Monkton Insurance Services Limited

Insurance Regulations in effect in Bermuda

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Introduction

Captive insurance companies licensed in Bermuda are regulated in accordance with the Bermuda Insurance Act, 1978. The following is a compilation of the Bermuda Insurance Act, 1983-9 and all subsequent amending legislation and represents a current statement as at December 31, 1997 of the Bermuda Insurance Act as amended. While every effort has been made to ensure the accuracy of the compilation, no responsibility can be undertaken for any errors which may have inadvertently occurred. Persons seeking advice on the Act itself are recommended to consult their professional advisors.

Arrangement of Sections

Part I - Preliminary

• Interpretation

• Insurance Advisory Committee

Part II - Registration

• Insurers to be registered

• Registration as insurer

• Determination of class of registration for general business

• Class 1 insurer

• Class 2 insurer

• Class 3 insurer

• Class 4 insurer

• Classes of insurer: interpretation

• Factors to be considered by Minister under section 4

• Margin of solvency

• Paid up share capital

• Principal office and principal representative

• Principal representative to report certain events

• Insurance managers and intermediaries to be registered

• Minister may register insurance managers and intermediaries

• Factors to be considered by Minister under section 10

• Power of Minister in relation to registration

• Registration

• Fees

Part III - Regulation of Insurers Generally

• Statutory financial statements

• Audit of statutory financial statements

• Keeping and filing of statutory financial statements

• Insurer to make financial returns

• Failure to file statutory statements or returns

• Opinion of loss reserve specialist

• Requirement to keep records in Bermuda

• Segregation of insurance accounts and business

• Minister may require Bermuda investment

• Maintenance of assets in Bermuda

• Custody of assets

Part IV - Insurers Carrying on Long-term Business

• Insurers to which the Part applies

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

• Transfer of long-term business

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

• Actuarial certificates of long-term business liabilities

Part V - Insurance Managers, Brokers, Agents and Salesmen

• Insurance Managers to maintain lists of insurers for which they act

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

Part VI - Powers

• Investigation of affairs of an insurer

• Minister may require information

• Failure to meet solvency requirements

• Restrictions as to payment of dividends

• Restriction as to reduction of capital

• Powers of intervention

Part VII - Insolvency and Winding Up

• Margin of solvency for general business

• Winding up of insurers under Companies Act 1981

• Winding up on petition of Registrar

• Winding up of insurers carrying on long-term business

• Continuance of long-term business of insurer in liquidation

• Subsidiary insurers

• Reduction of contracts as alternative to winding up

• Winding up rules

Part VIII - Cancellation of Registration

• Cancellation of registration of insurers

• Cancellation of registration of insurance managers, etc

• Appeals to Supreme Court

• Cancellation of registration to be gazetted

Part IX - Supplementary

• Prohibition of loans to directors, etc.

• Effect on business transactions of infringement of Act

• Acting on behalf of unregistered insurer

• Personal liability of intermediaries in certain cases

• Control of advertisements

• Issue of false documents etc.

Part X - Miscellaneous

• Service on insurers

• Confidentiality

• Regulations by Minister

• Specific offences

• General provisions relating to offences

• Minister may modify accounting provisions in certain cases

• Application

Enacted by the Parliament of Bermuda as follows:

Interpretation - 1. (1) In this Act, unless the context otherwise requires-

"actuary" means a person qualified as an actuary by examination of the Institute of Actuaries in England or the Faculty of Actuaries in Scotland or the Society of Actuaries in the United States of America or Canada, or a person recognized by the Minister as an actuary;

"association of underwriters" means an association of individual underwriters, organized according to the system known as Lloyd's whereby each underwriting member of the association becomes liable for a separate and proportionate part of the sum secured by each policy subscribed to by that association; and, in relation to such an association as aforesaid, "recognized" means recognized by the Minister;

"auditor" means either
(a) a person entitled to practise as a public accountant in Bermuda; or
(b) a person who has qualified as an accountant by examination of one of the Institutes of Chartered Accountants of England and Wales, Ireland and Scotland ot the Canadian Institute of Chartered Accountants or the American Institute of Certified Public Accountants; or
(c) a person recognized by the Minister as an auditor;

"bank" means a bank licensed under the Banks Act 1969;

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

"the Court" means the Supreme Court;

"domestic business" means insurance business where, whether the contract of insurance is made in Bermuda or elsewhere, the subject matter of the contract is either
(a) property that at the time of the making of the contract is in, or in transit to or from Bermuda; or
(b) the life, safety, fidelity or insurable interest of an individual who at the time of the making of the contract is ordinarily resident in Bermuda; or
(c) a risk of a company formed in Bermuda that is not an exempted company within the definition of that expression in section 127 of the Companies Act 1981;

"excepted long-term business" means either
(a) credit life business, that is to say, the business of effecting and carrying out contracts of insurance against risks of loss to persons arising from the nonpayment of debts due to such persons by reason of the death of debtors of theirs, being contracts that are

• (i) not contracts of domestic business; and
  (ii) expressed to be in effect for a period of five years or less; and
  (iii) not either automatically renewable or convertible into contracts of insurance of any other kind or for any different periods; and
  (iv) of a kind which the Minister, upon application made to him by the insurer for the purpose, has given his prior approval in writing for the insurer to effect and carry out; or

(b) employee group business, that is to say, the business of effecting and carrying out contracts of insurance on the lives of employees of the insurer or an affiliate (within the definition of "affiliate" in regulation 2 of the Insurance Accounts Regulations 1980) of the insurer, being contracts that are

• (i) not contracts of domestic business; and
  (ii) expressed to be in effect for a period of five years or less; and
  (iii) not either automatically renewable or convertible into contracts of insurance of any other kind or for any different period; and
  (iv) made on a group insurance basis; and
  (v) of a kind which the Minister, upon application made to him by the insurer for the purpose, has given his prior approval in writing for the insurer to effect and carry out;

"financial year", in relation to an insurer, means the period not exceeding fifty-three weeks at the end of which the balance of the insurer's accounts is struck or, if no such balance is struck or if a period in excess of fifty-three weeks is employed, then calendar year;

"functions" includes powers and duties;

"general business" means, subject to subsection (4), insurance business that is not long-term business;

"insolvent" means, in relation to an insurer at any relevant date, that if proceedings had been taken for the winding up of the insurer the Court could, in accordance with sections 161 and 162 of the Companies Act 1981, hold or have held that the insurer was at that date unable to pay its debts;

"inspector" means a person appointed as an inspector under section 30;

"Insurance Advisory Committee" means the Insurance Advisory Committee established by section 2;

"insurance agent" means a person who with the authority of an insurer acts on its behalf in relation to any or all of the following matters, that is to say, the initiation and receipt of proposals, the issue of policies and the collection of premiums, being proposals, policies and premiums relating to insurance business;

"insurance broker" means a person who arranges or places insurance business with insurers on behalf of prospective or existing policy-holders;

"insurance business" means the business of effecting and carrying out contracts
(a) protecting persons against loss or liability to loss in respect of risks to which such persons may be exposed; or
(b) to pay a sum of money or render money's worth upon the happening of an event,
and includes reinsurance business;

"insurance manager" means a person who, not being an employee of any insurer, holds himself out as a manager in relation to one or more insurers, whether or not the functions performed by him as such go beyond the keeping of insurance business accounts and records;

"insurance salesman" means a person who otherwise than as an employee solicits applications for, or negotiates, insurance business on behalf of an insurer or an insurance broker or agent;

"insurer" means a person carrying on insurance business;

"long-term business" means, subject to subsection (4), insurance business of any of the following kinds, namely,
(a) effecting and carrying out contracts of insurance on human life or contracts to pay annuities on human life;
(b) effecting and carrying out contracts of insurance against risks of the persons insured sustaining injury as a result of an accident or of an accident of a specified class or dying as a result of an accident or of an accident of a specified class or becoming incapacitated or dying in consequence of disease or disease of a specified class, being contracts that are expressed to be in effect for a period of not less than five years or without limit of time and either not expressed 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 endowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or a series of sums is to become payable to the persons insured in the future, not being contracts such as fall within either 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 out 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) Repealed.

(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 authorised to carry on general business, from carrying on long-term business; or
(b) if authorised to carry on long-term business, from carrying 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 the 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 respects as a composite within the definition of "composite" in regulation 2 of the Insurance Accounts Regulations 1980; or

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

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 knowledgeable 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 subsection (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 account any such advice or representation that the Committee may tender or make to him.

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 offence.

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 insurance.

(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 this 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 the insurer, the Minister may

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

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

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

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

(a) the nature of the intended relationship between the body corporate and its intended policy-holders, the interests of those policy-holders and of the public generally, and
(b) the level of regulation which is applicable to the different classes of insurer,

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

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

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

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

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

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

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

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

(a) not all of the business which it intends to carry on, but at least 80% of the net premiums written, will consist of the business described in paragraph (a) or (b) of section 4B; or
(b) it intends to carry on insurance business not less than 80% of the net premiums written in respect of which will, in the opinion of the Minister, arise out of the business or operations of the person by whom it is owned or any of the affiliates of that person.

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

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

(a) it has at the time of its application for registration, or will have before it carries on insurance business, a total statutory capital and surplus of not less than $100,000,000; and
(b) it intends to carry on insurance business including excess liability business or property catastrophe reinsurance business.

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

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 these 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 section 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.

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 knowledge and expertise;
(b) whether any person to be concerned in the management of the business is a fit and proper person to be so concerned;
(c) whether the premises intended to be used in the business are adequate for the conduct of the business.

Margin of solvency - 6. (1) The Minister shall not register a body under section 4 unless 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 determined 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;
(c) as a Class 1, Class 2 or Class 3 insurer and as a long-term insurer is $370,000;
(d) as a Class 4 insurer is $1,000,000;
(e) as a Class 4 insurer and a s a long-term insurer is $1,250,000.

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

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

(a) of paragraph (d) of subsection (1) if it has at least $120,000 paid up share capital, or
(b) of paragraph (e) of subsection (1) if it has at least $370,000 paid up share capital,

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

Principal office and principal representative - 8. (1) Every insurer shall maintain a principal office in Bermuda.

(1A) Every insurer shall appoint and maintain a principal representative 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 representative, 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 Registrar particulars of the alteration within twenty-one days after the alteration is made.

(3A) Without a reason acceptable to the Minister

(a) the 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 personal representative wilfully fails to give to the Minister notice which he is required by subsection (3A) to give, he commits an offence.

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 insurer for which he acts becoming insolvent; or
(b) its coming to his knowledge, or his having reason to believe, that an event to which this section applies has occurred,

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 applies 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 imposed 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 provision, or with a condition, being a provision or condition specified in a direction given to the insurer by the Minister in the exercise of his powers under section 56;
(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 under subsection (1) commits an offence.

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 insurance 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 offence.

Minister may register insurance managers and intermediaries - 10. (1) Subject to sections 11 and 12, the Minister may, on application being made to him for that purpose by any person, and on payment 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 Minister 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.

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 business adequate to enable him to act in the capacity in which he has applied for registration.

Powers 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 Registrar 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 cancelled.

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

(a) the name and business address of the person registered;
(b) the date of registration; and
(c) any conditions imposed under section 4 or 10.

(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 in respect of

(a) the making of any application for registration under section 4(1) or 10;
(ab) the making of any application under 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;
(c) the issue of any certificate;
(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 payment had expired,

before those proceedings were commenced; and

(b) if a business fee that a company is excused by paragraph (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 action, the court may order,

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

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 prescribed.

(3) The information required to be included in statutory financial statements pursuant to subsection (2) shall be information calculated 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 examining 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 business 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 independent 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 auditor 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 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).

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.

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 $1,000, in the case of a Class 3 insurer or a long-term insurer; or
(c) of $5,000, in the case of a Class 4 insurer;

and the fine applicable to an insurer failing 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 statement or return, the Minister shall appoint an inspector to investigate the affairs of the insurer under section 30.

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 of 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.

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

and any such directions may make different provisions 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 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.

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 business, and shall segregate the assets and liabilities of its insurance business 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 liabilities 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 paragraph (a) alone or paragraph (b) alone, or may fix investment asset values 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 otherwise 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-organize 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 reinsured.

(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 reinsurance, of the premiums received by the insurer;
  (iii) a "domestic liability" is a liability arising in respect of domestic business; and

(b) references to "premium income" and "domestic liabilities", 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 preceding 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 the 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 approved 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 assets of a specified class or description shall or shall not be treated as assets 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 affected by an order under section 21 that the whole or a specified portion 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 insurer shall be taken to be held by him in compliance with a requirement imposed under this section if, and only if 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 assets in whose case the insurer has given him a written notice as aforesaid 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 compliance with a requirement imposed under this section shall, as 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 the section, being a mortgage or charge conferring a security on any assets 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 other creditor of the insurer.

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

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 accounts - 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 arrangement 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 approved 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 insurer other than long-term business.

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

(a) either

• (i) was an exempted company within the definition of section 1 of the Exempted Companies Act 1950; or
  (ii) had a permit under section 69 of the Bermuda Immigration and Protection Act 1956 or under section 3 of the Non-Resident Insurance Undertakings Act 1967; and

(b) was carrying on both long-term business and general business in or from within Bermuda.

Transfer of long-term business - 25. (1) Any scheme under which the whole or any part of the long-term business of any insurer to which this Part applies (in this section referred to as the "transferor") is to be transferred to another insurer (in this section referred to as the "transferee") shall be void unless it is made in accordance with this section and the Court has sanctioned the scheme thereunder.

(2) Either the transferor or the transferee may apply to the Court, by petition, for an order sanctioning the scheme, and the Court shall have the power to make such an order subject to this section.

(3) The Court shall not entertain such a petition unless the petition is accompanied by a report on the scheme prepared by an approved actuary and the Court is satisfied that sufficient notice of the scheme has been served on each policy-holder affected and has been published in the Gazette, and also that copies of the petition and the report have been served on the Minister.

(4) On any petition under this section

(a) any person who alleges that he would be adversely affected by the carrying out of the scheme; and
(b) the Minister,

shall be entitled to be heard.

(5) Subsections (1) to (4) shall not have effect in relation to the transfer of long-term business that is reinsurance business.

Appointment of actuary by insurer carrying on long-term business - 26. (1) An insurer shall not carry on long-term business at any time if it does not have an approved actuary (in this Act referred to as an "insurer's approved actuary") at that time.

(2) In subsection (1) "approved actuary", in relation to an insurer, means an actuary approved by the Minister as that insurer's approved actuary.

Actuarial certificates of long-term business liabilities - 27. (1) An insurer to which this Part applies shall include in the insurer's statutory financial return called for by section 18 a certificate prepared by the insurer's approved actuary in the prescribed form as to the amount of the insurer's liabilities outstanding on account of its long-term business.

(2) Notwithstanding subsection (1) the Minister may in writing at any time direct an insurer to which this Part applies to cause to be produced to him a valuation of the insurer's liabilities outstanding at the date specified in the direction on account of its long-term business, together with a certificate prepared by the insurer's approved actuary in the prescribed form relating thereto; and the insurer shall comply with any such direction.

Insurance managers to maintain lists of insurers for which they act - 28. An insurance manager shall maintain an accurate list of all insurers for which he acts as insurance manager, and shall, if required in writing at any time by the Registrar so to do, provide the Registrar with a copy of that list.

Insurance broker, agent or salesman deemed agent of insurer in certain cases - 29. (In relation to any contract of insurance to which an insurer is a party and in respect of which an insurance broker agent or salesman having apparent authority to act for the insurer in that respect in fact receives a premium under the contract

(a) the broker, agent or salesman shall be deemed to be the agent of the insurer; and
(b) the insurer shall be deemed to have received the premium,

notwithstanding anything to the contrary in the contract.

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 become policy-holders.

(2) It shall be the duty of any insurer in relation to whose affairs an inspector has been appointed under subsection (1) (in this section 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 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 investigation 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 person to attend and be examined on oath before the Court on any matter relevant to the investigation.

Minister may require information - 31. (1) The Minister may in writing direct any person to whom this section 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 provided 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 preceding that time was, an insurer or insurance manager, broker, agent or salesman.

(3) Any person to whom a direction is given under subsection (1) commits and 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
(c) a general business solvency certificate in respect of those statements.

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

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

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

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

(a) an affidavit signed

• (i) by at least two directors of the insurer (one of whom must be a director resident in Bermuda if the insurer has a director so resident), and
  (ii) by the insurer's principal representative in Bermuda,
  
  which states that in the opinion of those signing, the proposed reduction of capital will not cause the insurer to fail to meet its relevant margins; and

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

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

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

Powers of intervention - 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 investments 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 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.

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 accordingly.

(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 provision 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 an 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 certificate")

(a) in such form and signed by such persons as may be prescribed 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 manner in which, on a winding up, any assets or liabilities are required to be dealt with whether by virtue of section 36 or otherwise.

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 the 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 company 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 imposed upon it by section 15 as to the preparation of accounts 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 presented by the Registrar under subsection (1), evidence that the insurer is 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 presented 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.

Winding up of insurer 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 of the insurer's long-term business fund fact 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 assets mentioned in either paragraph of subsection (2) exceeds the amount of the inspector mentioned in that paragraph the restriction imposed by that subsection shall not apply to so much of those assets as represents the excess.

(4) In relation to the assets failing 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 creditors 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 wrongful act which is the reason for the making of the order related to assets belonging to the insurer's long-term business fund, the Court shall include 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.

Continuance 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 interest of the creditors 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 to that business to act during such time as the Court may direct, with such powers, including any 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 special 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 provisions (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 independent 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 continuation.

(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 arrangement in pursuance of which the first mentioned insurer (in this section called the subsidiary insurer) or the creditors thereof has of have claims against the insurer to which the transfer was made (in the section 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 subsequent order appoint the same person to be liquidator for the two insurer, 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 insurer shall, save as otherwise ordered by the Court, be the commencement 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 between 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 circumstances admit.

(4) Where any insurer alleged to be a 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 insurer 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 subsidiary insurer.

(6) Where an insurer stands in the relation of a principal insurer to one insurer, and in the relation of subsidiary insurer to some other insurer, or where there are several insurers standing in the relation of subsidiary insurers to the 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. In the case of an insurer which has been proved to be unable 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 conditions 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 determining 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 generally for carrying into effect this Act in respect of the winding up of insurers.

(2) Without prejudice to the generality of subsection (1), rules made under this section may make provision for all or any of the following 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 description 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 mentioned 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 negative resolution procedure.

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 its behalf for the purpose of any provision of this Act or the regulations;
  (ii) that two years have elapsed since the registration of the insurer, and the insurer has not commenced to carry on business;
  (iii) that the insurer has ceased to carry on business;
  (iv) that the insurer has persistently failed to pay fees due under section 14;
  (v) that the insurer has not complied with a condition attached to its registration or with a requirement made of it under this Act or the regulations;
  (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 subsection (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 registration, 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 insurance 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 or on his behalf for the purposes of any provision of this Act or the regulations;
  (ii) that two years have elapsed since his registration, 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 attached 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 in 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 business in accordance with sound insurance principles.

(2) The provisions of subsection (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 salesman, as the case may be.

Appeals to Supreme Court - 43. (1) An appeal at the instance of an insurer or other person affected by an order made under section 41 or 42 shall lie to 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 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, reverse 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 determination or abandonment of the appeal:

Provided that the insurer or other person affected by the order shall not during the period of 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 cancellation of a registration under this Act.

Prohibition of loans to directors, etc. - 45. (1) Subject to subsection (2), an insurer which carries on domestic 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 paragraph (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 offence.

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 insurer 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 reinsurance.

Personal liability of intermediaries in certain cases - 48. (1) Any insurance broker or agent who arranges a policy of domestic 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 insurer'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.

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 notice, 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 information 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 purposes of any provision of this Act;
(b) exempting any class of insurance from any provision of the Act;
(c) exempting any person or class of persons from any provision of this Act;
(d) determining the value of assets or the amount of liabilities 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 specified 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 register under this Act which is to be made available for inspection 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 statement or report annexed to, the statement or return; or may require there to be in such a note, statement or report as aforesaid such information 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 annexed 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 statement 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 commits 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 regulation by a body corporate is proved to have been committed with the consent 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 corporate, or any person who was purporting to act in any such capacity, he, as well as the body corporate, commits an offence and is liable to be proceeded against and punished accordingly.

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 section 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
(c) the provisions of any regulations

• (i) relating to the limitations referred to in paragraph (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 instrument having legislative effect.

Application - 57. (1) Insurance business of any of the following kinds

(a) insurance business carried on by a friendly society registered under the Friendly Societies Act 1868 or by a trade union registered under the Trade Union Act 1965, 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 Insurance Commission pursuant to the Hospital Insurance Act 1970;
(c) the health insurance scheme conducted pursuant to the Government Employees (Health Insurance) Act 1986;
(d) housing loan insurance carried on by the Bermuda Housing Corporation under the Bermuda Housing Loan Insurance Act 1984,

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 member of a recognized association of underwriters.

(3) In relation to a member of a recognized association of underwriters

(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 registration;
(b) sections 9 to 14 and any regulations made for the purposes of those sections shall apply in relation to a member of a recognized association of underwriters as respects the carrying on of insurance business by him in or from within Bermuda as those provisions apply in relation to an insurance manager, broker, agent or salesman 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 insurance 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 interpretation of any other section that applies.