Lesotho
Insurance Act, 2014
Act 12 of 2014
- Published in Government Gazette 57 on 26 September 2014
- Commenced on 26 September 2014
- [This is the version of this document from 26 September 2014.]
Part I – Preliminary
1. Short title and commencement
This Act may be cited as the Insurance Act, 2014 and shall come into operation on the date of its publication in the Gazette, except that different dates may be appointed by the Minister for different provisions of this Act.2. Interpretation
In this Act, unless the context otherwise requires—“accounting records” includes books, vouchers, invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and such working papers and other documents as are necessary to explain the methods and calculations by which financial statements are made up and such other documents as may be prescribed;“actuary” means a person having an actuarial qualification and a member of a professional actuarial body or institute recognised as such by the Commissioner under section 68;“approved securities” means securities issued by Government and such other securities or investments as the Commissioner may approve;“auditor” means a member of the Lesotho Institute of Accountants certified to provide auditing functions recognised by the Institute or a member of any other professional body as the Commissioner may approve;“class” means a class of insurance business specified in Schedule 1;“capital” means—(a)in the case of a company with share capital, its fully paid-up share capital; and(b)in the case of a mutual company, its uncommitted reserves;“code” means a code of practice issued by the Commissioner under section 135;“Commissioner” means the Central Bank of Lesotho continued into existence by the Central Bank Act, 20001;“company” has the meaning assigned to it in section 2(1) of the Companies Act, 20112;“derivatives” means a financial instrument whose value is based on the performance of underlying assets such as stocks, bonds, currency exchange rates and real estate;“external insurer” means an insurance company incorporated under the laws of any other country than Lesotho provided such any insurer is regulated by an authorised supervisor of that other country;“facultative reinsurance” means a type of reinsurance whereby each and every offer of reinsurance is considered individually by the reinsurer who has the option either to accept or to reject the offer;“financial statement” in relation to an insurer and to a financial year means—(a)a statement made in accordance with the International Financial Reporting Standards (IFRS);(b)a statement of cash flows for an insurer in relation to a financial year;(c)such statement relating to the prospects for the business of an insurer as may be specified by prescribed accounting standards; and(d)such other statements as may be prescribed.“financial year” in relation to this Act, means each period of 12 months beginning on 1st January and ending on 31st December of each year and includes any lesser or greater periods as the Commissioner may approve;“funeral policy” means a contract of insurance whereby the insurer assumes, in return for a premium or the promise of a premium, an obligation to provide, on the death of any person, benefits to be determined by the Commissioner by regulations;“Government” means Government of the Kingdom of Lesotho;“gross liability” means the liability assessed by an actuary at a valuation made by him or her and approved by the Commissioner;“gross premium” means premium after deduction of discounts, refunds and rebates of premium but before deduction of any premium paid or payable by any insurer for reinsurance ceded and includes premiums receivable by the insurer under reinsurance contracts accepted by that insurer and any premium in respect of annuity contracts;“insolvency” has the meaning assigned to it under the Insolvency Proclamation, 19573;“insurance agent” means a person appointed and authorised by an insurer to solicit applications for insurance or negotiate for insurance business on behalf of the insurer and to perform such other functions as may be assigned to him or her by the insurer but does not include an individual who is a salaried employee of the insurer;“insurance broker” means a person who is licensed to act as an independent contractor or consultant for commission or other compensation, and not being an agent of an insurer, carries out any of the following activities—(a)the soliciting or negotiating of insurance business, including the renewal and continuance of such business, on behalf of an insured or a prospective insured other than himself or herself;(b)the bringing together, either directly or through the agency of a third party, with a view to the insurance of risks of persons seeking insurance and insurers, and carries out work preparatory to the conclusion of contracts of insurance;“insurance business” means the business of undertaking liability under a contract of insurance to indemnify a person in respect of any loss or damage, including the liability to pay damages or compensation contingent upon the happening of a specified event, and includes assurance and reinsurance business;“insurance company” means a public company incorporated under the laws of Lesotho and licensed under this Act to carry out insurance business;“insurance intermediary” means an insurance broker, insurance agent, insurance loss adjuster, insurance loss assessor or risk consultant registered under this Act;“insurance loss adjuster or loss assessor” means a person who, for commission or other compensation, including a salary, investigates and negotiates settlement of claims under insurance contracts solely on behalf of either an insurer or insured but does not include an insurance agent who is authorised to settle claims on behalf of the insurer for whom he acts as an agent;“insurer” means a person, including an association of underwriters and reinsurers, who carries on, or holds himself, herself or itself out as carrying on insurance business, other than an insurance intermediary registered under this Act;“key employee” includes a managing director, chief executive officer, chairman of the board of directors, director, president, principal officer, chief financial officer or treasurer and their deputies or equivalents and any other person who occupies the same level of management or holds a position of decision making;“life insurance business” means the business of assuming the obligations of an insurer classified under section 5 as transacting long term insurance business;“life insurance fund” means a fund established under a particular life business, receipts from which are used by an insurer in respect of that life business only;“life policy” means a contract of insurance made or agreed to be made by an insurer classified under section 5 as transacting long term business;“micro-insurance” means an insurance that is accessed by the low income population and is provided by variety of different entities, but run in accordance with generally accepted insurance policies;“management expenses” means expenses incurred by an insurer in the administration of an insurance business which are not commission payable and, in the case of general insurance business, are not incurred in claims paid, claims outstanding, or expenses for settling claims outstanding;“Minister” means the minister responsible for finance;“net premiums” means the balance of gross premium after deduction from the gross premium of any premium paid or payable by an insurer for reinsurance ceded;“net liability” means the liability assessed by an actuary at a valuation made by him and approved by the Commissioner;“person” includes a juristic person;“place of business” means the principal office or any branch office of an insurer or an insurance intermediary open to the public and is located in Lesotho;“policyholder” means a person who is the owner of a policy and, for the time being, has the legal title to the policy and includes any person to whom a policy is for the time being assigned;“policy” means a contract of insurance, irrespective of the form in which the rights and obligations of the parties are expressed or created, including a writing where any valid contract of insurance is made or agreed to be made;“prescribed” means prescribed by regulations under section 134;“principal officer” means a person responsible for the daily management of a principal office in Lesotho of an insurer or insurance intermediary;“regulations” means regulations made by the Minister under section 134;“reinsurer” means a person who carries on reinsurance business and includes a retrocessionaire;“reinsurance business” means the business of undertaking liability to pay money to reinsurers in respect of insurance business incurred by insurers or reinsurers and includes a retrocession;“risk consultant” means a person who advises his client or employer with regard to a programme of minimising losses arising through unforeseen events and of minimising the cost of such protection by physical or financial means through insurance or other means;“rules” means market conduct rules issued by the Commissioner under section 136;“scheme” means a scheme for merger, sale, transfer, takeover or any other similar arrangement that an insurer may enter into under section 107;“short term insurer” means an insurer authorised by its licence to carry on any class of short term insurance business;“subsidiary” has the meaning set out in the Companies Act, 2011;“treaty reinsurance” means a reinsurance under which a ceding company agrees to cede and a reinsurer agrees to accept all reinsurances offered in accordance with the terms of a treaty agreement;“trustee” in relation to an estate in insolvency, includes an assignee or a trustee in a deed of arrangement of a person having the conduct of an order of composition;“underwriter” includes a person named in a policy or other contract of insurance as liable to pay or contribute towards the payment of the sum secured by the policy or contract.Part II – Powers and functions of Commissioner
3. Powers and functions of Commissioner
4. Annual report by Commissioner
The Commissioner shall, within 6 months after the end of each year ending on 31st December, furnish to the Minister a report on the enforcement of the Act during that year, together with summaries of annual returns of insurers and insurance intermediaries deposited with the Commissioner during that year.Part III – Registration of insurer
5. Classification of insurance
6. Insurer to be public company resident in Lesotho
7. Registration of existing insurer
8. Registration of new insurer
9. Conditions attached to licence
10. Variation of conditions of licence
11. Restriction on name of insurer
A person shall not be registered as an insurer under a name which so closely resembles the name of an existing insurer as would be likely, in the opinion of the Commissioner, to mislead the public or cause confusion in the insurance market.12. Publication of issue, suspension or revocation of licence
The Commissioner shall cause to be published in the Gazette—13. Display of licence
A copy of a licence issued under section 7, 8, 10, 72 or 73 shall be conspicuously displayed to the public at an office of the insurer or insurance intermediary.14. Validity of licence
A licence is valid for a period of 5 years from the date of issue unless—15. Renewal of licence
16. Refusal to issue or renew a licence
Where an applicant does not meet the licensing requirements for registration or renewal and the Commissioner—17. Surrender of licence
18. Revocation or suspension of licence
19. Effect of revocation or suspension of insurer’s or insurance intermediary’s licence
20. Delivery of licence to Commissioner
An insurer or insurance intermediary shall deliver its licence to the Commissioner if—21. Review of revocation or refusal to register insurer
The Commissioner may—Part IV – Capitalisation, solvency and financial resources
22. Capital requirements
23. Shares to be fully paid for in cash
24. Maintenance of financially sound condition
25. Solvency margin
26. Reserves
27. Value of assets to be held in Lesotho by short term insurer
28. Value of assets to be held in Lesotho by long-term insurer
29. Statement of assets
30. Valuation of assets of short-term and long-term insurer
31. Assets not to be pledged or encumbered
32. Liabilities to be recorded separately
An insurer shall identify the liabilities under domestic policies in respect of its long-term insurance business in Lesotho and those relating to any longterm insurance business carried on by it elsewhere, and such liabilities shall be stated separately in the accounts or other records of the insurer and in the statement of liabilities.33. Certain liabilities not to be incurred without approval
An insurer shall not, without the prior written approval of the Commissioner—34. Statement of liabilities
35. Calculation of liabilities
36. Calculation of unmatured domestic policy liabilities in the case of short term insurance
37. Calculation of unmatured domestic policy liabilities in the case of long term insurance
38. Distribution
39. Prohibitions relating to advances and loans to connected persons
Part V – Appointment and responsibilities of key employees
40. Appointment of key employee
41. Qualifications of key employee
42. Obligations of key employee
43. Conflict of interest
44. Suspension of key employee or insurer
The Commissioner may, by written order, suspend from office for any period not exceeding one year, any key employee or an insurer who fails to take all reasonable steps to secure compliance by the insurer with the requirements of this Act:Provided that before the suspension, the key employee is given a reasonable opportunity of being heard in their defence.45. Termination of appointment of key employee
Where an insurer terminates the appointment of a key employee, the insurer shall, within 14 days of such termination, submit a written notification of the termination to the Commissioner.46. False and misleading statements
A key employee or agent of an insurer who, with intent to deceive, makes any false or misleading statement or entry or omits any statement or entry that should be made in any book, account, report or statement of the insurer or obstructs or endeavours to obstruct the performance by an auditor of his duties in accordance with this Act, or a lawful inspection of the insurer by a duly authorised examiner appointed by the Commissioner, commits an offence.47. Responsibilities of key employee
A key employee shall have responsibility for—48. Responsibilities of board of directors
Part VI – Obligations of and restrictions on insurers
49. Insurer to carry on insurance business only
No insurer shall carry on any business or activities, whether in Lesotho or elsewhere, other than in connection with or for the purposes of its insurance business.50. Insurer to carry on insurance business in accordance with business plan
51. Trading in derivatives
An external insurer shall not, without the written approval of the Commissioner, invest or trade in derivatives, other than derivatives which are approved assets.52. Head office or registered office
53. External insurer to appoint representative
54. Authorisation to open representative office
An insurer shall not open, maintain or carry on an insurance business through a representative, branch or contact office outside Lesotho unless it has obtained written approval of the Commissioner.55. Disposal or acquisition of significant interest in an insurer
56. Disposal or acquisition of significant interest in external insurer
An external insurer shall notify the Commissioner, within the prescribed period of time, if—57. Prohibition on payment of commission to unlicensed insurance intermediary
Subject to any regulations made in relation to payment of commission, no insurer shall pay any commission to an insurance intermediary that is not licensed under Part IX.58. Internal control and culture
A board of directors and key employee are responsible for promoting high ethical and integrity standards, and establishing a culture within an organisation that emphasises and demonstrates to all levels of personnel the importance of internal controls and, to this effect shall, by administrative guidelines, ensure that adequate and effective system of internal controls is established and maintained.59. Essential elements of sound internal control system
An internal control system of an insurer shall, among other things, include, as a minimum—60. Internal audit of control system
An insurer shall establish an effective and comprehensive internal audit of the internal control system carried out by operationally independent, appropriately trained and competent staff as may be prescribed by regulations.61. Approval of arrangements of reinsurance by Commissioner
62. Reinsurance statements and documents to be filed
63. Reinsurance of risks outside Lesotho
64. Assessment of policies
Part VII – Accounts and audit
65. Preparation and submission of financial statements, reports, returns etc.
An insurer or insurance broker shall prepare financial statements, reports and annual return for each financial year that comply with the prescribed accounting standards which shall be submitted to the Commissioner in such form and manner as may be prescribed.66. Appointment of auditor
67. Accounts and audit provisions of the Companies Act
Except to the extent that this Act and regulations provide otherwise, PART VII does not limit the application of the provisions of the Companies Act 2011 relating to accounts and audit of an insurer that are subject to the Companies Act.Part VIII – Appointment and responsibilities of actuary
68. Appointment of actuary
Part IX – Registration of insurance intermediary
69. Categories of insurance intermediaries
A licence of an insurance intermediary shall be issued in one of the following categories—70. Prohibition on unlicensed business as insurance intermediary
71. Registration of existing insurance intermediary
72. Registration of new insurance intermediary
73. Registration requirements for insurance intermediary
74. Restrictions on persons who may be licensed
75. Status of personnel of insurance broker
An insurance broker may not employ as his key employee, a person who—76. Maintenance of professional indemnity policy
77. Maintenance of deposits
A person shall not be registered as an insurance broker unless that person has deposited with a bank in Lesotho such an amount of money and subject to such conditions as the Commissioner may prescribe.78. Conduct of insurance business by insurance intermediaries
79. Provisions of insurer licence applicable to intermediary licence
The provisions of sections 9(1) and (5), 10, 12, 13, 14, 15, 20 and 21 applicable to an insurer relating to the following—80. Revocation of registration of insurance intermediary
81. Surrender of licence
82. Maintenance of capital
83. Accounts and audit
The provisions of Part VII relating to accounts of an audit shall apply with modifications, where necessary, to a licensed insurance intermediary.84. Collection of premiums by licensed insurance intermediary
85. Commission to insurance intermediary
A company or an individual not a party to any contract of insurance except an insurance intermediary registered under this Act, shall not be paid any commission or other payment by any insurer for the effecting or renewing of any policy of insurance.86. Merger, sale, transfer and takeover of insurance intermediary
The provisions of Part XII relating to a merger, sale, transfer and takeover of an insurer shall apply with necessary modifications, where necessary, to an insurance intermediary.87. Liquidation and winding up of insurance intermediary
The provisions of Part XIII relating to liquidation and winding up of an insurer shall apply, with modifications, where necessary, to an insurance intermediary.Part X – Supervision of insurer and insurance intermediary
88. Interpretation
In this Part—“inspection” means an inspection of a relevant person undertaken pursuant to section 89;“foreign regulatory authority” means an authority in a jurisdiction outside Lesotho which exercises functions corresponding or similar to those exercised by the Commissioner;“relevant person” means—89. Inspection
90. Duties of relevant persons, directors and employees in relation to inspection
91. Report on inspection
92. Power of Commissioner to gather information
93. Examination under oath
94. Provision of assistance to foreign regulatory authority
95. Search warrant
96. Appointment of inspector to conduct investigation
97. Order of court
Part XI – Enforcement provisions
98. Enforcement action
99. Directives
100. Advertisements
101. Change of name
An insurer or insurance intermediary shall not, without the prior written approval of the Commissioner, change the name under which it carries on business.102. Directive to change name by Commissioner
The Commissioner may, by written notice, direct an insurer or insurance intermediary forthwith to change the name under which it carries on business or under which it is incorporated if the Commissioner is of the opinion that the name is—103. Filing of returns and reporting of information to the Commissioner
An insurer or insurance intermediary shall report any information or furnish any returns or documentation prescribed by regulations or required by the code or the rules to the Commissioner within such time and verified in such form and manner as is prescribed or required by regulations, the code or the rules.104. Defective returns
105. Insurer or insurance intermediary to notify Commissioner of any judgement
An insurer or insurance intermediary shall notify the Commissioner of any judgement obtained against it and shall provide the Commissioner with evidence as to whether or not the judgement has been satisfied.Part XII – Merger, sale, transfer and takeover by insurer etc.
106. Merger, sale, transfer and takeover by insurer etc.
107. Details of scheme
A scheme shall set out—108. Service of notices
109. Compromise with creditor under section 161 of the Companies Act by insurer
Part XIII – Liquidation and judicial management
110. Winding up and judicial management
The provisions of the Companies Act, 2011 or any subsequent Act relating to the winding up and judicial management of companies shall by regulations be modified in respect of insurers and insurance intermediaries.Part XIV – Abandoned property
111. Unclaimed funds and property
112. Reports and disposition
113. Failure to make a report or payment
A licensed institution which wilfully fails to file a report with the Commissioner or to pay funds presumed to be abandoned into the custody of the Accountant-General, in accordance with section 112, commits an offence.Part XV – Offences and penalties
114. General offences and penalties
115. Penalty for failure to submit certain document or to furnish certain information
116. False or misleading representations, statements, reports or returns
117. Penalty for failure to comply with certain financial requirements
118. Other offences
A person who commits an offence under this Act for which no punishment is provided for elsewhere in this Act is liable to a fine of M500, 000 or to imprisonment for 10 years or both.119. Powers of court
Notwithstanding any penalty imposed by or under this Act, a court may, where circumstances warrant, impose a penalty less or greater than that stipulated by or under this Act.Part XVI – Miscellaneous
120. Prohibition of transacting certain business with or securing certain business for unregistered concern
121. Restriction on use of certain names and terms
122. Incorporation, use and change of name of company
The Registrar of Companies shall not register a memorandum of a company under, or register a change of name of a company to, a name that, whether in Sesotho or English, includes—123. Change or alteration
124. Use and change of registered name
125. Request for information
126. Use of prescribed forms
127. Registers
128. Inspection of registers and information held by Commissioner
129. Fees payable to Commissioner
Any fee, charge or contribution which is owed to the Commissioner under this Act or regulations may be recovered as a debt due to the Commissioner.130. Power of Commissioner to extend time periods
Where any person is obliged or entitled in terms of a provision of this Act to perform any act within a specified period or before or on a specified date, the Commissioner may, at any time, whether before or after the expiry of the period or date, extend that period or date if the Commissioner is satisfied that it is just and equitable to do so in any particular case.131. Restrictions on disclosure of information
132. Right of appeal to the Tribunal
133. Notices
134. Regulations
The Commissioner may make regulations generally for giving effect to this Act.135. Code of Practice
136. Market conduct rules
137. Transitional provisions
A person registered as an insurer or intermediary under the Insurance Act, 1976 shall adjust his insurance activities in accordance with the provisions of this Act within 1 year from the coming into operation of this Act.138. Savings
Anything done before the commencement of this Act under or by virtue of the Insurance Act, 1976 or in relation to a person registered under that Act shall, insofar as it was done lawfully and unless it is clearly inappropriate to do so, be deemed to have been done under or in accordance with the corresponding provisions of this Act.139. Repeals
The Insurance Act, 1976 is repealed.History of this document
26 September 2014 this version
Commenced