INSURANCE Citation, commencement and purpose 1 1 These Regulations may be cited as the Insurance Companies (Amendment) Regulations 1990 and shall come into force on the day after the day on which they are made. 2 These Regulations give effect to Council Directive 88/357/ EEC of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC . Interpretation 2 1 In Part V of the Insurance Companies Act 1982 (supplementary provisions), after section 96 (general interpretation) insert– Interpretation of expressions derived from general insurance Directives. 96A 1 In this Act– a “the first general insurance Directive” means Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance; b “the second general insurance Directive” means Council Directive 88/357/EEC of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC ; and “the general insurance Directives” means those Directives as amended and such other Directives as make provision with respect to the business of direct insurance other than life assurance. 2 In this Act, in relation to an insurance company carrying on general business (other than reinsurance), “establishment” means the head office or a branch or agency of the company; and references to a company being established in a particular member State mean that the company has its head office or a branch or agency there. Any permanent presence of such a company in a member State shall be regarded as a branch or agency, even if that presence consists merely of an office managed by the company’s own staff or by a person who is independent but has permanent authority to act for the company in the same way as an agency. 3 References in this Act to the member State where the risk is situated are– a where the insurance relates to buildings or to buildings and their contents (in so far as the contents are covered by the same policy), to the member State in which the property is situated; b where the insurance relates to vehicles of any type, to the member State of registration; c in the case of policies of a duration of four months or less covering travel or holiday risks (whatever the class con cerned), to the member State where the policy holder took out the policy; d in a case not covered by paragraphs (a) to (c)– i where the policy holder is an individual, to the member State where he has his habitual residence; ii otherwise, to the member State where the establishment of the policy holder to which the policy relates is situated. 4 In this Act the “ ECU ” means the unit of account of that name defined in Council Regulation (EEC) No. 3180/78 as amended. The exchange rates as between the ECU and the currencies of the member States to be applied for each year beginning on 31st December shall be the rates applicable on the last day of the preceding October for which rates for the currencies of all the member States were published in the Official Journal of the Communities. . 2 In regulation 2 of the Insurance Companies Regulations 1981 (interpretation: general), in paragraph (1) at the appropriate place insert– “unit of account” means the unit of account known as the ECU; ; and for paragraph (2) substitute– 2 For the purposes of these Regulations, other than regulation 25C, the rate of conversion from the ECU to the pound sterling shall be subject to a minimum of 41.66 pence per ECU. . 3 In regulation 3 of the Insurance Companies (Accounts and Statements) Regulations 1983 (interpretation), for paragraph (5) substitute– 5 For the purposes of these Regulations, other than regulation 13A, the rate of conversion from the ECU to the pound sterling shall be subject to a minimum of 41.66 pence per ECU. . Meaning of general and special policy conditions 3 In regulation 29 of the Insurance Companies Regulations 1981 (authorisation: submission of information), after paragraph (3) insert– 4 References in Schedule 5 to general and special policy conditions do not include specific conditions intended to meet, in an individual case, the particular circumstances of the risk to be covered. . Meaning of “large risks” 4 In Part V of the Insurance Companies Act 1982, after the section inserted by regulation 2 above insert– Meaning of “large risks”. 96B 1 In this Act “large risks” means– a risks falling within classes 4, 5, 6, 7, 11 and 12 of Part I of Schedule 2; b risks falling within classes 14 and 15 of that Part which relate to a business carried on by the policy holder; c risks falling within classes 8, 9, 13 and 16 of that Part where the policy holder carries on a business in respect of which the condition specified in subsection (2) below is met. 2 The condition referred to in subsection (1)(c) is that at least two of the three following criteria were exceeded in the most recent financial year for which the information is available: First stage: until 31st December 1992– balance sheet total: 12.4 million ECU net turnover: 24 million ECU number of employees: 500; Second stage: from 1st January 1993– balance sheet total: 6.2 million ECU net turnover: 12.8 million ECU number of employees: 250. 3 For the purposes of subsection (2) as it applies to a company within the meaning of section 735(1) of the Companies Act 1985 or Article 3 of the Companies (Northern Ireland) Order 1986 – a “balance sheet total” has the meaning given by section 247(5) of that Act or Article 255(5) of that Order, b “net turnover” has the meaning given to “turnover” by section 262(1) of that Act or Article 270(1) of that Order, and c “number of employees” has the meaning given by section 247(6) of that Act or Article 255(6) of that Order; and for a financial year which is a company’s financial year but not in fact a year, the net turnover of the company shall be proportionately adjusted. 4 Where the policy holder is a member of a group for which consolidated accounts (within the meaning of Directive 83/349/EEC ) are drawn up, the question whether the condition in subsection (2) is met shall be determined by reference to those accounts. 5 For the purposes of subsection (1)(c) as it applies where the policy holder is a professional association, joint venture or temporary grouping, the question whether the condition in subsection (2) is met shall be determined by reference to the aggregate of the relevant figures for all the members of the professional association, joint venture or temporary grouping. 6 In this section “business” includes a trade or profession and, for the purposes of subsection (1)(c), any activity of a professional association, joint venture or temporary grouping. . Matching of assets and liabilities 5 1 In the Insurance Companies Regulations 1981, for regulation 25 (matching of assets and liabilities) substitute– Matching: general requirement 25 1 Where the liabilities of an insurance company in any particular currency exceed 5 per cent of the company’s total liabilities, the company shall hold sufficient assets in that currency to cover at least 80 per cent of the company’s liabilities in that currency. 2 Where an insurance company carries on both long term and general business, the requirements of paragraph (1) apply to the assets and liabilities of each kind of business separately. 3 For the purposes of this regulation– “assets”, except in the case of assets of the kind referred to in regulation 38(2) below, means assets valued in accordance with Part V of these Regulations; and “liabilities” means provision by an insurer to cover liabilities arising under or in connection with contracts of insurance (not being liabilities relating to insurance business excluded by regulation 27 below). 4 For the purposes of this regulation references to assets in a currency shall be construed as references to assets expressed in or capable of being realised (without exchange risk) in that currency; and an asset is capable of being realised (without exchange risk) in a currency if it is reasonably capable of being realised in that currency without risk that changes in exchange rates would reduce the cover of liabilities in that currency. 5 The provisions of this regulation have effect subject to the following regulations. . 2 After that regulation insert– Matching: property linked benefits 25A 1 In so far as the liabilities for property linked benefits are covered by assets which determine the benefits payable under a linked long term contract, regulation 25 above does not apply. 2 In so far as the liabilities for property linked benefits are covered by assets in a currency other than that in which the insurer’s obligations to the policy holder are expressed, those liabilities shall for the purposes of regulation 25 be deemed to be liabilities in the first-mentioned currency. 3 In this regulation “property linked benefits” has the meaning given by regulation 37(1) below. Matching: currency of general business liabilities 25B 1 The currency of an insurance company’s general business liabilities shall, for the purposes of regulation 25 above, be determined as follows. 2 Where the contract of insurance expresses any liability in terms of a particular currency, that liability shall be regarded as a liability in that currency. 3 Where the liabilities are not so expressed, they shall be regarded as liabilities in the currency of the country in which the risk is situated or, if the company on reasonable grounds so determines, in the currency in which the premium payable under the contract is expressed. 4 However, the company may regard its liabilities as liabilities in the currency which it will use in accordance with past experience or, in the absence of such experience, in the currency of the country in which it is established– a for contracts covering risks falling within general business classes 4, 5, 6, 7, 11, 12 and 13 (producer’s liability only), b for contracts covering risks falling within any other general business class where, in accordance with the nature of the risks, the company’s liabilities are liabilities in a currency other than that determined in accordance with paragraph (2) or (3). 5 Where a claim has been notified to an insurance company and the company’s liability in respect of that claim is payable in a currency other than one which would result from the application of the above provisions, the liability shall be regarded as a liability in the currency in which the company is actually obliged to pay it. 6 Where a claim is assessed in a currency which is known to the company in advance but which is different from a currency determined in accordance with the above provisions, the company may regard its liabilities as liabilities in that currency. Matching: exception for certain general business liabilities 25C 1 The requirements of regulation 25 above have effect subject to the following provisions as regards a company’s general business. 2 The company need not cover the liabilities of its general business by assets in a particular currency if those assets would amount to 7 per cent or less of the remainder of its assets in other currencies. This paragraph is subject to paragraphs (3) and (4) below. 3 During the periods specified below, paragraph (2) has effect in relation to liabilities required to be covered by assets in Greek drachmas, Irish pounds or Portuguese escudos as if the following amounts, if less than the percentage mentioned in that paragraph, were substituted for that percentage– Until 31st December 1992: 1 million ECU From 1st January 1993 until 31st December 1998: 2 million ECU. 4 During the period until 31st December 1996, paragraph (2) has effect in relation to liabilities required to be covered by assets in Belgian francs, Luxembourg francs or Spanish pesetas as if the amount of 2 million ECU, if less than the percentage mentioned in that paragraph, were substituted for that percentage. . 3 For regulation 27 of the Insurance Companies Regulations 1981 (exclusions from requirements as to the matching and localisation of assets), substitute– Exclusions from regulations 25 and 26 27. 27 1 Nothing in regulation 25 or 26 above shall apply to– a insurance business carried on outside the United Kingdom, or b reinsurance business (unless it is facultative reinsurance written by an insurer who also carries on insurance business that is not reinsurance). 2 Nothing in regulation 26 above shall apply to insurance business of groups 3 and 4 (within the meaning of Part II of Schedule 2 to the Insurance Companies Act 1982). . Law applicable to certain contracts of insurance 6 1 In Part V of the Insurance Companies Act 1982 (supplementary provisions), after section 94 insert– Law applicable to certain contracts of insurance Law applicable to certain contracts of insurance. 94A 1 The law applicable to a contract of insurance the effecting of which constitutes general business, and which covers risks situated in the United Kingdom or another member State, shall be determined in accordance with the provisions of Schedule 3A to this Act. 2 Those provisions do not apply in relation to a contract of reinsurance. . 2 After Schedule 3 to the Insurance Companies Act 1982 insert–