Sri Lanka Consolidated Acts

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Control Of Insurance Act (No. 25 of 1962) - Sect 84

Interpretation

84.
(1) In this Act, unless the context otherwise requires-
(2) For the purposes of this Act, a person shall be deemed to carry on or transact insurance business of any class in Ceylon if such person-
(a) issues, or undertakes liability under, any policy or contract of insurance of that class to or with a person for the time being in Ceylon; or
(b) offers whether orally or in writing to issue, 01 undertake liability under, any policy or contract whether such offer is made directly to any such person or generally to any such person by the publication, transmission, or circulation of any advertisement, book, pamphlet, or any document whatsoever; or
(c) employs, engages or in any other manner causes or encourages, any person to make any such offer as aforesaid whether or not any remuneration is paid or payable to such other person.
1.
(1) The balance sheet required to be prepared by an insurer must be in Form A set out in Part II of this Schedule.
(2) Form A set out in Part II of this Schedule, which is intended to be used by an insurer who carries on insurance business and who has undischarged liabilities in respect of life assurance policies issued by such insurer, must be used with the necessary modifications in the case of an insurer who does not have such undischarged liabilities or in the case of an insurer who also has undischarged liabilities on bond investment business.
2. The balance sheet of the life assurance business, the balance sheet relating to any other class of insurance business, and the balance sheet of bond investment business shall each be prepared as a separate document. The totals of each separate balance sheet prepared by any insurer under this regulation, that is to say, the total assets of the long-term business and insurance business, the balance to the credit of the life assurance fund and of every other separate fund or account, the amount of the shareholders' undivided profits, and outstanding liabilities shall in every case be incorporated in the general balance sheet of that insurer.3. Every combined balance sheet issued for any purpose by an insurer, shall be in Form A referred to in regulation 1. There shall not be included among the assets shown in any combined balance sheet any amount in respect of any holding in or advance to any insurer whose assets and liabilities have been incorporated therein. Every combined balance sheet must show clearly on the face thereof that it is a combined balance sheet, and must set out fully the name of every insurer whose assets and liabilities have been incorporated therein; and where the assets and liabilities of any person who is not an insurer are included in the combined balance sheet the fact must be expressly stated in the balance sheet. 4. Where any guarantee has been given by an insurer (otherwise than in the ordinary course of reinsurance business) in respect of the policies of one or more other insurers, the balance sheet of the first-mentioned insurer must show clearly the name of each other insurer whose policies have been so guaranteed and the extent of the guarantee: Provided that this regulation shall not apply where a combined balance sheet is issued incorporating the assets and liabilities of the insurer whose policies are guaranteed. 5. Where any part of the assets of an insurer is deposited in any place outside Ceylon as security for the owners of the insurance policies issued in that place, the balance sheet must state that such part of the assets has been so deposited, and, if any such part forms part of the life assurance fund, the balance sheet must show the amount thereof and the place where it is deposited. Where any combined balance sheet is issued by an insurer for any purpose, the information required by this regulation must be shown in the aggregate in respect of all the insurers whose assets and liabilities have been incorporated in the balance sheet.6. There shall be appended to the balance sheet of each insurer a statement, in Form AA set out in Part II of this Schedule, showing the value of the assets of that insurer in Ceylon together with a certificate by an auditor that the stated value does not in his opinion exceed the market value.7. Every balance sheet must have the following certificates set out therein, namely-
(a) a certificate signed by the same persons as are required by this Act to sign the balance sheet, as to the manner in which the values of the investments in stocks and shares shown in the balance sheet have been arrived at, and the market value thereof has been ascertained for the purpose of comparison with the values so shown;
(b) a certificate signed by the same persons as are required by this Act to sign the balance sheet and signed also, so far as respects the value of any items shown in the balance sheet under the heading of " Reversions and Life Interests ", by an actuary to the effect that the values of all the assets have been reviewed as at the date of the balance sheet, and that in their belief the assets set forth in the balance sheet are shown in the aggregate at amounts not exceeding their realizable or market value under the several headings-" Loans ", " Reversions and Life Interests ", " Investments '', " Agents' Balances ", " Outstanding Premiums ", "Interest, Dividends and Rents accruing but not due ", " Amounts due from other persons or bodies carrying on Insurance business" separately for Ceylon Insurers and for Foreign Insurers, " Sundry Debtors ", " Bills Receivable ", " Cash " and the several items specified under " Other Accounts ":
(c) where the balance sheet relates either wholly or in part to life assurance business, a certificate signed by the same persons as are required by this Act to sign the balance sheet and by the auditor, to the effect that no part of the assets of the life assurance fund has been directly or indirectly applied in contravention of the provisions of this Act relating to the application and investment of life assurance funds; and
(d) certificates signed by the auditor (which shall be in addition to any other certificate or report which he is required by law to give with respect to the balance sheet) to the effect-
(i) that he has verified the cash balances and the securities relating to the insurer's loans, reversions and life interests, and investments;
(ii) to what extent, if any, he has verified the investments and transactions relating to any trusts undertaken by the insurer as trustee; and
(iii) in the case of a combined balance sheet that he has audited the balance sheet and accounts of every insurer whose assets and liabilities are incorporated therein, or that any such balance sheet and accounts which have not been audited by him have been certified by independent auditors. The said certificate shall contain a reference to such reservations, if any, as may have been made by any auditor upon any report or certificate given by him with respect to the balance sheet and accounts of any insurer whose assets and liabilities are incorporated in the combined balance sheet.
8. If the values shown in the balance sheet in respect of " Holdings in Subsidiary Companies " or " House property " (i) in Ceylon (ii) out of Ceylon have been increased since the last previous balance sheet, the certificate required by paragraph (b) of regulation 7 shall state the amount of every increase not solely due to the cost of subsequent additions or, as respects holdings in controlled companies, to increased profits, and shall contain an explanation of the reason for such increase in values.9. For the purposes of this Schedule, the following expressions have the meaning hereby respectively assigned to them, namely: -
(a) " combined balance sheet" includes any combined statement of assets and liabilities made by an insurer in the form of a balance sheet which includes the assets and liabilities of any other insurer; and
(b) "market value", as respects any asset, means the market value thereof as ascertained from published market quotations, or, if there be no such quotations published, its fair value as between a willing buyer and a willing seller.
1. The revenue account relating to life assurance business must be in Form D set out in Part II of this Schedule.2. A separate revenue account must be prepared for every class of business in respect of which the insurer is required to maintain a separate account.3. The revenue account relating to marine insurance business must be in Form E set out in Part II of this Schedule. 4. The revenue account relating to fire insurance business must be in Form E set out in Part II of this Schedule.5. A separate revenue account substantially in Form E must be prepared in respect of motor vehicle insurance business, employers' liability insurance business and miscellaneous insurance business.6. Every combined revenue account issued for any purpose by an insurer-
(a) must be in accordance with the Forms set out in Part II of this Schedule;
(b) must clearly show on the face thereof that it is a combined revenue account;
(c) must set out fully the name of every insurer who is required to make separate returns under this Act and whose revenue and expenditure have been included therein; and
(d) if the revenue and expenditure of any person who is not an insurer are included in the account, the fact must be expressly stated thereon.
7. The items on the income side of the revenue account must relate to income whether actually received or not, and the items on the expenditure side must relate to expenditure whether actually paid or not.8. Insurance business (excluding life assurance business), reinsurance premiums, whether on business ceded or accepted, must be brought into account as gross amounts. Net amounts, ordinary reinsurance commissions and reinsurance profits commissions must be shown separately.9. In respect of the life assurance business carried on by each insurer, there shall be furnished annually to the Controller a statement, setting out full details, in each of the Forms DD, DDD, and DDDD set out in Part II of this Schedule.10. Premiums received under each class of insurance business in Ceylon must be shown separately from Premiums in respect of business out of Ceylon.11. Any office premises which form part of the assets of an insurer carrying on life assurance business must be treated as an investment on which interest accrues, and accordingly, in the revenue account relating to the life assurance business a fair rent for the premises must be included under the heading " Interest, Dividends and Rents ", and in the revenue account relating to every other class of business for which the premises are used proper charges for the use thereof must be included under the heading "Expenses of Management".12. Where an insurer carries on the business of life assurance in conjunction with any other class of insurance business, the expenses of management charged to the life assurance revenue account must not include more than a reasonable proportion of the common expenses, and in particular, such account must not be charged with more than a fair sum for the use of any office premises, having regard to the income from the various classes of business carried on and to the extent to which the premises are used for the purposes of each class of business.13. Deductions in respect of income tax from the Interest, Dividends and Rents must include all income tax charged thereon, whether or not it has been or is to be deducted at source or paid direct.1. Abstracts and Statements must be so arranged that the numbers and letters of the paragraphs correspond with those of the paragraphs of Part II of this Schedule.2.In showing the proportion which that part of the annual premiums reserved as a provision for future expenses and profits bears to the total of the annual premiums, in accordance with the requirements of paragraph (4) of Part II of this Schedule, no credit is to be taken for any adjustments made in order to secure that no policy is treated as an asset. 3.
(1) The average rate of interest yielded in any year by the assets constituting a life assurance fund shall, for the purposes of paragraph (5) of Part II of this Schedule, be calculated by dividing the interest of the year by the mean fund of the year ; and for the purposes of any such calculation the interest of the year shall be taken to be the whole of the interest credited to the life assurance fund during the year after deduction of income tax charged thereon (any refund of income tax in respect of expenses of management made during the year being taken into account) and the mean fund of the year shall be ascertained by adding a sum equal to one-half of the amount of the life assurance fund at the beginning of the year to a sum equal to one-half of that fund at the end of the year, and deducting from the aggregate of those two sums an amount equal to one-half of the interest of the year.
(2) For the purposes of the calculation aforesaid either-
(a) all profits and income arising during the year from sums invested in reversions shall be included in the interest credited to the life assurance fund during the year; or
(b) such portion of the life assurance fund as is invested in the purchase of reversions, and the profits and income arising therefrom, shall be excluded from the calculation ; but in that case a statement must be added to the information required under the said paragraph (5), showing, in respect of the portion of the fund so excluded as aforesaid, the average rate of annual profit and income for which credit has been taken during the three years last preceding the valuation date, and explaining the manner in which the said average rate has been calculated.
(3) The information given in accordance with the requirements of the said paragraph (5) shall show clearly by which of the methods hereinbefore in this regulation mentioned the sums invested in reversions and the profits and income arising therefrom have been dealt with.
4. Every abstract prepared in accordance with the requirements of Part II of this Schedule shall be signed by an actuary and shall contain a certificate by him to the effect that he has satisfied himself as to the accuracy of the valuations made for the purposes thereof and of the valuation data: Provided that in the case of an abstract prepared on behalf of an insurer, if the actuary who signs the abstract is not a permanent officer of the insurer, the certificate as to the accuracy of the valuation data shall be given and signed by the principal officer of the insurer and the actuary shall include in the abstract a statement signed by him showing what precautions he has taken to ensure the accuracy of the data. 5. For the purposes of this Schedule, the following expressions have the meanings hereby respectively assigned to them, namely: - " extra premium" means a charge for any risk not provided for in the minimum contract premium; " inter-valuation period" means, as respects any valuation, the period to the valuation date of that valuation from the valuation date of the last preceding valuation in connexion with which an abstract was prepared under this Act or, in a case where no such valuation has been made in respect of the class of business in question, from the date on which the insurer began to carry on that class of business; " maturity date" means the fixed date on which any benefits will become payable either absolutely or contingently; " net premiums" means as respects any valuation the premium taken credit for in the valuation; " premium term" means the period during which premiums are payable; "valuation date " as respects any valuation means the date as at which the valuation is made. The following tabular statement shall be annexed to every abstract prepared in accordance with the requirements of this Part of this Schedule, namely: -
(a) a Consolidated Revenue Account, in Form F annexed to this Part of this Schedule, for the inter-valuation period (except that it shall not be necessary to prepare such an account in respect of any class of business so long as the insurer deposits annually with the Controller an abstract in respect of that class of business); and
(b) a Summary and Valuation in Form G annexed to this Part of this Schedule of the policies included at the valuation date in the class of business to which the abstract relates; and
(c) a Valuation Balance Sheet in Form H annexed to this Part of this Schedule; and
(d) a statement in Form D as set forth in Part II of the Third Schedule of the additions to and deductions from the number of policies and the sums insured thereunder for each claim of life assurance; and
(e) a statement in Form D as set forth in Part II of the Third Schedule of particulars of policies, forfeited or lapsed under each class of life assurance;
and every such abstract shall show-
(1) the valuation date;
(2) the general principles and full details of the methods adopted in the valuation of each of the various classes of assurances and annuities shown in the said Form G, including statements on the following points:-
(a) whether the principles were determined by the instruments constituting the insurer or by its regulations or by-laws or how otherwise;
(b) the method by which the net premiums have been arrived at and how the ages of entry, premium terms and maturity dates have been treated for the purpose of the valuation;
(c) the methods by which the valuation age, period from the valuation date to the maturity date, and the future premium terms, have been treated for the purpose of the valuation;
(d) the rate of bonus taken into account where by the method of valuation definite provision is made for the maintenance of a specific rate of bonus;
(e) the method of allowing for-
(i) the incidence of the premium income; and
(ii) premiums payable otherwise than annually;
(f) the methods by which provision has been made for the following matters, namely:-
(i) the immediate payment of claims;
(ii) future expenses and profits in the case of limited payment and paid-up policies;
(iii) the reserve in respect of lapsed policies not included in the valuation, but under which a liability exists or may arise; and whether any reserves have been made for the matters aforesaid;
(g) whether under the valuation method adopted any policy would be treated as an asset, and, if so, what steps, if any, have been taken to eliminate such assets;
(h) a statement of the manner in which policies on under-average lives and policies subject to premiums which include a charge for climatic, military or other extra risks have been dealt with; and
(i) the rates of exchange at which liabilities in respect of policies issued in foreign currencies have been converted into rupees and what provision has been made for possible increase of liability arising from future variations in the rates of exchange;
(3) the table of mortality used, the rate of interest and the taxation basis assumed, in the valuation;
(4) the proportion which that part of the annual premiums reserved as a provision for future expenses and profits bears to the total of the annual premiums separately specified in respect of assurances with immediate profits, with deferred profits, with profits under discounted bonus systems, and without profits;
(5) the average rates of interest yielded by the assets, whether invested or uninvested constituting the life assurance fund for each of the years covered by the valuation date;
(6) the basis adopted in the distribution of profits as between the insurer and policy holders, and whether such basis was determined by the instruments constituting the insurer, or by its regulations or by-laws or how otherwise;
(7) the general principles adopted in the distribution of profits among policy holders, including statements on the following points: -
(a) whether the principles were determined by the instruments constituting the insurer, or by its regulations or by-laws, or how otherwise;
(b) the number of years' premiums to be paid, the period to elapse and other conditions to be fulfilled before a bonus is allotted;
(c) whether the bonus is allotted in respect of each year's premium paid, or in respect of each completed calendar year or year of assurance or how otherwise; and
(d) whether the bonus vests immediately on allocation, or if not, the conditions of vesting;
(8)
(i) the total amount of surplus arising during the inter-valuation period, including surplus paid away and sums transferred to reserve funds or other accounts during that period, and the amount brought forward from the preceding valuation (to be stated separately) and the allocation of such surplus-
(a) to interim bonus paid;
(b) among policy holders with immediate participation giving the number of the policies which participated and the sums assured thereunder (excluding bonuses);
(c) among policy holders with deferred participation, giving the number of the policies which participated and the sums assured thereunder (excluding bonuses);
(d) among policy holders in the discounted bonus class, giving the number of policies which participated and the sums assured thereunder (excluding bonuses);
(e) to the insurer or, in the case of an insurance company, among shareholders or to shareholders' accounts (any such sums passed through the accounts during the inter-valuation period to be separately stated);
(f) to every reserve fund or other fund or account (any such sums passed through the accounts during the inter-valuation period to be separately stated);
(g) as carried forward unapproved;
(ii) specimens of bonuses allotted as at the valuation date to policies for one thousand rupees-
(a) for the whole term of life effected at the respective ages of 20, 30 and 40, and having been in force respectively for five years, ten years and upwards at intervals of ten years; and
(b) for endowment assurances effected at the respective ages of 20, 30 and 40, for endowment terms of fifteen, twenty and thirty years, and having been in force respectively for five years, ten years and upwards at intervals of ten years;
(9) a statement in Form I annexed to this Part of this Schedule of specimen policy reserve values held or required to be held according to the methods adopted in the valuation, and specimen minimum surrender values in respect of whole life assurance policies for Rs. 1,000 with premiums payable throughout life effected at the respective ages of 20, 30, 40 and 50, and immediately on payment of the first, second, third, fourth, sixth, seventh, eighth, ninth, tenth, fifteenth and twentieth annual premium, with similar specimen policy reserve values and specimen surrender values in respect of whole life assurance policies subject to premiums payable for 20 years and of endowment assurance policies maturing at age of 55;
(10) a statement showing how the liability under any disability clause in a policy has been determined in the valuation with full information of the tables of sickness or accident rates used for the purpose
1. Statements prepared under this Schedule must be prepared, so far as practicable, in tabular form and must be identified by numbers and letters corresponding with those of the paragraphs of Part II of this Schedule.2. Except with respect to rates of premium or contribution, items in statements prepared under this Schedule are to be shown to the nearest rupee.3. Extra premium shown in the forms of Summary and Valuation prepared under the Fourth Schedule must not be included in statements prepared under this Schedule.4. Every statement prepared under this Schedule shall be signed by the actuary making the investigation in connexion with which it is prepared.5. For the purposes of this Schedule the following expressions have the meanings hereby respectively assigned to them, namely: -
(a) " annual loading " means the provision made for future expenses and profits;
(b) "extra premiums" means a charge for any risk not provided for in the minimum contract premium;
(c) " net premiums" means the premiums taken credit for in the valuation in connexion with which any statement is prepared; and
(d) " valuation date " means as respects any valuation the date as at which the valuation is made.
The statements required to be prepared under this Part of this Schedule are as follows: -
1. Where new life assurance business is currently transacted in Ceylon, statements, separately prepared in respect of policies with and without participation in profits, showing-
(a) as respects policies for the whole term of life, the rates of office premiums charged, in accordance with the published tables in use, for new policies giving the rates for decennial ages at entry from 20 to 70 inclusive; and
(b) as respects endowment assurance policies, the rates of office premiums charged, in accordance with the published tables in use, for new policies with original terms of ten, fifteen, twenty, thirty and forty years, giving the rates for decennial ages at entry form 20 to 40 inclusive, but excluding policies under which the age at maturity exceeds 70.
2. Statements, separately prepared in respect of policies with immediate profits, with deferred profits, with profits under discounted bonus systems and without profits, showing in quinquennial groups-
(a) as respects policies for the whole term of life-
(i) the total amount assured (specifying sums assured and reversionary bonuses separately), grouped according to ages attained;
(ii) the amount per annum, after deducting abatements made by application of bonus, of office premiums payable throughout life, and of the corresponding net premiums, grouped according to ages attained; and
(iii) the amount per annum, after deducting abatements made by application of bonus, of office premiums payable for a limited number of years, and either, the corresponding net premiums grouped in accordance with the grouping adopted for the purposes of the valuation, or, the annual loading reserved for the remaining duration of the policies, grouped according to ages attained;
(b) as respects endowment assurance policies-
(i) the total amount assured (specifying sums assured and reversionary bonuses separately), grouped in accordance with the grouping adopted for the purposes of the valuation; and
(ii) the amount per annum, after deducting abatements made by application of bonus, of office premiums payable, and of the corresponding net premiums grouped in accordance with the grouping adopted for the purposes of the valuation:
3. Statements as respects any policies in force under which premiums cease to be payable, whether permanently or temporarily, during disability arising from sickness or accident, showing the total amount of the office premiums payable.
4. Policies under which there is a waiver of premiums during disability must be shown as a separate class.
5. Statements as respects immediate annuities on single lives for the whole terms of life, separately prepared in respect of annuities on male and female lives, showing in quinquennial age groups the total amount of such annuities.
6. Statements as respects deferred annuities, separately prepared in respect of annuities on male and female lives, showing the specimen reserve values for annuities of one hundred rupees which will be produced on maturity on the basis of valuation adopted at ages, in the case of male lives, 60 and 65 and in the case of female lives, 55 and 60; the said statements must show the specimen reserve values which will be produced under the table of annual premiums in use for new policies where new business is currently transacted in Ceylon and if under any other table of annual premiums in use for any other deferred annuity policies in force smaller reserve values will be produced the like specimens of these must also be given.
7. Statements as respects any policies of assurance upon the lives of a group of persons, whereby sums assured are payable in respect of the several persons included in the group, showing the total claims paid since the date as at which the last statements were prepared under this Part of this Schedule or, where no such statements have been prepared, since the date on which the insurer began to carry on the class of business to which the statements relate or the date of the last valuation of the insurer's liabilities in respect of that class of business, and the reserve for unexpired risks and outstanding claims.
The liabilities of an insurer in respect of current contracts effected in the course of life assurance business including annuity business shall be calculated by the method and upon the basis to be determined by an actuary approved by the District Court or Winding-up Tribunal, and the actuary so approved shall, in determining as aforesaid, take into account-
(a) the purpose for which such valuation is to be made,
(b) the rate of interest, taxation, and the rates of mortality and sickness to be used in valuation, and
(c) any special directions which may be given by the District Court or Winding-up Tribunal.
The liabilities of an insurer in respect of current policies of general business shall be such portion of the last premium paid as is proportionate to the unexpired portion of the policy in respect of which the premium was paid. 1. The Committee of Lloyds shall appoint a person resident in Ceylon as the chief representative of underwriting members of Lloyds (hereinafter referred to as the "chief representative") and shall notify the Controller the name of the person so appointed.2. The person appointed as the chief representative under regulation 1 shall, on payment of the deposit or deposits referred to in regulation 3, be deemed to be registered as a person authorized to carry on Ceylon business on behalf of any member, or all members, of Lloyds: Provided that nothing in this regulation shall be construed to prevent any member of Lloyds from carrying on Ceylon business through any other representative or agent so long as the registration of the chief representative is in force. 3. The chief representative shall keep deposited with the Deputy Secretary to the Treasury, for and on behalf of the Government of Ceylon, a sum of fifty thousand rupees in respect of each class of Ceylon business proposed to be carried on by any member, or all members, of Lloyds: Provided that the maximum amount of the deposit shall be two hundred thousand rupees. 4. The chief representative shall file with the Controller-
(a) a copy of each of the Acts of the British Parliament defining or regulating the functions of Lloyds Underwriters,
(b) a copy of the annual list of members of Lloyds Underwriters and all information relating to the constitution of the Committee of Lloyds, and
(c) the names and addresses of one or more persons resident in Ceylon duly authorized, except in respect of cases arising from marine insurance cover, to accept, on behalf of underwriting members of Lloyds, service of process or other notice required by law to be served on them, together with a power of attorney granted to such person or persons.
5. The chief representative shall forward to the Controller-
(a) four copies of the returns and accounts submitted by Lloyds Underwriters to, and published each year by, the British Board of Trade, one copy being authenticated by the Chairman of Lloyds Underwriters and the appropriate Department of the British Government,
(b) a declaration signed by the Chairman of Lloyds Underwriters and by the appropriate Department of the British Government, certifying that all Lloyds Underwriters have complied with the requirements for the time being imposed upon them by the provisions of the First Schedule to the Insurance Companies Act, 1958, of Great Britain,
(c) such additional information as the Controller may from time to time call for relating to the conduct of the Ceylon business of underwriting members of Lloyds.
6. In these regulations and in section 3 (3) of this Act, " Ceylon business " means any insurance business, other than life assurance business, transacted in Ceylon, and such business shall be deemed to be transacted in Ceylon, where-ever it may be so transacted, if the relevant contract of insurance is in respect of persons resident in Ceylon or in respect of property situated in Ceylon or any vessel or aircraft registered in Ceylon. If any question arises as to whether any business is business transacted in Ceylon or not, the Controller shall decide the question and his decision shall be final.


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