REGULATION OF INSURANCE INDUSTRY ACT

Arrangement of Sections

1. Short title.

PART I

ESTABLISHMENT AND CONSTITUTION OF THE Insurance Regulatory Commission of Sri Lanka

2. Establishment of the Insurance Commission of Sri Lanka.

3. Object and responsibility of the Commission.

4. Constitution of the Commission.

5. Powers, duties and functions of the Commission.

6. Fund of the Commission.

7. Levy of cess on net premium income.

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

9. Director-General.

10. Staff of the Commission.

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

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.

15B. Local subsidiary insurance company of any foreign holding company.

15C. Exemption from being listed.

15D. Duty to comply with the terms and conditions.

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 Repealed.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 Repealed.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 Commission of proposed appointment, nomination or election of Directors.

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

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 Repealed.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 Commission 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 Commission regarding returns.

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

53. Power of the Commission to increase deposit.

54. Power of the Commission to order investigation.

55. Powers of investigator.

56. Further returns and abstracts.

57. Power of Commission 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 Commission.

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

95. Register of policies.

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

96. Use of the word “Insurance”.

96A. Commission to give directions.

96B. Determination made to be communicated forthwith.

97. Service of Notices.

98. Power of the Commission 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 Commission.

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

110. Commission to be a scheduled Institution.

111. Officers and servants of the Commission 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,

23 of 2017.

AN ACT to provide for the establishment of an Insurance Regulatory Commission of Sri Lanka 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.

[Long title am by s 2 of Act 23 of 2017.]

[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 Regulatory Commission of Sri Lanka

2. Establishment of the Insurance Commission of Sri Lanka.

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

(2) The Commission 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 Commission.

The object and responsibility of the Commission 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 Commission.

(1) The Commission 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 Commission;

(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 Commission as the Chairman of the Commission.

(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 Commission, remuneration payable to members of the Commission, meetings and the Seal of the Commission.

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

5. Powers, duties and functions of the Commission.

For the purpose of fulfilling its object and responsibility, the Commission 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 Commission

(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 Commission.

(1) The Commission shall have its own Fund.

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

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

(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 Commission 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 Commission 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 Commission, all such sums of money required to defray the expenditure incurred by the Commission, 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 Commission 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 Commission.

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

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

(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 Commission.

9. Director-General.

(1) The Minister shall, in consultation with the Commission, appoint a Director-General of the Commission, 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 Commission on being invited to do so by the Commission, but shall not be entitled to vote at such meetings.

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

(4) The Director-General may, with the approval of the Commission, whenever he considers it necessary to do so, delegate to any officer or servant of the Commission 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 Commission, remove from office the Director-General appointed under subsection (1) for reasons assigned therefor.

10. Staff of the Commission.

(1) The Commission 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 Commission.

(3) At the request of the Commission, 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 Commission for such period as may be determined by the Commission 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 Commission, 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 Commission, 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 Commission employs any person who has agreed to serve the Government for a specified period, any period of service to the Commission 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 Commission.

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

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

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 Commission 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 Commission 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 Commission established by the Social Security Commission 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 Commission, 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 general insurance business or long term insurance business in Sri Lanka, unless such person—

[S 13(1) am by s 4 of Act 23 of 2017.]

(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 Commission by rules made in that behalf;

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

(bb) has in its Commission 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 Commission, by rules made in that behalf;

(d) pay the prescribed fee: and

(e) fulfill such other requirements as may be laid down by the Commission 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 Commission in such form as may be provided for that purpose by the Commission, 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 Commission 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 Commission.

[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 Commission 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 Commission 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 Commission is satisfied regarding the suitability of the applicant to be registered, the Commission 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 Commission, its Director-General or any person authorised by the Commission 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.]

15B. Local subsidiary insurance company of any foreign holding company.

Notwithstanding the provisions of section 15A, the Commission shall, upon being satisfied—

(a) that at least eighty five per centum of shares of the local subsidiary insurance company are held by a foreign holding company listed on a stock exchange outside Sri Lanka and which stock exchange is a member of the World Federation of Exchanges or such other organisation recognised by the Commission;

(b) the accounts of such local subsidiary insurance company are included in the Group Consolidated Accounts of the foreign holding company; and

(c) such foreign holding company is legally required by the foreign stock exchange on which it is listed to ensure group level compliance with all regulatory requirements of the foreign stock exchange including the requirement pertaining to the accounts of the local subsidiary insurance company,

exempt such local subsidiary insurance company from being listed on a stock exchange licensed under the Securities and Exchange Commission of Sri Lanka Act.

[S 15B ins by s 5 of Act 23 of 2017.]

15C. Exemption from being listed.

(1) The National Insurance Trust Fund established under the provisions of the National Insurance Trust Fund Act shall be exempted from being listed on a stock exchange licensed under the provisions of the Securities and Exchange Commission of Sri Lanka Act.

(2) The Commission shall, upon being satisfied that a local subsidiary insurance company is held by a company that is listed on a stock exchange licensed under the Securities and Exchange Commission of Sri Lanka Act shall exempt such local subsidiary insurance company from being listed on a stock exchange licensed under the provisions of abovesaid Act.

(3)

(a) The Sri Lanka Insurance Corporation Limited or any insurance companies formed upon the segregation of the Sri Lanka Insurance Corporation Limited into two separate companies, whatever the names assigned to such companies on the date on which such segregation takes place shall be exempted from being listed on stock exchanges, licensed under the Securities and Exchange Commission of Sri Lanka Act.

(b) No such exemption shall be valid, unless the Sri Lanka Insurance Corporation Limited or any insurance companies formed upon the segregation of the Sri Lanka Insurance Corporation Limited into two separate companies is or are owned by the Government of Sri Lanka.

[S 15C ins by s 5 of Act 23 of 2017.]

15D. Duty to comply with the terms and conditions.

It shall be the duty of—

(a) any local subsidiary insurance company of any foreign holding company;

(b) the National Insurance Trust Fund established under the provisions of National Insurance Trust Fund Act; and

(c) the entities referred to in subsections (2) and (3) of section 15C of this Act,

to comply with any terms and conditions as may be determined by the Commission from time to time.

[S 15D ins by s 5 of Act 23 of 2017.]

16. Annual fee.

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

(2) The Commission 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 Commission 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 Commission 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 Commission or determination made by the Commission 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 Commission;

[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 Commission 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 Commission why such suspension should be removed.

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

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

(b) where the Commission 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 Commission 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 Commission 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 Commission and the Commission 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 Commission 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 Commission, 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 Commission 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 Commission 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 Commission 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 Commission, 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 Commission 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 Commission 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 Commission 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 Commission is of the view that the technical reserve being maintained by the insurer is inadequate to meet its liabilities the Commission 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 Commission.

(2) The Commission 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 Commission on application being made in that behalf by an insurer. Guidelines for the granting of permission by the Commission 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 Commission in respect of that class of insurance business, by rules made in that behalf.

(2) Rules may be made by the Commission 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 Commission 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.

(1) No insurer shall grant to any person who holds the position of a Director of such insurer, or to any company in which such a person holds any such position, any loan. other than a loan on a mortgage of a policy of life assurance issued by that insurer, except with the prior approval of the Commission which shall grant such approval only if it is satisfied that sufficient security is being given for the repayment of the loan.

(2) Where a loan has been granted by the insurer to a Director of such insurer or to any company in which such person is a Director, on the mortgage of a policy of life assurance and such loan is outstanding on the appointed date the Commission shall have the power, notwithstanding anything to the contrary in any agreement or contract, to examine the adequacy of the security given by such person for the repayment of the loan and if the Commission considers it necessary to do so to require that the loan be repaid or that additional security be given, on or before a specified date if such person fails to repay the loan, or to give additional security, on or before the specified date, he shall, on the expiry of a period of one year from that date, cease to hold office as a Director of such insurer.

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

None of the assets of any insurer shall be kept otherwise than in the name of the insurer.

31. Reinsurance.

(1) An insurer may. subject to such terms and conditions that may be specified by the Commission in order in ensure that the interests of policy holders and the insurers are adequately safeguarded, reinsure with any other insurer in or outside Sri Lanka, any liability arising out of and contract or policy of insurance, effected or issued by the first-mentioned insurer.

(1A) Every insurer who reinsures shall be required to reinsure with the National Insurance Trust Fund Commission established by the National Insurance Trust Fund Act, No. 28 of 2006, a percentage not exceeding fifty per centum as shall be determined by the Minister by Order published in the Gazette, of the liability sought to be reinsured.

[S 31(1A) ins by s 3 of Act 27 of 2007.]

(2) The Commission may by a notice in writing, require and insurer carrying on reinsurance to furnish such information as it may deem necessary to ascertain whether such insurer has the necessary funds to satisfy any claim that may be made on such insurer to comply with the requirements of such notice.

(3) The Commission may from time to time, by Notification published in the Gazette, prohibit all insurers, from reinsuring with any specified reinsurer in or outside Sri Lanka, risks upon policies or contracts of insurance issued or effected in respect of insurance business transacted in Sri Lanka, where any such arrangement with that reinsurer is detrimental to the national interest:

Provided however, that before issuing any Notification under this subsection, the Commission shall inform the insurer or insurers who is or are earning on reinsurance business with such specified reinsurer in or outside Sri Lanka, of its intention to issue such Notification and shall consider any representations made by such insurer or insurers, with reference to its proposed decision.

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

A person shall not be appointed, elected or nominated as a Director of an insurer or continue as a Director of an insurer, if such person is subject to any one or more of the disqualifications specified in the Second Schedule to this Act.

[S 31A ins by s 12 of Act 3 of 2011.]

32. Staff of insurer carrying on insurance business.

(1) Every insurer carrying on insurance business shall employ as a specified officer, at least one person possessing the qualification of Associate of the Chartered Insurance Institute, or an equivalent qualification acceptable to the Commission, and having at least five years post qualification experience, at managerial level.

(1A) The disqualifications specified in the Second Schedule to this Act, shall mutatis mutandis, apply to and in relation to a person employed as a specified officer under subsection (1).

[S 32(1A) ins by s 13 of Act 3 of 2011.]

(2) A person employed as a specified officer may also function as the Principal Officer of the insurer, provided such officer possesses the qualifications of a Principal Officer as determined by the Commission under section 94.

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

No—

(a) insurer or the holding or associate or subsidiary company of an insurer; or

(b) Director, Principal Officer or specified officer of an insurer or the Director or Chief Executive Officer of a holding or associate or subsidiary company of an insurer; shall be a shareholder, Director or employee of a company registered as a broker under this Act:

Provided that where an insurer or any such, person as is referred to in this section is a shareholder, Director or employee of any company registered as a broker under this Act as on the date of registration, such insurer or person shall be required to dispose of such shares, or to relinquish such Directorships or employment, as the case may be within such period as may be determined by the Commission.

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

(1) A Director or an employee of an insurer shall not be appointed, elected or nominated as a Director of another insurer, except where such insurer is a subsidiary company or an associate company of the first mentioned insurer.

(2) An employee of an insurer may be appointed, elected or nominated as a Director of that insurer, subject however to the condition that the number of employees that may be so appointed, elected or nominated as Directors, shall not exceed one-third of the total number of members of the Commission of Directors of that insurer.

[S 33A ins by s 14 of Act 3 of 2011.]

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

(1) Every insurer shall submit to the Commission along with the Form required to be filed with the Registrar-General of Companies, a notice in such form and manner as shall be determined by the Commission, giving information about each person sought to be appointed, elected or nominated as a Director of the insurer, prior to the making of such appointment, election or nomination, as the case may be, and obtain the Commissions approval for the same.

(2) Where the Commission receives a notice from an insurer under subsection (1) informing it of a proposed appointment, election or nomination of a person as a Director of such insurer, the Commission shall within thirty days of receipt of such notice and having regard to the provisions of section 33A, and to the disqualifications specified in the Second Schedule to this Act, approve or refuse to approve such appointment, election or nomination, as the case may be, and inform the insurer of its decision along with its reasons for reaching such decision. It shall also be the duty of the insurer to communicate to the person concerned, who is sought to be appointed, elected or nominated as a Director, the decision of the Commission.

(3) Any person aggrieved by a decision given by the Commission under subsection (2), may submit an appeal against such decision to the Commission which shall be referred by the Commission to a Panel of Review, consisting of three persons appointed by the Minister, from among persons who have experience and shown capacity in the field of insurance, financial management or law. The Panel of Review shall having considered the grounds on which the appeal is being made and any other matters which in its opinion merits consideration, make a decision either confirming the refusal or approving the appointment, election or nomination, as the case may be, of such person as a Director of the insurer concerned.

[S 33B ins by s 14 of Act 3 of 2011.]

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

(1) An insurer shall not appoint, elect or nominate as a Director of such insurer a person whose appointment, election or nomination has not been approved by the Commission under section 33B of this Act.

(2) Notwithstanding the provisions of subsection (1), a person whose name has been submitted to the Commission for approval under subsection (1) of section 33B, may be appointed, elected or nominated as a Director of the insurer, pending the receipt of the decision of the Commission. However, where the Commission refuses to grant approval and the insurer communicates to the person concerned, the decision of the Commission, such person shall from the date of such communication, cease to hold office as a Director of the insurer, subject to any decision the Commission may reach upon any objections that may have been tendered by the person concerned, under subsection (3) of section 33B, against the decision of the Commission refusing to grant approval.

(3) It shall be the duty of an insurer to inform the Commission forthwith of every appointment, election or nomination of a Director, whose appointment, election or nomination, as the case may be, was approved by the Commission.

[S 33C ins by s 14 of Act 3 of 2011.]

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

(1) An insurer shall, immediately upon becoming aware that a Director of such insurer has become subject to any one or more of the disqualifications specified in the Second Schedule to this Act or has become ineligible to continue to hold office as a Director of the insurer, inform the Commission of such fact.

(2) Where the Commission receives any information under subsection (1) about a Director or where the Commission becomes aware at any time that a person appointed, elected or nominated as a Director of an insurer has thereafter become disqualified under any one or more of the disqualifications specified in the Second Schedule to this Act or has otherwise become ineligible to continue to hold office as a Director of an insurer, the Commission shall—

(a) direct the insurer concerned, in writing, to remove such person from the office of a Director within such period as may be specified in such direction; and

(b) in writing, notify the person who is to be removed of the fact of such removal, with a copy of the direction issued to the insurer regarding the same annexed to such notification.

(3) The insurer to whom a direction is issued under subsection (2) shall, within the period specified in the direction—

(a) remove the person from the office of Director; and

(b) take such steps as are necessary to inform the shareholders of the insurer and the Registrar-General of Companies of such removal.

(4) The removal of a Director in accordance with a direction issued under paragraph (a) of subsection (2) shall, notwithstanding the Articles of Association of the insurer, take effect from the date of receipt by the Director of the notification of removal sent by the insurer.

(5) Any person who is aggrieved by the removal of such person from the office of a Director under subsection (3) of this section, may within fourteen days of being notified of such removal, appeal therefrom to the Court of Appeal. 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.

[S 33D ins by s 14 of Act 3 of 2011.]

33E. Failure to comply to be an offence.

An insurer who fails to comply with any direction given under paragraph (a) of subsection (2) of section 33D within the period specified in such direction and a Director who has been served with a notice under paragraph (b) of that subsection who continues to function as a Director thereafter, shall each be guilty of an offence under this Act and shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding five hundred thousand rupees and shall in addition be liable—

(a) in the case of the insurer, to a further fine of one hundred thousand rupees, for each day that the insurer continues to commit such offence after conviction; and

(b) in the case of a Director of the insurer, to a further fine of rupees one hundred thousand for each day such Director continues to function as Director, after conviction.

[S 33E ins by s 14 of Act 3 of 2011.]

34. Persons from whom insurer may accept insurance business.

No insurer shall accept any insurance business except from—

(a) any person who has an insurable interest in the subject matter of insurance;

(b) another insurer in respect of reinsurance;

(c) an insurance agent; or

(d) an insurance broker registered under this Act.

35. …

[S35 rep by s 15 of Act 3 of 2011.]

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

(1) The Commission may from time to time, where it is of the view that policy holders are being adversely affected by any tariff limits set by insurers fix the minimum tariff for motor, fire and employers liability, to be charged by such insurers in respect of policies of insurance to be issued by them, and also may fix the maximum tariff for motor insurance business.

(2) No insurer shall accept as under a contract or policy of insurance affected or issued by it in respect of such sub-class of insurance as is referred to in subsection (1) an amount which is—

(a) less than the minimum sale that may be fixed in respect of motor, fire and employers liability under subsection (1); or

(b) higher than the maximum sale that may be fixed in respect of motor insurance under subsection (1).

37. Policy forms.

(1) For the purpose of examining whether the interests of the policy holders are being adequately safeguarded every insurer shall be required to file with the Commission—

(a) all policy forms to be issued by such insurer, prior to its issue;

(b) any amendments to be made to any policy forms already issued; and

(c) where required to do so by a notice in writing, copies of any policy forms already issued.

[S 37(1) subs by s 16 of Act 3 of 2011.]

(2) The Commission may having regard to the need to ensure that the terms of the contract of insurance covered by such policy form are fair and equitable, direct amendments so any policy form furnished to the Commission under subsection (1), and it shall be the duty of the insurer furnishing such forms to give effect to such amendments.

(3) No information acquired under this section by any member of the Commission or any officer or servant thereof shall be disclosed or used by such person, except when required to do so by a court of law or for the purpose of exercising, performing and discharging the powers, duties and functions of the Commission.

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.

(1) Every insurer who carries on long term insurance insurer business, whether solely or in addition to general insurance business, shall—

(a) maintain a separate fund to be called the “Long Term Insurance Fund” and shall credit all money received in respect or the long term insurance business earned on by such insurer, to that Fund; and

(b) keep the assets in respect of the long term insurance business separate from the assets in respect of any-other class of insurance business.

(2) The Long Term Insurance Fund maintained by an insurer under subjection (1). Shall not be liable for any contracts of the insurer for which it would not have been liable had the business of the insurer been only that of long term insurance business, and shall not be applied directly or indirectly for any purposes other than these of the long term insurance business earned on by that insurer.

(3) For the purpose of verifying whether an insurer complies with the provisions of subsection (1) the Commission may—

(a) call upon such insurer to furnish from time to time a return in such form as may be prescribed;

(b) authorise an officer in writing to enter at all reasonable hours the place at which such insurer is carrying on long term insurance business and examine any books,

registers or documents of such insurer relating to such business, and such insurer shall furnish such return or permit such officer to enter such place and make such examination.

(4) Where, following an actuarial investigation into the financial affairs of an insurer transacting long term insurance business under subsection (1) of section 48 there is an established surplus in respect of participating policies which the actuary has recommended as being available for distribution, the insurer shall not transfer or otherwise apply assets representing any part of that surplus, unless the insurer has allocated for the payment of bonuses to holders of participating policies at least ninety per centum of that surplus.

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

(1) A transfer or an assignment of a policy of long term insurance business, whether with or without consideration, may be made only by an endorsement upon the policy itself or by a separate instrument signed in either case by the transferor or by the assignor or his duly authorised agent, and attested by at least one witness, and specifically setting forth the fact of transfer or assignment.

(2) No transfer or assignment of a policy of long term insurance business shall be of any effect as against the insurer, unless it is made in accordance with subsection (1) and until a notice in writing of the transfer or assignment, together with the instrument or endorsement or a copy thereof which is certified by or on behalf of the parties to the transfer or assignment to be correct, is served on the insurer at its principal place of business in Sri Lanka.

(3) The date on which the notice referred to in subsection (2) is served on the insurer, shall regulate the priority of all claims under a transfer or an assignment of a policy of long term insurance business as between persons interested in the policy, and where there is more than one instrument of transfer or assignment, the priority of the claims under such instruments shall he governed by the order in which the notices referred to in subsection (2) are served.

(4) Upon the receipt of the notice referred to in subsection (2). the insurer shall record the fact of such transfer or assignment to set with the date thereof and the name of the transferee or the assignee, and shall on the request of the person by whom the notice was given, or of the transferee or assignee, grant a written acknowledgment of the receipt of such notice, and any such acknowledgment shall be conclusive evidence against the insurer that such insurer has duly received the notice to which such acknowledgment relates.

(5) Subject to the terms and conditions of the transfer or assignment, the insurer shall from the date of the receipt of the notice referred to in subsection (2), recognize the transferee or assignee named in the notice as the only person entitled to benefit under the policy, and such person shall be subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transferor assignment, and may institute any proceedings in relation to the policy without obtaining the consent of the transferor or assignor or making him a party to such proceedings.

(6) Any rights and remedies of an assignee or transferee of a policy of long term insurance business under an assignment or transfer effected prior to the appointed date, shall not be affected by the provisions of this section.

(7) Notwithstanding any law or custom having the force of law to the contrary, an assignment in favour of a person made with the condition that the interest shall pass to some other person on the happening of a specified event during the lifetime of the person whose life is insured, and an assignment in favour of survivor or survivors of a number of persons, shall be valid.

40. Acquisition of surrender value by policy.

(1) Where, in terms of a policy of long term insurance business, the policy is to mature upon survival to a fixed date or on the death of such person, and the policy is subject to payment of premium at an uniform sale for a fixed term or where the death occurs before the expiry of such fixed term, until the date of such death, and all premium have been paid for three consecutive years, the policy shall he deemed to acquire a surrender value, and. notwithstanding any contract to the contrary, shall not lapse by reason of non-payment of further premium, but shall notwithstanding such non-payment, be kept in force to the extent of its paid-up value. For the purpose of this subsection, the method to be used to calculate surrender values and paid-up values, shall be certified by an actuary.

(2) Where a debt owing to an insurer is secured by a policy of long term insurance business issued by the insurer and. under subsection (1) the policy is kept alive to the extern of its paid-up value, the insurer—

(a) may treat the debt as a debt secured by the policy so kept alive, and thereupon the policy so kept alive shall be a security for the debt; or

(b) may reduce the amount of such paid-up value by an amount the present value of which is equal to the amount of the debt, and thereupon the debt shall cease to be owing to the insurer.

(3) This section shall not apply in any case where—

(a) the sum assured is payable only on the happening of a contingency which may not arise:

(b) the paid-up value of the policy is less than such amount as is determined by the Commission from time to time;

(c) after default has occurred in the payment of the premium, the parties agree; in writing to some other arrangement; or

(d) the surrender value of the policy is automatically applied under the terms of the contract for maintaining the policy in force notwithstanding the non-payment of premium.

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

No policy of long term insurance business shall after the expiry of two years from the date of the issue of the policy. be called in question by any insurer on the ground that a statement made in the proposal or other document on the faith of which the policy was issued or reinstated, or in any report of a medical officer or referee, was inaccurate or false, unless the insurer shows that such a statement was made on a material matter or suppressed facts which it was material to disclose, and that it was fraudulently made by the policy holder and that the policy holder knew at the time of making it that the statement was false or that it suppressed facts it was material to disclose:

Provided that, nothing in this section shall prevent the insurer from calling for proof of age at any time, if it is entitled to do so under the policy conditions, and no policy shall be deemed to have been called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal.

42. Supply of notice of options.

(1) Where any premium in respect of a policy of long term insurance business is not paid on the date on which it is of options, payable, notice of the options available to the policy holder shall be given to him by the insurer before the expiry of a period of three months from the said date, unless such options are set out in the policy, and no further notice of the options available shall be given thereafter to the policy holder.

(2) Every notice under subsection (1) shall be deemed to have been duly given to the policy holder if it is sent to him to such address as may be specified in the policy or where the address is not so specified, to the address to which a renewal premium notice or receipt was last sent by the insurer to the policy holder.

(3) Upon application made to an insurer in that behalf the insurer shall supply to the policy holder or to his legal representative or to an assignee of the policy, a certified copy of the proposal for the policy and of the personal statement made to the medical officer by the proposer, unless copies thereof are attached to the policy.

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

(1) The holder of a policy of long term insurance business may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death:

Provided that, where any nominee is a minor it shall be lawful for the policy holder to appoint in the prescribed manner any person on behalf of the minor, who may receive the money secured by the policy, in the event of his death during the minority of the nominee.

(2) A nomination under subsection (1) shall, unless it is incorporated in the text of the policy itself, be made by an endorsement on the policy and such endorsement shall by notice in writing be communicated to the insurer who shall register such endorsement in the record or register relating to that policy. Any such nomination may at any time before the policy matures for payment be cancelled or changed by another endorsement or by a will of the policy holder, as the case may be. and unless notice in writing of any such cancellation or change has been given by the policy holder so the insurer, the insurer shall not be liable for any payment under the policy made bona fide by him to a nominee mentioned in the text of the policy, or registered in records of the insurer.

(3) The insurer shall furnish to the policy holder a written acknowledgment of having registered a nomination or of any cancellation or change thereof.

(4) A transfer or assignment of a policy made in accordance with section 39 shall have the effect of canceling a nomination:

Provided that, the assignment of a policy to an insurer who bears the risk on the policy at the time of the assignment, in consideration of a loan granted by that insurer on the security of the policy within its surrender value, or its reassignment on repayment of the loan, shall not effect a cancellation of a nomination, but shall affect the rights of the nominee only to the extent of the insurer’s interest in the policy.

(5) Where the policy matures for payment during the lifetime of the person whose life is assured or where the nominee, or if there are more nominees than one, or if the nominees, die before the policy matures for payment, the amount secured by the policy shall be payable to the policy holder or his heirs or legal representatives, as the case may be.

(6) Where the nominee, or if there are more nominees than one, one or more of such nominees survive like person whose life is assured, the amount secured by the policy shall be payable to such survivor or survivors.

44. Restrictions on dividends and bonuses.

No insurer who carries on long term insurance business shall, for the purpose of declaring or paying any dividend to shareholders or any bonus to its policy holders, or of making any payment in service of any debentures, loans or advances on account, utilise directly or indirectly any portion of the Long Term Insurance Fund or of the funds of such other class of insurance business, except a surplus shown in the valuation balance sheet submitted to the Commission as part of the abstract referred to in section 48 as a result of an actuarial valuation of the assets and liabilities of the insurer: and such surplus shall not be increased by contributions out of any reserve fund or otherwise, unless such contributions have been brought in as revenue through the revenue account applicable to long term business on or before the date of the valuation aforesaid, except when the reserve fund is made up solely of transfers from similar surpluses disclosed by valuation in respect of which returns have been submitted to the Commission under section 49 of this Act.

45. Declaration of interim bonus.

Notwithstanding anything contained in this Act to the contrary, an insurer shall be at liberty to declare on the recommendation of an actuary made at the last preceding valuation, an interim bonus or bonuses to long term insurance business policy holders, whose policies mature for payment by reason of death or otherwise, during the inter-valuation of period.

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

Every insurer carrying on long term insurance business shall employ or retain on a permanent basis, an actuary.

PART V

ACCOUNTS, INSPECTION AND INVESTIGATION

47. Audit of accounts of an insurer.

(1) An insurer shall prepare and maintain its accounts in such form and manner as may be determined by the Commission.

[S 47(1) am by s 17 of Act 3 of 2011.]

(2) Every insurer shall have us annual accounts audited by an auditor selected from and out of a list of approved auditors that shall be issued by the Commission, and shall submit a copy of such audited accounts to the Commission within such period after the close of the financial year as the Commission may determine. The auditor shall state in his report whether the accounting records of the insurer have been maintained in the manner required by the Commission, so as to clearly indicate the true and fair view of the financial position of the insurer.

[S 47(2) am by s 17 of Act 3 of 2011.]

(3) The Commission may on receipt of the auditor’s report call upon the auditor to submit—

(a) information regarding the format and contents of the audited accounts; and

(b) any other additional information relating to the audit as the Commission may consider necessary.

48. Actuarial report and abstract.

(1) Every insurer shall, in respect of all long term insurance business transacted by the insurer, cause an investigation to be made by an actuary at the end of each financial year into the financial condition of such long term insurance business, including a valuation of its assets and liabilities in respect of that business, and shall cause an abstract to be made in such manner and within such period after the close of the financial year, as the Commission may determine. The actuary shall certify whether the reserves of the insurer are adequate to meet all liabilities current and contingent of its policy holders and determine the surplus, and shall recommend the quantum of bonus that may be paid to policy holders. The actuary shall also recommend the surplus that is available for transfer to the shareholders of the insurer.

[S 48(1) am by s 18 of Act 3 of 2011.]

(2) The provisions of .subsection (1) regarding the making of an abstract shall apply whenever at any other time, an investigation into the financial condition of the insurer is made with a view to the distribution of surplus or an investigation is made the results of which, are made public.

(3) A copy of an abstract made under subsection (1) shall be submitted to the Commission, and the Commission shall have power to call for any additional information and documents relating to the actuarial valuation.

(4) there shall be appended to every abstract required by subsection (1) or subsection (2), a certificate signed by the Director or Principal Officer of the insurer, the full and accurate particulars of every policy under which there is a liability either actual or contingent, have been furnished to the actuary for the purposes of the investigation.

(5) There shall be appended to every abstract required by subsection (1) or subsection (2) a statement of the long term insurance business subsisting at the date to which the accounts of the insurer are made up for the purposes of such attract.

(6) Where an investigation into the financial condition of an insurer is made at a date other than the last date of the year of account, the accounts for the period elapsing after the end of the preceding year of account, and the balance sheet as at the date at which investigation is made, shall be prepared and audited in the manner provided for in this Act.

49. Furnishing of reports.

Every insurer shall furnish to the Commission—

(a) a certified copy of the report relating to the business of the insurer submitted to the shareholders of the company, or the policy holders of the insurer, immediately after it is so submitted: and

(b) a quarterly return containing such information and during such period of time as may be determined by the Commission.

[S 49(b) am by s 19 of Act 3 of 2011.]

50. Furnishing copies of reinsurance treaties.

(1) every insurer shall from time to time furnish the Commission with certified copies of its reinsurance treaties (including treaties which are revised), contracts and arrangements relating to any class of insurance business transacted by such insurer in Sri Lanka:

Provided that certified copies of such reinsurance treaties, contracts and arrangements as are in force on the appointed dale, shall be furnished not later than three months after the appointed date.

(2) The Commission shall have the power to review all reinsurance treaties, contracts and arrangements furnished to it under subsection (1) for the purpose of determining whether such treaty, contrail or arrangement is in any way detrimental, to the interest of the insurer, the insured or to the development of the insurance industry or to the national interest. Where the Commission is of the view that the interests of the insurers and the public are not adequately safeguarded, the Commission shall have the power to recommend any amendments that it considers necessary for the development of the insurance industry.

(3) Where any recommendations are made for amendments, it shall be the duty of the insurer to make the necessary amendments to such treaty, contract or arrangement as the case may be, when such treaty, contract or arrangement comes up for renewal.

51. Powers of Commission regarding returns.

(1) If it appears to the Commission that any return furnished to it under the provisions of this Act is inaccurate or defective in any respect, it may—

(a) require from the insurer such further information, certified if the Commission so directs by such auditor or actuary as it may consider necessary, to correct or supplement such return;

(b) call upon the insurer to submit for its examination at the registered office or the principal place of business of the insurer, any book of account, register, or other document or to supply any statement which it may specify in a notice served on the insurer for the purpose;

(c) examine any officer of the insurer on oath or affirmation in relation to the return; or

(d) decline, to accept such return unless such further information as may be required by the Commission is furnished before the expiry of one month from the date on which the requisition asking for such further information was delivered to the insurer, or of such further time as the Commission may specify in the requisition.

(2) A District Court may, on the application of an insurer and after hearing the Commission, direct the acceptance of any return which the Commission has declined to accept, if the insurer satisfies the Court that the action of the Commission was in the circumstances Unreasonable;

Provided that, no application under this subsection shall be entertained by the District Court, unless it is made before the expiration of two months after the date on which the Commission made the order or declined to accept the return.

(3) The decision of the District Court in any application under this section shall be final and shall not be subject to any appeal.

(4) An application to the District Court under this section shall be made by petition in the way of summary procedure and the provisions of the Civil Procedure Code relating to such procedure shall apply to and in regard to the same.

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

(1) If it appears to the Commission that an investigation or valuation made under section 48 does not properly indicate the condition of the affairs of the insurer by reason of what appears to it to be a faulty basis adopted in the valuation, the Commission may after giving the insurer reasonable notice and an opportunity of being heard, cause an investigation and valuation as at such date as it may specify, to be made at the expense of the insurer, by an actuary appointed by the insurer for that purpose and approved by the Commission, and the insurer shall place at the disposal of such actuary, all the material required by such actuary for the purposes of the investigation and valuation within such period, not being less than three months, as the Commission may specify.

(2) The provisions of subsections (1) and (4) of section 48 relating to the making of abstracts shall apply in relation to any investigation and valuation to be made under this, section:

Provided that, the abstract prepared as the result of such investigation and valuation shall be furnished on or before such date as the Commission may specify.

53. Power of the Commission to increase deposit.

Where upon examination of the returns and reinsurance treaties, contracts and arrangements furnished by any insurer, it appears to the Commission that the deposit made by the insurer under section 21 or that the amount of the assets in respect of insurance business of the insurer is inordinately low in relation to the volume of insurance business transacted by the insurer, the Commission may after giving the insurer an opportunity of being heard, order the insurer to make an additional deposit under the provisions of subsections (2), (3), (4) and (5) of section 21 and the provisions of section 22 and section 23 shall apply to such additional deposit:

Provided however, where the insurer establishes to the satisfaction of the Commission that the assets of such insurer in Sri Lanka are adequate to meet the outstanding claims and unexpired risks in respect of the insurance business transacted in Sri Lanka by such insurer, the amount of such additional deposit, together with any deposit made under section 21 shall not exceed the solvency margin as determined by the Commission under section 26.

54. Power of the Commission to order investigation.

(1) Where the Commission has reason to believe—

(a) that the interests of the policy holders of an insurer are in danger; or

(b) that any insurer is unable to meet its obligations or has made default in complying with any of the provisions of this Act,

the Commission may after giving the insurer reasonable notice and an opportunity of being heard, order an investigation of the affairs of the insurer to be made on behalf of the Commission by an auditor or an actuary or by both an auditor and an actuary appointed simultaneously or first an auditor only or an actuary only and afterwards by an actuary or auditor, or may itself make such investigation:

Provided that, an auditor or actuary appointed for the purpose by the Commission shall not be an auditor or actuary in the employment of the insurer.

(2) The cost and expenses of any investigation under subsection (1) shall be paid for by the insurer.

(3) In Carrying Out an investigation under this section, the Commission may by notice in writing require—

(a) the insurer, or any person having the custody of books of accounts, records or other documents on behalf of the insurer;

(b) any person who is or has at any time been or acted as a Director, Actuary, Auditor, an officer or servant or agent of the insurer; or

(c) any past or present member or policy holder of the insurer to produce for its inspection and allow it to copy,

The whole or any part of any books, accounts, records or other documents of the insurer, including documents evidencing the insurer’s title to assets held for the purposes of such business:

Provided that, a requirement under this subsection shall extend only to documents relating to business earned on by the insurer evidencing the insurer’s title to assets held for the purposes of any such business.

(4) In making an investigation under this section, the Commission may require any such individual as is specified in subsection (3) to attend before it and be examined on oath with respect to the insurer’s business, and for the purpose of this section, it may administer oaths.

(5) Any person who refuses or fails when required to do so under subsection (3) or (4) to produce any document in his or her custody or to attend for or submit for examination by the Commission or any person appointed by it, or to answer any question put to him or her on such examination, shall be guilty of an offence and shall on conviction after summary trial before a Magistrate be liable to a fine not less than fifty thousand rupees,

(6) The results of any investigation made under this section shall be recorded in writing by the auditor or actuary appointed, as the case may be and copies of the record shall be supplied to the Commission and to the insurer.

55. Powers of investigator.

When any investigation in respect of an insurer is made under section 54, the provision of section 173 of the Companies Act No. 7 of 2007, shall apply for the purposes of such investigation, as they apply to an investigation made in pursuance of that section of that Act, and all expenses of and incidental to such investigation shall be defrayed by the insurer and shall have priority over other debts due from the insurer.

[S 55 am by s 20 of Act 3 of 2011.]

56. Further returns and abstracts.

Every insurer shall furnish to the Commission such further returns or abstracts as may be determined by the Commission and within such period as the Commission may determine.

[S 56 am by s 21 of Act 3 of 2011.]

57. Power of Commission to issue directions.

(1) Where the Commission is satisfied that the affairs of any insurer are being conducted in a manner likely to be detrimental to the public or national interest or the interest of the policy holders or prejudicial to the interests of the insurer, the Commission may issue such directions to the insurer as it may consider necessary, and in particular may require the insurer—

(a) to take such action or recruit such management personnel as may be necessary to enable it to conduct its business in accordance with sound insurance principles;

(b) to remove any of its Directors or any person whom the Commission considers unfit to be associated with it;

(c) to take action as to the disposition or recovery of any of its assets;

(d) to take steps for the recover by the insurer of sums appearing to the Commission to have been illegally or improperly paid; and

(e) to make such arrangements with respect to reinsurance as the Commission considers necessary.

(2) The Commission may upon representation; being made to it or on its own motion, modify or cancel any directions issued under subsection (i) and in so doing, may impose such conditions as it thinks fit.

(3) Any insurer who fails to comply with any direction issued to it under subsection (1) shall be guilty of an offence under this Act, and shall be liable on conviction after summary trial before a Magistrate to a fine not less than Fifty thousand rupees.

(4) Where upon a conviction under subsection (3) an insurer continues to fail to comply with a direction issued, the Commission shall have the power to suspend the registration granted for a period to be specified by the Commission, and the provisions of subsection (2) of section 18 shall apply in respect of such insurer, during that period of suspension.

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