Insurance Act 1978

PART I

1 Interpretation

2 Insurance Advisory Com mittee

PART II
REGISTRATION

3 Insurers to be registered

4 Registration as insurer

4A Determination of class of registration for general business

4B Class 1 insurer

4C Class 2 insurer

4D Class 3 insurer

4E Class 4 insurer

4F Classes of insurer: interpretation

5 Factors to be considered by Minister under section 4

6 Margin of solvency

7 Paid up share capital

8 Principal office and prin cipal representative

8A Principal representative to report certain events

9 Insurance managers and intermediaries to be reg istered

10 Minister may register in surance managers and intermediaries

11 Factors to be considered by Minister under section 10

12 Power of Minister in rela tion to registration

13 Registration

14 Fees

PART III
REGULATION OF INSURERS GENERALLY

15 Statutory financial state ments

16 Audit of statutory finan cial statements

17 Keeping and filing of statutory financial statements

18 Insurer to make financial returns

18A Failure to file statutory statements or returns

18B Opinion of loss reserve specialist

18C Requirement to keep records in Bermuda

19 Segregation of insurance accounts and business

20 Minister may require Bermuda investment

21 Maintenance of assets in Bermuda

22 Custody of assets

PART IV
INSURERS CARRYING ON LONG-TERM BUSINESS

23 Insurers to which this Part applies

24 Insurer carrying on long-term business to maintain separate accounts

25 Transfer of long-term business

26 Appointment of actuary by insurer carrying on long-term business

27 Actuarial certificates of long-term business liabil ities

PART V
INSURANCE MANAGERS, BROKERS, AGENTS AND SALESMEN

28 Insurance managers to maintain lists of insurers for which they act

29 Insurance broker, agent or salesman deemed agent of insurer in certain cases

PART VI
POWERS

30 Investigation of affairs of an insurer

31 Minister may require in formation

31A Failure to meet solvency requirements

31B Restrictions as to payment of dividends

31C Restrictions as to reduction of capital

32 Powers of intervention

PART VII
INSOLVENCY AND WINDING UP

33 Margin of solvency for general business

34 Winding up of insurers under Companies Act 1981

35 Winding up on petition of Registrar

36 Winding up of insurers carrying on long-term business

37 Continuation of long-term business of insurer in liq uidation

38 Subsidiary insurers

39 Reduction of contracts as alternative to winding up

40 Winding up rules

PART VIII
CANCELLATION OF REGIS TRATION

41 Cancellation of registra-

to be terminable by the insurer before the expiration of five years from the taking effect thereof or are expressed to be so terminable before the expiration of that period only in special circumstances therein mentioned, but does not include excepted long-term business;

(c) effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or en dowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or a se ries of sums is to become payable to the persons insured in the future, not being contracts such as fall within ei ther paragraph (a) or (b),

but does not include excepted long-term business;

"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;

"Minister" means the Minister of Finance;

"non-resident insurance undertaking" means an insurer carrying on domestic business under a permit granted under section 3 of the Non-Resident Insurance Undertakings Act 1967;

"prescribed" means prescribed by regulations;

"to register" means to register under this Act;

"Register" means the Register for which provision is made in section 13(1);

"Registrar" means the Registrar of Companies;

"regulations" means regulations made under section 53;

"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;

"statutory financial return" means the return provided for in section 18;

"statutory financial statements" means the accounts provided for in section 15

"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) [spent on repeal of the Companies (Winding Up) Act 1977]

(3) In this Act �

(a) any reference to carrying on business from within Bermuda includes reference to carrying on business outside Bermuda from a principal place of business within Bermuda;

(b) unless the context otherwise requires, any reference to carrying on the business of effecting and carrying out contracts of any kind includes reference to carrying on one aspect, or some aspects, only of that business;

(c) every company or body, being a company or body formed in Bermuda with power to carry on insurance business, shall, if carrying on insurance business anywhere, be deemed to be carrying on insurance business in or from within Bermuda for the purposes of section 3(1).

(4) The limitations upon the meaning of "general business" and "long-term business" as defined in subsection (1) shall, in relation to any insurer, not operate to disentitle that insurer �

(a) if authorized to carry on general business, from carrying on long-term business; or

(b) if authorized to carry on long-term business, from car rying on general business,

being�

(aa) in the case set forth in paragraph (a), long-term business as to which the Minister has given a direction under section 56 on the ground that he is satisfied that that long-term business either is or will be only incidental to the insurer's general business, or is or will be of
such a limited extent that the insurer ought not to be treated in all re spects as a composite within the definition of "composite" in regulation 2 of the Insurance Ac counts Regulations 1980 [title 17 item 49(a)]; or

(bb) in the case set forth in paragraph (b), general business as to which the Minister has given a corresponding direction mutatis mutandis.

[Section 1 amended by 1995:20 effective 29 April 1995]

Insurance Advisory Committee

2 (1) There shall be a committee, to be known as "the Insurance Advisory Committee" for the purpose of advising the Minister on matters connected with the discharge of his functions under this Act.

(2) The Insurance Advisory Committee shall consist of such persons (not fewer than five in number) to be appointed by the Minister, as the Minister may think fit, but so that not fewer than three members of the Committee shall be persons appearing to the Minister to be knowl edgeable about insurance business in Bermuda.

(3) The Minister shall appoint a person to be chairman of the Insurance Advisory Committee.

(4) The Insurance Advisory Committee shall advise the Minister on any matter which he is required or permitted by or under this Act to refer to them, or which, being a matter such as is mentioned in subsec tion (1), he may otherwise refer to them, and they may also of their own motion make representations to the Minister as respects any such matter as is mentioned in that subsection; and the Minister shall take into ac count any such advice or representations that the Committee may tender or make to him.

PART II

REGISTRATION

Insurers to be registered

3 (1) Subject to this Act, and notwithstanding anything in any other Act, no person shall carry on insurance business in or from within Bermuda unless he is registered by the Minister as an insurer under section 4.

(2) Any person who contravenes subsection (1) commits an of fence.

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 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.

[Section 4 substituted by 1995:20 effective 29 April 1995]

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.

(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.

[Section 4A inserted by 1995:20 effective 29 April 1995]

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.

[Section 4B inserted by 1995:20 effective 29 April 1995]

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

(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.

[Section 4C inserted by 1995:20 effective 29 April 1995]

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.

[Section 4D inserted by 1995:20 effective 29 April 1995]

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.

[Section 4E inserted by 1995:20 effective 29 April 1995]

Classes of insurer: interpretation

4F (1) In sections 4B to 4E and this section

"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.

[Section 4F inserted by 1995:20 effective 29 April 1995]

Factors to be considered by Minister under section 4

5 (1) In considering whether to register a body as an insurer, the Minister shall (but without prejudice to his discretion under section 12 to refuse registration) have regard to whether the body appears to him to be a fit and proper body to be engaged in insurance business, and to the following additional considerations�

(a) whether the body has, or has available, adequate knowl edge and expertise;

(b) whether any person to be concerned in the management of the business is a fit and proper person to be so con cerned;

[Section 5 amended by 1995:20 effective 29 April 1995]

Margin of solvency

6 (1) The Minister shall not register a body under section 4 un less he is satisfied that the value of its assets exceeds the amount of its liabilities by the prescribed amount.

(2) For the purposes of this section the value of any assets and the amount of any liabilities shall, subject to subsection (3), be deter mined in accordance with any applicable regulations.

(3) The amount of the liabilities of the long-term business of a body at any time shall, for the purposes of this section, 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 regulations,

whichever is the greater.

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;

(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).

[Section 7 substituted by 1995:20 effective 29 April 1995]

Principal office and principal representative

8 (1) Every insurer shall maintain a principal office in Bermuda.

(1A) Every insurer shall appoint and maintain a principal repre sentative in Bermuda who satisfies the requirements of subsection (1B).

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

(2) An insurer at the time of registration shall give notice in writing to the Registrar �

(a) of the location of its principal office; and

(b) of the prescribed particulars of its principal representa tive, its insurance manager (if it has one), its approved auditor and any other prescribed person to be engaged or employed in, or in connection with, its business.

(3) If any information required by subsection (2) to be notified to the Registrar is altered, the insurer shall give in writing to the Regis trar particulars of the alteration within twenty-one days after the alter ation is made.

(3A) Without a reason acceptable to the Minister �

(a) an insurer shall not terminate the appointment of its principal representative; and

(b) a principal representative shall not cease to act as such,

unless it or he gives thirty days notice in writing to the Minister of the intention to do so.

(4) An insurer shall maintain in its principal office an accurate list of all its insurance agents in Bermuda and, if required in writing at any time by the Registrar so to do, shall provide him with a copy of that list.

(5) If an insurer fails to comply with any of subsections (1) to (3A), or with a requirement made of it under subsection (4), it commits an offence.

(6) If a principal representative wilfully fails to give to the Min ister notice which he is required by subsection (3A) to give, he commits an offence.

[Section 8 amended by 1995:20 effective 29 April 1995]

Principal representative to report certain events

8A (1) It shall be the duty of the principal representative within thirty days of �

(a) his reaching the view that there is a likelihood of the in surer for which he acts becoming insolvent; or

(b) its coming to his knowledge, or his having reason to be lieve, that an event to which this section applies has oc curred,

to make a report in writing to the Minister setting out all the particulars of the case that are available to him.

(2) As respects any principal representative, this section ap plies to the following events, being events in which the insurer for which he acts as principal representative is involved, that is to say �

(a) failure by the insurer �

(i) to comply substantially with a condition im posed upon the insurer by the Minister relating to a solvency margin or a liquidity or other ratio;

(ii) to comply in any respect with any other such condition not so relating;

(b) an offence by the insurer against section 20(8) or section 21(5) or section 22(5);

(c) failure by the insurer to comply with a modified provi sion, or with a condition, being a provision or condition specified in a direction given to the insurer by the Min ister in the exercise of his powers under section 56 or section 57A;

(d) involvement of the insurer in any criminal proceedings whether in Bermuda or abroad;

(e) the insurer's ceasing to carry on insurance business in or from within Bermuda.

(3) A principal representative who fails to perform his duty un der subsection (1) commits an offence.

[section 8A amended by 1998 : 8 effective 23 March 1998]

Insurance managers and intermediaries to be registered

9 (1) Subject to this Act, and notwithstanding anything in any other Act, no person shall in or from within Bermuda act as an insur ance manager, broker, agent or salesman unless he is registered for the purpose by the Minister under section 10.

(2) Any person who contravenes subsection (1) commits an of fence.

Minister may register insurance managers and intermediaries

10 (1) Subject to sections 11 and 12, the Minister may, on appli cation being made to him for that purpose by any person, and on pay ment of the relevant fee provided for by section 14, register that person as an insurance manager, broker, agent or salesman, as the case may be, subject to that person complying with such conditions as the Minis ter may see fit to impose.

(2) Every application under subsection (1) for registration shall be made to the Registrar and shall be in such form, shall contain such information and shall be accompanied by such documents as the Minister may require.

[Section 10 amended by 1995:20 effective 29 April 1995]

Factors to be considered by Minister under section 10

11 In considering whether to register a person under section 10, the Minister shall (but without prejudice to his discretion under section 12 to refuse registration) have regard to whether the person appears to him to be a fit and proper person to be so registered and, in particular, to whether the person has knowledge of the insurance busi ness adequate to enable him to act in the capacity in which he has ap plied for registration.

[Section 11 amended by 1995:20 effective 29 April 1995]

Power of Minister in relation to registration

12 In deciding whether to register a person under section 4 or 10 the Minister shall act as he thinks fit in the public interest, and, if of opinion that it is not in the public interest that registration should be granted, he shall refuse to grant it.

Registration

13 (1) Where the Minister determines to register any person under section 4 or 10, he shall direct the Registrar accordingly, and the Regis trar shall cause the prescribed particulars relating to that person to be entered in a register to be maintained for the purpose by the Registrar (in this Act referred to as "the Register").

(2) A person's registration shall remain in force until it is can celled.

(3) Where a person is registered as aforesaid, the Registrar shall issue to him a certificate of registration, in which shall be speci fied�

(a) the name and business address of the person registered;

(b) the date of registration; and

(4) A certificate issued under this section shall be accepted in all courts as prima facie evidence of the fact that the person named therein is registered, and of the particulars set forth in the certificate.

(5) A copy of every certificate of registration shall be kept by the Registrar in his office and shall be open to inspection by the public.

Fees

14 (1) Fees shall be prescribed under the Government Fees Act 1965 [title 15 item 18] in respect of �

(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;

(b) the registration of any person;

(d) the inspection of the Register; and

(e) the furnishing by the Registrar of any document or copy.

(2) In addition to the fees for which subsection (1) provides, there shall, subject to subsection (3), be payable by a registered insurer or insurance manager, broker, agent or salesman before the 31 March in every year following the year in which it or he was registered a business fee of such amount as shall be prescribed under the Government Fees Act 1965:

Provided that �

(a) a business fee shall not be payable by a company whose winding up is in progress in winding up proceedings in Bermuda, except where �

(i) the fee, being due for payment, was not paid; and

(ii) the time allowed by this subsection for its pay ment had expired,

before those proceedings were commenced; and

(b) if a business fee that a company is excused by para graph (a) of this proviso from paying has in fact been paid, the liquidator may recover it from the Government.

(3) An unpaid business fee may be sued for by the Government by action as a civil debt and �

(a) the Government may (whether in such an action or not) require; and

(b) where judgment is given for the Government in any ac tion, the court may order,

for late payment of the fee payment of a penalty in an amount equal to the amount of the fee.

[Section 14 amended by 1995:20 effective 29 April 1995]

PART III

REGULATION OF INSURERS GENERALLY

Statutory financial statements

15 (1) An insurer shall prepare accounts (in this Act referred to as "statutory financial statements") in respect of its insurance business for each financial year.

(2) Statutory financial statements shall be in such form (being a form calculated to enable comparison to be made between the insurer's business for the financial year in respect of which the statements are prepared and the insurer's business for the financial year immediately preceding that year), and shall contain such information, as may be pre scribed.

(3) The information required to be included in statutory finan cial statements pursuant to subsection (2) shall be information calcu lated to fulfil (in addition to any other purposes for which regulations may be made) the following purposes�

(a) to give as early warning as possible to any person ex amining the said statements (whether by way of notice of the observance or non-observance by the insurer of any margin of solvency, or in any other way) of any financial or operational difficulties into which the insurer's busi ness has fallen or might appear likely to fall;

(b) to provide the basis on which the Minister or any other authority may in good time take action under this Act or any other statutory provision to exercise any statutory power available to him or it for the safeguarding of any element of the public interest involved in or affected by the insurer's business.

Audit of statutory financial statements

16 (1) The statutory financial statements of an insurer shall be audited annually by the insurer's approved auditor.

(2) In this Act "approved auditor", in relation to an insurer, means that the auditor has been approved by the Minister as the inde pendent auditor of that insurer.

(3) In subsection (2) "independent", in relation to an insurer's auditor, means that the auditor has satisfied the Minister that the audi tor is not, and will not at any relevant time be, financially interested in any way in any business of the insurer apart from the audit.

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 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).

[Section 17 amended by 1995:20 effective 29 April 1995]

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.

[Section 18 substituted by 1995:20 effective 29 April 1995]

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;

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

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.

[Section 18A inserted by 1995:20 effective 29 April 1995]

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

[Section 18B inserted by 1995:20 effective 29 April 1995]

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

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.

[Section 18C inserted by 1995:20 effective 29 April 1995]

Segregation of insurance accounts and business

19 An insurer which carries on any business other than insurance business shall keep separate accounts in respect of its insurance busi ness, and shall segregate the assets and liabilities of its insurance busi ness from those of its other business,

Minister may require Bermuda investment

20 (1) The Minister may by order made under this section require that every insurer, or every insurer of a class specified in the order, being a non-resident insurance undertaking, must maintain invested in Bermuda during the currency of the order approved assets of a value fixed in the order (in this section referred to as "investment asset value").

(2) An order under this section may fix �

(a) an investment asset value of not more than 60% of the value of the domestic liabilities of insurers, being liabili ties outstanding on account of long-term business;

(b) an investment asset value of not more than 40% of the premium income of insurers, being premium income arising on account of general business that is domestic business,

and such an order may either fix an investment asset value under para graph (a) alone or paragraph (b) alone, or may fix investment asset val ues so as to be in force concurrently under both those paragraphs.

(3) Such an order as aforesaid may contain such transitional provision (including provision reducing temporarily a percentage other wise fixed by the order) as the Minister may deem necessary to enable insurers affected by the order, or any class of such insurers, to re-orga nize investments held by them immediately before the coming into force of the order with a view to meeting the requirements of the order.

(4) Where an approved asset is a security on which a value was placed by the approved auditor in the course of the latest audit of the statutory financial statements of the insurer, that value shall, in any dispute as to the value of the security, be deemed conclusively to be the true value of the security.

(5) The Minister may include provision in such an order as aforesaid that for the purposes of the order domestic liabilities shall not include any part of such liabilities which is re-insured.

(6) For the purposes of this section �

(a) (i) an "approved asset" is an asset approved by the Minister;

(ii) "premium income", in relation to an insurer, means the net amount, after deduction of any premiums paid by the insurer for re-insurance, of the premiums received by the insurer;

(iii) a "domestic liability" is a liability arising in re spect of domestic business; and

(b) references to "premium income" and "domestic liabili ties", in relation to an insurer affected by an order, are respectively references to premium income and domestic liabilities as shown in the statutory financial statements of the insurer in respect of the financial year next pre ceding the date of the making of the order;

(c) subject to any applicable regulations, in computing the amount of any liabilities all contingent and prospective liabilities shall be taken into account but not liabilities in respect of share capital.

(7) Any order made under this section shall be subject to the affirmative resolution procedure.

(8) An insurer which at any time fails to comply with an order that is in force under this section and applies to it commits an offence.

Maintenance of assets in Bermuda

21 (1) The Minister may by order made under this section require that every insurer, or every insurer of a class specified in the order, being a non-resident insurance undertaking, must maintain in Bermuda ap proved assets of the insurer of a value which at any time is equal to the whole or a specified proportion of the amount of its domestic liabilities.

(2) Such an order as aforesaid may contain provision that as sets of a specified class or description shall or shall not be treated as as sets maintained in Bermuda.

(3) Section 20(4), (5) and (as respects the interpretation or treatment of approved assets, liabilities and domestic liabilities) (6) shall apply mutatis mutandis in relation to an order made under this section as those subsections apply in relation to an order made under section 20.

(4) Any order made under this section shall be subject to the

affirmative resolution procedure.

(5) An insurer which fails at any time to comply with an order that is in force under this section and applies to the insurer commits an offence.

Custody of assets

22 (1) The Minister may impose a requirement on any insurer af fected by an order under section 21 that the whole or a specified propor tion of the insurer's assets affected by such an order shall be held by a person approved by the Minister for the purposes of the requirement as trustee of the insurer.

(2) Assets of an insurer held by a person as trustee for an in surer shall be taken to be held by him in compliance with a requirement imposed under this section if, and only it they are assets in whose case the insurer has given him written notice that they are to be held by him in compliance with such a requirement, or they are assets into which as sets in whose case the insurer has given him a written notice as afore said have, by any transaction or series of transactions, been transposed by him on the instructions of the insurer.

(3) No asset held by a person as trustee of an insurer in com pliance with a requirement imposed under this section shall, so long as the requirement is in force, be released except with the consent of the Minister.

(4) If a mortgage or charge is created by an insurer at a time when there is in force a requirement imposed on the insurer by virtue of this section, being a mortgage or charge conferring a security on any as sets which are held by a person as trustee of the insurer in compliance with the requirement, the mortgage or charge shall, to the extent that it confers such a security, be void against the liquidator and any creditor of the insurer.

(5) An insurer which fails to comply with a requirement prop erly imposed upon it under this section commits an offence.

PART IV

INSURERS CARRYING ON LONG-TERM BUSINESS

Insurers to which this Part applies

23 This Part shall apply to insurers carrying on long-term business.

Insurer carrying on long-term business to maintain separate ac counts

24 (1) An insurer to which this Part applies shall keep its accounts in respect of its long-term business separate from any accounts kept in respect of any other business.

(2) All receipts of such an insurer's long-term business shall be carried to, and form part of, a special fund with an appropriate name, in this Act referred to as a "long-term business fund".

(3) Such an insurer shall maintain books of account and other records such that �

(a) the assets in its long-term business fund; and

(b) the liabilities of its long-term business,

can be readily identified at any time.

(4) No payment from such an insurer's long-term business fund shall be made directly or indirectly for any purpose other than a purpose of the insurer's long-term business, notwithstanding any ar rangement for its subsequent repayment out of receipts of business other than the long-term business, except in so far as such payment can be made out of any surplus certified by the insurer's approved actuary to be available for distribution otherwise than to policy-holders.

(5) No insurer to which this Part applies shall declare or pay a dividend to any person other than a policy-holder unless the value of the assets of its long-term business fund, as certified by the insurer's ap proved actuary, exceeds the extent (as to certified) of the liabilities of the insurer's long-term business; and the amount of any such dividend shall not exceed the aggregate of �

(a) that excess; and

(b) any other funds properly available for the payment of dividend, being funds arising out of business of the in surer other than long-term business.

(6) This section shall not apply in relation to an insurer which, immediately before 1 January 1980�

(a) either �

(i) was an exempted company within the definition in section 1 of the Exempted Companies Act 1950; or

(ii) had a permit under section 69 of the Bermuda

PART VI

POWERS

Investigation of affairs of an insurer

30 (1) The Minister may appoint any person appearing to him to be a suitable person as an inspector to investigate the affairs, or any part of the affairs, of an insurer if he is satisfied that such an investigation is required in the interest of the policy-holders or of persons who may be come policy-holders.

(2) It shall be the duty of any insurer in relation to whose af fairs an inspector has been appointed under subsection (1) (in this sec tion called an "insurer under investigation"), and of any past or present officer, employee or insurance manager of such an insurer, to produce to the inspector on request all books, records and documents relating to the insurer under investigation which are in its or his custody or control and otherwise to give to the inspector all assistance in connection with the investigation which it or he is reasonably able to give.

(3) An inspector may �

(a) examine on oath any past or present officer, employee, or insurance manager of the insurer under investigation in relation to its business, and may administer an oath accordingly;

(b) if he thinks it necessary for the purpose of his investiga tion that a person whom he has no power to examine on oath should be so examined, make application to the Court, and the Court may, if it thinks fit, order that per son to attend and be examined on oath before the Court on any matter relevant to the investigation.

Minister may require information

31 The Minister may in writing direct any person to whom this sec tion applies to produce to him any document or information relating to any matter or thing connected with insurance business which is in that person's custody or control and which the Minister reasonably requires for the purpose of verifying or supplementing information otherwise pro vided under this Act.

2) In subsection (1) "person to whom this section applies" means any person who at the time a direction under that subsection is given is, or at any time within the period of five years immediately pre ceding that time was, an insurer or an insurance manager, broker, agent or salesman.

(3) Any person to whom a direction is given under subsection (1) commits an offence if he fails to comply with the direction.

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

[Section 31A inserted by 1995:20 effective 29 April 1995]

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 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.

[Section 31B inserted by 1995:20 effective 29 April 1995]

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

(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.

[Section 31C inserted by 1995:20 effective 29 April 1995]

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 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

(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.

(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.

[Section 32 substituted by 1995:20 effective 29 April 1995]

PART VII

INSOLVENCY AND WINDING UP

Margin of solvency for general business

33 (1) An insurer, being a company that may be wound up under the Companies Act 1981, carrying on general business shall be deemed for the purposes of section 161 of the Companies Act 1981 (winding up of company by the court) to be unable to pay its debts if at any time the value of its assets does not exceed the amount of its liabilities and the provisions of this Act as to winding up shall have effect ac cordingly.

(2) For the purposes of this section in computing the amount of liabilities of an insurer, all contingent and prospective liabilities shall be taken into account but not liabilities in respect of share capital.

(3) For the purposes of this section the value of any assets and the amount of any liabilities shall, subject to subsections (4) and (5), be determined in accordance with any applicable regulations making provi sion as to the taking into, or leaving out of, account of assets or liabilities for any purpose.

(4) In the case of an insurer which carries on long-term business as well as general business, the amount of the liabilities of its long-term business at any time shall, for the purposes of this section, be taken to be �

(a) an amount equal to the total amount at that time standing to the credit of the insurer's long-term business fund; or

(b) the amount of those liabilities at any time as determined in accordance with any applicable regulations,

whichever is the greater.

(5) Regulations may require that, in every statutory financial return prepared by an insurer carrying on general business, there shall be included a certificate as to solvency (to be called a "solvency certifi cate") �

(a) in such form and signed by such persons as may be pre scribed by the regulations; and

(b) containing such a statement with respect to the assets and liabilities of the insurer as may be so prescribed,

and if any such insurer fails to comply with the regulations so made the value of its assets shall, in any proceedings under this section for the winding up of the insurer, be deemed, until the contrary is proved, not to exceed the amount of its liabilities by the amount required by subsection (1).

(6) Nothing in this section shall be taken as affecting the man ner in which, on a winding up, any assets or liabilities are required to be dealt with whether by virtue of section 36 or otherwise.

[Section 33 amended by 1995:20 effective 29 April 1995]

Winding up of insurers under Companies Act 1981

34 The Court may order the winding up, in accordance with the Companies Act 1981, of an insurer, being a company which may be wound up under that Act, and that Act shall apply accordingly subject to the modification that the insurer may be ordered to be wound up on the petition of ten or more policyholders owning policies of an aggregate value of not less than $50,000:

Provided that such a petition shall not be presented except by leave of the Court, and leave shall not be granted until a prima facie case has been established to the satisfaction of the Court and until security for costs for such amount as the Court may think reasonable has been given.

Winding up on petition of Registrar

35 (1) The Registrar may present a petition for the winding up, in accordance with the Companies Act 1981, of an insurer, being a com pany which may be wound up under that Act, on the ground�

(a) that the insurer is unable to pay its debts within the meaning of sections 161 and 162 of the Companies Act 1981; or

(b) that the insurer has failed to satisfy an obligation to which it is or was subject by virtue of this Act; or

(c) that the insurer has failed to satisfy the obligation im posed upon it by section 15 as to the preparation of ac counts or to produce or file statutory financial statements in accordance with section 17, and that the Minister is unable to ascertain its financial position.

(2) In any proceedings on a petition to wind up an insurer pre sented by the Registrar under subsection (1), evidence that the insurer was insolvent �

(a) at the close of the period to which the statutory financial statements last prepared under section 15 relate; or

(b) at any date specified in a direction under section 27(2),

shall be evidence that the insurer continues to be unable to pay its debts, unless the contrary is proved.

(3) If, in the case of an insurer, being a company which may be wound up under the Companies Act 1981, it appears to the Minister that it is expedient in the public interest that the insurer should be wound up, he may, unless the insurer is already being wound up by the Court, direct the Registrar to present a petition for it to be so wound up if the Court thinks it just and equitable for it to be so wound up.

(4) Where a petition for the winding up of an insurer is pre sented by a person other than the Registrar, a copy of the petition shall be served on the Registrar, and he shall be entitled to be heard on the petition.

[Section 35amended by 1995:20 effective 29 April 1995]

Winding up of insurers carrying on long-term business

36 (1) An insurer which carries on long-term business shall not be wound up voluntarily.

(2) Subject to subsection (3) and to rules made by virtue of section 40, in any winding up of an insurer which immediately before the winding up was carrying on or entitled to carry on long-term business �

(a) the assets in the insurer's long-term business fund shall be available only for meeting the liabilities of the insurer attributable to its long-term business;

(b) other assets of the insurer shall be available only for meeting the liabilities of the insurer attributable to its other business.

(3) Where the value of the assets mentioned in either para graph of subsection (2) exceeds the amount of the liabilities mentioned in that paragraph the restriction imposed by that subsection shall not ap ply to so much of those assets as represents the excess.

(4) In relation to the assets falling within either paragraph of subsection (2) the creditors mentioned in section 176(1) and (2) of the Companies Act 1981 shall be only those who are creditors in respect of liabilities falling within that paragraph; and any general meeting of cred itors summoned for the purposes of that section shall accordingly be separate general meetings of the creditors in respect of the liabilities falling within each paragraph.

(5) Where under section 247(1) of the Companies Act 1981 (power of court to assess damages against delinquent officers) the Court orders any money or property to be repaid or restored to an insurer or any sum to be contributed to its assets then, if and so far as the wrong ful act which is the reason for the making of the order related to assets belonging to an insurer's long-term business fund, the Court shall in clude in the order a direction that the money, property or contribution shall be treated for the purposes of this Act as assets of that fund, and this Act shall have effect accordingly.

Continuation of long-term business of insurer in liquidation

37 (1) This section shall have effect in relation to the winding up of an insurer, being an insurer carrying on long-term business.

(2) The liquidator shall, unless the Court otherwise orders, carry on the long-term business of the insurer with a view to its being transferred as a going concern to another insurer, whether an existing insurer or an insurer formed for that purpose; and, in carrying on that business as aforesaid, the liquidator may agree to the variation of any contracts of insurance in existence when the winding up order is made, but shall not effect any new contracts of insurance.

(3) If the liquidator is satisfied that the interests of the credi tors in respect of liabilities of the insurer attributable to its long-term business require the appointment of a special manager of the insurer's long-term business, he may apply to the Court, and the Court may on such application appoint a special manager of that business to act dur ing such time as the Court may direct, with such powers, including any of the powers of a receiver or manager, as may be entrusted to him by the Court.

(4) Section 190(2) and (3) of the Companies Act 1981 (special manager to give security and receive remuneration) shall apply to a spe cial manager appointed under subsection (3) of this section as they apply to a special manager appointed under that section.

(5) The Court may, if it thinks fit and subject to such provi sions (if any) as it may determine, reduce the amounts of the contracts made by the insurer in the course of carrying on its long-term business.

(6) The Court may, on the application of a liquidator, a special manager appointed under subsection (3) or the Registrar, appoint an in dependent actuary to investigate the long-term business of the insurer and to report to the liquidator, the special manager or the Registrar, as

the case may be, on the desirability or otherwise of that business being conducted and on any reduction in the contracts made in the course of carrying on that business that may be necessary for its successful con tinuation.

(7) Notwithstanding section 175(1) of the Companies Act 1981 (which requires the liquidator to obtain the sanction of the Court or committee of inspection for the bringing of legal proceedings in the name of and on behalf of the company) the liquidator may without any such sanction make an application in the name of and on behalf of the insurer under section 25.

Subsidiary insurers

38 (1) Where the insurance business or any part of the insurance business of an insurer has been transferred to an insurer under an ar rangement in pursuance of which the first mentioned insurer (in this section called the subsidiary insurer) or the creditors thereof has or have claims against the insurer to which the transfer was made (in this sec tion called the principal insurer), then, if the principal insurer is being wound up by or under the supervision of the Court, the Court shall, subject to this section, order the subsidiary insurer to be wound up in conjunction with the principal insurer, and may by the same or any sub sequent order appoint the same person to be liquidator for the two in surers, and make provision for such other matters as may seem to the Court necessary, with a view to the insurers being wound up as if they were one insurer.

(2) The commencement of the winding up of the principal in surer shall, save as otherwise ordered by the Court, be the commence ment of the winding up of the subsidiary insurer.

(3) In adjusting the rights and liabilities of the members of the several insurers between themselves, the Court shall have regard to the constitution of the insurers, and to the arrangements entered into be tween the insurers, in the same manner as the Court would have regard to the rights and liabilities of different classes of contributories in the case of the winding up of a single insurer, or as near thereto as circum stances admit.

(4) Where any insurer alleged to be subsidiary is not in process of being wound up at the same time as the principal insurer to which it is subsidiary, the Court shall not direct the subsidiary insurer to be wound up unless, after hearing all objections (if any) that may be urged by or on behalf of the insurer against it being wound up, the Court is of the opinion that the insurer is subsidiary to the principal insurer, and that the winding up of the insurer in conjunction with the principal in surer is just and equitable.

(5) An application may be made in relation to the winding up of any subsidiary insurer in conjunction with a principal insurer by any creditor of, or person interested in, the principal insurer or the sub sidiary insurer.

(6) Where an insurer stands in the relation of a principal in surer to one insurer, and the relation of a subsidiary insurer to some other insurer, or where there are several insurers standing in the relation of subsidiary insurers to one principal insurer, the Court may deal with any number of such insurers together or in separate groups, as it thinks most expedient, upon the principles laid down in this section.

Reduction of contracts as alternative to winding up

39 (1) In the case of an insurer which has been proved to be un able to pay its debts, the Court may, if it thinks fit, reduce the amount of the contracts of the insurer on such terms and subject to such condi tions as the Court thinks just instead of making a winding up order.

Winding up rules

40 (1) The Minister may make rules under this section for deter mining the amount of the liabilities of an insurer to policyholders of any class or description for the purpose of proof in a winding up and gener ally for carrying into effect this Act in respect to the winding up of insur ers.

(2) Without prejudice to the generality of subsection (1), rules made under this section may make provision for all or any of the follow ing matters�

(a) the identification of the assets and liabilities falling within either paragraph of section 36(2);

(b) the apportionment between the assets falling within paragraphs (a) and (b) of section 36(2) of the costs, charges or expenses of the winding up or any debts of the insurer having priority under section 236 of the Companies Act 1981;

(c) the determination of the amount of liabilities of any de scription falling within either paragraph of section 36(2) for the purpose of establishing whether or not there is any such excess in respect of that paragraph as is men tioned in section 36(3);

(d) the application of assets within subsection (2)(a) for meeting the liabilities within that paragraph;

(e) the application of assets representing any such excess as is mentioned in section 36(3).

(3) Rules made under this section shall be subject to the nega tive resolution procedure.

PART VIII

CANCELLATION OF REGISTRATION

Cancellation of registration of insurers

41 (1) The Minister may, subject to this Part, by order cancel the registration of an insurer �

(a) at the request of the insurer; or

(b) upon any one or more of the following grounds�

(i) that false, misleading or inaccurate information has been supplied by the insurer or on it's be half for the purpose of any provision of this Act or the regulations;

(ii) that two years have elapsed since the registra tion of the insurer, and the insurer has not commenced to carry on business;

(iii) that the insurer has ceased to carry on busi ness;

(iv) that the insurer has persistently failed to pay fees due under section 14;

(v) that the insurer has not complied with a condi tion attached to its registration or with a re quirement made of it under this Act or the reg ulations:

(vi) that the insurer has been convicted of an offence against a provision of this Act or the regulations;

(vii) that, in the opinion of the Minister, arrived at after consultation with the Insurance Advisory Committee, the insurer has not been carrying on business in accordance with sound insurance principles.

(2) Before he cancels the registration of an insurer under sub section (1)(b), the Minister shall give the insurer notice in writing of the ground on which he proposes to cancel the registration, and shall afford the insurer an opportunity to make objection in writing within the period of thirty days after receipt of the notice; and the Minister shall take into consideration any such objection and, if he decides to cancel the regis tration, cause the order of cancellation to be served on the insurer.

(3) The cancellation of the registration of an insurer shall take effect on the expiration of the period of twenty-one days beginning on the date of service of the order upon the insurer, or on such later date as may be specified in the order, but subject to the right of the insurer to appeal to the Court under section 43.

(4) In this section "to carry on business" means to carry on in surance business in or from within Bermuda.

Cancellation of registration of insurance managers, etc

42 (1) The Minister may, subject to this Part, by order cancel the registration of an insurance manager, broker, agent or salesman �

(a) at the request of the manager, broker, agent or salesman in question; or

(b) upon any one or more of the following grounds�

(i) that false, misleading or inaccurate information has been supplied by him on his behalf for the purposes of any provision of this Act or the reg ulations;

(ii) that two years have elapsed since his registra tion, and he has not commenced to carry on business;

(iii) that he has ceased to carry on business;

(iv) that he has persistently failed to pay fees due under section 14;

(v) that he has not complied with a condition at tached to his registration or with a requirement made of him under this Act or the regulations;

(vi) that he has been convicted of an offence against a provision of this Act or the regulations;

(vii) that he has been convicted by a court (whether in Bermuda or elsewhere) of an offence involving fraud or dishonesty;

(viii) that, in the opinion of the Minister, arrived at after consultation with the Insurance Advisory Committee, he has not been carrying on busi ness in accordance with sound insurance prin ciples.

(2) The provisions of subsections (2) and (3) of section 41 shall apply in relation to the cancellation under this section of a registration as those provisions apply in relation to a cancellation under that section.

(3) In this section "to carry on business" means in or from within Bermuda to act as an insurance manager, broker, agent or sales man, as the case may be.

Appeals to Supreme Court

43 (1) An appeal at the instance of an insurer or other person af fected by an order made under section 41 or 42 shall lie to the Court against the order.

(2) Such an appeal shall be commenced by notice of motion, and shall �

(a) be filed in the Registry of the Supreme Court; and

(b) be served on the Attorney General,

within twenty-one days after the date on which the order was served on the insurer or other person affected by the order.

(3) Rules of court may be made under section 62 of the Supreme Court Act 1905 [title 8 item 1] for the purpose of regulating the practice and procedure on appeals under this section.

(4) On an appeal under this section the Court may confirm, re verse or modify the order of the Minister, or may remit the matter to him with the opinion of the Court thereon.

(5) The bringing of an appeal under this section shall operate to suspend the order of cancellation appealed against, pending the de termination or abandonment of the appeal:

Provided that the insurer or other person affected by the order shall not during the period of the suspension be entitled to effect any business or perform any function other than business or a function arising out of business commenced or transacted by him before the order was served upon him.

Cancellation of registration to be gazetted

44 The Registrar shall publish in the Gazette notice of any cancella tion of a registration under this Act.

PART IX

SUPPLEMENTARY

Prohibition of loans to directors, etc

45 (1) Subject to subsection (2), an insurer which carries on do mestic business shall not, directly or indirectly, without the previous consent of the Minister in writing �

(a) make any loan to any director or officer of the insurer, or to the wife or child of any such director or officer; or

(b) guarantee, or provide any security in connection with, a loan by any other person to a person referred to in para graph (a).

(2) Nothing in subsection (1) shall operate to prohibit the making of a loan �

(a) to a person referred to in subsection (1)(a) where the amount of the loan is within the surrender value of a life policy issued to him by the insurer; or

(b) secured by a first mortgage, where the amount of the loan does not exceed three quarters of the market value of the property mortgaged.

(3) An insurer which contravenes this section commits an of fence.

Effect on business transactions of infringement of Act

46 No business transaction shall be void or voidable by reason only that at the relevant time any party to the transaction is in breach of any provision of this Act.

Acting on behalf of unregistered insurer

47 (1) Subject to subsection (2), any person who solicits another person, or causes him to enter into, or make application to enter into, a contract of domestic business with a person who is not a registered in surer commits an offence.

(2) Subsection (1) shall not apply in relation to �

(a) any contract arranged by any person authorized in that behalf by the Minister in accordance with any conditions imposed by the Minister; or

(b) any contract of re-insurance.

Personal liability of intermediaries in certain cases

48 (1) Any insurance broker or agent who arranges a policy of do mestic business with a person who is not a registered insurer shall be personally liable on the policy as if he were the insurer.

(2) For the purposes of subsection (1) a member of a recognized association of underwriters shall be deemed to be a registered insurer.

Control of advertisements

49 An insurer or an insurance broker or agent shall not publish any advertisement which misleads, or directly or by implication is likely to mislead or deceive, any prospective policy-holder with respect to an in surer's assets or financial standing, or in any other material respect.

Issue of false documents etc

50 (1) Any person who, for any purposes of this Act, issues any document which is false or misleading in a material respect, and any person who takes part in the preparation or issue of such a document, or who signs such a document, commits an offence unless he proves �

(a) if an individual, that he had no knowledge of the falsity or misleading character of the document and took every reasonable precaution to ensure its accuracy; and

(b) in any other case, that every person acting on his behalf had no such knowledge, and took every such reasonable precaution, as aforesaid.

PART X

MISCELLANEOUS

Service on insurers

51 (1) Any notice, instrument or other document, and any legal process, to be delivered to, or served on, an insurer for the purposes of this Act may be delivered or served by leaving it at the principal office of the insurer.

(2) If the said office cannot reasonably be found, any such no tice, instrument, document or process may be delivered or served by leaving it at the office of the Registrar and publishing notice of the fact in the Gazette.

(3) Delivery or service pursuant to subsection (2) shall be deemed to be delivery to, or service on, an insurer.

Confidentiality

52 (1) Information received by any public officer or an inspector in the course of the performance by him of any function under this Act shall not be disclosed by him except �

(a) to the Minister or a public officer or, but so far only as may be necessary or expedient for the proper discharge of any function to be performed under this Act, to other persons; or

(b) for the purposes of any criminal or civil proceedings; or

(c) in the form of a summary or other general statement which does not identify the person from whom the in formation was received or to whom it relates.

(2) Any person who discloses information in contravention of this section commits an offence.

Regulations by Minister

53 (1) The Minister may make regulations �

(a) dividing insurance business into classes for the pur poses of any provision of this Act;

(b) exempting any class of insurance business from any provision of this Act;

(d) determining the value of assets or the amount of liabili ties for the purposes of any provision of this Act;

(e) without prejudice to paragraph (d), providing that, for any specified purpose, assets or liabilities of any speci fied class or description shall be left out of account or shall be taken into account only to a specified extent;

(f) prescribing the information to be contained in any statement or report required by any provision of this Act to be provided, and the manner of presentation of such information;

(g) prescribing the information to be contained in any reg ister under this Act which is to be made available for in spection by members of the public;

(h) prescribing the number of copies and the manner of certification of any document required to be furnished under any provision of this Act;

(i) prescribing anything permitted or required by this Act to be prescribed;

(j) creating offences and prescribing penalties (including imprisonment) for breach of such offences.

(2) Regulations prescribing the information to be contained in any statutory financial statement or any statutory financial return may provide for enabling the information to be given in a note on, or a state ment or report annexed to, the statement or return; or may require there to be given in such a note, statement or report as aforesaid such infor mation in addition to that given in the statement or return as may be prescribed.

(3) Regulations may, as respects such matters stated in any statutory financial statement or any statutory financial return or in statements or reports annexed thereto as may be prescribed, require there to be given by such persons as may be prescribed and to be an nexed to the statutory financial statement or statutory financial return certificates of such matters as may be prescribed.

(4) If a form is prescribed for any statutory financial statement or as that in which information authorized or required to be given in a statement or report annexed to any statutory financial statement is to be given, or for a certificate to be so annexed, the statutory financial state ment shall be prepared, the information shall be given or, as the case may be, the certificate shall be framed, in that form.

(5) In this section "Act" includes any regulations.

(6) Regulations made under this section shall be subject to the affirmative resolution procedure.

Specific offences

54 (1) Any person who fails to comply with any duty or prohibition imposed upon him by any provision to which this section applies com mits an offence.

(2) The provisions to which this section applies are section 17(1), (2), and (3); section 24(4); section 27(2); section 28; section 30(2); the proviso to section 43(5); and section 49.

General provisions relating to offences

55 (1) Any person committing an offence against this Act or any regulation for which no penalty is specifically provided may be proceeded against either summarily or on indictment:

Punishment on summary conviction: imprisonment for 12 months or a fine of $5,000 or both such imprisonment and fine.

Punishment on conviction on indictment: imprisonment for 3 years or a fine of $15,000 or both such imprisonment and fine.

(2) Where an offence committed against this Act or any regula tion by a body corporate is proved to have been committed with the con sent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body cor porate, or any person who was purporting to act in any such capacity, he, as well as the body corporate, commits that offence and is liable to be proceeded against and punished accordingly.

[Section 55 amended by 1995:20 effective 29 April 1995]

Minister may modify accounting provisions in certain cases

56 (1) The Minister may, on the application, or with the consent, of any insurer, direct that all or any of the provisions to which this sec tion applies shall not apply to that insurer or shall apply to it subject to such modifications as may be specified in the direction.

(2) A direction under this section may be subject to conditions.

(3) A direction under this section may be made with retroactive effect.

(4) A direction under this section may be revoked at any time

by the Minister; and the Minister may also vary any such direction at any time, provided the variation has been applied for, or is consented to, by the insurer affected by the variation.

(5) The provisions to which this section applies are �

(a) the limitations upon the carrying on of general business or, as the case may be, long-term business specified in section 1(4);

(b) the provisions of sections 4 to 4F, 6, 15 to 18 and 33; and

(i) relating to the limitations referred to in para graph (a); or

(ii) made for the purposes of any of the provisions specified in paragraph (b).

(6) A direction given under this section is not a statutory in strument having legislative effect.

[Section 56 amended by 1995:20 effective 29 April 1995]

Application

57 (1) Insurance business of any of the following kinds�

(a) insurance business carried on by a friendly society reg istered under the Friendly Societies Act 1868 [title 13 item 11] or by a trade union registered under the Trade Union Act 1965 [title 18 item 2], being business in which risks of members of the friendly society or trade union, as the case may be, are insured;

(b) insurance business carried on by the Hospital Insur ance Commission pursuant to the Hospital Insurance Act 1970 [title 18 item 9];

(c) the health insurance scheme conducted pursuant to the Government Employees (Health Insurance) Act 1986 [title 9 item 16];

(d) housing loan insurance carried on by the Bermuda Housing Corporation under the Bermuda Housing Loan Insurance Act 1984 [title 29 item 5],

shall be deemed not to be insurance business within the meaning of this Act.

(2) Apart from �

(a) section 48; and

(b) any provision dealt with in subsection (3) of this section,

nothing in this Act or any regulation shall apply in relation to any mem ber of a recognized association of underwriters.

(3) In relation to a member of a recognized association of un derwriters�

(a) section 3 shall not apply in relation to any member of a recognized association of underwriters who is registered in accordance with paragraph (b) below and carries on his business in accordance with the requirements of that paragraph and with any conditions attached to his reg istration;

(b) sections 9 to 14 and any regulations made for the pur poses of those sections shall apply in relation to a mem ber of a recognized association of underwriters as re spects the carrying on of insurance business by him in or from within Bermuda as those provisions apply in re lation to an insurance manager, broker, agent or sales man acting as such;

(c) sections 42 to 44 shall apply in relation to a member of a recognized association of underwriters in the same manner as those sections apply in relation to an insur ance manager, broker, agent or salesman;

(d) section 54 shall apply as respects the proviso to section 43(5);

(e) section 55 shall apply;

(f) section 1 shall apply to the extent necessary for the in terpretation of any other section that applies.

Designated investment contracts

57A (1) For the purposes of this section�

"contract" includes investment or security, and any reference to "parties" in relation to an investment or security shall be taken to be a reference to its issuers and investors; and

"designated investment contract" means�

(a) any contract (including, but not limited to, any option contract, futures contract, swap contract, derivative contract, contract for differences or security) the purpose of which is to secure a profit or avoid a loss�

(i) by reference to fluctuations in the value or price of property of any description, or in an index, or other factor, specified for that purpose in the contract, or

(ii) based on the happening of a particular event specified for that purpose in the contract; and

(b) in relation to which the Minister has given a direction under subsection (2).

(2) The Minister may direct in writing that a contract falling within paragraph (a) of the definition of designated investment contract in subsection (1), which was submitted to him in draft together with�

(a) the fee of $1000, or such other fee as may be prescribed under the Government Fees Act 1965, and

(b) such other documents as the Minister may require,

is a designated investment contract for the purposes of this section.

(3) A direction under this section�

(a) may be made with retroactive effect;

(b) may be subject to conditions which may be varied at any time, provided�

(i) that the variation has been applied for, or is consented to by the parties to the contract in question; and

(ii) that those parties undertake to notify such other persons as the Minister considers may be affected by the variation;

(4) Being a party to a designated investment contract shall not constitute carrying on insurance business, and a designated investment contract shall not constitute a contract of insurance, for any purposes.

(5) For the avoidance of doubt, a designated investment contract shall not constitute a bet for the purposes of the Betting Act 1975.

(6) The Minister may by order amend the definition of designated investment contract in subsection (1), if, after consulting the Insurance Advisory Committee, he considers it necessary to do so; and any such order shall be subject to the negative resolution procedure.

[section 57A inserted by 1998 : 8 effective 23 March 1998]

Transitional

58 [omitted]

Amendment of Act No. 43 of 1971

59 [omitted]

Commencement

60 [omitted]

[this Act was brought into operation on 1 January 1980]

[Amended by:
1995 : 20
1998 : 8]

Bermuda Consolidated Legislation

Insurance Act 1978