CONTROL OF INSURANCE [Cap. 332 · CONTROL OF INSURANCE [Cap.332 Registration and issue of certificates. (2) Every application by a foreign insurance company for registration under

CONTROL OF INSURANCE [Cap. 332

ActsNos-25 of 1962,

9 of 1967,22 of 1979.

CHAPTER 332

CONTROL OF INSURANCE

AN ACT TO M A K E PROVISION FOR THE REGULATION AND SUPERVISION OF THEBUSINESS OF INSURANCE.

Short title.

Exemption ofthe InsuranceCorporation ofCeylon and asubsidiarycorporation ofthe InsuranceCorporation ofCeylon and anindependentcorporation.[§ 44. 22 of1979.]

Exemption forcertain otherassociations.

1. This Act may be cited as the Controlof Insurance Act.

PART I

APPLICATION OF ACT

2. Nothing in this Act shall apply to orbe deemed or construed to prohibit orrestrict the carrying on of insurance businessby the Insurance Corporation of Ceylon, orby a subsidiary corporation of the InsuranceC o r p o r a t i o n of Ceylon or by anindependent corporation.

3. (1) Subject to the provisions ofsubsection (2), nothing in this Act shallapply to or be deemed or construed toprohibit or restrict the carrying on ofinsurance business by—

(i) any association which is constitutedby any Act or Ordinance (enactedin Sri Lanka whether after orbefore the appointed date) andwhich is authorized by such Act orOrdinance to carry on businesstailing within the meaning ofinsurance business as defined in thisAct,

(ii) any association in the case of whichall the following requirements aresatisfied, that is to say—

(a) that contracts of insurance(whether express or arising byoperation of the rules or by-laws of the association) are

[1st November, 1962.]

effected or entered into by theassociation only with personswho are members of theassociation, and that thebenefit under such contractaccrues or may accrue only tomembers or their heirs ordependants or to personsnominated by such membersin that behalf in accordancewith the rules or by-laws ;

(b) that no part of the net profitsor income of the association ispaid or payable to personsother than members or theirheirs, dependan t s , ornominees as aforesaid; and

(c) that membership of theassociation is restricted topersons in the employment ofany one employer, or of twoor more employers each ofwhom is engaged in a businessor undertaking of the samedescription as the other or theothers, and

(iii) any association of persons whichmay be declared by the Minister bynotification published in theGazette to be exempt from theprovisions of this Act.

(2) The Minister may, by notificationpublished in the Gazette, declare that anyprovision or provisions of this Act shallapply to any association referred to in thepreceding provisions of this section.

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Cap.332] CONTROL OF INSURANCE

Insurancebusiness to becarried on onlyby personsregisteredunder this Act.

Requirementthat a companyapplying forregistrationmust be anincorporatedcompanywhich haspaid-up sharecapital andwhich is not aprivatecompany.

(3) The provisions of this Act other thanthe regulations in the Seventh Scheduleshall not apply to any member of LloydsUnderwriters carrying on Sri Lankabusiness.

PART II

REGISTRATION OF INSURERS

4. Save as otherwise expressly providedin this Act—

(a) no person who on or before theappointed date is carrying oninsurance business of any class inSri Lanka shall continue to carryon insurance business of such class,and

(b) no person shall commence to carryon insurance business of any classother than life assurance business,

unless such person is for the time beingregistered under this Act as a personauthorized to carry on insurance business ofthat class.

5. No company shall be registered underthis Act as being authorized to carry oninsurance business in Sri Lanka unless suchcompany—

(a) is a company which is incorporatedin Sri Lanka under the CompaniesOrdinance*, and which is not aprivate company as defined insection 27 of that Ordinance, or

(b) is a body which is incorporated byor under any law in any othercountry and which is not of thenature of such private company asaforesaid, and which has a paid-upcapital of not less than one hundredthousand rupees, or the equivalentof such sum (ascertained at the timeof registration) in any othercurrency, or

(c) is a company which is limited byguarantee.

6. (1) Every application for the Application forregistration of an insurer under this Act registration of, ,, , , , — ,, . , ,. insurers.shall be made to the Controller in such form

as may be provided for the purpose by theController and be accompanied by—

(a) a statement in writing by the insurerthat the provisions of section 12have been complied with, togetherwith a certificate under the hand ofthe Deputy Secretary to theTreasury specifying the amountdeposited under that section by theinsurer, and

(b) if such application is by acompany—

(i) a certified copy of thememorandum and articles ofassociation of the company,or of the charter, statute, deedof s e t t l e m e n t , or otherinstrument constituting ordefining the constitution ofthe company, and if theinstrument is not written int h e S i n h a l a l a n g u a g e , acertified translation thereof;

(ii) a statement setting out then a m e , a d d r e s s a n doccupation, if any, of each ofthe directors of the company,if it is a Sri Lanka company;or if it is a foreign company, alist of directors, the address ofthe regis te red off ice orprincipal place of business inSri Lanka of the company orof its principal agent in SriLanka and the full name andaddress of the manager of thebusiness of the company in SriLanka;

(iii) a statement setting out theclass or classes of insurancebusiness carried on orproposed to be carried on inSri Lanka by the company;and

(iv) a statement setting out theamount of the paid-up capitalof the company.

• Repealed and replaced by the Companies Act, No. 17 of 1982.

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CONTROL OF INSURANCE [Cap.332

Registrationand issue ofcertificates.

(2) Every application by a foreigninsurance company for registration underthis Act shall in addition be accompanied bya statement verified by an affidavit settingout the special requirements, if any, of thenature specified in section 9 imposed by thecountry in which such foreign company isincorporated, on insurance companiesincorporated in Sri Lanka and carrying onbusiness in that country.

(3) Every application under this sectionshall be verified by a declaration signed bythe person making the application that thestatements accompanying the applicationare true and accurate. Every suchdeclaration shall be free of stamp duty.

(4) Every application under this sectionshall be accompanied by a fee of twohundred and fifty rupees in respect of eachclass of insurance business carried on orproposed to be carried on by the insurer:

Provided that in the case of life assurancebusiness the fee shall be fifty rupees.

7. (1) Where the Controller is satisfiedthat an insurer making an application forregistration under this Act has compliedwith the provisions of sections 5 and 6, theController shall register the insurer as aperson authorized to carry on insurancebusiness in Sri Lanka and shall determinethe class or classes of insurance businesswhich the insurer is authorized to carry on :

Provided that the Controller shall refuseto register any foreign insurance company ifhe is satisfied—

(a) that Sri Lanka companies are by thelaw relating or applied to insurancein the country, in which thatcompany is incorporated, debarredfrom carrying on insurance businessin that country; or

(b) that any requirement imposed onthat company under the provisionsof section 9 of this Act has not beencomplied with by that company:

And provided further that if the Ministeris of the opinion that a company should notbe allowed to carry on insurance business in

Sri Lanka in the national interest, theController shall refuse to register thatcompany if the Minister so directs.

(2) Upon the registration of an insureras hereinbefore provided, the Controllershall issue to the insurer a certificate ofregistration which shall be kept at all timesat the principal office or place of business inSri Lanka of the insurer and be madeavailable for inspection by the Controller orany other person authorized by him for thepurpose.

8. Whenever, after registration of acompany, any alteration occurs or is madeso as to affect any of the documents orparticulars which under the provisions ofsubsection (1) or of subsection (2) of section6 accompanied or were required toaccompany the application of any companyfor registration, the company shall forthwithfurnish to the Controller a full authenticatedstatement of such alteration.

9. Where by the law or practice of anycountry other than Sri Lanka in which anyforeign insurance company is incorporated,insurance companies incorporated in SriLanka are required as a condition ofcarrying on insurance business in thatcountry to comply with any specialrequirement, whether as to the keeping ofdeposits or assets in that country orotherwise, which is not imposed under thisAct upon companies of that country theMinister may, if satisfied of the existence ofsuch special requirement, by notificationpublished in the Gazette, direct that thesame requirement or requirements as similarthereto as may be, shall be imposed uponforeign insurance companies incorporated inthat country either—

(a) as a condition of carrying onbusiness of insurance in Sri Lanka,or

(b) as a condition of entering into anynew contract of long-term businessin Sri Lanka.

Alteration inparticularsfurnished withapplication forregistration tobe reported tothe Controller.

Power ofMinister toimposereciprocaldisabilities onforeigncompanies.

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Cancellation oralteration ofregistration.

10. (1) The Controller—

(a) shall cancel the registration of aninsurer, either wholly or in respectof any particular class of insurancebusiness, as the case may be—

(i) if the insurer is in liquidation oris adjudged an insolvent;

(ii) if the insurer makes default incomplying with the provisionsof section 12 or section 44 orif the whole of the depositmade under this Act has beenreturned to the company ashereinafter provided;

(iii) if the insurance business of theinsurer has been transferred toany other person, orama lgamated wi th theb u s i n e s s of, or whol lyreinsured with, any otherperson; and

(b) may cancel the registration of aninsurer—

(i) if the insurer makes default incomplying with, or acts inc o n t r a v e n t i o n of, anyrequirement of this Act or ofany regulation or order madethereunder; or

(ii) if the insurer fails to complywith any requirement ofsection 38; or

(iii) if the Controller has reason tobelieve that any amount dueby the insurer under a decreeentered in an action in SriLanka arising out of anypolicy of insurance issued bythe i n s u r e r has remainedunpaid for three months afterthe date of the finaladjudication in such action;or

(iv) if the insurer carries on anybusiness other than insurancebusiness; or

(v) in any other case in which he isauthorized by this Act tocancel the registration.

(2) Where in any case referred to in sub-paragraph (ii) or sub-paragraph (iii) ofparagraph (a) of subsection (1), the defaultor the transfer or amalgamation orreinsurance of the business or the return ofthe deposit relates only to one or more, butnot all, of the classes of insurance businesscarried on by the insurer, the Controllermay, upon the cancellation of theregistration of the insurer under thatparagraph, register the insurer afresh inrespect of any other class of insurancebusiness and issue a fresh certificate inrespect of that class of insurance business inaccordance with the provisions of section 7.

(3) In any case where a registeredinsurer ceases to carry on insurance businessof any class or proposes to carry oninsurance business of any other class notpreviously carried on by the insurer, theController may alter the registration of theinsurer in such manner as may be necessary,and may alter the certificate of registrationissued to that insurer or cancel suchcertificate and issue a fresh certificate ofregistration under section 7, as thecircumstances of the case may require:

Provided, however, that the insurer shallnot by any such alteration be authorized tocarry on any new class of insurance businessunless—

(a) the statements and other informationmentioned in section 6 relating tothe new class of insurance businessare furnished to the Controller anda fee of two hundred and fiftyrupees for registration in respect ofthat class of insurance business hasbeen paid to the Controller; and

(b) unless the appropriate amount of thedeposit required by section 12 hasbeen made by the insurer and acertificate to that effect has beenissued by the Deputy Secretary tothe Treasury.

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(4) In any case where the Controller issatisfied,—

(a) that any insurer has contravened theprovisions of section 19 or anyorder made thereunder; and

(b) that for the reason aforesaid it isexpedient in the interests of thepolicy holders that the insurershould be prevented from carryingon insurance business in Sri Lanka,

the Controller may make order cancellingthe registration of the insurer.

(5) Notice of any order made undersubsection (4) shall be served on the insurer,and the order shall take effect upon theexpiration of a period of two months afterthe date of the service of the notice unlessan appeal as hereinafter provided ispreferred against the order.

(6) The insurer in respect of whom orwhich an order is made under subsection (4)may, before the expiry of a period of twomonths after the date of the service of noticeof the order on the insurer, appeal to theDistrict Court against the order; and suchCourt may, if it is satisfied that the insurerhas not contravened the provisions ofsection 19, revoke the order of theController.

(7) The order of the District Court onany appeal under this section shall besubject to an appeal to the Court of Appealand such appeal shall be preferred in likemanner as though it were an appeal againsta final order of the District Court made in acivil action.

11. (I) The following provisions shallapply in the case of any insurer who orwhich had prior to the appointed datecarried on in Sri Lanka insurance businessof any class:—

(a) The insurer may continue to carryon general business of that class fora period of not more than threemonths after the appointed datenotwithstanding that the insurer isnot registered as required by section4 or that the provisions of section 5

are not satisfied in the case of thatinsurer, or that the insurer has notmade the deposit required bysection 12.

(b) If the insurer is not, within a periodof three months after the appointeddate, duly registered under this Actas being authorized to carry oninsurance business of that class theinsurer shall not, save as hereinafterprovided, continue to carry on suchinsurance business in Sri Lankaafter the expiry of that period,

(c) Notwithstanding that an insurer isnot duly registered within theperiod of three months after theappointed date, every policy orcontract of insurance effected orrenewed by the insurer at any timebefore the appointed date or withinthree months thereafter shall bedeemed to be valid and effectual forall purposes, and nothing in thisAct shall be deemed to prohibit orotherwise render unlawful thecontinuance of insurance businessin Sri Lanka by that insurer in sofar, but in so far only, as thetransaction of such business isnecessary for the purpose of themaintenance of any policy orcontract of insurance withoutrenewal.

(2) Such provisions of this Act as arenot inapplicable shall apply to any insurerwho or which had prior to the appointeddate carried on in Sri Lanka insurancebusiness of any class so long as any liabilityof the insurer upon any policy or contract ofinsurance of any class remains unpaid orundischarged.

(3) Where the registration of any insureris cancelled as provided in this Act, then,notwithstanding such cancellation—

(a) every contract of insurance effectedby the insurer at any time beforethe cancellation takes effect shall bedeemed to be valid and effectual forall purposes, and nothing in thisAct shall be deemed to prohibit orotherwise render unlawful the

Unregisteredinsurers.

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continuance of insurance businessin Sri Lanka by that insurer in sofar, but in so far only, as thecontinuance of such business isnecessary for the purpose of thecollection and receipt of the premiapayable upon such policy orcontract and the payment of sumspayable by the insurer thereunder ;

(b) such of the provisions of this Act asare not inapplicable shall continueto apply to that insurer so long asany liability of the insurer upon anypolicy or contract of insurance ofany class remains unpaid orundischarged.

Making of 12. (1) Every insurer applying fordeposits, registration under this Act shall, keep

deposited with the Deputy Secretary to theTreasury, for and on behalf of theGovernment of Sri Lanka, a sum of fiftythousand rupees in respect of each class ofinsurance business proposed to be carriedon by that insurer in Sri Lanka:

Provided that the maximum amount ofthe deposit shall, subject to the provisions ofsection 44, be two hundred thousand rupees.

(2) A deposit made under this Act mayconsist of cash or of Government securitiesor of Government guaranteed securities, andthe value of any securities so deposited shallbe taken to be their market value at the dateof deposit.

(3) A deposit made in cash shall be heldby the Deputy Secretary to the Treasury tothe credit of the insurer and shall bereturnable to the insurer in cash in thecircumstances and in the manner in whichunder the provisions of this Act a deposit isto be returned, and any interest accruingdue on securities deposited under thissection by any insurer shall, when it iscollected, be paid by the Deputy Secretaryto the Treasury to the insurer.

(4) An insurer may at any timesubstitute for the securities deposited withthe Deputy Secretary to the Treasury underthis section other Government securities orGovernment guaranteed securities of equalvalue assessed at the market rate prevailing

at the time of substitution, and the DeputySecretary to the Treasury shall, on thewritten application of any insurer who orwhich has made a deposit, invest inGovernment securities or Governmentguaranteed securities the whole or any partof the cash received by the Deputy Secretaryto the Treasury on the redemption of anysecurities deposited by the insurer under thisAct.

(5) The Deputy Secretary to theTreasury shall, if so requested by theinsurer, sell any securities deposited withhim and either hold the cash realized bysuch sale as deposit or invest in suchGovernment securities or Governmentguaranteed securities as may be specified bythe insurer the whole or any part of the cashreceived by him and hold the securities inwhich investment is so made as deposit.

(6) The amount of any deposit madeunder the provisions of Part II of the MotorTraffic (Third Party Risks) Regulations,1951, by an insurer seeking registrationunder this Act shall be deemed to have beenreturned to such insurer under regulation5 (3) of Part II of the aforesaid regulationsand thereafter to have been paid by suchinsurer as a deposit in terms of subsection(1) of this section:

Provided, however, that so much of thatamount as may not be required to be keptdeposited in terms of subsection (1) of thissection shall be returned to the insurer bythe Deputy Secretary to the Treasury.

13. The deposit made by the insurer Reservation ofunder section 12 shall be deemed to be part deposits of the assets of the insurer, but shall not—

(a) be capable of being transferred orassigned or of being encumberedwith any mortgage or other chargeby the insurer or be liable to seizurein execution of any decree; or

(b) be available for the discharge of anyliability of the insurer except for thedischarge, in the event of thewinding up of the insurer, ofliabilities arising out of policies ofinsurance business issued by thei n s u r e r and r e m a i n i n gundischarged.

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14. Where the Controller is satisfied thatan insurer has ceased to carry on in SriLanka any class of insurance business inrespect of which a deposit has been madeunder section 12 and that its liabilities in SriLanka in respect of business of that classhave been satisfied or are otherwiseprovided for, the Controller shall, on theapplication of the insurer, order the returnto the insurer of so much of the deposit asmay not be required under section 12 for thepurposes of any other class of insurancebusiness which the insurer may carry onthereafter;

Provided, however, that no such ordershall be made in relation to any class ofinsurance business until after the expirationof two years from the date of the last policyof insurance of that class issued by theinsurer.

PART III

GENERAL PROVISIONS APPLICABLE TOINSURERS

15. Where an insurer carries on businessof more than one of the classes of insurancebusiness as defined in this Act, such insurershall keep a separate account of all receiptsand payments in respect of each such classof insurance business.

16. Every Sri Lanka insurer shall inrespect of all insurance business transactedby such insurer, and every foreign insurershall in respect of all insurance businesstransacted by such insurer in Sri Lanka,keep and maintain—

(a) a register or record of policies, inwhich shall be entered in respect ofevery policy issued by the insurer,the name and address of the policyholder, the date when the policywas effected, and particulars of anytransfer, assignment or nominationof which the insurer has notice; and

(b) a register or record of claims inwhich shall be entered every claimpresented to the insurer togetherwith the date of the claim and thename and address of the claimant,the date of settlement of the claim,

and where a claim is repudiated thedate of repudiation and the groundstherefor.

17. (1) No insurer shall grant to any Prohibition ofperson who holds the position of manager, Ioans-managing agent, actuary, auditor, or officerof such insurer, and, if such insurer is acompany, to any person who holds theposition of director of such company, or toany company in which such a person holdsany such position, any loan, other than amortgage of a policy of life assurance issuedby that insurer, except with the priorapproval of the Controller who shall grantsuch approval only if he is satisfied thatsufficient security is being given for therepayment of the loan.

(2) In respect of any loan granted by aninsurer to any person referred to insubsection ( I ) and outstanding on theappointed date, the Controller shall havethe power, notwithstanding anything to thecontrary in any agreement or contract, toexamine the adequacy of the security givenby such person for the repayment of theloan and, if the Controller considers itnecessary so to do, to require that the loanbe repaid or that additional security begiven, on or before a specified date. If suchperson fails to repay the loan, or to giveadditional security, on or before thespecified date, he shall cease to hold officeon the expiry of a period of one year fromthat date.

18. None of the assets in Sri Lanka ofany insurer shall be kept otherwise than inthe name of the insurer.

19. (1) No insurer shall reinsure withany person in Sri Lanka other than aninsurer or with any such institution as maybe declared by the Minister by notificationpublished in the Gazette any risk under anypolicy or contract of insurance issued oreffected in respect of insurance businesstransacted in Sri Lanka.

(2) Every insurer shall, not later thanthree months after the appointed date,furnish to the Controller a list of theinsurers (together with their addresses), withwhom that insurer has reinsured risks uponpolicies or contracts of insurance issued or

Assets ofinsurer to bekept in thebusiness nameof the insurer.Reinsurance.

Return ofdeposits.

Separation ofaccounts andassets.

Register ofpolicies andregister ofclaims.

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Application oflaw to policiesissued inSri Lanka-

Power ofController tofix rates ofpremia.

effected in respect of insurance businesstransacted in Sri Lanka and shallwhensoever reinsurance is effected with aninsurer whose name is not in such listfurnish the name and address of such last-mentioned insurers to the Controller.

(3) The Controller may from time totime, by order published in the Gazette orby special order addressed to any insurer,prohibit all insurers or any specifiedinsurer, as the case may be, fromreinsuring with any specified insureroutside Sri Lanka risks upon policies orcontracts of insurance issued or effected inrespect of insurance business transacted inSri Lanka:

Provided, however, that before makingany order under this subsection theController shall inform the insurer orinsurers of his intention to make suchorder and shall consider anyrepresentations made by the insurer orinsurers with reference to his intention.

20. The holder of a policy of insuranceissued by any insurer in respect ofinsurance business transacted in Sri Lankaafter the appointed date shall have theright, notwithstanding anything to thecontrary contained in the policy or in anyagreement relating thereto, to receivepayment in Sri Lanka of any sum securedthereby and to sue for any relief in respectof the policy in any competent court in SriLanka; and if the suit is brought in SriLanka any question of law arising inconnexion with any such policy shall bedetermined according to the law in forcein Sri Lanka:

Provided that this section shall not applyto holders of policies of marine insurance.

In this section " competent court " meansthe District Court of Colombo or of thedistrict in which the plaintiff resides.

21. The Controller may from time totime fix and notify the maximum orminimum rates of premia, or both suchrates, to be charged by insurers in respect ofpolicies of insurance to be issued by them.

PART IV

LIFE ASSURANCE BUSINESS

22. (1) Every insurer who or which hastransacted life assurance business in SriLanka prior to the first day of January,1962, and who or which has issued anypolicies of life assurance under whichliabilities have not been discharged by suchinsurer on the appointed date shall maintainin Sri Lanka assets of such value as will besufficient to discharge the liabilities undersuch policies determined in the prescribedmanner.

(2) At least half of the assets which aninsurer is required to have in Sri Lanka forthe purposes of subsection (1) shall consistof investments in Government securities andthe remainder of such assets shall be of suchkind as are notified to, and approved inwriting by, the Controller.

(3) An insurer shall comply with theprovisions of subsection (1) before theexpiry of a period of five years after theappointed date:

Provided that the insurer shall at the endof the first year after the appointed datehave in Sri Lanka not less than one-fifth ofthe assets required for the purposes ofsubsection (1) and shall thereafter before theend of each subsequent year increase suchassets by at least one-fifth so that there shallbe all the assets required for the purposes ofsubsection (1) at the end of five years afterthe appointed date.

(4) Every insurer to whom subsection(1) applies shall not later than Januarythirty-first in each year furnish to theController a return, in the prescribed formand certified in the prescribed manner, ofthe assets and liabilities of such insurer inSri Lanka on the last day of December inthe previous year; and such insurer shallfurnish a similar return to the Controller inrespect of each period of three monthsending on March thirty-first, June thirtiethand September thirtieth in each year, thereturn in respect of each such period beingfurnished not later than one month after thedate of termination of such period :

Provided that the Controller may, uponan application being made by an insurer,grant an extension of time not exceedingone month to furnish such return.

Duty ofinsurers whohave issued anypolicies of lifeassuranceunder whichliabilities havenot beendischarged onthe appointeddate tomaintain assetsin Sri Lanka.

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(5) The Controller may cause suchinvestigation as he may consider necessaryfor the purpose of verifying the particularscontained in any return furnished by aninsurer under subsection (4), and suchinsurer shall upon being requested to do soby notice in writing by the Controller,furnish on or before the date specified in thenotice such information or explanation asthe Controller may require for suchinvestigation.

23. (1) Every insurer who or whichcarries on the business of life assurance inSri Lanka, whether solely or in addition toany other business, shall—

(a) maintain a separate fund to be calledthe life assurance fund and shallcredit all money received in respectof the life assurance businesscarried on by such insurer to thatfund ; and

(b) keep the assets in respect of the lifeassurance business separate fromthe assets in respect of any otherclass of insurance business.

(2) The life assurance fund maintainedby an insurer under subsection (1) shall notbe liable for any contracts of the insurer forwhich it would not have been liable had thebusiness of the insurer been only that of lifeassurance, and shall not be applied directlyor indirectly for any purposes other thanthose of the life assurance business carriedon by that insurer.

(3) For the purpose of verifying whetheran insurer complies with the provisions ofsubsection (1), the Controller may—

(a) call upon such insurer to furnishfrom time to time a return in suchform as may be prescribed ;

(b) authorize an officer in writing toenter at all reasonable hours theplace at which such insurer iscarrying on the business of lifeassurance and examine any books,registers or documents of suchinsurer relating to such businessand such insurer shall furnish such

return or permit such officer toenter such place and make suchexamination.

24. (I) A transfer of an assignment ofa policy of a life assurance, whether with orwithout consideration, may be made only byan endorsement upon the policy itself or bya separate instrument signed in either caseby the transferor or by the assignor or hisduly authorized agent and attested by atleast one witness, and specifically settingforth the fact of transfer or assignment.

(2) No transfer or assignment of a policyof life assurance shall be of any effect asagainst the insurer unless it is made inaccordance with subsection (1), or until anotice in writing of the transfer orassignment, together with the instrument orendorsement of a copy thereof which iscertified by or on behalf of the parties to thetransfer or assignment to be correct, isserved on the insurer at his or its principalplace of business in Sri Lanka,

(3) The date on which the noticereferred to in subsection (2) is served on theinsurer shall regulate the priority of allclaims under a transfer or an assignment ofa policy of life assurance as between personsinterested in the policy; and where there ismore than one instrument of transfer orassignment, the priority of the claims undersuch instruments shall be governed by theorder in which the notices referred to insubsection (2) are served.

(4). Upon the receipt of the noticereferred to in subsection (2), the insurershall record the fact of such transfer orassignment together with the date thereofand the name of the transferee or theassignee and shall, on the request of theperson by whom the notice was given, or ofthe transferee or assignee, on payment of afee not exceeding one rupee, grant a writtenacknowledgment of the receipt of suchJiotice, and any such acknowledgment shallbe conclusive evidence against the insurerthat he has duly received the notice to whichsuch acknowledgment relates.

(5) Subject to the terms and conditionsof the transfer or assignment, the insurershall, from the date of the receipt of the

Assignmentand transfer oflife assurancepolicies.

Duty of insurercarrying onbusiness of lifeassurance tomaintain aseparate fundand keep assetsrelating to suchbusinessseparate fromassets relatingto any otherbusiness.

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Acquisition ofsurrender valueby policy.

notice referred to in subsection (2),recognize the transferee or assignee namedin the notice as the only person entitled tobenefit under the policy, and such personshall be subject to all liabilities and equitiesto which the transferor or assignor wassubject at the date of the transfer orassignment and may institute anyproceedings in relation to the policy withoutobtaining the consent of the transferor orassignor or making him a party to suchproceedings.

(6) Any rights and remedies of anassignee or transferee of a policy of lifeassurance under an assignment or transfereffected prior to the appointed date shallnot be affected by the provisions of thissection.

(7) Notwithstanding any law or customhaving the force of law to the contrary, anassignment in favour of a person made withthe condition that it shall be inoperative orthat the interest shall pass to some otherperson on the happening of a specified eventduring the lifetime of the person whose lifeis insured, and an assignment in favour ofsurvivor or survivors of a number ofpersons, shall be valid.

25. (1) Where, in terms of a policy oflife assurance, the policy is to mature upondeath or upon survival to a fixed date or onearlier death, and the policy is subject topayment of premiums at an uniform rate fora fixed term or until earlier death, and allpremiums have been paid for threeconsecutive years, the policy shall bedeemed to acquire a surrender value, and,notwithstanding any contract to thecontrary, shall not lapse by reason of non-payment of further premium but shall,notwithstanding such non-payment, be keptalive to the extent of its paid-up value.

For the purposes of this subsection, thepaid-up value of a policy under whichpremiums are payable at a minimum ratefor a fixed term or until earlier death shallbe an amount bearing to the tolal sumassured by the policy the same proportionas the total of the premiums already paid onthe policy bears to the total of the premiumspayable under the policy.

(2) Where a debt owing to an insurer issecured by a policy of life assurance issuedby the insurer and, under subsection (1), thepolicy is kept alive to the extent of its paid-up value, the insurer—

(a) may treat the debt as a debt securedby the policy so kept alive, andthereupon the policy so kept aliveshall be a security for the debt, or

(b) may reduce the amount of suchpaid-up value by an amount thepresent value of which is equal tothe amount of the debt, andthereupon the debt shall cease to beowing to the insurer.

(3) This section shall not apply in anycase where—

(a) the sum assured is payable only onthe happening of a contingencywhich may not arise ; or

(b) the paid-up value of the policy willbe less than one hundred rupees ; or

(c) the parties after default has occurredin the payment of the premiumagree in writing to some otherarrangement; or

(d) the surrender value of the policy isautomatically applied under theterms of the contract formaintaining the policy in forcenotwithstanding the non-paymentof premiums.

26. No policy of life assurance shallafter the expiry of two years from the dateof the policy be called in question by anyinsurer on the ground that a statement madein the proposal or other document on thefaith of which the policy was issued orreinstated, or in any report of a medicalofficer, or referee, or friend of the policyholder, was inaccurate or false unless theinsurer shows that such a statement wasmade on a material matter or suppressedfacts which it was material to disclose, andthat it was fraudulently made by the policyholder and that the policy holder knew atthe lime of making it that the statement was

Policy not tobe called inquestion on theground of mis-statement aftertwo years.

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Supply ofnotice ofoptions, &c.

Power ofpolicy holderlo nominateperson orpersons towhom themoney securedby ihe policysnail be paid.

false or that it suppressed facts it wasmaterial to disclose;

Provided that nothing in this section shallprevent the insurer from calling for proof ofage at any time if it is entitled to do so, andno policy shall be deemed to be called inquestion merely because the terms of thepolicy are adjusted on subsequent proofthat the age of the life insured wasincorrectly stated in the proposal.

27. (1) Where any premium in respectof a policy of life assurance is not paid onthe date on which it is payable, notice of theoptions available to the policy holder shallbe given to him by the insurer before theexpiry of a period of three months from thesaid date, unless such options are set out inthe policy:

Provided that where two or morepremiums in respect of the same policy aredue and unpaid, nothing in this subsectionshall apply to the case of the failure.

(2) Every notice under subsection (1)shall be deemed to have been duly given tothe policy holder if it is sent to him to suchaddress as may be specified in the policy or,where the address is not so specified, to theaddress to which a renewal premium noticeor receipt was last sent by the insurer to thepolicy holder.

(3) Upon application made to an insurerin that behalf, and on payment of a fee oftwo rupees, the insurer shall supply to thepolicy holder or to his legal representativeor to an assignee of the policy, a certifiedcopy of the proposal for the policy and ofthe personal statement made to the medicalofficer by the proposer, unless copiesthereof are attached to the policy.

28. (1) The holder of a policy of lifeassurance may, when effecting the policy orat any time before the policy matures forpayment, nominate the person or persons towhom the money secured by the policy shallbe paid in the event of his death:

Provided that, where any nominee is aminor, it shall be lawful for the policyholder to appoint in the prescribed mannerany person to receive the money secured bythe policy in the event of his death duringthe minority of the nominee.

(2) A nomination under subsection (I)shall, umess it is incorporated in the text ofthe policy itself, be made by an endorsementon the policy and such endorsement shall bynotice in writing be communicated to theinsurer who shall register such endorsementin the record or register relating to thatpolicy. Any such nomination may at anytime before the policy matures for paymentbe cancelled or changed by anotherendorsement or a will of the policy holder,as the case may be, and unless notice inwriting of any such cancellation or changehas been given by the policy holder to theinsurer, the insurer shall not be liable forany payment under the policy made bonafide by him to a nominee mentioned in thetext of the policy or registered in records ofthe insurer.

(3) The insurer shall furnish to thepolicy holder a written acknowledgment ofhaving registered a nomination or acancellation or change thereof, and maycharge a fee not exceeding one rupee forregistering such cancellation or change.

(4) A transfer or assignment of a policymade in accordance with section 24 shallhave the effect of cancelling a nomination:

Provided that the assignment of a policyto an insurer who bears the risk on thepolicy at the time of the assignment, inconsideration of a loan granted by thatinsurer on the security of the policy withinits surrender value, or its reassignment onrepayment of the loan, shall not cancel anomination, but shall affect the rights of thenominee only to the extent of the insurer'sinterest in the policy.

(5) Where the po l icy ma tu re s forpayment during the lifetime of the personwhose life is assured or where the nomineeor, if there are more nominees than one, allthe nominees die before the policy maturesfor payment, the amount secured by thepolicy shall be payable to the policy holderor his heirs or legal representatives, as thecase may be.

(6) Where the nominee or, if there aremore nominees than one, one or more ofsuch nominees survive the person whose life

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Restrictions ondividends andbonuses.

Declaration ofinterim bonus.

is assured, the amount secured by the policyshall be payable to such survivor orsurvivors.

29. No insurer who or which carries onthe business of life assurance in Sri Lankashall, for the purposes of declaring orpaying any dividend to shareholders or anybonus to policy holders of the company, ifsuch insurer is a company, or of making anypayment in service of any debentures, loansor advances on account, utilize directly orindirectly, any portion of the life assurancefund or of the funds of such other class orsub-class of insurance business, as the casemay be, except a surplus shown in thevaluation balance sheet as in Form H as setforth in the Fourth Schedule submitted tothe Controller as part of the abstractreferred to in section 37 as a result of anactuarial valuation of the assets andliabilities of the insurer; and such surplusshall not be increased by contributions outof any reserve fund or otherwise unless suchcontributions have been brought in asrevenue through the revenue accountapplicable to life assurance business on orbefore the date of the valuation aforesaid,except when the reserve fund is made upsolely of transfers from similar surplusesdisclosed by valuation in respect of whichreturns have been submitted to theController under section 37 of this Act;

Provided that payments made out of anysuch surplus in service of any debentures,loans or advances on account shall notexceed ninety per centum of such surplusincluding any payment by way of interest onthe debentures, loans or advances onaccount, and interest paid on thedebentures, loans or advances on accountshall not exceed ten per centum of any suchsurplus except when the interest paid on thedebentures, loans or advances on account isoffset against the interest credited to thefund concerned in deciding the interest basisadopted in the valuation disclosing theaforesaid surplus.

39. Notwithstanding anything containedin this Act to the contrary , an insurershall be at liberty to declare on therecommendation of an actuary made at thelast preceding valuation, an interim bonusor bonuses to life assurance policy holders

whose policies mature for payment byreason of death or otherwise during theinter-valuation of period.

31. (1) Notwi ths tanding anything Prohibition ofcontained in any contract between any cessation of

. . i_ •..i. payment ofinsurer and an insurance agent, who either commission inhas effected business for the insurer to the certain cases.value of fifty thousand rupees or more, orhas had three years of service under theinsurer and whose name appears in thebooks of the insurer on the first day ofAugust, 1960, as to the forfeiture ofcommission on renewal premiums or thecessation of payment of such commission tothe insurance agent, no such insurer shall, inrespect of life assurance business transactedin Sri Lanka, refuse payment, or be entitledto refuse payment, to such insurance agentof commission on renewal premiums due tohim under the agreement by reason only ofthe termination of his agreement on anyground other than fraud.

(2) In any case where the commission onrenewal premiums is in terms of anycontract between such insurer and suchinsurance agent payable to the widow orother dependants of the agent after hisdeath, then the restrictions set out insubsection (1) shall, in the event of the deathof the agent, after the termination of hisagreement, apply in relation to the paymentof c o m m i s s i o n to such widow ordependants.

(3) Nothing in the preceding provisionsof this section shall be deemed to renderunlawful any agreement between an insurerand an insurance agent or the widow ordependants of the agent, as the case may be,for the commutation of the liability to makethe payments referred to in those provisions.

(4) The provisions of this section shallapply to and in relation to contractsbetween insurers and insurance agentsnotwithstanding that such contracts mayhave been entered into prior to theappointed date.

32. (1) Subject to the provisions of the Restrictions onInsurance Corporation Act, an insurer who iransten, andi amalgamations-has prior to the appointed date transactedlife assurance business in Sri Lanka shallnot transfer the assets and liabilities relating

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Restrictionon theemploymentunder certainconditions ofpersons in thecapacity ofmanagers orofficers incharge of thebusiness ofinsurers-

to his life assurance business to any personother than to such an institution as may bedeclared by the Minister by notificationpublished in the Gazette or amalgamatesuch assets and liabilities with the assets andliabilities of the life assurance business ofany insurer other than such an institution.

(2) A t ransfer or an amalgamat ionpermissible under subsection (1) shall not bevalid unless the Commissioner-General ofInland Revenue has issued a certificate oftax clearance under his hand indicating thathe is satisfied that the revenue of theGovernment of Sri Lanka will not bep r e j u d i c e d by such t ransfer oramalgamation and that an appropriate sumhas been paid by the insurer incommutation of his prospective liability toSri Lanka income tax.

33. ( I ) Notwithstanding anything inthe Companies Ordinance* or in the articlesof association of an insurer, where suchinsurer is a company, or in any contract oragreement, no insurer shall after the expiryof six months after the appointed date bedirected or managed by, or employ asmanager or officer in any capacity, anyperson whose remuneration or any partthereof takes the form of commission orbonus or a share in the valuation surplus inrespect of the life assurance business of theinsurer:

Provided that nothing in this subsectionshall be deemed to prohibit—

(i) the payment of commission to aprincipal agent or an insuranceagent in .respect of life assurancebusiness procured by or throughhim;

(ii) the employment of any person in aclerical or other subordinatecapacity who, as an insuranceagent, receives commission inrespect of insurance businessprocured by him;

(iii) the employment as an officer of anyperson who receives renewalcommission in respect of lifeassurance business procured by himin his capacity as an insurance

agent or as an employer of agentsbefore the date of such employmentor before the appointed date,whichever date is the later.

(2) Notwithstanding anything in theCompanies Ordinance* or in the articles ofassociation of an insurer, where such insureris a company, or in any contract oragreement, no manager, managing directoror any other person concerned in themanagement of an insurer's business shallbe entitled to nominate a successor to hisoffice, and no person so nominated, whetherbefore or after the appointed date, shall beentitled to hold or to continue to hold suchoffice,

(3) If, in the case of any insurancecompany, provision is made by the articlesof association of the company or by anagreement entered into between any personand the company for empowering a directoror manager or other officer of the companyto assign his office to any other person, anyassignment of office made in pursuance ofthe said provision, shall, notwithstandinganything contained in the said provision orin the Companies Ordinance*, be void,

(4) No person shall have any right,whether in contract or otherwise, to anycompensation for any loss incurred byreason of the operation of any provision ofthis section.

34. If by reason of a contravention of Liability ofany of the provisions of section 33 any loss directors, &c.,

for loss due tois sustained by an insurer or by any policy contraventionholder of that insurer, every director, of section 33.manager, or officer of that insurer who isknowingly a party to such contraventionshall, without prejudice to any other penaltyto which he may be liable under this Act, beseverally liable to make good the amount ofsuch loss.

PART V

ACCOUNTS, INSPECTION AND INVESTIGATION

35. (1) Every Sri Lanka insurer in Accounts andrespect of all insurance business transacted balance sheet-by such insurer, and every foreign insurer in


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respect of the insurance business transactedby such insurer in Sri Lanka, shall at theexpiration of each calendar year preparewith reference to that year—

(a) a balance sheet substantially inaccordance with the regulationscontained in Part I of the FirstSchedule and substantially in theform set forth in Part II of thatSchedule,

(b) a profit and loss account, and aprofit and loss appropriationaccount substantially in accordancewith the regulations contained inPart I of the Second Schedule, andsubstantially in the forms set forthin Part II of that Schedule exceptwhere the insurer carries onbusiness of one class only and noother business,

(c) in respect of each class of insurancebusiness carried on by the insurer, arevenue account in accordance withthe regulations contained in Part Iof the Third Schedule, and astatement substantially in each ofthe forms set forth in Part II of thatSchedule as may be applicable to

. that class of insurance business :

Provided that in the case of lifeassurance business transacted byany such insurer, such insurer shallprepare only such statements ofaccounts as may be prescribed.

(2) The accounts and statementsr e f e r r e d to in subsec t ion (1) sha l l besigned—

(a) in the case of a company to whichthe Companies Ordinance* applies,by the officers or persons requiredby that Ordinance to sign accountsand statements;

(b) in the case of any other company, bytwo directors;

(c) in the case of any other insurer, bysuch insurer or the officerauthorized by such insurer,

and shall be accompanied by a statementcontaining the names and descriptions ofeach of the persons in charge of themanagement of the business during theperiod to which such accounts andstatements relate and by a report by suchpersons on the affairs of the business duringthat period.

36. (1) The annual balance sheet, Audit.profit and loss account, profit and lossappropriation account and revenue accountprepared by each insurer under section 35shall, unless they are subject to audit underthe Companies Ordinance*, be audited byan auditor.

(2) For the purposes of the audit of anyaccounts under this section, an auditor shallhave the same powers, exercise the samefunctions and discharge the same duties asan auditor of companies under theprovisions of section 132 of the CompaniesOrdinance*.

37. (1) Every insurer shall, in respect Actuarialof all life assurance business transacted by report and, . - • • . abstract.the insurer, cause an investigation to be

made by an actuary once at least in everythree years into the financial condition ofsuch life assurance business, including avaluation of its liabilities in respect of thatbusiness, and shall cause an abstract to bemade in accordance with the regulationscontained in Part I of the Fourth Scheduleand in conformity with the requirements ofPart II of that Schedule :

Provided that where an insurer is unableto establish to the satisfaction of theController that an investigation has beenmade by an actuary into the financialcondition of the insurer's life assurancebusiness in Sri Lanka as at a date not earlierthan the thirty-first day of December, 1958,an investigation shall be made as at a datenot later than the thirty-first day ofDecember, 1961.

(2) The provisions of subsection (1)regarding the making of an abstract shallapply whenever at any other time aninvestigation into the financial condition ofthe insurer is made with a view to thedistribution of surplus or an investigation ismade the results of which are made public.


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(3) There shall be appended to everyabstract required by subsection (1) orsubsection (2) a certificate signed by theinsurer or authorized officer of the insurer,or where the insurer is a company, thedirector or principal officer of the company,that full and accurate particulars of everypolicy under which there is a liability eitheractual or contingent have been furnished tothe ac tua ry for the purposes of theinvestigation.

(4) There shall be appended to everyabstract required by subsection (1) orsubsection (2) a statement prepared inaccordance with the regulations containedin Part I of the Fifth Schedule and inconformity with the requirements of Part IIof that Schedule of the life assurancebusiness subsisting at the date to which theaccounts of the insurer are made up for thepurposes of such abstract.

(5) Where an investigation into thefinancial condition of an insurer is made ata date other than the last date of the year ofaccount, the accounts for the periodelapsing after the end of the preceding yearof account, and the balance sheet as at thedate at which investigation is made, shall beprepared and audited in the mannerprovided for in this Act.

(6) Where by the law of the country inwhich a foreign insurer is constituted,incorporated or domiciled, the insurer isrequired to prepare and furnish to a publicauthority of that country documentssubstantially of the same nature as thedocuments to be furnished under thissection, the insurer shall, within the timespecified in section 38, furnish to theController four certified copies in theSinhala or English language of everyabstract, statement, account and returnsupplied to such public authority and theforegoing provisions of this sectionper ta ining to investigation, valuation,abstracts, certificates and statements shall,in addition, apply separately to lifeassurance business transacted in Sri Lanka.

Submission of 38. (1) Every insurer shall cause to bereturns, printed the audited accounts and statements

Exemptionfrom certainprovisions ofthe CompaniesOrdinance.

required by section 35 and the abstract andstatements required by section 37 and shallfurnish four copies thereof as returns to theController within six months after the endof the period to which they relate;

Provided that in the case of any foreigninsurer or of a Sri Lanka insurer carryingon business outside Sri Lanka, the periodallowed for furnishing such printed returnsshall be nine months;

Provided, further, that the Controllermay extend the period allowed forfurnishing returns by a period not exceedingthree months.

(2) One of the four copies furnishedunder subsection (I) shall be signed by theinsurer, or where the insurer is a company,by the Directors.

39. (1) Where an insurance companyincorporated in Sri Lanka furnishes in anyyear the accounts and balance sheets inaccordance with the provisions of section35, the company may at the same time sendto the Registrar of Companies a copy ofsuch accounts and balance sheet; and wheresuch a copy is so sent it shall not benecessary for the company to file a balancesheet with the Registrar of Companies asrequired by section 121 (2) of theCompanies Ordinance*, and the copy ofthe accounts and balance sheet so sent shallbe chargeable with the same fees and shallbe dealt with by the Registrar of Companiesin all respects as if they were filed inaccordance with that section.

(2) Where an insurance company whichtransacts motor vehicle insurance businessin any year furnishes revenue and profit andloss accounts and a balance sheet inaccordance with the provisions of section 35of this Act such insurer shall be deemed tohave complied with the provisions ofregulation 4 of Part II of the Motor Traffic(Third Party Risks) Regulations, 1951.

40. Every insurer shall furnish to the Furnishing ofController a certified copy of the report repoprtsrelating to the business of the insurersubmit ted to the shareholders of the

* Repealed and replaced by the Companies Act, No. 17 of 1982.

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Furnishingcopies ofreinsurancetreaties.

Powers ofControllerregardingreturns.

company, in the case of an insurer which isa company, or the policy holders of theinsurer, immediately after it is so submitted.

41. Every registered insurer shall fromtime to time furnish the Controller withcertified copies of its reinsurance treaties(including treaties which are revised)relating to any class of insurance businesstransacted by such insurer in Sri Lanka:

Provided that certified copies of suchreinsurance treaties as are in force on theappointed date shall be furnished not laterthan three months after the appointed date.

42. (1) If it appears to the Controllerthat any return furnished to him under theprovisions of this Act is inaccurate ordefective in any respect, he may—

(a) require from the insurer such furtherinformation, certified if he sodirects by such auditor or actuaryas he may consider necessary tocorrect or supplement such return;or

(b) call upon the insurer to submit forhis examination at the registeredoffice or the principal place ofbusiness of the insurer in Sri Lanka,any book of account, register, orother documents or to supply anystatement which he may specify in anotice served on the insurer for thepurpose; or

(c) examine any officer of the insurer onoath or affirmation in relation tothe return; or

(d) decline to accept such return unlesssuch further information as may berequired by him is furnished beforethe expiry of one month from thedate on which the requisition askingfor such further information wasdelivered to the insurer or of suchfurther time as the Controller mayspecify in the requisition ; and if theController declines to accept anysuch return, the insurer shall bedeemed to have failed to complywith the provisions of section 38relating to the furnishing of returns.

(2) The District Court may, on theapplication of an insurer and after hearingthe Controller, direct the acceptance of anyreturn which the Controller has declined toaccept, if the insurer satisfies the Court thatthe action of the Controller was in thecircumstances unreasonable:

Provided that no application under thissubsection shall be entertained by theDistrict Court unless it is made before theexpiration of two months after the date onwhich the Controller made the order ordeclined to accept the return.

(3) The decision of the District Court inany application under this section shall befinal and shall not be subject to any appeal.

43. (1) If it appears to the Controllerthat an investigation or valuation madeunder section 37 does not properly indicatethe condition of the affairs of the insurer byreason of what appears to him to be a faultybasis adopted in the valuation, theController may after giving the insurerreasonable notice and an opportunity to beheard cause an investigation and valuationas at such date as he may specify to be madeat the expense of the insurer by an actuaryappointed by the insurer for that purposeand approved by the Controller, and theinsurer shall place at the disposal of suchactuary all the material required by suchactuary for the purposes of the investigationand valuation within such period, not beingless than three months, as the Controllermay specify.

(2) The provisions of subsections (1) and(4) of section 37 relating to the making ofabstracts and the provisions of section 38relating to the printing of statements shallapply in relation to any investigation andvaluation to be made under this section :

Provided that the abstract and statementsprepared as the result of such investigationand valuation shall be furnished on orbefore such date as the Controller mayspecify.

44. Where upon examination of thereturns and reinsurance treaties furnished byany registered insurer it appears to theController that the deposit made by the

Power ofControllerto orderre-valuation.

Power ofController toincreasedeposit.

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Power ofController tocancelregistration.

insurer under section 12 or that the amountof the assets in Sri Lanka in respect ofinsurance business of the insurer in SriLanka is inordinately low in relation to thevolume of insurance business transacted bythe insurer in Sri Lanka, the Controller (b)may, after giving the insurer an opportunityof being heard, order the insurer to make anadditional deposit and the provisions ofsubsections (2), (3), (4) and (5) of section 12and the provisions of section 13 and section14 shall apply to such additional deposit:

Provided, however, that where the insurerestablishes to the satisfaction of theController that the assets of such insurer inSri Lanka are adequate to meet theoutstanding claims and unexpired risks inrespect of the insurance business transactedin Sri Lanka by such insurer, the amount ofsuch additional deposit, together with anydeposit made under section 12, shall notexceed one-tenth of the premia paid in SriLanka in the financial year preceding theyear in which such order is made in respectof the policies of insurance issued by suchinsurer.

45. Where, having regard to thefinancial aspect and the volume of businesstransacted by any insurer the Controller isof the opinion that such insurer cannotcarry on any class of insurance business in asatisfactory and efficient manner, theController may, after giving such insurer anopportunity of being heard, cancel theregistration of the insurer in so far as itrelates to the particular class of insurancebusiness.

(iii) that an offence under this Acthas been or is likely to becommitted by any suchinsurer or any officer; or

receives a requisition supported byan affidavit and signed by not lessthan fifty policy holders holdingpolicies of life assurance which havebeen in force for not less than threeyears and which on maturity will beof a total value of not less than fiftyt h o u s a n d rupees , t h a t aninvestigation into the affairs of theinsurer be held ; or

receives a similar requisition in thecase of an insurance companysigned by not less than one-tenth ofthe shareholders of that companywho shall not have less than one-tenth of the whole share capital,

(c)

the Controller may, subject to theprovisions of subsection (2), after giving theinsurer reasonable notice and anopportunity to be heard, order aninvestigation of the affairs of the insurer tobe made by an auditor or an actuary or byboth an auditor and an actuary appointedsimultaneously or first an auditor only or anactuary only and afterwards by an actuaryor auditor, or may himself make suchinvestigation:

Provided that an auditor or actuaryappointed for the purpose by the Controllershall not be an auditor or actuary in theemploy of the insurer.

(2) The Controller may, as a conditionprecedent to the ordering of an investigationupon a requisition being sent therefor eitherby policy holders or by shareholders of aninsurance company as provided insubsection (1), require the persons makingthe requisition to furnish security in suchamount as he may deem sufficient to meetthe cost to the insurer of the investigations.

Power to order 46. (1) Where the Controller—inspection.

(a) has reason to believe—

(i) that the interests of the policyholders of an insurer are indanger; or

(ii) that any insurer is unable tomeet his or its obligations orhas made default in complyingwith any of the provisions ofthis Act • or

(3) For the purpose of determiningwhether or not an order should be madeunder subsection (1), the Controller mayexercise the powers conferred by paragraph(b) of section 42(1).

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(4) The results of any investigationmade under this section shall be recorded inwriting by the auditor or actuary appointed,as the case may be, and copies of the recordshall be supplied to the Controller and tothe insurer, and to the shareholders of aninsurance company or to the policy holderswho have sent a requisition for suchinvestigation.

(5) The Controller may by writtennotice require the insurer to comply withinsuch time as may be specified therein (notbeing less than fifteen days from the receiptof the notice by the insurer) with suchdirections (including a direction that theinsurer shall have sufficient funds to meetthe liabilities under the policies of lifeassurance issued by him) as may in theopinion of the Controller be necessary forremedying the defects disclosed by anyinvestigation made under this section.

(6) If, as a result of any investigationmade under this section, the Controller is ofopinion that it is necessary in the interests ofthe policy holders that the business of theinsurer should be wound up, or if theinsurer fails to comply with any directionsissued under subsection (5), the Controllermay, after giving the insurer reasonablenotice and an opportunity to be heard,apply to the District Court or a Winding-upTribunal for an order for the winding up ofthe business of the insurer.

(7) Where the investigation disclosesthat the requisition., if any, made thereforwas made without reasonable cause, theController may order that the whole or anypart of the amount deposited as security asa c o n d i t i o n of the o r d e r i n g of theinvestigation shall be forfeited and paid tothe insurer in order to defray the costsincurred by the insurer in connexion withthe investigation.

(8) The Minister may at any time byorder in writing direct the Controller or anyother person specified in the order toinvestigate the affairs of any insurer and to

Power ofController orpersonauthorized byhim to inquireinto theworking andfinancialcondition of aninsurancecompany.[§2,9 of 1967.]

report to him on any investigation made byhim:

Provided that the Controller or the otherperson may, wherever necessary, employ anauditor or actuary or both for the purposeof assisting him in any investigation underthis subsection.

46A. For the purposes of this Act, theController or other person authorized inthat behalf by him in writing may hold aninquiry into the working and financialcondition of any insurer which is a companyincorporated under any law for the timebeing in force, and accordingly everydirector, manager or other officer oremployee of such company, whether past orpresent shall, whenever required to do so bynotice in writing by the Controller or suchother person—

(a) furnish such information in regard tothe affairs of such company andproduce such books, accounts ordocuments in his custody as theController or such other personmay require;

(b) attend at such place and on suchdate and at such time as may bespecified in such notice to beexamined by the Controller or suchother person in regard to anymatter relating to the working andfinancial condit ion of suchcompany.

47. When any investigation in respect of Powers ofan insurance company is made under Investigator.section 46, the provision of section 133 ofthe Companies Ordinance* shall apply forthe purposes of such investigation as theyapply to an investigation made in pursuanceof that section of that Ordinance and allexpenses of and incidental to suchinvestigation shall be defrayed by thecompany and shall have priority over otherdebts due from the company.

48. Every insurer shall furnish to the Further returnsController such further returns or abstracts and abstractsor amended or substituted returns orabstracts as may be prescribed.


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PART VI PART VII

Custody andinspection ofdocuments.

Evidence ofdocuments.

Summary ofreturns to bepublished.

Returns to bepublished instatutory form.

PUBLICITY

49. (1) Every return furnished to theController under this Act or a certified copythereof shall be kept at the office of theController and shall be open for inspectionby any person with the approval of theController at such hours as he may specify.

(2) A person may obtain a copy of anysuch return or any part thereof, on paymentof a fee calculated at the rate of twenty-fivecents for every hundred words or partthereof required to be copied, any fivefigures being deemed for this purpose to beequivalent to one word.

50. Every document purporting to becertified by the Controller to be a copy of areturn furnished to him shall be deemed tobe a copy of that return and shall bereceived in evidence as if it were the originalreturn, unless some variation between it andthe original return is proved.

51. The Minister may cause to bepublished in each year, in such manner as hemay direct, a summary of the accounts,balance sheets, statements, abstracts andother returns furnished or purporting to befurnished under this Act to the Controllerand may append to such summary any notemade by the Controller thereon and anycorrespondence in relation thereto ;

Provided, however, that no reference shallbe made in any such note to any matteraffecting any particular insurer unless theinsurer has been afforded an opportunity tomake representations against the inclusionof such reference in the note.

52. No insurer shall publish in SriLanka any return in a form other than thatin which it has been furnished to theController:

Provided that nothing contained in thissection shal l p reven t an i n s u r e r f rompublishing a true and accurate abstract fromsuch returns for the purpose of publicity.

MANACEMENT BY ADMINISTRATOR ANDWINDING UP

53. (1) If at any time the Controllerhas from information available to him fromany source whatsoever reason to believe thatan insurer, who is carrying on the businessof life assurance, or the business of lifeassurance in conjunction with any otherclass of insurance business, has acted in amanner prejudicial to the interests ofholders of insurance policies or is acting in amanner likely to be prejudicial to theinterests of holders of insurance policies, hemay, after giving such opportunity to theinsurer to be heard as he thinks fit, make areport thereon to the Minister.

(2) The Minister, if he is of opinion afterconsidering the report that it is necessaryand proper to do so, may appoint anadministrator to manage the business of theinsurer under the direction and control ofthe Controller.

(3) An administrator appointed undersubsection (2) shall receive suchremuneration as the Minister may direct,and such remuneration shall be payable outof the funds of the business which ismanaged by the administrator.

(4) The management of the business ofan insurer shall, on and after the date ofappointment of an administrator undersubsection (2), vest in such administrator:

Provided however that, except with theapproval of the Controller, an administratorshall not issue any new policies of insurance.

(5) The Minister may at any time revokethe appointment of any person asadministrator and appoint some otherperson as administrator, and thereupon thefirst-mentioned person shall be divested ofthe management of the affairs of the insurer.

(6) The Controller may issue suchdirections to the administrator as to hispowers and duties as he deems desirable inthe circumstances of the case, and theadministrator may apply to the Controllerat any time for instructions as to the

Whenadministratormay beappointed.

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Powers andduties ofadministrator.

management of the business of the insureror in relation to any matter arising in thecourse of such management.

54. (1) The administrator shallconduct the management of the business ofthe insurer with the greatest economycompatible with efficiency and shall, as soonas may be possible, file with the Controller areport stating which of the following coursesis in the circumstances most advantageousto the general interests of the holders of lifeassurance polices, namely :—

(a) the transfer of the business to suchan institution as the Controllermay, with the approval of theMinister, determine, or

the winding up of the insurer, or

insurance policies. Before cancelling orvarying any contract or agreement, theadministrator shall give to all persons, whowill be affected by such cancellation orvariation, an opportunity of being heard.

56. If at any time, on a report made bythe Controller in that behalf, it appears tothe Minister that the purpose of theappointment of an administrator has beenfulfilled or that for any reason it isundesirable that such appointment shouldcontinue, the Minister may revoke theappointment and thereupon theadministrator shall be divested of themanagement of the insurance businesswhich shall, unless otherwise directed by theMinister, again vest in the person in whomit was vested immediately prior to the dateof appointment of the administrator.

Termination ofappointment ofadministrator.

Cancellation ofcontracts andagreements.

(c) such other course as he may deemadvisable.

(2) On the filing of the report with theController, the Controller may take suchaction as he thinks fit for protecting andpromoting the interests of the holders ofinsurance policies in general.

(3) Any act done by the Controller inpursuance of the powers vested in himunder subsection (2) shall have effect,—

(a) if the insurer is a company,notwithstanding anything in thememorandum or articles ofassociation of that company, and

(b) if the insurer is a person other than acompany, notwithstanding anythingin the instrument of incorporationof such insurer.

55. An administrator may, at any timeduring the continuance of his managementof the affairs of an insurer, cancel or vary(either unconditionally or subject to suchconditions as he thinks fit to impose) anycontract or agreement, other than a policybetween the insurer and any other person,which the administrator is satisfied has beenor is prejudicial to the interests of holders of

57. Any decision of the Minister madein pursuance of section 53 or section 56shall be final and shall not be called inquestion in any court.

58. If any director of an insurancecompany or any officer in charge of thebusiness of an insurer fails to deliver to theadministrator any book of account, registeror any other documents in his custody,relating to the business of the insurer orinsurance company the management ofwhich has vested in the administrator, orretains any property of such insurer orcompany, he shall be guilty of an offenceand shall be liable to imprisonment of eitherdescription for a period not exceeding sixmonths, or a fine not exceeding onethousand rupees or both such imprisonmentand fine.

59. No suit or prosecution shall lieagainst the Minister, or Controller or anadministrator or any officer or other personfor any act which is in good faith done orpurported to be done in pursuance of any ofthe sections 53, 54, 55 or 56.

Finality ofdecisionappointingadministrator.

Penally forwithholdingdocuments orproperty fromadministrators.

No suit orprosecution tolie against theMinister,Controller,administratoror any officeror other person.

60. Notwithstanding anything in any Voluntaryother law, the business of an insurer shall winding upnot be wound up voluntarily except with theprior approval of the Controller.

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Margin ofsolvency.

Appointmentof Winding-upTribunals.[§ 3, 9 of 1967.]

61. (I) An insurance company carryingon insurance business shall be deemed forthe purposes of section 162 of theCompanies Ordinance* (which sectionauthorizes the court to wind up a company)to be unable to pay its debts, and any otherinsurer shall be deemed to be unable to paythe debts appertaining to the insurancebusiness carried on by such insurer, if thevalue of the assets relating to the insurancebusiness carried on by such company orother insurer, as the case may be, does notexceed the amount of the liabilities relatingto such business by the amount of thedeposit for the time being required to bemaintained by such company or otherinsurer under section 12 of this Act or one-tenth of the general premium income for thepreceding financial year, whichever is thegreater; and the provisions of section 46 ofthis Act shall apply accordingly.

(2) For the purposes of this section—

(a) in computing the amount of theassets of an insurer, no accountshall be taken of any uncalledcapital or fictitious or intangibleassets,

(b) the value of the assets shall becomputed at their market value orrealizable value,

(c) in computing the amount of theliabilities of an insurer, allcont ingent and prospect iveliabilities shall be taken intoaccount , bu t no t liabilit ies inrespect of share capital, and

(d) the general premium income of aninsurer in any year shall be taken tobe the net amount, after deductionof any premiums paid by theinsurer for reinsurance of thepremiums received by the insurer inthat year in respect of all insurancebusiness other than long-terminsurance business.

62. (I) There may be appointed, forthe purposes of this Act, one or moreWinding-up Tribunals. Each such Tribunalshall consist of three members, of whom one

shall be a person who is or has been a Judgeof a District Court, and such person shall bethe Chairman of the Tribunal-

(2) A Winding-up Tribunal may chooseone or more persons possessing specialknowledge of any matter relating to anycase under inquiry to assist the Tribunal indetermining any question which has to bedecided by it under this Act.

(3) Every Winding-up Tribunal shallhave such powers of a civil court under theCivil Procedure Code as may be prescribed.

(4) Every Winding-up Tribunal mayreview any of its decisions in the event ofthere being a mistake on the face of therecord or correct any arithmetical or clericalmistake therein.

63. (1) The District Court or aWinding-up Tribunal may order thewinding up of any insurance company inaccordance with the Companies Ordinance*and the provisions of that Ordinance shall,subject to the provisions of this Part of thisAct, apply accordingly.

(2) The District Court or a Winding-upTribunal may order the winding up of aninsurer—

(a) if a pe t i t ion in t ha t behalf ispresented by not less than fiftyholders of policies of life assuranceissued by that insurer and whichhave been in force for not less thanthree years and which will onmaturity be of the total value of notless than fifty thousand rupees ; or

(b) if the Controller, who is herebyauthorized to do so applies in thatbehalf to the District Court or to aWinding-up Tribunal on any of thefollowing grounds, namely:—

(i) that the insurer has failed tocomply with the provisions ofsection 12 and of section 44;

(ii) that the insurer having failedto c o m p l y w i t h anyrequirement of this Act has

Circumstancesunder whichthe DistrictCourt or aWinding-upTribunal mayorder thewinding up ofan insurer.


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Valuation ofassets andliabilities.

Application ofsurplus ofassets fund inliquidation.

continued such failure, orhaving contravened anyprovisions of this Act, hascontinued such contravention,for a period of three monthsafter notice of such failure orcon t raven t ion has beenconveyed to the insurer by theController;

(iii) that it appears from thereturns furnished under theprovisions of this Act or fromthe results of any investigationmade thereunder that theinsurer is insolvent; or

(iv) that the continuance of theinsurer is prejudicial to theinterests of the policy holders.

(3) Where any petition under paragraph(a) of subsection (2) is found to have beenmade frivolously or vexatiously, the DistrictCourt or Winding-up Tribunal may makeorder for the payment by the petitioners ofthe costs and expenses actually andreasonably incurred by the insurer inconsequence of the petition and in theproceedings thereon.

64. (1) In the winding up of an insurer,the value of the assets and liabilities of theinsurer shall be ascertained in such mannerand upon such basis as the liquidator thinksfit, subject, as far as practicable, to theregulation contained in the Sixth Scheduleto this Act and to any directions which maybe given by the District Court or Winding-up Tribunal, as the case may be.

(2) For the purposes of any reduction bythe District Court or Winding-up Tribunalof the amounts of the contracts of aninsurer, the value of the assets and liabilitiesof the insurer and all claims in respect ofpolicies issued by the insurer shall beascertained in such manner and upon suchbasis as the Court or Winding-up Tribunalthinks proper having regard to theregulation in the Sixth Schedule to this Act.

65. ( t ) In the winding up of an insurer,the value of the assets and the liabilities ofthe insurer in respect of life assurancebusiness shall be ascertained separately fromthe value of any other assets and liabilitiesof the insurer, and the first-mentioned assetsshall not be applied for the discharge of any

liabilities other than those in respect of lifeassurance business except in so far as thefirst-mentioned assets exceed the liabilitiesin respect of life assurance business.

(2) Where in the winding up of anyinsurer carrying on the business of lifeassurance it is found that when the assetsand liabilities of the insurer are ascertainedthere is a surplus of assets over liabilities(hereinafter referred to as a " prima faciesurplus ") and that any part of the surplushad, at any time during the ten yearspreceding the commencement of thewinding up, been allocated to life policyholders, the following provisions shall haveeffect :—

(i) there shall be added to the liabilitiesof the insurer in respect of the lifeassurance business an amountwhich bears to the prima faciesurplus the same proportion as theaggregate amount of surplus soallocated to policy holders duringthe aforesaid ten years bears to thetotal surplus arising from the lifeassurance business in those tenyears; and

(ii) the assets of the insurer shall bedeemed to exceed its liabilities onlyin so far as they are in excess aftersuch addition is made :

Provided that—

(a) if in any case there has been no suchallocation or if it appears to theDistrict Court or a Winding-upTribunal that by reason of specialcircumstances it would beinequitable that the amount to beadded to the liabilities of the insurerin respect of the life assurancebusiness should be an amount equalto such proportion as aforesaid, theamount to be so added shall besuch amount as the District Courtor Winding-up Tribunal may direct,and

(b) for the purpose of the application ofthis subsection to any case wherebefore the commencement of the

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winding up a proportion of suchsurplus as aforesaid of a categoryonly of the life assurance businessin question has been allocated tolife policy holders, the value of theassets and liabilities of the insurerin respect of that category shall beseparately ascertained in likemanner as the value of the assetsand liabilities of such insurer inrespect of the life assurancebusiness was ascertained, and anysurplus so found of assets overliabilities shall, for the purpose ofascertaining the amount to beadded to the liabilities of the insurerin respect of the life assurancebusiness, be deemed to be primafacie surplus.

66. In the winding up of an insurerotherwise than in a case to which section 67applies the liquidator shall apply to theDistrict Court or a Winding-up Tribunal foran order for a return of the deposit made bythe insurer under section 12 or section 44and the Court or Winding-up Tribunal shallon such application order a return of thedeposit subject to such terms and conditionsas it shall direct.

67. (1) If at any time it appears to beexpedient that the affairs of an insurer inrespect of any class of insurance businesscomprised in the undertaking of the insurershould be wound up but that any other classof insurance business comprised in theundertaking should continue to be carriedon by the insurer or be transferred to suchan institution as may be declared by theMinister by notification published in theGazette a scheme for such purpose may beprepared and submitted for confirmation ofthe District Court or a Winding-up Tribunalin accordance with the provisions of thisAct.

(2) Any scheme prepared under thissection shall provide for the allocation anddistribution of the assets and liabilities ofthe insurer between any classes of insurancebusiness effected (including the allocation ofany surplus assets which may arise on theproposed winding up), for any future rightsof every class of policy holders in respect oftheir policies and for the manner of windingup of any of the affairs of the insurer which

are proposed to be wound up, and may, ifsuch insurer is a company, containprovisions for altering the memorandum ofthe insurance company with respect to itsobjects and such further provisions as maybe expedient for giving effect to the scheme.

(3) The provisions of this Act relating tothe valuation of liabilities of insurers inliquidation and to the applications ofsurplus assets of the life assurance fund inliquidation shall apply to the winding up ofany part of the affairs of an insurer inaccordance with the scheme under thissection in like manner as they apply in thewinding up of an insurer, and any schemeunder this section in relation to a companymay apply with the necessary modificationsto any of the provisions of the CompaniesOrdinance* relating to the winding up ofcompanies.

(4) An order of the District Court or aWinding-up Tribunal confirming a schemeunder this section whereby, if the insurer isa company, the memorandum of thatcompany is altered with respect to its objectshall as respects the alteration have effect asif it were an order confirmed under section 6of the Companies Ordinance*, and theprovisions of that section shall applyaccordingly,

(5) When making an order confirming ascheme under this section, the DistrictCourt or a Winding-up Tribunal may makesuch orders as it considers necessary for thedisposal of so much of the deposit made bythe insurer under section 12 or section 44 asdoes not relate to the classes of insurancebusiness, if any, which the insurer continuesto carry on.

68. In the winding up of an insurer for Notice ofthe purpose of a cash distribution of assets, policy values.the liquidator shall ascertain the value of theliability to each person appearing by thebooks of the insurer to be entitled to orinterested in the policies granted by theinsurer and shall give notice of such value toeach such person in such manner as theDistrict Court or Winding-up Tribunal maydirect; and any person to whom notice is sogiven shall be bound by the value soascertained, unless he gives notice of his

Return ofdeposit on theapplication ofa liquidator.

Scheme ofpartial windingup.

* Repealed and replaced by the Companies Act, No. I? of 1982.

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Power ofDistrict Courtor Winding-upTribunal toreducecontracts ofinsurer.

Right ofcertain holdersof life assurancepolicies to haverecourse incertaincircumstancesto other assetsof persons whohave issuedsuch policiesand who havewound up, orare taking stepsto wind up thebusiness of lifeassurance.

intention to dispute such value in suchmanner and within such time as may bespecified by the District Court or Winding-up Tribunal.

69. (1) Where an insure r is inliquidation, the District Court or Winding-up Tribunal may make an order reducingthe amounts payable in respect of theinsurance contracts of the insurer upon suchterms and subject to such conditions as theDistrict Court or Winding-up Tribunalthinks just.

(2) Where an insurer carrying on thebusiness of life assurance has been proved tobe insolvent, the District Court or Winding-up Tribunal may, if it thinks fit, in place ofmaking a winding-up order reduce theamounts payable in respect of the insurancecontracts of the insurer upon such termsand subject to such conditions as theDistrict Court or Winding-up Tribunalthinks Just.

(3) Application for an order under thissection may be made either by the liquidatoror by or on behalf of the insurer or by apolicy holder or by the Controller ; and theController and any person whom theDistrict Court or Winding-up Tribunalthinks likely to be affected shall be entitledto be heard on any such application.

70. Where on or after the twenty-firstday of July, 1960, a person carrying on thebusiness of life assurance has wound up, ortakes steps to wind up, such business andwhere the assets relating to such businesshave not been, or are not, sufficient to meetthe liabilities subsisting under policies of lifeassurance issued by such person, then everyholder of such a policy shall be entitled byaction instituted in a court of competentjurisdiction to proceed against—

(a) if such person is an individual, anyother assets held by such individualon or after that date, or

(b) if such person is a company, anyother assets held by each director ofsuch company on or after that date,or

(c) if such person is a firm, any otherassets held by each partner of thatfirm on or after that date,

and recover any sum outstanding undersuch policy of insurance.

PART VJII

OFFENCES

71. Any person who—

(a) carries on any insurance business, orcommences any insurance business,without being duly registered underthis Act, or

(b) carries on any class of insurancebusiness which he is not authorizedunder this Act to carry on,

shall be guilty of an offence and shall, onconviction after summary trial before aMagistrate, be liable to a fine not exceedingone thousand rupees or to imprisonment ofeither description for a term not exceedingone year or to both such fine andimprisonment.

72. Any person who solicits or procuresin Sri Lanka insurance business of any class,or makes any offer referred to in paragraph(b) of section 84 (2) with the object ofeffecting any contract of insurance of anyclass, for or on behalf of a person not beingan insurer duly authorized under this Act tocarry on insurance business of that class,shall be guilty of an offence and shall, onconviction after summary trial before aMagistrate, be liable to a fine not exceedingone thousand rupees or to imprisonment ofeither description for a term not exceedingsix months or to both such fine andimprisonment.

72A. If any person upon whom a noticeis served under section 46A—

(a) refuses or fails, without such causeas is in the opinion of theControl ler or other personauthorized by the Controllerreasonable, to furnish suchinformation or to produce suchbook, account or document asis required by such notice, or

Offence ofcarrying on orcommencingany insurancebusinesswithoutregistration orof carrying onany class ofinsurancebusiness notauthorized.

Offence ofsolicitinginsurancebusiness onbehalf ofunauthorizedpersons.

Failure tocomply withthe provisionsof section 46A,[§ 4, 9 of 1967.]

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Other Offencesunder this Act.

Institution ofproceedings.

(b) fails, without such cause as is in theopinion of the Controller or otherperson authorized by the Controllerreasonable, to appear on the dateand at the time and placementioned in such notice, or havingappeared refuses or fails, withoutsuch cause as is in the opinion ofthe Controller or other personauthor ized by the Cont ro l le rreasonable, to answer any questionput to him relating to the mattersunder inquiry,

he shall be guilty of an offence and shall, onconviction after summary trial before aMagistrate, be liable to a fine not exceedingone thousand rupees or to imprisonment ofeither description for a term not exceedingsix months or to both such fine andimprisonment.

73. (1) Without prejudice to theprovisions of section 58 or section 71 orsection 72 by which a special penalty isprescribed for an offence, any person whocontravenes or fails to comply with anyprovision of this Act shall be guilty of anoffence and shall, on conviction aftersummary trial before a Magistrate, be liableto a fine not exceeding five hundred rupeesand in the case of a continuing offence to afurther fine not exceeding two hundredrupees for each day on which the offence isso continued after the conviction.

(2) Where an offence under this Act iscommitted by an insurer, every principal,agent, manager or other officer of theinsurer, and, if the insurer is a company,every director of the company, shall also beguilty of the same offence and liable to thesame punishment, unless he proves that theoffence was committed without hisknowledge or consent and that he had takenall reasonable steps to prevent thecommission of the offence.

74. (1) A prosecution for any offenceunder this Act may be instituted by theController or by any other officer actingunder the written authority of theController.

(2) No prosecution for any offenceunder this Act shall be instituted by anyperson other than the Controller or anofficer acting under his authority, exceptwith the prior written sanction of theAttorney-General.

75. If in any prosecution or other Power of courtproceedings taken under this Act, it appears to grant relief-to the court that a person is or may be liablein respect of negligence, default or breach ofduty, but that he has acted honestly andreasonably and that having regard to all thecircumstances of the case, he ought fairly tobe excused for such negligence, default orbreach of duty, the court may relieve himfully or partly from his liability subject tosuch conditions as the court may seem fit.

PART IX

GENERAL

76. There may be appointed for thepurposes of this Act—

(a) a person, by name or by office, to beor to act as the Controller ofInsurance,

(b) a person, by name or by office, to beor to act as the Deputy Controllerof Insurance, and

(c) such other officer, consultants andservants as may from time to timebe required for the purposes of thisAct.

77. (1) Any notice or other document Service ofrequired or authorized by or under this Act notices.to be served on any insurer shall—

(a) if such insurer is a company, beserved on any director or manageror officer thereof in accordancewith the provisions in that behalfconta ined in the CompaniesOrdinance*, and

(b) if such insurer is a person other thana company, be served on suchinsurer or the manager or principalagent of such insurer,

Appointmentof Controllerof Insuranceand otherofficers.


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and, if so served, shall be deemed for thepurposes of this Act to have been dulyserved.

[§ 5,9 of 1967.] (2) Any notice required to be served onany person under section 46A may be servedon such person—

(a) by the delivery thereof to suchperson, or by the delivery thereof atthe last known place of abode ofsuch person to some adult memberof his family or to some servant ofhis:

(b) by the delivery thereof at the usualor last known place of abode orbusiness of such person in a coveraddressed to such person ; or

(c) by the despatch thereof by registeredpost in a letter addressed to suchperson at his usual or last knownplace of abode or business.

78. (1) Where a dispute relating to thesettlement of a claim on a policy of lifeassurance, by which the sum assured doesnot exceed two thousand rupees (exclusiveof any profit or bonus not being aguaranteed profit or bonus) and which wasissued by an insurer in respect of insurancebusiness transacted by the insurer in SriLanka, arises between a claimant under thepolicy and the insurer who issued the policyor has otherwise assumed liability in respectthereof, the dispute may, at the option ofthe claimant, be referred to the Controllerfor his decision, and the Controller may,after giving an opportunity to the parties tobe heard and after making such furtherinquiries as he may think fit, make his orderon the dispute.

Power ofController tosettle claimsarising underlife assurancepolicies inwhich the sumassured doesnot exceed twothousandrupees.

(2) The order of the Controller underthis section shall be final and shall not becalled in question in any court of law, andmay, on application made by the Controllerto the court in which, if the dispute had notbeen referred to the Controller, actionwould have been instituted in respect of thedispute, be executed by that court as if itwere a decree entered by that court.

(3) The Controller shall be entitled tolevy from the claimant such amount as may

be prescribed as his fees for the dutiesperformed by him under this section. Suchamount may be recovered in the prescribedmanner from the claimant and shall onrecovery be paid into the ConsolidatedFund.

79. (1) The Minister may make Regulations.regulations for the purpose of carrying outor giving effect to the principles andprovisions of this Act or of amending anySchedule to this Act, and in particular inrespect of matters required by this Act to beprescribed or in respect of which regulationsare authorized to be made.

(2) No regulation made by the Minister [§ 6,9 of 1967.]shall have effect until it is approved byParliament and notification of suchapproval is published in the Gazette.

79A. (1) Where the Controller or anadministrator appointed under section 53 orany policy holder or member of an insurerwhich is a company incorporated under anylaw for the time being in force or theliquidator of any such insurance company inliquidation is of the opinion—

(a) that any person whether he be aperson who has taken part in thepromotion or formation of suchcompany or is a past or presentd i rec to r , managing agent ormanager, or other officer oremployee of such company—

(i) has misapplied or retained orbecome liable or accountablefor any money or otherproperty of such company, or

(ii) has been guilty of anymisfeasance or breach of trustin relation to such company,or

(iii) has acted in a mannerprejudicial to the interests ofthe policy holders of suchcompany; or

(b) that any person, whether he is or hasbeen in any way connected with theaffairs of such company or not, is inwrongful possession of any moneyor other property of such companyor having any such money or other

Power ofControlleror anadministratorappointedunder section53 or policyholder ormember of aninsurancecompany toapply in certaincircumstancesto a DistrictCourt for anorder forpayment ofmoney orrestoration ofproperty byany person.[§7,9 of 1967.]

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property in his possessionwrongfully withholds it, or hasconverted it to any use other thanthat of such company; or

(c) that any person has by contraventionof the provisions of this Actdiminished the amount of the lifeassurance fund of such company,

then the Controller, or such administrator,policy holder, member or liquidator may,on application made to the District Courtwithin the jurisdiction of which suchcompany carries on business or such personresides, be entitled to an order—

(a) for the payment by such person, tothe life assurance fund of suchcompany, of such sum by way ofcompensation as the Court thinksfit in respect of the misapplication,retention, misfeasance or breach oftrust or acts prejudicial to theinterests of the policy holders ofsuch company, or

(b) for the payment by such person tothe life assurance fund of suchcompany of such sum as may befound due from him in respect ofany money or other property ofsuch company for which he isaccountable, or for the restorationof other property or part thereof, asthe case may be, or

(c) where the amount of the lifeassurance fund of such companyhas been diminished, for thepayment by such person to suchfund of such sum as the Courtthinks fit.

(2) Every application under subsection(1) shall be made, and shall be disposed of,by way of s u m m a r y p r o c e d u r e inaccordance with the provisions of ChapterXXIV of the Civil Procedure Code.

(3) The provisions of Chapter XXII ofthe Civil Procedure Code relating toexecution shall be applicable to any order ofa District Court for the payment of any

money, or for the restoration of property inany application made under subsection (1),and for the purposes of the application ofsuch provisions the Controller or otherperson making such application shall bedeemed to be the judgment-creditor and theperson liable to pay the money or restorethe property in accordance with the order ofthe District Court shall be deemed to be thejudgment-debtor.

(4) Where in any proceedings in anyDistrict Court arising out of an applicationunder subsection (1) the Court is satisfiedthat any money or other property of theinsurance company has disappeared or hasbeen lost, the Court shall presume thatevery person in charge of, or having adisposing power over, such money or otherproperty, whether such person is a director,manager, or other officer or employee ofsuch company, is accountable for suchmoney or other property unless such personproves—

(a) that the money or other propertyhad been utilized or disposed of inthe ordinary course of the businessof such company and for thepurposes of that business, or

(b) that he took all reasonable steps toprevent the disappearance or loss ofsuch money or p r o p e r t y orotherwise satisfactorily accounts forsuch disappearance or loss.

80. Save as expressly provided in thisAct, the provisions of this Act relating toinsurance companies shall have effect inaddition to and not in substitution for theprovisions of the Companies Ordinance*.

81. (1) Any insurer who is registeredunder the provisions of this Act to carry onmotor vehicle insurance business shall bedeemed to be an authorized insurer for thepurposes of Part VI of the Motor TrafficAct.

(2) Any insurer who is registered underthe provisions of this Act to carry onemployers' liability Insurance business shallbe deemed to have been granted a licenceunder the provisions of section 45 (1) of the

Application ofCompaniesOrdinance*.

Certaininsurersdeemed to beauthorizedinsurers for thepurposes of theMotor TrafficAct, anddeemed to begrantedlicences undersection 45 (1)of theWorkmen'sCompensationOrdinance.


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Duty ofinsurers whohave disposedof assetsrelating to lifeassurancebusiness priorto theappointed date.

Repeals.

Workmen's Compensation Ordinance toundertake insurance against liabilities toworkmen which may be incurred byemployers under that Ordinance.

82. Notwithstanding anything in thepreceding provisions of this Act, where anyinsurer has, at any time between the twenty-fourth day of November, 1961, and theappointed date, committed any of thefollowing acts,—

(i) invested any moneys forming part ofthe assets re la t ing to his l i feassurance business in investmentsother than in approved securities ;

(ii) given loans of such moneys whichare not in accordance with theprovisions of this Act;

(iii) in any manner whatsoever alienatedsuch assets or any part thereof,

such act shall be deemed to be null andvoid, and it shall be the duty of suchinsurer, notwithstanding anything in anyother law, to recover such moneys or assetsby the institution of legal proceedings in acompetent court;

Provided that this section shall not applyto any loan or investment given or made byan insurer if the Minister is satisfied thatsuch loan or investment was made in thebest interests of the policy holders of thatinsurer.

83. The Life Insurance CompaniesOrd inance , No. 11 of 1911 , i s h e r e b yrepealed.

Interpretation. 84. (1) In this Act, unless the contextotherwise requires—

" actuary" means a person possessingsuch qualifications as may beprescribed;

" appointed date " means the 1st day ofNovember 1962;

"approved project* " shall have the samemeaning as " approved project" in

section 47A (1) of the Income TaxOrdinance;

" approved securities " means—

(a) Government securities,

(b) Government g u a r a n t e e dsecurities,

(c) Local authority securities,

(d) Savings Bank Certificates, anddepos i t s in the NationalSavings Bank,

(e) shares of the DevelopmentFinance Corpora t ion ofCeylon,

(f) investments in any approvedproject, and

(g) ordinary shares, preferenceshares, and debentures, of anyinstitution in which theGovernment of Sri Lanka andprivate individuals participatejointly;

" auditor" means a person possessingsuch qualifications as may beprescribed;

" certified " in relation to any statement,account or return, or to any copy ortranslation of a document requiredto be furnished by or on behalf ofan insurer, means that a certificateto the effect that such a statement,account or return is true andcorrect or that the copy is a truecopy or that the translation is acorrect translation, has beenendorsed thereon or attachedthereto by the insurer or theprincipal officer of the insurerauthorized in that behalf, as thecase may be;

" Controller" means the Controller ofInsurance appointed for thepurposes of this Act and includesthe Depu ty Controller ofInsurance;

" District Court" means the DistrictCourt of the district in which thehead office or principal place ofbusiness in Sri Lanka of an insureris situated •

• There is no definition of " approved project " in the Inland Revenue Act. (No. 28 of 1979).

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" foreign insurance company " means acompany formed and registeredunder the law in that behalf in anycountry other than Sri Lanka whichhas at any time carried on insurancebusiness in Sri Lanka;

" foreign insurer " means an insurer otherthan a Sri Lanka insurer;

"Government guaranteed securities"includes any security in respect of aloan the r e p a y m e n t of whichtogether with interest thereto isguaranteed by the Government ofSri Lanka;

" Government securit ies " meansp r o m i s s o r y notes ( i n c l u d i n gtreasury bills), stock, bearer bonds,and any other security issued by oron behalf of the Government of SriLanka in respect of any loan raisedeither before or after the appointedda te , bu t does not inc lude acurrency note;

" insurance agents " means an individualwho receives or agrees to receivepayment from an insurer by way ofcommission or other remunerationin consideration for his soliciting orp r o c u r i n g i n s u r a n c e bus inessincluding business relating to thecontinuance, renewal or revival ofpolicies of insurance;

" insurance business " means any of thefollowing classes of business :—

(a) life assurance business, that isto say, the business of enteringinto or maintaining contractsof assurance on human lives,such contracts includingcontracts whereby thepayment of money is assuredon death or on the happeningof any contingency dependenton human life, and contractswhich are subject to paymentof premiums for a termdependent on human life and

such contracts being deemedto include—

(i) contracts for the grantingof disability and doubleor triple indemnityaccident and sicknessbenefits if so specifiedin such contracts,

(ii) contracts for the grant ofannuities dependent onhuman life, and

(iii) contracts relat ing tocapital redemptionbusiness;

(b) marine insurance business, thatis to say, the business ofeffecting contracts ofinsurance upon vessels of anydescription, including cargoesand freights, and otherinterest which may legally beinsured in or in relation tosuch vessels, cargoes andfreights , goods, wares,merchandise and property ofwhatever description insuredfor any transit by land orwater, or both, and whetheror not including warehouserisks or similar risks inaddition or as are incidentalto such transit and includesany other risks customarilyincluded among the risksinsured against in marineinsurance policies;

(c) fire insurance business, that isto say, the business ofeffecting, otherwise thanincidental ly to some otherclass of insurance business,contracts of insurance againstloss by or incidental to fire orother occurrence customarilyincluded among the risksinsured against in fireinsurance policies;

(d) motor vehicle insurancebusiness, that is to say, thebusiness of effecting contractsof insurance against loss ofmotor vehicles or damage

XII/331

Cap.3321 CONTROL OF INSURANCE

arising out of or in connexionwith the use of motor vehicles,including third-party risks;

(e) employers' liability insurancebusiness, that is to say, theissue of, or the undertaking ofl iabi l i ty under , policiesinsuring employers againstliability to pay compensationor damages to workmen intheir employment;

(f) miscellaneous insurancebusiness, including personalaccident insurance business,aircraft insurance business,fidelity guarantee insurancebusiness, burglary insurancebusiness, cash in transitinsurance business and cash insafe insurance business butexcluding insurance businesswhich is not principally orwholly of any kind or kindsincluded in paragraphs (b),(c), (d) and (e) and excludinginsurance business involvingcontracts of a long-termnature;

insurer " means—

(a) any body corporate carryingon or transacting insuranceb u s i n e s s and b e i n gincorporated under any lawfor the time being in force inSri Lanka;

(b) an i n d i v i d u a l orunincorpora ted body ofindividuals or body corporateincorporated under the law ofany country other than SriLanka, who or which carrieson or transacts insurancebusiness and who or which—

(i) carries on that business inSri Lanka, or

(ii) has his or its principalplace of business or hisor its domicile in SriLanka, or

(iii) with the object of offeringinsurance business

employs a representativeor maintains a place ofbusiness in Sri Lanka,

and shall be deemed toinclude an individual, anybody co rpora t e , orun incorpora ted body ofindividuals who or which hasprior to the appointed datecarried on or transactedinsurance business, liability inrespect of which remainsunpaid or undischarged on theappointed date;

" local authority securities " means anysecurity that may be issued, inaccordance with the law in force forthe time being by any localauthority in Sri Lanka;

"long-term business" means insurancebusiness of all or any of thefollowing classes, namely, lifeassurance business and bondinvestment business, and includes inrelation to any insurer, insurancebusiness carried on by the insurer asincidental only to any such class ofbusiness;

" manager " means a person who, subjectto the control and supervision ofthe insurer, or if the insurer is acompany, of the directors, has themanagement of the whole of theaffairs of an insurer, and includesany other person occupying theposition of a manager, by whatevername called, and whether under acontract of service or not;

" officer " or " principal officer " includesany director, managing director,manager or secretary of an insurer;

" policy holder" includes a person towhom the whole of the interest ofthe policy holder in the policy isassigned once and for all, but doesnot include an assignee thereofwhose interest in the policy isdefeasible or is for the time beingsubject to any condition;

XII/332


" principal agent" means a person who,not being a salaried employee of aninsurer, in consideration of anycommission—

(i) performs any administrativeand organizing function forthe insurer, and

(ii) procures insurance business ;

" prescribed " means prescribed byregulation made under this Act;

" Sri Lanka insurer " means in the case ofa company any body corporatecarrying on or transacting insurancebusiness and being incorporatedunder any law for the time being inforce in Sri Lanka and shall bedeemed to include any such bodycorporate that has prior to theappointed date carried on ortransacted insurance business,liability in respect of which remainsunpaid or undischarged on theappointed date;

"Winding-up Tr ibunal" means aTribunal appointed under section62 of this Act.

(2) For the purposes of this Act, aperson shall be deemed to carry on ortransact insurance business of any class inSri Lanka if such person—

(a) issues, or undertakes liability under,any policy or contract of insuranceof that class to or with a person forthe time being in Sri Lanka; or

(b) offers whether orally or in writing toissue, or undertake liability under,any policy or contract whether suchoffer is made directly to any suchperson or generally to any suchperson by the publicat ion,transmission, or circulation of anyadvertisement, book, pamphlet, orany document whatsoever; or

(c) employs, engages or in any othermanner causes or encourages, anyperson to make any such offer asaforesaid whether or not anyremuneration is paid or payable tosuch other person.

FIRST SCHEDULE

REGULATIONS AND FORMS FOR THE PREPARATION OF BALANCE SHEET

PART I

REGULATIONS

1. (i) The balance sheet required to be prepared by an insurer must be in Form A set out in Part II of this Schedule.

(2) Form A set out in Part II of this Schedule, which is intended to be used by an insurer who carries oninsurance business and who has undischaiged liabilities in respect of life assurance policies issued by such insurer,must be used with the necessary modifications in the case of an insurer who does not have such undischargedliabilities or in the case of an insurer who also has undischarged liabilities on bond investment business.

2. The balance sheet of the life assurance business, the balance sheet relating to any other class of insurancebusiness, and the balance sheet of bond investment business shall each be prepared as a separale document. Thetotals of each separate balance sheet prepared by any insurer under th i s regulat ion, that is to say. the total assets ofthe long-lerm business and insurance business, the balance in the credit of the l ife assurance fund and of everyother separate fund or account, the amount of the shareholders' undivided profits, and outstanding liabilities shallin every case be incorporated in the general balance sheet of that insurer.

XII/333

[Section 35.]

Cap. 332] CONTROL OF INSURANCE

3. Every combined balance sheet issued for any purpose by an insurer, shall be in Form A referred to inregulation I. There shall not be included among the assets shown in any combined balance sheet any amount inrespect of any holding in or advance to any insurer whose assets and liabilities have been incorporated therein.Every combined balance sheet must show clearly on the face thereof that it is a combined balance sheet, and mustset out fully the name of every insurer whose assets and liabilities have been incorporated therein; and where theassets and liabilities of any person who is not an insurer are included in the combined balance sheet the fact mustbe expressly stated in the balance sheet.

4. Where any guarantee has been given by an insurer (otherwise than in the ordinary course of reinsurancebusiness) in respect of the policies of one or more other insurers, the balance sheet of the first-mentioned insurermust show clearly the name of each other insurer whose policies have been so guaranteed and the extent of theguarantee:

Provided that this regulation shall not apply where a combined balance sheet is issued incorporating the assetsand liabilities of the insurer whose policies are guaranteed.

5. Where any part of the assets of an insurer is deposited in any place outside Sri Lanka as security for theowners of the insurance policies issued in that place, the balance sheet must state that such part of the assets hasbeen so deposited, and, if any such part forms part of the life assurance fund, the balance sheet must show theamount thereof and the place where it is deposited. Where any combined balance sheet is issued by an insurer forany purpose, the information required by this regulation must be shown in the aggregate in respect of all theinsurers whose assets and liabilities have been incorporated in the balance sheet.

6. There shall be appended to the balance sheet of each insurer a statement, in Form AA set out in Part II ofthis Schedule, showing the value of the assets of that insurer in Sri Lanka together with a certificate by an auditorthat the stated value does not in his opinion exceed the market value.

7. Every balance sheet must have the following certificates set out therein, namely—

(a) a certificate signed by the same persons as are required by this Act to sign the balance sheet, as to themanner in which the values of the investments in stocks and shares shown in the balance sheet havebeen arrived at, and the market value thereof has been ascertained for the purpose of comparison withthe values so shown;

(b) a certificate signed by the same persons as are required by this Act to sign the balance sheet and signedalso, so far as respects the value of any items shown in the balance sheet under the heading of" Reversions and Life Interests ", by an actuary to the effect that the values of all the assets have beenreviewed as at the dale of the balance sheet, and that in their belief the assets set forth in the balancesheet are shown in the aggregate at amounts not exceeding their realisable or market value under theseveral headings- " Loans ", " Reversions and Life Interests ", " Investments ", " Agents' Balances "," Outstanding Premiums ", " Interest, Dividends and Rents accruing but not due ", " Amounts due fromother persons or bodies carrying on Insurance business " separately for Sri Lanka Insurers and forForeign Insurers, "Sundry Debtors", "Bills Receivable", "Cash" and the several items specifiedunder " Other Accounts ";

Provided that in any case where it is not possible to certify that the assets set forth in the balancesheet are shown as required by this regulation a full explanation of the bases upon which the valuesshown in the balance sheet have been assessed shall be given in the certificate ;

(c) where the balance sheet relates either wholly or in part to life assurance business, a certificate signed by thesame persons as are required by this Act to sign the balance sheet and by the auditor, to the effect thatno part of the assets of the life assurance fund has been directly or indirectly applied in contravention ofthe provisions of this Act relating to the application and investment of life assurance funds ; and

(d) certificates signed by the auditor (which shall be in addition to any other certificate or report which he isrequired by law to give with respect to the balance sheet) to the effect—

(i) that he has verified the cash balances and the securities relating to the insurer's loans, reversions andlife interests, and investments,

(ii) to what extent, if any, he has verified the investments and transactions relating to any trustsundertaken by the insurer as trustee ; and

(iii) in the case of a combined balance sheet that he has audited the balance sheet and accounts of everyinsurer whose assets and liabilities are incorporated therein, or that any such balance sheet andaccounts which have not been audited by him have been certified by independent auditors. Thesaid certificate shall contain a reference to such reservations, if any, as may have been made byany auditor upon any report or certificate given by him \vith respect to the balance sheet andaccounts of any insurer whose assets and liabilities are incorporated in the combined balancesheet.

XII/334


FORM A (Contd.)

Amounts due to other personsor Bodies carrying onInsurance business [b) . .

Sri Lanka Rs . . . . . . . . . .

Foreign R s . . . . . . . . . . . . . .

Sundry Creditors (b) • .

Other sums owing (to bespecified) (b) . .

Contingent Liabilities (tobe specified) (b) . .

LifeAssurance

Rs. c.

GeneralBusinessRs. c.

Sundry Debtors (e) . .

Cash on deposit account - •

Bank Accounts . .

Other accounts (to bespecified (/) . .

LifeAssurance

Rs. c.

GeneralBusinessRs. c.

NOTES

(a) The Reserves or Contingency Accounts must be separately stated.

(b) If the insurer has deposited security as cover in respect of any of these items, the amount and nature of thesecurities so deposited must be clearly indicated on the face of the balance sheet.

(c) Full particulars of holdings in and loans to subsidiary companies must be stated giving the name of eachcompany, the number and description of each class of shares held, the amounts paid thereon, and the value atwhich the holdings in each company stand in the balance sheet.

(d) The aggregate amount owing by a subsidiary company or subsidiary companies must he shown separatelyfrom all other assets and the aggregate amount owing to a subsidiary company or subsidiary companies must beshown separately from all other liabilities.

(e) Amounts due from directors and from officers must be shown separately.

(/) Under this heading must be included such items as the following, which must be shown under separatedheadings suitably described :- office furniture, goodwill, preliminary formation and organization expenses,development expenditure account, other expenditure carried forward to be written off in future years, balancebeing loss on profit and loss appropriation accounts, etc. The amounts included in the balance sheet must not bein excess of cost.

XII/336


FORM AA

Classified Summary of the Assets in Sri Lanka of the

. . . . . . . . . . . . . . 19 . . . . . . . .

Class of Asset

1. Government Securities . .2. Government Guaranteed Securities . .3. Local Authority Securities . .4. Debentures of concerns in Sri Lanka (approved) • •5. Debentures of concerns in Sri Lanka (unapproved) . .6. Preference Shares of concerns in Sri Lanka (approved) • •7. Preference Shares of concerns in Sri Lanka (unapproved) . .8. Ordinary Shares of concerns in Sri Lanka (approved) - •9. Ordinary Shares of concerns in Sri Lanka (unapproved) - .

10. Loans on Company's policies in Sri Lanka - •11. Loans on mortgage of property in Sri Lanka . .12. Other loans granted in Sri Lanka (particulars to be stated) . -13. Land and House Properly in Sri Lanka . .14. Buildings . .15. Savings Bank Certificates . .16. Deposits in National Savings Bank • •17. Cash at Commercial Banks . .18. Interest, dividends and rents outstanding . .19. Agents' balances and outstanding premia . .20. Other Assets in Sri I.anka (to be specified) . .

(a)BookValue

Rs.

WMarketValue

Rs.

(<•)

Remarks

The statement shall show—

(o) the value for which credit is taken in the balance sheet for each of the above-mentioned classes of assets,

{b) the market value of such of the above-mentioned classes of assets as has been ascertained from publishedquotations after deduction of accrued interest included in market prices in those cases where accruedinterest is included elsewhere in the balance sheet, and

(c) how the value of such of the above-mentioned classes as has not been ascertained from published quotationshas been arrived at.

SECOND SCHEDULE

REGULATIONS AND FORMS FOR THE PREPARATION OF PROFIT AND LOSS ACCOUNTS

PART I

REGULATIONS

1. The hems on the income side of the profit and loss account and profit and loss appropriation account mustrelate to income whether actually received or not, and the items on the expenditure side must relate to expenditurewhether actually paid or not.

2. Deduction from Interest, Dividends and Rents shown in respect of income tax must include all amounts inrespect of Sri Lanka Income Tax whether or not it has been or is to be deducted at source or paid direct.

XII/337

[Section 35.]


PART II

Forms

FORM B

FORM OF PROFIT AND LOSS ACCOUNT

Profit and Loss Account of for the year ended 19

Taxes not applicable to any particular Fundor Account . .

Expenses of Management not applicable toany particular Fund or Account (a) • •

Loss on Realization of Investments (notcharged to Revenue or any particularFund or Account) . .

Depreciation of Investments (not chargedto Revenue or any particular Fund orAccount) . .

Loss transferred from Revenue Accounts(details to be given) . .

Other Expenditure (to be specified) . .

Balance for the year carried to Profit andLoss Appropriation Account . .

Rs. c. Interest, Dividends and Rents (notapplicable to any particular Fund orAccount) . . Rs.

Less IncomeTax thereon Rs.

Profit on Realization of Investments (notcredited to Revenue or any particularFund or Account) . .

Appreciation of Investments (notcredited to revenue or any particularFund or Account) . .

Profit transferred from RevenueAccounts (details to be given) . .

Transfer fees . .Other Income (to be specified) - -Balance being loss for the year carried to

Appropriation Account . .

Rs. c.

(a) If any sum has been deducted from this item and entered on the assets side of the balance sheet, theamount must be shown separately.

FORM C

FORM OF PROFIT AND LOSS APPROPRIATION ACCOUNT

Profit and Loss Appropriation Account o f . . . . . . . . . . . . . . . . . . f o r the year ended . . . . . . . . . . . . 19

Rs. c. Rs. c.Balance being loss for the year brought

down from Profit and Loss Account (asin Form B) . .

Dividends paid during the year on accountof the current year (to be specified)

Transfers to any particular Funds orAccounts (details to be given) . .

Balance at end of year as shown in theBalance Sheet . .

Balance brought forward from lastyear less dividends since paid inrespect of last year (to he specified)Rs.... . .

Balance for the year brought from Profitand Loss Account (as in Form B)

XII/338


THIRD SCHEDULE (Section 35.]

REGULATIONS AND FORMS FOR THE PREPARATION OF REVENUE ACCOUNTS

PART I

REGULATIONS

1. The revenue account relating to life assurance business must be in Form D set out in Part II of thisSchedule.

2. A separate revenue account must be prepared for every class of business in respect of which the insurer isrequired to maintain a separate account.

3. The revenue account relating to marine insurance business must be in Form E set out in Part II of thisSchedule.

4. The revenue account relating to fire insurane business must be in Form E set out in Part II of this Schedule.

5. A separate revenue account substantially in Form E must be prepared in respect of motor vehicle insurancebusiness, employers' liability insurance business and miscellaneous insurance business.

6. Every combined revenue account issued for any purpose by an insurer—

(fl) must be in accordance with the Forms set out in Pan II of this Schedule;

{b) must clearly show on the face thereof that it is a combined revenue account;

(c) must set out ful ly the name of every insurer who is required to make separate returns under this Actand whose revenue and expenditure have been included therein ; and

(rf) if the revenue and expenditure of any person who is not an insurer arc included in the account, thefact must be expressly stated thereon.

7. The items on the income side of the revenue account must relate lo income whether actually received or not,and the items on the expenditure -ilde must relate to expenditure whether actually paid or not.

8. Insurance business (excluding life assurance business), reinsurance premiums, whether on business ceded oraccepted, must be brought into account as gross amounts. Net amounts, ordinary reinsurance commissions andreinsurance profits commissions must be shown separately.

9. In respect of the life assurance business carried on by each insurer, there shall be furnished annually to theController a siaiemem, setting out full details, in each of the Forms DD, DDD, and DDDD set out in Part II ofthis Schedule.

10. Premiums received under each class of insurance business in Sri Lanka must be shown separately fromPremiums in respect of business out of Sri Lanka.

11. Any office premises which form part of the assets of an insurer carrying on life assurance business must betreated as an investment on which interest accrues, and accordingly, in the revenue account relating to the lifeassurance business a fair rent for the premises must be included under the heading "Interest, Dividends andRents ", and in the revenue account relating to every other class of business for which the premises are used propercharges for the use thereof must be included under (he heading " Expenses of Management ".

12. Where an insurer carries on the business of life assurance in conjunction with any other class of insurancebusiness, the expenses of management charged lo the life assurance revenue account must not include more than areasonable proportion of the common expenses, and in particular, such account must not be charged with morethan a fair sum for the use of any office premises, having regard to the income from the various classes of businesscarried on and to the exient to which [he premises are used for the purposes of each class of business.

13. Deductions in respect of income lax from the Interest, Dividends and Rents must include all income taxcharged thereon, whether or not it has been or is to be deducted at source or paid direct.

XII/339


PART II

Forms

FORM D

FORM OF REVENUE ACCOUNT APPLICABLE TO LIFE ASSURANCE BUSINESS

Revenue Account of . . . . . . . . for the year ended . . . . . . . 19 . . . . .

Claims under Policies(including provisionsfor claims due orintimated), less Re-insurances—

By death . .By maturity . .

Annuities, lessReinsurances . .

Surrenders (includingSurrenders of Bonus),less Reinsurances . .

Bonuses in cash, lessReinsurances . .

Bonuses in Reduction ofPremiums, less Re-insurances . .

Commission (less thaton Reinsurances) . .

Expenses of Management(")(/)

1. Commission andallowances . .

2. Salaries, &c. (otherthan to agents andthose contained initem No. 1)

3. Travelling Expenses4. Directors'fees . .5. Auditors'fees . .6. Law charges . .7. Advertisements . .8, Printing and Sta-

tionery . .9. Other expenses of

management (ac-counts to be specified)

10. Other payments(accounts to bespecified) . .

11. Rents for officesbelonging to andoccupied by theinsurer . .

Busi-ness

withinSri

LankaRs.

Busi-ness

out ofSri

LankaRs.

Total

Rs.

Balance of Fund atthe beginning of theyear

Premiums less Re-insurances—

(i) First yearpremiums . .

(ii) Renewal pre-miums - -

(iii) Single premiumsConsideration for

Annuities granted,less Reinsurances {b}

Interest, Dividends andRent . .

Less Income taxthereon (c) . .

Registration Fees . .Other Income (to be

specified) (d) . .Deficit transferred to

Profit and LossAccount . .

Transferred fromAppropriationAccount . .

Busi-ness

withinSri

LankaRs.

Busi-ness

out ofSri

LankaRs.

Total

Rs.

XII/340


FORM D (Comd.)

12. Rents of other officesoccupied by theinsurer . .

Bad Debts . .Sri Lanka and Foreign

Taxes . .Other Expenditure (to

be specified) . .Surplus transferred to

Profit and LossAccount . .

Balance of Fund at theend of the year asshown in the BalanceSheet . .

Busi-ness

withinSri

LankaRs.

Busi-ness

out ofSri

LankaRs.

Total

Rs.

Busi-ness

withinSri

LankaRs.

Busi-ness

out ofSri

LankaRs.

Total

Rs.

NOTES(a) If any sum has been deducted from this item and entered on the assets side of the balance sheet, the

amount so deducted must be shown separately. Under this item the salary paid to the managing agent or managingdirector shall be shown separately from the total amount paid as salaries to the remaining staff.

(b) All single premiums for annuities, whether immediate or deferred, must be Included under this heading.(c) Sri Lanka and foreign income tax on interest, dividends and rents must be shown undei this heading, less

any rebates of income lax recovered from the revenue authorities m respect of expenses of management. Theseparate heading on the other side ot the account is for Sri Lanka and foreign taxes, other than those shown underthis item.

((/) Under the head 'Other Income' fines, if any. realized from the staff must be shown separately. All theamounts received by the insurer directly or indirectly whether from his head office or from any other sourceoutside Sri Lanka shall also be shown separately in the revenue account except such sums as properly appertain tothe capital account.

FORM DDClassified Statement of Life Assurance Policies of the for the year ending 19

Ordinary policies-In Sri Lanka , .Out of Sri Lanka

Toial , .Annuity contracts,

&c.—In Sri Lanka . .Out of Sri Lanka

ToialGroup insurance

policies—In Sri LankaOut of Sri Lanka

Total . .

New life assurance business in respect of which apremium has been paid in the year —

Numberof poli-

cies

SumsInsured and

annuitiesper

annum

Rs,

Single premiums(including con-sideration for

immediateannuilies and allother premiums

paid al theoutset where

no subsequentpremium is

payable)

Rs.

Yearlyrenewal

premiumincome

Rs.

Total life a.<iiirancebusiness in force at

end of the year

Numberof poli-

cies

Sumsinsured

withbonuses

andannuities

perannum

Rs.

Premiumincome

for whichcredit hasbeen taken

in therevenueaccount

Rs,

The amounts should be stated to the nearest rupee and after deduction of reinsurance.

XII/341


FORM DDD

Additional to and Deductions from Policies of the.........................for............................ ending.........19

1. Policies at beginning of year2. New po l i t i e s issued . .3. Old policies rc\i-.ed . .4. Old policies changed and increased . .5. Bonus additions allotted . .

TOTAL - •

Discontinued during yttt6. By death . .7. By survival or the happening of Ihc

contingencies insured against other than death8. By expiry of term under temporary insurance9. By surrender of policy . .

10. By surrender of bonus . .11. By forfeiture or lapse . .12. By change and dccreas- . .13. By being not taken up . .

Total ducootinutd • •

Total existing at end of year

Ordinary life assurancepolicies insuring money to be

paid on death or survival

Number Sumassured

Rs.

Reversionarybonus

additions

Annuities

Number Annuityper annum

Rs.

FORM DDDD

Particulars of the policies forfeited or lapsed in the last financial year under review, less those revived andreinstated for full benefits, classified according to the year in which they were issued—

Financial year in which the policieswere issued

Number of policiesforfeited or lapsed

Sum insured underpolicies forfeited

or lapsed

Rs.Year ending . . . . . .

under reviewYear ending . . . . . . . .

to that under review

. . „ 19 . . . . . . being the year

19 . . . . . . being the year previous

And so on the number of and sum insured under policies forfeited or lapsed in the last financial year under reviewbeing stated after classification according to each of the preceding years in which they were issued.

A separate statement must be given in respect of each class of life assurance business for which a separaterevenue account is submitted.

Insurers having their principal place of business in Sri Lanka shall give the information required in the formseparately for business transacted in Sri Lanka and business transacted outside Sri Lanka and insurers havingtheir principal place of business outside Sri Lanka will furnish information regarding business transacted in SriLanka only.

XII/342


[Section 37.] FOURTH SCHEDULE

REGULATION FOR THE PREPARATION OF ABSTRACTS OF ACTUARIES' REPORTS AND REQUIREMENTS APPLICABLETO SUCH ABSTRACTS

PART I

REGULATIONS

1. Abstracts and Statements must be so arranged that the numbers and letters of the paragraphs correspondwith those of the paragraphs of Part II of this Schedule.

2. In showing the proportion which that part of the annual premiums reserved as a provision for futureexpenses and profits bears to the total of the annual premiums, in accordance with the requirements of paragraph(4) of Pan II of this Schedule, no credit is to be taken for any adjustments made in order to secure that no policyis treated as an asset.

3. (1) The average rate of interest yielded in any year by the assets constituting a life assurance fund shall, forthe purposes of paragraph (5) of Part II of this Schedule, be calculated by dividing the interest of the year by themean fund of the year; and for the purposes of any such calculation the interest of the year shall be taken to bethe whole of the interest credited to the life assurance fund during the year after deduction of income tax chargedthereon (any refund of income lax in respect of expenses of management made during the year being taken intoaccount), and the mean fund of the <.ear shal l be ascertained bv adding a sum equal to one-half of the amount ofthe life assurance fund at the beginning of the year to a sum equal to one-halt" of that fund at the end of the year,and deducting from the aggregate of those two sums an amount equal to one-half of the interest of the year.

(2) For the purposes of the calculation aforesaid either—

(a) all profits and income arising during the year from sums invested in reversions shall be included in theinterest credited to the life assurance fund during the year; or

(b) such portion of the life assurance fund as is invested in the purchase of reversions, and the profits andincome arising therefrom, shal l be excluded from the calculation ; but in that case a statement musl beadded to the information required under the said paragraph (5), showing, in respect of the portion ofthe fund so excluded as aforesaid, the average rate of annual profit and income for which credit hasbeen taken during the three years last preceding the valuation date, and explaining the manner in whichthe said average rate has been calculated.

(3) The information given in accordance with the requirements of the said paragraph (5) shall show clearly bywhich of the methods hereinbefore in this regulation mentioned the sums invested in reversions and the profits andincome arising therefrom have been dealt with.

4. Every abstract prepared in accordance with the requirements of Part II of this Schedule shall he signed byan actuary and shall contain a certificate by him lo the effect that he has satisfied himself as to the accuracy of thevaluations made for the purposes thereof and of the valuation data;

Provided that in the case of an abstract prepared on behalf of an insurer, if the actuary who signs the abstract isnot a permanent officer of the insurer, the certificate as to the accuracy of the valuation data shall be given andsigned by the principal officer of the insurer and the actuary shall include in the abstract a statement signed by himshowing what precautions he has taken to ensure the accuracy of the data.

5. For the purposes of this Schedule, the following expressions have the meanings hereby respectively assignedto them, namely:—

" extra premium " means a charge for any risk not provided for in the minimum contract premium;

" inter-valuation period " means, as respects any valuation, the period to the valuation date of that valuationfrom the valuation date of the last preceding valuation in connexion with which an abstract wasprepared under this Act or, in a case where no such valuation has been made in respeci of the class ofbusiness in question, from the date on which the insurer began to carry on that class of business;

" maturity date " means the fixed date on which any benefits will become payable either absolutely orcontingently;

XII/344


H net premiums " means as respects any valuation the premium taken credit for in the valuation;

" premium term " means the period during which premiums are payable ;

" valuation date " as respects any valuation means the date as at which the valuation is made.

PART II

REQUIREMENTS APPLICABLE TO AN ABSTRACT IN RESPECT OF LIFE ASSURANCE BUSINESS

The fol lowing tabular s ia iement shall be annexed to every abstract prepared in accordance with (herequirements ut this Pan of ihJs Schedule, namely :—

(a) a Consolidated Revenue Account, in Form F annexed to this Part of this Schedule, for the inter-valuationperiod (except that it shall not be necessary [o prepare such an account in respect of any class ofbusiness so long as the insurer deposits annually with the Controller an abstract in respect ot that classof business); and

(b) a Summary and Valuation in Form G annexed to this Part of this Schedule of the policies included at thevaluation date in the class of business to which the abstract relates ; and

(c) a Valuation Balance Sheet in Form H annexed to this Part of this Schedule; and

(d) a statement in Form DDD as set forth in Part II of the Third Schedule of the additions to and deductionsfrom the number of policies and the sums insured thereunder tor each claim of life assurance ; and

(e) a statement in Form DDDD as set forth in Part II of the Third Schedule of particulars of policies, forfeitedor lapsed under each class of life assurance ;

and every such abstract shall show—

(1) the valuation date ;

(2) the general principles and full details of the methods adopted in the valuation of each of the various classesof assurances and annuities shown in the said Form Ci, including statements on the following points :--

(a) whether the principles were determined by the instruments constituting the insurer or by its regulations orby-laws or how otherwise;

(b) the method by which the net premiums have been arrived at and how the ages of entry, premium terms andmaturity dates have been treated for the purposes of the valuation ;

(c) the methods by which the valuation age, period from the valuation date to the maturity date, and the futurepremium terms, have been treated for the purpose of the valuation ;

(d) the rate of bonus taken into account where by the method of valuation definite provision is made for themaintenance of a specific rate of bonus ;

(e) the method of allowing for—

(i) the incidence of the premium income; and

(ii) premiums payable otherwise than annually ;

(f) the methods by which provision has been made for the following matters, namely :—

(i) the immediate payment of claims ;

(ii) future expenses and profits in the case of limited payment and paid-up policies;

(iii) the reserve in respect of lapsed policies not included in the valuation, but under which a liabilityexists or may arise ; and whether any reserves have been made for the matters aforesaid ;

(g) whether under the valuation method adopted any policy would be treated as an asset, and, if so, whatsteps, if any, have been taken to eliminate such assets ;

(h) a statement of the manner in which policies on under- average lives and policies subject to premiums whichinclude a charge tor climatic, military or other extra risks have been dealt with ; and

XII/345


(i) the rates of exchange at which liabilities in respect of policies issued in foreign currencies have beenconverted into rupees and what provision has been made for possible increase of liability arising fromfuture variations in the rates of exchange;

(3) the table of mortality used, the rate of interest and the taxation basis assumed, in the valuation ;

(4) the proportion which that part of the annual premiums reserved as a provision for future expenses andprofits bears to the total of the annual premiums separately specified in respect of assurances with immediateprofits, with deferred profits, with profits under discounted bonu-i systems, and wi thout profits ;

(4A) the proportion which that part of the total annual premiums reserved as provision for future renewalexpenses bears to the total annual premiums ;

(5) the average rates of interest yielded by the assets, whether invested or uninvested constituting the lifeassurance fund for each of th vears covered by the valuation date ;

(6) the basis adopted in the distribution of profits as between the insurer and policy holders, and whether suchbasis was determined by the instruments constituting the insurer, or by its regulations or by-laws or howotherwise ;

(7) the general principles adopted in the distribution of profits among policy holders, including statements onthe following points :—

(a) whether the principles were determined by the instruments constituting the insurer, or by its regulations orby-laws, or how otherwise ;

(b) the number of years' premiums to be paid, the period to elapse and other conditions to be fulfilled before abonus is allotted;

(c) whether the bonus is allotted in respect of each year's premium paid, or in respect of each completedcalendar year or year of assurance or how otherwise; and

(d) whether the bonus vests immediately on allocation, or if not, the conditions of vesting;

(8) (i) the total amount of surplus arising during the inter-valuation period, including surplus paid away andsums transferred to reserve funds or other accounts during that period, and the amount brought forward from thepreceding valuation (to be stated separately) and the allocation of such surplus—

(a) to interim bonus paid ;

(6) among policy holders with immediate participation giving the number of the policies which participatedand the sums assured thereunder (excluding bonuses);

(c) among policy holders with deferred participation, giving the number of the policies which participated andthe sums assured thereunder (excluding bonuses);

(d) among policy holders in the discounted bonus class, giving the number of policies which participated andthe sums assured thereunder (excluding bonuses);

(e) to the insurer or, in the case of an insurance company, among shareholders or to shareholders' accounts (anysuch sums passed through the accounts during the inter-valuation period to be separately stated);

(f) to every reserve fund or other fund or account (any such sums passed through the accounts during theinter-valuation period to be separately stated);

(g) as carried forward unapproved ;

(h) specimens of bonuses allotted as at the valuation date to policies for one thousand rupees—

(a) for the whole term of life effected at the respective ages of 20, 30 and 40, and having been in forcerespectively for five years, ten years and upwards at intervals of ten years , and

XII/346


(b) for endowment assurances effected at the respective ages of 20, 30 and 40, for endowment terms of fifteen,twenty and thirty years, and having been in force respectively for five years, ten years and upwards atintervals of ten years;

together with the amounts apportioned under the various manners in which the bonus is receivable;

(9) a statement in Form I annexed to this Part of this Schedule of specimen policy reserve values held orrequired to be held according to the methods adopted in the valuation, and specimen minimum surrender values inrespect of whole life assurance policies for Rs. 1,000 with premiums payable throughout life effected at therespective ages of 20, 30, 40 and 50, and immediately on payment of the first, second, third, fourth, sixth, seventh,eighth, ninth, tenth, fifteenth and twentieth annual premium, with similar specimen policy reserve values andspecimen surrender values in respect of whole life assurance policies subject to premiums payable for 20 years andof endowment assurance policies maturing at age of 55 ;

(10) a statement showing how the liability under any disability clause in a policy has been determined in thevaluation with full information of the tables of sickness or accident rates used for the purpose.

Consolidated Revenue Account of.. . . . . . . . . . Ending. . . . . . . . . .

FORM F

.... for ... Years Commencing and

Claims under Policies (includingprovision for claims due orintimated) . .

less Reinsurances — . .By death . .By maturity . .

Annuities, less Reinsurances • •Surrenders ( including Surrender of

Bonuses). I^-ss Reinsurances . .Bonuses in Cash, lp\s ReinsurancesBonuses in reduction of Premiums

less Reinsurances . .Commission (less at on

Reinsurances . .Expenses of Management (n) Agents'

and Canvassers' allowance . .Salaries. Ac, |other lhan 10 Agents

and Canvassers ) . .Travelling expenses . .Directors' fess . .Auditors' fess . .Medical fees . .Law charges . .Advertising . .Pr iming am! Stationery . .Other expenses of management

(accounts lo be specified) . .Other payments (accounts to be

specified) . .Rents for offices belonging to and

occupied by the company . .Rents of other offices occupied by the

insurer . .Sri Lanka Taxes . .Foreign Taxes . .Bad Debts . .Olher expenditure (to be specified)Surplus transferred 10 Profit and

Loss Account . .Balance lo Life Assurance Fund at end

of the period as shown in theBalance Sheet . .

Rs . . .

BusinesswithinCeylon

Rs.

Total

Rs.Balance of I . ife Assurance Fund at the

beginning of the periodPremiums, less Reinsurances • -Consideration for Annuities Granted,

less Reinsurances . .Interest, Dividends and Rents Rs.Less—Income tax thereon (b) - .

Rs. ——

Registration Few . .Other Income (to be specified) . .Deficit transferred !o Profit and Loss

Account . .Transferred from Appropriation Account

Rs.. .

BusinesswithinCeylon

Rs.

Total

Rs.

(a) If any sum has been deducted from this item and entered on the assets side of the balance sheet the amountso deducted must be shown separately.

(b) Sri Lanka and Foreign income lax on interest, dividends and rents must be shown under this heading, lessany rebates of income tax recovered from the revenue authorities in respect of expenses of management. Theseparate heading on the other side of the account is for Sri Lanka and Foreign taxes, other than those shownunder this item.

XII/347


FORM G

. . . . . . as at.Summary and Valuation of the Policies of. 19

DIVISION IASSURANCESGroup A—

With immediate participation in profitsFor whole term of life . .Other classes (to be specified) . .Extra premiums . .

Total Assurances . .Deduct Reinsurances • •Net Assurances . .

Group B—With deferred participation in profitsFor whole term of life . .Other classes (to be specified) . .Extra premiums . .

Total Assurances . .Deduct—Reinsurances . .Net Assurances . .

Group C—Under discounted bonus systems . .For whole term of life - .Other classes (to be specified) . .Extra premiums . .

Total Assurances . .Deduct -Reinsurances . .Net Assurances . .Total Assurances with profits . .

Group D—Without participation in profits . .For whole term of life . .Other classes (to be specified) . .Extra premiums . .

Total Assurances . .Deduct—Reinsurances . .Net Assurances . .

Total Assurances without profits . .

Total of the Assurances shown in allgroups . .Deduct—Reinsurances - .

Net amount of Assurances Adjustments,if any (to be separately specified) . .

DIVISION IIAnnuities on Lives . .Immediate Annuities . .Deferred Annuities with return of

premiums . .Deferred Annuities without return of

premiums . .Other classes (to be specified) . .

Total Annui t i es . .Deduct-- Reinsurances . .Net Annuities . .

Total nf the results (after deductionof Reinsurances)

Particulars of the Policiesfor Valuation

v' S"30.0

5̂5E3Z

-0£3

i

E3t/]

U3e0A

P3

'Sti&•*l

'5^V

(-̂0

a"E£>-LlB

^'CZ

Valuation

•oCw•oti= Rtfl V

S '5u, CC 01 ^

Vs

!33

'ev0.vu£0

1

S0->,

a•̂3Z

y~^J3a

J

Z

XII/348

CONTROL OF INSURANCE [Cap.332FORM G (Conid.)

WTES

1. Items in this summary are to be stated to the nearest rupee.

2. No policy of assurance upon the lives of a group of persons, whereby sums assured are payable in respect ofthe several persons included in the group, is to be included in Groups A, B, C or D of this Form: any such policiesmust be shown in a separate Group which must be added to the Form.

3. If policies without participation in profits but with a guaranteed rate of bonus are issued they must beseparately specified in Group D of this Form.

4. Separate forms must be prepared in respect of classes of policies valued by different tables of mortality or atdifferent rates of interest or involving the valuation of net premiums on different bases.

5. In cases where separate valuations of any portion of the business are required under local laws in placesoutside Sri Lanka and reserves based on such valuations are deposited in such places, a statement must befurnished in respect of the business so valued in each such place showing the total number of policies, the totalsums assured and bonuses, the total office yearly premiums, and the total net liability on the bases as to mortalityand interest adopted in each such place with a statement as to such bases respectively.

6. Office and net premiums and the values thereof must be shown after deduction of abatements made by theapplication of bonus.

FORM H

Valuation Balance Sheet of, as at 19

Rs. Rs.Net liability under business as shown in the

Summary and Valuation of Policies

Surplus, if any

Balance of Life Assurance Fund as shown in theBalance Sheet

Deficiency, if any

M.ile—lfthe proportion of surplus allocated 10 the insurer, or in the case of an insurance company to shareholders, is not uniformin respect of all classes of insurances, the surplus must be shown separately for the classes to which the different proportions relate.

FORM I

Specimen Policy Reserve Values and Minimum Surrender Values under a . . . . . . . . . Policy for Rs. 1,000

Numberof

premiumspaid

123456789

101520

Age at entry20

Reservevalue

Minimumsurrendervalue

Age at entry30

Reservevalue

Minimumsurrender

value

Age at entry40

Reservevalue

Minimumsurrender

value

Age at entry50

Reservevalue

Minimumsurrender

value

Noie.— Items in this Form to be stated lo the nearest rupee.

XII/349

CONTROL OF INSURANCE

FIFTH SCHEDULE

REGULATIONS FOR PREPARING STATEMENTS OF BUSINESS IN FORCE ANDREQUIREMENTS APPLICABLE TO SUCH STATEMENTS

PART I

REGULATIONS

1. Statements prepared under this Schedule must be prepared, so far as practicable, in tabular form and mustbe identified by numbers and letters corresponding with those of the paragraphs of Part II of this Schedule.

2. Except with respect to rates of premium or contribution, items in statements prepared under this Scheduleare to be shown to the nearest rupee.

3. Extra premium shown in the forms of Summary and Valuation prepared under the Fourth Schedule mustnot be included in statements prepared under this Schedule.

4. Every statement prepared under this Schedule shall be signed by the actuary making the investigation inconnexion with which it is prepared.

5. For the purposes of this Schedule the following expressions have the meanings hereby respectively assignedto them, namely;—

(a) " annual loading " means the provision made for future expenses and profits;

(b) " extra premiums " means a charge for any risk not provided for in the minimum contract premium ;

(c) " net premiums " means the premiums taken credit for in the valuation in connexion with which anystatement is prepared ; and

(d) " valuation date " means as respects any valuation the date as at which the valuation is made.

PART II

REQUIREMENTS FOR STATEMENTS APPLICABLE TO LIFE ASSURANCE BUSINESS

The statements required to be prepared under this Part of this Schedule are as follows :—

1. Where new life assurance business is currently transacted in Sri Lanka, statements, separately prepared inrespect of policies with and without participation in profits, showing—

(a) as respects policies for the whole term of life, the rates of office premiums charged, in accordance with thepublished tables in use, for new policies giving the rates for decennial ages at entry from 20 to 70inclusive; and

(b) as respects endowment assurance policies, the rates of office premiums charged, in accordance with thepublished tables in use, for new policies with original terms of ten, fifteen, twenty, thirty and forty years,giving the rates for decennial ages at entry from 20 to 40 inclusive, but excluding policies under whichthe age at maturity exceeds 70.

2. Statements, separately prepared in respect of policies with immediate profits, with deferred profits, withprofits under discounted bonus systems and without profits, showing in quinquennial groups—

(a) as respects policies for the whole term of life—

(i) the total amount assured (specifying sums assured and reversionary bonuses separately), groupedaccording to ages attained ;

(ii) the amount per annum, after deducting abatements made by application of bonus, of officepremiums payable throughout life, and of the corresponding net premiums, grouped according toages attained; and

(iii) the amount per annum, after deducting abatements made by application of bonus, of officepremiums payable for a limited number of years, and either, the corresponding net premiumsgrouped in accordance with the grouping adopted for the purposes of the valuation, or, theannual loading reserved for the remaining duration of the policies, grouped according to agesattained;

XII/350

Cap.332]

[Section 37]


(b) as respects endowment assurance policies—

(i) the total amount assured (specifying sums assured and reversionary bonuses separately), grouped inaccordance with the grouping adopted for the purposes of the valuation; and

(ii) the amount per annum, after deducting abatements made by application of bonus, of officepremiums payable, and of the corresponding net premiums grouped in accordance with thegrouping adopted for the purposes of the valuation :

Provided that—

(a) as respects endowment assurance policies which will reach maturity in less than five years, the informationrequired by sub-paragraph (b) (i) of this paragraph must be given for each year instead of inquinquennial groups; and

(b) where the office premiums payable under policies for the whole term of life for a limited number of years,or the office premiums payable under endowment assurance policies, or the corresponding netpremiums, are grouped for the purposes of the valuation otherwise than according to the number ofyears payments remaining to be made, or, where the sums assured under endowment assurance policiesare grouped for the purposes of the valuation otherwise than according to the years in which the policieswill mature for payment or in which they are assumed to mature if earlier than the true year, then, inany such case the valuation constants and an explanation of the method by which they are calculatedmust be given for each group, and in the case of the sums assured under endowment assurance policies astatement must also be given of the amount assured maturing for payment in each of the two yearsfollowing the valuation date.

3. Statements as respects any policies in force under which premiums cease to be payable, whetherpermanently or temporarily, during disability arising from sickness or accident, showing the total amount of theoffice premiums payable.

4. Policies under which there is a waiver of premiums during disability must be shown as a separate class.

5. Statements as respects immediate annuities on single lives for the whole terms of life, separately prepared inrespect of annuities on male and female lives, showing in quinquennial age groups the total amount of suchannuities.

6. Statements as respects deferred annuities, separately prepared in respect of annuities on male and femalelives, showing the specimen reserve values for annuities of one hundred rupees which will be produced on maturityon the basis of valuation adopted at ages, in the case of male lives, 60 and 65 and in the case of female lives, 55and 60; the said statements must show the specimen reserve values which will be produced under the table ofannual premiums in use for new policies where new business is currently transacted in Sri Lanka and if under anyother table of annual premiums in use for any other deferred annuity policies in force smaller reserve values will beproduced the like specimens of these must also be given.

7. Statements as respects any policies of assurance upon the lives of a group of persons, whereby sums assuredare payable in respect of the several persons included in the group, showing the tola! claims paid since the date asat which the last statements were prepared under this Part of this Schedule or, where no such statements have beenprepared, since the date on which the insurer began to carry on the class of business to which the statements relateor the date of the last valuation of the insurer's liabilities in respect of that class of business, and the reserve forunexpired risks and outstanding claims.

SIXTH SCHEDULE [Section 64.]

REGULATION AS TO THE VALUATION OF THE LIABILITIES OF AN INSURER IN LIQUIDATION

The liabilities of an insurer in respect of current contracts effected in the course of life assurance businessincluding annuity business shall be calculated by the method and upon the basis to be determined by an actuaryapproved by the District Court or Winding-up Tribunal, and the actuary so approved shall, in determining asaforesaid, take into account—

(a) the purpose for which such valuation is to be made,

(b) the rate of interest, taxation, and the rates of mortality and sickness to be used in valuation, and

(c) any special directions which may be given by the District Court or Winding-up Tribunal.

XII/351


The liabilities of an insurer in respect of current policies of general business shall be such portion of the lastpremium paid as is proportionate to the unexpired portion of the policy in respect of which the premium was paid.

[Section 3.] SEVENTH SCHEDULE

REGULATIONS APPLICABLE TO UNDERWRITING MEMBERS OF LLOYDS

1. The Committee of Lloyds shall appoint a person resident in Sri Lanka as the chief representative ofunderwriting members of Lloyds (hereinafter referred to as the " chief representative ") and shall notify theController the name of the person so appointed.

2. The person appointed as the chief representative under regulation 1 shall, on payment of the deposit ordeposits referred to in regulation 3, be deemed to be registered as a person authorized to carry on Sri Lankabusiness on behalf of any member, or all members, of Lloyds:

Provided that nothing in this regulation shall be construed to prevent any member of Lloyds from carrying onSri Lanka business through any other representative or agent so long as the registration of the chief representativeis in force.

3. The chief representative shall keep deposited with the Deputy Secretary to the Treasury, for and on behalfof the Government of Sri Lanka a sum of fifty thousand rupees in respect of each class of Sri Lanka businessproposed to be carried on by any member, or all members, of Lloyds :

Provided that the maximum amount of the deposit shall be two hundred thousand rupees.

4. The chief representative shall file with the Controller—

(a) a copy of each of the Acts of the British Parliament defining or regulating the functions of LloydsUnderwriters,

(b) a copy of the annual list of members of Lloyds Underwriters and all information relating to theconstitution of the Committee of Lloyds, and

(c) the names and addresses of one or more persons resident in Sri Lanka duly authorized, except in respect ofcases arising from marine insurance cover, to accept, on behalf of underwriting members of Lloyds,service of process or other notice required by law to be served on them, together with a power ofattorney granted to such person or persons.

5. The chief representative shall forward to the Controller—

(a) four copies of the returns and accounts submitted by Lloyds Underwriters to, and published each year by,the British Board of Trade, one copy being authenticated by the Chairman of Lloyds Underwriters andthe appropriate Department of the British Government,

(b) a declaration signed by the Chairman of Lloyds Underwriters and by the appropriate Department of theBritish Government, certifying that all Lloyds Underwriters have complied with the requirements for thetime being imposed upon them by the provisions of the First Schedule to the Insurance Companies Act,1958, of Great Britain,

(c) such returns, abstracts and additional information as the Controller may from time to time call for relatingto the conduct of the Sri Lanka business of underwriting members of Lloyds.

6- In these regulations and in section 3 (3) of this Act, " Sri Lanka business " means any insurance business,other than life assurance business, transacted in Sri Lanka and such business shall be deemed to be transacted inSri Lanka wherever h may be so transacted, if the relevant contract of insurance is in respect of persons resident inSri Lanka or in respect of property situated in Sri Lanka or any vessel or aircraft registered in Sri Lanka. If anyquestion arises as to whether any business is business transacted in Sri Lanka or not, the Controller shall decidethe question and his decision shall be final.

XII/352

Documents

CONTROL OF INSURANCE [Cap. 332 · CONTROL OF INSURANCE [Cap.332 Registration and issue of certificates. (2) Every application by a foreign insurance company for registration under