Insurance Amendment Act 1995

Link to law: http://www.bermudalaws.bm/Laws/Annual%20Laws/1995/Acts/Insurance%20Amendment%20Act%201995.pdf

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Insurance Amendment Act 1995
The Laws of Bermuda
Annual Volume of Public Acts 1995 : 20

1
101

BERMUDA
1995 : 20

INSURANCE AMENDMENT ACT 1995

[Date of Assent 29 March 1995]

[Operative Date 29 April 1995]

WHEREAS it is expedient to amend the Insurance Act 1978, the
Insurance Accounts Regulations 1980 and the Insurance Returns and
Solvency Regulations and to revoke the Insurance Applications
Regulations 1980:

Be it enacted by The Queen's Most Excellent Majesty, by and
with the advice and consent of the Senate and the House of Assembly of
Bermuda, and by the authority of the same, as follows:

ARRANGEMENT OF SECTIONS

1 Short title
2 Interpretation
3 The new classes of insurer
4 Increased paid up share

capital
5 Principal representative to be

approved by Minister
6 Fees
7 Statutory financial statements
8 Statutory financial returns
9 Failure to file statements and

returns

10 Opinion of loss reserve
specialist

11 Requirement to keep records
in Bermuda

12 General business solvency
margin

13 Controls relating to solvency,
dividends and reduction of
capital

14 Powers of intervention
15 Amendment of regulations by

Act

INSURANCE AMENDMENT ACT 1995

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16 Minor and consequential
amendments

17 Commencement and
transitional provision

SCHEDULE

Minor and consequential
amendments

Short title
1 This Act may be cited as the Insurance Amendment Act 1995.

Interpretation
2 In this Act

"the 1978 Act" means the Insurance Act 1978;

"the Accounts Regulations" means the Insurance Accounts
Regulations 1980; and

"the Returns Regulations" means the Insurance Returns and
Solvency Regulations 1980.

The new classes of insurer
3 For section 4 of the 1978 Act (Minister may register insurers)
there shall be substituted

"Registration as insurer
4 (1) Subject to sections 4A to 7 and 12, on an
application made to the Registrar by a body corporate and on
payment of the relevant fee provided for by section 14, the
Minister may register that body

(a) as a Class 1, Class 2, Class 3 or Class 4 insurer
where it proposes to carry on general business;

(b) as a long-term insurer where it proposes to carry
on long-term business; or

(c) as a Class 1, Class 2, Class 3 or Class 4 insurer
and as a long-term insurer where it proposes to
carry on both general business and long-term
business.

(2) Registration of a body corporate as an insurer shall
be subject to its complying with the terms of its registration and
with such other conditions as the Minister may impose; and

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different conditions may be imposed in respect of different
insurers or categories of insurer.

(3) The Minister may at any time, whether or not on an
application made by an insurer, add to, vary or delete any
conditions imposed under subsection (2).

(4) Before the Minister exercises his power under
subsection (3) in relation to a Class 1, Class 2 or Class 3 insurer,
or a long-term insurer, who has not made an application under
that subsection, the Minister shall give notice to the insurer and
shall take into account any written representations made by the
insurer within such period as may be specified in the notice.

(5) Before the Minister exercises his power under
subsection (3) in relation to a Class 4 insurer, he shall give
notice to all Class 4 insurers and shall take into account any
written representations made by them within such period as
may be specified in the notice.

(6) On application made to the Registrar for that
purpose by an insurer, the Minister may

(a) register a Class 1, Class 2, Class 3 or Class 4
insurer as a different class of insurer carrying
on general business;

(b) register an insurer carrying on long-term
business as a Class 1, Class 2, Class 3 or Class
4 insurer where it proposes to carry on general
business (either instead of, or in addition to, its
registration as a long-term insurer); or

(c) register an insurer carrying on general business
as a long-term insurer where it proposes to carry
on long-term business (either instead of, or in
addition to, its registration as a Class 1, Class 2,
Class 3 or Class 4 insurer).

(7) An application under this section shall be in such
form, shall contain such information and shall be accompanied
by such documents as the Minister may require.

Determination of class of registration for general business
4A (1) Subject to subsection (2), the Minister shall
determine whether a body corporate proposing to carry on
general business shall be registered as a Class 1, Class 2, Class
3 or Class 4 insurer in relation to its general business in
accordance with sections 4B to 4E.

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(2) But a body corporate may be registered as a
particular class of insurer where it would not be so registrable
under sections 4B to 4E if, after taking into account

(a) the nature of the intended relationship between
the body corporate and its intended policy-
holders, the interests of those policy-holders and
of the public generally, and

(b) the level of regulation which is applicable to the
different classes of insurer,

the Minister considers it appropriate, whether or not on an
application made to him for that purpose by the body corporate.

(3) The Minister shall not under any circumstances
determine under subsection (2) that a body corporate shall be
registered as a Class 4 insurer if it does not satisfy the
requirement of section 4E(1)(a).

(4) An application under this section shall be in such
form, shall contain such information and shall be accompanied
by such documents as the Minister may require.

Class 1 insurer
4B A body corporate is registrable as a Class 1 insurer
where that body corporate

(a) is wholly owned by one person and intends to
carry on insurance business consisting only of
insuring the risks of that person; or

(b) is an affiliate of a group and intends to carry on
insurance business consisting only of insuring
the risks of any other affiliates of that group or
of its own shareholders.

Class 2 insurer
4C (1) A body corporate is registrable as a Class 2 insurer
where that body corporate is wholly owned by two or more
unrelated persons and intends to carry on insurance business
not less than 80% of the net premiums written in respect of
which will be written for the purpose of

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(a) insuring the risks of any of those persons or of
any affiliates of any of those persons; or

(b) insuring risks which, in the opinion of the
Minister, arise out of the business or operations
of those persons or any affiliates of any of those
persons.

(2) A body corporate is registrable as a Class 2 insurer
where that body corporate would be registrable as a Class 1
insurer but for the fact that

(a) not all of the business which it intends to carry
on, but at least 80% of the net premiums
written, will consist of the business described in
paragraph (a) or (b) of section 4B; or

(b) it intends to carry on insurance business not
less than 80% of the net premiums written in
respect of which will, in the opinion of the
Minister, arise out of the business or operations
of the person by whom it is owned or any of the
affiliates of that person.

Class 3 insurer
4D A body corporate is registrable as a Class 3 insurer
where that body corporate is not registrable as a Class 1, Class 2
or Class 4 insurer.

Class 4 insurer
4E (1) A body corporate is registrable as a Class 4 insurer
where

(a) it has at the time of its application for
registration, or will have before it carries on
insurance business, a total statutory capital and
surplus of not less than $100,000,000; and

(b) it intends to carry on insurance business
including excess liability business or property
catastrophe reinsurance business.

(2) Where a body corporate is registrable as a Class 4
insurer it shall not be so registered if it is also registrable as a
Class 1 or Class 2 insurer.

Classes of insurer: interpretation
4F (1) In sections 4B to 4E and this section

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"affiliate" means a body forming part of a group;

"excess liability business" means the business of
effecting and carrying out contracts of insurance
insuring the risk of the persons insured in the event
that any such person incurs liabilities to third parties
in excess of a stated sum;

"group" means any two or more bodies, whether
corporate or unincorporate, that are in association,
and two bodies shall be deemed for this purpose to be
in association if any one of them has control of the
other or both are under the control of the same
person or persons; and "control" shall be construed in
accordance with section 86(4) of the Companies Act
1981;

"insure" includes reinsure;

"net premiums written" means amounts calculated in
relation to a body corporate by the application of the
principles set out in the Insurance Accounts
Regulations 1980 for the calculation of those
amounts in relation to an insurer;

"property catastrophe reinsurance business" means the
business of effecting and carrying out contracts of
reinsurance indemnifying (whether or not to a
specified limit) an insurer as a result of an
accumulation of losses arising from a single
catastrophic event or series of events;

"shareholder" includes a partner of a partnership and a
member of any other body or association; and

"unrelated" means not forming part of the same group.

(2) In determining for the purposes of sections 4B and
4C whether a body corporate is wholly owned by a person, the
Minister may have regard to the beneficial as well as the legal
ownership of the body corporate.".

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Increased paid up share capital
4 For section 7 of the 1978 Act (paid up share capital) there shall
be substituted

"Paid up share capital
7 (1) In relation to an insurer which has a share capital,
the minimum amount paid up on the share capital where the
insurer is registered

(a) as a Class 1, Class 2 or Class 3 insurer is
$120,000;

(b) as a long-term insurer is $250,000;

(c) as a Class 1, Class 2 or Class 3 insurer and as a
long-term insurer is $370,000;

(d) as a Class 4 insurer is $1,000,000;

(e) as a Class 4 insurer and as a long-term insurer
is $1,250,000.

(2) Subject to subsection (3), the Minister shall not
register under section 4 a body corporate which has a share
capital unless it satisfies the requirements of subsection (1).

(3) The Minister may register a body corporate as a
Class 4 insurer where it does not satisfy the requirement

(a) of paragraph (d) of subsection (1) if it has at
least $120,000 paid up share capital, or

(b) of paragraph (e) of subsection (1) if it has at least
$370,000 paid up share capital,

but such a body shall not carry on insurance business until it
does satisfy the requirement of paragraph (d) or (e).".

Principal representative to be approved by Minister
5 For section 8(1B) of the 1978 Act (principal representative to be
registered insurance manager or person approved by the Minister) there
shall be substituted

"(1B) The principal representative of an insurer shall be
a person approved by the Minister as that insurer's principal
representative.".

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Fees
6 In section 14(1) of the 1978 Act, for paragraph (a) (prescribed fee
for making of any application for registration) there shall be substituted-

"(a) the making of any application for registration under
section 4(1) or 10;

(ab) the making of any application under any of the following
provisions

(i) sections 4(3) and (6), 4A(2), 17(4), 18C(2),
31B(3), 31C and 56 of this Act;

(ii) regulation 11(4) of the Insurance Returns and
Solvency Regulations 1980; and

(iii) the instructions for line 14 in Part I of Schedule
III to the Insurance Accounts Regulations
1980;".

Statutory financial statements
7 For section 17 of the 1978 Act (duty to keep financial statements
for production to Registrar) there shall be substituted

"Keeping and filing of statutory financial statements
17 (1) Every insurer shall have a copy of its statutory
financial statements (together with the notes to those statements
and the auditor's report thereon) available at its principal office
on or before its filing date, and shall produce them to the
Registrar if so directed by him on or before a date specified in the
direction.

(2) Every insurer shall keep the statutory financial
statements, notes and auditor's report at its principal office for
the period of five years beginning with its filing date.

(3) Every Class 2, Class 3 and Class 4 insurer and
every long-term insurer shall file a copy of its statutory financial
statements (together with the notes to those statements) with the
Registrar on or before its filing date.

(4) In this section and sections 18 and 18A, "filing
date" in relation to an insurer means

(a) in the case of a Class 1 or Class 2 insurer

(which is not also a long-term insurer), six
months after the end of the financial year to

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which the statements relate (or such longer
period, not exceeding nine months, as the
Registrar may allow in the case of that insurer
on an application made to him for that purpose);
and

(b) in the case of a Class 3 or Class 4 insurer or a
long-term insurer, four months after the end of
the financial year to which the statements relate
(or such longer period, not exceeding seven
months, as the Registrar may allow in the case
of that insurer on an application made to him
for that purpose).".

Statutory financial returns
8 (1) For section 18 (insurer to make financial returns) there
shall be substituted

"Insurer to make financial returns
18 (1) Every insurer shall send to the Registrar a financial
return (in this Act referred to as "the statutory financial return")


(a) in the case of a Class 1 insurer, on or before its
filing date; and

(b) in the case of a Class 2, Class 3 or Class 4
insurer or a long-term insurer, at the same time
as it files its statutory financial statements
under section 17.

(2) A statutory financial return shall be in the
prescribed form, and different forms of return may be prescribed
for different categories of insurer.".

(2) In regulation 5 of the Returns Regulations (content of
statutory financial return), at the end of paragraph (1) there shall be
added "and

(d) in the case of a Class 4 insurer, a schedule of ceded
reinsurance, in addition.".

(3) After regulation 14 of the Returns Regulations there shall be
added

INSURANCE AMENDMENT ACT 1995

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"Schedule of ceded reinsurance
14A The schedule of ceded reinsurance shall be divided into
separate entries dealing with each reinsurer and each entry shall
include the following information relating to a reinsurer

(a) the name of the reinsurer;

(b) the rating of the reinsurer (if any) and the name of
the rating agency;

(c) the jurisdiction of its incorporation;

(d) the amount of the reinsurance premiums ceded to it
during the relevant year;

(e) the amount of reinsurance recoverable from it (lines
11, 12, 17 and 18 of the statutory balance sheet);

(f) the amount of reinsurance balances payable to it
(lines 28, 29, 33 and 34 of the statutory balance
sheet);

(g) the amount of net reinsurance recoverable from it
(that is, the figure required by paragraph (e) less
that required by paragraph (f));

(h) the amount of net reinsurance recoverable from it
which has been due for less than 180 days; and

(i) the remainder of net reinsurance recoverable from it
(that is, the figure required by paragraph (g) less
that required by paragraph (h)).".

Failure to file statements and returns
9 After section 18 of the 1978 Act there shall be inserted

"Failure to file statutory statements or returns
18A (1) Where an insurer fails to comply with a duty
imposed on it under section 17(1) or (3) or section 18(1) it shall
be guilty of an offence and liable on summary conviction to a fine
calculated in accordance with subsection (2).

(2) For each week or part of a week during which an
insurer is guilty of an offence by virtue of subsection (1) it shall
be liable to a maximum fine

(a) of $500, in the case of a Class 1 or Class 2
insurer;

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(b) of $1000, in the case of a Class 3 insurer or a
long-term insurer; or

(c) of $5000, in the case of a Class 4 insurer;

and the fine applicable to an insurer falling within more than
one paragraph shall be the higher fine.

(3) If the Registrar is satisfied that an insurer is guilty
of an offence under subsection (1), he may, with the consent of
the insurer, accept from the insurer a sum not exceeding its
maximum liability for that offence, and no proceedings shall be
brought for that offence.

(4) Any sum accepted from an insurer under
subsection (3) shall be paid into the Consolidated Fund.

(5) Where three months after its filing date (for these
purposes not including any extension which may have been
granted under section 17(4)(b)) a Class 4 insurer has failed to file
its statutory financial statements or return, the Minister shall
appoint an inspector to investigate the affairs of the insurer
under section 30.".

Opinion of loss reserve specialist
10 (1) After section 18A of the 1978 Act (inserted by section 9 of
this Act) there shall be inserted

"Opinion of loss reserve specialist
18B (1) This section applies in relation to a Class 2, Class 3
or Class 4 insurer.

(2) The statutory financial return required by section
18 shall include the opinion of a loss reserve specialist in respect
of the insurer's loss and loss expense provisions

(a) annually, in the case of a Class 3 or Class 4
insurer; or

(b) every third year, in the case of a Class 2 insurer,
beginning with the return relating to the
financial year following the insurer's registration
as a Class 2 insurer.

(3) The requirements of paragraph (f) of the
instructions in Part II of Schedule III to the Insurance Accounts
Regulations 1980 relating to line 17 of the statutory balance
sheet shall not apply in relation to any financial year for which

INSURANCE AMENDMENT ACT 1995

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an insurer is required by this section to include the opinion of a
loss reserve specialist in the statutory financial return.".

(2) In Part II of Schedule III to the Accounts Regulations
(instructions affecting the statutory balance sheet), the instructions for
line 17 (loss and loss expense provisions) shall be amended as follows

(a) in paragraph (e), for the words "the discounting of the
loss provisions shall be certified by a loss reserve
specialist", there shall be substituted "the opinion of a
loss reserve specialist shall be given on the loss and loss
expense provisions"; and

(b) for paragraph (f) (certification by loss reserve specialist of
gross premiums relating to products liability insurance
or professional liability insurance) there shall be
substituted

"(f) where the gross premiums from professional
liability insurance constitute more than 30% of
the gross premiums written by the insurer
during the relevant year, then the opinion of a
loss reserve specialist must be given on the loss
and loss expense provisions relating to all
professional liability insurance business; but if
the loss provisions cannot be so separated then
the opinion of the loss reserve specialist must be
given on the whole amount of the loss
provisions;

(g) where, in relation to an insurer no longer
effecting contracts of professional liability
insurance, the opinion of a loss reserve
specialist as to the matters described in
paragraph (f) was required in either of the last
two years during which it did effect contracts of
professional liability insurance, then such an
opinion must be given in every subsequent
year.".

(3) In regulation 5 of the Returns Regulations (content of
statutory financial return), for paragraph (1)(bb) there shall be
substituted

"(bb) an opinion of a loss reserve specialist where
such is required under

(i) section 18B of the Act, or

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(ii) the instructions in Part II of Schedule III
to the Insurance Accounts Regulations
1980, relating to line 17 of the statutory
balance sheet, in which case it shall be
accompanied by statutory financial
statements and the notes to those
statements,

in addition;".

Requirement to keep records in Bermuda
11 After section 18B of the 1978 Act (inserted by section 10(1) of
this Act) there shall be added

"Requirement to keep records in Bermuda
18C (1) The Minister may direct insurers to keep in
Bermuda proper records of account with respect to

(a) all sums of money received and expended by the
insurer and the matters in respect of which the
receipt and expenditure takes place;

(b) all premiums and claims relating to the insurer;
and

(c) the assets, liabilities and equity of the insurer;

and any such directions may make different provision in relation
to Class 1 insurers, Class 2 insurers, Class 3 insurers, Class 4
insurers and long-term insurers.

(2) Without prejudice to section 83 of the Companies
Act 1981 (keeping of books of account), on an application made
to him for that purpose, the Minister may direct that an insurer
be exempt from such of the requirements of subsection (1) as
may be specified in the direction.".

General business solvency margin
12 (1) In regulation 10 of the Returns Regulations (minimum
margin of solvency for general business), for paragraphs (1) to (2A) there
shall be substituted

"(1) For the purposes of section 6(1) of the Act, the
prescribed amount by which the value of the general business
assets of an insurer must exceed its general business liabilities
is the greatest of figure A, figure B and figure C, where those
letters represent values calculated, in relation to that insurer, in
accordance with Schedule I.".

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(2) For Schedule I to those Regulations there shall be
substituted

"SCHEDULE I

GENERAL BUSINESS SOLVENCY MARGIN

Figure A
1 For the purposes of regulation 10, figure A has the
following value in relation to the class of insurer indicated

Class 1 $120,000

Class 2 $250,000

Class 3 $1,000,000

Class 4 $100,000,000.

Figure B
2 (1) For the purposes of regulation 10, sub-paragraphs
(2) and (3) set out the method of calculating figure B in relation
to Class 1, Class 2 and Class 3 insurers, and sub-paragraph (4)
in relation to Class 4 insurers.

(2) Where the net premiums—

(a) written by a Class 1, Class 2 or Class 3 insurer
in its current financial year, or

(b) projected to be written by an insurer, on
application for registration as a Class 1, Class 2
or Class 3 insurer, in its first financial year,

do not or (as the case may be) are not projected to exceed
$6,000,000, figure B shall be calculated as 20% of those net
premiums.

(3) Where the net premiums—

(a) written by a Class 1, Class 2 or Class 3 insurer
in its current financial year, or

(b) projected to be written by an insurer, on
application for registration as a Class 1, Class 2
or Class 3 insurer, in its first financial year,

do or (as the case may be) are projected to exceed $6,000,000,
figure B shall be calculated as $1,200,000 plus the following

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percentage of the net premiums written which exceed
$6,000,000 in relation to the class of insurer indicated

Class 1 10%

Class 2 10%

Class 3 15%.

(4) Figure B shall be calculated as 50% of the net
premiums written by a Class 4 insurer in its current financial
year or projected to be written by an insurer on application for
registration as a Class 4 insurer.

(5) In this paragraph, "net premiums written" in
relation to any financial year means

(a) in relation to a Class 1, Class 2 or Class 3
insurer, the net amount, after deductions of any
premiums ceded by the insurer for reinsurance,
of the premiums written by the insurer in that
year in respect of general business; and

(b) in relation to a Class 4 insurer, the net amount,
after deductions of any premiums ceded by the
insurer for reinsurance (not exceeding 25% of
gross premiums written), of the premiums
written by the insurer in that year in respect of
general business,

and "net premiums projected to be written" has a corresponding
meaning.

Figure C
3 For the purposes of regulation 10, figure C shall be
calculated as the following percentage of the aggregate

(a) of the amounts shown by the insurer in completing
lines 17 and 18 of Form 1 in the Insurance Accounts
Regulations 1980, or

(b) of those amounts as projected by the insurer on
application for registration,

in relation to the class of insurer indicated

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Class 1 10%

Class 2 10%

Class 3 15%

Class 4 15%.".

Controls relating to solvency, dividends and reduction of capital
13 After section 31 of the 1978 Act there shall be inserted

"Failure to meet solvency requirements
31A (1) A Class 3 or Class 4 insurer which at any time fails
to meet its general business solvency margin shall within 30
days after becoming aware of that failure, or having reason to
believe that such a failure has occurred, file with the Minister a
written report containing particulars

(a) of the circumstances leading to the failure, and

(b) of the manner and time within which the insurer
intends to rectify the failure;

and, notwithstanding anything to the contrary in any other
enactment, shall not declare or pay any dividends until the
failure is rectified.

(2) Where subsection (1) applies in relation to a Class 4
insurer by reason of its total statutory capital and surplus falling
to $75,000,000 or less, the report required by that subsection
shall be filed within 45 (rather than 30) days and shall be
accompanied by

(a) unaudited interim statutory financial statements
covering such period as the Registrar may
require;

(b) the opinion of a loss reserve specialist in relation
to lines 17 and 18 of those statements; and

(c) a general business solvency certificate in
respect of those statements.

Restrictions as to payment of dividends
31B (1) A Class 4 insurer shall not in any financial year
pay dividends which would exceed 25% of its total statutory
capital and surplus, as shown on its statutory balance sheet in
relation to the previous financial year, unless at least 7 days

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before payment of those dividends it files with the Registrar an
affidavit signed

(a) by at least two directors of the insurer (one of
whom must be a director resident in Bermuda if
the insurer has a director so resident), and

(b) by the insurer's principal representative in
Bermuda,

which states that in the opinion of those signing, declaration of
those dividends has not caused the insurer to fail to meet its
relevant margins.

(2) A copy of every affidavit filed under subsection (1)
shall be kept by the Registrar in his office and shall be open to
inspection by the public.

(3) An insurer shall not declare or pay any dividends
during any financial year if it would cause the insurer to fail to
meet its relevant margins.

(4) An insurer which fails to meet its relevant margins
on the last day of any financial year shall not, without the
approval of the Minister, declare or pay any dividends during the
next financial year.

(5) In this section and section 31C, "the relevant
margins" means

(a) in relation to an insurer, its solvency margin,
and

(b) in relation to an insurer carrying on general
business, its minimum liquidity ratio.

Restrictions as to reduction of capital
31C (1) A Class 4 insurer, before reducing by 15% or more
its total statutory capital, as set out in its previous year's
financial statements, shall apply to the Minister for his approval.

(2) An application by an insurer under subsection (1)
shall consist of

(a) an affidavit signed

(i) by at least two directors of the insurer
(one of whom must be a director
resident in Bermuda if the insurer has a
director so resident), and

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(ii) by the insurer's principal representative
in Bermuda,

which states that in the opinion of those signing,
the proposed reduction of capital will not cause
the insurer to fail to meet its relevant margins;
and

(b) such other information as the Minister may
require.

(3) A copy of every affidavit filed under subsection (1)
relating to an application which the Minister has approved shall
be kept by the Registrar in his office and shall be open to
inspection by the public.

(4) A Class 1, Class 2 or Class 3 insurer or a long-term
insurer before reducing by 15% or more its total statutory
capital, as set out in its previous year's financial statements,
shall apply to the Minister for his approval and shall provide
such information as he may require.".

Powers of intervention
14 For section 32 of the 1978 Act (powers of Minister where
insolvency of insurer is feared) there shall be substituted

"Powers of intervention
32 (1) If it appears to the Minister that

(a) the business of an insurer is being so conducted
that there is a significant risk of the insurer
becoming insolvent; or

(b) an insurer is in breach of a provision of this Act
or of regulations, or with a condition imposed on
its registration;

the Minister may direct the insurer to take or refrain from taking
such of the steps listed in subsection (2) as he considers
appropriate.

(2) Those steps are

(a) not to effect further contracts of insurance, or
any contract of insurance of a specified
description;

(b) to limit the aggregate of the premiums to be
written by it during a specified period beginning

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not earlier than 28 days after the direction is given;

(c) not to vary any contract of insurance in force
when the direction is given, if the effect of the
variation would be to increase the liabilities of
the insurer;

(d) not to make any investment of a specified class;

(e) before the expiration of a specified period (or
such longer period as the Minister may allow) to
realise any existing investment of a specified
class;

(f) not to declare or pay any dividends or any other
distributions, or to restrict the making of such
payments to such extent as the Minister thinks
fit;

(g) not to enter into any specified transaction with
any specified person or persons of a specified
class;

(h) to provide such written particulars relating to
the financial circumstances of the insurer as the
Minister thinks fit; and

(i) to obtain the opinion of a loss reserve specialist
with respect to general business, or an actuarial
opinion with respect to long-term business, and
to submit it to the Minister within a specified
time;

and in this subsection "specified" means specified in the
direction.

(3) In addition, if it appears to the Minister that the
business of an insurer is being so conducted that there is a
significant risk of the insurer becoming insolvent he may, if he
considers it appropriate, direct the insurer to maintain in, or
transfer to and keep in the custody of, a specified bank, assets of
the insurer of such value and description as are specified in the
direction.

(4) Without restricting the generality of subsections (1)
and (3), the Minister may in particular proceed under those
subsections where

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(a) an insurer has failed to meet a solvency margin
or a minimum liquidity ratio which it is required
by this Act or regulations to meet;

(b) an event specified in regulation 7(3) of the
Insurance Returns and Solvency Regulations
1980 occurs in relation to the audit of an
insurer and the approved auditor qualifies his
report accordingly, expresses an adverse opinion
or denies an opinion under regulation 7(2) of
those Regulations;

(c) the auditor's report submitted as part of an
insurer's statutory financial return indicates
that there is a significant doubt as to the
insurer's ability to continue as a going concern;

(d) an insurer fails to retain an auditor or principal
representative, or fails to retain a loss reserve
specialist or actuary where required to retain
one under this Act or regulations;

(e) the insurer's total statutory capital and surplus
has diminished to an extent which the Minister
considers unacceptable having regard to the
particular circumstances of the insurer.

(5) The Minister shall not give a direction by virtue of
subsection (1)(b) if the breach in question

(a) is being investigated by an inspector by virtue of
section 18A(5), or

(b) requires a report to be filed under section 31A,

until the Minister has considered a preliminary report of the
inspector or (as the case may be) the report filed under section
31A.

(6) No assets kept in the custody of a bank pursuant to
a direction under subsection (3) shall, so long as the direction is
in force, be removed from the bank except with the prior consent
of the Minister in writing.

(7) Where the Minister gives the insurer notice of his
intention to give a direction under subsection (1), he shall take
into account any representations made by the insurer within
such period as may be specified in the notice before giving such
a direction.

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(8) The powers which the Minister may exercise under
this section in certain circumstances in relation to an insurer do
not restrict the exercise of any other powers in relation to the
same insurer on the basis of the same circumstances, nor do
they restrict any other consequences provided for under any
enactment in respect of that insurer on the basis of those
circumstances.

(9) Any insurer who fails to comply with a direction
given under subsection (1), and any person who causes such a
direction to be contravened, commits an offence.".

Amendment of regulations by Act
15 The amendment by this Act of a provision contained in
regulations shall not be taken to have prejudiced any power to make
further regulations amending or revoking that provision.

Minor and consequential amendments
16 (1) The Schedule to this Act, which makes amendments
consequential on the provisions of this Act and other minor amendments
to the 1978 Act, the Accounts Regulations and the Returns Regulations,
shall have effect.

(2) The Insurance Applications Regulations 1980 are hereby
revoked.

Commencement and transitional provision
17 (1) This Act shall come into force one month after it is passed,
apart from this section which shall come into force immediately.

(2) Subject to subsections (3) and (4), from the coming into
force of this Act until 1st January 1996 ("the transitional period")
nothing in this Act shall apply to or in relation to any body corporate
which immediately before the passing of this Act

(a) was registered under the 1978 Act; or

(b) had applied for registration under the 1978 Act.

(3) Where a body corporate falling within subsection (2) makes
an application to the Minister during the transitional period, the Minister
may, if satisfied that that body corporate needs a further period in order
to enable it to comply with the provisions of this Act, exempt that body
corporate from such provisions of this Act as he may specify for such
further period, not exceeding twelve months, as he considers
appropriate.

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(4) Where, but for the operation of subsection (2), any body
corporate would on the coming into force of this Act be registrable as a
Class 4 insurer by virtue of sections 4 to 4F of the 1978 Act (as inserted
by section 3 of this Act), the provisions of this Act shall apply to and in
relation to that body corporate from the date of the coming into force of
this Act.

(5) The Registrar may request such information from bodies
corporate falling within subsection (2) as he considers necessary in
preparation for their registration as insurers under the 1978 Act as
amended by this Act.

(6) In relation to any body corporate which immediately before
the passing of this Act was registered as an insurer under the 1978 Act,
the fee for application for registration under section 4(1) of that Act (as
substituted by section 3 of this Act) as a Class 1, Class 2, Class 3 or
Class 4 insurer or as a long-term insurer shall be $250, and not the fee
prescribed under section 14 of that Act.

(7) Subsection (8) applies to an insurer

(a) which immediately before the passing of this Act was
registered under the 1978 Act;

(b) which from the date this Act comes into force does not
effect any contracts of insurance; and

(c) the solvency margin of which does not, on the coming
into force of this Act, satisfy the requirements of the
Returns Regulations as amended by section 12 of this
Act ("the new solvency requirements").

(8) The new solvency requirements shall not apply to an
insurer to which this subsection applies, except for the purposes of
section 31B(3) and 31C of the 1978 Act (as inserted by section 13 of this
Act), unless after the coming into force of this Act its solvency margin
does satisfy the new solvency requirements.

SCHEDULE

MINOR AND CONSEQUENTIAL AMENDMENTS

The Insurance Act 1978
1 In the appropriate places in alphabetical order in section 1(1) of
the 1978 Act (interpretation) there shall be inserted the following
definitions

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" "Class 1", "Class 2", "Class 3" and "Class 4" in relation to
an insurer carrying on general business mean the class
of the insurer's registration under section 4;"

" "long-term insurer" means an insurer carrying on long-
term business registered as such under section 4;"

" "loss reserve specialist" has the meaning assigned by
regulation 2 of the Insurance Accounts Regulations
1980;"

" "minimum liquidity ratio" means the ratio prescribed by
regulation 11 of the Insurance Returns and Solvency
Regulations 1980;"

" "solvency margin" means, in relation to an insurer
carrying on general business, the margin prescribed by
regulation 10 of the Insurance Returns and Solvency
Regulations 1980, and in relation to an insurer carrying
on long-term business, the margin prescribed by
regulation 12 of those Regulations;"

" "total statutory capital" in relation to an insurer, means
the total statutory capital of the insurer as calculated in
accordance with the Insurance Accounts Regulations
1980;"

" "total statutory capital and surplus" in relation to an
insurer, means the total statutory capital and surplus of
the insurer as calculated in accordance with the
Insurance Accounts Regulations 1980;".

2 In sections 5(1) and 11 of the 1978 Act (factors to be considered
by Minister) the words "on any grounds" shall be omitted.

3 In section 10 of the 1978 Act (Minister may register insurance
managers and intermediaries) in subsection (2) for the words "in the
prescribed form" there shall be substituted "and shall be in such form,
shall contain such information and shall be accompanied by such
documents as the Minister may require.".

4 In section 33 of the 1978 Act (margin of solvency for general
business) in subsection (1) for the words "by the prescribed amount, and
this Act" there shall be substituted "and the provisions of this Act".

5 In section 35 of the 1978 Act (winding up on petition of
Registrar) in subsection (1)(c) for the words "to produce statutory
financial statements pursuant to a direction given by the Registrar under
section 17(1)" there shall be substituted "to produce or file statutory
financial statements in accordance with section 17".

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6 In section 55 of the 1978 Act (general provisions relating to
offences) in subsection (2) for the words "and liable" there shall be
substituted "and is liable".

7 In section 56 of the 1978 Act (Minister may modify accounting
provisions in certain cases) in subsection (5) for the words "sections 6"
there shall be substituted "sections 4 to 4F, 6".

The Insurance Accounts Regulations 1980
8 In regulation 9 of the Accounts Regulations (instructions relating
to statutory financial statements) in paragraph (2)(c) for the words "Part
II" there shall be substituted "Part III".

9 In Part I of Schedule III to the Accounts Regulations, in the
instructions relating to line 14 of the statutory balance sheet (letter of
credit, guarantees and other instruments) after the words "approval of
the Minister" there shall be inserted "obtained on an application made for
that purpose".

The Insurance Returns and Solvency Regulations 1980
10 In regulation 4 of the Returns Regulations (return to relate to
relevant year) in subsection (2) for the words "of whose" to the end there
shall be substituted "which are required to be available or filed by section
17 of the Act".

11 In regulation 5 of the Returns Regulations (content of return), in
paragraph (2)

(a) for the words "and 14" there shall be substituted ", 14
and 14A"; and

(b) for the words "and the actuary's certificate" there shall
be substituted ", the actuary's certificate and the
schedule of ceded reinsurance".

12 In regulation 7 of the Returns Regulations (auditor's report) at
the end of paragraph (3) there shall be added "and

"(e)the auditor considered that there was a
significant doubt as to the insurer's ability to
continue as a going concern.".

13 In regulation 8 of the Returns Regulations (general business
solvency certificate)

(a) in paragraph (2)(b), after the words "section 17(1)" there
shall be inserted "or, as the case may be, have been filed
pursuant to section 17(3)"; and

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(b) for paragraph (2)(i) there shall be substituted

"(i) the amount prescribed by regulation 10 as the
general business solvency margin, and whether
it was met;".

14 For regulation 8A of the Returns Regulations (loss reserve
certificate) there shall be substituted

"Loss reserve opinion
8A (1) A loss reserve opinion shall relate to the general
business of the insurer and shall be signed and dated by a loss
reserve specialist.

(2) In such an opinion the loss reserve specialist shall
state to what extent the instructions in Part II of Schedule III to
the Insurance Accounts Regulations 1980 relating to line 17 of
the statutory balance sheet, in so far as those instructions call
for the opinion of a loss reserve specialist, have been complied
with.".

15 Regulation 17(1) of the Returns Regulations (offence of failing to
send return as required by section 18(1) of the 1978 Act) which is
superseded by the offence in section 18A of the 1978 Act inserted by
section 9 of this Act, is hereby revoked.

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