Part IU.K. Restriction on Carrying on Insurance Business

PreliminaryU.K.

1 Classification.U.K.

(1)For the purposes of this Act insurance business is divided into long term business and general business; and—

• “long term business” means insurance business of any of the classes specified in Schedule 1 to this Act, and

• “general business” means insurance business of any of the classes specified in Part I of Schedule 2 to this Act.

(2)For the purposes of this Act the effecting and carrying out of a contract whose principal object is within one class of insurance business, but which contains related and subsidiary provisions within another class or classes, shall be taken to constitute the carrying on of insurance business of the first-mentioned class, and no other, if subsection (3) or (4) below applies to the contract.

(3)This subsection applies to a contract whose principal object is within any class of long term business but which contains subsidiary provisions within general business class 1 or 2 if the insurer is authorised under section 3 or 4 below to carry on long term business class I.

(4)This subsection applies to a contract whose principal object is within one of the classes of general business but which contains subsidiary provisions within another of those classes, not being class 14 or 15 [F1or (except as mentioned in subsection (4A) below) class 17.]

[F2(4A)Subsection (4) applies to a contract whose principal object is within one of the classes of general business but which contains subsidiary provisions within general business class 17 if—

(a)the principal object of the contract is the provision of assistance for persons who get into difficulties while travelling, while away from home or while away from their permanent residence, or

(b)those subsidiary provisions concern disputes or risks arising out of, or in connection with, the use of sea-going vessels]

2 Restriction on carrying on insurance business.U.K.

(1)Subject to the following provisions of this section, no person shall carry on any insurance business in the United Kingdom unless authorised to do so under section 3 or 4 below.

[F3(1A)Subsection (1) above shall not apply to insurance business carried on by anEC company through a branch in respect of which such of the requirements of Part I of Schedule 2F to this Act as are applicable have been complied with.]

(2)Subsection (1) above shall not apply to insurance business (other than industrial assurance business) carried on—

(a)by a member of Lloyd’s, or

(b)by a body registered under the enactments relating to friendly societies; or

(c)by a trade union or employers’ association where the insurance business carried on by the union or association is limited to the provision for its members of provident benefits or strike benefits.

In this subsection “trade union" and “employers’ association" have (throughout the United Kingdom) the meanings [F4respectively assigned by section 1 and section 122(1) of the Trade Union and Labour Relations (Consolidation) Act 1992].

(3)Subsection (1) above shall not apply to industrial assurance business carried on by a friendly society registered under the enactments relating to such societies.

(4)Subsection (1) above shall not apply to general business of class 14, 15, 16 [F5, 17 or 18] if it is carried on solely in the course of carrying on, and for the purposes of, banking business.

(5)Subsection (1) above shall not apply to general business consisting in the effecting and carrying out, by an insurance company that carries on no other insurance business, of contracts of such descriptions as may be prescribed, being contracts under which the benefits provided by the insurer are exclusively or primarily benefits in kind.

[F6(6)In this Act 'EC company’ means an insurance company—

(a)which is incorporated in or formed under the law of a member State other than the United Kingdom;

(b)whose head office is in that member State; and

(c)which is authorised in accordance with Article 6 of the first general insurance Directive or Article 6 of the first long term insurance Directive.]

Authorised insurance companiesU.K.

3 Authorisation by Secretary of State.U.K.

(1)The Secretary of State may authorise a body to carry on in the United Kingdom such of the classes of insurance business specified in Schedule 1 or 2 to this Act, or such parts of those classes, as may be specified in the authorisation.

(2)An authorisation under this section may be restricted to industrial assurance business or to reinsurance business; and a body may not carry on industrial assurance business by virtue of an authorisation under this section unless the authorisation expressly extends to such business.

(3)An authorisation under this section may identify classes or parts of classes of general business by referring to the appropriate groups specified in Part II of Schedule 2 to this Act.

(4)On the issue to a body of an authorisation under this section, any previous authorisation of that body under this section or section 4 below shall lapse.

4 Existing insurance companies.U.K.

(1)A body that was, immediately before the commencement of this Act, authorised under section 3 or 4 of the M1Insurance Companies Act 1981 to carry on in the United Kingdom insurance business of a class specified in Schedule 1 or 2 to that Act (or a part of such a class) is authorised to carry on there insurance business of the class identified by the same number in Schedule 1 or 2 to this Act (or that part of such a class).

(2)A body may not carry on industrial assurance business by virtue of this section unless—

(a)it was carrying on such business immediately before 1st January 1982, or

(b)it was immediately before the commencement of this Act authorised to carry on such business under section 3 of the Insurance Companies Act 1981.

Applications for authorisationU.K.

5 Submission of proposals etc.U.K.

(1)The Secretary of State shall not issue an authorisation under section 3 above unless—

(a)the applicant has submitted to him such proposals as to the manner in which it proposes to carry on business, such financial forecasts and such other information as may be required by or in accordance with regulations under this Act, and

(b)he is satisfied on the basis of that and any other information received by him that the application ought to be granted.

[F7(1A)The Secretary of State shall not issue an authorisation under section 3 above to an applicant which is a UK or non-EC company if it appears to him that the criteria of sound and prudent management are not or will not be fulfilled with respect to the applicant.]

(2)[F8Subject to subsection (3) below,] the Secretary of State shall decide an application for an authorisation under section 3 above within six months of receiving the information referred to in subsection (1)(a) above; and if he refuses to issue the authorisation he shall inform the applicant in writing of the reasons for the refusal.

[F9(3)The Secretary of State may defer a decision on an application for an authorisation under section 3 above for such period as may be necessary for the purpose of implementing any decision of the Council or Commission of the Communities under—

(a)Article 29b(4) of the first general insurance Directive; or

(b)Article 32b(4) of the first long term insurance Directive.]

[F10(4)In this Act—

'criteria of sound and prudent management’ means the criteria set out in Schedule 2A to this Act;

'EEA State’ means a State which is a Contracting Party to the EEA Agreement but, until the EEA Agreement comes into force in relation to Liechtenstein, does not include the State of Liechtenstein;

'EFTA State’ means an EEA State which is not a member State;

'non-EC company’ means an insurance company—

(a)whose head office is not in a member State;

(b)which is authorised under section 3 or 4 above; and

(c)whose business in the United Kingdom is not restricted to reinsurance business;

'UK company’ means an insurance company—

(a)which is incorporated in the United Kingdom;

(b)whose head office is in the United Kingdom;

(c)which is authorised under section 3 or 4 above;

(d)whose business is not restricted to business to which subsection (5) below applies; and

(e)which is not excluded from each Directive mentioned in that subsection by Article 3 of that Directive;

and any reference in this Part to an applicant or body which is a UK or non-EC company includes a reference to an applicant or body which would be such a company if the authorisation sought by it were issued.

F10(5)This subsection applies to—

(a)reinsurance business;

(b)business which is excluded from the first long term insurance Directive by Article 2(2) or (3) of that Directive;

(c)business which is excluded from the first general insurance Directive by Article 2(2)(b) of that Directive; and

(d)business which is exempted from the authorisation requirements contained in this Part of this Act by subsections (2) to (5) of section 2 above.]

[F116 Combination of long term and general business.U.K.

The Secretary of State shall not under section 3 above authorise a body to carry on both long term business and general business unless—

(a)the long term business is restricted to reinsurance; or

(b)the body is at the time the authorisation is issued already lawfully carrying on in the United Kingdom, otherwise than under paragraph (c) below, both long term business and general business (in neither case restricted to reinsurance); or

(c)in the case of a body which is a UK company, the general business is restricted to Group 1 of Part II to Schedule 2 to this Act (accident and health) or to any class or part of a class of insurance within that group.]

7 United Kingdom applicants.U.K.

(1)The Secretary of State shall not issue an authorisation under section 3 above to an applicant whose head office is in the United Kingdom unless the applicant is—

(a)a company as defined in section [F12735] of the [F13Companies Act] or [F14Article 3] of the [F15Companies (Northern Ireland) Order 1986], or

(b)a registered society, or

(c)a body corporate established by royal charter or Act of Parliament and already authorised under section 3 or 4 above to carry on insurance business (though not to the extent proposed in the application).

(2)The Secretary of State shall not issue an authorisation under section 3 above to an applicant whose head office is in the United Kingdom if it has an issued share capital any part of which was issued after the commencement of this section but is not fully paid up.

(3)The Secretary of State shall not issue an authorisation under section 3 above to an applicant

[F16(a)whose head office is in the United Kingdom; and

(b)which is not an applicant to which section 5(1A) above applies,]

if it appears to the Secretary of State that any director, controller, manager or main agent of the applicant is not a fit and proper person to hold the position held by him.

[F17(4)In this section

• “controller”, in relation to the applicant, means—

(a)a managing director of the applicant or of a body corporate of which the applicant is a subsidiary;

(b)a chief executive of the applicant or of a body corporate, being an insurance company, of which the applicant is a subsidiary;

(c)a person—

(i)in accordance with whose directions or instructions the directors of the applicant or of a body corporate of which it is a subsidiary are accustomed to act, or

(ii)who either alone or with any associate or associates is entitled to exercise, or control the exercise of, [F18one-third][F1815 per cent] or more of the voting power at any general meeting of the applicant or of a body corporate of which it is a subsidiary.

F17(5)In this section

• “manager”, in relation to the applicant, means an employee of the applicant (other than a chief executive) who, under the immediate authority of a director or chief executive of the applicant—

(a)exercises managerial functions, or

(b)is responsible for maintaining accounts or other records of the applicant,

not being a person whose functions relate exclusively to business conducted from a place of business outside the United Kingdom.

F17(6)In this section

• “main agent”, in relation to the applicant, means, subject to such exceptions as may be prescribed, a person appointed by the applicant to be its agent in respect of general business in the United Kingdom, with authority to enter into contracts on behalf of the applicant in any financial year—

(a)without limit on the aggregate amount of premiums; or

(b)with a limit in excess of 10 per cent. of the premium limit as determined in accordance with Schedule 3 to this Act.

F17(7)In this section

F17(8)In this section

• “associate”, in relation to any person, means—

(a)the wife or husband or minor son or daughter of that person;

(b)any company of which that person is a director;

(c)any person who is an employee or partner of that person;

(d)if that person is a company—

(i)any director of that company;

(ii)any subsidiary of that company;

(iii)any director or employee of any such subsidiary;

and for the purposes of this subsection

• “son” includes step-son,

• “daughter” includes step-daughter and

• [F19 “minor”, in relation to Scotland, includes pupil.]]

8 Applicants from other member States.U.K.

(1)The Secretary of State shall not issue an authorisation under section 3 above to an [F20applicant to which this section applies]unless the applicant has a representative fulfilling the requirements of section 10 below.

(2)The Secretary of State shall not issue an authorisation under section 3 above to an [F20applicant to which this section applies] if it appears to the Secretary of State that any relevant executive or main agent of the applicant is not a fit and proper person to hold the position held by him.

(3)Where an [F20applicant to which this section applies] seeks an authorisation under section 3 above restricted to reinsurance business—

(a)the Secretary of State shall not issue the authorisation unless he is satisfied that the applicant is a body corporate entitled under the law of that State to carry on insurance business there; and

(b)subsection (2) above shall have effect as if the reference to any relevant executive were a reference to any person who is a director, controller or manager of the applicant or a person within paragraph (a) or (b) of subsection (4) below.

[F21[(3A)An applicant is one to which this section applies if—

(a)its head office is in a member State other than the United Kingdom and it is not an EC company; or

(b)its head office is in an EFTA State; or

(c)its head office is in Switzerland and the authorisation sought by it is an authorisation to carry on general business which is not restricted to reinsurance business.]]

(4)In this section

• “relevant executive” in relation to the applicant means a person who is—

(a)the representative referred to in subsection (1) above or the individual representative referred to in section 10(5) below;

(b)an officer or employee of the applicant who, either alone or jointly with others, is responsible for the conduct of the whole of the insurance business carried on by the applicant in the United Kingdom, not being a person who—

(i)is also responsible for the conduct of insurance business carried on by the applicant elsewhere, and

(ii)has a subordinate who is responsible for the whole of the insurance business carried on by the applicant in the United Kingdom; or

(c)an employee of the applicant who, under the immediate authority of a director or of an officer or employee within paragraph (b) above,—

(i)exercises managerial functions, or

(ii)is responsible for maintaining accounts or other records of the applicant, not being a person whose functions relate exclusively to business conducted from a place of business outside the United Kingdom;

[F22and

• “controller”

• “manager”

• “main agent” have the same meaning as in section 7 above].

9 Applicants from outside the Community.U.K.

(1)The Secretary of State shall not issue an authorisation under section 3 above in respect of long term or general business to an applicant [F23to which this section applies] unless he is satisfied—

(a)that the applicant is a body corporate entitled under the law of the place where its head office is situated to carry on long term or, as the case may be, general business there;

(b)that the applicant has in the United Kingdom assets of such value as may be prescribed; and

(c)that the applicant has made a deposit of such amount and with such person as may be prescribed;

but subject to subsection (2) and (3) below.

(2)Where the applicant seeks to carry on insurance business in the United Kingdom and one or more other [F24EEA States],the Secretary of State and the supervisory authority in the other State or States concerned may agree that this subsection shall apply to the applicant; and in that event—

(a)paragraph (b) of subsection (1) above shall have effect as if the reference to the United Kingdom were a reference to the [F24EEA States] concerned taken together; and

(b)paragraph (c) of that subsection shall have effect as if the reference to such person as may be prescribed were a reference to such person as may be agreed between the Secretary of State and the other supervisory authority or authorities concerned.

(3)Paragraph (c) of subsection (1) above shall not apply where the authorisation sought is one restricted to reinsurance.

(4)The Secretary of State shall not issue an authorisation under section 3 above to an applicant [F23to which this section applies] unless the applicant has a representative fulfilling the requirements of section 10 below.

(5)The Secretary of State shall not issue an authorisation under section 3 above [F25which is restricted to reinsurance business to an applicant to which this section applies] if it appears to the Secretary of State that—

(a)the representative of the applicant referred to in subsection (4) above or the individual representative referred to in section 10(5) below, or

(b)any director, controller or manager of the applicant, or

(c)a main agent of the applicant,

is not a fit and proper person to hold the position held by him.

[F26(5A)An applicant is one to which this section applies if—

(a)its head office is not in an EEA State; and

(b)it is not an applicant to which section 8 above applies.]

(6)[F27In this section

• “controller”,

• “manager” and

• “main agent” have the same meanings as in section 7 above, except that] for the purposes of this section the controllers of the applicant shall be taken to include any officer or employee who, either alone or jointly with others, is responsible for the conduct of the whole of the insurance business carried on by the applicant in the United Kingdom, not being a person who—

(a)is also responsible for the conduct of insurance business carried on by it elsewhere; and

(b)has a subordinate who is responsible for the whole of the insurance business carried on by the applicant in the United Kingdom.

(7)Regulations under this Act may make such provision as to deposits under this section as appears to the Secretary of State to be necessary or expedient, including provision for the deposits of securities instead of money, and, in relation to deposits with the Accountant General of the Supreme Court, provision applying (with or without modification) any of the provisions of the rules for the time being in force under section 38(7) of the M2Administration of Justice Act 1982.

10 General representatives.U.K.

(1)The requirements referred to in sections 8(1) and 9(4) above are those set out in the following provisions of this section.

(2)The representative must be a person resident in the United Kingdom who has been designated as the applicant’s representative for the purposes of this section.

(3)The representative must be authorised to act generally, and to accept service of any document, on behalf of the applicant.

(4)The representative must not be an auditor, or a partner or employee of an auditor, of the accounts of any business carried on by the applicant.

(5)If the representative is not an individual, it must be a company as defined in section [F28735] of the [F29Companies Act] or [F30Article 3] of the [F31Companies (Northern Ireland) Order 1986] with its head office in the United Kingdom and must itself have an individual representative resident in the United Kingdom who is authorised to act generally, and to accept service of any document, on behalf of the company in its capacity as representative of the applicant.

Withdrawal of authorisationU.K.

11 Withdrawal of authorisation in respect of new business.U.K.

(1)The Secretary of State may, at the request of the company or on any grounds set out in subsection (2) below, direct that an insurance company authorised under section 3 or 4 above to carry on insurance business shall cease to be authorised to effect contracts of insurance, or contracts of any description specified in the direction.

(2)The grounds referred to in subsection (1) above are—

(a)that it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is subject by virtue of this Act [F32or the Financial Services Act 1986 or, if it is a member of a recognised self-regulating organisation within the meaning of that Act, an obligation to which it is subject by virtue of the rules of that organisation];

[F33(aa)that the company is a UK company and it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is subject by virtue of any provision of the law of another EEA State which—

(i)gives effect to the general or long term insurance Directives; or

(ii)is otherwise applicable to the insurance activities of the company in that State;

(ab)that the company is a UK or non-EC company and it appears to the Secretary of State that any of the criteria of sound and prudent management is or has not been fulfilled, or may not be or may not have been fulfilled, in respect of the company.]

(b)that there exists a ground on which he would be prohibited by section 7, 8 or 9 above from issuing an authorisation to the company;

(c)that the company has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in a member State where it has its head office or where it has in accordance with section 9(2) above made a deposit.

[F34(d)that the company is a Swiss general insurance company which has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in Switzerland.]

(3)After giving a direction under this section otherwise than at the request of the company concerned the Secretary of State shall inform the company concerned of his reasons for giving the direction.

(4)A direction under this section shall not prevent a company from effecting a contract of insurance in pursuance of a term of a subsisting contract of insurance.

[F35(5)Where a direction under this section has been given in respect of—

(a)a company which has its head office, or has in accordance with section 9(2) above made a deposit, in a member State other than the United Kingdom; or

(b)a Swiss general insurance company, the Secretary of State may revoke or vary the direction if after consultation with the supervisory authority in that member State or, as the case may be, in Switzerland he considers it appropriate to do so.]

(6)Subject to subsection (5) above a direction given under this section in respect of any insurance company may not be revoked or varied; but if the Secretary of State subsequently issues to the company under section 3 above an authorisation to carry on insurance business of a class to which the direction relates, the direction shall cease to have effect in relation to such business.

[F36(7)In this Act “Swiss general insurance company" means an insurance company—

(a)whose head office is in Switzerland;

(b)which is authorised under section 3 or 4 above to carry on general business; and

(c)whose authorisation is not restricted to reinsurance business.]

12 Notices of withdrawal under section 11.U.K.

(1)Before giving a direction under section 11 above otherwise than at the request of the company concerned the Secretary of State shall serve on the company a written notice stating—

(a)that he is considering giving a direction and the ground on which he is considering it; and

(b)that the company may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if the company so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.

(2)Before giving a direction under section 11 above in respect of a company [F37on either of the grounds set out in subsection (2A) below], the Secretary of State shall serve on the person whose fitness is in question a written notice stating—

(a)that he is considering giving a direction on that ground; and

(b)that the person on whom the notice is served may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if that person so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.

[F38(2A)The grounds referred to in subsection (2) above are—

(a)that the company is a UK or non-EC company and it appears to the Secretary of State that the second or third criterion of sound and prudent management is or has not been fulfilled, or may not be or may not have been fulfilled, in respect of the company; and

(b)that there exists a ground on which the Secretary of State would be prohibited by section 7(3), 8(2) or 9(5) above from issuing an authorisation to the company.]

(3)Subject to subsection (4) below, the Secretary of State shall consider any representations made in response to a notice under subsection (2) above before serving a notice under subsection (1) above.

(4)Subsection (3) above shall not apply where the position held by the person on whom the notice under subsection (2) above is served, and whose fitness for that position is in question, is controller of a company.

(5)A notice under subsection (1) or (2) above shall give particulars of the ground on which the Secretary of State is considering giving a direction.

(6)Where representations are to be made in response to a notice under subsection (1) or (2) above, the Secretary of State shall take them into consideration before giving a direction.

(7)Any notice to be served on a person under subsection (1) or (2) above may be served by post, and a letter containing the notice shall be deemed to be properly addressed if it is addressed to that person at his last known residence or last known place of business in the United Kingdom.

(8)After giving a direction under section 11 above the Secretary of State shall publish notice of it in the London, Edinburgh and Belfast Gazettes and in such other ways as appear to him expedient for notifying the public.

[F3912A Suspension of authorisation in urgent cases.U.K.

(1)Where, in the case of a UK or non-EC company, it appears to the Secretary of State—

(a)that one of the grounds in section 11(2) above exists in relation to the company: and

(b)that the authorisation should be suspended as a matter of urgency,

the Secretary of State may direct that the company shall forthwith cease to be authorised to effect contracts of insurance, or contracts of any description specified in the direction.

(2)A direction under this section—

(a)shall not prevent a company from effecting a contract of insurance in pursuance of a term of a subsisting contract of insurance; and

(b)unless confirmed by the Secretary of State under subsection (6) below, shall cease to have effect at the end of the relevant period.

(3)Where the Secretary of State gives a direction under this section, he shall forthwith serve on the company a written notice stating—

(a)the ground on which the direction is given; and

(b)that the company may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if the company so requests, oral representations to an officer of the Department of Trade and Industry appointed for the purpose by the Secretary of State.

(4)Where the Secretary of State gives a direction under this section on the ground set out in section 11(2)(ab) above, the Secretary of State shall forthwith serve on any person whose fitness is in question a written notice stating—

(a)the ground for giving the direction; and

(b)that the person on whom the notice is served may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if that person so requests, oral representations to an officer of the Department of Trade and Industry appointed for the purpose by the Secretary of State.

(5)The Secretary of State shall consider any representations made in response to a notice under subsection (3) or (4) above before confirming a direction under this section.

(6)At any time before the end of the relevant period, the Secretary of State may confirm a direction under this section by a written notice served on the company.

(7)Where a direction under this section is so confirmed, it may not be revoked or varied; but if the Secretary of State subsequently issues to the company under section 3 above an authorisation to carry on insurance business of a class to which the direction relates, the direction shall cease to have effect in relation to such business.

(8)In this section 'the relevant period’, in relation to a direction under this section, means the period of two months beginning with the date on which the direction is given.]

[13 Final withdrawal of authorisation.U.K.

[F40(1)Where—

(a)a UK company ceases to carry on insurance business or insurance business of any class in the European Community; or

(b)an insurance company which is not a UK company ceases to carry on insurance business or insurance business of any class in the United Kingdom,

the Secretary of State may direct that it shall cease to be authorised under section 3 or 4 above to carry on insurance business or insurance business of that class.

F40(2)If—

(a)a body authorised under section 3 above to carry on insurance business of any class has not at any time carried on insurance business of that class, and at least twelve months have elapsed since the issue of the authorisation; or

(b)a body authorised under section 4 above to carry on insurance business of any class has not at any time since the commencement of this Act carried on business of that class,

the Secretary of State may direct that the body shall cease to be authorised to carry on business of that class.]

(2A)The Secretary of State may direct that an insurance company shall cease to be authorised to carry on business which is insurance business by virtue of section 95(c)(ii) of this Act if it appears to him that the company has failed to satisfy an obligation to which it is subject by virtue of the Financial Services Act 1986 or, if it is a member of a recognised self-regulating organisation within the meaning of that Act, an obligation to which it is subject by virtue of the rules of that organisation.

(2B)Subsections (3), (5) and (6) of section 11 and subsections (1) and (5) to (8) of section 12 above shall apply to a direction under subsection (2A) above as they apply to a direction under section 11.]

(3)A direction under this section is without prejudice to the subsequent issue of an authorisation to carry on insurance business of a class to which the direction relates.

Withdrawal of authorisationU.K.

11 Withdrawal of authorisation in respect of new business.U.K.

(1)The Secretary of State may, at the request of the company or on any grounds set out in subsection (2) below, direct that an insurance company authorised under section 3 or 4 above to carry on insurance business shall cease to be authorised to effect contracts of insurance, or contracts of any description specified in the direction.

(2)The grounds referred to in subsection (1) above are—

(a)that it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is subject by virtue of this Act [F32or the Financial Services Act 1986 or, if it is a member of a recognised self-regulating organisation within the meaning of that Act, an obligation to which it is subject by virtue of the rules of that organisation];

[F33(aa)that the company is a UK company and it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is subject by virtue of any provision of the law of another EEA State which—

(i)gives effect to the general or long term insurance Directives; or

(ii)is otherwise applicable to the insurance activities of the company in that State;

(ab)that the company is a UK or non-EC company and it appears to the Secretary of State that any of the criteria of sound and prudent management is or has not been fulfilled, or may not be or may not have been fulfilled, in respect of the company.]

(b)that there exists a ground on which he would be prohibited by section 7, 8 or 9 above from issuing an authorisation to the company;

(c)that the company has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in a member State where it has its head office or where it has in accordance with section 9(2) above made a deposit.

[F34(d)that the company is a Swiss general insurance company which has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in Switzerland.]

(3)After giving a direction under this section otherwise than at the request of the company concerned the Secretary of State shall inform the company concerned of his reasons for giving the direction.

(4)A direction under this section shall not prevent a company from effecting a contract of insurance in pursuance of a term of a subsisting contract of insurance.

[F35(5)Where a direction under this section has been given in respect of—

(a)a company which has its head office, or has in accordance with section 9(2) above made a deposit, in a member State other than the United Kingdom; or

(b)a Swiss general insurance company, the Secretary of State may revoke or vary the direction if after consultation with the supervisory authority in that member State or, as the case may be, in Switzerland he considers it appropriate to do so.]

(6)Subject to subsection (5) above a direction given under this section in respect of any insurance company may not be revoked or varied; but if the Secretary of State subsequently issues to the company under section 3 above an authorisation to carry on insurance business of a class to which the direction relates, the direction shall cease to have effect in relation to such business.

[F36(7)In this Act “Swiss general insurance company" means an insurance company—

(a)whose head office is in Switzerland;

(b)which is authorised under section 3 or 4 above to carry on general business; and

(c)whose authorisation is not restricted to reinsurance business.]

12 Notices of withdrawal under section 11.U.K.

(1)Before giving a direction under section 11 above otherwise than at the request of the company concerned the Secretary of State shall serve on the company a written notice stating—

(a)that he is considering giving a direction and the ground on which he is considering it; and

(b)that the company may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if the company so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.

(2)Before giving a direction under section 11 above in respect of a company [F37on either of the grounds set out in subsection (2A) below], the Secretary of State shall serve on the person whose fitness is in question a written notice stating—

(a)that he is considering giving a direction on that ground; and

(b)that the person on whom the notice is served may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if that person so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.

[F38(2A)The grounds referred to in subsection (2) above are—

(a)that the company is a UK or non-EC company and it appears to the Secretary of State that the second or third criterion of sound and prudent management is or has not been fulfilled, or may not be or may not have been fulfilled, in respect of the company; and

(b)that there exists a ground on which the Secretary of State would be prohibited by section 7(3), 8(2) or 9(5) above from issuing an authorisation to the company.]

(3)Subject to subsection (4) below, the Secretary of State shall consider any representations made in response to a notice under subsection (2) above before serving a notice under subsection (1) above.

(4)Subsection (3) above shall not apply where the position held by the person on whom the notice under subsection (2) above is served, and whose fitness for that position is in question, is controller of a company.

(5)A notice under subsection (1) or (2) above shall give particulars of the ground on which the Secretary of State is considering giving a direction.

(6)Where representations are to be made in response to a notice under subsection (1) or (2) above, the Secretary of State shall take them into consideration before giving a direction.

(7)Any notice to be served on a person under subsection (1) or (2) above may be served by post, and a letter containing the notice shall be deemed to be properly addressed if it is addressed to that person at his last known residence or last known place of business in the United Kingdom.

(8)After giving a direction under section 11 above the Secretary of State shall publish notice of it in the London, Edinburgh and Belfast Gazettes and in such other ways as appear to him expedient for notifying the public.

[13 Final withdrawal of authorisation.U.K.

[F40(1)Where—

(a)a UK company ceases to carry on insurance business or insurance business of any class in the European Community; or

(b)an insurance company which is not a UK company ceases to carry on insurance business or insurance business of any class in the United Kingdom,

the Secretary of State may direct that it shall cease to be authorised under section 3 or 4 above to carry on insurance business or insurance business of that class.

F40(2)If—

(a)a body authorised under section 3 above to carry on insurance business of any class has not at any time carried on insurance business of that class, and at least twelve months have elapsed since the issue of the authorisation; or

(b)a body authorised under section 4 above to carry on insurance business of any class has not at any time since the commencement of this Act carried on business of that class,

the Secretary of State may direct that the body shall cease to be authorised to carry on business of that class.]

(2A)The Secretary of State may direct that an insurance company shall cease to be authorised to carry on business which is insurance business by virtue of section 95(c)(ii) of this Act if it appears to him that the company has failed to satisfy an obligation to which it is subject by virtue of the Financial Services Act 1986 or, if it is a member of a recognised self-regulating organisation within the meaning of that Act, an obligation to which it is subject by virtue of the rules of that organisation.

(2B)Subsections (3), (5) and (6) of section 11 and subsections (1) and (5) to (8) of section 12 above shall apply to a direction under subsection (2A) above as they apply to a direction under section 11.]

(3)A direction under this section is without prejudice to the subsequent issue of an authorisation to carry on insurance business of a class to which the direction relates.

OffencesU.K.

14 Offences under Part I.U.K.

(1)A person who carries on business in contravention of this Part of this Act shall be guilty of an offence.

(2)A person who for the purpose of obtaining the issue of an authorisation furnishes information which he knows to be false in a material particular or recklessly furnishes information which is false in a material particular shall be guilty of an offence.

(3)A person guilty of an offence under this section shall be liable—

(a)on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or to both;

(b)on summary conviction—

(i)in England and Wales . . . F41, to a fine not exceeding £1,000 or, if it is greater, the prescribed sum within the meaning of section 32 of the M3Magistrates’ Courts Act 1980;

(ii)in Scotland, to a fine not exceeding £1,000 or, if it is greater, the prescribed sum within the meaning of section 289B of the M4Criminal Procedure (Scotland) Act 1975;

[F42(iii)in Northern Ireland, to a fine not exceeding £1,000 or, if it is greater, the prescribed sum within the meaning of Article 4 of the Fines and Penalties (Northern Ireland) Order 1984.]

Part IIU.K. Regulation of Insurance Companies

PreliminaryU.K.

15 Insurance companies to which Part II applies.U.K.

(1)Subject to the provisions of this section, this Part of this Act applies to all insurance companies, whether established within or outside the United Kingdom, which carry on insurance business within the United Kingdom.

[F43(1A)Except as otherwise provided by Part I of Schedule 2F to this Act, this Part of this Act (except sections 47A, 47B, 54 to 59 and Schedule 2B) does not apply to an EC company in so far as it is carrying on insurance business through a branch in respect of which such of the requirements of Part I of Schedule 2F to this Act as are applicable have been complied with.]

(2)This Part of this Act does not apply to any insurance company which is registered under the enactments relating to friendly societies.

(3)Where a trade union or an employers’ association carries on insurance business, this Part of this Act does not apply to it as an insurance company if the insurance business is limited to the provision for its members of provident benefits or strike benefits.

In this subsection “trade union" and “employers’ association" have (throughout the United Kingdom) the meanings [F44 respectively assigned by section 1 and section 122(1) of the Trade Union and Labour Relations (Consolidation) Act 1992].

(4)This Part of this Act does not apply to a member of Lloyd’s who carries on insurance business of any class provided that he complies with the requirements set out in section 83 below and applicable to business of that class.

(5)This Part of this Act does not apply to a person by reason only that he carries on general business of class 14, 15, 16 [F45, 17 or 18] in the course of carrying on, and for the purposes of, banking business.

(6)This Part of this Act does not apply to an insurance company whose insurance business is restricted to general business consisting in the effecting and carrying out of contracts of such descriptions as may be prescribed, being contracts under which the benefits provided by the insurer are exclusively or primarily benefits in kind.

16 Restriction of business to Insurance.U.K.

(1)An insurance company to which this Part of this Act applies shall not carry on any activities, in the United Kingdom or elsewhere, otherwise than in connection with or for the purposes of its insurance business.

(2)For the purposes of subsection (1) above any activities of an insurance company that are excluded from the definition of insurance business by section 95(c) (ii) below shall be treated as carried on in connection with its insurance business.

Accounts and statementsU.K.

17 Annual accounts and balance sheets.U.K.

(1)Every insurance company to which this Part of this Act applies shall, with respect to each financial year of the company, prepare a revenue account for the year, a balance sheet as at the end of the year and a profit and loss account for the year or, in the case of a company not trading for profit, an income and expenditure account for the year.

(2)The contents of the documents required by subsection (1) above to be prepared shall be such as may be prescribed, but regulations may provide for enabling information required to be given by such documents to be given instead in a note thereon or statement or report annexed thereto or may require there to be given in such a note, statement or report such information in addition to that given in the documents as may be prescribed.

(3)Regulation may, as respects such matters stated in such documents as aforesaid or in statements or reports annexed thereto as may be prescribed, require there to be given by such persons as may be prescribed and to be annexed to the documents certificates of such matters as may be prescribed.

(4)If a form is prescribed—

(a)for any such document as aforesaid or,

(b)as that in which information authorised or required to be given in a statement or report annexed to any such document is to be given or,

(c)for a certificate to be so annexed,

the document shall be prepared, the information shall be given or, as the case may be, the certificate shall be framed, in that form.

18 Periodic actuarial investigation of company with long term business.U.K.

(1)Every insurance company to which this Part of this Act applies which carries on long term business—

(a)shall, once in every period of twelve months, cause an investigation to be made into its financial condition in respect of that business by the person who for the time being is its actuary under section 19(1) below or any corresponding enactment previously in force; and

(b)when such an investigation has been made, or when at any other time an investigation into the financial condition of the company in respect of its long term business has been made with a view to the distribution of profits, or the results of which are made public, shall cause an abstract of the actuary’s report of the investigation to be made.

(2)An investigation to which subsection (1)(b) above relates shall include—

(a)a valuation of the liabilities of the company attributable to its long term business; and

(b)a determination of any excess over those liabilities of the assets representing the fund or funds maintained by the company in respect of that business and, where any rights of any long term policy holders to participate in profits relate to particular parts of such a fund, a determination of any excess of assets over liabilities in respect of each of those parts.

(3)At least once in every period of five years an insurance company to which subsection (1) above applies shall prepare a statement of its long term business at the date to which the accounts of the company are made up for the purposes of an investigation in pursuance of paragraph (a) of that subsection.

(4)For the purposes of any investigation to which this section applies the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations.

(5)The form and contents of any abstract or statement under this section shall be such as may be prescribed.

19 Appointment of actuary by company with long term business.U.K.

(1)Every insurance company to which this Part of this Act applies shall within one month of beginning to carry on long term business appoint an actuary as an actuary to the company; and whenever an appointment under this section or any corresponding enactment previously in force comes to an end the company shall as soon as practicable make a fresh appointment.

(2)A company making an appointment under this section shall within fourteen days serve on the Secretary of State a written notice stating that fact and the name and qualifications of the person appointed; and if an appointment under this section or any corresponding enactment previously in force comes to an end the company shall within fourteen days serve on the Secretary of State a written notice stating that fact and the name of the person concerned.

20 Annual statements by company with prescribed class of insurance business.U.K.

Classes of insurance business may be prescribed for the purposes of this section, and every insurance company to which this Part of this Act applies which carries on such business of a prescribed class shall annually prepare the prescribed statement of business of that class, being, if a form is prescribed for the statement, a statement in the prescribed form.

21 Audit of accounts.U.K.

(1)The accounts and balance sheets of every insurance company to which this Part of this Act applies shall be audited in the prescribed manner by a person of the prescribed description, and regulations made for the purposes of this section may apply to such companies [F46the provisions relating to the audit of the accounts of companies under the Companies Acts], subject to such adaptations and modifications as may appear necessary or expedient.

(2)In subsection (1) above the reference to accounts and balance sheets shall include a reference to any statement or report annexed thereto giving information authorised or required by virtue of section 17(2) above to be given in a statement or report so annexed.

[F4721A Communication by auditor with Secretary of State.U.K.

(1)No duty to which an auditor of an insurance company to which this Part of this Act applies may be subject shall be regarded as contravened by reason of his communicating in good faith to the Secretary of State, whether or not in response to a request from him, any information or opinion on a matter of which the auditor has become aware in his capacity as auditor of that company and which is relevant to any functions of the Secretary of State under this Act.

(2)If it appears to the Secretary of State that any auditor or class of auditor to whom subsection (1) above applies is not subject to satisfactory rules made or guidance issued by a professional body specifying circumstances in which matters are to be communicated to the Secretary of State as mentioned in that subsection the Secretary of State may make regulations applying to that auditor or class of auditor and specifying such circumstances; and it shall be the duty of an auditor to whom the regulations made by the Secretary of State apply to communicate a matter to the Secretary of State in the circumstances specified by the regulations.

(3)The matters to be communicated to the Secretary of State in accordance with any such rules or guidance or regulations may include matters relating to persons other than the company.

(4)No regulations shall be made under subsection (2) above unless a draft of them has been laid before and approved by a resolution of each House of Parliament.

(5)If it appears to the Secretary of State that an auditor has failed to comply with the duty mentioned in subsection (2) above, the Secretary of State may disqualify him from being the auditor of an insurance company or any class of insurance company to which Part II of this Act applies; but the Secretary of State may remove any disqualification imposed under this subsection if satisfied that the person in question will in future comply with that duty.

(6)An insurance company to which this Part of this Act applies shall not appoint as auditor a person disqualified under subsection (5) above.]

22 Deposit of accounts etc. with Secretary of State.U.K.

(1)Every account, balance sheet, abstract or statement required by sections 17, 18 and 20 above and any report of the auditor of the company made in pursuance of section 21 above shall be printed, and five copies shall be deposited with the Secretary of State within six months after the close of the period to which the account, balance sheet, abstract, statement or report relates; but if in any case it is made to appear to the Secretary of State that the circumstances are such that a longer period than six months should be allowed, the Secretary of State may extend that period by such period not exceeding three months as he thinks fit.

(2)There shall be deposited with the Secretary of State, at the same time as the documents mentioned in subsection (1) above, five printed copies of a statement of the names and the connection with the company of any persons who, during the period to which those documents relate—

(a)were authorised by the company to issue, or to the knowledge of the company have issued, any such invitation in relation to the company as is mentioned in subsection (1)(a) of section 74 below; and

(b)were connected with the company as provided by regulations under that section.

(3)One of the copies of any document deposited under subsection (1) or (2) above except an auditor’s report shall be a copy signed by such persons as may be prescribed.

(4)One of the copies of any auditor’s report deposited under subsection (1) above shall be a copy signed by the auditor.

(5)The Secretary of State shall consider the documents deposited under subsections (1) and (2) above, and if any such document appears to him to be inaccurate or incomplete in any respect he shall communicate with the company with a view to the correction of any such inaccuracies and the supply of deficiencies.

(6)There shall be deposited with every revenue account and balance sheet of a company any report on the affairs of the company submitted to the shareholders or policy holders of the company in respect of the financial year to which the account and balance sheet relate.

(7)In this section any reference to an account or balance sheet includes a reference to any statement or report annexed thereto giving information authorised or required by virtue of subsection (2) of section 17 above to be so given and any certificate so annexed by virtue of subsection (3) of that section.

23 Right of shareholders and policy holders to receive copies of deposited documents.U.K.

(1)Subject to subsection (2) below, an insurance company shall forward by post or otherwise to any shareholder or policy holder who applies for one—

(a)a printed copy of any of the documents last deposited by the company under subsection (1) or (2) of section 22 above;

(b)a copy of any document supplied to the Secretary of State under subsection (5) of that section which relates to any of those documents;

(c)a copy of any report deposited with any of those documents under subsection (6) of that section.

(2)If, in the opinion of the Secretary of State, the disclosure of information contained in—

(a)a statement or report annexed to a document prepared in pursuance of section 17(1) above by an insurance company; or

(b)a statement prepared in pursuance of section 20 above by such a company,

would be harmful to the business of the company or of any of its subsidiaries, the Secretary of State may dispense the company from complying with the obligation imposed by subsection (1) above to forward a copy of the document containing the information to a shareholder or policy holder who applies for it.

24 Deposit of accounts etc. by registered society.U.K.

(1)A registered society shall, in addition to depositing with the Secretary of State, as required by section 22 above, five copies of each document to which subsections (1) and (2) of that section apply, deposit, within the time limited by virtue of that section for depositing them, a copy with the appropriate registrar in the case of a society registered in Great Britain or with the registrar in the case of a society registered in Northern Ireland, being a copy signed by the like persons as those by whom the copies deposited under that section are required to be signed.

(2)Subsection (6) of the said section 22 shall have effect in relation to the deposit by virtue of this section of accounts and balance sheets as it has effect in relation to the deposit by virtue of that section of accounts and balance sheets.

(3)Section 71(1) of the M5Industrial and Provident Societies Act 1965 (which empowers the Treasury to make regulations respecting, among other things, the inspection of documents kept by the appropriate registrar under that Act) and section 97(1) of the M6Industrial and Provident Societies Act (Northern Ireland) 1969 (which confers corresponding powers on the Department of Commerce for Northern Ireland) shall have effect as if the reference to documents kept by the appropriate registrar under that Act of 1965 or, as the case may be, by the registrar under that Act of 1969 included a reference to documents deposited in pursuance of this section.

(4)In this section

• “appropriate registrar” has the meaning given in section 73(1) of the said Act of 1965 and

• “registrar” has the meaning given by section 101(1) of the said Act of 1969.

25 Periodic statements by company with prescribed class of business.U.K.

(1)Every insurance company to which this Part of this Act applies which carries on business of a class or description prescribed for the purposes of this section shall prepare, at such intervals and for such periods as may be prescribed, a statement of its business of that class or description.

(2)The form and contents of any statement under this section shall be such as may be prescribed.

(3)Regulations may, as respects such matters contained in a statement under this section as may be prescribed, require there to be given by such persons as may be prescribed and to be annexed to the statement certificates of such matters and in such form as may be prescribed.

(4)Five copies of any statement made under this section (with any certificate annexed thereto in pursuance of subsection (3) above) shall be deposited by the company with the Secretary of State within such period as may be prescribed, and one of those copies shall be a copy signed by the persons required to sign copies of statements made under section 20 above which are deposited under section 22 above.

(5)The whole or any part of any document deposited under subsection (4) above may be deposited by the Secretary of State with the registrar of companies or with the registrar of companies in Northern Ireland or with both and may be published by the Secretary of State in such ways as he thinks appropriate.

26 Statements of transactions of prescribed class or description.U.K.

(1)Classes or descriptions of agreements or arrangements appearing to the Secretary of State as likely to be undesirable in the interests of policy holders may be prescribed for the purposes of this section, and every insurance company to which this Part of this Act applies or subordinate company within the meaning of section 31 below of any such company which enters into an agreement or arrangement of a class or description so prescribed shall, within such period as may be prescribed, furnish the Secretary of State with a statement containing such particulars of that agreement or arrangement as may be prescribed.

(2)Different classes or descriptions of agreements or arrangements may be prescribed for the purposes of this section in relation to companies of different classes or descriptions.

(3)The whole or any part of any statement furnished to the Secretary of State under this section may be deposited by him with the registrar of companies or with the registrar of companies in Northern Ireland or with both and may be published by the Secretary of State in such ways as he thinks appropriate.

27 Companies from outside the Community.U.K.

An insurance company to which this Part of this Act applies

[F48(a)whose head office is not in a member State; and

(b)which is not a Swiss general insurance company,]

shall keep in the United Kingdom proper accounts and records in respect of insurance business carried on in the United Kindgom.

Assets and liabilities attributable to long term businessU.K.

28 Separation of assets and liabilities attributable to long term business.U.K.

(1)Where an insurance company to which this Part of this Act applies carries on ordinary long-term insurance business or industrial assurance business or both of those kinds of insurance business—

(a)the company shall maintain an account in respect of that business or, as the case may be, each of those kinds of business; and

(b)the receipts of that business or, as the case may be, of each of those kinds of business shall be entered in the account maintained for that business and shall be carried to and form a separate insurance fund with an appropriate name.

(2)An insurance company to which this Part of this Act applies which carries on ordinary long-term insurance business or industrial assurance business or both of those kinds of business shall maintain such accounting and other records as are necessary for identifying—

(a)the assets representing the fund or funds maintained by the company under subsection (1)(b) above (but without necessarily distinguishing between the funds if more than one); and

(b)the liabilities attributable to that business or, as the case may be, each of those kinds of business.

29 Application of assets of company with long term business.U.K.

(1)Subject to subsections (2) and (4) and section 55(3) below, the assets representing the fund or funds maintained by an insurance company in respect of its long term business—

(a)shall be applicable only for the purposes of that business, and

(b)shall not be transferred so as to be available for other purposes of the company except where the transfer constitutes reimbursement of expenditure borne by other assets (in the same or the last preceding financial year) in discharging liabilities wholly or partly attributable to long term business.

(2)Where the value of the assets mentioned in subsection (1) above is shown, by an investigation to which section 18 above applies or which is made in pursuance of a requirement imposed under section 42 below, to exceed the amount of the liabilities attributable to the company’s long term business the restriction imposed by that subsection shall not apply to so much of those assets as represents the excess.

(3)Subsection (2) above shall not authorise a transfer or other application of assets by reference to an actuarial investigation at any time after the date when the abstract of the actuary’s report of the investigation has been deposited with the Secretary of State in accordance with section 22(1) above or section 42(4) below.

(4)Nothing in subsection (1) above shall preclude an insurance company from exchanging, at fair market value, assets representing a fund maintained by the company in respect of its long term business for other assets of the company.

(5)Any mortgage or charge (including—

(a)a charge imposed by a court on the application of a judgment creditor,

(b)in Scotland, a charge imposed by way of diligence, and

(c)a charge imposed by the Enforcement of Judgments Office in Northern Ireland)

shall be void to the extent to which it contravenes subsection (1) above.

(6)Money from a fund maintained by a company in respect of its long term business may not be used for the purposes of any other business of the company notwithstanding any arrangement for its subsequent repayment out of the receipts of that other business.

(7)No insurance company to which this Part of this Act applies, and no company of which any such insurance company is a subsidiary, shall declare a dividend at any time when the value of the assets representing the fund or funds maintained by the insurance company in respect of its long term business, as determined in accordance with any applicable valuation regulations, is less than the amount of the liabilities attributable to that business as so determined.

30 Allocations to policy holders.U.K.

(1)Where in the case of an insurance company to which this Part of this Act applies—

(a)there is an established surplus in which long term policy holders of any category are eligible to participate, and

(b)an amount has been allocated to policy holders of that category in respect of a previously established surplus in which policy holders of that category were eligible to participate,

the company shall not by virtue of section 29(2) above transfer or otherwise apply assets representing any part of the surplus mentioned in paragraph (a) above unless the company has either allocated to policy holders of that category in respect of that surplus an amount not less than the relevant minimum, or complied with the requirements of subsection (3) below and made to those policy holders any allocation of which notice is given under paragraph (a) of that subsection.

(2)Subject to subsections (6) and (7) below, the relevant minimum is the amount represented by the formula

(3)The requirements of this subsection are that the company—

(a)has served on the Secretary of State a written notice stating that it proposes to make no allocation or an allocation of an amount (specifying it) which is smaller than the relevant minimum; and

(b)has published a statement approved by the Secretary of State in the London, Edinburgh and Belfast Gazettes and in such other ways as he may have directed,

and that a period of not less than fifty-six days has elapsed since the date, or the last date, on which the company has published the statement mentioned in paragraph (b) above as required by or under that paragraph.

(4)In this section

(5)For the purposes of this section an amount is allocated to policy holders if, and only if—

(a)bonus payments are made to them; or

(b)reversionary bonuses are declared in their favour or a reduction is made in the premiums payable by them;

and the amount of the allocation is, in a case within paragraph (a) above, the amount of the payments and, in a case within paragraph (b) above, the amount of the liabilities assumed by the company in consequence of the declaration or reduction.

(6)For the purposes of this section the amount of any bonus payments made in anticipation of an established surplus shall be treated as an amount allocated in respect of the next established surplus in respect of which an amount is allocated to eligible policy holders generally; and for the purposes of sub-section (2) above the amount of any surplus in respect of which such an allocation is made shall be treated as increased by the amount of any such payments.

(7)Subsection (1) above shall not authorise the application for purposes other than those mentioned in section 29(1) above of assets representing any part of the surplus mentioned in sub-section (1)(a) above which the company has decided to carry forward unappropriated; and for the purposes of subsection (2) above the amount of any surplus shall be treated as reduced by any part thereof which the company has decided to carry forward as aforesaid.

(8)For the purposes of subsection (1) above policy holders shall be taken to be eligible to participate in an established surplus in any case where they would be eligible to participate in a later established surplus representing it if it were carried forward unappropriated.

31 Restriction on transactions with connected persons.U.K.

(1)Neither an insurance company to which this Part of this Act applies which carries on long term business nor a subordinate company of any such insurance company shall enter into a transaction to which this section applies—

(a)at a time when the aggregate of the value of the assets and the amount of the liabilities attributable to such transactions already entered into by the insurance company and its subordinate companies exceeds the prescribed percentage of the total amount standing to the credit of the insurance company’s long term funds; or

(b)at any other time when the aggregate of the value of those assets and the amount of those liabilities would exceed that percentage if the transaction were entered into.

(2)This section applies to any transaction entered into by any such insurance company as is mentioned in subsection (1) above (whether or not itself a subordinate company of another company), being a transaction under which—

(a)a person connected with the insurance company will owe it money; or

(b)the insurance company acquires shares in a company which is a person connected with it; or

(c)the insurance company undertakes a liability to meet an obligation of a person connected with it or to help such a person to meet an obligation,

if the right to receive the money would constitute a long term asset of the insurance company, the acquisition is made out of its long term funds or the liability would fall to be discharged out of those funds, as the case may be.

(3)Without prejudice to subsection (2) above, this section applies to any transaction entered into by a subordinate company of any such insurance company as is mentioned in sub-section (1) above, being a transaction under which—

(a)the insurance company or a person connected with it will owe money to the subordinate company (not being money owed by the insurance company which can be properly paid out of its long term funds); or

(b)the subordinate company acquires shares in the insurance company or in a company which is a person connected with the insurance company; or

(c)the subordinate company undertakes a liability to meet an obligation of the insurance company or of a person connected with that company or to help the insurance company or such a person to meet an obligation;

but where the subordinate company is itself such an insurance company as is mentioned in subsection (1) above this section shall not by virtue of this subsection apply to any such transaction if the right to receive the money would constitute a long term asset of the subordinate company, the acquisition is made out of its long term funds or the liability would fall to be discharged out of those funds, as the case may be.

(4)In this section

• “subordinate company”, in relation to any such insurance company as is mentioned in subsection (1) above, means—

(a)a company having equity share capital some or all of which is held by the insurance company as part of its long term assets where the share capital so held by the insurance company—

(i)amounts to more than half in nominal value of that share capital; and

(ii)confers on the insurance company the power to appoint or remove the holders of all or a majority of the directorships of the company whose share capital is held and more than one half of the voting power at any general meeting of that company;

(b)a company having equity share capital some or all of which is held by another company which is itself a subordinate company of the insurance company where the share capital held by that other company—

(i)amounts to more than half in nominal value of that share capital; and

(ii)confers on that other company the power to appoint or remove the holders of all or a majority of the directorships of the company whose share capital is held and more than one half of the voting power at any general meeting of that company;

and for the purposes of this subsection share capital held for any person by a nominee shall (except where that person is concerned only in a fiduciary capacity) be treated as held by that person, and share capital held by a person in a fiduciary capacity or by way of security shall be treated as not held by that person.

(5)For the purposes of this section a person is connected with any such insurance company as is mentioned in subsection (1) above if that person is not a subordinate company of the insurance company but—

(a)controls, or is a partner of a person who controls, the insurance company; or

(b)being a company, is controlled by the insurance company or by another person who also controls the insurance company; or

(c)is a director of the insurance company or the wife or husband or a minor son or daughter of such a director;

and for the purposes of this subsection a person controls a company if he is a controller of it within the meaning of section 7(4)(c) above.

(6)For the purposes of this section the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations.

(7)In this section—

• “company" (except in the expression

• “insurance company”) includes any body corporate;

• “equity share capital” means, in relation to a company, its issued share capital excluding any part thereof which, neither as respects dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution;

• “liability” includes a contingent liability;

• “long term assets” and

• “long term funds”, in relation to an insurance company, mean respectively assets representing the fund or funds maintained by the company in respect of its long term business and that fund or those funds;

• “the prescribed percentage” means 5 per cent. or such greater percentage as may from time to time be prescribed for the purposes of this section by regulations;

• “share” has the same meaning as in the [F49Companies Act] or the [F50Companies (Northern Ireland) Order 1986];

• “son” includes step-son,

• “daughter” includes step-daughter, and

• [F51 “minor”, in relation to Scotland, includes pupil] and, (without prejudice to section 39(6) of the M7Adoption Act 1976 and section 39(4) of the M8Adoption (Scotland) Act 1978) in relation to Northern Ireland,

• “son” includes step-son and adopted son and

• “daughter” includes step-daughter and adopted daughter.

(8)This section shall not be construed as making any transaction unenforceable as between the parties thereto or as otherwise making unenforceable any rights or liabilities in respect of property.

[F5231A Arrangement to avoid unfairness between separate insurance funds etc.U.K.

(1)An insurance company to which this Part of this Act applies which carries on long term business in the United Kingdom shall secure that adequate arrangements are in force for securing that transactions affecting assets of the company (other than transactions outside its control) do not operate unfairly between the section 28 fund or funds and the other assets of the company or, in a case where the company has more than one identified fund, between those funds.

(2)In this section—

• “the section 28 fund or funds” means the assets representing the fund or funds maintained by the company under section 28(1)(b) above; and

• “identified fund”, in relation to a company, means assets representing the company’s receipts from a particular part of its long term business which can be identified as such by virtue of accounting or other records by the company.]

Financial resourcesU.K.

32 Margins of solvency.U.K.

(1)Every insurance company to which this Part of this Act applies—

(a)whose head office is in the United Kingdom, or

(b)whose business in the United Kingdom is restricted to reinsurance,

shall maintain a margin of solvency of such amount as may be prescribed by or determined in accordance with regulations made for the purposes of this section.

(2)Subject to subsection (3) below, every insurance company to which this Part of this Act applies whose head office is not in a member State shall maintain—

(a)a margin of solvency, and

(b)a United Kingdom margin of solvency,

of such amounts as may be prescribed by or determined in accordance with regulations made for the purposes of this section.

(3)Subsection (2) above shall not apply to an insurance company if its business in the United Kingdom is restricted to re-insurance [F53or if it is a Swiss general insurance company]or if section 9(2) above applies to it; but an insurance company that has made a deposit in the United Kingdom in accordance with section 9(2)(b) above shall maintain—

(a)a margin of solvency, and

(b)a [F54EEA margin of solvency],

of such amounts as may be prescribed by or determined in accordance with regulations made for the purposes of this section.

(4)An insurance company that fails to comply with subsection (1), (2) or (3) above—

(a)shall at the request of the Secretary of State submit to him a plan for the restoration of a sound financial position;

(b)shall propose modifications to the plan (or the plan as previously modified) if the Secretary of State considers it inadequate;

(c)shall give effect to any plan accepted by the Secretary of State as adequate.

(5)For the purposes of this Act—

(a)the margin of solvency of an insurance company is the excess of the value of its assets over the amount of its liabilities, that value and amount being determined in accordance with any applicable valuation regulations;

(b)the United Kingdom margin of solvency of an insurance company is its margin of solvency computed by reference to the assets and liabilities of the business carried on by the company in the United Kingdom;

(c)the [F55EEA margin of solvency] of an insurance company is its margin of solvency computed by reference to the assets and liabilities of the business carried on by the company [F56in EEA States (taken together)].

(6)In the case of an insurance company that carries on both long term and general business, subsections (1), (2) and (3) above shall have effect as if—

(a)the requirements to maintain a margin of solvency, and

(b)where the company carries on both kinds of business in the United Kingdom, the requirement to maintain a United Kingdom margin of solvency, and

(c)where the company carries on both kinds of business [F56in EEA States (taken together)], the requirement to maintain a [EEA margin of solvency],

were requirements to maintain separate margins in respect of the two kinds of business (and accordingly as if the references in subsection (5) to assets and liabilities were references to assets and liabilities relating to the kind of business in question).

33 Failure to maintain minimum margin.U.K.

(1)If—

(a)the margin of solvency of an insurance company to which section 32(1) above applies, or

(b)the margin of solvency or United Kingdom margin of solvency of an insurance company to which section 32(2) above applies, or

(c)the margin of solvency or [F57EEA margin of solvency] of an insurance company to which section 32(3) above applies,

falls below such amount as may be prescribed by or determined in accordance with regulations made for the purposes of this section, the company shall at the request of the Secretary of State submit to him a short-term financial scheme.

(2)An insurance company that has submitted a scheme to the Secretary of State under subsection (1) above shall propose modifications to the scheme (or the scheme as previously modified) if the Secretary of State considers it inadequate, and shall give effect to any scheme accepted by him as adequate.

(3)Where a company is required by virtue of section 32(6) above to maintain separate margins in respect of long term and general business, subsection (1) above shall have effect as if any reference to the margin of solvency, the United Kingdom margin of solvency or the [F57EEA margin of solvency] of the company were a reference to the margin in respect of either of the two kinds of business.

34 Companies supervised in other member States.U.K.

(1)An insurance company to which this Part of this Act applies—

[F58(a)whose head office is in an EEA State other than the United Kingdom, or

(b)which has in accordance with section 9(2) above made a deposit in such a State, or]

[F59or

(c)which is a Swiss general insurance company,]

shall secure that the value of the assets of the business carried on by it in the United Kingdom does not fall below the amount of the liabilities of that business, that value and amount being determined in accordance with any applicable valuation regulations.

(2)In the case of a company that carries on in the United Kingdom both long term and general business subsection (1) above shall have effect separately in relation to the assets and liabilities of the two kinds of business.

35 Form and situation of assets.U.K.

(1)Regulations may make provision for securing that, in such circumstances and to such extent as may be prescribed, the assets of an insurance company to which this Part of this Act applies are maintained in such places as may be prescribed and the nature of the assets is appropriate in relation to the currency in which the liabilities of the company are or may be required to be met.

(2)Regulations made for the purposes specified in subsection (1) above shall not have effect in relation to the assets of [F61an insurance company whose head office is in an EFTA State][F62or which is a Swiss general insurance company]so far as their value exceeds the amount of the liabilities of the business carried on by the company in the United Kingdom, that value and amount being determined in accordance with any applicable valuation regulations.

[35AF63 Adequacy of assets.U.K.

(1)A UK company shall secure—

(a)that its liabilities under contracts of insurance entered into by it, other than liabilities in respect of linked benefits, are covered by assets of appropriate safety, yield and marketability having regard to the classes of business carried on; and

(b)without prejudice to the generality of paragraph (a) above, that its investments are appropriately diversified and adequately spread and that excessive reliance is not placed on investments of any particular category or description.

(2)A UK company which has entered into a linked long term contract shall secure that, as far as practicable, its liabilities under the contract in respect of linked benefits are covered as follows—

(a)if those benefits are linked to the value of units in an undertaking for collective investments in transferable securities or to the value of assets contained in an internal fund, by those units or assets;

(b)if those benefits are linked to a share index or other reference value not mentioned in paragraph (a) above, by units which represent that reference value, or by assets of appropriate safety and marketability which correspond, as nearly as may be, to the assets on which that reference value is based.

(3)A UK company which has entered into a linked long term contract shall also secure that [ its liabilities under the contract in respect of linked benefitsunder the contract in respect of linked benefits as are not covered by contracts of reinsurance] are covered by assets of a description prescribed by regulations under section 78 below.

(4)In this section—

'linked benefits’, in relation to a contract of insurance, means benefits payable to the policy holder which are determined by reference to the value of or the income from property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified);

'linked long term contract’ means a contract ofinsurance —

(a)the effecting of which constitutes the carrying on of long term business; and

(b)under which linked benefits are payable to the policy holder.]

[F6435B Adequacy of premiums: long term business.U.K.

(1)Before entering into a contract of insurance the effecting of which constitutes the carrying on of long term business, a UK company shall satisfy itself that the aggregate of—

(a)the premiums payable under the contract and the income which will be derived from them; and

(b)any other resources of the company which will be available for the purpose,

will be sufficient, on reasonable actuarial assumptions, to meet all commitments arising under or in connection with the contract.

(2)A UK company shall not rely on other resources for the purposes of subsection (1) above in such a way as to jeopardise the solvency of the company in the long term.]

Financial resourcesU.K.

32 Margins of solvency.U.K.

(1)Every insurance company to which this Part of this Act applies—

(a)whose head office is in the United Kingdom, or

(b)whose business in the United Kingdom is restricted to reinsurance,

shall maintain a margin of solvency of such amount as may be prescribed by or determined in accordance with regulations made for the purposes of this section.

(2)Subject to subsection (3) below, every insurance company to which this Part of this Act applies whose head office is not in a member State shall maintain—

(a)a margin of solvency, and

(b)a United Kingdom margin of solvency,

of such amounts as may be prescribed by or determined in accordance with regulations made for the purposes of this section.

(3)Subsection (2) above shall not apply to an insurance company if its business in the United Kingdom is restricted to re-insurance [F53or if it is a Swiss general insurance company]or if section 9(2) above applies to it; but an insurance company that has made a deposit in the United Kingdom in accordance with section 9(2)(b) above shall maintain—

(a)a margin of solvency, and

(b)a [F54EEA margin of solvency],

of such amounts as may be prescribed by or determined in accordance with regulations made for the purposes of this section.

(4)An insurance company that fails to comply with subsection (1), (2) or (3) above—

(a)shall at the request of the Secretary of State submit to him a plan for the restoration of a sound financial position;

(b)shall propose modifications to the plan (or the plan as previously modified) if the Secretary of State considers it inadequate;

(c)shall give effect to any plan accepted by the Secretary of State as adequate.

(5)For the purposes of this Act—

(a)the margin of solvency of an insurance company is the excess of the value of its assets over the amount of its liabilities, that value and amount being determined in accordance with any applicable valuation regulations;

(b)the United Kingdom margin of solvency of an insurance company is its margin of solvency computed by reference to the assets and liabilities of the business carried on by the company in the United Kingdom;

(c)the [F55EEA margin of solvency] of an insurance company is its margin of solvency computed by reference to the assets and liabilities of the business carried on by the company [F56in EEA States (taken together)].

(6)In the case of an insurance company that carries on both long term and general business, subsections (1), (2) and (3) above shall have effect as if—

(a)the requirements to maintain a margin of solvency, and

(b)where the company carries on both kinds of business in the United Kingdom, the requirement to maintain a United Kingdom margin of solvency, and

(c)where the company carries on both kinds of business [F56in EEA States (taken together)], the requirement to maintain a [EEA margin of solvency],

were requirements to maintain separate margins in respect of the two kinds of business (and accordingly as if the references in subsection (5) to assets and liabilities were references to assets and liabilities relating to the kind of business in question).

33 Failure to maintain minimum margin.U.K.

(1)If—

(a)the margin of solvency of an insurance company to which section 32(1) above applies, or

(b)the margin of solvency or United Kingdom margin of solvency of an insurance company to which section 32(2) above applies, or

(c)the margin of solvency or [F57EEA margin of solvency] of an insurance company to which section 32(3) above applies,

falls below such amount as may be prescribed by or determined in accordance with regulations made for the purposes of this section, the company shall at the request of the Secretary of State submit to him a short-term financial scheme.

(2)An insurance company that has submitted a scheme to the Secretary of State under subsection (1) above shall propose modifications to the scheme (or the scheme as previously modified) if the Secretary of State considers it inadequate, and shall give effect to any scheme accepted by him as adequate.

(3)Where a company is required by virtue of section 32(6) above to maintain separate margins in respect of long term and general business, subsection (1) above shall have effect as if any reference to the margin of solvency, the United Kingdom margin of solvency or the [F57EEA margin of solvency] of the company were a reference to the margin in respect of either of the two kinds of business.

34 Companies supervised in other member States.U.K.

(1)An insurance company to which this Part of this Act applies—

[F58(a)whose head office is in an EEA State other than the United Kingdom, or

(b)which has in accordance with section 9(2) above made a deposit in such a State, or]

[F59or

(c)which is a Swiss general insurance company,]

shall secure that the value of the assets of the business carried on by it in the United Kingdom does not fall below the amount of the liabilities of that business, that value and amount being determined in accordance with any applicable valuation regulations.

(2)In the case of a company that carries on in the United Kingdom both long term and general business subsection (1) above shall have effect separately in relation to the assets and liabilities of the two kinds of business.

35 Form and situation of assets.U.K.

(1)Regulations may make provision for securing that, in such circumstances and to such extent as may be prescribed, the assets of an insurance company to which this Part of this Act applies are maintained in such places as may be prescribed and the nature of the assets is appropriate in relation to the currency in which the liabilities of the company are or may be required to be met.

(2)Regulations made for the purposes specified in subsection (1) above shall not have effect in relation to the assets of [F61an insurance company whose head office is in an EFTA State][F62or which is a Swiss general insurance company]so far as their value exceeds the amount of the liabilities of the business carried on by the company in the United Kingdom, that value and amount being determined in accordance with any applicable valuation regulations.

Liabilities of unlimited amountU.K.

36 Avoidance of contracts for unlimited amounts.U.K.

A contract entered into after the coming into force of this section by an insurance company to which this Part of this Act applies shall be void if—

(a)it is a contract under which the company undertakes a liability the amount, or maximum amount, of which is uncertain at the time when the contract is entered into; and

(b)it is not a contract of insurance or a contract of a class or description exempted by regulations from the operation of this section.

Powers of interventionU.K.

37 Grounds on which powers are exercisable.U.K.

(1)The powers conferred on the Secretary of State by sections 38 to 45 below shall be exercisable in relation to any insurance company to which this Part of this Act applies and shall be exercisable in accordance with the following provisions of this section.

(2)The powers conferred by sections 38 and 41 to 45 below shall be exercisable on any of the following grounds—

(a)that the Secretary of State considers the exercise of the power to be desirable for protecting policy holders or potential policy holders of the company against the risk that the company may be unable to meet its liabilities or, in the case of long term business, to fulfil the reasonable expectations of policy holders or potential policy holders;

[F65(aa)that the company is a UK or non-EC company and it appears to him that any of the criteria of sound and prudent management is not or has not been or may not be or may not have been fulfilled with respect to the company;]

(b)that it appears to him—

(i)that the company has failed to satisfy an obligation to which it is or was subject by virtue of this Act or any enactment repealed by this Act or by the Insurance Companies Act 1974;

[F66(ia)that the company has failed to satisfy an obligation to which it is subject by virtue of any provision of the law of another member State giving effect to the [F67general or long term insurance Directives];]

(ii)that a company of which it is a subsidiary has failed to satisfy an obligation to which it is or was subject by virtue of section 29(7) above or section 24(6) of the M9Insurance Companies Act 1974 or section 8(6) of the M10Insurance Companies Amendment Act 1973; or

(iii)that a subordinate company within the meaning of section 31 above of the company has failed to satisfy an obligation to which it is or was subject by virtue of that section or section 26 above or section 22 or 26 of the M11Insurance Companies Act 1974 or of section 6 or 10 of the said Act of 1973;

(c)that it appears to him that the company has furnished misleading or inaccurate information to the Secretary of State under or for the purposes of any provision of this Act or any enactment repealed by this Act or by the Insurance Companies Act 1974;

(d)that he is not satisfied that adequate arrangements are in force or will be made for the reinsurance of risks against which persons are insured by the company in the course of carrying on business, being risks of a class in the case of which he considers that such arrangements are required;

(e)that there exists a ground on which he would be prohibited, by section 7, 8 or 9 above, from issuing an authorisation with respect to the company if it were applied for;

(f)that it appears to him that there has been a substantial departure from any proposal or forecast submitted to him by the company in accordance with section 5 above;

(g)that the company has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in [F68an EFTA State where it has its head office or an EEA State where it] has in accordance with section 9(2) above made a deposit.

[F69(h)that the company is a Swiss general insurance company which has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in Switzerland.]

(3)The powers conferred on the Secretary of State by [F70sections 39, 40 and 40A]below shall not be exercisable in relation to an insurance company except—

(a)where the Secretary of State has given (and not revoked) a direction in respect of the company under [F71section 11 or 12A above] or section 11 of the M12Insurance Companies Act 1981; or

(b)on the ground that it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 33, 34 or 35 above or section 26B, 26C or 26D of the Insurance Companies Act 1974; or

(c)on the ground that a submission by the company to the Secretary of State of an account or statement specifies, as the amount of any liabilities of the company, an amount appearing to the Secretary of State to have been determined otherwise than in accordance with valuation regulations or, where no such regulations are applicable, generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies. [F72or

(d)on the grounds that the company is a UK or non-EC company and it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 32 or 35A above.]

(4)The power conferred on the Secretary of State by sub-sections (2) to (4) of section 44 below shall also be exercisable on the ground that he considers the exercise of that power to be desirable in the general interests of persons who are or may become policy holders of insurance companies to which this Part of this Act applies, and references in those subsections to a company include references to any body (whether incorporated or not) which appears to the Secretary of State to be an insurance company to which this Part of this Act applies.

[F73(4A)The powers conferred on the Secretary of State by sections 43A and 44 below shall be exercisable in respect of a UK or non-EC company to obtain information to enable him to perform his functions under this Act.]

(5)Any power conferred on the Secretary of State by section 38, 41, 42, 44(1) or 45 below shall also be exercisable, whether or not any of the grounds specified in subsections (2) and (4) above exists, in relation to—

(a)any body in respect of which the Secretary of State has issued an authorisation;

(b)any insurance company to which this Part of this Act applies in the case of which a person has become a controller within the meaning of [F74section 96C(1)(c), (d) or (e) below],

[F75(c)any UK company in a case where a person has notified an intention to acquire a notifiable holding in accordance with section 61A(1) below,]

if that power is exercised before the expiration of the period of five years beginning with the date on which the authorisation was issued or that person became such a controller [F76or acquired such a holding], as the case may be; but no requirement imposed by virtue of this sub-section shall continue in force after the expiration of the period of ten years beginning with that date.

(6)The power conferred on the Secretary of State by section 45 below shall not be exercisable except in a case in which he considers that the purpose mentioned in that section cannot be appropriately achieved by the exercise of the powers conferred by sections 38 to 44 below or by the exercise of those powers alone.

(7)The Secretary of State shall, when exercising any power conferred by sections 38 to 45 below, state the ground on which he is exercising it or, if he is exercising it by virtue of subsection (5) above, that he is so exercising it; but this subsection shall not apply where the Secretary of State has given notice under section 46 below of the proposed exercise of the power.

(8)The grounds specified in subsections (2)(b) to (g) and (4) above are without prejudice to the ground specified in sub-section (2)(a) above.

38 Requirements about investments.U.K.

(1)The Secretary of State may require a company—

(a)not to make investments of a specified class or description;

(b)to realise, before the expiration of a specified period (or such longer period as the Secretary of State may allow), the whole or a specified proportion of investments of a specified class or description held by the company when the requirement is imposed.

(2)A requirement under this section may be framed so as to apply only to investments which are (or, if made, would be) assets representing a fund or funds maintained by the company in respect of its long term business or so as to apply only to other investments.

(3)A requirement under this section shall not apply to the assets of a company so far as their value exceeds—

(a)in the case of a company

[F77(i)whose head office is in an EFTA State, or

(ii)which has in accordance with section 9(2) above made a deposit in an EEA State other than the United Kingdom, or

(iii)which is a Swiss general insurance company,]

the amount of the liabilities of the business carried on by the company in the United Kingdom;

(b)in any other case, the amount of the liabilities of the company;

that value and amount being determined in accordance with any applicable valuation regulations.

39 Maintenance of assets in the United Kingdom.U.K.

[F78(1)The Secretary of State may require—

(a)in the case of a UK company, that assets of the company of a value which at any time is equal to the whole or a specified proportion of the amount of its EC liabilities shall be maintained in the European Community; and

(b)in the case of an insurance company which is not a UK company, that assets of a value which at any time is equal to the whole or a specified proportion of the amount of its domestic liabilities shall be maintained in the United Kingdom.]

(2)The Secretary of State may direct that for the purposes of any requirement under this section assets of a specified class or description shall or shall not be treated

[F79(a)in the case of a UK company, as assets maintained in the European Community; and

(b)in the case of an insurance company which is not a UK company, as assets maintained in the United Kingdom]

(3)The Secretary of State may direct that for the purposes of any requirement under this section the [F80EC or domestic liabilities] of a company, or such liabilities of any class or description, shall be taken to be the net liabilities after deducting any part of them which is reinsured.

(4)A requirement imposed under this section may be framed so as to come into effect immediately after the day on which it is imposed or so as to come into effect after the expiration of a specified period (or such longer period as the Secretary of State may allow).

[F81(5)In this section—

(a)any reference to an EC liability is a reference to a liability of the business carried on by the company in the European Community; and

(b)any reference to a domestic liability is a reference to a liability of the business carried on by the company in the United Kingdom.]

(6)Subject to subsection (7) below, in computing the amount of any liabilities for the purposes of this section all contingent and prospective liabilities shall be taken into account but not liabilities in respect of share capital.

(7)For the purposes of this section the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations; and subsection (6) above shall have effect subject to any such regulations made by virtue of section 90(2) below.

40 Custody of assets.U.K.

(1)The Secretary of State may, in the case of a company on which a requirement has been imposed under section 39 above or under section 31 of the M13Insurance Companies Act 1974, impose an additional requirement that the whole or a specified proportion of the assets to which the requirement under that section applies shall be held by a person approved by him for the purposes of the requirement under this section as trustee for the company.

(2)Section 39(4) above shall apply also to a requirement under this section.

(3)Assets of a company held by a person as trustee for a company shall be taken to be held by him in compliance with a requirement imposed under this section if, and only if, they are assets in whose case the company has given him written notice that they are to be held by him in compliance with such a requirement or they are assets into which assets in whose case the company has given him such written notice have, by any transaction or series of transactions, been transposed by him on the instructions of the company.

(4)No assets held by a person as trustee for a company in compliance with a requirement imposed under this section shall, so long as the requirement is in force, be released except with the consent of the Secretary of State.

(5)If a mortgage or charge is created by a company at a time when there is in force a requirement imposed on the company by virtue of this section, being a mortgage or charge conferring a security on any assets which are held by a person as trustee for the company in compliance with the requirement, the mortgage or charge shall, to the extent it confers such a security, be void against the liquidator and any creditor of the company.

[F8240A Prohibition on disposal of assets.U.K.

(1)If on the application of the Secretary of State it appears to the court that any of the grounds set out in section 37(3) above are established in relation to a UK company, the court may grant an injunction restraining, or in Scotland an interdict prohibiting, the company from disposing of or otherwise dealing with any of its assets to the value of its EC liabilities.

(2)Where a court makes an order under subsection (1) above, it may by subsequent orders make provision for such incidental, consequential and supplementary matters as are necessary to enable the Secretary of State to perform his functions under this Act.

(3)The jurisdiction conferred by this section shall be exercisable by the High Court and the Court of Session.

(4)In this section “EC liabilities" has the same meaning as in section 39 above.]

41 Limitation of premium income.U.K.

(1)The Secretary of State may require a company to take all such steps as are requisite to secure that the aggregate of the premiums—

(a)to be received by the company in consideration of the undertaking by it during a specified period of liabilities in the course of carrying on general business or any specified part of such business; or

(b)to be received by it in a specified period in consideration of the undertaking by the company during that period of liabilities in the course of carrying on long term business or any specified part of such business.

shall not exceed a specified amount.

(2)A requirement under this section may apply either to the aggregate premiums to be received as mentioned in subsection (1) above or to the aggregate of those premiums after deducting any premiums payable by the company for reinsuring the liabilities in consideration of which the first-mentioned premiums are receivable.

42 Actuarial investigations.U.K.

(1)The Secretary of State may require a company which carries on long term business—

(a)to cause the person who for the time being is its actuary under section 19(1) above or any corresponding enactment previously in force to make an investigation into its financial condition in respect of that business, or any specified part of that business, as at a specified date;

(b)to cause an abstract of that person’s report of the investigation to be made; and

(c)to prepare a statement of its long term business or of that part thereof as at that date.

(2)For the purposes of any investigation made in pursuance of a requirement under this section the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations.

(3)The form and contents of any abstract or statement made in pursuance of a requirement under this section shall be the same as for an abstract or statement made under section 18 above and subsection (2) of that section shall apply to an investigation made in pursuance of this section as it applies to an investigation to which subsection (1)(b) of that section relates.

(4)Five copies of any abstract or statement made in pursuance of a requirement under this section shall be deposited by the company with the Secretary of State on or before such date as he may specify, and one of those copies shall be a copy signed by the persons required to sign copies of abstracts or statements made under the said section 18 which are deposited under section 22 above.

43 Acceleration of information required by accounting provisions.U.K.

(1)The Secretary of State may require any documents which under section 22 above are required to be deposited with him by a company within the period specified in that section to be deposited with him on or before a specified date before the end of that period, being a date not earlier than three months before the end of that period and not earlier than one month after the date on which the requirement is imposed.

(2)The Secretary of State may require any statement which under section 25 above is required to be deposited with him by a company within a period prescribed under that section to be deposited with him on or before a specified date before the end of that period.

[F8343A General investigations.U.K.

(1)The Secretary of State may appoint one or more competent persons to make an investigation into and report to the Secretary of State on—

(a)whether the criteria of sound and prudent management are fulfilled with respect to any insurance company which is a UK or non-EC company ; or

(b)where a person has notified the Secretary of State under section 60 or 61 below of his intention to become a controller of any such company, whether those criteria would be so fulfilled if that person became such a controller;

and the Secretary of State shall give written notice of any such appointment to the company.

(2)It shall be the duty of every person who is or was a director, manager, controller, agent, actuary, auditor or solicitor of a company which is under investigation—

(a)to produce to the persons appointed under subsection (1) above, within such time and at such place as they may require, all documents relating to the company which are in his custody or power;

(b)to attend before the persons so appointed at such time and place as they may require; and

(c)otherwise to give those persons all assistance in connection with the investigation which he is reasonably able to give;

and those persons may take copies of or extracts from any documents produced to them under paragraph (a) above.

(3)For the purpose of exercising his powers under this section a person appointed under subsection (1) above may enter any premises occupied by a company which is being investigated by him under this section; but he shall not do so without prior notice in writing unless he has reasonable cause to believe that if such a notice were given any documents whose production could be required would be removed, tampered with or destroyed.

(4)A person exercising powers by virtue of an appointment under this section shall, if so required, produce evidence of his authority.

(5)A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.]

44 Power to obtain information and require production of documents.U.K.

(1)The Secretary of State may require a company to furnish him, at specified times or intervals, with information about specified matters being, if he so requires, information verified in a specified manner.

(2)The Secretary of State may—

(a)require a company to produce, at such time and place as he may specify, such [F84documents] as he may specify; or

(b)authorise any person, on producing (if required so to do) evidence of his authority, to require a company to produce to him forthwith any [F84documents] which that person may specify.

[F85F85(2A)Subsections (1) and (2) above shall have effect as if any reference to a company included a reference to any person who is or has been a controller, officer, agent or employee of a UK or non-EC company and to any body corporate which is or has been—

(a)a parent undertaking or subsidiary undertaking of such a company;

(b)a subsidiary undertaking of a parent undertaking of such a company; or

(c)a parent undertaking of a subsidiary undertaking of such a company.

F85(2B)The Secretary of State may require a UK or non-EC company to furnish him, at a specified time, with a report by a specified person, being an actuary or accountant or other person with relevant professional skills, on any matter about which the Secretary of State has required, or could require, the company to provide information under subsection (1) above.]

(3)Where by virtue of subsection (2) above the Secretary of State or a person authorised by him has power to require the production of any [F84documents] from any company, the Secretary of State or that person shall have the like power to require production of those [F84documents] from any person who appears to him to be in possession of them; but where any person from whom such production is required claims a lien on [F84documents] produced by him, the production shall be without prejudice to the lien.

(4)Any power conferred by or by virtue of [F86subsections (2), (2A) and (3)]above to require a company or other person to produce [F84documents] shall include power—

(a)if the [F84documents] are produced—

(i)to take copies of them or extracts from them; and

(ii)to require that person, or any other person who is a present or past director, controller or auditor of, or is or was at any time employed by, the company in question, to provide an explanation of any of them;

(b)if the [F84documents] are not produced, to require the person who was required to produce them to state, to the best of his knowledge and belief, where they are.

[F87(4A)Any person authorised by the Secretary of State may, on producing if required evidence of his authority, enter any premises occupied by—

(a)a UK or non-EC company on which a requirement under subsection (1) or (2) above has been imposed; or

(b)a person on whom or a body on which such a requirement has been imposed by virtue of subsection (2A) above,

for the purpose of obtaining the information or documents required to be furnished or produced and exercising the powers conferred by subsection (4) above.]

(5)A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.

[F88(6)In this section “document” includes information recorded in any form; and, in relation to information recorded otherwise than in legible form, the power to require its production includes power to require the production of a copy of the information in legible form.]

[F8944A Entry and search of premises.U.K.

(1)A justice of the peace may issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, or by a person authorised to exercise powers under section 44 above, that there are reasonable grounds for believing that there are on any premises documents whose production has been required under section 44(2) to (4) above and which have not been produced in compliance with the requirement.

(2)A justice of the peace may also issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, or by a person authorised to exercise powers under section 44 above—

(a)that there are reasonable grounds for believing that an offence has been committed for which the penalty on conviction on indictment is imprisonment for a term of not less than two years and that there are on any premises documents relating to whether the offence has been committed,

(b)that the Secretary of State or, as the case may be, the authorised person has power to require the production of the documents under section 44(2) to (4) above, and

(c)that there are reasonable grounds for believing that if production was so required the documents would not be produced but would be removed from the premises, hidden, tampered with or destroyed.

(3)A warrant under this section shall authorise a constable, together with any other person named in it and any other constables—

(a)to enter the premises specified in the information, using such force as is reasonably necessary for the purpose;

(b)to search the premises and take possession of any documents appearing to be such documents as are mentioned in subsection (1) or (2), as the case may be, or to take, in relation to any such documents, any other steps which may appear to be necessary for preserving them or preventing interference with them;

(c)to take copies of any such documents; and

(d)to require any person named in the warrant to provide an explanation of them or to state where they may be found.

(4)f in the case of a warrant under subsection (2) the justice of the peace is satisfied on information on oath that there are reasonable grounds for believing that there are also on the premises other documents relevant to the investigation, the warrant shall also authorise the actions mentioned in subsection (3) to be taken in relation to such documents.

(5)A warrant under this section shall continue in force until the end of the period of one month beginning with the day on which it is issued.

(6)Any documents of which possession is taken under this section may be retained—

(a)for a period of three months; or

(b)if within that period proceedings to which the documents are relevant are commenced against any person for any criminal offence, until the conclusion of those proceedings.

(7)In the application of this section to Scotland for the references to a justice of the peace substitute references to a justice of the peace or a sheriff, and for the references to information on oath substitute references to evidence on oath.

(8)In this section “document” includes information recorded in any form.]

45 Residual power to impose requirements for protection of policy holders.U.K.

[F90(1)The Secretary of State may require a company to take such action as appears to him to be appropriate—

(a)for the purpose of protecting policy holders or potential policy holders of the company against the risk that the company may be unable to meet its liabilities or, in the case of long term business, to fulfil the reasonable expectations of policy holders or potential policy holders; or

(b)in the case of a UK or non-EC company, for the purpose of ensuring that the criteria of sound and prudent management are fulfilled with respect to the company.]

(2)The power conferred by this section shall not be exercised in such a way as to restrict the company’s freedom to dispose of its assets except where it is exercised—

(a)after the Secretary of State has given a direction under [F91section 11 or 12A above] or section 11 of the M14Insurance Companies Act 1981; or

(b)on the ground that it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 33, 34 or 35 above or section 26B, 26C or 26D of the M15Insurance Companies Act 1974; or

(c)where the ground for intervention arises out of the submission by the company to the Secretary of State of an account or statement specifying, as the amount of any liabilities of the company, an amount appearing to the Secretary of State to have been determined otherwise than in accordance with valuation regulations or, where no such regulations are applicable, generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies [F92or

F92(d)on the grounds that the company is a UK or non-EC company and it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 32 or 35A above.]

46 Notice of proposed exercise of powers on ground of unfitness of certain persons.U.K.

(1)Before exercising with respect to a company any power or powers conferred by sections 38 to 45 above on the ground that he would be prohibited from issuing an authorisation to the company because of the unfitness of a person for the position held by him (not being that of controller of the company), the Secretary of State shall serve on that person a written notice stating—

(a)that the Secretary of State is considering exercising a power or powers by those sections and the ground on which he is considering the exercise of the power or powers; and

(b)that the person on whom the notice is served may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if that person so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.

(2)Unless the Secretary of State, after considering any representations made in accordance with subsection (1) above by the person served with a notice under that subsection, decides not to exercise the power or powers in relation to which the notice was served, he shall before exercising the power or powers serve on the company a written notice—

(a)containing the matters mentioned in paragraphs (a) and (b) of that subsection, taking references to the person there mentioned as references to the company; and

(b)specifying the power or powers which he proposes to exercise and, if the power or one of them is that conferred by section 45 above, specifying the manner of its proposed exercise.

(3)A notice under this section shall give particulars of the ground on which the Secretary of State is considering the exercise of the power or powers in question.

(4)Where representations are made in accordance with this section the Secretary of State shall take them into consideration before exercising the power or powers in question.

(5)A requirement imposed on a company in the exercise of any power or powers to which this section applies may be framed so as to come into effect after the expiration of a specified period (or such longer period as the Secretary of State may allow) unless before the expiration of that period the person whose fitness is in question has ceased to hold the position concerned.

47 Rescission, variation and publication of requirements.U.K.

(1)The Secretary of State may rescind a requirement imposed under sections 38 to 45 above if it appears to him that it is no longer necessary for the requirement to continue in force, and may from time to time vary any such requirement.

(2)No requirement imposed by virtue of subsection (5) of section 37 above shall be varied after the expiration of the period of five years mentioned in that subsection except in a manner which relaxes that requirement.

(3)Where a requirement is imposed under section 40 above or any such requirement is rescinded or varied the Secretary of State shall forthwith serve—

(a)except where paragraph (b) below applies, on the registrar of companies or on the registrar of companies in Northern Ireland or on both;

(b)if the requirement is imposed on a registered society, on the appropriate registrar as defined by section 73(1) of the M16Industrial and Provident Societies Act 1965 in the case of a society registered in Great Britain or on the registrar as defined by section 101(1) of the M17Industrial and Provident Societies Act (Northern Ireland) 1969 in the case of a society registered in Northern Ireland;

a written notice stating that fact and, in the case of a notice of the imposition of a requirement, setting out the terms of the requirement, in the case of a notice of the rescission of a requirement, identifying the requirement and, in the case of a notice of a variation of a requirement, identifying the requirement and setting out the terms of the variation.

(4)A notice served in pursuance of subsection (3) above on the registrar of companies or the registrar of companies in Northern Ireland shall be open to inspection, and a copy thereof may be procured by any person on payment of such fee as the Secretary of State or, in the case of a notice served on the registrar of companies in Northern Ireland, the Department of Commerce for Northern Ireland may direct; and every document purporting to be certified by the registrar of companies or the registrar of companies in Northern Ireland to be a copy of such a notice shall be deemed to be a copy of that notice and shall be received in evidence as if it were the original notice unless some variation between it and the original is proved.

(5)Section 71(1) of the said Act of 1965 (which empowers the Treasury to make regulations respecting, among other things, the inspection of documents kept by the appropriate registrar under that Act) and section 97(1) of the said Act of 1969 (which confers corresponding powers on the Department of Commerce for Northern Ireland) shall have effect as if the reference to documents so kept included a reference to notices served in pursuance of subsection (3) above on the appropriate registrar or, as the case may be, on the registrar.

[F9347A Restriction on disclosure of information.U.K.

Schedule 2B to this Act (which, subject to certain exceptions, restricts the disclosure of information obtained under or by virtue of this Act) shall have effect.]

[F9447B Privilege from disclosure.U.K.

(1)A requirement imposed under [F95section 43A or 44(2) to (4)] above shall not compel the production by any person of a document which he would in an action in the High Court or, in Scotland, in the Court of Session be entitled to refuse to produce on grounds of legal professional privilege or authorise the taking of possession of any such document which is in his possession.

(2)F96]

48 Power of Secretary of State to bring civil proceedings on behalf of insurance company.U.K.

(1)[F97Section 438(1) of the Companies Act] (power of Secretary of State to bring civil proceedings on behalf of body corporate) shall have effect in relation to an insurance company to which this Part of this Act applies (whether or not a body corporate) as if the reference to any information or document obtained under the provisions there mentioned included a reference to any information or document obtained under this Act or any enactment repealed by this Act or by the M18Insurance Companies Act 1974.

(2)The Secretary of State may bring civil proceedings in the name and on behalf of an insurance company to which this Part of the Act applies (whether or not a body corporate) under [F98Article 431(1) of the Companies (Northern Ireland) Order 1986] and that subsection shall have effect in relation to such an insurance company as if the reference to any information or document obtained under the provisions there mentioned included a reference to any information or document obtained under this Act or any enactment repealed by this Act or by the M19Insurance Companies Act 1980 and any reference to the Department of Commerce for Northern Ireland were a reference to the Secretary of State.

(3)Where under a judgment given or decree pronounced in proceedings brought by virtue of [F99section 438(1) of the Companies Act] or [F100Article 431(1) of the said Order of 1986] on behalf of an insurance company a sum is recovered in respect of a loss of assets representing a fund or funds maintained by the company in respect of its long term business the court shall direct that the sum shall be treated for the purposes of this Act as assets of that fund or those funds and this Act shall have effect accordingly.

Powers of interventionU.K.

37 Grounds on which powers are exercisable.U.K.

(1)The powers conferred on the Secretary of State by sections 38 to 45 below shall be exercisable in relation to any insurance company to which this Part of this Act applies and shall be exercisable in accordance with the following provisions of this section.

(2)The powers conferred by sections 38 and 41 to 45 below shall be exercisable on any of the following grounds—

(a)that the Secretary of State considers the exercise of the power to be desirable for protecting policy holders or potential policy holders of the company against the risk that the company may be unable to meet its liabilities or, in the case of long term business, to fulfil the reasonable expectations of policy holders or potential policy holders;

[F65(aa)that the company is a UK or non-EC company and it appears to him that any of the criteria of sound and prudent management is not or has not been or may not be or may not have been fulfilled with respect to the company;]

(b)that it appears to him—

(i)that the company has failed to satisfy an obligation to which it is or was subject by virtue of this Act or any enactment repealed by this Act or by the Insurance Companies Act 1974;

[F66(ia)that the company has failed to satisfy an obligation to which it is subject by virtue of any provision of the law of another member State giving effect to the [F67general or long term insurance Directives];]

(ii)that a company of which it is a subsidiary has failed to satisfy an obligation to which it is or was subject by virtue of section 29(7) above or section 24(6) of the M9Insurance Companies Act 1974 or section 8(6) of the M10Insurance Companies Amendment Act 1973; or

(iii)that a subordinate company within the meaning of section 31 above of the company has failed to satisfy an obligation to which it is or was subject by virtue of that section or section 26 above or section 22 or 26 of the M11Insurance Companies Act 1974 or of section 6 or 10 of the said Act of 1973;

(c)that it appears to him that the company has furnished misleading or inaccurate information to the Secretary of State under or for the purposes of any provision of this Act or any enactment repealed by this Act or by the Insurance Companies Act 1974;

(d)that he is not satisfied that adequate arrangements are in force or will be made for the reinsurance of risks against which persons are insured by the company in the course of carrying on business, being risks of a class in the case of which he considers that such arrangements are required;

(e)that there exists a ground on which he would be prohibited, by section 7, 8 or 9 above, from issuing an authorisation with respect to the company if it were applied for;

(f)that it appears to him that there has been a substantial departure from any proposal or forecast submitted to him by the company in accordance with section 5 above;

(g)that the company has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in [F68an EFTA State where it has its head office or an EEA State where it] has in accordance with section 9(2) above made a deposit.

[F69(h)that the company is a Swiss general insurance company which has ceased to be authorised to effect contracts of insurance, or contracts of a particular description, in Switzerland.]

(3)The powers conferred on the Secretary of State by [F70sections 39, 40 and 40A]below shall not be exercisable in relation to an insurance company except—

(a)where the Secretary of State has given (and not revoked) a direction in respect of the company under [F71section 11 or 12A above] or section 11 of the M12Insurance Companies Act 1981; or

(b)on the ground that it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 33, 34 or 35 above or section 26B, 26C or 26D of the Insurance Companies Act 1974; or

(c)on the ground that a submission by the company to the Secretary of State of an account or statement specifies, as the amount of any liabilities of the company, an amount appearing to the Secretary of State to have been determined otherwise than in accordance with valuation regulations or, where no such regulations are applicable, generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies. [F72or

(d)on the grounds that the company is a UK or non-EC company and it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 32 or 35A above.]

(4)The power conferred on the Secretary of State by sub-sections (2) to (4) of section 44 below shall also be exercisable on the ground that he considers the exercise of that power to be desirable in the general interests of persons who are or may become policy holders of insurance companies to which this Part of this Act applies, and references in those subsections to a company include references to any body (whether incorporated or not) which appears to the Secretary of State to be an insurance company to which this Part of this Act applies.

[F73(4A)The powers conferred on the Secretary of State by sections 43A and 44 below shall be exercisable in respect of a UK or non-EC company to obtain information to enable him to perform his functions under this Act.]

(5)Any power conferred on the Secretary of State by section 38, 41, 42, 44(1) or 45 below shall also be exercisable, whether or not any of the grounds specified in subsections (2) and (4) above exists, in relation to—

(a)any body in respect of which the Secretary of State has issued an authorisation;

(b)any insurance company to which this Part of this Act applies in the case of which a person has become a controller within the meaning of [F74section 96C(1)(c), (d) or (e) below],

[F75(c)any UK company in a case where a person has notified an intention to acquire a notifiable holding in accordance with section 61A(1) below,]

if that power is exercised before the expiration of the period of five years beginning with the date on which the authorisation was issued or that person became such a controller [F76or acquired such a holding], as the case may be; but no requirement imposed by virtue of this sub-section shall continue in force after the expiration of the period of ten years beginning with that date.

(6)The power conferred on the Secretary of State by section 45 below shall not be exercisable except in a case in which he considers that the purpose mentioned in that section cannot be appropriately achieved by the exercise of the powers conferred by sections 38 to 44 below or by the exercise of those powers alone.

(7)The Secretary of State shall, when exercising any power conferred by sections 38 to 45 below, state the ground on which he is exercising it or, if he is exercising it by virtue of subsection (5) above, that he is so exercising it; but this subsection shall not apply where the Secretary of State has given notice under section 46 below of the proposed exercise of the power.

(8)The grounds specified in subsections (2)(b) to (g) and (4) above are without prejudice to the ground specified in sub-section (2)(a) above.

38 Requirements about investments.U.K.

(1)The Secretary of State may require a company—

(a)not to make investments of a specified class or description;

(b)to realise, before the expiration of a specified period (or such longer period as the Secretary of State may allow), the whole or a specified proportion of investments of a specified class or description held by the company when the requirement is imposed.

(2)A requirement under this section may be framed so as to apply only to investments which are (or, if made, would be) assets representing a fund or funds maintained by the company in respect of its long term business or so as to apply only to other investments.

(3)A requirement under this section shall not apply to the assets of a company so far as their value exceeds—

(a)in the case of a company

[F77(i)whose head office is in an EFTA State, or

(ii)which has in accordance with section 9(2) above made a deposit in an EEA State other than the United Kingdom, or

(iii)which is a Swiss general insurance company,]

the amount of the liabilities of the business carried on by the company in the United Kingdom;

(b)in any other case, the amount of the liabilities of the company;

that value and amount being determined in accordance with any applicable valuation regulations.

39 Maintenance of assets in the United Kingdom.U.K.

[F78(1)The Secretary of State may require—

(a)in the case of a UK company, that assets of the company of a value which at any time is equal to the whole or a specified proportion of the amount of its EC liabilities shall be maintained in the European Community; and

(b)in the case of an insurance company which is not a UK company, that assets of a value which at any time is equal to the whole or a specified proportion of the amount of its domestic liabilities shall be maintained in the United Kingdom.]

(2)The Secretary of State may direct that for the purposes of any requirement under this section assets of a specified class or description shall or shall not be treated

[F79(a)in the case of a UK company, as assets maintained in the European Community; and

(b)in the case of an insurance company which is not a UK company, as assets maintained in the United Kingdom]

(3)The Secretary of State may direct that for the purposes of any requirement under this section the [F80EC or domestic liabilities] of a company, or such liabilities of any class or description, shall be taken to be the net liabilities after deducting any part of them which is reinsured.

(4)A requirement imposed under this section may be framed so as to come into effect immediately after the day on which it is imposed or so as to come into effect after the expiration of a specified period (or such longer period as the Secretary of State may allow).

[F81(5)In this section—

(a)any reference to an EC liability is a reference to a liability of the business carried on by the company in the European Community; and

(b)any reference to a domestic liability is a reference to a liability of the business carried on by the company in the United Kingdom.]

(6)Subject to subsection (7) below, in computing the amount of any liabilities for the purposes of this section all contingent and prospective liabilities shall be taken into account but not liabilities in respect of share capital.

(7)For the purposes of this section the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations; and subsection (6) above shall have effect subject to any such regulations made by virtue of section 90(2) below.

40 Custody of assets.U.K.

(1)The Secretary of State may, in the case of a company on which a requirement has been imposed under section 39 above or under section 31 of the M13Insurance Companies Act 1974, impose an additional requirement that the whole or a specified proportion of the assets to which the requirement under that section applies shall be held by a person approved by him for the purposes of the requirement under this section as trustee for the company.

(2)Section 39(4) above shall apply also to a requirement under this section.

(3)Assets of a company held by a person as trustee for a company shall be taken to be held by him in compliance with a requirement imposed under this section if, and only if, they are assets in whose case the company has given him written notice that they are to be held by him in compliance with such a requirement or they are assets into which assets in whose case the company has given him such written notice have, by any transaction or series of transactions, been transposed by him on the instructions of the company.

(4)No assets held by a person as trustee for a company in compliance with a requirement imposed under this section shall, so long as the requirement is in force, be released except with the consent of the Secretary of State.

(5)If a mortgage or charge is created by a company at a time when there is in force a requirement imposed on the company by virtue of this section, being a mortgage or charge conferring a security on any assets which are held by a person as trustee for the company in compliance with the requirement, the mortgage or charge shall, to the extent it confers such a security, be void against the liquidator and any creditor of the company.

41 Limitation of premium income.U.K.

(1)The Secretary of State may require a company to take all such steps as are requisite to secure that the aggregate of the premiums—

(a)to be received by the company in consideration of the undertaking by it during a specified period of liabilities in the course of carrying on general business or any specified part of such business; or

(b)to be received by it in a specified period in consideration of the undertaking by the company during that period of liabilities in the course of carrying on long term business or any specified part of such business.

shall not exceed a specified amount.

(2)A requirement under this section may apply either to the aggregate premiums to be received as mentioned in subsection (1) above or to the aggregate of those premiums after deducting any premiums payable by the company for reinsuring the liabilities in consideration of which the first-mentioned premiums are receivable.

42 Actuarial investigations.U.K.

(1)The Secretary of State may require a company which carries on long term business—

(a)to cause the person who for the time being is its actuary under section 19(1) above or any corresponding enactment previously in force to make an investigation into its financial condition in respect of that business, or any specified part of that business, as at a specified date;

(b)to cause an abstract of that person’s report of the investigation to be made; and

(c)to prepare a statement of its long term business or of that part thereof as at that date.

(2)For the purposes of any investigation made in pursuance of a requirement under this section the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations.

(3)The form and contents of any abstract or statement made in pursuance of a requirement under this section shall be the same as for an abstract or statement made under section 18 above and subsection (2) of that section shall apply to an investigation made in pursuance of this section as it applies to an investigation to which subsection (1)(b) of that section relates.

(4)Five copies of any abstract or statement made in pursuance of a requirement under this section shall be deposited by the company with the Secretary of State on or before such date as he may specify, and one of those copies shall be a copy signed by the persons required to sign copies of abstracts or statements made under the said section 18 which are deposited under section 22 above.

43 Acceleration of information required by accounting provisions.U.K.

(1)The Secretary of State may require any documents which under section 22 above are required to be deposited with him by a company within the period specified in that section to be deposited with him on or before a specified date before the end of that period, being a date not earlier than three months before the end of that period and not earlier than one month after the date on which the requirement is imposed.

(2)The Secretary of State may require any statement which under section 25 above is required to be deposited with him by a company within a period prescribed under that section to be deposited with him on or before a specified date before the end of that period.

44 Power to obtain information and require production of documents.U.K.

(1)The Secretary of State may require a company to furnish him, at specified times or intervals, with information about specified matters being, if he so requires, information verified in a specified manner.

(2)The Secretary of State may—

(a)require a company to produce, at such time and place as he may specify, such [F84documents] as he may specify; or

(b)authorise any person, on producing (if required so to do) evidence of his authority, to require a company to produce to him forthwith any [F84documents] which that person may specify.

[F85F85(2A)Subsections (1) and (2) above shall have effect as if any reference to a company included a reference to any person who is or has been a controller, officer, agent or employee of a UK or non-EC company and to any body corporate which is or has been—

(a)a parent undertaking or subsidiary undertaking of such a company;

(b)a subsidiary undertaking of a parent undertaking of such a company; or

(c)a parent undertaking of a subsidiary undertaking of such a company.

F85(2B)The Secretary of State may require a UK or non-EC company to furnish him, at a specified time, with a report by a specified person, being an actuary or accountant or other person with relevant professional skills, on any matter about which the Secretary of State has required, or could require, the company to provide information under subsection (1) above.]

(3)Where by virtue of subsection (2) above the Secretary of State or a person authorised by him has power to require the production of any [F84documents] from any company, the Secretary of State or that person shall have the like power to require production of those [F84documents] from any person who appears to him to be in possession of them; but where any person from whom such production is required claims a lien on [F84documents] produced by him, the production shall be without prejudice to the lien.

(4)Any power conferred by or by virtue of [F86subsections (2), (2A) and (3)]above to require a company or other person to produce [F84documents] shall include power—

(a)if the [F84documents] are produced—

(i)to take copies of them or extracts from them; and

(ii)to require that person, or any other person who is a present or past director, controller or auditor of, or is or was at any time employed by, the company in question, to provide an explanation of any of them;

(b)if the [F84documents] are not produced, to require the person who was required to produce them to state, to the best of his knowledge and belief, where they are.

[F87(4A)Any person authorised by the Secretary of State may, on producing if required evidence of his authority, enter any premises occupied by—

(a)a UK or non-EC company on which a requirement under subsection (1) or (2) above has been imposed; or

(b)a person on whom or a body on which such a requirement has been imposed by virtue of subsection (2A) above,

for the purpose of obtaining the information or documents required to be furnished or produced and exercising the powers conferred by subsection (4) above.]

(5)A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.

[F88(6)In this section “document” includes information recorded in any form; and, in relation to information recorded otherwise than in legible form, the power to require its production includes power to require the production of a copy of the information in legible form.]

[F8944A Entry and search of premises.U.K.

(1)A justice of the peace may issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, or by a person authorised to exercise powers under section 44 above, that there are reasonable grounds for believing that there are on any premises documents whose production has been required under section 44(2) to (4) above and which have not been produced in compliance with the requirement.

(2)A justice of the peace may also issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, or by a person authorised to exercise powers under section 44 above—

(a)that there are reasonable grounds for believing that an offence has been committed for which the penalty on conviction on indictment is imprisonment for a term of not less than two years and that there are on any premises documents relating to whether the offence has been committed,

(b)that the Secretary of State or, as the case may be, the authorised person has power to require the production of the documents under section 44(2) to (4) above, and

(c)that there are reasonable grounds for believing that if production was so required the documents would not be produced but would be removed from the premises, hidden, tampered with or destroyed.

(3)A warrant under this section shall authorise a constable, together with any other person named in it and any other constables—

(a)to enter the premises specified in the information, using such force as is reasonably necessary for the purpose;

(b)to search the premises and take possession of any documents appearing to be such documents as are mentioned in subsection (1) or (2), as the case may be, or to take, in relation to any such documents, any other steps which may appear to be necessary for preserving them or preventing interference with them;

(c)to take copies of any such documents; and

(d)to require any person named in the warrant to provide an explanation of them or to state where they may be found.

(4)f in the case of a warrant under subsection (2) the justice of the peace is satisfied on information on oath that there are reasonable grounds for believing that there are also on the premises other documents relevant to the investigation, the warrant shall also authorise the actions mentioned in subsection (3) to be taken in relation to such documents.

(5)A warrant under this section shall continue in force until the end of the period of one month beginning with the day on which it is issued.

(6)Any documents of which possession is taken under this section may be retained—

(a)for a period of three months; or

(b)if within that period proceedings to which the documents are relevant are commenced against any person for any criminal offence, until the conclusion of those proceedings.

(7)In the application of this section to Scotland for the references to a justice of the peace substitute references to a justice of the peace or a sheriff, and for the references to information on oath substitute references to evidence on oath.

(8)In this section “document” includes information recorded in any form.]

45 Residual power to impose requirements for protection of policy holders.U.K.

[F90(1)The Secretary of State may require a company to take such action as appears to him to be appropriate—

(a)for the purpose of protecting policy holders or potential policy holders of the company against the risk that the company may be unable to meet its liabilities or, in the case of long term business, to fulfil the reasonable expectations of policy holders or potential policy holders; or

(b)in the case of a UK or non-EC company, for the purpose of ensuring that the criteria of sound and prudent management are fulfilled with respect to the company.]

(2)The power conferred by this section shall not be exercised in such a way as to restrict the company’s freedom to dispose of its assets except where it is exercised—

(a)after the Secretary of State has given a direction under [F91section 11 or 12A above] or section 11 of the M14Insurance Companies Act 1981; or

(b)on the ground that it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 33, 34 or 35 above or section 26B, 26C or 26D of the M15Insurance Companies Act 1974; or

(c)where the ground for intervention arises out of the submission by the company to the Secretary of State of an account or statement specifying, as the amount of any liabilities of the company, an amount appearing to the Secretary of State to have been determined otherwise than in accordance with valuation regulations or, where no such regulations are applicable, generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies [F92or

F92(d)on the grounds that the company is a UK or non-EC company and it appears to the Secretary of State that the company has failed to satisfy an obligation to which it is or was subject by virtue of section 32 or 35A above.]

46 Notice of proposed exercise of powers on ground of unfitness of certain persons.U.K.

(1)Before exercising with respect to a company any power or powers conferred by sections 38 to 45 above on the ground that he would be prohibited from issuing an authorisation to the company because of the unfitness of a person for the position held by him (not being that of controller of the company), the Secretary of State shall serve on that person a written notice stating—

(a)that the Secretary of State is considering exercising a power or powers by those sections and the ground on which he is considering the exercise of the power or powers; and

(b)that the person on whom the notice is served may, within the period of one month from the date of service of the notice, make written representations to the Secretary of State and, if that person so requests, oral representations to an officer of the Department of Trade appointed for the purpose by the Secretary of State.

(2)Unless the Secretary of State, after considering any representations made in accordance with subsection (1) above by the person served with a notice under that subsection, decides not to exercise the power or powers in relation to which the notice was served, he shall before exercising the power or powers serve on the company a written notice—

(a)containing the matters mentioned in paragraphs (a) and (b) of that subsection, taking references to the person there mentioned as references to the company; and

(b)specifying the power or powers which he proposes to exercise and, if the power or one of them is that conferred by section 45 above, specifying the manner of its proposed exercise.

(3)A notice under this section shall give particulars of the ground on which the Secretary of State is considering the exercise of the power or powers in question.

(4)Where representations are made in accordance with this section the Secretary of State shall take them into consideration before exercising the power or powers in question.

(5)A requirement imposed on a company in the exercise of any power or powers to which this section applies may be framed so as to come into effect after the expiration of a specified period (or such longer period as the Secretary of State may allow) unless before the expiration of that period the person whose fitness is in question has ceased to hold the position concerned.

47 Rescission, variation and publication of requirements.U.K.

(1)The Secretary of State may rescind a requirement imposed under sections 38 to 45 above if it appears to him that it is no longer necessary for the requirement to continue in force, and may from time to time vary any such requirement.

(2)No requirement imposed by virtue of subsection (5) of section 37 above shall be varied after the expiration of the period of five years mentioned in that subsection except in a manner which relaxes that requirement.

(3)Where a requirement is imposed under section 40 above or any such requirement is rescinded or varied the Secretary of State shall forthwith serve—

(a)except where paragraph (b) below applies, on the registrar of companies or on the registrar of companies in Northern Ireland or on both;

(b)if the requirement is imposed on a registered society, on the appropriate registrar as defined by section 73(1) of the M16Industrial and Provident Societies Act 1965 in the case of a society registered in Great Britain or on the registrar as defined by section 101(1) of the M17Industrial and Provident Societies Act (Northern Ireland) 1969 in the case of a society registered in Northern Ireland;

a written notice stating that fact and, in the case of a notice of the imposition of a requirement, setting out the terms of the requirement, in the case of a notice of the rescission of a requirement, identifying the requirement and, in the case of a notice of a variation of a requirement, identifying the requirement and setting out the terms of the variation.

(4)A notice served in pursuance of subsection (3) above on the registrar of companies or the registrar of companies in Northern Ireland shall be open to inspection, and a copy thereof may be procured by any person on payment of such fee as the Secretary of State or, in the case of a notice served on the registrar of companies in Northern Ireland, the Department of Commerce for Northern Ireland may direct; and every document purporting to be certified by the registrar of companies or the registrar of companies in Northern Ireland to be a copy of such a notice shall be deemed to be a copy of that notice and shall be received in evidence as if it were the original notice unless some variation between it and the original is proved.

(5)Section 71(1) of the said Act of 1965 (which empowers the Treasury to make regulations respecting, among other things, the inspection of documents kept by the appropriate registrar under that Act) and section 97(1) of the said Act of 1969 (which confers corresponding powers on the Department of Commerce for Northern Ireland) shall have effect as if the reference to documents so kept included a reference to notices served in pursuance of subsection (3) above on the appropriate registrar or, as the case may be, on the registrar.

[F9347A Restriction on disclosure of information.U.K.

Schedule 2B to this Act (which, subject to certain exceptions, restricts the disclosure of information obtained under or by virtue of this Act) shall have effect.]

[F9447B Privilege from disclosure.U.K.

(1)A requirement imposed under [F95section 43A or 44(2) to (4)] above shall not compel the production by any person of a document which he would in an action in the High Court or, in Scotland, in the Court of Session be entitled to refuse to produce on grounds of legal professional privilege or authorise the taking of possession of any such document which is in his possession.

(2)F96]

48 Power of Secretary of State to bring civil proceedings on behalf of insurance company.U.K.

(1)[F97Section 438(1) of the Companies Act] (power of Secretary of State to bring civil proceedings on behalf of body corporate) shall have effect in relation to an insurance company to which this Part of this Act applies (whether or not a body corporate) as if the reference to any information or document obtained under the provisions there mentioned included a reference to any information or document obtained under this Act or any enactment repealed by this Act or by the M18Insurance Companies Act 1974.

(2)The Secretary of State may bring civil proceedings in the name and on behalf of an insurance company to which this Part of the Act applies (whether or not a body corporate) under [F98Article 431(1) of the Companies (Northern Ireland) Order 1986] and that subsection shall have effect in relation to such an insurance company as if the reference to any information or document obtained under the provisions there mentioned included a reference to any information or document obtained under this Act or any enactment repealed by this Act or by the M19Insurance Companies Act 1980 and any reference to the Department of Commerce for Northern Ireland were a reference to the Secretary of State.

(3)Where under a judgment given or decree pronounced in proceedings brought by virtue of [F99section 438(1) of the Companies Act] or [F100Article 431(1) of the said Order of 1986] on behalf of an insurance company a sum is recovered in respect of a loss of assets representing a fund or funds maintained by the company in respect of its long term business the court shall direct that the sum shall be treated for the purposes of this Act as assets of that fund or those funds and this Act shall have effect accordingly.

Transfers of long term businessU.K.

[F10149 Transfers of long term and general general business.U.K.

Schedule 2C to this Act shall have effect long term and with respect to transfers of business.]

[F10349A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F104F105[49B].. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10650. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfers of long term businessU.K.

[F10149 Transfers of long term and general general business.U.K.

Schedule 2C to this Act shall have effect long term and with respect to transfers of business.]

F10650. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfers of long term businessU.K.

[F10149 Transfers of long term and general general business.U.K.

Schedule 2C to this Act shall have effect long term and with respect to transfers of business.]

[F10349A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10650. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfers of long term businessU.K.

[F10149 Transfers of long term and general general business.U.K.

Schedule 2C to this Act shall have effect long term and with respect to transfers of business.]

[F10349A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F104F105[49B].. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10650. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfers of general businessU.K.

F11151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F11652A Issue of certificates by Secretary of State.U.K.

[F117(1)Where it is proposed to execute an instrument by which—

(a)an EC company, or a non-EC company whose head office is in an EFTA State, is to transfer—

(i)to a UK company; or

(ii)to a non-EC company whose solvency is supervised by the Secretary of State in accordance with Article 29 or 30 of the first long term insurance Directive or Article 25 or 26 of the first general insurance Directive,

all its rights and obligations under such long term or general policies, or long term or general policies of such descriptions, as may be specified in the instrument; or

(b)a Swiss general insurance company is to transfer to a UK company all its rights and obligations under such general policies, or general policies of such descriptions, as may be so specified,

the Secretary of State may, if he is satisfied that the transferee possesses the necessary margin of solvency after taking the proposed transfer into account, issue a certificate to that effect.]

(2)In this section “general policy" means a policy evidencing a contract the effecting of which constituted the carrying on of general business, other than reinsurance; [F118'long term policy’ means a policy evidencing a contract the effecting of which constitutes the carrying on of long term business, other than reinsurance].]

[F11952B Effect of transfers authorised in other EEA States.U.K.

(1)This section applies where—

(a)an EC company transfers to another body all its rights and obligations under any UK policies and the transfer is authorised in its home State in accordance with—

(i)Article 11 of the third long term insurance Directive, or

(ii)Article 12 of the third general insurance Directive;

(b)a non-EC company whose head office is in an EFTA State transfers to another body all its rights and obligations under any UK policies and the transfer is authorised in an EEA State other than the United Kingdom in accordance with—

(i)Article 6 of the second long term insurance Directive, or

(ii)Article 11 of the second general insurance Directive; or

(c)a non-EC company whose head office is not in an EFTA State transfers to another body all its rights and obligations under any UK policies and the transfer is authorised in a member State other than the United Kingdom in accordance with—

(i)Article 31a of the first long term insurance Directive (as amended by Article 49 of the third long term insurance Directive), or

(ii)Article 28a of the first general insurance Directive (as amended by Article 53 of the third general insurance Directive).

(2)If notice of the execution of the instrument giving effect to the transfer is published in such manner as the Secretary of State may from time to time direct, the instrument shall be effectual in law—

(a)to transfer to the transferee all the transferor’s rights and obligations under the UK policies included in the instrument, and

(b)if the instrument so provides, to secure the continuation by or against the transferee of any legal proceedings by or against the transferor which relate to those rights or obligations,

notwithstanding the absence of any agreements or consents which would otherwise be necessary for it to be effectual in law for those purposes.

(3)Directions under this section may make different provision for different cases or descriptions of case.

(4)A policy which evidences a contract of direct insurance is a UK policy for the purposes of this section if the law applicable to it is the law of any part of the United Kingdom.]

Transfers of general businessU.K.

F11151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F11652A Issue of certificates by Secretary of State.U.K.

[F117(1)Where it is proposed to execute an instrument by which—

(a)an EC company, or a non-EC company whose head office is in an EFTA State, is to transfer—

(i)to a UK company; or

(ii)to a non-EC company whose solvency is supervised by the Secretary of State in accordance with Article 29 or 30 of the first long term insurance Directive or Article 25 or 26 of the first general insurance Directive,

all its rights and obligations under such long term or general policies, or long term or general policies of such descriptions, as may be specified in the instrument; or

(b)a Swiss general insurance company is to transfer to a UK company all its rights and obligations under such general policies, or general policies of such descriptions, as may be so specified,

the Secretary of State may, if he is satisfied that the transferee possesses the necessary margin of solvency after taking the proposed transfer into account, issue a certificate to that effect.]

(2)In this section “general policy" means a policy evidencing a contract the effecting of which constituted the carrying on of general business, other than reinsurance; [F118'long term policy’ means a policy evidencing a contract the effecting of which constitutes the carrying on of long term business, other than reinsurance].]

Winding upU.K.

53 Winding up of insurance companies under Companies Acts.U.K.

The court may order the winding up, in accordance with the [F120Insolvency Act 1986] or, as the case may be, the [F121Insolvency (Northern Ireland) Order 1989], of an insurance company to which this Part of this Act applies and the provisions of [F122the][F120that Act of 1986] or, as the case may be, [F123that Order of 1989] shall apply accordingly subject to the modification that the company may be ordered to be wound up on the petition of ten or more policy holders owning policies of an aggregate value of not less than £10,000.

Such a petition shall not be presented except by leave of the court, and leave shall not be granted until a prima facie case has been established to the satisfaction of the court and until security for costs for such amount as the court may think reasonable has been given.

54 Winding up on petition of Secretary of State.U.K.

(1)The Secretary of State may present a petition for the winding up, in accordance with [F124Part IV or V of the Insolvency Act 1986], of an insurance company to which this Part of this Act applies, being a company which may be wound up by the court under the provisions of that Act, on the ground—

(a)that the company is unable to pay its debts within the meaning of sections [F124123 or sections 222 to 224] of that Act;

(b)that the company has failed to satisy an obligation to which it is or was subject by virtue of this Act or any enactment repealed by this Act or by the M22Insurance Companies Act 1974; or

[F125(bb)that the company is a UK company and has failed to satisfy an obligation to which it is subject by virtue of any provision of the law of another EEA State which—

(i)gives effect to the general or long term insurance Directives; or

(ii)is otherwise applicable to the insurance activities of the company in that State;]

(c)that the company, being under the obligation imposed by [F126sections 221 and 222 of the Companies Act] with respect to the keeping of accounting records, has failed to satisfy that obligation or to produce records kept in satisfaction of that obligation and that the Secretary of State is unable to ascertain its financial position.

(2)The Secretary of State may present a petition for the winding up, in accordance with the [F127Part V or VI of the Insolvency (Northern Ireland) Order 1989], of an insurance company to which this Part of this Act applies, being a company which may be wound up by the court under the provisions of that Act, on the ground—

(a)that the company is unable to pay its debts within the meaning of [F128[F129Article 103 or Articles 186 to 188] of that Order]

(b)that the company has failed to satisfy an obligation to which it is or was subject by virtue of this Act or any enactment repealed by this Act or by the M23Insurance Companies Act 1980; or

[F130(bb)that the company is a UK company and has failed to satisfy an obligation to which it is subject by virtue of any provision of the law of another EEA State which—

(i)gives effect to the general or long term insurance Directives; or

(ii)is otherwise applicable to the insurance activities of the company in that State;]

(c)that the company, being under an obligation imposed by [F131Articles 229 to 231 of the][F132Part V or VI of the Insolvency (Northern Ireland) Order 1989] with respect to the keeping of accounting records, has failed to satisfy that obligation or to produce records kept in satisfaction of that obligation and that the Secretary of State is unable to ascertain its financial position;

and [F133Article 433 of the said Order of 1986] shall have effect in relation to such an insurance company as if any reference to the Department of Commerce for Northern Ireland were a reference to the Secretary of State.

(3)In any proceedings on a petition to wind up an insurance company presented by the Secretary of State under subsection (1) of (2) above, evidence that the company was insolvent—

(a)at the close of the period to which—

(i)the accounts and balance sheet of the company last deposited under section 22 above; or

(ii)any statement of the company last deposited under section 25 above,

relate; or

(b)at any date or time specified in a requirement under section 42 or 44 above,

shall be evidence that the company continues to be unable to pay its debts, unless the contrary is proved.

(4)If, in the case of an insurance company to which this Part of this Act applies, being a company which may be wound up by the court under the provisions of the [F134Insolvency Act 1986] or, as the case may be, the [F135Insolvency (Northern Ireland) Order 1989], it appears to the Secretary of State that it is expedient in the public interest that the company should be wound up, he may, unless the company is already being wound up by the court, present a petition for it to be so wound up if the court thinks it just and equitable for it to be so wound up.

(5)Where a petition for the winding up of an insurance company to which this Part of this Act applies is presented by a person other than the Secretary of State, a copy of the petition shall be served on him and he shall be entitled to be heard on the petition.

55 Winding up of insurance companies with long term business.U.K.

(1)No insurance company to which this Part of this Act applies which is an unincorporated body and carries on long term business shall be made the subject of bankruptcy proceedings or, in Scotland, sequestration proceedings.

(2)No insurance company to which this Part of this Act applies which carries on long term business shall be wound up voluntarily.

(3)Section 29(1) above shall not have effect in relation to the winding up of a company to which section 28(1) above applies but, subject to subsection (4) below and to rules made by virtue of section 59(2) below, in any such winding up—

(a)the assets representing the fund or funds maintained by the company in respect of its long term business shall be available only for meeting the liabilities of the company attributable to that business;

(b)the other assets of the company shall be available only for meeting the liabilities of the company attributable to its other business.

(4)Where the value of the assets mentioned in either paragraph of subsection (3) above exceeds the amount of the liabilities mentioned in that paragraph the restriction imposed by that subsection shall not apply to so much of those assets as represents the excess.

(5)In relation to the assets falling within either paragraph of subsection (3) above the creditors mentioned in [F136section 168(2) of the Insolvency Act 1986] or, as the case may be, [F137Article 143(2) of the Insolvency (Northern Ireland) Order 1989] shall be only those who are creditors in respect of liabilities falling within that paragraph; and any general meetings of creditors summoned for the purposes of that section shall accordingly be separate general meetings of the creditors in respect of the liabilities falling within each paragraph.

(6)Where under section [F138212 of the Insolvency Act 1986] or [F139Article 176 of the Insolvency (Northern Ireland) Order 1989] (defalcations of directors etc. disclosed in course of winding up) a court orders any money or property to be repaid or restored to a company or any sum to be contributed to its assets then, if and so far as the wrongful act which is the reason for the making of the order related to assets representing a fund or funds maintained by the company in respect of its long term business, the court shall include in the order a direction that the money, property or contribution shall be treated for the purposes of this Act as assets of that fund or those funds and this Act shall have effect accordingly.

56 Continuation of long term business of insurance companies in liquidation.U.K.

(1)This section has effect in relation to the winding up of an insurance company to which this Part of this Act applies, being a company carrying on long term business.

(2)The liquidator shall, unless the court otherwise orders, carry on the long term business of the company with a view to its being transferred as a going concern to another insurance company, whether an existing company or a company formed for that purpose; and, in carrying on that business as aforesaid, the liquidator may agree to the variation of any contracts of insurance in existence when the winding up order is made but shall not effect any new contracts of insurance.

(3)If the liquidator is satisfied that the interests of the creditors in respect of liabilities of the company attributable to its long term business require the appointment of a special manager of the company’s long term business, he may apply to the court, and the court may on such application appoint a special manager of that business to act during such time as the court may direct, with such powers, including any of the powers of a receiver or manager, as may be entrusted to him by the court.

(4)[F140Section 177(5) of the Insolvency Act 1986] or, in the case of a special manager appointed in proceedings in Northern Ireland, [F141Article 151(5) of the Insolvency (Northern Ireland) Order 1989] (special manager to give security and receive remuneration) shall apply to a special manager appointed under subsection (3) above as they apply to a special manager appointed under [F140section 177 of the said Act of 1986] or, as the case may be, [F142Article 151 of the said Order of 1989]

(5)The court may, if it thinks fit and subject to such conditions (if any) as it may determine, reduce the amount of the contracts made by the company in the course of carrying on its long term business.

(6)The court may, on the application of the liquidator, a special manager appointed under subsection (3) above or the Secretary of State, appoint an independent actuary to investigate the long term business of the company and to report to the liquidator, the special manager or the Secretary of State, as the case may be, on the desirability or otherwise of that business being continued and on any reduction in the contracts made in the course of carrying on that business that may be necessary for its successful continuation.

(7)Notwithstanding [F143section 167 of, and Schedule 4 to, the Insolvency Act 1986] or, as the case may be, [F144Article 142 of, and Schedule 2 to, the Insolvency (Northern Ireland) Order 1989] (which requires a liquidator to obtain the sanction of the court or [F145a specified committee] for the bringing of legal proceedings in the name of and on behalf of the company) the liquidator may without any such sanction make an application in the name of and on behalf of the company under section 49 above.

(8)In this section “the court” means the court having jurisdiction to wind up the company.