INTERNATIONAL INSURANCE: SUBSIDIARY LEGISLATION

INDEX TO SUBSIDIARY LEGISLATION

International Insurance Regulations

INTERNATIONAL INSURANCE REGULATIONS

 

(section 32)

 

(2nd March, 2007)

 

ARRANGEMENT OF REGULATIONS

 

REGULATION

 

 

 

   1.   Citation

 

   2.   Interpretation

 

   3.   Application for a licence to carry on international insurance business

 

   4.   Application fees

 

   5.   Requirements for licensed firms

 

   6.   New management officers to be appointed on approval of regulatory authority

 

   7.   Solvency margins for licensed insurers

 

   8.   Issue of bearer shares and issue of shares to discretionary trust prohibited

 

   9.   Prohibition against issue of shares without regulatory authority approval

 

   10.   Financial returns

 

   11.   Submission of quarterly statement

 

   12.   Maintenance of records

 

   13.   Regulatory authority may commission auditor

 

 

 

      First Schedule

 

      Second Schedule

 

      Third Schedule

 

      Fourth Schedule

 

      Fifth Schedule

 

      Sixth Schedule

 

      Seventh Schedule

 

      Eighth Schedule

 

 

Act 2, 2007,
S.I. 6, 2007.

 

1.   Citation

   These Regulations may be cited as the International Insurance Regulations.

 

2.   Interpretation

   (1) In these Regulations, unless the context otherwise requires–

   "actuary" means a Fellow who is in good standing, of the Institute of Actuaries, or of the Faculty of Actuaries or of the Society of Actuaries, or of any other international actuarial associations recognised by the regulatory authority;

   "bearer shares" means shares which are owned by and give all their rights to the holder (the "bearer"), but the ownership of the shares is not recorded on the company's books;

   "discretionary trust" means a trust that allows the trustee the discretion to make or not make distributions of benefits to the beneficiary, and to make unequal distributions among all beneficiaries;

   "dollar" means a unit of the currency of the United States of America and the sign "$" has the same meaning;

   "licensed firm" means an international insurance firm licensed in terms of regulation 3 (4) to carry on international insurance business;

   "licensing certificate" means a licensing certificate granted under section10 of the Act to an applicant international insurance firm to operate as an international insurance firm in Botswana;

   "Pula" means a unit of the currency of the Republic of Botswana and the sign "P" has the same meaning;

   (2) In these Regulations, any reference to category or a numbered class of insurance business shall be construed by reference to the following table –

 

TABLE OF CLASSES OF INSURANCE BUSINESS

 

Category  

Class number  

Description  

Long-term business 

Linked long-term. 

 

Long-term, but excluding contracts within classes 1and 9. 

General business 

Marine, aviation and transport. 

 

Property, but excluding contracts within classes 3 or 5. 

 

Motor. 

 

Pecuniary loss. 

 

Liability, other than contracts within classes 3 or 5. 

 

Credit and suretyship. 

 

Personal miscellaneous, including accident, health and disability. 

Reinsurance 

10 

Reinsurance of contracts within classes 1 and 2. 

 

11 

Reinsurance of contracts within classes 3 to 9 

Restricted (Captive) 

12 

Contracts which-


   (a)   are within classes 1 to 11 and are with -


      (i)   related companies; or


      (ii)   members of a common industry or association; or


   (b)   are within classes 10 or 11 and are with bodies corporate where the original insured is a body corporate which is a related company.

 

3.   Application for a licence to carry on international insurance business

   (1) An applicant international insurance firm seeking licensing under section 9 of the Act may apply to be licensed to carry on international insurance business as-

 

   (a)   an international insurer;

 

   (b)   an insurance manager; or

 

   (c)   a principal insurance representative.

   (2) An applicant international insurance firm shall at the time of application furnish to the regulatory authority, in addition to any specific document, information and evidence required under section 10 of the Act, the following-

 

   (a)   with respect to-

 

      (i)   an international insurer, an application in Form 1 as set out in the First Schedule,

 

      (ii)   an insurance manager, an application in Form 2 as set out in the First Schedule, or

 

      (iii)   a principal insurance representative, an application in Form 3 as set out in the First Schedule;

 

   (b)   adequate background information on the beneficial owners, shareholders, chairperson, directors, chief executive officer, controller, secretary or manager, or on any other person holding an equivalent position thereof; and such information, as regards each holder of a position, shall include-

 

      (i)   the details of the role performed in the applicant's operations,

 

      (ii)   the details of probity, competence and management skills, and

 

      (iii)   a duly sworn biographical affidavit as set out in the Second Schedule;

 

   (c)   a business plan, which shall contain a three year projection (with effect from the date of licensing) based on the annual returns as set out in regulation 10 and shall, where appropriate, state details of-

 

      (i)   the principal assumptions on which the business plan has been based;

 

      (ii)   the type of international insurance business to be undertaken and the categories thereof; and

 

      (iii)   the principal sources of business; and

 

   (d)   if the applicant is seeking licensing as an international insurer -

 

      (i)   the projected risk exposure and asset base at the end of each year in the three year period following registration;

 

      (ii)   the anticipated premium income from each category of international insurance business expected to be written;

 

      (iii)   the overall assessment of the risk factors with, if appropriate, an analysis of proposed reinsurances; and

 

      (iv)   an assessment of the expected ratio of claims to premiums for each category of international insurance business and a statement of the rationale for the ratio applied.

   (3) Where the applicant international insurance firm meets the requirements of the Act and these Regulations, the regulatory authority may grant it a licensing certificate, in the form of an annual licence as set out in the Third Schedule, for a period not exceeding 12 months, subject to renewal.

   (4) A licensed firm shall obtain an annual licence for operation not later than the 31st January in every year.

 

4.   Application fees

   (1) An application for licensing to carry on each of the international insurance businesses referred to in regulation 3 (1) shall be accompanied by an application fee in the amount applicable to the particular business, as set out in the Fourth Schedule.

   (2) An application for the annual licence referred to in regulation 3(4) shall be accompanied by an annual licence fee in the amount applicable to the particular business, as set out in the Fourth Schedule.

   (3) The annual licence fee applicable in the first year of licensing shall be pro-rated from the date of licensing to the end of the calendar year.

 

5.   Requirements for licensed firms

   (1) A licensed firm shall display in a conspicuous position at each of the offices of such firm in Botswana a valid licensing certificate, or a copy thereof, issued by the regulatory authority.

   (2) A licensed firm shall not carry on any activities in Botswana or elsewhere, otherwise than in connection with or for the purposes of its licensed insurance business.

   (3) A licensed firm shall, at all times when licensed, produce evidence of its ability to effect and maintain in force-

 

   (a)   professional indemnity insurance cover for a minimum of one hundred thousand United States dollars (US $100,000); and

 

   (b)   a maximum deductible of ten thousand United States dollars (US $10,000) with an insurer acceptable to the Regulatory authority.

 

6.   New management officer to be appointed on approval of regulatory authority

   A licensed firm shall, before confirming any new appointment to the posts of chairperson, chief executive officer, controller, secretary or manager, or any post equivalent thereto, apply to the regulatory authority for approval of such appointment; and such application shall be accompanied by-

 

   (a)   particulars of the appointee describing his or her probity, competence and management skills; and

 

   (b)   a duly sworn biographical affidavit by the appointee containing the information set out in the Second Schedule.

 

7.   Solvency margins for licensed international insurers

   (1) The minimum amount by which the total value of a licensed international insurer's admissible assets must at any time exceed the total amount of its liabilities shall be as set out in Part I of the Fifth Schedule.

   (2) The extent to which particular assets may be taken into account shall be as set out in Part II of the Fifth Schedule.

   (3) The calculation of a licensed insurer's solvency margin shall be in the manner set out in Part III of the Fifth Schedule.

 

8.   Issue of bearer shares and issue of shares to discretionary trust prohibited

   (1) No licensed firm shall, at any time, issue bearer shares nor shall it at any time be authorised to do so by its Memorandum or Articles of Association or other instrument defining its constitution.

   (2) No company which is, or shall become, directly or indirectly the registered or beneficial owner of any share in any licensed firm shall have issued or shall issue at any time, or have power to issue, any bearer shares.

   (3) No shares in a licensed international insurer or any interest in any shares shall be transferred to or issued to the trustees of a discretionary trust.

 

9.   Prohibition against issue of shares without regulatory authority approval

   (1) No shares in a licensed firm shall be issued and no issued shares shall be transferred, changed or disposed of in any manner without the prior written approval of the regulatory authority.

   (2) Without prejudice to the foregoing, any licensed firm proposing to make any change in the-

 

   (a)   shareholdings in its firm;

 

   (b)   members of its firm;

 

   (c)   persons who are beneficial but not registered owners of the shares in its firm; or

 

   (d)   nature of business being written,

shall give notice, in writing, to the Regulatory Authority, within 60 days of such change, and include in such notice details of the proposed new shareholdings, members, persons, or businesses, as the case may be.

 

10.   Financial returns

   In accordance with section 10(3)(i) of the Act, every licensed firm shall, within four months of the end of its financial year, submit to the regulatory authority the following documents in relation to its previous financial year-

 

   (a)   evidence of payment of the annual licence fees set out in the Fourth Schedule;

 

   (b)   a statement signed by the regulatory authority's principal operating officer confirming that all changes to the information submitted for the licensing of the firm, as varied from time to time, have been communicated in writing to the regulatory authority and identifying any changes made but not communicated to the regulatory authority; and

 

   (c)   in the case of a licensed international insurer-

 

      (i)   two copies of the audited annual accounts comprising-

 

         (A)   a revenue or fund account as set out in Part I to Part III, inclusive, of the Sixth Schedule, as applicable;

 

         (B)   a profit and loss account as set out in Part IV of the Sixth Schedule, as applicable;

 

         (C)   a balance sheet as set out in Part V and Part VI of the Sixth Schedule, as applicable;

 

      (ii)   the information as set out in Part I of the Seventh Schedule;

 

      (iii)   a certificate in the form set out in Part II of the Seventh Schedule;

 

      (iv)   a report signed by the actuary and supported by a certificate in the form set out in Part III of the Seventh Schedule to the insurer, which contains-

 

         (A)   an analysis of the value of liabilities of the long-term business fund (specifying the bases of the valuation and methods used), both net and gross of reinsurance, under contracts within each class of business categorised by reference to type of product;

 

         (B)   an analysis of expenses attributable to the long-term business fund, including a comparison between initial and renewal expenses and the corresponding expense loading,

 

         (C)   a statement of any other factors which the actuary considers are material to the present or future valuation of liabilities or any other factor which he or she considers should be brought to the attention of the regulatory authority; and

 

      (v)   an auditor's report on the supplementary information and directors' certificate shall be given by the insurer's auditors in the form set out in Part V of the Seventh Schedule;

 

   (d)   in the case of a company licensed to write general insurance business only-

 

      (i)   a certificate from an independent and approved auditor as set out in the Eighth Schedule, of the existence of current professional indemnity insurance in respect of his or her activities; and

 

      (ii)   an affidavit specifying the licensed insurers represented by the auditor during the last financial year and confirming that each of those licensed insurers is currently in compliance with the requirements of the international insurance laws of Botswana.

 

11.   Submission of quarterly statement

   Every licensed firm shall submit to the regulatory authority, within three months of the end of each quarter, a financial statement that includes the following, for the year to date-

 

   (a)   for General Business and Restricted Long-term Business-

 

      (i)   premiums written, gross and net of reinsurance;

 

      (ii)   commissions and other expenses;

 

      (iii)   claims paid or benefits payable, net of reinsurance;

 

      (iv)   reported claims outstanding;

 

      (v)   amounts due from reinsurers;

 

      (vi)   cash balances including deposits;

 

      (vii)   value of investments; and

 

      (viii)   details of any material change, made or projected, in the different types of insurance business transacted, net retentions or reinsurance ceded from the information last provided; and

 

   (b)   for Long-term Business (other than Restricted)-

 

      (i)   premiums written, gross and net of reinsurance, sub-divided by the separate products identified in the business plan;

 

      (ii)   commission and expenses;

 

      (iii)   details of any material change in any aspect of the business since the previous annual returns;

 

      (iv)   a profit profile, for any product which is planned to be introduced before the next annual return, showing-

 

         (A)   emerging cash strains and surpluses, monthly for at least two years and annually for the rest of the lifetime of the product;

 

         (B)   the breakdown of any initial strains between indemnity commission, valuation strain and solvency margin requirement;

 

         (C)   a discounted present value; and the assumptions made;

 

         (D)   details of reinsurance arranged or proposed, and the names of the reinsurers; and

 

         (E)   the projected cash flow;

 

      (v)   cash balances including deposits; and

 

      (vi)   value of investments.

 

12.   Maintenance of records

   Every licensed firm shall maintain permanently at its principal office in Botswana such books of accounts and records of its insurance business or such business which it manages or represents and records of its administrative and financial affairs to enable the regulatory authority to be supplied with all information necessary for the proper discharge of the regulatory functions.

 

13.   Regulatory authority may commission auditor

   (1) If at any time it appears to the regulatory authority that a licensed firm is not conducting its business in a satisfactory manner, the regulatory authority may commission an independent auditor in accordance with section 17 (5) of the Act to confirm-

 

   (a)   the financial status of the licensed firm;

 

   (b)   inadequacy or absence of records and systems of control and recommend corrective action;

 

   (c)   the extent of breach of any condition imposed under section 10 (2), section 10 (3) and section 12 (2) of the Act and recommend corrective action;

 

   (d)   the extent of compliance by the licensed firm with the code of practice;

 

   (e)   the extent of compliance with any direction given by the regulatory authority.

   (2) The regulatory authority may incorporate recommendations of the auditor with respect to matters to be confirmed under subregulation (1) into additional conditions to be met by the licensed firm.

FIRST SCHEDULE

 

(reg 3(2)(a))

Form 1
APPLICATION FOR LICENCE AS AN INTERNATIONAL INSURER

 

1.   Full name of applicant:............................................................................................ 

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

2.   Address of applicant 

   (a)   Registered office: 

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

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

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

   (b)   Office in Botswana where full business records will be kept: 

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

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

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

3.   Date on which applicant intends to commence carrying on international insurance business in or within Botswana: 

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

4.   Date and number of company incorporation: 

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

5.   Date on which the company's financial year will end: 

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

6.   (a) Category of business proposed to be transacted (as defined in section 2 of the Act) 

   ( ) Long-term ( ) General ( ) Reinsurance ( ) Captive Restricted 

   If applicant is/is to be a captive insurer, is/will any business unrelated to the captive's parent being/be written? ( ) YES ( ) NO 

   If "Yes", state type of business and percentage of total business proposed and reasons to justify such writings. 

   (b) Specify the types of insurance business contemplated under this application: 

   Life ( ) Health ( ) Worker's Compensation ( ) Motor ( ) 

   Personal Accident ( ) Property ( ) Aviation ( ) Public Liability ( ) 

   Contractor's Liability ( ) Bonds And Surety ( ) Marine ( ) Other ( ) 

   (Please indicate)

 

 

   ( ) Insurance Manager (in Botswana) 

   ( ) Principal Insurance Representative (in Botswana) 

   ( ) Underwriters 

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