Insurance Act, 2014

Year of Act: 
2014
Number of Act: 
12
Date of promulgation: 
26 September 2014

 

 

 

I

LESOTHO

Government   Gazette

Vol. 59                               Friday -  26th September, 2014                            No. 57

 

 

 

CONTENTS

 

No.                                                                                                                      Page

 

ACT

 

12     Insurance Act, 20 14                                                                                  863

 

 

 

 

GOVERNMENT  NOTICE

 

 

55      Statement of Objects and Reasons of the                                                964

Insurance Bill, 2014

 

 

 

 

OTHER NOTICES

 

 

(See Supplement   of the Gazette)

 

 

 

 

 

 

 

 

 

Published  by the Authority   of His Majesty  the King

Price: M82.00

 

863

 

 

ACT NO. 12 OF 2014

 

Insurance Act, 2014

 

Arrangement of Sections

 

Sections

 

 

PART I - PRELIMINARY

 

1.         Short title and commencement

2.        Interpretation

 

PART II - POWERS AND FUNCTIONS OF COMMISSIONER

 

3.          Powers and functions of Commissioner

4.          Annual report by Commissioner

 

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

12.       Publication of issue, suspension or revocation of licence

13.       Display of licence

14.       Validity of licence

15.       Renewal of licence

16.       Refusal to issue or renew a licence

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

21.        Review of revocation or refusal to register insurer

 

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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

33.        Certain liabilities not to be incurred without approval

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 RESPONSIDILITIES OF KEY EMPLOYEE

 

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

45.        Termination of appointment of key employee

46.        False and misleading statements

47.        Responsibilities of key employee

48.        Responsibilities of board of directors

 

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PART VI -  OBLIGATIONS  OF  AND

RESTRICTIONS ON INSURER

 

49.        Insurer to carry on insurance business only

50.       Insurer to carry on insurance business in accordance with business plan

51.       Trading in derivatives

52.       Head office or registered office

53.       External insurer to appoint representative

54.       Authorisation to open representative office

55.       Disposal or acquisition of significant interest in an insurer

56.       Disposal or acquisition of significant interest in external insurer

57.       Prohibition on payment of commission to unlicensed insurance intermediary

58.       Internal control and culture

59.        Essential elements of sound internal control system

60.        Internal audit of control system

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

66.       Appointment of auditor

67.       Accounts and audit provisions of the Companies Act

 

PART VIII -APPOINTNMENT AND

RESPONSIBILITIES OF ACTUARY

 

68.        Appointment of actuary

 

 

PART IX - REGISTRATION OF

INSURANCE INTERMEDIARY

 

69.        Categories of insurance intermediaries

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

 

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74.        Restrictions on persons who may be licensed

75.        Status of personnel of insurance broker

76.        Maintenance of professional indemnity policy

77.        Maintenance of deposits

78.        Conduct of brokerage business

79.        Provisions of insurer licence applicable to intermediary licence

80.       Revocation of registration of insurance intermediary

81.        Surrender of licence

82.       Maintenance of capital

83.       Accounts and audit

84.        Collection of premiums by insurance broker

85.        Commissions to insurance agent and insurance broker

86.       Merger, sale, transfer and takeover of insurance intermediary

87.        Liquidation and winding up of insurance broker

 

PART X - SUPERVISION OF INSURER AND INSURANCE INTERMEDIARY

 

88.        Interpretation

89.       Inspection

90.       Duties of relevant persons, directors and employees in relation to in- spection

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

102.     Directive to change name by Commissioner

103.     Filing of returns and reporting of information to the Commissioner

104.     Defective returns

 

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105.            Insurer or insurance intermediary to notify Commissioner of any judgement

 

PART XII - MERGER, SALE, TRANSFER AND TAKEOVER BY INSURER ETC..

 

106.     Merger, sale, transfer and takeover by insurer etc.

107.     Details of scheme

108.     Service of notices

109.     Compromise with creditor under section 78 of the Companies Act by insurer

 

PART XIII- LIQUIDATION AND JUDICIAL MANAGEMENT

 

 

110.     Winding up and Judicial Management

 

PART XIV - ABANDONED PROPERTY

 

111.     Unclaimed funds and property

112.     Reports and disposition

113.     Failure to make a report or payment

 

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

119.     Powers of court

 

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

123.     Change or alteration

124.     Use and change of registered name

 

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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

130.     Power of Commissioner to extend time periods

131.     Restrictions on disclosure of information

132.     Right of appeal to Financial Institutions Tribunal

133.     Notices

134.     Regulations

135.     Code of Practice

136.     Market conduct rules

137.     Transitional provisions

138.     Savings

139.     Repeals

 

SCHEDULE 1 - CLASSES OF INSURANCE BUSINESS

 

PART A - Classes of Long Term Business PART B - Classes of General Business PART C - Classes of Micro-Insurance

 

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ACT NO. 12 OF 2014

 

Insurance Act, 2014

 

An Act to make provision for the consolidation, administration, supervision,

regulation, control, protection and development of insurance business, and for incidental matters.

 

Enacted by the Parliament of Lesotho.

 

PART I - PRELIMINARY

 

Short title and commencement

 

1.          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.

 

Interpretation

 

2.          In this Act, unless the context otherwise requires-

 

"accounting  records" includes books, vouchers, invoices, receipts, or- ders 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 cer- tified 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;

 

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"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 ex- istence by the Central Bank Act, 20001   ;

 

 

 

;

"company" has the meaning assigned to it in section 2(1) of the Comp- anies 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 reg- ulated 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  ac-

 

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counting 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 as-

sumes, in return for a premium or the promise of a premium, an obliga- tion 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 valua- tion made by him or her and approved by the Commissioner;

 

"gross  premium"   means  premium   after  deduction   of discounts, refund sand   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   Pro-

clamation,   19573;

 

 

"insurance   agent"  means  a person  appointed   and  authorised   by an in- surer to  solicit  applications   for insurance   or negotiate   for insurance   busi- ness  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 indi- vidual  who  is a salaried   employee   of the insurer;

 

"insurance   broker"   means  a person   who is licensed  to act as an inde- pendent   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,

 

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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 contin- gent 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 regis- tered under this Act;

 

"insurance loss adjuster or loss assessor" means a person who, for com- mission 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;

 

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"life insurance business" means the business of assuming the obliga- tions 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 busi- ness;

 

"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 out- standing;

 

"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;

 

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"policy"   means  a contract   of insurance,   irrespective   of the form  in which the rights  and obligations   of the parties  are expressed   or created,   inclu- ding  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;

 

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"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 payor  contribute towards the payment of the sum secured by the policy or contract.

 

PART II- POWERS AND FUNCTIONS OF COMMISSIONER

 

Powers and functions of Commissioner

 

3.          (1)        The Commissioner shall be responsible for the general adminis- tration and enforcement of this Act, and for that purpose -

 

(a)        shall ensure effective supervision, regulation, control and protection of insurance business;

 

(b)        may appoint technically qualified personnel for the effective administration of this Act.

 

(2)        In furtherance  of the satisfactory performance  of his responsi- bility under subsection  (1) and the functions related to him, the Commissioner shall perform the following functions and duties and any others under this Act -

 

(a)       registration and renewals for insurers and insurance intermediaries;

 

(b)        formulation and enforcement of appropriate directives and codes of standards in the conduct of the insurance business, at all levels and for all categories of insurance and service providers in the insurance market;

 

(c)       regulation and control, offering advice and guidance to insurers and insurance intermediaries on matters involving insurance underwriting and claims business in general;

 

(d)       promoting healthy competition and sound business cooperation within the local insurance market, and also

 

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ensuring fair and adequate protection for the insurance business;

 

(e)       advising the Minister on regulations and policies on matters relating to the sound development  and growth of insurance industry;

 

(D          offering protection, enlightenment  and guidance to policyholders  and the public in matters of insurance policies and their application or implications;

 

(g)         advising Government and all parastatal authorities on the essence and the need for adequate insurance cover- age and security for all national strategic assets and properties against any contingencies  or risks;

 

(h)       monitoring compliance by insurers and insurance inter- mediaries with legislation relating to money laundering and financing of terrorism;

 

(i)          monitoring insurance business and to take action against persons carrying on the business without a licence;

 

(j)          establishing standards for the conduct of insurance busi- ness for compliance by insurers and insurance interme- diaries;

 

(k)       monitoring the effectiveness of this Act and the regula- tions in enabling, and providing for, the supervision  of insurance business and the business of insurance inter- mediaries in accordance with internationally  accepted standards;

(I)        making recommendations to Government concerning - (i)      amendment or revision of this Act, regulations

or any other law relating to insurance business;

 

 

(ii)        enactment of new legislation relating to insurance business; or

 

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(iii)      proposals made otherwise than by the Commis- sioner in respect of matters specified in sub-- paragraphs  (i) and (ii);

 

(m)      maintaining  contact and developing relations with for- eign insurance  supervisors, international  and regional associations of insurance  supervisors and other interna- tional and regional associations or groups relevant to the functions of the Commissioner  and, maintaining  a gen- eral review of internationally  accepted standards for the supervision of insurance business;

 

(n)       providing regulatory assistance to foreign regulatory authorities in accordance with this Act; and

 

(0)         providing such information  and advice to licencees and the public concerning insurance including insurance intermediaries  as the Commissioner  considers appropriate.

 

(3)        The Commissioner  may take into account any matter which he considers to be appropriate but shall, in particular, have regard to the protection of the public against financial loss  arising out of dishonesty, incompetence, mal- practice  or insolvency of persons -

 

(a)        engaged in insurance business; or

 

 

(b)         acting as insurance intermediaries.

 

 

(4)        The Commissioner may, by notice published in the Gazette, de- termine the minimum  and maximum  commission rates payable  by insurers  to other insurers,  brokers  or agents  in respect  of all or any class  of insurance, whether insurance or reinsurance.

 

(5)        The Commissioner may, by notice in writing, require an insurer to deposit with the Commissioner, within such time as the Commissioner  may consider reasonable,  such securities  as the Commissioner  may stipulate in the requisition in respect of any or each class of insurance business being carried on by that insurer.

 

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(6)         After  consideration    of the extent  and duration   of a business   car- ried  on by an insurer  and a provision   generally   made  for management    expenses in the premium   rates  of insurers,   the Commissioner    may,  by notice  published   in the Gazette  -

 

(a)         require  an insurer  to limit  its management    expenses   to an amount   contained   in the notice;

 

(b)        in writing  to an insurer,   allow  dispensation    from  the provisions   of paragraph    (a) to any  other  amount   and for any period  as the  Commissioner    may  consider  reason- able,  except  that  such  period   shall  not  exceed  2 consec-

utive  years.

 

Annual report by Commissioner

 

4.           The Commissioner    shall,  within  6 months  after the end of each year end- ing on 31 st 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

 

Classification of insurance

 

5.           (1)        For  the purposes   of this Act,  insurance   business   is divided   into long-term,   short-term   and micro-insurance     business.

 

(2)         SUbject to subsection   (3) -

 

(a)                  "long-term   insurance   business"   means  a life insurance business   comprising    of all types  of life policies   of a class specified   in Part A of Schedule   1;

 

(b)

"short-term   insurance   business"

means  a general  busi-

 

ness which  is non-life   insurance

of a class  specified   in

 

Part B of  Schedule   1; and

 

 

(c)                  "micro  insurance"   means  all types  of micro-insurance business   specified   in Part  C of Schedule   1.

 

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(3)        Notwithstanding  subsections (1) and (2), if the Commissioner is satisfied  that any part of the business  of an insurer  ought to be treated  as be- longing to a different type or class of insurance business other than that provided for in Schedule I, the Commissioner may direct, in writing, that part of the busi- ness be so treated for the purposes of this Act, regulations, the code and rules.

 

(4)        Where an insurer or a person  applies for registration  as an in- surer, and the Commissioner  does not agree as to the class to which any class of insurance business belongs,  or if such insurer or person so requests, the Com- missioner  shall determine  the class under which  such business  shall be dealt with.

 

Insurer to be public company resident in Lesotho

 

6.          (1)         Subject to section 9, no person shall knowingly  or intentionally operate an insurance business unless the person is registered as an insurer and is incorporated  as a public company under the Companies Act, 2011 or under the law of any other country and has obtained a licence from the Commissioner.

 

(2)        A person who contravenes the provisions of subsection (1) com- mits an offence and is liable on conviction to a fine of M500,000.00  or to im- prisonment  for 10 years or to both.

 

Registration of existing insurer

 

 

7.          (1)        An insurer registered to carry on insurance business under the In- surance Act, 19764  shall, on the date on which this Act comes into operation, be deemed to have been registered  under this Act.

 

(2)        Subject  to subsection  (1), an existing  insurer  deemed to have been registered under this Act, shall, upon renewal of his licence, be registered in accordance with this Act.

 

Registration of new insurer

 

8.          (1)        A person who intends to carry on any class of insurance busi- ness shall, subject to this Act, apply to the Commissioner for registration.

 

 

 

 

shall-

 

(2)        An application for registration referred to in subsection (1)

 

880

 

 

(a)        be in writing and made in such a manner and form as may be prescribed  by the Commissioner;

 

(b)         state the address of the place of business of the applicant;

 

(c)        state the names and addresses of persons holding five

per cent or a higher percentage  of the share capital of the applicant and the number of shares allotted to each such person;

 

(d)        be accompanied  by -

 

 

(i)          a certified  copy of documents  of incorporation

of the company or, in the case of a foreign insu- rance company, such similar documents relating to its incorporation;

 

(ii)             a list of names,  addresses and occupations of persons constituting  its board of directors and key employees,  and, where the applicant is a foreign insurance  company, the name and address of the principal  officer in Lesotho and the name and address of one person resident in Lesotho who is authorised to accept any notice required to be served upon the applicant;

 

(iii)      a statement of the class of insurance business for which the applicant seeks to be registered;

 

(iv)      a statement  duly certified by an auditor that the relevant capital requirements  specified in section

22 has been complied with by the applicant;

 

 

(v)             an original copy of the premium rates, rating plans, rules and the standard policy forms of each class or subclass of insurance business to

be carried out by the applicant duly verified and signed by the principal officer;

 

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(vi)      if the applicant intends to carry out long-term insurance business,  a statement on-

 

(aa)      the basis of calculations  of premium rates;

(bb)      the calculation of non-forfeiture  values; (cc)      the method of distributing profits to

policyholders  and shareholders;

 

 

(vii)             a statement showing particulars  of proposed reinsurance  agreements;

 

(viii)    a statement as to the prospective  administrative costs and commission;

 

(ix)      a statement showing qualification and experi- ence in insurance business of the key employee of the applicant;

 

(x)        a business plan -

 

 

(aa)      including detailed financial projections which demonstrate medium-term  viabil- ity and sufficient information  on the financial resources  of its founding directors to support the company

through its initial stage;

 

 

(bb)      describing how the company is to be organised and controlled internally, including its internal policies and procedures;

 

(xi)      prescribed  investigation and application fees;

and

 

 

(xii)     such documents, statements or information as the Commissioner may require.

 

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(3)        The Commissioner may, subject to section 9, issue an insurance licence to-

 

(a)        a public company incorporated  under the Companies

Act, 2011; or

 

 

(b)        an external insurer incorporated  under the laws of any other country.

 

(4)        When considering  an application  for registration,  the Commis- sioner shall satisfy himself that -

 

(a)        subsection (3) is complied with;

 

 

(b)        the applicant intends to carry on insurance business  and has a principal  office in Lesotho;

 

(c)       the key employees who shall be engaged in the day-to- day management  of the company are resident in Lesotho and are also persons who, in the opinion of the Commi- ssioner, have insurance knowledge  and experience as

may be prescribed  by regulations;

 

(d)           the applicant has complied with all the capital and fmancial requirements  prescribed  by this Act;

 

(e)       where the applicant is associated with one or more other persons, the relationship  between the applicant and those persons shall not affect the effective supervision  of the insurance business  to the policyholders;

 

(f)        the organisation, management  and fmancial resources  of the applicant are adequate for the carrying on of the rel- evant insurance business;

 

(g)        key employees of the applicant are fit and proper per- sons to be engaged in the management  of insurance business;

 

(h)        it will  not be contrary to the public interest for the

 

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applicant to carry on any  class of insurance business; (i)         the manner in which the applicant intends to carry on

any class of insurance business is not likely to be incon- sistent with the provisions  of this Act, regulations, the code and the rules and sound insurance principles;

 

(j)         the memorandum  of association and articles of associa- tion are not inconsistent  with this Act and that the main objects of the company include the following -

 

(i)        to carry on any class of insurance business and conduct all affairs relating to it in accordance with sound insurance practices and methods and this Act;

 

(ii)        to, in so far as practicable, protect the interests of policyholders;

 

(iii)      to, at all times, maintain a margin of solvency sufficient for the purposes of meeting all obliga- tions to policyholders;  or

 

(k)        the name under which the applicant intends to carry on any class of insurance business is not -

 

(i)         identical to the name of any other insurer;

 

 

(ii)                   a name which so closely resembles the name of any other insurer that the one insurer is likely to be mistaken for the other;

 

(iii)       a name which is likely to mislead the public.

 

Conditions attached to licence

 

9.          (1)        The Commissioner  may issue a licence under section 8(3) sub- ject to such conditions as he considers appropriate.

 

(2)        The Commissioner may, by written notice, require an applicant,

 

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either prior to the issue of a licence or as a condition of issuing the licence -

 

(a)       to increase its capital to an amount greater than the prescribed minimum;  or

 

(b)        to maintain a solvency  margin greater than the prescribed  minimum.

 

(3)        A notice under subsection (2) shall have the effect of a directive under section 22(3) or 25(8) upon the issuance  of a licence to the applicant.

 

(4)        Without limiting subsection  (1), a licence may be restricted-

 

(a)        to reinsurance  business; or

 

(b)        to insurance business, excluding reinsurance    business. (5)        Where a licence is issued subject to a condition-

(a)        the Commissioner  shall issue, together with the licence, a written notice specifying the condition; and

 

(b)        where, in respect of any condition,  the Commissioner considers that it is in the public interest to do so, the

Commissioner  may state that condition on the licence.

 

Variation of conditions of licence

 

10.        (1)        The Commissioner  may, upon giving written notice to a licencee -

 

(a)        vary or revoke a condition of a licence; or

 

 

(b)         impose new conditions  on the licencee.

 

 

(2)        An insurer may apply to the Commissioner, in writing, for a con- dition of a licence to be revoked or varied.

 

(3)        Where, on an application made under subsection  (2), the Com- missioner  is satisfied  that a condition  of a licence  is no longer  necessary  or

 

885

 

 

should be varied, the Commissioner  may revoke or vary the condition.

 

 

(4)        Where the Commissioner  revokes or varies a condition of a li- cence or imposes a new condition, the insurer shall, if requested to do so by the Commissioner,  deliver its licence to the Commissioner  for re-issue.

 

Restriction on name of insurer

 

11.       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 opin- ion of the Commissioner,  to mislead the public or cause confusion in the insur- ance market.

 

Publication of issue, suspension or revocation of licence

 

12.       The Commissioner  shall cause to be published in the Gazette -

 

(a)        a notice of licences issued under sections 9 and 10; and

 

 

(b)         a notice of suspension or revocation of a licence.

 

Display of licence

 

13.       A copy of a licence issued under section 7,8,10,72    or 73 shall be con- spicuously displayed to the public at an office of the insurer or insurance inter- mediary.

 

Validity of licence

 

14.       A licence is valid for a period of 5 years from the date of issue unless - (a) it is suspended, surrendered or revoked; or

(b)        a condition of a licence provides for any other period of duration.

 

Renewal  of licence

 

15.        (1)        A licence may be renewed upon application to and approval by the Commissioner  on payment of a prescribed renewal fee.

 

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(2)        The Commissioner  may, in issuing  or renewing  a licence, im- pose conditions to be satisfied by an insurer.

 

Refusal to issue or renew a licence

 

16.       Where an applicant does not meet the licensing requirements  for regis- tration or renewal and the Commissioner  -

 

(a)        refuses to issue a licence; or

 

(b)         issues a licence but refuses to authorise any of the classes of insurance business specified in the applic- ation, the Commissioner  shall notify the applicant, in

writing, of his refusal, stating the reasons for the refusal.

 

Surrender of licence

 

17.        (1)        An insurer  or insurance  intermediary  may apply to the Com- missioner, in writing, to surrender its licence.

 

(2)        Where an insurer  intends to cease carrying  on insurance  busi- ness, the insurer shall, at least 90 days before the proposed  cessation,  apply to the Commissioner,  in a manner  and form as may be determined  by the Com- missioner, for surrender of the licence.

 

(3)        The Commissioner  may refuse an application  under subsection

(1) if, in his opinion -

 

 

(a)       the insurance liabilities of the insurer have not been dis- charged or transferred;

 

(b)         the surrender would not be in the best interests of the public or the insurer's  policyholders  or potential policy- holders;

 

(c)        the insurer or insurance intermediary  is in breach of this

Act, regulations, the code or the rules; or

 

(d)        the licence should, for any other reason, be surrendered.

 

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(4)         Where the Commissioner  approves  an application  under sub- section (1), the Commissioner  shall notify the insurer, in writing, and shall pub- lish a notice of approval in the Gazette.

 

(5)        A surrender shall under this section take effect from such a date as may be specified by the Commissioner  in a notice.

 

(6)         Where the Commissioner refuses to approve a surrender of a li- cence, the Commissioner shall notify the applicant, in writing, of its refusal, stat- ing the reasons for the refusal.

 

Revocation  or suspension of licence

 

 

18.       (1)         No insurer or insurance intermediary shall carry on an insurance business other than in connection with or for purposes of its insurance business or in accordance  with a licence of the insurer or insurance intermediary.

 

(2)         The Commissioner may, at any time and by notice published in the Gazette, revoke or suspend a licence of an insurer or insurance intermediary if -

 

(a)       the insurer fails to comply with or carries on the insur- ance business contrary to the provisions of this Act;

 

(b)        the insurer has ceased to carry on insurance business and the liabilities of the insurer in respect of insurance busi- ness have been satisfied or are otherwise provided for;

 

(c)       any claim upon the insurer arising in Lesotho under any policy of insurance remains unpaid for one month after final judgment  in a court of law;

 

(d)       the margin of solvency as defined in section 25 is inadequate;

 

(e)       the insurer refuses to submit to inspection under section 89;

 

(f)         after appropriate investigations,  there is reason to believe that the insurance business is not being conducted in

 

888

 

 

accordance with sound insurance principles;

 

 

(g)       the insurer makes default in complying with, or acts in contravention  of any requirement  of this Act, regula- tions, the code or rules;

 

(h)        the insurer fails to apply for renewal of licence within one month after its expiry;

 

(i)        the insurer has requested,  in writing, the cancellation  of the registration;

 

(j)          the Commissioner  is entitled to take enforcement  action against the insurer or insurance intermediary  under section 98;

 

(k)         the insurer or insurance intermediary  fails to commence the business for which it was licensed within 6  months of the licence being issued or ceases to carry on the business for which it was licensed;  or

 

(1)       requested to do so by the insurer or insurance intermediary.

 

(3)        Before  suspending  or revoking  a licence  under subsection  (1), the Commissioner  shall give written notice to the insurer or insurance interme- diary stating -

 

(a)                    the grounds upon which the Commissioner  intends to revoke or suspend the licence; and

 

(b)        that unless the insurer or insurance  intermediary, by written notice filed with the Commissioner,  shows good reason why its licence should not be revoked or sus- pended, on a date not less than 14 days after the date of the notice.

 

(4)        Where the Commissioner revokes or suspends a licence, he shall send a written notice to an insurer or insurance intermediary  stating -

 

889

 

 

(i)         that the licence has been revoked or suspended;

and

 

(ii)       the grounds upon which and the date on which the licence has been revoked or suspended.

 

Effect of revocation or suspension  of insurer's or insurance intermediary's licence

 

19.        (1)        Where a licence of an insurer or insurance intermediary  is sus- pended or revoked, the insurer or insurance intermediary shall not, after the date of revocation  or suspension -

 

(a)       enter into a new contract of insurance or solicit new insurance business; or

 

(b)       renew or vary a contract of insurance entered into before the commencement  of this Act.

 

(2)        A suspension  or revocation  shall take effect on the date stipu- lated in the notice of suspension or revocation.

 

(3)        Where a licence is suspended or revoked, and an insurer remains under any liability in respect  of any insurance  policies,  the insurer  shall take such action as it considers necessary or as may be required by the Commissioner to ensure that reasonable provision  is made for that liability  and that adequate arrangements exist or will exist for payment of premiums and expenses on those policies.

 

(4)        Where a licence of an insurance broker is suspended or revoked, and the broker remains under any liability in respect of any premiums,  the in- surance broker shall take such action as it considers necessary or as may be re- quired by the Commissioner to ensure that reasonable provision has been or will be made for payment of such premiums to the insurer concerned and that ade- quate arrangements  exist or will exist for payment  of premiums to the insurer concerned.

 

Delivery of licence to Commissioner

 

 

20.        An insurer or insurance intermediary shall deliver its licence to the Com-

 

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missioner if -

 

(a)        the licence is suspended, revoked  or surrendered;  or

 

 

(b)         it is required by the Commissioner  to do so.

 

 

Review of revocation or refusal to register insurer

 

21.        The Commissioner  may -

 

(a)        review a licence which was revoked; or

 

(b)         register a licence that was refused, if satisfied that the circumstances  which warranted the revocation  or refusal no longer exist, and the insurer or insurance intermedi- ary has complied with any directives which may have been given by the Commissioner  to rectify non-compli-

ance.

 

PART  IV   -  CAPITALISATION,   SOLVENCY AND FINANCIAL RESOURCES

 

Capital requirements

 

 

22.        (1)        A person shall not be registered  or carry on any insurance busi- ness unless the person has and maintains, at all times and while carrying on such insurance business,  an unimpaired paid-up capital or assigned capital.

 

(2)        The Commissioner may, for the purposes of subsection (1), pre- scribe different amounts in respect of long-term  and short term insurance busi- ness.

 

(3)        Where the Commissioner,  having regard to the nature and ex- tent of the insurance business carried on by an insurer, considers it appropriate, the Commissioner  may direct the insurer  to increase  its capital  to an amount greater than the prescribed minimum capital and shall specify a reasonable time period for compliance  with the directive.

 

(4)        Where the capital of an insurer falls below the amount that is re-

 

891

 

 

quired under subsection  (1), the insurer shall notify the Commissioner  in writ- ing.

 

(5)        An insurer who contravenes  subsection (1) commits an offence and on conviction, in addition to a penalty set out under sections 117(1)(a), is li- able to have its licence suspended or revoked.

 

Shares to be fully paid for in cash

 

 

23.       (1)        Subject to subsection (2), every share of an insurer issued on or after the commencement  of this Act shall be fully paid for in cash.

 

(2)        The Commissioner may, on the application of an insurer, autho- rise the insurer to issue one or more shares otherwise than in accordance  with subsection (1).

 

Maintenance  of financially   sound condition

 

24.        (1)        An insurer  shall, at all times, maintain  its business  in a finan- cially sound condition by -

 

(a)        having assets;

 

(b)         providing for its liabilities;  and

 

 

(c)       generally conducting its business so as to be in a position to meet its liabilities.

 

(2)        If an insurer fails to comply with subsection (1), the insurer shall immediately  notify the Commissioner in writing.

 

(3)        Sections  22,25,26,27     and 28 shall not limit the generality  of this section.

 

Solvency margin

 

 

25.        (1)         For the purposes  of this Act, a reference  to approved assets in- cludes a reference to any property, security, item or interest of a person but does not include a reference  to -

 

892

 

 

(a)        an unsecured or, in the opinion of the Commissioner,  in adequately secured loan;

 

(b)                  an asset that is mortgaged or charged for the benefit of a person other than the insurer to the extent that it is so mortgaged;

 

(c)                 a loan to, debenture of, or share in any insurer who is re- lated to such a person;

 

(d)                 an unpaid premium that became due to the insurer more than three months previously  except in so far as that pre- mium is secured under automatic non-forfeiture  condi- tions against the surrender value of a life assurance policy;

 

(e)        a guarantee given to an insurer other than a bank guar- antee issued by a bank licensed under the Financial Institutions Act, 2012  or a guarantee given by a rein- surer in the course of reinsurance  transactions;

 

(f)          an intangible asset;

 

 

(g)        unsecured loans to intermediaries;

 

 

(h)        prepaid preliminary  and organisational  expenses;

(i)         such other assets as may be prescribed  by regulations. (2)        For the purposes of this Act, a reference  to approved liabilities

of an insurer means liabilities shown as current, contingent  and prospective  lia-

bilities in the accounts of an insurer and includes,  in the case of long term in- surance business, the liabilities in respect of the policies of long term insurance business.

 

(3)        For the purposes  of this Act, a reference  to approved liabilities does not include a reference to -

 

(a)        a liability in respect of a share capital;

 

893

 

 

(b)        such other liabilities as may be prescribed  by regula- tions.

 

(4)        An insurer shall ensure that it maintains a solvency margin and approved assets in accordance with this section and as the Commissioner  may, by regulations,  determine.

 

(5)        A solvency margin to be maintained  by an insurer shall be not less than the greater of -

 

(a)                 the solvency margin calculated in accordance with reg- ulations; or

 

(b)                  such solvency margin as the Commissioner  may direct under subsection (4).

 

(6)        Where  an insurer  requests  the Commissioner   to approve  the whole or part of an asset excluded in subsection  (1) as an approved asset, the Commissioner  may, by notice in writing given to the insurer, approve the asset or such part of the asset as the Commissioner may determine.

 

(7)        An insurer shall make adequate provision in its accounts for li- abilities in respect of unexpired risks, outstanding  and incurred claims, includ- ing provision for claims incurred but not reported, computed in accordance with a method approved by the Commissioner.

 

(8)        Where, having regard to the nature and extent of the insurance business  carried  on by an insurer, the Commissioner  considers  it appropriate, the Commissioner  may direct the insurer to maintain a larger solvency margin than that prescribed.

 

(9)        A directive issued under subsection (8) shall specify a period for compliance with the directive.

 

(10)      If the solvency margin of an insurer falls below the amount that it is required to maintain under subsection (4), the insurer shall immediately no- tify the Commissioner in writing.

 

(l l )      For the purposes of subsection (5), an insurer is deemed to be in- sol vent if the total value of its approved assets does not exceed the total amount

 

894

 

 

of its approved liabilities by at least the minimum margin of solvency that the in- surer is required to maintain under this section.

 

Reserves

 

26.        (1)         An insurer shall establish  and maintain  the following  reserves in respect of each class of insurance business  -

 

(a)        reserves for unexpired  risks;

 

 

(b)         reserves for outstanding  claims;

 

 

(c)        contingency reserves to cover fluctuations  in securities and variations in statistical estimates;

 

(d)        reserves for claims incurred but not reported;  and

 

 

(e)        any other reserves that the Commissioner  may prescribe to be established  and maintained  in respect of any class of insurance business.

 

(2)        An insurer shall maintain such reserves in respect of short-term or general insurance  and long-term  or life insurance  business  as the Commis- sioner may by regulations prescribe  and remember  sequentially.

 

Value of assets to be held in Lesotho  by short  term  insurer

 

 

27.       (1)        A short term insurer shall hold assets in Lesotho having such an aggregate value as may be prescribed by regulations.

 

(2)        A short term insurer shall hold assets in Lesotho having such an aggregate value of not less than a total amount as may be prescribed by the Com- missioner.

 

Value of assets to be held in Lesotho  by long-term   insurer

 

 

28.        (1)         A long term insurer shall hold assets in Lesotho having such an aggregate value as may be prescribed by the Commissioner.

 

(2)        The assets required in terms of subsection (1) shall, subject to the

 

895

 

 

prescribed limits of investment in particular kinds or categories of assets, be as- sets of one or more of the kinds prescribed by regulations.

 

Statement  of assets

 

 

29.        (1)        An insurer shall annually, within three months after the end of its fmancial year, submit to the Commissioner  a statement of the assets held by the insurer as at the end of that financial year.

 

(2)        A statement referred to in subsection (1) shall be prepared by the insurer concerned in such form as may be determined by the Commissioner.

 

Valuation of assets of short-term  and long-term insurer

 

 

30.        (1)         Subject to section 31(2) and  subsections (2) and (3) in the case of a short and long term insurers, the determination of the value of the assets of an insurer shall, for the purposes  of section 27 and of a statement of assets re- ferred to in section 29, be made by the insurer on such basis as the insurer con- siders the most reasonable and appropriate in any particular case, but, in the case of movable or immovable assets, such value shall not exceed the price that would be paid upon the sale of such assets between a willing buyer and willing seller as estimated by the insurer.

 

(2)       In determining the value of assets in terms of subsection (1) - (a)     the assets shall not include -

(i)         any amount representing  any payments made in advance in respect of expenses of administra- tion, organisation or business extension;

 

(ii)        the purchase price of any business, except the value of any property belonging to such business or any goodwill;

 

(iii)       any debt owing to an insurer;

 

 

(iv)      any amount representing  an outstanding premium, irrespective of whether or not it has been debited to an insurance broker or is a

 

896

 

 

deferred installment  of a premium;

 

 

(b)        the value of any outstanding  premium  or premiums  deb- ited to insurance brokers shall, subject to the provisions

of paragraph  (a)(iv), be shown at an amount which in the aggregate does not exceed the full amount of such pre- miums, reduced by -

 

(i)                 the amount or estimated  amount of any com- mission which the insurer owes or is likely to become liable for in connection  with such premiums;

 

(ii)        the amount or estimated  amount of the corre- sponding outstanding premiums  under any rein- surances of the policies  in question, less the cor- responding  commission  payable under those reinsurances,  as a liability in a statement of lia- bilities referred to in section 34;

 

(iii)       a reserve, in an amount deemed by the Commis- sioner to be adequate, but not less than seven am! a half per cent of the said full amount, to cover

the risk of loss arising from non-receipt  by the insurer of any such premium.

 

(3)        Where, in the opinion of the Commissioner,  a value determined in respect of an asset by an insurer is not a fair estimate, the value of such asset shall be the amount as determined by the Commissioner.

 

Assets not to be pledged or encumbered

 

 

31.        (1)        No person shall hold on behalf of an insurer,pledge,  hypothecate or otherwise encumber  an asset of an insurer, except with the prior written ap- proval of the Commissioner  and to the extent authorised by the Commissioner.

 

(2)        Where an asset of an insurer  is held, pledged,  hypothecated  or otherwise encumbered  as contemplated in subsection (1), the value of that asset shall, for the purposes  of this Act, be reduced  proportionately  to the extent to which it is so held, pledged, hypothecated  or otherwise  encumbered.

 

897

 

 

Liabilities  to be recorded  separately

 

 

32.         An insurer  shall identify  the liabilities  under  domestic  policies  in respect of  its long-term   insurance   business   in Lesotho   and  those  relating   to any  long- term  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 state- ment  of liabilities.

 

Certain  liabilities  not to be incurred  without  approval

 

 

33.         An insurer  shall  not, without  the prior  written  approval  of the Commis- sioner  -

 

(a)         borrow  money;  or

 

 

(b)         guarantee   to discharge   or bind  himself  or herself  as surety  for the discharge   of the debts  or other  obligations of any person,  except  in terms  of a guarantee   policy.

 

Statement   of liabilities

 

34.         (1)         An insurer  shall annually,  within  three months  after the end of its financial   year,  submit  to the Commissioner    a statement   of the liabilities   held  by

the insurer  as at the end  of that  financial   year  -

 

(a)               in a case  of short  term  insurer,  signed  by directors   and duly  certified   by its auditor  together   with  a written report  by that  auditor;  and

 

(b)         in a case  of long  term  insurer  signed  by directors  and duly  certified  by its auditor  and  actuary  together  with  a written  report  by that  auditor  and  by that actuary.

 

(2)         Notwithstanding    subsection   (1), an insurer  shall,  if so requested in writing  by the Commissioner,    submit  a statement   of its liabilities   on a day  to be specified   by the Commissioner.

 

(3)         The statement   referred  to in subsections   (1) and (2) shall  be pre- pared  by the insurer  in such  form  as may be determined   by the Commissioner.

 

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Calculation  of liabilities

 

 

35.        (1)         Subject to subsection (2), the liabilities of an insurer shall, for the purposes of a statement of liabilities referred  to in section 34, be calculated by the insurer and shall include -

 

(a)       the amount of its net liabilities under unmatured  domes- tic policies calculated in accordance with section 37; and

 

(b)        an amount, estimated by the insurer, in respect of -

 

 

(i)        claims under policies which had been intimated to the insurer or the agent of the insurer, but had not been paid by the insurer before the expiry of the  financial year; and

 

(ii)       income tax or any other tax which has not been finally assessed.

 

(2)        Where the amount estimated  by an insurer in respect of the lia- bilities referred to in paragraph (b)(ii)  is, in the opinion of the Commissioner, not a fair estimate,  the amount of such liabilities  shall be determined  by the Com- missioner.

 

Calculation of unmatured domestic policy liabilities in the case of short term insurance

 

36.        (1)         The liability of an insurer under unmatured domestic policies in a short-term  insurance business  on any particular  date shall be an amount cal- culated as the Commissioner  may prescribe.

 

(2)        The amount to be calculated  for the purposes  of subsection  (1) shall be the amount of the premium to which an insurer was entitled under each such policy, after deducting the amount of any refund of premium,  discount  or other allowance  made to the policyholder  in his or her capacity  as the policy- holder, but without making any deduction in respect of commission, brokerage or other remuneration  paid to an insurance broker or an agent of the insurer, re- duced by-

 

(a)        an amount equal to the premiums paid by the insurer in

 

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respect of any reinsurance  business;

 

 

(b)        an amount approved by the Commissioner  as represent- ing the expenses incurred by the insurer in conducting short term insurance business, but which amount shall not exceed 20 percent of the amount obtained after the deduction in terms of paragraph  (a);

 

(c)              such an amount as bearing the same ratio to the amount obtained after the deduction in terms of paragraph (b) as the expired part of the insurance period covered by such premium bears to the whole of the said period.

 

(3)        Notwithstanding  subsection 0), the Commissioner may, in writ- ing, authorise or direct an insurer to adopt, for the purposes of calculating its li- abilities under all unmatured domestic policies in any particular class or classes of short-term insurance business or part of such business, a different method of calculation which, in the opinion of the Commissioner,  will provide a more ac- curate calculation  of such liabilities,  and the insurer  shall thereupon  adopt no other method in calculating such liabilities without the prior written approval of the Commissioner.

 

Calculation of unmatured domestic policy liabilities in the case of long term insurance

 

37.        (1)        In calculating the liabilities of an insurer under unmatured  do- mestic policies of long-term insurance business, the insurer shall adopt any rea- sonable  valuation  basis  which  its actuary  considers,  according  to generally accepted actuarial standards and principles,  actuarially sound and which places a proper and adequate value on such liabilities having regard to the expected -

 

(a)       income from premiums payable to and investments made by the insurer;

 

(b)       expenses and benefits payable by the insurer in respect of the carrying on of his insurance business; and

 

(c)       rates of mortality and morbidity among the  various persons whose lives are insured under policies issued by the insurer.

 

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(2)        In the calculation of liabilities in terms of subsection (1) -

 

 

(a)        a policy shall not be treated as an asset; and

 

(b)        the capitalised value of any bonuses standing to the credit  of the owner of an unmatured  domestic policy on the date of calculation,  and the capitalised  value of any reduction of premiums  which has been granted as a bonus or which has been obtained by the surrender of a bonus or by the giving of any valuable consideration  or in any other way, shall be included in the liability of the insurer under such policy.

 

Distribution

 

 

38.        (1)        For the purposes of this section, "distribution",  in relation to dis- tribution by a company to a shareholder, means -

 

(a)       a direct or indirect transfer of money or property, other than the shares of the company, to or for the benefit of the shareholder;  or

 

(b)        the incurring of a debt to or for the benefit of a share- holder in relation to shares held by that shareholder and whether by means of a purchase  of property, the re- demption or other acquisition  of shares, a distribution of indebtedness  or by some other means.

 

(2)        An insurer shall not make a distribution  to a shareholder unless after the distribution -

 

(a)       its capital exceeds the capital that the insurer is required to maintain under section 22;

 

(b)        its solvency margin exceeds the solvency margin that the insurer is required to maintain under section 25;

 

(c)       it continues to meet the approved assets requirements specified in section 25(6); and

 

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(d)       its reserves equal or exceed the reserves that the insurer is required to maintain under section 26.

 

Prohibitions  relating to advances and loans to connected persons

 

39.        (1)        For the purposes of this section "connected persons",  in relation to an insurance means -

 

(a)        a firm, partnership,  syndicate,  association, company or other body of persons corporate or unincorporated  in which it or anyone  or more of its affiliates, insiders or principal shareholders is interested as principal share- holder, owner, director, officer, partner, manager, agent or member; and

 

(b)                  any persons related to the persons referred to in sub-- paragraphs  (a) and (b) as the Commissioner may deter- mine.

 

(2)        An insurer shall have in place policies approved by the board in respect of connected persons which -

 

(a)        clearly set out that -

 

 

(i)        the insurer will avoid transactions with con- nected persons where reasonable  alternative transactions are available;

 

(ii)       no transaction with connected persons may be entered into without the approval of the board and satisfaction of the directors that the criteria set out in paragraph  (b) has been satisfied.

 

(b)        establish the following criteria that will be met in cases where transactions with connected persons are being proposed -

 

(i)        the transaction is at a value that does not exceed market value;

 

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(ii)       the transaction has a benefit for the insurance company and the connected persons;

 

(iii)      the potential  exposure  of the insurer from the transaction  is not material relative to its equity base.

 

PART V - APPOINTMENT AND

RESPONSIBILITIES OF KEY EMPLOYEES

 

Appointment  of key employee

 

 

40.       (1)        No insurer  shall appoint  a key employee  without prior written approval of the Commissioner.

 

(2)        An approval under subsection  (1) may be granted on such con- ditions as the Commissioner  considers fit.

 

(3)        The Commissioner  shall not grant an approval under subsection (1) unless it is satisfied that the person  concerned is a fit and proper person to hold the proposed appointment.

 

Qualifications  of key employee

 

 

41.       (1)        A person shall not be appointed as a key employee of an insurer if the person -

 

 

(a)        has contravened  any law designed to protect members

of the public against financial loss due to dishonesty, in- competence or malpractice  by persons concerned in the provision  of insurance or other services or the manage- ment of companies  or against financial loss due to the conduct of discharged or undischarged  insolvents;

 

(b)         has been convicted of an offence involving fraud, dis- honesty or breach of trust;

 

(c)       has been found mentally incompetent  to manage his or her affairs and has not recovered  from such condition;

 

903

 

 

(d)        is, for more than two months, a delinquent without ade- quate cause as determined  by the Commissioner, with respect to any loan, extension of credit, guarantee or other obligation to that person by any licensed institu- tion for which that person is liable;

 

(e)        is under suspension or removal from office by order or directive of the Commissioner pursuant to this Act;

 

(f)         has engaged in any business practice appearing to the Commissioner  to be deceitful or oppressive, or other- wise improper, or which otherwise reflects discredit on his  method of conducting business;

 

(g)       has an employment record which led the Commissioner to believe that the person carried out an act of impropri- ety in the handling of the business  of his or her employer;

 

(h)       has engaged in or been associated with any other busi- ness practices or otherwise conducted himself or herself in such a way as to cast doubt on his or her competence and soundness of judgment;

 

(i)          is an unrehabilitated  insolvent; or

 

 

(j)                 in the opinion of the Commissioner, is not a fit and proper person to hold the office.

 

(2)        A person who is a key employee of an insurer shall immediately cease to hold office upon -

 

(a)        becoming insolvent;

 

 

(b)        being convicted of an offence involving fraud, dishon- esty or breach of trust;

 

(c)       being declared mentally incompetent in any official pro- ceeding under the laws of Lesotho or elsewhere; or

 

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(d)        being suspended or removed from office by order of the

Commissioner pursuant to this Act.

 

 

(3)        A person who bas been a key employee of, or directly or indi- rectly concerned in the management of an insurer, the licence of which bas been revoked, shall not, without the approval of the Commissioner, act or continue to act as a employee or indirectly concerned in the management of the insurer.

 

Obligations of key employee

 

 

42.        (1)        A key employee of an insurer, in exercising the powers and dis- charging the duties of his or her office shall -

 

(a)        be a fit and proper person to hold the particular position;

 

(b)         act honestly and in good faith to the best interests of the insurer; and

 

(c)              exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circum- stances.

 

(2)        In determining whether a person is a fit and proper person under subsection (1), regard shall be had to the probity, competence  and soundness of judgment of the person for fulfilling the responsibilities of that position, the dili- gence with which he or she is fulfilling or is likely to fulfill those responsibili- ties and whether the interests  of policyholders  or creditors  or potential policyholders  or creditors of insurers are or are likely to be jeopardised  by the person holding that position.

 

Conflict of interest

 

 

43.        (1)        A key employee of an insurer who -

 

 

(a)              is a party to a material loan, contract or transaction, or a proposed material loan, contract or transaction with the insurer; or

 

(b)         has a material interest in or a material relation to, any person who is a party to a material loan, contract or

 

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transaction, or a proposed material loan, contract or transaction with the insurer, shall disclose, in writing, to the insurer the nature and extent of the material interest or relation.

 

(2)        The disclosure required by subsection (1) shall be made by the key employee when the matter or proposed contract comes or ought reasonably to come to the attention of the key employee.

 

(3)        A general notice in writing to the board of directors by a key em- ployee, disclosing at the time that person assumes or is appointed to office and from time to time, but in no event less than annually, every material, commer- cial, financial,  agricultural,  industrial  or other business or family interest that such person has at the time, stating that the person is to be regarded as interested in any material contract between the insurer and any person named in the dis- closure, shall be a sufficient declaration  of material interest in relation to any such contract.

 

(4)        A key employee who has a material interest or a material relation within the scope of subsection (1) or (3) shall leave any meeting at which the matter is discussed, and shall refrain from voting on any matter related to such a matter which becomes the subject of attention by the board of directors of the insurer:

 

Provided that such an interest, if so disclosed, shall not disqualify the interested director for purposes of constituting a quorum.

 

(5)        For the purposes  of subsections  (1)  and (3); an interest, loan, contract or transaction  shall be material if it is material  with reference  to the wealth, business, or family interest of the person with the interest, and a person has material interest in any company of which tbe person is, directly or indi- rectly, a shareholder or equity holder with a ten percent or more interest in such company, or a key employee of that company.

 

(6)        Where a key employee fails to disclose a material conflict of in- terest in accordance with this section, the Commissioner  may, by written order, suspend the key employee from office for any period not exceeding one year.

 

906

 

 

Suspension  of key employee  or insurer

 

 

44.        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 op- portunity of being heard in their defence.

 

Termination of appointment  of key employee

 

 

45.        Where an insurer terminates the appointment  of a key employee, the in- surer shall, within 14 days of such termination,  submit a written notification  of the termination to the Commissioner.

 

False and misleading  statements

 

 

46.        Akey 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 ob- structs 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 autho- rised examiner appointed by the Commissioner,  commits an offence.

 

Responsibilities  of key employee

 

 

47.        A key employee shall have responsibility  for -

 

 

(a)        implementing  strategies and policies  approved by board of directors of the company of which he is an employee;

 

(b)         developing processes that identify, measure, monitor and control risk incurred by an insurer;

 

(c)        maintaining  an organisational  structure that depicts clear responsibilities,  authority and reporting relationships;

 

(d)        ensuring that delegated responsibilities  are effectively carried out;

 

907

 

 

(e)         setting  appropriate   internal  control  policies;   and

 

(f)         monitoring   the adequacy   and effectiveness   of an internal control  system .

 

 

• <

Responsibilities      of board   of directors

 

 

48.        (1)        A board  of directors   shall  include   in its activities   -

 

 

(a)        periodic   discussion   with  management   concerning   the effectiveness  of the internal  control  system;

 

(b)        a timely  review  of evaluations   of internal  controls  made by management,    internal  and external  auditors;

 

(c)        periodic   efforts  to ensure  that management   has promptly followed   up on recommendations     and concerns   expre- ssed  by auditors  or the Commissioner    on internal  control weaknesses;          and

 

(d)        a periodic   review  of the appropriateness    of the financial strategy   of an institution   and risk  limits.

 

(2)         A board  of directors  of an insurance  company   shall  manage  and supervise   the management    of the company   in accordance   with  this Act and  ap- plicable  international    best practices,   codes  and  standards.

 

PART VI - OBLIGATIONS OF

AND RESTRICTIONS ON INSURERS

 

Insurer    to carryon     insurance    business   only

 

 

49.         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.

 

Insurer    to carryon     insurance    business   in accordance     with  business   plan

 

 

50.         (1)        The  Commissioner    may, at any  time, request  an insurer  to file-

 

908

 

 

(a)       a business plan clearly stating the assumptions  underly- ing the plan, and an insurer shall carry on its business in accordance  with the most recent business plan submitted to and approved by the Commissioner;

 

(b)       an attestation by an auditor in respect of a short-term insurer or actuary in respect of a long-term insurer to the effect that in the opinion of the auditor or actuary the assumptions underlying  the plan are reasonable  and that the auditor or actuary is not aware of any reason why the plan cannot not be achieved.

 

(2)        An insurer may, at any time, submit an amended business plan together with an application to the Commissioner  for approvaL

 

(3)        On receipt of the application, the Commissioner  may require the insurer to provide it with such further information  or documentation  as he may require to assess the application.

 

(4)        The Commissioner  may refuse to approve an amended business plan or may approve it subject to such conditions  as it may consider appropri- ate.

 

Trading in derivatives

 

 

51.        An external insurer shall not, without the written approval of the Com- missioner,  invest  or trade in derivatives,  other than derivatives  which  are ap- proved assets.

 

Head office or registered office

 

 

52.        (1)        An insurer shall establish and maintain its head office or regis- tered office in Lesotho.

 

(2)        An insurer shall notify the Commissioner  of the address of its head office or of its registered  office.

 

(3)        If the address of the head office or the registered  office of an in- surer changes,  the insurer  shall notify  the Commissioner   of the new address within 14 days of the change.

 

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External insurer to appoint representative

 

 

53.       (1)        For the purposes of this section, "external insurer", means an in- surance company incorporated under the laws of any other country and the in- surer is regulated by an authorised supervisor of that other country.

 

(2)        An external insurer shall appoint, and at all times have, a repre- sentative approved by the Commissioner  who is authorised to act generally on behalf of the insurer and to accept service of any documents on behalf of the in- surer.

 

(3)        A representative. appointed by an external insurer under subsec- tion (1) shall be responsible for submitting to the Commissioner  any documents required to be submitted under this Act or regulations.

 

Authorisation  to open representative  office

 

 

54.        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.

 

Disposal or acquisition of significant  interest in an insurer

 

 

55.        (1)         A person who owns or holds a significant interest in an insurer shall not sell, transfer, charge or otherwise dispose of his or her interest in the in- surer, or any part of his or her interest,  without written approval of the Com- missioner.

 

(2)        A person shall not, whether directly or indirectly, acquire a sig- nificant interest in an insurer without written approval of the Commissioner.

 

 

 

 

sioner -

 

(3)        An insurer shall not, without written  approval of the Commis-

 

 

(a)                  cause, permit or acquire a right or an interest in a sale, transfer, charge or other disposition referred to in sub- section (1);

 

(b)         issue or allot any shares or cause, permit or acquire a

right or an interest in any other reorganisation  of its share

 

910

 

 

capital that results in -

 

 

(i)         a person acquiring a significant  interest in the in- surer; or

 

(ii)         a person who already owns or holds a significant interest in the insurer, increasing or decreasing the size of his or her interest.

 

(4)        An application to the Commissioner  for approval under subsec- tion (1), (2) or (3) shall be made, in writing, by the insurer.

 

(5)        The Commissioner shall not grant approval under subsection (1), (2) or (3) unless it is satisfied that following  the acquisition  of disposal-

 

(a)       the insurer will continue to meet the criteria for licen- sing specified in section  10; and

 

(b)        any person who will acquire a significant interest is a fit and proper person to have an interest in an insurer.

 

(6)        An approval under subsection  (1),  (2) or (3) may be granted by the Commissioner  on such terms and conditions  as he may consider fit.

 

Disposal or acquisition  of significant interest in external insurer

 

 

56.        An external insurer shall notify the Commissioner, within the prescribed period of time, if -

 

(a)                    a person who owns or holds a significant interest in the insurer sells, transfers, changes, or otherwise disposes of his or her interest in the insurer, or any part of his interest; or

 

(b)                     a person, whether directly or indirectly, acquires a sig- nificant interest in the insurer.

 

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Prohibition  on payment  of commission  to unlicensed  insurance intermediary

 

57.        Subject to any regulations made in relation to payment of commission, no insurer shall pay any commission to an insurance intermediary that is not li- censed under Part IX.

 

Internal control and culture

 

 

58.        A board of directors  and key employee  are responsible  for promoting high ethical and integrity standards, and establishing  a culture within an organ- isation that emphasises  and demonstrates  to all levels of personnel the impor- tance of internal controls and, to this effect shall, by administrative  guidelines, ensure that adequate and effective system of internal controls is established and maintained.

 

Essential elements  of sound internal control system

 

 

59.        An internal  control system of an insurer shall, among other things, in- clude, as a minimum -

 

(a)        risk recognition  and assessment;

 

 

(b)         control activities such as top level reviews, activity con- trols, physical controls, risk exposure, approvals and authorisation, verifications  and reconciliations;

(c)        appropriate segregation of duties and responsibilities; (d)        adequate and comprehensive  internal financial, opera-

tional and compliance data, as well as external market

information;

 

 

(e)       reliable management information  systems which shall be secure, monitored independently  and supported by adequate contingency  arrangements;

 

(f)         effective channels of communication  - upward, down- ward and across the organisation; and

 

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(g)        continuous monitoring  and evaluation  of the effective- ness of the internal control system.

 

Internal audit of control system

 

 

60.        An insurer shall establish an effective and comprehensive  internal audit of the internal control system carried out by operationally  independent,  appro- priately trained and competent staff as may be prescribed  by regulations.

 

Approval  of arrangements  of reinsurance  by Commissioner

 

61.        (1)        For the purposes of this section, "business  as an insurer" means -

 

 

(a)        in the case of a Lesotho licensed insurer, its entire busi- ness; and

(b)        in the case of an external insurer, its domestic business. (2)        An insurer shall make arrangements by way of treaty or faculta-

tive, approved by its board of directors in accordance  with regulations  for the

reinsurance  of liabilities in respect of risks insured by the insurer in the course of its business  as an insurer.

 

 

(3)        The Commissioner  may, by written notice, exempt reinsurance contracts  of a type specified in the notice from the requirements  for approval under subsection (2).

 

(4)        The insurer shall, subject to subsection  (2), submit a written se- lection criterion supporting the selected reinsurance  company  together with at- testation from the insurer that due diligence was undertaken in ensuring that the selected company is fmancially stable.

 

Reinsurance  statements and documents  to be filed

 

 

62.        (1)         An insurer shall, on or before such date each year as may be de- termined by the Commissioner, for that insurer, file with the Commissioner state- ments  setting  out such details  as to its reinsurance   arrangements   as may be prescribed.

 

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(2)        The statement filed under subsection (1) shall be accompanied by a copy of every reinsurance  agreement referred to in the statement.

 

Reinsurance  of risks outside Lesotho

 

63.        (1)        Subject to subsection (2), an insurer shall not enter into a contract of reinsurance,  as the reinsurer, with any person other than another insurer.

 

(2)        Subsection (1) does not apply to an insurer whose licence is re- stricted to reinsurance business.

 

Assessment of policies

 

64.        (1)        An insurer shall not have a new insurance policy in place unless the Commissioner  has given a written approval of the policy.

 

(2)        An insurer wishing to have a new policy shall submit the policy to the Commissioner  for assessment.

 

(3)         Where the provisions of a policy are, in the opinion of the Com- missioner contrary to the interests of the public, the Commissioner may require the policy to be amended or the product to be withdrawn from the market.

 

PART VII - ACCOUNTS AND AUDIT

 

 

Preparation  and submission  of fmancial statements, reports, returns etc.

 

 

65.        An insurer  or insurance  broker  shall prepare  financial  statements,  re- ports and annual return for each fmancial year that comply with the prescribed accounting standards which shall be submitted to the Commissioner in such form and manner as may be prescribed.

 

Appointment  of auditor

 

 

66.        (1)        An insurer  shall, subject to the approval of the Commissioner and regulations made in relation to the appointment, power, functions and duties of an auditor, appoint, and at all times have, an auditor for its business in Lesotho and shall notify the Commissioner  in writing within  14 days of such appoint- ment.

 

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Accounts    and  audit   provisions    of the  Companies    Act

 

67.        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 Compa- nies Act.

 

PART  VITI - APPOINTMENT     AND

RESPONSIBILITIES      OF ACTUARY Appointment      of actuary

68.        (1)        A long  term  insurer   shall,  subject  to the  written   approval   of the Commissioner    and regulations   made  in relation   to an actuary,  appoint,   and at all times  have,  an actuary  for the purposes   of this Act.

 

(2)        The  Commissioner     shall  not  approve   the  appointment    of an ac- tuary  under   subsection   (1) unless  he  is satisfied   that  the  individual    concerned has  sufficient   experience    and  is competent    to act  as actuary   of a long-term   in- surer.

 

(3)        A long-term   insurer  shall,  within   14 days  of- (a)            the appointment    of his  actuary;  or

(b)        a person   ceasing  to be his  actuary,

 

 

submit  a notice  to that  effect,  in writing,   to the Commissioner.

 

 

(4)        Where  for any reason,  a person  ceases  to be an actuary  of a long- term insurer,  the long-term   insurer  shall  not be in breach  of subsection   (1), in ap- pointing   another   qualified   actuary   within   6 weeks   of the  date  that  person   who was previously    appointed   actuary  ceases  to hold  that  appointment.

 

PART  IX - REGISTRATION

OF INSURANCE    INTERMEDIARY Categories    of insurance    intermediaries

69.         A licence  of an insurance   intermediary    shall  be issued  in one of the fol-

 

 

 

 

 

 

lowing categories -

 

 

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(a)

 

insurance

 

broker;

 

 

(b) (c) (d)

(e)

 

insurance insurance insurance

insurance

 

agent;

 

 

loss adjuster;

loss assessor; or risk consultant.

 

 

Prohibition  on unlicensed  business as insurance  intermediary

 

 

70.        (1)        No person shall, after the expiry of three months from the com- mencement  of this Act, carry on business as, or hold himself out as carrying on business as, an insurance  intermediary in or from Lesotho unless that person -

 

(a)       is registered to carry a business  in the category set out in section 69 and in accordance  with this Act; or

 

(b)         has not been suspended under section 80.

 

 

(2)        For the purposes of subsection (1), but without limiting that sub- section,  a person  carries  on business  as an insurance  intermediary  in Lesotho if -

 

 

(a)        he or she for such purposes occupies premises in

Lesotho; or

 

 

(b)                in a case of an insurance broker, the applicant is a  com- pany incorporated under the Companies Act 2011.

 

(3)        Regulations may exempt from the application of this section, ei- ther generally or in respect of such activities as may be specified -

 

(a)        a person whose business  as an insurance intermediary  is incidental to some other business and is confined to the insurance of goods or services sold by that person;

 

916

 

 

(b)                  the sale of a policy of insurance  as part of a contract to provide goods or services;

 

(c)        such' other activities as may be prescribed.

 

 

Registration  of existing insurance intermediary

 

 

71.        (1)        An existing insurance intermediary registered to carry on insur- ance business  in Lesotho  under the Insurance  Act,  1976 shall, on the date of commencement  of this Act, be deemed to have been registered under this Act.

 

(2)        Subject  to subsection  (1), an existing  insurance  intermediary deemed to have been registered under this Act shall, upon renewal of its licence, be registered in accordance with the provisions  of this Act.

 

Registration of new insurance intermediary

 

72.        (1)        An application for a licence as an insurance intermediary may be made in writing to the Commissioner  and shall -

 

(a)       state the category of licence for which application is made;

 

(b)       where the application is for a licence to act as an insur- ance agent or an insurance broker, state the type and the class or classes of business in respect of which the

applicant wishes to be authorised.

 

(2)        An application for a licence to act as an insurance agent shall be supported by a letter from the insurer with which the applicant is or will be con-

tracted.

 

(3)        The Commissioner  may make such amendments to an applica- tion as it considers necessary to ensure that it complies with the requirements of this Act.

 

Registration  requirements for insurance intermediary

 

 

73.       (1)        Subject to section 74, the Commissioner  may issue a licence to an applicant under section 72, if satisfied that -

 

917

 

 

(a)          in the case  of an insurance   broker,   the applicant-

 

 

(i)          is a company   registered   under  the  Companies

Act;

(ii)        has  an acceptable   and properly   managed   office in Lesotho;

 

(iii)       has  key  employees   who  handle   the day-to-day management        of the company   resident   in Lesotho;

 

(iv)                             has complied   with  all capital  and  financial requirements    including   bank  deposits   under   this Act;

 

(v)                          complied   with  the  qualifications     prescribed   by regulations  for  a key  employee   of a broker;

 

(vi)       has  ensured  that  the relevant   trust  accounts   will be operated;

 

(vii)      has  submitted   a copy  of an agreement   between the insurance   broker   and insurer  to solicit  busi- ness  on behalf  of such  insurer;

 

(b)        a key  employee   of the insurance   intermediary    is a fit   and proper  person   under  the  Insolvency   Proclamation;

 

(c)         the  applicant   intends  to carry  on insurance   business,   if issued  with  a licence  as an insurance   intermediary    in Lesotho;

 

(d)        the  applicant   satisfies  the requirements    of this Act  in respect   of the application   and will,  upon  issuance   of the licence,   be in compliance    with  this Act,  regulations,    the code  and rules;

 

(e)         the  organisation,    management    and financial   resources   of the  applicant   are adequate   for  an insurance   intermediary

in the relevant   category;

 

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(f)          the name of the applicant does not suggest that the applicant is carrying on insurance business as an insur- ance intermediary  in a different category to that which he or she is applying;

 

(g)        the issuing of the licence is not against public interest;

and

 

 

(h)        the applicant -

 

(i)                   is not seeking to be registered under a name identical to the name of any other person regis- tered in terms of this Act or a name so closely resembling the name of any such person as to be mistaken for it;

 

(ii)        is not an unrehabilitated  insolvent;

 

 

(iii)      has not been convicted by any court of law of any offence Involving dishonesty, or of an offence in terms of this Act, for which the appli- cant has been imprisoned without the option of

a fine;

 

 

(iv)      has, in the case of an application for registration as an insurance broker, not entered into an agree- ment relating to the preferential  offer of long- term insurance business with any other person carrying on long-term insurance business so as

to impair his or her impartiality in operating long-term insurance business.

 

(2)        Subject to the provisions  of subsection  (1),  the Commissioner shall, after having satisfied himself as contemplated in subsection (4), register the insurance intermediary to carry on insurance business under the category in re- spect of which registration is required.

 

 

 

(3)        Upon registration of an applicant in terms of subsection (2), the

Commissioner shall issue to the applicant a licence in a form determined by the

 

919

 

 

Commissioner.

 

 

(4)        The Commissioner shall not issue a licence to an applicant under subsection  (2) if he is of the opinion that a director or key employee of the ap- plicant is not a fit and proper person to be concerned with the management of an insurance intermediary.

 

(5)        A licence issued under subsection (2) shall be in writing and shall specify -

 

(a)        the category in respect of which the licence is issued;

 

(b)         where the category of the licence is insurance  agent or insurance broker, the class or classes of insurance busi- ness in respect of which the licencee is authorised as an insurance intermediary;  and

 

(c)       where the category of the licence is insurance  agent, the insurer by which the insurance agent is or will  be ap- pointed.

 

Restrictions  on persons who may be licensed

 

 

74. pany.

 

(1)        A licence for an insurance broker shall only be granted to a com-

 

 

(2)        A director or employee of a company holding a licence as an in- surance broker and a person holding a significant interest in an insurance broker shall not be granted a licence as an insurance intermediary.

 

(3)        A director or employee of an insurer and a person holding a significant interest in an insurer shall not be granted a licence as an insurance broker and shall not be a director or employee of a person holding  a licence as an insurance broker.

 

(4)        A person holding  a licence as an insurance  agent shall not hold a licence as an insurance broker, risk consultant,  insurance loss adjuster or in- surance loss assessor.

 

(5)        A person holding a licence as an insurance broker shall not hold

 

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a licence as an insurance agent.

 

 

(6)        A person holding a licence as an insurance  loss adjuster or in- surance loss assessor shall not hold a licence  as an insurance  broker or an in- surance agent.

 

(7)         A person holding a licence as a risk consultant shall not hold a licence as an insurance  broker, insurance  agent, insurance  loss adjuster or in- surance loss assessor.

 

Status of personnel of insurance broker

 

 

75.        An  insurance  broker  may not employ  as his key  employee,  a person who -

 

(a)       has been adjudged an unrehabilitated  insolvent in any country;

 

(b)         has made an assignment to or arrangement or composi- tion with creditors which has not been rescinded  or set aside;

 

(c)       has been convicted by any court in any country of an of- fence involving fraud or dishonesty;  or

 

(d)       is in the opinion of the Commissioner  an unfit person to hold the office.

 

Maintenance  of professional indemnity policy

 

 

76.        (1)        A person  shall not be registered  as an insurance broker unless that person has insured himself or herself against any liability referred to under subsection (2).

 

(2)        A broker is liable for his acts or omissions  and for the acts or omissions  of his employees  in transacting  insurance  business,  and shall have and maintain  a professional  indemnity insurance  policy of such an amount  as the Commissioner  may prescribe.

 

(3)        A policy  in respect  of professional   indemnity  insurance  con-

 

921

 

 

templated in subsection (2) shall be issued by an insurer in Lesotho.

 

 

Maintenance  of deposits

 

 

77.       A person shall not be registered  as an insurance broker unless that per- son has deposited with a bank in Lesotho such an amount of money and subject to such conditions  as the Commissioner  may prescribe.

 

Conduct of insurance business  by insurance intermediaries

 

 

78 .       (1)        All insurance brokerage business or services required by Lesotho residents  or Lesotho  resident companies  shall, within three months of coming into force of this Act, be transacted  or handled by insurance  brokers registered in Lesotho under this Act.

 

(2)        A special  broker  may place  business  with  an insurer  outside Lesotho, if the special broker has evidence that the required coverage is not avail- able in Lesotho,  and shall seek a written  authority to do so from the Commis- sioner.

 

(3)        The Commissioner  shall before  granting a special broker  per- mission to place business  with an insurer  outside Lesotho  satisfy itself of the unavailability  of that class of business  in the local market  by seeking  written submissions from insurers registered  in Lesotho.

 

(4)        The special broker in placing business outside Lesotho shall ob- tain an approval signed by the insured stating that the insured understands  that the placement  is with an unlicensed foreigner and not protected under this Act.

 

(5)        The Commissioner-

 

 

(a)        shall issue guidelines in respect of fair treatment of  a client and policyholder by a licensed intermediary;

 

(b)        may prescribe conduct that constitutes a misconduct  on the part of a licensed intermediary  for the purposes of this section.

 

(6)        A licensed intermediary  shall-

 

-----

 

 

 

 

922

 

 

(a)       hold, in strict confidence, all information  concerning the business affairs of his clients acquired in the course of their professional  relationship  and shall not divulge the information unless authorised by the client or required

by law to do so, or it is necessary in order to arrange for

the insurance required by the client;

 

 

(b)         not stipulate, charge or accept any fee the basis of which is not fully disclosed prior to the service being rendered or which so disproportionate  to the service provided as

to be reasonably excessive;

 

 

(c)        maintain accounts and keep financial records in respect

of the insurance business for a period of, at least, 2 years after the period to which those accounts and records relate.

 

(d)        comply with such other specific accounting, financial and records requirements  as may be issued by the Com- missioner;

 

(e)        produce its licence when so required by the Commis- sioner or any other person authorised by it.

 

(7)        A licensed intermediary who engages in a business or occupation other than the intermediary business shall not allow the other business interest to jeopardise the integrity, independence  or competence  of the intermediary.

 

Provisions  of insurer licence applicable to intermediary  licence

 

 

79.        The provisions of sections 9(1) and (5),10,12,13,14,15,20       and 21 ap- plicable to an insurer relating to the following -

 

(a)        conditions of a licence;

 

 

(b)        variation of conditions of a licence;

 

 

(c)        publication  of issue, suspension or revocation of a licence;

 

923

 

 

(d)        display of a licence; (e)         validity of a licence; (f)           renewal of a licence;

(g)         review of revocation  or refusal to register insurer; or

 

 

(h)        delivery of a licence to the Commissioner,

 

 

shall apply with such modifications,  where necessary, to an insurance intermediary  licence.

 

Revocation  of registration  of insurance  intermediary

 

 

80. ary -

 

(1)        If the Commissioner  is satisfied  that  an insurance  intermedi-

 

 

 

(a)                   does no longer satisfy one or more of the requirements, for registration  specified in section 73(1);  or

 

(b)        has in the case of an insurance  agent or insurance broker, in his or her capacity  as an insurance  agent or insurance broker made a material misrepresentation  to members of the public in connection with the entering into of any policy;

 

(c)        has failed to comply with a condition  subject to which he has been registered  as an insurance agent or an insurance broker; or

 

(d)        contravened  or failed to comply with a provision  of this

Act,

 

 

the Commissioner  may, by written notice to the insurance intermediary, inform the insurance  intermediary that the Commissioner  intends to re- voke the licence of the insurance intermediary  and in such notice state the reasons for such intended action.

 

(2)        An insurance intermediary may, within 30 days from the date of

 

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receipt of the notice referred to in subsection (1), make written representations to the Commissioner.

 

(3)        After consideration  of the representations  referred to in subsec- tion (2) or, if no such representations have been made, upon the expiry of the pe- riod mentioned in that subsection, the Commissioner may, despite the provisions of subsection (4) -

 

(a)       if the Commissioner  is satisfied that it is just and equi- table to do so in the particular case, by written notice to the insurance intermediary,  withdraw the notice referred to in subsection (1); or

 

(b)        by written notice to the insurance intermediary,

 

 

revoke the licence of the insurance intermediary  with effect from a date specified in that notice.

 

(4)        Subject to the provisions  of subsection  (5), the Commissioner may, at the written request of an insurance intermediary, a liquidator or trustee of the insurance intermediary, revoke the licence of an insurance intermediary.

 

(5)        The Commissioner shall not revoke a licence of an insurance in- termediary  under subsection  (4) unless the Commissioner  is satisfied that the insurance intermediary  has made proper arrangements  for ensuring that its lia- bilities relating to the business in respect of which revocation  of the licence is required, will be met.

 

Surrender of licence

 

 

81.        (1)         An insurance intermediary  may apply to the Commissioner,  in writing, to surrender licence.

 

(2)        The Commissioner  may refuse an application  under subsection (1) if the insurance intermediary is in breach of this Act, regulations, the code or rules or if he considers that for any other reason, the licence should not be sur- rendered.

 

(3)        Where  the Commissioner  approves  an application  under sub- section (1), he shall issue a notice of approval to the insurance intermediary and

 

925

 

 

the surrender shall take effect from such date as may be specified by the Com- missioner in the notice.

 

(4)        If the Commissioner refuses to approve a surrender, he shall no- tify the insurance  intermediary, in writing, of his refusal, stating the reasons for such refusal.

 

Maintenance  of capital

 

 

82.        (1)        A company holding  a licence  as an insurance  broker  shall en- sure that its capital is maintained in such an amount as may be prescribed by the Commissioner.

 

(2)        If a capital of an insurance broker falls below the amount that it is required to maintain under subsection (1), it shall immediately notify the Com- missioner in writing.

 

(3)        The Commissioner  may, by notice in writing, require an insur- ance broker to deposit the balance of the capital either in money or in prescribed securities  or security  in a value prescribed  by the Commissioner,  within such time as the Commissioner  may consider reasonable.

 

Accounts and audit

 

 

83.       The provisions  of Part V1I relating to accounts of an audit shall apply with modifications,  where necessary, to a licensed insurance intermediary.

 

Collection  of premiums  by licensed insurance  intermediary

 

 

84.        (1)        An insurance intermediary  shall not receive, hold or in any way deal with a premium payable under an insurance policy entered into or to be en- tered into with an insurer unless -

 

(a)        the insurance intermediary  is authorised by the insurer concerned to receive, hold or deal with the premium; and

 

(b)         the insurance intermediary  receives, holds or deals with the premium in accordance with the regulations.

 

(2)        Notwithstanding  subsection (1), no insurance agent shall collect

 

926

 

 

a premium from a policyholder.

 

 

(3)        Where a licensed intermediary  receives a premium under para- graphs (a) and (b), the intermediary shall follow the procedure for receipt of pre- miums set out in the regulations.

 

Commission  to insurance   intermediary

 

 

85.       A company or an individual not a party to any contract of insurance ex- cept 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.

 

Merger,  sale, transfer  and  takeover  of insurance   intermediary

 

86.        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.

 

 

Liquidation   and  winding  up of insurance   intermediary

 

87.        The provisions of Part XIII relating to liquidation and winding up of an insurer shall apply, with modifications,  where necessary, to an insurance inter- mediary.

 

PART X - SUPERVISION OF INSURER AND INSURANCE INTERMEDIARY

 

Interpretation

 

88.        In this Part -

 

"inspection"  means an inspection of a relevant person undertaken pur- suant to section 89;

 

"foreign regulatory authority" means an authority in a jurisdiction  out- side Lesotho which exercises functions corresponding  or similar to those exercised by the Commissioner;

 

"relevant person" means -

 

927

 

 

(a)        a licencee;

 

 

(b)         a former licencee; and

 

(c)             a subsidiary or holding company  of a licencee or a for- mer licencee;  and

 

(d)        a director and employee of a licensee or former licensee.

 

Inspection

 

89.        (1)         The Commissioner may, at any time and for the purposes ofpru- dential supervision  of relevant persons, inspect -

 

(a)        any premises, business and affairs, including the proce- dures, systems and controls, of a person, whether in or outside Lesotho;

 

(b)         the assets, including  cash, belonging  to or in the posses- sion or control of a relevant person; and

 

(c)        make copies of documents, including  accounting

records, belonging to or in the possession  or control of a relevant person.

 

(2)        The Commissioner  shall, from time to time, appoint examiners to inspect, with or without any prior notice, the books or other documents,  ac- counts and transactions  of a relevant person and of any office outside Lesotho of an insurer.

 

(3)        An inspection shall be conducted in respect of a relevant person in order to determine that the person is in a sound financial  condition  and that the requirements  of this Act have been complied with in the administration of his or her affairs.

 

(4)        For the purpose of determining the financial conditions of a rel- evant person and its compliance  with this Act in the course of an inspection un- dertaken pursuant to subsection (1), the Commissioner may cause an inspection to be made of any of affiliates of the relevant person in Lesotho to the same ex- tent that an inspection  shall be made of the relevant person.

 

928

 

 

(5)        The  Commissioner  shall  also cause  such  an inspection  to be made under subsection (1) where an application containing such evidence as the Commissioner may consider necessary to justify an inspection is made by one- fifth of the total number of policyholders  or creditors, or by any number of pol- icyholders  or creditors  holding  not less than one-third  of the liabilities  to the public in Lesotho of the relevant person.

 

(6)        When undertaking  an inspection,  the Commissioner  may have regard to any matters which are relevant to the prudential  supervision of insur- ers and insurance intermediaries  including -

 

(a)        verifying the capital and deposits, and in the case of an insurer, the solvency margin and reserves of a relevant person;

 

(b)        satisfying itself that the relevant person is in compliance with this Act, regulations, the Code and the Rules, any conditions to which his or her licence is subject and di- rectives that the Commissioner  may have issued to the relevant person; and

 

(c)        satisfying himself that the relevant person has adequate procedures in place to prevent him from being used for the purposes of money laundering  and for processing of terrorist funds.

 

(7)        The Commissioner may give reasonable notice to a relevant per- son of its intention to exercise its powers under subsection (1).

 

(8)        Subject to section 131, the Commissioner may employ such suit- ably qualified and experienced persons to assist it with an inspection as it con- siders appropriate.

 

(9)        In undertaking  an inspection,  the Commissioner  shall exercise reasonable care to avoid hindrance to the day to day activities of a relevant per- son.

 

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Duties of relevant persons, directors  and employees  in relation to inspection

 

90.        (1)        Where the Commissioner is undertaking an inspection in relation to a relevant person, the relevant person concerned shall -

 

(a)       give the Commissioner  access to its premises  and to all assets that the Commissioner,  in his opinion, needs access to for the purposes  of the inspection;

 

(b)         give the Commissioner  access to all documents,  includ- ing accounting records,  and produce to the Commis- sioner such documents  as the Commissioner  may requITe;

 

(c)        provide the Commissioner,  with all information  and ex- planations that the Commissioner  may require.

 

(2)        Where  documents  required  by the Commissioner  for the pur- poses of an inspection are held by a person other than a relevant person, the rel- evant person shall ensure that that other person produces those documents to the Commissioner  and provides the Commissioner  with such information  and ex- planation  as the Commissioner  may require.

 

(3)        When  undertaking   an inspection,  the  Commissioner   may, by written notice, require any director or employee of the relevant person, actuary or auditor to provide it with such information  and explanation  as the Commis- sioner may require.

 

(4)        A person  who fails to give access or furnish information  when directed  to do so under this section commits  an 'offence, and is liable, on con- viction, to a penalty set out in section  115.

 

(5)        A relevant  person who contravenes  subsection  (1) commits  an offence and is liable on conviction to a penalty set out in section 115.

 

Report   on inspection

 

91.        (1)        The Commissioner  shall, upon completion of an inspection, for- ward a report to a relevant person concerned setting out a summary of his find-

 

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ings.

 

(2)        The report issued under subsection  (1) -

 

 

(a)       may contain such recommendations  to a relevant person concerning the conduct of his or her business, systems, procedures  or controls or concerning such other matters as the Commissioner  may consider appropriate; and

 

(b)       shall specify whether or not the Commissioner requires a response from the relevant person concerning the re- port and, if the Commissioner  does require a response, he may indicate particular  aspects of the report or par- ticular recommendations  in respect of which a response is required.

 

(3)        Where the Commissioner  specifies in his report that he requires a response to the report, the relevant person concerned shall provide a response to the Commissioner within 14 days of receiving the report, or within such longer period as may be specified in the report.

 

Power of Commissioner  to gather information

 

 

92.        (1)        Subject to section 94, where a relevant person is required by the Commissioner for the performance of the functions of the relevant person under this Act or any other law, or on the written request of a foreign regulatory au- thority, the Commissioner may, by notice in writing given to a person specified in subsection (2), require the person-

 

(a)       to provide specified information  of a specified descrip- tion; or

 

(b)        to produce specified documents or documents of a spec- ified description.

 

(2)       A notice under subsection (1) - (a) may be issued to-

(i)          a relevant person;

 

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(ii)        a person connected with a relevant person;

 

 

(iii)                  a person carrying on insurance business  or the business of an insurance intermediary;  or

 

(iv)                  a person reasonably  believed to have the infor- mation or documentation  to which the notice re- lates; and

 

(b)         shall specify the place where, and the period within which the information  or documents  shall be provided or produced.

 

(3)        The Commissioner  may require -

 

 

(a)                   any information provided  under this section to be pro- vided in such form as the Commissioner  may require;

 

(b)                    any information provided  or documents produced under this section to be verified or authenticated in such man- ner as he may reasonably require; and

 

(c)       the person to whom the notice is issued, or any person who is or has been a director, auditor or actuary of that person, to provide such explanation relating to the inf- ormation provided  or the documents produced  as the Commissioner  may require.

 

(5)        The Commissioner may take copies or extracts of any documents produced under this section.

 

(6)        Where  a person  claims  a lien  on a document,  its production under this section is without prejudice to the lien.

 

Examination  under oath

 

 

93.        (1)        Where, in connection  with a directive  given under section 92, the Commissioner  considers  it necessary  to examine  a person under oath, the Commissioner  may apply to court to have that person  examined  by the court and to have the results of that inspection transmitted  to the Commissioner.

 

932

 

 

(2)        The Court may, on an application under subsection (1), order an examination of a person under oath on such terms and conditions as it considers fit.

 

Provision of assistance to foreign regulatory authority

 

 

94.        (1)        Where a foreign regulatory authority requests the Commissioner in writing to provide it with assistance in connection with the exercise of its reg- ulatory functions, the Commissioner may disclose information,  or provide doc- umentation,  in its possession to the foreign regulatory  authority in accordance with this section.

 

(2)        The Commissioner  shall not -

 

 

(a)       issue a notice under section 92 on the request of a foreign regulatory authority; or

 

(b)         disclose information  or provide documentation  to a for- eign regulatory authority under subsection (1),

 

unless the Commissioner is satisfied that the information  or documen- tation to which the request relates is reasonably required by the foreign regulatory authority for the purposes  of its regulatory functions.

 

(3)        In deciding whether or not to issue a notice under section 92 on the request of a foreign regulatory authority or to disclose information or provide documentation  to a foreign regulatory authority under subsection (1), the Com- missioner may take into account, in particular  -

 

(a)                whether corresponding  assistance would be given to the Commissioner in the country or territory of the foreign regulatory authority concerned;

 

(b)                whether the request relates to the breach of law, or other requirement,  which has no close parallel in Lesotho or involves the assertion of a jurisdiction  not recognised by Lesotho;

 

(c)        the seriousness of the case and its importance to persons

in Lesotho; and

 

933

 

 

(d)       whether it is otherwise appropriate in the public interest to provide the assistance sought.

 

(4)        For the purposes of subsection (3)(a), the Commissioner may re- quire the foreign regulatory  authority making the request to give a written un- dertaking,   in  such   form   as  the  Commissioner    may   require,   to  provide corresponding  assistance to the Commissioner.

 

(5)        Where a foreign regulatory  authority fails to comply with a re- quirement of the Commissioner  made under subsection  (4), the Commissioner may refuse to provide the assistance sought by the foreign regulatory authority.

 

(6)        The Commissioner may decide that he will not, on the request of a foreign regulatory authority, exercise its powers under section 92 or subsection (1) unless -

 

(a)       he is satisfied that any information  provided to the for- eign regulatory authority will not be used in any crimi- nal proceedings  against the person furnishing it, other than proceedings  for an offence under this section or for an offence of perjury or any like offence; and

 

(b)        the foreign regulatory  authority undertakes to make such contribution  towards the cost of exercising its powers as the Commissioner  considers appropriate.

 

(7)        The Commissioner  shall not exercise his powers under subsec- tion (1) unless he is satisfied that the information  or documentation  provided to a foreign regulatory  authority will be subject to safeguards equivalent  to those contained in this Act.

 

Search warrant

95.       (1)         In this section, "premises"  includes a vehicle, vessel or aircraft. (2)  A Magistrate may issue a search warrant under this section if he

is satisfied that information  on oath or affirmation given on behalf of the Com- missioner  that there  are reasonable  grounds  for believing  that the conditions specified in subsection (3) exist.

 

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(3)        The conditions referred to in subsection  (2) are -

 

(a)       that a person has failed to comply with a notice of the Commissioner  issued under section 92(1) within the time period specified in the notice and that on the prem- ises specified in the warrant -

 

 

(i)

there are documents that have been required to be produced,  or

 

(ii)

 

there is information  that has been required to be provided;  or

 

(b)

 

that -

 

 

 

(i)

 

the notice could be issued by the Commissioner against a person;

 

 

(ii)

 

there are documents, or there is information, on the premises  specified in the warrant in respect

 

 

of which the notice could be issued; and

 

 

(iii)

 

if the notice was to be issued, it would not be

 

 

complied with or the documents or information

 

 

to which the notice related would be removed, tampered with or destroyed; or

 

(c)

 

that -

 

 

 

(i)

 

a relevant offence has been, or is being, com- mitted by a person;

 

 

(ii)

 

there are documents,  or there is information, on the premises specified in the warrant that evi-

 

 

dence the commission of the offence; and

 

 

(iii)

 

if the notice was to be issued, it would not be

 

 

complied with or the documents or information to which the notice related would be removed,

 

 

tampered with or destroyed.

 

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(4)        A warrant issued under this section shall authorise a named rep- resentative  of the Commissioner,  together  with a police  officer and any other person named in the warrant -

 

(a)        to enter the premises  specified in the warrant at any time within one week from the date of the warrant;

 

(b)        to search the premises  and take possession  of any docu- ments or information  appearing to be documents  or information  of a type in respect of which the warrant was issued or to take, in relation to such documents  or infor- mation, any other steps which appear to be necessary for preserving or preventing  interference  with them;

 

(c)        to take copies of, or extracts from, any documents or information  appearing to be documents  or information of a type in respect of which the warrant was issued;

 

(d)                  to require any person on the premises to provide an ex- planation of any document or information  appearing to be documents or information  of a type in respect of

which the warrant was issued or to state where such doc- uments or information  may be found; and

 

(e)        to use such force as may be reasonably  necessary.

 

 

(4)        Unless the court, on the application  of the Commissioner,  oth- erwise orders, any document of which possession is taken under this section may be retained -

 

(a)        for a period of three months; or

 

 

(b)       if, within that period proceedings  for a criminal offence, to which the document is relevant, are commenced against any person, until the conclusion  of those pro-

ceedings.

 

Appointment of inspector to conduct investigation

 

96.        (1)        Where the Commissioner  is entitled to take enforcement  action

 

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against a relevant person under section 98, he may appoint one or more compe- tent persons as inspectors to conduct an investigation  on his behalf.

 

(2)        The matter  investigated  by an inspector  appointed  under  sub- section (1) may include one or more of the following-

 

(a)       the nature, conduct or state of the business of the relevant person;

 

(b)         a particular aspect of the business of the relevant person;

and

 

(c)        the ownership or control of the relevant person.

 

 

(3)        An  inspector  appointed under subsection  (1) may, if he or she considers it necessary for the purposes of his investigation,  also investigate the business of any person who is, or at any relevant time has been a member of the group of which the person under investigation  is a member.

 

(4)        The appointment  of an inspector  shall be made on such terms and conditions as the Commissioner  may consider appropriate.

 

Order of Court

 

97.        (1)        If a person fails to comply with a notice issued by the Commis- sioner under section 92, the Commissioner  may apply to the Court for an order requiring the person to comply with the notice.

 

(2)        On an application by the Commissioner  under subsection  (1),

the Court may order the person to whom the notice was issued -

 

(a)        to comply with the notice; or

 

(b)       to comply with such part of the notice as it considers appropriate.

 

(3)        A person who, without reasonable  excuse, fails to comply with an order of the Court made under subsection (2) commits an offence.

 

(4)        A person who purported non-compliance  with a notice issued by

 

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the Commissioner  under section 92 or an order of the Court under subsection

(2) -

 

 

(a)       provides information  which he knows to be false or mis- leading in a material respect; or

 

(b)        recklessly provides information  which is false or mis- leading in a material respect,

 

commits an offence.

 

 

(5)        A person who, for the purpose of obstructing or frustrating com- pliance with a notice issued by the Commissioner  under section 92 or compli- ance with an order of the Court under subsection (2) destroys, mutilates, defaces, hides or removes  a document commits an offence.

 

PART XI - ENFORCEMENT PROVISIONS

 

Enforcement Action

 

98.        (1)        The Commissioner  may take enforcement  action against an in- surer or insurance intermediary  if -

 

(a)        in the opinion of the Commissioner, the insurer or in- surance intermediary  -

 

(i)        has contravened this Act, regulations, the code or rules;

 

(ii)                has contravened .any law, the Guidelines or the Code Relating to Money Laundering  and the Financing of Terrorism;

 

(iii)      is carrying on business in a manner detrimental to the public interest or to the interests of any of its customers or creditors or, in the case of an in- surance agent, the insurer on whose behalf he acts; or

 

(iv)       is or is likely to become insolvent;

 

938

 

 

(b)         the insurer or insurance intermediary  -

 

 

(i)        has failed to comply with a directive given to it by the Commissioner  under section 99; or

 

(ii)         is in breach of any condition of its licence;

 

 

(c)        in the case of an insurer or insurance broker that is a company -

 

(i)          passes a resolution for winding up;

 

 

(ii)       the Commissioner  is of the opinion that a person having a share or interest in the insurer or insur- ance intermediary, whether equitable or legal, or any director of the insurer or insurance interme- diary is not a fit and proper person to have an in- terest in or be concerned with the management

of the insurer or insurance intermediary;

 

 

(d)                    the Commissioner  is of the opinion that the key em- ployee of the insurer or insurance intermediary is not a fit and proper person to be concerned with the manage- ment of the insurer or insurance intermediary;

 

(e)                    an insurer or insurance intermediary  proposes to make or has made any composition  or arrangement with its cred- itors;

 

(f)         a receiver and manager have been appointed in respect of the business carried on by an insurer or possession

has been taken of any of his property by or on behalf of the holder of a debenture secured by a charge;

 

(g)                    an insurer or insurance intermediary  or a relevant per- son has refused or failed to co-operate with the Com- missioner on an inspection conducted by the Commis- sioner under section 89;

 

(h)        in the case of an insurer, the Commissioner  is of the

 

939

 

 

opinion that -

 

(i)         its insurance business,  or any part of its insur- ance business,  is not being carried on in accor- dance with core insurance principles  and interna- tional best practices;

 

(ii)       adequate arrangements  have not been made, or will not be made, for the reinsurance  of risks against which persons  are insured by the insurer; or

 

(iii)      there has been a substantial departure  from the business plan submitted to the Commissioner;

 

(iv)      the insurer has provided the Commissioner  with false, inaccurate  or misleading information, whether on making an application for a licence or subsequent to the issue of the licence.

 

(2)        For the purposes of subsection (1)(a)(iv), an insurer is deemed to be insolvent if the total value of its assets does not exceed the total amount of its liabilities by at least the minimum margin of solvency that it is required to main- tain under section 25.

 

(3)        If the Commissioner is entitled to take enforcement action under subsection  (1), it may exercise one or more of the following powers -

 

(a)        revoke or suspend the licence of an insurer or insurance intermediary  under sections 18 and 80;

 

(b)         appoint an inspector to conduct an investigation under section 96;

 

(c)        appointment of a qualified person to advise an insurer

or insurance intermediary  on the proper conduct of his or her or its business; or

 

(d)        issue a directive under section 99.

 

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Directives

 

99.        (1)        Where the Commissioner  is entitled to take enforcement action against an insurer or insurance intermediary, the Commissioner may issue a writ- ten directive to the insurer or insurance intermediary  -

 

(a)        in the case of an insurer, directing the insurer-

 

(i)        to cease to engage in any class or type of insur- ance business;

 

(ii)       not to enter into any new contracts for any class or type of insurance business;

(iii)        not to vary any existing contracts of insurance; (iv)       to limit to a specified amount the aggregate pre-

miums to be received by the insurer, whether be-

fore or after the deduction of reinsurance premi- ums payable by the insurer for reinsurance of the liabilities in respect of which premiums  are to be received;

 

(v)       to refrain from making investments  of a speci- fied class of description;

 

(vi)      to realise before such date as may be specified in the directive, the whole or a specified portion of investments of a specified type or description

held by the insurer;

 

 

(vii)         to cause an actuary or such other person as may be prescribed by the Commissioner  to undertake an investigation  into his or her or its financial position in respect of his or her or its business or any part of his or her or its business and to sub- mit a report of the investigation to the Commis- stoner;

 

(viii)    to provide any return or other document the in-

 

941

 

 

surer is obliged to file with the Commissioner under this Act within a shorter period of time than that permitted under this Act;

 

(ix)      to deposit with the Commissioner  such a sum as may be specified in the directive;

 

(x)       to take such other action as the Commissioner may consider necessary  to protect the assets of a licencee or to protect policyholders  or potential policyholders  of the insurer; or

 

(b)       in the case of an insurance intermediary,  directing the in- surance intermediary  -

 

(i)         to cease to act as an insurance intermediary;

 

 

(ii)        to cease accepting particular types of business;

or

 

 

(iii)      to take such other action as the Commissioner may consider necessary to protect the interests

of their customers or, in the case of an insurance agent, the insurer on whose behalf he acts.

 

(2)        Unless the Commissioner  otherwise directs -

 

(a)           an investigation under subsection (l)(a)(vii)  shall com- ply with such requirements  as may be prescribed  for an investigation  under section 89(2); and

 

(b)       the report of an investigation  under subsection (l)(a)(vii) shall contain such information  and be in such form as may be prescribed for a report prepared under section

89(4),

 

 

with such modifications  as may be appropriate if the insurer or insur- ance intermediary  carries on short term insurance business.

 

(3)        An insurer or insurance intermediary  who fails to comply with,

_)

 

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or carries  on business  in contravention  of a directive  issued by the Commis- sioner under this section commits an offence.

 

Advertisements

 

100.     (1)         An insurer or insurance intermediary  shall not issue, or cause or permit to be issued, any advertisement, statement, brochure or other similar doc- ument which is misleading or which contains an incorrect statement of fact.

 

(2)        If the Commissioner  is of the opinion  that any advertisement, statement, brochure or other similar document issued, or to be issued, by or on behalf of an insurer or insurance intermediary  is misleading, contains an incor- rect statement of fact or is contrary to the public interest, he may -

 

(a)        direct him or it in writing not to issue the document or to withdraw it; or

 

(b)        authorise him or it in writing to issue the document with such changes as the Commissioner  may specify.

 

(3)        An insurer or insurance intermediary that issues or causes or per- mits to be issued an advertisement,  statement, brochure  or other similar docu- ment intending it to mislead or knowing that it contains an incorrect statement of fact, commits an offence.

 

(4)        An insurer or insurance intermediary that issues or causes or per- mits to be issued an advertisement,  statement, brochure  or other similar docu- ment  contrary  to  a  directive  or  authorisation   of  the  Commissioner   under subsection (2), commits an offence.

 

Change of name

 

 

10 1.     An insurer or insurance intermediary shall not, without the prior written approval of the Commissioner, change the name under which it carries on busi- ness.

 

Directive to change name by Commissioner

 

 

102.     The Commissioner may, by written notice, direct an insurer or insurance intermediary forthwith to change the name under which it carries on business or

 

943

 

 

under which it is incorporated  if the Commissioner  is of the opinion that the name is-

 

(a)        identical to that of any other person, whether within or outside Lesotho, or it so nearly resembles that name as to be likely to deceive;

 

(b)         likely to suggest falsely the patronage of or connection with some person whether within or outside Lesotho;

 

(c)             likely to suggest falsely that he has special status in re- lation to or derived from Government  or has the official approval of, or acts on behalf of, Government  or any of its departments  or officials; or

 

(d)        is otherwise misleading  or undesirable.

 

 

Filing of returns and reporting  of information  to the Commissioner

 

 

103.     An insurer or insurance intermediary shall report any information or fur- nish 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.

 

Defective Returns

 

104.      (1)        If the Commissioner  considers that any document furnished by an insurer or insurance intermediary  for purposes  of an audit report under Part vn is inaccurate  or incomplete  or is not prepared in accordance with this Act, regulations,  the code or the rules the Commissioner  may, by written notice, re- quire the insurer or insurance intermediary  to amend the document or to submit

a replacement  document.

 

 

(2)        If an insurer or insurance intermediary fails to comply with a no- tice under subsection (1),  the Commissioner  may reject the document.

 

Insurer or insurance intermediary  to notify Commissioner  of any judgement

 

105.     An insurer or insurance intermediary  shall notify the Commissioner  of

 

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any judgement   obtained   against  it and shall provide   the  Commissioner    with  ev- idence  as to whether   or not the judgement   has been  satisfied.

 

PART XII - MERGER, SALE, TRANSFER

AND TAKEOVER BY INSURER ETC.

 

Merger,  sale, transfer   and takeover  by insurer  etc.

 

106.       (1)         A scheme  shall not be entered  into by an insurer  without  the writ- ten approval   of the Commissioner.

 

(2)         An application   to the Commissioner    for the approval  of a scheme under  subsection   (1) shall be made jointly  by or on behalf  of an insurer  and each other  person  who  is a party  to the scheme.

 

(3)         An application under     subsection   (2) shall  be in such  form,  con- tain  such  information    and  be  accompanied    by  such  documentation     as may  be

prescribed.

 

 

(4)         The  Commissioner    may,  as a condition   for its approval,   require that  amendments,    be made  to the scheme.

 

(5)         An application   under  subsection   (2) shall  be by notice  published in the Gazette   and in such  other  publications    as may  be specified   by the  Com- missioner   and the notice  of the application   together   with  an approved   summary of the scheme   shall  be sent to policyholders    affected  by the scheme.

 

(6)         A notice  of a scheme   shall  contain   a statement   that  representa- tions be made  to the Commissioner    concerning   the scheme  two months  after the date of the publication.

 

(7)         Before  determining   an application   under  this section,  the

Commissioner    may  -

 

 

(a)        at the cost of an insurer,   undertake   an investigation    into the desirability   or otherwise   of the  scheme;   and

 

(b)        require  the insurer  and each  other  party  to the scheme  to provide   him  with  such  documents    and information   as he may require.

 

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(8)        An investigation  under subsection (7) may be carried out by the Commissioner or by one or more persons appointed by the Commissioner  to act on his behalf.

 

(9)        Any transaction to which an insurer is a party which has the ef- fect of transferring  any part of the business  of the insurer to another person  or amalgamating  any part of the business  of the insurer  with the business  of an- other person,  is void and of no legal effect unless effected under a scheme  ap- proved by the Commissioner.

 

Details of scheme

 

 

107.     A scheme shall set out -

 

 

(a)       the terms of the agreement or deed under which the pro- posed merger, sale or transfer is to be carried out;

 

(b)       particulars  of such other arrangements  as are necessary to give effect to the scheme; and

 

(c)        contain such other information  as may be prescribed.

 

 

Service of notices

 

 

108.      (1)        Where a notice is required by this Act, regulations,  the code or rules to be given by an insurer to a policyholder,  it may be given to the last ad- dress of the policyholder  notified by the policyholder  to the insurer.

 

(2)        Where  a person claiming to be interested  in a policy has given notice of his or her interest to an insurer, notice required to be given by the in- surer to a policyholder  shall also be sent to the person claiming an interest at the address specified by the policyholder  in his notice to the insurer.

 

Compromise  with creditor under section  161 of the Companies Act by insurer

 

109.      (1)        In this section "insurer" includes a former insurer.

 

 

(2)        An insurer shall not propose a compromise or arrangement under section  161 of the Companies Act unless the Commissioner  has given his ap-

 

946

 

 

proval,  in writing,   of the compromise    or arrangement.

 

PART XIII - LIQUIDATION AND JUDICIAL MANAGEMENT

 

Winding up and Judicial Management

 

110.      The  provisions    of the  Companies   Act,  2011  or any  subsequent   Act  re- lating  to the  winding   up and judicial   management    of companies    shall  by regu-

lations  be modified   in respect  of insurers   and insurance   intermediaries.

 

PART XIV - ABANDONED PROPERTY

 

Unclaimed funds and property

 

111. (1)           Except  as provided   in subsection   (2),the following   items  held or owing  by  an insurer   or insurance   intermediary,    shall  be presumed   to  be aban-

doned  -

 

(a)         any general  deposits   or funds  placed  in Lesotho   with  an insurer  or insurance   intermediary,    together   with  any in- terest  or dividend,   excluding   any  lawful  charges;

 

(b)         any funds  paid  in Lesotho   towards   the purchase   of shares or other  interests  in the insurer  or insurance   intermediary, together   with  any interest   or dividend,   excluding   any lawful  charges;

 

(c)        any sum  payable   on cheques   certified   in Lesotho,   or on written  instruments   issued  in Lesotho,   on which  such  an insurer  or insurance   intermediary    is directly  liable;

 

(d)        any contents   of a safe deposit   box upon  which  the lease or  rental  period  has expired   and concerning   which  no- tice  of the intent  to deliver  the said  contents   into  the cus- tody  of the  Commissioner    has been  sent by registered letter  to the last known  address   of the lessee.

 

(2)         The  items  enumerated   in subsection   (l)(a),   (b) and (c) shall not be presumed   to be  abandoned   if the  owner  has,  within  fifteen  years  of the date of -

 

947

 

 

(a)        initial deposit or any subsequent deposit or withdrawal;

 

(b)         payment  of funds; or

 

(c)        issuance of instruments  -

 

(i)        increased or decreased the amount of the dep- osits or funds or presented the passbook or other record for the crediting of interest or

dividends in respect of the items enumerated in

subsection  (1)(a) or (b);

 

 

(ii)       corresponded  in writing with the licensed  insti- tution concerning the items enumerated in sub- section (l)(a),  (b) or (c); or

 

(iii)      otherwise indicated an interest in the items enu- merated in subsection  (1)(a), (b) or (c), as evi- denced by a memorandum  concerning the items on file with the insurance company or insurance intermediary .

 

Reports and disposition

 

112.      (1)        An insurer  or insurance  intermediary   holding  any funds pre- sumed to be abandoned under section 111 shall annually report such holding to the Commissioner,  and payor  deliver to the Accountant-General  all abandoned funds listed in the report, as may be prescribed by regulations.

 

(2)        Upon paying or delivering abandoned funds into the custody of the Accountant  General,  an insurer or insurance  intermediary  shall be relieved of all liability to the extent of the value of such funds or other property for any claim in respect of the insurer or insurance intermediary.

 

(3)        Any funds paid to the Accountant-General  under subsection (1) (a) shall be credited to the consolidated fund as may be prescribed by regulations, but where a person entitled to such funds subsequently proves his claim to such funds to the satisfaction  of the Accountant-General,  he or she shall be paid from the fund.

 

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Failure to make a report or payment

 

113.     A licensed institution which wilfully fails to file a report with the Com- missioner or to pay funds presumed to be abandoned into the custody of the Ac- countant-General,  in accordance with section 112, commits an offence.

 

PART XV - OFFENCES AND PENALTIES

 

General Offences and penalties

 

114.      (1)        A person who -

 

(a)       contravenes or fails to comply with a provision of sec- tion 6,8,46,55(1) and (2), 66, 68, 70, 119 and 124; or

 

(b)         prepares or issues any document required for the pur- poses of this Act, or participates in the preparation  or is- suing of any such document, knowing such document to be false or misleading in any material respect,

 

commits an offence and is liable on conviction to a fine ofM500,000.00  or im- prisonment  for 10 years or both.

 

(2)        An insurer who -

 

(a)           contravenes or fails to comply with a provision  of sec- tion 20, 31, 32, 33,36,37,49,50,51,52,53,54,57,60,

62,63,65,66,68,106(1),(2), (3), (4), (6) or (7),121(1) or

(2); or

 

(b)         fails to observe any prohibition imposed upon such in- surer under a provision of this Act,

 

commits an offence and is liable on conviction to a fine of M5000 ,000.00 or imprisonment for 10 years or both.

 

(3)        An insurance intermediary,  an insurance broker or reinsurance broker who contravenes or fails to comply with a provision of section 76, com- mits an offence and is liable on conviction to a fine of M5000.00 or imprison- ment for 12 months or both.

 

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Penalty for failure to submit certain document or to furnish certain information

 

 

115.      (1)

mediary.

 

In this section  "person" includes an insurer and insurance inter-

 

 

(2)        A person who fails to -

 

(a)                 submit or furnish to the Commissioner  any statement, report, return or other document or information;  or

 

(b)        notify the Commissioner  of any name, address, change of name or address, date, appointment,  termination, ter- mination of appointment or other particulars, in accor- dance with a requirement  of this Act within  the period determined  by or under this Act or, if that period has been extended by the Commission  under section 130,

within the extended period,

 

is liable, on conviction, to a fine of M10,000.00 for each day during which such failure continues.

 

(3)        An amount of penalty payable in terms of subsection  (1) shall constitute  a debt due to the Commissioner  by the person concerned and may be recovered by the Commissioner by means of proceedings instituted in any com- petent court.

 

(4)        Notwithstanding  the provisions  of subsections  (1) and (2), the Commissioner  may waive the payment  of or refund the whole or any part of a fine payable in terms of subsection (1), if the Commissioner is satisfied that fail- ure of the person concerned to comply with a requirement contemplated  in sub- section (1) was not due to willful conduct or want of reasonable care on the part of such person.

 

False or misleading representations, statements, reports or returns

 

116.     (1)        A person who makes or assists in making a representation,  state- ment, report or return, whether oral or written -

 

(a)        that is required or permitted by this Act, regulations, the

 

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code or rules to be made to or, in the case of a document to be filed with, the Commissioner;  and

 

(b)        that-

 

(i)          contains a false statement of a material fact; or

 

(ii)         omits to state a material fact required to be dis- closed to the Commissioner or necessary to avoid the statement or document being materi-

ally misleading, commits an offence and on con- viction is liable to a fine of M50 000 or impriso- nment for 6 months or both.

 

(2)        A person does not commit an offence under subsection (1) if he or she did not know and, with the exercise of reasonable  diligence, could not have known that the representation or statement contained a false statement or omitted a material fact.

 

Penalty for failure to comply with certain financial requirements

 

117.     (1)        An insurer who fails to comply with a provision of-

 

(a)           section 22 in that the amount of its unimpaired capital and reserves falls short of that required in terms of that section;

 

(b)       section 25 in that the amount of its margin of solvency falls short of that required in terms of that section; or

 

(c)       section 27 or 28 in that the amount of its assets falls short of that required in terms of any of those sections,

 

is liable to a fine of M500, 000 or 5 percent of the amount of the short- fall whichever is the greater amount, and in addition, to a fine of

M500, 000 or 5 percent of the amount of the shortfall for each month or part of a month reckoned from the end of the financial year during which the shortfall occurred until the date on which the auditor of the insurer issues a certificate to the effect that the shortfall has been remedied dur- ing which the shortfall continues to exist, whichever is a greater amount.

 

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(2)         An amount   of penalty   payable   in  terms  of subsection    (1) shall constitute   a debt  due  to the Commissioner    by the insurer  concerned   and may be recovered   by the  Commissioner    by  means  of proceedings    instituted   in a com-

petent  court.

 

 

(3)         Notwithstanding     the  provisions    of subsection    (1)  and  (2),  the Commissioner    may  waive  the payment   of or refund  the whole  or any  part  of a fine payable  in tenns  of subsection   (1) if the Commissioner   is satisfied  that it will be in the interests   of policyholders to do so.

 

 

(4)         An insurer  who,  while  a shortfall  contemplated   in subsection   (1) exists  in respect   of his  insurance   business,   pays  any  dividend   to his  sharehold- ers commits   an offence  and on conviction   is Liable to a fine ofM100, 000 or im-

prisonment   for 24 months  or both.

 

Other offences

 

 

118.      A person  who  commits   an offence  under  this Act  for which  no punish- ment  is provided   for elsewhere   in this Act  is liable  to a fine of M500,  000 or to imprisonment    for  10 years  or both.

 

Powers  of court

 

 

119.      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

 

Prohibition   of transacting   certain  business  with or securing  certain  busi- ness for unregistered   concern

 

 

120.       (1)         A person   shall  not  transact   any  class  of  business   with  a person who is not a registered  insurer  or insurance  intermediary   unless  an exemption  has been granted  to the insurer  or insurance  intermediary   by the Commissioner   under

section  8(5) or 72.

 

 

(2)         A person   shall  not  induce   or  attempt   to  induce   any  person   to enter  into a domestic  policy  with  a person  who  is not an insurer  or insurance  in- termediary   or to make  an application   to enter  into  a domestic   policy  with  such

 

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last-mentioned person.

 

Restriction On Use of Certain Names and erms

 

121.     (1)        Subject to subsections (2) and (3), a person shall not, except with the written authority of the Commissioner or unless authorised by law -

 

(a)        use, whether in the name under which he is registered or in the description or title under which he  carries on busi- ness in or outside Lesotho and whether in Sesotho, Eng- lish or in any other language -

 

(i)         the words "insurance",  "assurance" or "under- write" or any combination  or derivative of such words; or

 

(ii)        any other word prescribed  as a word that sug- gests insurance business or the business of an in- surance intermediary;  or

 

(b)           make any representation,  whether in a document or in any other manner, that is likely to suggest that he is car- rying on, or that he is licensed or otherwise entitled to carry  on-

 

(i)          insurance business; or

 

 

(ii)         business as an insurance intermediary.

 

(2)        Subsection (l)(a)  does not apply to an insurer holding a licence under Pan III or to an insurance intermediary holding a licence under Part IX.

 

(3)        Subsection  (l)(b)(i)  does not apply to an insurer holding a li- cence under Part III and subsection (1)(b )(ii) does not apply to an insurance in-

termediary holding a licence under Part IX.

 

Incorporation, use and change of name of company

 

122.     The Registrar of Companies shall not register a memorandum of a com- pany under, or register a change of name of a company to, a name that, whether

 

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in Sesotho or English, includes -

 

 

(a)         the words "insurance", "assurance"  or "underwrite" or any combination or derivative thereof; or

 

(b)        any other word prescribed under section 121(1)(a)(ii), unless the Registrar is satisfied that the company is or is going to be an insurer or insurance intermediary.

 

Change or alteration

 

123.     (1)         An insurer shall furnish the Commissioner with full particulars as to any change of registration  particulars within a period of 30 days of such change.

 

(2)        An insurer shall apply to the Commissioner  in writing if he or she intends to make any alteration in the registration particulars, and such alter- ation shall not take effect until and except insofar as it has been approved by the Commissioner.

 

(3)        Where, before a determination by the Commissioner  of an ap- plication -

 

(a)          there is a material change in any information or docu- mentation provided by or on behalf of the applicant to the Commissioner in connection with the application; or

 

(b)       the applicant discovers that any such information or documentation is incomplete, inaccurate or misleading, the applicant shall forthwith give the Commissioner written particulars of the change or of the incomplete,

inaccurate or misleading information or documentation.

 

Use and change of registered    name

 

124.     (1)        Subject to the provisions  of subsection (2), an insurer and in- surance intermediary shall, for all purposes and in every public document issued by the insurer or insurance intermediary, use the name under which it is regis- tered.

 

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(2)         An insurer  or insurance   intermediary   shall  not -

 

 

(a)         change  the name  under  which  it is registered;

 

 

(b)        use or refer  to itself by a name  other  than  the name  under which  he is registered;   or

 

(c)         use or refer  to itself by a shortened   form  or derivative   of the name  under  which  it is registered,   without  the prior written  approval  of the Commissioner.

 

(3)         An application   for a change  of name  contemplated   in subsection

(2)(a)  shall  -

 

(a)        be made  in such  manner  and form  as may  be determined by the Commissioner;    and

 

(b)         be accompanied   by -

 

(i)         such documents   and information   as the Com- missioner  may require  in the particular  case; and

 

(ii)         the prescribed   application   fees.

 

(4)         Upon  receipt  of an application   referred  to in subsection   (3), the Commissioner   shall, if he is satisfied  that the provisions  of this Act and any other law relating  to such  a change  of name  have been complied   with, register  the in- surer or insurance   intermediary   concerned   under  his name  and issue  to such  in- surer  or  insurance   intermediary,   in a form  determined   by the Commissioner    a

new licence  under  that  name.

 

Request for information

 

125.      (1)        The Commissioner   may, by notice  in writing,  require  any insurer or insurance  intermediary   to supply  him with any document  or information   in re- lation  to any matter  connected   with the insurance  business  carried  on by the in- surer  or insurance   intermediary,   and the insurer  or insurance   intermediary   shall comply  with such requirement   within  such period,  after receipt  of the notice,  as may be prescribed   in the notice.

 

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(2)        Any information supplied under this section shall be certified by a key employee, and, if the notice so requires, also by an auditor or actuary, or both.

 

Use of prescribed forms

 

 

126.     (1)        If a document required or permitted by this Act or regulations to be prepared or submitted to the Commissioner is of a type  the form of which is prescribed, that form shall be used with such modifications as the circumstances

may require.

 

 

(2)        Notwithstanding subsection (1),  a prescribed  form shall not be varied so as to omit any information or guidance which the form gives to the in- tended recipient of the form.

 

Registers

 

 

127.     (1)        In this section "document in electronic form" means a document in a computer processable format that is capable of being transmitted electroni- cally.

 

 

(2)        The Commissioner shall maintain -

 

(a)        a register of insurance companies;

 

(b)         a register of insurance intermediaries; and

 

 

(c)             such other registers as may be prescribed, in which it shall record such information as may be prescribed.

 

(3)        Registers and information contained in any document filed with the Commissioner may be kept in such form as the Commissioner may consider fit, including, either wholly or partly, by means of a device or facility _

 

 

(a)              that records or stores information in magnetic or elec- tronic form; and

 

 

(b)               that permits the information to be inspected and repro- duced in legible and useable form.

 

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Inspection of registers and information held by Commissioner

 

128.      (1)        Subject to subsection (2), a person may, on payment of the pre- scribed fee during normal business hours -

 

(a)       inspect the registers and any records kept by the Com- missioner that are prescribed  as public records; and

(b)       require the Commissioner  to furnish him with a copy or certified copy of, or extract from, any document that he would be entitled to inspect under paragraph (a).

 

(2)        In  respect  of documents  filed  or kept in electronic  form,  the rights granted under subsection (1) extend only to reproductions  of those docu- ments in useable written form produced in such manner as the Commissioner considers appropriate.

 

(3)        A copy or reproduction  of, or extract from,  any document  or record that is kept by the Commissioner  and certified as such by the Commis- sioner is admissible in evidence in all legal proceedings to the same extent as the

original document.

 

Fees payable to Commissioner

 

129.     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 Commis- stoner.

 

Power of Commissioner to extend time periods

 

130.     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.

 

Restrictions on disclosure of information

 

131.    (1)        For the purposes of this section, "protected person" means -

 

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(a)        a person who has applied for a licence; (b)        a licencee; or

(c)        a policyholder or a former policyholder  of a licencee;

 

 

"licencee" includes a person who has at any time been a licencee but who has ceased to be a licencee.

 

(2)        Subject to subsection (3), the Commissioner and a person acting under the authority of the Commissioner shall not disclose to any person infor- mation concerning the affairs of a protected person that he has acquired in the course of his duties or in the exercise of his functions under this Act or under any other law.

 

(3)        Subsection (2) does not apply to a disclosure-

 

 

(a)       required or permitted by any court of competent juris- diction in Lesotho;

 

(b)        to any person for the purpose of discharging any duty or exercising any power under this Act;

 

(c)       in respect of the affairs of a protected person made with the consent of that person;

 

(d)       if the information disclosed is or has been available to the public from any other source;

 

(e)       where the information disclosed is in a summary or in statistics expressed in a manner that does not enable the identity of a protected person to which the information relates to be determined; or

 

(f)         made by the Commissioner to a foreign regulatory au- thority upon the written request of that authority in ac- cordance with section 94.

 

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Right of appeal to the Tribunal

 

132.     (1)        Aperson  aggrieved by any decision taken by the Commissioner under this Act, including refusal or cancellation of registration of an insurer may, within 30 days from the date on which the decision is intimated to the person in writing, appeal against the decision by a petition, in writing to the Tribunal es- tablished  in terms  of section 76 of the Financial  Institutions  Act 2012 which may, subject to the limitations of this Act, uphold, reverse, revoke or vary that decision.

 

(2)        Except  as hereinafter  provided,  the decision taken under sub- section (1) shall be final and shall within 30 days of its taking, be transmitted in writing to the applicant.

 

Notices

 

133.     (1)        Subject to subsection  (2), all notices required or authorised to be given by or under this Act or regulations shall be in writing.

 

(2)        Subsection (1) shall not apply where -

 

 

(a)        this Act or the regulations provide otherwise; or

 

(b)       the court requires or permits a notice to be given in some other way.

 

Regulations

 

134.     The Commissioner may make regulations generally for giving effect to this Act.

 

Code of Practice

 

 

135.     (1)         The Commissioner  shall, by notice  published  in the Gazette, issue a code with respect to the procedures to be followed by and the conduct ex- pected of an insurer or insurance intermediary  in the operation of its licensed business.

 

(2)        Without limiting the generality of subsection (1), the code may provide for the matters specified in Schedule 2.

 

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(3)        The Commissioner  may amend, add to or replace the code by notice published in the Gazette.

 

(4)        Before issuing the code under subsection (1) or publishing a no- tice under subsection (3), the Commissioner shall-

 

(a)         send a draft of the code, or the proposed amendment, ad- dition to or replacement of the code, to each body rep- resenting those licencees affected, specifying the period within which written representations  are to be provided

to the Commissioner; and

 

 

(b)        consider such written representations  and decide as the

Commissioner may find it appropriate.

 

Market conduct rules

 

 

136.     (1)

issue rules.

 

The Commissioner  may, by notice  published  in the Gazette,

 

 

(2)        The Commissioner  may amend, add to or replace the rules by notice published in the Gazette.

 

(3)        Before issuing the rules under subsection (1) or publishing a no- tice under subsection (2), the Commissioner shall-

 

(a)       send a draft of the rules, or the proposed amendment, ad- dition to or replacement of the rules, to each body rep- resenting those licencees affected, specifying the period within which written representations  are to be provided

to the Commissioner;  and

 

 

(b)        consider such written representations  and decide as the

Commissioner  may find it fit.

 

Transitional Provisions

 

137.     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.

 

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Savings

 

138.     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.

 

Repeals

 

139.     The Insurance Act, 1976 is repealed.

 

 

 

NOTE

 

 

 

1.         Act No.2  of 2000

2.         Act No. 18 of 2011

3.         Proclamation  No. 51 of 1957

4.          Act No. 18 of 1976

5.         Act No. 2 of2012

 

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SCHEDULE 1

 

(Section 5(2)(a)

CLASSES OF INSURANCE BUSINESS PART A

 

Classes of Long Term Business

 

Class                Description of Business

 

1                       Life

2                        Health

3                        Assistance

4                        Disability

5                        Fund

6                        Sinking fund

 

PART B

 

Classes of General Business

 

Class                 Description of Business

 

1                     Property

2                        Accident and health

3                        Motor

4                        Transportation

5                        Engineering

6                        Liability

7                        Guarantee

8                          Miscellaneous

 

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PARTC

 

Classes of Micro-Finance

 

 

 

Class                 Description of Business

 

1                       Funeral cover

2                        Crop insurance

3                        Credit life

4                        Savings life

5                        Health insurance

6                       Miscellaneous

 

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SCHEDULE 2

 

 

(Section 135(2))

 

MATTERS PERMITTED

TO BE CONTAINED IN THE CODE OF PRACTICE

 

1.         Commissioner's  interpretation of "fit and proper" .

 

 

2.          Corporate  governance,  including  appointment  and functions  of audit committee and other committees.

 

3.          The persons  considered by the Commissioner  to be key employees  of an insurer or an insurance intermediary.                                                       .

 

4.         The form and content of advertisements  issued by insurers  and insur- ance intermediaries.

 

5.         The preparation of a business plan, including the matters to be contained in a business plan.

 

6.          Persons who, even if qualified under the regulations for appointment as an auditor or as an actuary, would not be approved by the Bank whether by rea- son of their relationship  with the licencee concerned or for any other reason.

 

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GOVERNMENT NOTICE NO. 55 OF 2014

 

The Parliament   of Lesotho Statement  of Objects  and  Reasons  of the Insurance   Bill, 2014

 

(Circulated By Authority of the Honourable Minister of Finance

Leketekete Victor Ketso)

 

The object is to repeal and replace the Insurance Act of 1976 in order to provide for the consolidation,  administration,  supervision, regulation,  control, protec- tion and development of insurance business in Lesotho, thus ensuring that the in- surance industry in Lesotho prudently meet the demands of the economy for risk management  and stimulation of growth in the investment sector.

 

The Bill aligns the Commissioner of Insurance's regulatory and supervisory roles in accordance  with the international  standards  and practice,  in particular,  the Core Principles of International Association of Insurance Supervisors (IAlS) of which Lesotho has been a member since 1999. The IAlS Core Principles were designed to provide  the international  financial  community with a benchmark against which the efficiently and effectiveness of insurance supervisory regimes could be assessed. The Legal framework for the supervision of insurance busi- ness in Lesotho as contained in the Insurance Act of 1976 is out of date and as a result does not comply with most of the Core Principle of the IAlS.

 

The Bill grants the Commissioner of Insurance, as the regulator, with necessary powers and tools to enable the Commissioner to achieve effective regulation and supervision of the insurance sector.

 

The Bill further grants the Commissioner power to inspect without prior notice, premises, including systems and controls whether in Lesotho or elsewhere in re- spect of a licencee, former licencee, subsidiary, directors and employees of a li- cencee or former licencee. This improvement is a major protection tool for the public as it will improve prudential supervision of insurers and insurance inter- mediaries by the Commissioner. Additional provisions have been developed in the Bill to provide clearer treatment of dormant accounts and unclaimed mon- eys; the thrust of the improvement being to grant better protection to members of the public.

 

One of the lessons learned by regulators from the global financial crisis is that

 

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there is heightened  need to enhance  corporate  governance  structures in insur- ance business.  Through  this Bill, the Commissioner  has opportunity  to make necessary regulatory changes to achieve desired governance improvements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Printed  by the Government   Printer,  P.O. Box 268,  Maseru   100 Lesotho