REGULATION OF INSURANCE INDUSTRY ACT

Arrangement of Sections

1. Short title.

PART I

ESTABLISHMENT AND CONSTITUTION OF THE INSURANCE BOARD OF SRI LANKA

2. Establishment of the Insurance Board of Sri Lanka.

3. Object and responsibility of the Board.

4. Constitution of the Board.

5. Powers, duties and functions of the Board.

6. Fund of the Board.

7. Levy of cess on net premium income.

8. Financial year and audit of accounts of the Board.

9. Director-General.

10. Staff of the Board.

11. Appointment of officers and servants of Public Corporations to the staff of the Board.

PART II

REGISTRATION OF INSURERS

12. Insurance business to be carried on by companies registered under this Act.

13. Qualifications for registration.

14. Application for registration.

15. Registration and issue of licence.

15A. Insurer to be listed on a licensed stock exchange.

16. Annual fee.

17. Repealed.

18. Cancellation or suspension of a licence issued to an insurer.

19. Appeals.

20. Appointment of an administrator.

21. Deposit to be paid to the Treasury.

22. Reservation of deposits.

23. Return of deposits.

24. Maintaining a Technical Reserve.

25. General Provisions relating to Reserve and Fund being maintained by an insurer.

26. Solvency margin.

PART III

GENERAL PROVISIONS Applicable TO INSURERS

27. Separation of accounts and assets.

28. Repealed.

29. Prohibition of loans.

30. Assets of insurer to be kept in the name of the insurer.

31. Reinsurance.

31A. No person be appointed a Director of an insurer or continue as a Director in certain circumstances.

32. Staff of insurer carrying on insurance business.

33. Prohibition on holding shares in a brokering company by an insurer.

33A. Conditions relating to the appointment of Directors of an insurer.

33B. Insurer to inform Board of proposed appointment, nomination or election of Directors.

33C. Appointments, elections or nominations of Directors of an insurer to be approved by the Board.

33D. Removal of a Director who is ineligible to hold office as a Director.

33E. Failure to comply to be an offence.

34. Persons from whom insurer may accept insurance business.

35. Repealed.

36. Power of Board to fix rates of tariffs in respect of certain sub-class of insurance.

37. Policy forms.

PART IV

LONG TERM INSURANCE BUSINESS

38. Duty of insurer carrying on long term insurance business to maintain a separate fund and keep assets relating to such business separate from assets relating to any other business.

39. Assignment or transfer of long term insurance business policies.

40. Acquisition of surrender value by policy.

41. Policy not to be called in question on the ground of mis statement after two years.

42. Supply of notice of options.

43. Power of policy holder to nominate person or persons to whom the money secured by the policy shall be paid.

44. Restrictions on dividends and bonuses.

45. Declaration of interim bonus.

46. Insurer carrying on long term insurance business to appoint an actuary.

PART V

ACCOUNTS, INSPECTION AND INVESTIGATION

47. Audit of accounts of an insurer.

48. Actuarial report and abstract.

49. Furnishing of reports.

50. Furnishing copies of reinsurance treaties.

51. Powers of Board regarding returns.

52. Power of the Board to order re-valuation.

53. Power of the Board to increase deposit.

54. Power of the Board to order investigation.

55. Powers of investigator.

56. Further returns and abstracts.

57. Power of Board to issue directions.

PART VI

PUBLICITY

58. Custody and inspection of documents.

59. Evidence of documents.

60. Summary of returns to be published.

61. Publishing of returns submitted to the Board.

PART VII

MANAGEMENT BY ADMINISTRATION AND WINDING UP

62. When administrator may be appointed.

63. Powers and duties of administrator.

64. Cancellation of contracts and agreements.

65. Termination of appointment of administrator.

66. Finality of decision appointing administrator.

67. Penalty for withholding documents or property from administrators.

68. Voluntary winding up.

69. Circumstances under which the District Court may order the winding up of an insurer.

70. Valuation of assets and liabilities.

71. Application of surplus of assets fund in liquidation.

72. Return of deposit on the application of a liquidator.

73. Scheme of partial winding up.

74. Notice of policy values.

75. Power of District Court to reduce contracts of insurance.

76. Rights of certain holders of long term insurance policies to have recourse in certain circumstances to other assets of persons who have issued such policies and who have wound up, or are taking steps to wind up the long term insurance business.

77. Policy holders to have a prior claim.

PART VIII

REGISTRATION OF BROKERS AND INSURANCE AGENTS

78. Appointment of insurance agents.

79. Prohibition on carrying on the business of an insurance broker without being registered.

80. Qualifications for registration as a broker.

81. Application for registration.

82. Registration as a broker.

83. Renewal of a registration granted to a broker.

84. Cancellation or suspension of a registration.

84A. Board may direct certain measures to be taken in lieu of acting under section 84.

85. Registered broker to take and maintain policies of insurance.

86. Maintaining of accounts and submission of returns.

87. Notice to show cause.

88. Rate of commission paid to intermediaries.

89. Collection of premium by agents and brokers.

PART VIIIA

REGISTRATION OF LOSS ADJUSTERS

89A. Prohibition against acting as a loss adjuster without a Certificate of Registration.

89B. Qualifications for registration.

89C. Application for registration and issue of certificate.

89D. Revocation of registration.

89E. Board to grant opportunity to show cause before a rejection.

PART IX

OFFENCES

90. Offence of carrying on or commencing any insurance business without registration or of carrying on any class of insurance business not authorised.

91. Offence of carrying on business as an insurance agent in contravention of this Act.

92. Conversation of provision of section 82 to be an offence.

92A. Carrying on the function of a loss adjuster without being duly registered, to be an offence.

93. Other offences under this Act.

PART X

GENERAL

94. Appointment of Principal Officers.

94A. Board to be informed of any alteration in the particulars submitted with an application for registration.

95. Register of policies.

95A. Board to require increase of paid-up share capital.

96. Use of the word "Insurance”.

96A. Board to give directions.

96B. Determination made to be communicated forthwith.

97. Service of Notices.

98. Power of the Board to settle claims arising under long term or general insurance business policies in which the sum assured does not exceed a certain sum.

99. Advertisements.

100. Prohibition against carrying on business other than those for which a licence or registration is issued.

101. Overseas insurance.

102. General provisions relating to transfer and amalgamation of insurance business.

103. Policy holders protection fund.

104. Offences by bodies of persons.

105. Rules.

106. Annual Report.

107. Certain insurers deemed to be authorised insurers for the purposes of the Motor Traffic Act and deemed to be granted licences under section 45(1) of the Workmen's Compensation Ordinance.

108. Protection of members of the Board.

109. No writ to be issued against person or property.

110. Board to be a scheduled Institution.

111. Officers and servants of the Board deemed to be public servants.

112. Regulations.

113. Repeal and Savings.

114. Interpretation.

115. Sinhala text to prevail in case of inconsistency.

SCHEDULES

43 of 2000,

27 of 2007,

3 of 2011.

AN ACT to provide for the establishment of an insurance board for purpose of developing, supervising and regulating the insurance industry; for the repeal of the Control of Insurance Act, No. 25 of 1962 and for matters connected therewith or incidental thereto.

[Date of Commencement: 9th August, 2000]

1. Short title.

This Act may be cited as the Regulation of Insurance Industry Act

PART I

ESTABLISHMENT AND CONSTITUTION OF THE INSURANCE BOARD OF SRI LANKA

2. Establishment of the Insurance Board of Sri Lanka.

(1) There shall be established a board which shall be called the Insurance Board of Sri Lanka (hereinafter referred to as the "Board”) which shall be responsible for the development, supervision and regulation of the insurance industry in Sri Lanka.

(2) The Board shall, by the name assigned to it by subsection (1), be a body corporate and shall have perpetual succession and a common seal and may sue and be sued in such name.

3. Object and responsibility of the Board.

The object and responsibility of the Board shall be to ensure that insurance business in Sri Lanka is carried on with integrity and in a professional and prudent manner with a view to safeguarding the interests of the policy-holders and potential policy holders.

4. Constitution of the Board.

(1) The Board shall consist of the following members—

(a) Deputy Secretary to the Treasury;

(b) a Deputy Governor of the Central Bank of Sri Lanka nominated by the Monetary Board;

(c) the Registrar-General of Companies; and

[S 4(1)(c) subs by s 2 of Act 3 of 2011.]

(d) four members appointed by the Minister from among persons who have had academic or professional qualifications and experience in the field of insurance commerce, financial management business management, economics, law or any other related field (in this Act referred to as "appointed members”).

(2) The Minister shall nominate one of the members of the Board as the Chairman of the Board.

(3) The provisions of the First Schedule to this Act shall have effect in relation to the term of the office of the appointed members of the board, remuneration payable to members of the board, meetings and the Seal of the Board.

[S 4(3) am by s 2 of Act 3 of 2011.]

5. Powers, duties and functions of the Board.

For the purpose of fulfilling its object and responsibility, the Board may exercise, perform and discharge all or any of the following powers, duties and functions—

(a) register as insurers persons carrying on insurance business in Sri Lanka;

(b) register persons as insurance brokers;

(bb) register persons as loss adjusters; and

[S 5(bb) ins by s 3 of Act 3 of 2011.]

(c) advise the Government on the development and regulation of the insurance industry;

(d) implement the policies and programmes of the Government with respect to the insurance industry;

(dd) enter into any bi-lateral or multi-lateral memorandum of understanding pertaining to the sharing of information, with any local or foreign person;

[S 5(dd) ins by s 3 of Act 3 of 2011.]

(e) employ such officers and servants as may be necessary for the purpose of exercising, performing and discharging the powers, duties and functions of the Board

(f) acquire and hold any property, movable or immovable and sell, tease, mortgage or otherwise dispose of the same;

(g) enter into all such contracts as may be necessary for the exercise, performance and discharge of its powers, duties and functions; and

(h) do all such other acts as may be necessary for the due exercise, discharge and performance of its powers, duties and functions under this Act.

6. Fund of the Board.

(1) The Board shall have its own Fund.

(2) There shall be paid into the Fund of the Board—

(a) all such sums of money as may be voted from time to time by Parliament for the use of the Board;

(b) all such sums of money as shall be paid as registration fees under sections 14, 81, 83 and 89C of this Act;

[S 6(2)(b) subs by s 4 of Act 3 of 2011.]

(c) all such sums of money paid by insurers as an annual fee under section 16 of this Act;

(d) all such sums of money as may be received by the Board in the exercise, performance and discharge of its powers, duties and functions under this Act: and

(e) all such sums of money as may be received by the Board by way of loans, donations, gifts and grants from any source whatsoever, whether in or outside Sri Lanka.

(3) There shall be paid out of the Fund of the Board, all such sums of money required to defray the expenditure incurred by the Board, in the exercise of its powers, discharge of its functions and performance of its duties.

7. Levy of cess on net premium income.

(1) There shall be charged, levied and paid a cess at such rates as may be determined by the Minister with the concurrence of the Board from time to time by Order published in the Gazette, on the annual net premium income of every insurer, so however that such rate shall not exceed one hall per centum of such annual net premium income.

(2) Every Order made by the Minister under this section shall come into force on the date of its publication in the Gazette or on such later date as may be specified therein, and shall be brought before Parliament for approval within four months of the date of its publication. Any such Order which is not so approved shall be deemed to be revoked from the date of disapproval but without prejudice to the validity of anything previously done thereunder.

(3) The cess imposed under this section shall be in addition to any other tax or cess levied under any other written law.

(4) For the purpose of subsection (1) "annual net premium income” means the gross insurance premium income, less reinsurance premium.

8. Financial year and audit of accounts of the Board.

(1) The financial year of the Board shall be the calendar.

(2) The Board- shall cause proper books of accounts to be kept of the income and expenditure, assets and liabilities and all other transactions of the Board.

(3) The provisions of Article 154 of the Constitution relating to the audit of the accounts of Public Corporations shall apply to the audit of accounts of the Board.

9. Director-General.

(1) The Minister shall, in consultation with the Board, appoint a Director-General of the Board, who shall be its Chief Executive Officer the conditions of employment including remuneration of the Director-General, shall be determined by the Minister.

(2) The Director-General shall attend meetings of the Board on being invited to do so by the Board, but shall not be entitled to vote at such meetings.

(3) The Director-General shall, subject to the general direction and control of the Board, be charged with the direction of the affairs and transaction of all the business of the Board in the exercise, discharge and performance of its powers, functions and duties, and the administration and control of the officers and servants of the Board.

(4) The Director-General may, with the approval of the Board, whenever he considers it necessary to do so, delegate to any officer or servant of the Board any power, function or duty conferred or imposed on or assigned to him by this Act and such officer or servant shall exercise, discharge and perform such power, function or duty subject to the general or special directions of the Director-General.

(5) The Minister may on the recommendation of the Board, remove from office the Director-General appointed under subsection (1) for reasons assigned therefor.

10. Staff of the Board.

(1) The Board may appoint such officers and servants as it considers necessary for the efficient discharge of its functions.

(2) The officers and servants appointed under subsection (1) shall be remunerated in such manner and at such rates and shall be subject to such conditions of service as may be determined by the Board.

(3) At the request of the Board, any officer in the public service may with the consent of the officer and the Secretary to the Ministry of the Minister in charge of the subject of Public Administration, be temporarily appointed to the staff of the Board for such period as may be determined by the Board with like consent, or with like consent be permanently appointed to such staff.

(4) Where any officer in the public service is temporarily appointed to the staff of the Board, the provisions of subsection (2) of section 14 of the National Transport Commission Act, No. 37 of 1991 shall mutatis mutandis, apply to and in relation to such officer.

(5) Where any officer in the public service is permanently appointed to the staff of the Board, the provisions of subsection (3) of section 14 of the National Transport Commission Act. No 37 of 1991 shall mutatis mutandis, apply to and in relation to, such officer.

(6) Where the Board employs any person who has agreed to serve the Government for a specified period, any period of service to the Board by that person shall be regarded as service to the Government for the purpose of discharging the obligations of that person under such agreement.

11. Appointment of officers and servants of Public Corporations to the staff of the Board.

(1) At the request of the Board, any officer or servant of a Public Corporation mat with consent of such officer or servant and the governing board of such Corporation, be temporarily appointed to the staff of the Board for such period as may be determined by the Board with like consent, or wish like consent be permanently appointed to the staff of the Board on such terms and conditions, including those relating to pension or provident fund rights, as may be agreed upon by the Board and the governing board of such Corporations.

(2) Where any person is appointed whether temporarily or permanently under subsection (1) to the staff of the Board, he shall be subject to the same disciplinary control as any officer or servant of the Board.

PART II

REGISTRATION OF INSURERS

12. Insurance business to be carried on by companies registered under this Act.

(1) Subject to the provisions of this Act from and after the appointed date, no person shall curry on insurance business in Sri Lanka unless such person is for the time being registered or deemed to be registered under this Act to carry on such business.

(1A) Notwithstanding the provisions contained in subsection (1), the National Insurance Trust Fund Board established by the National Insurance Trust Fund Act, No. 28 of 2006 shall be deemed to be—

(a) a person registered under this Act to carry on insurance business in Sri Lanka; and

(b) an Insurer registered under the provisions of this Act to carry on insurance business from the date of coming into operation of this Act;

[S 12(1A) ins by s 5 of Act 3 of 2011.]

(2) A registration under subsection (1) may be for general insurance business or for long term insurance business.

[S 12(2) am by s 5 of Act 3 of 2011.]

(3) Notwithstanding the provisions of subsection (1) the provisions of this Act shall not apply in respect of the Agricultural and Agrarian Insurance Board established by the Agricultural and Agrarian Insurance Act, No. 20 of 1999 the Sri Lanka Export Credit Insurance Corporation established by the Sri Lanka Export Credit Insurance Corporation Act. No. 15 of 1978 and the Social Security Board established by the Social Security Board Act, No. 17 of 1996.

[S 12(3) am by s 2 of Act 27 of 2007; s 5 of Act 3 of 2011.]

(4) A person registered under subsection (1) shall not carry on any form of business other than insurance business:

Provided that, a person may with the prior written approval of the Board, carry on any financial services business which is ancillary or associated with the insurance business for which a registration is obtained under this Act.

13. Qualifications for registration.

(1) No person shall be registered to carry on either one or both classes of insurance business in Sri Lanka, unless such person—

(a) is a public company incorporated in Sri Lanka and registered under the Companies Act No 17 of 1982;

(b) has a paid up share capital of no less than such amount as determined by the Board by rules made in that behalf;

[S 13(1)(b) am by s 6 of Act 3 of 2011.]

(bb) has in its Board of Directors persons who are not subject to any one or more of the disqualifications specified in the Second Schedule to this Act;

[S 13(1)(bb) ins by s 6 of Act 3 of 2011.]

(c) pays as deposit to the Treasury such amount as may be determined by the Board, by rules made in that behalf;

(d) pay the prescribed fee: and

(e) fulfill such other requirements as may be laid down by the Board by rules made in that behalf, for the purpose of ensuring the proper conduct of insurers to safeguard the interests of the insured public and for the development of the insurance industry.

(2) For the purpose of paragraphs (b), (c) and (d) of subsection (1) different amounts may be prescribed for different classes of insurance business.

14. Application for registration.

(1) Every application for registration under .section 12, shall be made to the Board in such form as may be provided for that purpose by the Board, and be accompanied by-

(a) a statement in writing by the applicant that the provisions of paragraphs (b) and (c) of subsection (1) of section 13 have been complied with, together with a certificate issued by the Deputy Secretary to the Treasury specifying the amount deposited under paragraph (c) of that subsection:

(b) the fee prescribed in respect of the class of insurance business in respect of which the application for registration is being made;

(c) a certified copy of the Memorandum and Articles of Association of the company applying for registration;

(d) a certified copy of the certificate of Incorporation of the company applying for registration;

(e) a certified copy of the certificate to commence business issued by the Registrar of Companies:

(f) a statement setting out prescribed particulars relating to—

(i) the shareholders of the company;

(ii) the Directors of the company; and

(iii) the officers referred to in sections 32, 46 and 94;

(g) a statement selling out the class and where necessary the sub-class of insurance business proposed to be carried on by the applicant;

(h) a statement setting out the details of fulfillment of requirements, if any that were laid down by the Board under paragraph (e) of subsection (1) of section 13;

[S 14(1)(h) am by s 7 of Act 3 of 2011.]

(i) a scheme of work or business plan for a period of three years; and

[S 14(1)(i) am by s 7 of Act 3 of 2011.]

(j) such other documents and information as may be determined by the Board.

[S 14(1) (j) ins by s 7 of Act 3 of 2011.]

(2) Every application under this section shall be certified by a declaration signed by the person making the application that the statements accompanying the application are true and accurate. Every such declaration shall be free of stamp duty.

(3) The Board may conduct such investigations as it may consider necessary to verify the accuracy of any details contained in the application made under subsection (1) and to determine the suitability of the applicant to be registered under this Act as an insurer.

15. Registration and issue of licence.

(1) Where the Board is satisfied that any company making an application for registration under section 14 has complied with the provision of section (3) of this Act, and where an investigation is conducted under subsection (3) of section 14, the Board is satisfied regarding the suitability of the applicant to be registered, the Board shall register such company as an insurer and shall issue to the insurer a licence in which shall be specified the class, and where necessary the sub-class of insurance business, which such insurer is authorised to carry on.

(2) The licence issued to an insurer under subsection (1) shall be kept at all times at the principal office or place of business of the insurer, and be made available for inspection by any member of the Board, its Director-General or any person authorised by the Board for that purpose.

15A. Insurer to be listed on a licensed stock exchange.

Every insurer shall be required within three years of being issued with a licence under section 15 of this Act, to have itself listed on a licensed stock exchange.

[S 15A ins by s 8 of Act 3 of 2011.]

16. Annual fee.

(1) Every insurer shall pay to the Board as an annual fee, such sum of money as may be prescribed.

(2) The Board may prescribe different amounts as annual fee in respect of different classes of insurance business.

17. .

[S 17 rep by s 9 of Act 3 of 2011.]

18. Cancellation or suspension of a licence issued to an insurer.

(1) The Board may cancel or suspend the registration of an insurer, either wholly or in respect of a particular class or sub-class of insurance business, for any one or more of the following reasons or grounds, namely, that the insurer—

(a) has not commenced business within twelve months after being registered;

(b) has ceased to carry on insurance business in respect of any class of business;

(c) proposes to make or has made any composition or arrangement with its creditors or has gone into liquidation or has been wound up or otherwise dissolved;

(d) is carrying on its business in a manner likely to be detrimental to the interests of its policy holders or to the development of the insurance industry or the national interest:

(e) is unable to meet its obligations;

(f) has failed to maintain the solvency margin of such amount as is determined by the Board under section 26;

(g) has contravened any provision of this Act or any regulation or rule made thereunder or any condition imposed or and direction given by the Board or determination made by the board under this Act;

[S 18(1)(g) am by s 10 of Act 3 of 2011.]

(h) has furnished false, misleading or inaccurate information,
or has concealed or failed to disclose material facts, in its application for registration or in any information or document submitted to the Board;

[S 18(1)(h) am by s 10 of Act 3 of 2011.]

(i) has ceased to be of good financial standing;

(j) has since the grant of the licence, been disqualified for the grant of licence: or

(k) is found guilty of any malpractice or irregularity in the management of his affairs.

(2) The Board may for any one or more reasons or grounds specified in subsection (1), and by notice sent in that behalf, suspend the registration granted to an insurer for a period not exceeding three weeks, without prejudice to such insurer's responsibility to meet its obligations under policies already issued, and the insurer shall thereafter be prohibited from issuing new insurance policies until the suspension is removed.

(3) The notice referred to in subsection (2) shall specify the period of suspension and the date before which the insurer is required to show cause to the Board why such suspension should be removed.

(4) On receipt of an insurer's response to the notice sent under subsection (2). the Board may—

(a) where an insurer shows sufficient cause why the suspension should be removed, immediately remove the suspension; or

(b) where the Board is not satisfied with the response of the insurer, either extend the period of suspension already imposed, or cancel the registration as the case may be.

(5) Where the Board decides under subsection (4) to cancel or suspend for a further period the registration of an insurer, it shall be its duly to forthwith inform the insurer of lift cancellation or suspension us the case may be and in the event of an extension of a suspension for a further period, the Board shall further inform the insurer—

(a) of the period for which the suspension is being extended;

(b) of the action that needs to be taken to rectify or remove the reason or ground which caused the imposition of the suspension; and

(c) the nine within which the corrective measures referred to in paragraph (b) should be taken.

(6) Where a registration is cancelled or suspended under subsection (4), it shall be the duty of the licence holder whose licence is being cancelled or suspended as the case may be, to forthwith surrender the licence to the Board and the Board shall thereupon—

(a) in the case of a cancellation of a registration, cancel the licence; or

(b) in the case of a suspension of a registration for a specified period, make an endorsement to that effect on the face of the licence, and return the licence to the holder thereof.

(7) Notwithstanding the provisions contained in subsections (1) and (2) of this section, the Board may in lieu of a cancellation or suspension on any one or more grounds referred to in subsection (1), of a licence issued to an insurer under this Act, and where, the nature of the act or omission referred to therein and which is committed by such insurer is not of such nature as to warrant a cancellation or suspension of the licence, direct the insurer to take such measures as may be determined by the Board, to—

(a) prevent the continuance of such act or omission; and

(b) rectify and set a right any consequences resulting from such act or omission.

19. Appeals.

(1) An insurer who is aggrieved by a decision made by the Board under section 18 may, within fourteen days of being informed of such decision, appeal there from to the Court of Appeal.

(2) The Court of Appeal may on appeal made under this section, confirm, revise, modify or set aside the decision against which the appeal is made and may make such order as the interests of justice may require.

20. Appointment of an administrator.

(1) Where a licence issued to an insurer under this Act is cancelled or suspended under subsection (4) of section 18, and the Board is of the view that national and public interest requires that administration and management of the insurance business of such insurer should be taken over by an administrator, the Board may inform the Minister of that fact and the Minister may by notice published in the Gazette, appoint an administrator to manage and administer such business under the direction and control of the Board, for such period as shall be specified in the notice. The period so specified may, where necessary be extended in like manner from time to time.

(2) The Board shall cause a copy of the notice to be served on the Registrar of Companies, who shall be required to make an entry in the record maintained by such Registrar, relating to such insurance company.

21. Deposit to be paid to the Treasury.

(1) Every company applying for registration as an insurer under this Act, shall keep deposited with the Deputy Secretary to the Treasury, for and on behalf of the Government of Sri Lanka, such sum of money as is determined by the Board under paragraph (c) of subsection (1) of section 13 of this Act.

(2) A deposit made under subsection (1) may consist of cash or of Government securities or of Government guaranteed securities and the value of any securities so deposited shall be taken to be their market value at the date of deposit.

(3) A deposit made in cash shall be held by the Deputy Secretary to the Treasury to the credit of the insurer, and shall be returnable to the insurer in cash in the circumstances and in the manner in which under the provisions of this Act such a deposit may be returned, and any interest accruing due on securities deposited under this section by any insurer shall when it is collected, be paid by the Deputy Secretary to the Treasury to the insurer.

(4) An insurer may at any time substitute for the securities deposited with the Deputy Secretary to the Treasury and under this section, other Government securities or Government securities of equal value assessed at the market rate prevailing at the time of subsection and the Deputy Secretary to the Treasury shall on the written application of any insurer who has made a deposit invest in Government securities or Government guaranteed securities the whole or any part of the cash received by the Deputy Secretary deposited by the insurer under this act.

(5) The Deputy Secretary to the Treasury shall if so requested by the insurer sell any securities deposited with him and either hold the cash realised by such sale as deposit or invest in such Government securities or Government guaranteed securities as may be specified by the insurer, the whole or any part of the cash received by him and hold the securities in which the investment is so made as deposit.

22. Reservation of deposits.

The deposit made by an insurer shall be deemed to be part of the assets of the insurer, but shall not—

(a) be capable of being transferred or assigned or of being encumbered with any mortgage or other charge by the insurer or be liable to seizure in execution of any decree; or

(b) be available for the discharge of any liability of the insurer, except for the discharge in the event of the winding up of the insurer, of liabilities arising out of policies of insurance business issued by the insurer and remaining undischarged.

23. Return of deposits.

Where the Board is satisfied that an insurer has ceased to carry on any class of insurance business and its liabilities in respect of that class have been satisfied or otherwise provided for. the deposit in respect of that class of insurance business shall be refunded on expiry of two years from the date of issue of the last policy of insurance of that class, issued by the insurer.

24. Maintaining a Technical Reserve.

Every insurer who carries on general insurance business, whether solely or in addition to long term insurance business, shall establish and maintain adequate technical reserves:

Provided that where the Board is of the view that the technical reserve being maintained by the insurer is inadequate to meet its liabilities the Board shall have the power to require such insurer to increase or enhance its technical reserve.

25. General Provisions relating to Reserve and Fund being maintained by an insurer.

(1) Not less than twenty per centum of the assets of the technical reserve being maintained for a general insurance business under section 24 and not less than thirty per centum of the assets for the Long Term Insurance Fund being maintained under subsection (1) of section 38, shall be in the form of Government Securities. The balance assets shall be in the form of such other investments as shall be determined by the Board.

(2) The Board shall have the power, where it considers any investment of any assets in any reserve or Fund referred to in subsection (1) of this section is unsuitable, to issue directions for the disposal of such investment within such time as may be specified in such directions.

(3) Assets of a receive or Fund being maintained by an insurer under this Act and all other assets of such insurer shall be kept in Sri Lanka, unless otherwise permitted by the Board on application being made in that behalf by an insurer. Guidelines for the granting of permission by the Board shall be as prescribed.

26. Solvency margin.

(1) Every insurer shall maintain in respect of each class of insurance business, a. solvency margin of ‘such amount as may be determined by the Board in respect of that class of insurance business, by rules made in that behalf.

(2) Rules may be made by the Board to provide for the determination of the value of the assets and their admissibility and the amount of the liabilities for the purpose of determining the solvency margin to be maintained in respect of the class of insurance business being carried on by any such insurer,

(3) For purpose of ensuring the avoidance of mismatching of assets as against liabilities by insurers, the Board may from time to time by rules made in that behalf, lay down criteria to be made applicable in determining the minimum limits of their assets as against their liabilities.

PART III

GENERAL PROVISIONS Applicable TO INSURERS

27. Separation of accounts and assets.

Where an insurer carries on business of one or more classes of insurance business, such insurer shall keep separate accounts of all receipts and payments in respect of each class of insurance business and also maintain separate accounts in respect of each sub-class of general insurance business it is carrying on.

28. .

[S 28 rep by s 11 of Act 3 of 2011.]

29. Prohibition of loans.

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