(a) except for regulations 24 to 27 and 54 to 64, on 1st January 1982,

(b) as respects regulations 24 to 27, on 1st April 1982, and

(c) as respects regulations 54 to 64, on 1st October 1982.

Interpretation: general

2.—(1) In these Regulations, unless the context otherwise requires—

"the 1974 Act" means the Insurance Companies Act 1974;

"the 1981 Act" means the Insurance Companies Act 1981;

"cede" and "cession", in relation to reinsurance, include retrocede and retrocession;

"external company" means an insurance company whose head office is not in a member State;

"guarantee fund" has the meaning given in regulation 9(1) below;

"holding company" has the meaning given by section 154 of the Companies Act 1948(c) or section 148 of the Companies Act (Northern Ireland) 1960(d);

"linked long term contract" means a contract of the kind described in section 68(1) of the 1974 Act;

"mathematical reserves" means the provision made by an insurer to cover liabilities (excluding liabilities which have fallen due) arising under or in connection with contracts for long term business;

"minimum guarantee fund" has the meaning given in regulation 9(2) below;

"mutual" means an insurance company which is—

(a) a body corporate having no share capital (except a wholly owned subsidiary with no share capital but limited by guarantee), or

(b) a registered society;

"pure reinsurer" means an insurance company whose authorisation to carry on business in the United Kingdom is restricted to reinsurance;

"Schedule" means Schedule to these Regulations;

(a) 1974 c. 49; sections 26A, 26B and 26D were inserted by the Insurance Companies Act 1981 (c. 31), section 21; sections 52, 53 and 54 were amended by the Insurance Companies Act 1981, section 28; sections 65 and 68 were amended by the Insurance Companies Act 1981, Schedule 4, paragraphs 12 and 13; section 78 was amended by the Insurance Companies Act 1981, section 33(1); section 86 was amended by the Insurance Companies Act 1981, section 33(2).

(b) 1981 c. 31.

(c) 1948 c. 38.

(d) 1960 c. 22(N.I.).

"subsidiary" has the meaning given by section 154 of the Companies Act 1948 or section 148 of the Companies Act (Northern Ireland) 1960;

"United Kingdom company" means an insurance company whose head office is in the United Kingdom.

(2) For the purposes of these Regulations—

(a) a unit of account is the unit of account known as the ECU and defined in Council Regulation (EEC) No. 3180/78(a) (which changed the value of the unit of account used by the European Monetary Co-operation Fund), and

(b) the rate of conversion from the ECU to pounds sterling for each year beginning on 31st December shall, subject to a minimum of 41·66 pence per unit, be the rate published in the Official Journal of the Communities on the last day of the preceding October for which ECU conversion rates were so published for the currencies of all States that were then member States.

PART II

MARGINS OF SOLVENCY

Interpretation: Part II

3. In this Part of these Regulations—

"first calculation" and "second calculation" have the meaning given in regulation 5(1) to (3) below;

"implicit items" has the meaning given by regulation 10(4) below and "implicit item" shall be construed accordingly;

"required margin of solvency" means a margin of solvency required by section 26A of the 1974 Act;

"zillmerising" means the method known by that name for modifying the net premium reserve method of valuing a long term policy by increasing the part of the future premiums for which credit is taken so as to allow for initial expenses.

Margins of solvency: determination

4.—(1) Subject to paragraphs (2) to (5) below, the margin of solvency to be maintained by an insurance company to which Part II of the 1974 Act applies shall be determined—

(a) as regards long term business, in accordance with regulations 5 to 8 below, and

(b) as regards general business, by taking the greater of the two sums resulting from the application of the two methods of calculation set out in Schedules 1 and 2 respectively.

(2) Where an insurance company is required to maintain a United Kingdom margin of solvency or a Community margin of solvency—

(a) the United Kingdom margin of solvency shall be determined by applying paragraph (1) above, but only to business carried on in the United Kingdom, and

(b) the Community margin of solvency shall be determined by applying paragraph (1) above, but only to business carried on in the member States taken together.

(a) OJ No. L379, 30.12.78, p.1.

(3) For a contract to which section 1(3) of the 1981 Act applies, the required margin of solvency shall be determined by taking the aggregate of the results arrived at by applying—

(a) in the case of so much of the contract as is within any class of long term business, the appropriate method prescribed by this Part of these Regulations for that class, and

(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 1 (excluding paragraphs 7, 8 and 9).

(4) Where an insurance company 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 company in order to arrive at the company's required margin of solvency for long term business.

(5) Where an...

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