INSURANCE INDUSTRY: SUBSIDIARY LEGISLATION

INDEX TO SUBSIDIARY LEGISLATION

Exemption of Insurance Companies Order

Insurance (Exemption) Regulations

Insurance Industry Regulations

INSURANCE (EXEMPTION) REGULATIONS

 

(section 72)

 

(8th April, 1988)

 

ARRANGEMENT OF REGULATIONS

 

REGULATION

 

 

 

   1.   Citation

 

   2.   Exemption of Guaranteed Loans Insurance Fund

 

 

S.I. 42, 1988.

 

1.   Citation

   These Regulations may be cited as the Insurance (Exemption) Regulations.

 

2.   Exemption of Guaranteed Loans Insurance Fund

   The Guaranteed Loans Insurance Fund established by the Guaranteed Loans Insurance Fund Order, 1988, is hereby exempted from all the provisions of the Insurance Act.

EXEMPTION OF INSURANCE COMPANIES ORDER

 

(section 110)

 

(15th June, 2001)

 

ARRANGEMENT OF PARAGRAPHS

 

   PARAGRAPH

 

 

 

   1.   Citation

 

   2.   Exemption of insurance companies

 

 

S.I. 24, 2001.

 

1.   Citation

   This Order may be cited as the Exemption of Insurance Companies Order.

 

2.   Exemption of insurance companies

   Insurance companies are hereby exempted from the provisions of section 77(1)(ii) of the Act.

INSURANCE INDUSTRY REGULATIONS

 

(section 131)

 

(18th December, 1992)

 

ARRANGEMENT OF REGULATIONS

 

   REGULATION

 

 

 

PART I
Preliminary

 

   1.   Citation

 

   2.   Interpretation

 

 

 

PART II
Administration

 

   3.   Insurance Advisory Board

 

 

 

PART III
Capital Requirements of Insurers

 

   4.   Insurer's paid-up capital

 

   5.   Insurer's margin of solvency

 

   6.   Calculation of assets and liabilities of general insurer

 

   7.   Calculation of assets and liabilities of long term insurer

 

 

 

PART IV
Licensing of Insurers

 

   8.   Application for licensing by an insurer

 

   9.   Licensing certificate of an insurer

 

 

 

PART V
Insurer's Accounts and Returns

 

   10.   Insurer's accounts

 

   11.   Annual returns of insurers

 

   12.   Code of practice for insurers

 

 

 

PART VI
Qualification of Agents and Licensing of Brokers

 

   13.   Minimum qualifications for agents

 

   14.   Application for licensing of a broker

 

   15.   Licensing certificate of a broker

 

 

 

PART VII
Broker's Accounts and Returns

 

   16.   Broker's capital requirements

 

   17.   Broker's minimum indemnity

 

   18.   Remittance of premiums by broker

 

   19.   Broker's accounts

 

   20.   Annual returns of broker

 

   21.   Broker's code of conduct

 

 

 

PART VIII
Miscellaneous Provisions

 

   22.   Actuary's abstract on investigation

 

   23.   Exemptions

 

   24.   Fees

 

   25.   Insurance to be placed with licensed insurers

 

 

 

      First Schedule - Forms

 

      Second Schedule - Code of Practice for Insurers

 

      Third Schedule - Code of Conduct for Insurance Brokers

 

      Fourth Schedule - Fees

 

      Fifth Schedule - Insurers, Brokers, or Agents Exempted from the Provisions of the Insurance Industry Act

 

 

S.I. 124, 1992,
S.I. 55, 2000,
Act 2, 2007.

PART I
Preliminary (regs 1-2)

 

1.   Citation

   These Regulations may be cited as the Insurance Industry Regulations.

 

2.   Interpretation

   In these Regulations unless the context otherwise requires-

   "accounts" in relation to an insurer or a broker, means the accounts and information prepared in accordance with the Companies Act;

   "corporate insurance agent" means a company registered under the Companies Act that conducts business as an insurance agent, whose principal office is in Botswana, and whose principal officer resides in Botswana;

   "gross premium" means the total policy premium receivable;

   "individual insurance agent" means any individual so licensed to represent an insurer, a corporate insurance agent or an insurance broker, not being an employee thereof;

   "net liabilities" means gross claims payable to an insured less attributable gross reinsurance recoveries receivable;

   "net premium" means gross premium receivable less gross reinsurance premium payable;

   "payable" means both paid and payable;

   "preference shares" means shares which are given preference over ordinary shares;

   "receivable" means both received and receivable;

   "resident in Botswana" has the same meaning assigned to it in the Income Tax Act;

   "sub-agent" means an insurance agent who is licensed as an agent of a corporate insurance agent.

PART II
Administration (reg 3)

 

3.   Insurance Advisory Board

   There is hereby established an Insurance Advisory Board comprised of-

 

   (a)   one member nominated by each insurer licensed in Botswana;

 

   (b)   three members selected by insurance brokers licensed in Botswana; and

 

   (c)   one or more persons nominated by the Minister as being a person or persons possessing experience in an area of commerce relevant to a particular task to be performed by the Registrar.

PART III
Capital Requirements of Insurers (regs 4-7)

 

4.   Insurer's paid-up capital

   (1) The amount of paid-up capital to be maintained by an insurer transacting classes of general business or of long term business, shall be not less than two million Pula (P2,000,000).

   (2) An insurer transacting insurance business prior to the coming into operation of this Act who does not have the required paid-up capital on the 1st July, 1990, shall be granted a grace period of three (3) years therefrom within which to comply with the requirements of subregulation (1):

   Provided that such an insurer shall not, until the provisions of subregulation (1) have been complied with, declare any dividend to its shareholders.

   (3) The term "paid-up capital" shall not, in its application to this regulation, include debentures, preference shares, non-voting shares and such paid-up capital subscribed, directly or indirectly in itself, by the insurer.

 

5.   Insurer's margin of solvency

   (1) The margin of solvency prescribed for the purposes of section 10 of the Act shall be as follows-

 

   (a)   the assets of an insurer transacting classes of general business shall exceed all the liabilities of the company by one million Pula (P1,000,000), or twenty percent (20%) of the net premium income of the insurer, whichever is the greater;

 

   (b)   the assets of an insurer transacting classes of long term business shall exceed the liabilities of the insurer, including any liability attributable to any life insurance fund established by the said insurer.

   (2) For the purposes of this regulation the net premium income in any period in question of an insurer transacting classes of general business shall be the gross premium income of the said insurer less the gross premium paid by such insurer for reinsurance of the business to which the gross premium is attributable at the time in question.

   (3) Where any Director or the management of any Botswana insurer transacting classes of general business believes that the solvency margin of their company may have fallen significantly, or in any case is less than twenty five percent (25%), as calculated under subregulation (1)(a), for whatever reason, they shall advise the Registrar and all Directors of the insurer shall be so informed in writing immediately.

 

 

Sole ownership/
Individual 

Sole ownership/
Individual 

Sole ownership/
Individual 

Sole ownership/
Individual 

Sole ownership/
Individual 

Sole ownership/
Individual 

 

 

 

 

 

 

 

6.   Calculation of assets and liabilities of general insurer

   (1) In calculating the value of its assets, whether owned directly in or through a subsidiary or associate, an insurer transacting general business shall-

 

   (a)   ascribe such monetary value to those assets as represents the net sale value of such assets after deducting all reasonable anticipated costs incurred in the sale or realization of such assets;

 

   (b)   where the asset is land in Botswana with structures and buildings thereon, have such asset valued by an independent property valuer resident in Botswana and approved by the Registrar;

 

   (c)   for the purpose of solvency calculation take into account only the total of the admissible assets as defined in Form No. 9 in the First Schedule hereto.

   (2) In calculating the extent of its future liabilities under all classes of general business such insurer shall-

 

   (a)   incorporate a provision for liabilities net of anticipated reinsurance recoveries of policies already entered into but not yet time expired; such provision shall be made using the standard twenty fourths method of calculating such liabilities, or an internationally recognised formula or basis approved by the Registrar; in the calculation of this liability the gross premiums may be reduced only by the gross commissions paid to intermediaries;

 

   (b)   incorporate a provision for liabilities net of anticipated reinsurance recoveries of claims advised although all or some part of the payment has yet to be made; such provision shall be made on appraisal by experienced staff of all outstanding claim files in determining a realistic monetary sum of the insurer's anticipated potential liabilities and anticipated recoveries other than from the sale of salvaged goods already in the possession of the insurer which shall not be taken into account in calculating the liabilities of the insurer;

 

   (c)   incorporate a provision for liabilities net of anticipated reinsurance recoveries of policies under which liability has arisen in the insurer the extent of which has yet to be ascertained by the insurer; such provision shall be made using a formula or basis approved by the Registrar; but such provision shall not be less than 10% of total incurred claims in the previous financial year less actual and anticipated reinsurance recoveries in respect of such claims;

 

   (d)   where the liability of an insurer is denominated or arises in a foreign currency, incorporate a provision for possible adverse currency movements as the insurer shall deem appropriate;

 

   (e)   incorporate a provision for anticipated administration costs of the insurer in the handling and settlement of claims included in paragraphs (b) and (c) above;

 

   (f)   in the calculation of solvency take into account such other liabilities as are set out in Form No. 8 in the First Schedule hereto.

 

7.   Calculation of assets and liabilities of long term insurer

   (1) In calculating the value of its assets, whether owned directly in or through a subsidiary or associate, an insurer transacting long term business shall-

 

   (a)   include all assets and liabilities of statutory life insurance funds;

 

   (b)   ascribe such monetary value to those assets as represents the net sale value of such assets after deducting all reasonable anticipated costs incurred in the sale or realization of such assets;

 

   (c)   where the asset is land in Botswana with structures and buildings thereon, have such asset valued by an independent property valuer resident in Botswana and approved by the Registrar; such valuation shall be undertaken not less frequently than every three years;

 

   (d)   where the assets are shares held in a subsidiary company whose assets are made up of land and/or buildings, or an interest in these, value such shares at the net sale value of such property as determined under paragraphs (b) and (c) above, less the liabilities of the company including any taxation liabilities pursuant upon the sale of such assets;

 

   (e)   where the assets are shares held in a subsidiary company other than as described in paragraph (d) above, or of any other shares held by the insurer, value such shares at the open market sale price less all reasonable anticipated costs incurred in the sale of such shares;

 

   (f)   for the purpose of solvency calculation take into account only the total of admissible assets as defined in Form No. 9 in the First Schedule hereto.

   (2) In calculating the extent of its future liabilities under all classes of long term business such insurer shall-

 

   (a)   utilize the valuation of the liabilities for each of the statutory life insurance funds, established under section 70 of the Act, as determined by the actuary at an investigation carried out in accordance with section 69 of the Act; and

 

   (b)   adjust such liabilities as have been incurred since the last actuarial investigation only in accordance with such formula or basis as the actuary shall approve;

 

   (c)   in the calculation of solvency, take into account such other liabilities as are set out in Form 8 in the First Schedule hereto.

PART IV
Licensing of Insurers (regs 8-9)

 

8.   Application for a licence by an insurer

   (1) An application for a licence by an insurer shall be in Form No. 1 in the First Schedule hereto and shall be accompanied by the documents referred to in the said form.

   (2) An application for renewal of licence by an insurer shall be in Form No. 11 in the First Schedule hereto and shall be accompanied by the documents referred to in the said Form.

 

9.   Licensing certificate of an insurer

   A licensing certificate issued to an insurer shall be in Form No 2 in the First Schedule hereto.

PART V
Insurer's Accounts and Returns (regs 10-12)

 

10.   Insurer's accounts

   (1) Under the provisions of section 27(2) of the Act the accounts of an insurer shall be extended to include the following additional information-

 

   (a)   the margin of solvency as shown on Form No. 8 in the First Schedule hereto as-

 

      (i)   the Pula amount by which the total admissible assets exceed the total net liabilities;

 

      (ii)   the Pula amount by which the total admissible assets exceed the sum of the total net liabilities and the margin of solvency as set out in regulation 5(1);

 

      (iii)   the percentages that the Pula amounts in (i) and (ii) above bear to the total admissible assets;

 

   (b)   the number of shares of the insurer held by each director and the number of shares bought and sold by each director during the accounting period in question;

 

   (c)   a statement on the basis, if any, of the re-valuation and/or depreciation of land and buildings owned by it or by any subsidiary and associate companies; such statement shall state whether real property has been re-valued or is included in the accounts at purchase cost value, and if re-valued, the basis of such re-valuation and the date on which it was last revalued;

 

   (d)   where the insurer owns in excess of twenty per cent (20%) of the equity stock in any other company the company name, country of incorporation or licence, principal business activity and percentage stock holding of each such company shall be stated.

   (2) The accounts of an insurer shall be extended to include a declaration that, where any transfer of assets has been made during the period in question between an insurer transacting classes of long term business and a statutory life insurance fund maintained by it as permitted under section 71(4) of the Act, each such transfer had been examined by the auditor and that the transfer, in the opinion of the auditor was, or was not, executed at fair market value.

 

11.   Annual return of insurers

   Annual returns to be furnished by every insurer to the Registrar in accordance with section 31 of the Act shall in the case of-

 

   (a)   a balance sheet and profit and loss account, be prepared by the company and audited by an auditor approved by the Registrar as required by section 27 of the Act and shall be in such form as is required by recognised international accounting standards as amended by the Act, these regulations and any other relevant law of Botswana;

 

   (b)   an audited income and expenditure statement for each category, or group of categories, of insurance underwritten by an insurer transacting long term insurance business, be in Form No. 6, and of an insurer transacting general insurance business, be in Form No. 7 of the First Schedule hereto;

 

   (c)   an audited statement of solvency, be in Form No. 8 of the First Schedule hereto; and

 

   (d)   an audited statement of all admissible, and all inadmissible assets, be in Form No. 9 of the First Schedule hereto.

 

12.   Code of practice for insurers

   The code of practice set out in the Second Schedule hereto shall be a guide for insurers in the conduct of their business.

PART VI
Qualification of Agents and Licensing of Brokers (regs 13-15)

 

13.   Minimum qualifications for agents

   (1) A person, not being a company, shall not enter into or maintain an insurance agency agreement with an insurer or a broker unless he-

 

   (a)   is a resident of Botswana;

 

   (b)   has attained the age of 21 years;

 

   (c)   has not been convicted in any court in any country of an offence involving dishonesty or any other crime of a serious nature; and

 

   (d)   has successfully completed the examinations leading to a certificate of proficiency in the relevant area of work from a recognised institution, or the equivalent as may be determined by the Registrar;

 

   (e)   has not been adjudged insolvent or bankrupt, unless he has subsequently been rehabilitated or discharged.

   (2) A person, being a limited liability company, shall not enter into or maintain an insurance agency agreement with an insurer or a broker unless he-

 

   (a)   is a company incorporated under the Companies Act;

 

   (b)   is deemed by the Registrar to be resident in Botswana; and

 

   (c)   employs a principal officer who has successfully completed the examinations leading to a certificate of proficiency in the relevant area of work from a recognised institution, or the equivalent as may be determined by the Registrar;

   (3) Every sub-agent of any corporate insurance agent shall comply with subregulation (1) of this regulation.

 

14.   Application for licensing of a broker

   (1) An application for a licence by a broker shall be in Form No. 3 in the First Schedule hereto and shall be accompanied by the documents referred to in the said form.

   (2) An application for renewal of licence by a broker shall be in Form No. 12 in the First Schedule hereto and shall be accompanied by the documents referred to in the said Form.

 

15.   Licensing certificate of a broker

   A licensing certificate issued to a broker shall be in Form No. 4 in the First Schedule hereto.

PART VII
Broker's Accounts and Returns (regs 16-21)

 

16.   Broker's capital requirements

   (1) The Registrar may require a broker to deposit, either in money or in stipulated securities, security in a value not exceeding twenty five thousand Pula (P25,000) in a commercial bank of his choice, to be withdrawn only with the written authority of the Registrar.

   (2) The minimum paid-up capital for a broker, if it is a limited liability company, shall be thirty thousand Pula (P30,000).

 

17.   Broker's minimum indemnity

   The Registrar may require a broker to provide a minimum indemnity in a sum not less than five hundred thousand Pula (P500,000) or more than one hundred million Pula (P100,000,000) in a manner approved by the Registrar.

 

18.   Remittance of premiums by broker

   A broker shall remit to the insurer all premiums due to the insurer within sixty (60) days of the last day of the calendar month in which the cover under the policy incepted or the date on which the policy is renewable or in which an endorsement was made thereon.

 

19.   Broker's accounts

   (1) In consequence of section 58(2) of the Act the accounts of a broker shall be extended to include the following additional information-

 

   (a)   the number of commission-only agents employed by the broker;

 

   (b)   the sums paid and incurred by the broker in respect of agents and staff in consequence of section 55(1) of the Act;

 

   (c)   the total of sums paid or incurred by the broker in respect of premiums due to a Botswana insurer for which no, or inadequate, recompense has been received from clients in consequence of section 57(1) of the Act;

 

   (d)   the number of occasions that the broker has submitted explanations to the Registrar, as required by section 64(1) of the Act, in respect of practices discouraged by the brokers code of conduct;

 

   (e)   the total premiums remitted, without deducting commission earned, in respect of insurances placed overseas (other than reinsurances placed on behalf of a Botswana insurer) under the provisions of section 105 of the Act.

   (2) The accounts of a broker shall be extended to include the auditor's opinion on whether-

 

   (a)   the relevant bank deposits and capital requirements as required under section 54 of the Act have been complied with by the broker;

 

   (b)   the trust accounts maintained under section 57 of the Act are correctly operated;

 

   (c)   the insurances required by section 55 of the Act are so maintained and in force.

 

20.   Annual returns of broker

   Annual returns to be furnished by every broker to the Registrar in accordance with section 63 of the Act shall in the case of-

 

   (a)   a balance sheet and profit and loss account, be prepared by the company and audited by an auditor approved by the Registrar as required by section 58 of the Act and shall be in such form as is required by recognised international accounting standards as amended by the Act, these Regulations and any other relevant law of Botswana;

 

   (b)   an audited insurance premium income and expenditure statement, be in Form No. 5 in the First Schedule hereto.

 

21.   Broker's code of conduct

   The code of conduct set out in the Third Schedule hereto shall be a guide for insurance brokers in the conduct of their business.

PART VIII
Miscellaneous Provisions (regs 22-25)

 

22.   Actuary's abstract on investigation

   An abstract submitted by an actuary on completion of an investigation made under section 69 of the Act shall be in Form No. 10 in the First Schedule hereto.

 

23.   Exemptions

   (1) The Act shall not apply to the Motor Vehicle Accident Fund established by the Motor Vehicle Accident Fund Act.

   (2) The Act shall not apply to any insurance fund created by the Government of Botswana as a Special Fund under the Finance and Audit Act or to the Government of Botswana in respect of the collection and payment of insurance premiums, governed by Part VIII of the Act.

   (3) Section 122 of the Act shall not apply in respect of documents submitted to the Registrar under Section 63 of the Act other than the audited balance sheet and additional declarations submitted in terms of regulation 19(2).

   (4) The guarantee that the Registrar may accept in accordance with the proviso of section 57(3) of the Act shall in respect of the premium receipts less commissions received by the broker for the previous financial year be-

 

   (a)   for such sums as exceed five million Pula (P5,000,000) but do not exceed ten million Pula (10,000,000), twenty five per cent (25%) of premium receipts less commissions received by the broker for the previous financial year;

 

   (b)   for such sums as exceed ten million Pula (P10,000,000), ten per cent (10%) of premium receipts less commissions received by the broker for the previous financial year.

   (5) In accordance with section 110 of the Act, any insurer, broker, or agent listed in the Fifth Schedule is hereby exempted from the provisions of the Act.

 

24.   Fees

   Fees and licence fees of insurers and brokers shall be the sums set out in the Fourth Schedule hereto.

 

25.   Insurance to be placed with licensed insurers

   Subject to section 104(2) of the Act, all classes of insurance effected by Botswana residents or Botswana resident companies shall be placed with Botswana licensed insurers.

FIRST SCHEDULE
FORMS

Form No. 1
APPLICATION FOR LICENSING AS AN INSURER

 

BY THE ............................................... LIMITED

 

 

Address of Insurer- 

 

................................................................. 

 

................................................................. 

 

................................................................. 

 

Date ......................................... 20............ 

To-
The Registrar of Insurance,
Ministry of Finance and Development Planning,
Private Bag 008,
Gaborone.
Botswana. 

Dear Sir, 

 

INSURANCE INDUSTRY ACT
(Cap 46:01) 

1.   I/We apply for the licensing of the 1 ..................................................................................
.......................................................... under section 13 as an insurer resident in Botswana. 

2.   The registered office of the Company will be at 2 ..............................................................
.................................................................................................................................... 

3.   The head office of the Company will be at 3 ......................................................................
.................................................................................................................................... 

4.   (1) The person managing the business of the Company will be 4 .......................................


   ....................................................................................................................................


   (2) of Address ..............................................................................................................


   ................................................................................................................................... 

5.   (1) The Principal Officer of the Company is 5 ...................................................................


   ....................................................................................................................................


   (2) of Address 3 ............................................................................................................ 

6.   (1) The auditors of the Company are 6 ............................................................................


   ....................................................................................................................................


   (2) of Address 7 ............................................................................................................ 

7.   (1) The actuary to the Company is 8 ...............................................................................


   (2) of Address 7 ............................................................................................................ 

8.   (1) The amount of authorised share capital of the Company is ................................... Pula 

9.   The amount of issued and paid-up share capital (excluding preference shares and non voting shares) of the Company is ................................................................................. Pula 9 

10.   The amount of issued and paid-up preference shares and non voting shares of the Company is ........................................................................................................................ Pula 

11.   The month and day of the financial year end is ........................................................... 10 

12.   The following information and documentation should be attached to this application. Failure to provide all the required information will result in the return of the application by the Registrar. 

Statements showing- 

   (a)   The individual classes of insurance business under Schedules 1 and 2 of the Act which the insurer wishes to transact. 11 

   (b)   The monetary "own account" and reinsurance treaty limits which the insurer can underwrite under each of the classes of insurance business listed in (a) above. 12 

   (c)   Details of shareholdings in excess of 5 per cent of the total paid up share capital of the insurer. 

   (d)   A statement of any links with a Botswana licensed insurance broker as defined by section 8

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