The Minister of Finance intends tabling the Insurance Amendment Bill, 2002 in Parliament during the third Parliamentary term. The Bill is published in accordance with Rule 241(l)(c) of the Rules of the National Assembly. Interested persons and institutions are invited to submit written representation on the Bill to the Secretary to Parliament by no later than 23 September 2002.
Words underlined with a solidlineindicateinsertionsin existing enactments.
Amendment of Arrangement of Sections of Act 52 of 1998 1.
Amendment of section 1 of Act 52 of 1998 2.
' 'market-related policy' means a long-term policy, other than a linked policy.
Amendment of section 4 of Act 52 of 1998 3.
GAZETTE, not to publish or issue it or to cease publishingor issuing it or to effect the changes to it which the Registrar deems fit.
by the substitution in subsection 7(u)and (b), for the expression "Short-term Insurance Act. 1997" of the expression ''Short-term Insurance Act, 1998".
Amendment of section 8 of Act 52 of 1998 1.
for following "(2) No long-term insurer shall changeits name. or a translation. shortened form or derivative thereof. without the prior approval of the Registrar.".
Insertion of section 15A in Act 52 of 1998 6.
15A. Notwithstanding sections 15(4) and 70. a person who is. by virtue of registration under this Act, authorised to carry on reinsurance business only may, subject to section 11, also carry on the business of providing or undertaking to provide policy benefits in terms of a fund policy directly to any fund contemplated in the definition of 'fund' in section 1(I).
A long-term insurer shall notify the Registrar, in the form and of the information required bytheRegistrar, in respect of every director or managingexecutiveappointed by it or whoseappointmenthasbeen terminated by it, or whohasresigned, within 30 daysaftersuch appointment or termination or resipation, as the case may be, together with the reasons for any such termination or resignation.
Amendment of section 24 of Act 52 of 1998 8.
(ix)allow its subsidiary toacquiredirectly or indirectlyshares in it in terms of section 89 of the Companies Act: Provided that such conditions may.
of section 11(I). include a varied or a new registrationcondition contemplated in sections 10 and I 1. and that in any such case section 11(2) shall apply with the necessary changes.
Amendment of section 26 of Act 52 of 1998 9.
"(1) Subject to this section, no person shall, without the approval of the Registrar, acquireor hold shares or any other interest in a long-term insurer which results in that person, directlyor indirectly, alone or with [anassociate] a relatedparty, exercisingcontroloverthatlong-term insurer."
"(2)No personshallacquireshares in a long-terminsurer if the aggregate nominal value of those shares, by itself or together with the aggregate nominal value of the shares already ownedby that person or by that person and his, her or its [associates] related parties, will amountto 15 percent or more of the total nominal value of all of the issued shares ofthelong-terminsurerconcerned, withoutfirsthavingobtainedthe approval of the Registrar."
by the substitution in subsection (3)(c)for the words preceding subparagraph of the following words: "may be refused if the person concerned, alone or with his, her or its [associates]related parties.
by the substitution in subsection (5) for the words preceding paragraph (a)of the following words: "For the purposesof this section ['associate'] 'related party', in relation to--": and u) by the substitution in subsection (6)for the words preceding paragraph (a)of following the "For the purposes of this section a person shall be deemed to exercise control over a long-term insurer if that person, aloneor with [associates] related parties-".
of the following words: "so astobe in a position to meet its liabilities and capitaladequacy requirement at all times.".
Amendment of section 30 of Act 52 of 1998 11.
have assets, the aggregate value of which, on any day, is not less than the aggregate value. on that day, ofits liabilities; and subject to section 32, have, in the Republic, assets, the aggregate value of which. on any day, isnot less than the aggregate value. on that day, of those of its liabilities which are to be met in the Republic, and the capital requirementrespect of those liabilities.
the method set out in Schedule 2; and the financial soundness method as set out in Schedule 3.
if that has the result that the insurer fails to comply with subsection(1): or if [the]. after such declaration or payment [of the dividend would result in it failing to comply with subsection (1)l has an ag,- Oreeate value of assets which is less than the aggregate value of its liabilities. issued share capital and non-distributable reserves.
(1) Subject to section 32. a long-term insurer shall, in the Republic. have assets.
subject to such conditions as the Registrar may determine.
Amendment of section 33 of Act 52 of 1998 13.
"(1) For the purposes of this Act, the liabilities ofa long-term insurer shall include its contingent liabilities for policy benefits which have not become claimable, and which are specified in [Schedules] Schedule 3 [and 41."
Is'. The following section is hereby substituted for section 36 of the Long-term Act.
by the date or within the period, prescribed by the Registrar, either generally or in relation to a particular insurer.
If the Registrar is satisfied that a return furnished to him or her in terms of subsection (1) is incomplete or incorrect, he or shemay, by notice-25 direct the long-term insurer to furnish the Registrar, within a specified period.
Amendment of section 39 of Act 52 of 1998 16.
"(c) unless payment of the cost referredto in section 38(l)(c)(i) has been made or 35 secured.".
Amendment of section 44 of Act 52 of 1998 17.
"(4) Subsection (1) shall not apply atolong-term insurer if it lends money to one40 of its policyholders upon the security of a long-term policy issued by itself.".
Amendment of section 47 of Act 52 of 1998 18.
"(b)Paragraph (a) does not apply to a receipt issued by a bank as defined in section 1 of the Banks Act, 1990 (Act NO.
Interest on an unpaid premium. or on a loan made by a long-term insurer on the sole security of a long-term policy. or on an advance made bv a long-term insurer in respect of an amount which isto be payable under a long-term policy, shall not cease toaccruewhentheunpaidinterest has accumulated to. or exceeds, an amount equal to the amount of that unpaid premium, loan or advance.
(2)[Debt consisting of interest on an unpaid premium, or on a loan granted by a long-term insurer on the sole security of a long-term policy, or on an advance granted by a long-term insurer in respect of an amount which is to be payable under a long-term policy, shall, in] In the case of a long-term policy entered into or issued after 31 December 1973. aninterest-bearingdebtreferred to in subsection (I) shallnotprescribe beforetheliability of the long-terminsurerunderthelong-termpolicy prescribes.
(3)Subsection (1) shall be deemed to have come into operation on I January 1999.
Amendment of Schedule 1 to Act 52 of 1998 22.
by the substitution in paragraph 1 forthedefinitionof"securities" of the definition: following " 'securities' includes bills, bonds, debentures and debenture stock.
[. in respect of which the Registrar has recognised the- (aa) stock exchange outside the Republic; or (bb) country, other than the Republic, in which the regulated market 20 concerned is situated, subject to the conditions determined by the Registrar].
A creditbalance in anaccountwith, or a deposit, including a nefotiablecertificate of deposit or a bill, accepted by, an institution incorporatedoutsidetheRepublic, [in a country approved by the 25 Registrar,] which would have been a bank in terms of the Banks Act,1990, if it \yere incorporated in the Republic.
"20. Other claims, n.e.s., against- a, a long-term in terms of a long-term 30 insurer policy; hi a person in theRepublic:and L, J a body corporate and any stock or shares in a body corporate which is not incorporated andregistered in the Republicbutwhich, in the opinion of the Registrar. carries on business in the Republic and which has been approved by the Registrar generally by notice in the Gazette 35 and subjectto the conditions determinedby the Registrar and specified in the notice.".
Repeal of Schedule 2 to Act 52 of 1998 13. The Lon:-term Insurance ,4ct, 1998.
Substitution of Schedule 3 to Act 52 of 1998 14. The following Schedule is hereby substituted for Schedule 3 to the Long-term Insurance Act.
Definition for the purposes of calculating the contingent liabilities of a long-term insurerunderunmaturedlong-termpolicies in terms of which the policy benefits are to be provided- r0 12 No.
The values of assets. liabilities and the capital adequacy requirement shall be deemed to have been calculated in terms of this Schedule if the requirements set out in this Schedule and the requirements prescribed by the Registrar. after consulting the Actuarial Society of South Africa. have been complied with in making the calculations.
onlysuchassetsactuallyheld by the long-terminsurer or those approved by the Registrarin terms of section 34(1)(a)and (b).
an amount representing a prepaid expense or a deferred expense; and an amount representing a reinsurance contract in terms of which the long-term insurer is the policyholder, except reinsurance contract.
Notwithstandin paragraph 2. if the Registrar is not satisfied that the value of an asset. a contingent liabilityor the capital adequacy requirement1 calculated in terms of this Schedule reflects a proper value, the Registrar 15 ma!'-(cr) direct the insurer to appoint another person. at the cost of the insurer, to place a propervalue on thatasset.contingentliability or capital adequacy requirement: or (/I) direct the long-term insurer to calculate the value in another manner which the Registrar determines and which will produce a proper value?
Amendment of Arrangement of Sections of Act 53 of 1998 25. The Arrangement of Sections of the Short-term Insurance Act, 1998.
Amendment of section 1 of Act 53 of 1998 26. Section 1(1) of the Short-term Insurance Act. 1998.
"representative" of the following words: '' 'representative' a natural employed-.'.
Amendment of section 4 of Act 53 of 1998 27.
(3) (ai If any advertisement, brochure or similar [document] communication which relatesto the business of a short-term insurer, or to a short-term policy, and which is being, or is to be, published or issued by a person, is misleading or contrary to the public interest or contains an incorrect statement of fact, the Registrar mayby notice direct that person not to publishor issue it or to cease publishingor issuing it or to effect the changes to it which the Registrar deems fit.
An advertisement, brochure or similarcommunicationwhich relates to a short-term policy must include the name of the short-term insurer underwriting the short-term policy.; and by the substitution in paragraphs (a)and (b),respectively. of subsection (7). fortheexpression'Long-termInsuranceAct,1997'. of the expression 'Long-term Insurance Act, 1998'.
Amendment of section 8 of Act 53 of 1998 28.
"(6)No short-term insurer which is liable under a short-term insurance policy [shall change its name without the prior approvalof the Registrar] may refer to or use in any such policy or advertisement, brochure or similar communication the term 'funeral' or 'burial' or any derivative thereof.".
Insertion of section 15A in Act 53 of 1998 29.
15A. The ReFistrar may, subject to section 11, and notwithstandin sections 15(5) and 68, grant approval to an insurer carrying on reinsurance business only, todirectlyenterintoshort-termpoliciesotherthan short-term reinsurance policies?
Amendment of section 17 of Act 53 of 1998 substitution for paragraph (0) of the following paragraph: "(0) its name, or a translation, shortened form or derivative thereof.".
Substitution of section 18 of Act 53 of 1998 31. Thefollowingsectionis hereby substituted for section 18 of the Short-term Insurance Act.
aA short-term insurer shall notify the Registrar, in the form andof the information required by the Registrar. in respect of every director or managingexecutiveappointed by it or whoseappointmenthas been terminatedby it. or whohasresigned, within 30 daysaftersuch appointment or termination or resignation, as the case may be, together with the reasons for any such termination or resignation.
Amendment of section 23 of Act 53 of 1998 32. Section 23 of the Short-term Insurance Act, 1998.
allow its subsidiary to acquire directly or indirectly shares in terms of section 89 of the Companies Act: Provided that such conditions may.
of section 1 I(I). include a varied or a newregistrationcondition contemplated in sections 10 and 1I. and that in any such case section 11(2) shall apply with the necessary changes.
Amendment of section 25 of Act 53 of 1998 33.
"(1) Subject to this section. no person shall, without the approval of the Registrar, acquire or hold shares or any other interest ina short-term insurer which results in that person. directly or indirectly, aloneor with [anassociate] a related party. exercising controloverthatshort-term insurer."
"(2)No personshallacquireshares in a short-tern1 insurer if the aggregate nominal value of those shares, by itself or together with the aggregate nominal value of the shares already owned by that personor by that person and his. her or its[associates] related parties, will amount to 15 percent or more of the total nominal value of all of the issued shares of the short-terminsurerconcerned, without first having obtainedthe approval of the Registrar."
"(i) subject to theaggregatenominalvalue of the sharesowned by the person concerned and his.
id) bj, the xubstitution in subsection (3)(c)for the words preceding subparagraph words: following (i) of the "may be refused if the person concerned, alone or with his. her or its [associates] relatedparties.
by the substitution in subsection (5)for the words preceding paragraph (a)of following the "For the purposes of this section ['associate'] 'related party', in relation to-"; and If) by the substitution in subsection (6)for the words preceding paragraph (a) of the following words: "For the purposes of this section a person shall be deemed to exercise control over a short-term insurer if that person, aloneor with [associates] related parties-.'.
Amendment of section 47 of Act 53 of 1998 35.
"(3)The policyholder, and the person who entered into the short-term policy, shall be entitled[, against payment of a fee not exceeding that which may be prescribed by the Registrar,] to be provided, upon request, with a copy of the policy.".
Amendment of section 53of Act 53 of 1998 36.
Amendment of Schedule 1 to Act 53 of 1998 37.
by the substitution in paragraph 1 forthedefinition of 'securities' of the following definition: " 'securities' includes bills, bonds, debentures and debenture stock.
[, in respect of which the Registrar has recognised the- (aa) stock exchange outside the Republic; or (bb)country, other than the Republic, in which the regulated market concerned is situated, subject to the conditions determined by the Registrar].
Acreditbalanceinanaccountwith, or a deposit, includinga negotiablecertificate of deposit, or a bill, accepted by, aninstitution incorporatedoutsidetheRepublic[, in a country approved by the Registrar], which would have been a bankin terms of the Banks Act,1990. if it were incorporated in the Republic.": and by the substitution in the Table for item 20 of the following item: "20. Other claims. n.e.s.
Amendment of Schedule 2 to Act 53 of 1998 38. Part I of Schedule 2 to the Short-term Insurance Act, 1998.
Amendment of Schedule 3 to Act 53 of 1998 39.
"(2)Subject to section 63[(4)1 (61, the aggregate value of the assets referred toin subparagraph (1) shaun respect of each particular kindor category specified by regulation, when expressed as a percentageof the aggregate minimum amount required to be held in trust atthattime in accordance with Schedule 2, not exceed the percentage specified by regulation in relation to that kind or category of asset."
by the substitution in paragraph 8 for the proviso to subparagraph (I), of the following proviso: Provided that this paragraph shall cease to apply.
such policy in the event of the reinsurance, a s set out in the trust deeds of the Lloyd's Trusts. of all the obligations under the policy by another syndicate: [and] g if the Registrar and Lloyd's so agree.
Substitution of certain expression in Afrikaans text of Act 53 of 1998 40. The Short-term Insurance Act, 1998, is hereby amended by the substitution in the Afrikaans text of the definition of "uitvoerende bestuurder" in section 1(1), sections 9(3)(0)(ii),21(1)and 22(3)(bJ.respectively. for theexpression"bestuurder" of the 45 expression "bestuur".
Repeal of Act 49 of 1998 41. The Insurance Amendment Act, 1998 (Act No 49 of 1998), is hereby repealed.
This Act is called the Insurance Amendment Act,2002, and comes into operation on a date fixed by the President by proclamation in the Gazette.
The Insurance Amendment Bill. 2002 ("the Bill") provides for amendments to the Long-term Insurance Act, 1998 (ActNo. 52 of 1998) and the Short-term Insurance Act, 1998 (ActNo. 53 of 1998) ("the Acts") followingan intensive review by the Registrars of Long-and Short-term Insuranceof the administration, implementation and eficacyof the Acts since their promulgation four years ago.
The Bill is designed to updateandconsolidate the insurance industry'slegislative framework based on internationally accepted principles and best practice.
Expansion of notifications totheRegistrar of Short-andLong-Term Insurance of appointments.
The issuing of different classes of ordinary shares, the buying back of own shares and the holding of shares by a subsidiary in an insurer.
Extension of the scope of misrepresentations by policyholders and the legal consequences thereof (Section53 of Short-term Insurance Act and Section 59 of Lonz-term Insurance Act).
To enhance the financial soundnessof the industry by amendments to the actuarialmethod of calculating thevalue of assets.
Improvements of the wording of Schedules 1. 2 and 3 to the Act.
The references in the paragraphs of this Memorandum (consecutively numbered on left margin) to "clause" in the headings of paragraphs, refer to the applicable clause of the Bill.
This amendment effects changes to the Arrangement of Sections of the Long-term Insurance Act. 1998. consequent to the insertion and amendment of certain sections of the Act and the repeal of Schedule 2 thereof.
Thepresentdefinition of "managing executive" is used inter aliaasone of the categories of persons who, for purposesof registration of a long-term insurer, haveto be tit and properto hold the office concerned. Currently this definition is interpreted as only referring to the chief executive ofiicer or an executive manager of the long-term insurer.
The definition of "managing executive" is expanded to include not only the chief executive officer and executivemanagement, but also seniormanagerswhoreport directly to the chief executive officer.
it is desirable. from a regulatory point of vien.
the concept of "fit and proper" must not only apply toa person. but alsoto the top management of a long-term insurer.
The new definitions to be introduced are: "fair value", to replace the currently used term"marketvalue" in accordance with international accountingstandards;"linked policy" and "market-related policy". which were previously defined in Schedule 2 of the Long-Term Insurance Act (to be repealed); and "capital adequacy requirement" and "linked liabilities". which are required in the new provisions relating to the method of \.aluation of assets. liabilities and capital adequacy requirement.
20 No. 23736 GOVERNMENT GAZETTE, 13 AUGUST 2002 3.
it is essential that the Registrar keeps record not only of any change of the name, but also of the shortened version or derivative of the name.
In terms of sections 15(4) and 70 of the Long-term Insurance Act, only professional reinsurersmaycarry on long-termandshort-termreinsurancebusiness in one (composite) legal entity.
Current position whenever a long-term insurer appoints or terminates the appointments of its directors and managing executive. The section is currently interpretedas not dealing with cases of resignations by directors and managing executive and also not providing the Registrar the right to obtain further information from the specific person.
Resignationsandterminations of appointments maybetheresult of irregular circumstances in an insurer's internal affairs and it is necessary for information thereon to be given. or be available for submission to the Registrar as soon as possible as the interests of policyholders and other stakeholders may be at risk.
Thisamendment is consequential tothedeletions of sections 83 and 84 of the Companies Act.
This addition regulates the acquisition of shares directly or indirectly in a long-term insurer by its subsidiary. The director indirect acquisition by a subsidiary of shares in an insurer has an impact on the financial soundness condition of the insurer. It is therefore imperative for the Registrarto approve such transaction subject to conditions prior to it being effected.
Section 26 of the Long-term Insurance Act, 1998, imposes limitations on the control and the holding of shares and other interests in long-term insurers. To widen the net of such restrictions and to avoid indirect frustrationof the objectives soughtto be achieved by the section, limitations are also imposed on certain "associates" of persons primarily vested with such rights and interests.
The expression "associate" must be replaced by "related party".
22 No. 23736 GOVERNMENT GAZETTE, 13 AUGUST 2002 3.
Thisamendment is consequential to the proposed amendment to Schedule 3 to separate the expressions "liability" and "capital adequacy requirement".
Thisamendment is consequential to theproposed amendmenttoSchedule 3 to separate the expressions .'liability" and "capital adequacy requirement". In addition, further restriction on dividend payments by long-term insurers has been made.
3.21 contains an explanation of Schedule 2.
It is now proposed in paragraph 21 thatSchedule 2 bedeleted. Thoseliabilities mentioned in subparagraph (i) above will now be calculated on the methodof valuation in Schedule 3, as proposed in paragraph 3.11.
For purposeof spreading. distinction is made between liabilities and minimum capital adequacy requirement as a result of amendments to Schedule 3. Funhermore the expression "market value" is replaced with "fair value".
The reasons for the deletion of Schedule 2 and the introduction of a new amended Schedule 3 are mentioned in paragraph 3.31 of this memorandum. The reason for the introduction of a minimum capital adequacy requirement is to set a minimum level at which long-term insurers must spread their assets.
The proposed amendment of section 33(1) of the Act rectifies textual errors in regard to references to the relevant Schedulesof the Act.
The purpose of this addition is to enable an insurer to apply for approval to include shares held directly or indirectlyin its holding company in its assets. Shares held in this manner may have an impact on the linancial soundness condition of the insurer, as well as the capital adequacy of the group to whichtheinsurerbelongs. It istherefore imperative for the Registrar to approve such holding.
This amendment follows the insertion of a definition of "linked policy" in clause 3(c) of the Bill and the proposed deletion of section 33(2).
The amendment rectifies a textual error in the English text of section 36.
The amendment rectifies a textual error in section 39(c).
Section 34(1) of the Long-term Insurance Act provides thata person who is required to provide a policy or policy benefits, as security for a certain transaction.must be given a free choice regarding certain matters.
To exclude "policy loans" from the said requirements. The exclusion will only apply in the case wherea long-term insurer lends money to the holder of and upon the security of. a long-term polic, taken out with that insurer.
Section 47(I) of the Long-term lnsurance Act requires that where a premium is paid in cash, a receipt must be issued containing certain information which includes the name of the insurance cornpan)' involved, the policy number and details of the recipient.
24 No. 23736 GOVERNMENT GAZETTE, 13 AUGUST 2002 or settled. The section also applied to both long-term and short-term policies, andinwas terms of section 60(1)(q)of the repealed Act also applicable to policies of Lloyd's.
The intention in the newly worded section 59(1) is not to affect the application of the section as regards the matters referred to in paragraph (a) above, but only to clearly broaden the scope of the expression "representation". In strictlawthis expression in this context basically and in the first place refersto representations by means of positive acts ("misrepresentations per commissionem") committed by a policyholder. but can according to legal dogmaticsalso be interpreted ascovering(negative)casesof omissions ("misrepresentations per omissionem"), such as failures to disclose certain information. The intention behind the new section 59(1) is to make this legal position clear in order to promote the extension of the relative protection granted in the section to policyholders who are guilty of non-material inaccuracies. In conjunction with this aim. the new paragraph (0) of section 59(1) intends to legally clarify the concept of "materiality" of representations.
The new wording should clearly promote legal certainty as regards the exact intention behind section 59(l)(ai, and also clarifies the legal position following conflicting views expressed in two judgmentsof the SupremeCourt of Appeal. The proposed amendment has been recommended by the Ombudsman for Long-term Insurance. the Honourable Judge J. H. Steyn. As regards the new section 59(l)(b), this summarises views on the relevant "materiality" as enunciated by the Courts.
The Act is silent on the working of the in duplum-rule and therefore the common law principles apply in respect of cases mentioned in section61, namely, that unpaid interest on a capital amount due only accumulates up to an amount equal to the capital.
The application of the rule must be excluded in the case of loans against long-term policies.
Association made representations to the Advisory Committee on Long-term Insurance regarding this matter and the Committee resolved that an amendment should be made.
insurers can circumvent the common law rule quite easily by implementing certain system changes which will have huge cost implications and which will ultimately have to be borne by policyholders.
Clause 2(d)of the Bill effects a terminological change in the Afrikaans text of the Long-termInsuranceAct, toreplace"uitvoerendebestuurder"with"uitvoerende bestuur". Clause23 of the Bill effects consequential changes to other sections of the Act where currently the word "bestuurder" is still used. (See also clause 40 of the Bill as regards corresponding changes to the Short-term Insurance Act.
Schedule 1 to the Long-term Insurance Act deals with the assetsof long-term insurers.
Clause 22(b): Paragraph2(b)(i) of Schedule 1 requiresthattheRegistrarmust approve a counterparty to an over-the-counter instrument.
Clause 22(c): Item 16(1) of the Table to Schedule 1 refers to "debentures" which are already included in the definition of "securities" in paragraph 1 of the Schedule.
Clause 22(a): The wide effect of the current wording hasto be limited for the sake of legal certainty by empowering the Registrar rather to prescribe the other financial instruments contemplated.
Clause 22(b): Instead of approving the counterparty the Registrar will approve the criteria for a counterparty.
Clause 22(c): "Debentures" is replaced by the wider "securities" (as defined).
Clause 22(a): Legal certainty requires a more specific provision instead of a vague generality.
Clause 22(b): It is practically not possible for the Registrar to approve each and every counterparty.
Clause 22(c): ToenabletheRegistrartoapprove of new kinds of financial instruments which are continuously being developed.
Current position regarded as an asset in the Republic which long-term insurers must hold, if the Registrar has recognised the stock exchange or the country in which a regulated market exists.
A few aspects of the amendment proposals are formal and textual, but essentially the proposals mean that the relevant assets will still be regarded as assets in the Republic, but the stock exchange or the country within which a regulated market exists, shall no longer be subject to recognition by the Registrar.
Investing on a recognised stock exchange or in a country within which a regulated proposed amendments will have the effect that greater responsibility will be placed on the directorsof long-term insurance companiesto assess the risks in investing on foreign stock exchanges and regulated markets. Furthermore, this will facilitate investments in e.g. SADC and other developing countries without having to wait for the Registrar's recognition.
Item 20 in the Tableto Schedule 1 of the Long-term Insurance Act, contains one of the classes of assets which a long-term insurer may hold in the Republic. The item only includeclaimsagainststocks or shares in a body which is not incorporatedand registered in the Republic. but which in the opinion of the Registrar carrieson business in the Republic.
The item is re-arranged to allow also for claims against, and for stocks or shares in.
a body corporate which is not incorporated and registered in the Republic, but which in the opinion of the Registrar carries on business in the Republic.
unintended consequences resulted from the present wording. such as a claim against a stock or share of a body corporate; -only claims are allowed as an asset in terms of the current wording; and as they were allowed in the Insurance Act.
Schedule 2 to the Long-term Insurance Act regulates the methodof calculation of the value of a long-term insurer's assets and liabilities for the purposes of section 30 of that Act (maintenance of a financially sound condition), on what was commonly known as the "prescribed valuation method". Part I of the Schedule deals with the valuation of assets and PartI1 deals with the valuationof liabilities. The valuation of liabilities is also used for purposes of section 31 of that Act (spreading requirements). Theprescribedvaluationmethod is a prescriptivebasis.
the method requires different approaches to the valuation of the assets and the liabilities of a long-term insurer, thereby making the values inconsistent with each other.
Schedule 3 to the Long-term Insurance Act regulates the method of calculation of the value of a long-term insurer's assets and liabilities for the purposes of section30 of the Act (maintenance of a financially sound condition). on what was commonly known as the "financial soundness valuation method". This method has been developed by the Actuarial Society of South Africa and has been in use for the past 6 years.
In future the method of valuation in Schedule 3 will be the only method of valuation to be used for purposesof section 30 of the said Act (maintenance of a financially sound position). Schedule 3 is to be replaced by a new Schedule. adjusted to incorporateall the requirements.whicharedeemednecessary to replacetheprescribedvaluation, after which Schedule 2 can be repealed.
From a regulatory perspective. the method of valuation in Schedule3 is a much more informativemethod, it is more applicable to currenttypes of long-term insurance business and it is in line with actuarial practice.
Specific comment as regards paragraphs of new Schedule 3 liabilities. where such a policy is important as it may be deducted from the amount of the liability: subparagraph (n)(i)(Dh) of the definition, dealing with foreign insurers. provides that if reinsurance is placed with another insurer approved by the Registrar, such reinsurance will be approved reinsurance; the ne\\ approach is to amend these provisions to provide that the Registrar may grant approval subject to conditions.
it is necessary to require the foreign insurer to provide the local insurer with the necessary security.
Par 3:the Registrar is now empowered to prescribe the basis of the calculation of values of assets. liabilities and capital adequacy requirement.
Par 4: the provisions relating to amounts that must be disregarded have been streamlined and. inter alia. it has been made clear that negative reserves will not be allowed as assets although they may be deducted from liabilities.
Par 5: theseprovisionswerecovered in subparagraphs (c) and (d) of paragraph 3 of the existing Schedule 3.
Par 6: the Registrar is empowered to take action where the valuation of assets.
contingent liabilities or capital adequacy requirement by means of the method of valuation in Schedule 3 does not result in acceptable and proper values.
3.22 Clause 25: Amendment of Arrangement of Sections of Act 53 of 1998 consequent on the insertion of a new section in that Act, and other amendments.
28 No. 23736 GOVERNMENT GAZETTE, 13 AUGUST 2002 3.
The definition is expanded to also include a non-underwriting member of Lloyd's.
UndertheLong-termInsuranceActa"representative"canmeanbothanatural person and a body corporate. In the Short-term Insurance Act the statutory definition differs as denoting only "employed" persons who can only be natural persons.
It must be made clear that the intention is that a "representative" in the Short-term Insurance Act only denotes natural persons.
The current definitionin the Short-term Insurance Act has caused uncertainty and an appropriate amendment is necessary in order to achieve legal certainty.
This proposed amendment corresponds with that in clause3 of the Bill relating to the Long-termInsuranceAct:seethemotivation in paragraph 3.3 abovein this Memorandum.
The deletion of words in section 8(6) is necessary as they are already contained in section 17 of the Short-term Insurance Act.
The Short-term Insurance Act issilent on whether a short-term insurermay refer to a policy as a "funeral policy" or "burial policy".
Section 8(6)is amended to prohibit short-term insurers from marketing and calling or referring to a short-term insurance policy (whichis in any case defined in the Short-term Insurance Act) as a funeral policy or burial policy.
assistance business is exclusively long-term insurance business and should be kept in that realm.
The proposed amendment corresponds with thatin clause 6of the Bill, relating to the Long-term Insurance Act: see motivation in paragraph 3.6 of this Memorandum, above.
This amendment to section 17(b) of the Short-term Insurance Act corresponds with that in clause4 of the Bill relating to the Long-term Insurance Act: see the motivation in paragraph 3.4 above in this Memorandum.
The reason for the substitution of section 18 of the Short-term Insurance Act is the same as that applying to the corresponding amendment of the Long-term Insurance Act in clause 7 of the Bill (see paragraph 3.7 of this Memorandum).
This amendment to section23 of the Short-term Insurance Act corresponds with that in clause 8 of the Bill relating to the Long-term Insurance Act: see the motivation in paragraph 3.8 above in this Memorandum.
This amendment corresponds to the amendment in clause9 of the Bill, relating to the Long-term Insurance Act: see paragraph 3.9 of this Memorandum, above.
To be in line with the requirement in the Long-term Insurance Act, this section is amended to entitle a policyholder to obtain a copy of his or her policy free of charge.
The substitution of section 53 of the Short-term Insurance Act corresponds with that in clause 19 of the Bill relating to section 59 of the Long-term Insurance Act: see the motivation in paragraph 3.17 above in this Memorandum.
This amendmentof Schedule 1 to the Short-term Insurance Act corresponds with that in clause 22 of the Bill relating to the Long-term Insurance Act: see the motivation in paragraph 3.20 above in this Memorandum.
Paragraph ~(LI)in Part I of Schedule 2 determines which assets shall be disregardedin the calculation ofthecalue of the assets of an insurer. One of theamounts to be disregarded is the amount representing a negative liability.
Paragraph l(n)(v) is amended to delete"a negative liability" and to allow for a claim against a reinsurer in terms of a reinsurance contract to be regarded as an asset.
it makes clear that reinsurance placed with a non-approved reinsurer will be disregarded in valuing the assets the short-term insurer holds.
The provisoto paragraph 8(1) of Schedule 3 provides that the transitional provisions contained in that paragraph shall cease to apply if obligations under a Lloyd's policy are reinsured and the Registrar and Lloyd's so agree.
The amendment makes it clear that the transitional provisions will cease to apply in the event of either the one or the other occurrence.
The new proposed wording clarifies the original intention with the proviso.
This clause follows. as regards the Short-term Insurance Act, the amendments set out in clause 21 of the Bill as regards the Long-term Insurance Act (see paragraph 3.19 of this Memorandum. above).
Clauses 41- 42 of the Bill deal with incidental matters.
The following persons were consulted.
Most registered Long-term and Short-term Insurers including re-insurers.
Free State Department of Finance.
The Bill does not have any financial implications for the State.
75 of the Constitution, since it contains no provision to which the procedure set out in Section 74 or 76 of the Constitution applies.