INSURANCE COMPANIES ORDINANCE

INSURANCE COMPANIES ORDINANCE

LAWS OF HONG KONG

INSURANCE COMPANIES ORDINANCE

CHAPTER 41





CHAPTER 41

INSURANCE COMPANIES ORDINANCE

ARRANGEMENT OF SECTIONS

Section.................................... Page
PART 1
PRELIMINARY
1. Short title ...........................4
2. Interpretation ........................4
3. Classes of insurance business .........6
4. Insurance Authority ...................6
5. Register of insurers ..................6

PART II

AUTHORIZATION

6. Restriction on carrying on of insurance business 7
7. Application for authorization to carry on insurance business 8
8. Authorization ........................8
9. Meaning of 'controller' in section 8(2) 9

10.........................Meaning of 'relevant amount in section 8(3) ......................................... 10

11.......................................Appeal against refusal of authorization under section 8(2) 12
12.......................................Conditions imposed under section 8 may be revoked 12

13.............................Fee payable upon authorization and annually thereafter ........................... 12

14. Notification of change in particulars, and objection to appointment of new

director or controller .............13

PART III

ACCOUNTS AND
STATEMENTS

15.......................................Appointment of auditor and actuary 14
16.......................................Keeping and preserving of proper books of account 15
17.......................................Submission of financial information 16
18.......................................Periodic actuarial investigation of insurer with long term business 16
19.......................................Statements of transactions of prescribed class or description 17
20.......................................Deposit of accounts etc. with Insurance Authority 17
21.......................................Documents to be deposited with Registrar of Companies 18

PART IV

LONG TERM BUSINESS

22.......................................Separation of assets and liabilities attributable to long term business 18
22A......................................Foreign insurers may be authorized to maintain an account in relation to their
Hong Kong business ...................19

23...............................Application of assets of insurer with long term business 20

24.......................................Sanction of High Court for transfer of long term business 20
25.......................................Provisions supplementary to section 24 21





Section.................................... Page
PART V
POWERS OF INTERVENTION
26. Grounds on which powers are exercisable 22
27. Restrictions on new business ........24
28. Requirements about investments ......24
29. Maintenance of assets in Hong Kong ..24
30. Custody of assets ...................25
31. Limitation of premium income ........25

32...........................Actuarial investigations
..........................................26

33. Acceleration of information required by accounting provisions 26
34. Power to obtain information and require production of documents 27
35. Residual power to impose requirements for protection of policy holders 27

35A...........................Requirement under section 35 to make deposit ..................
..............................28

35B.........................Accounts
..........................................28

36. Notice of proposed exercise of power under section 27 29
37. Notice of proposed exercise of powers on ground of unfitness 29
38. Rescission, variation and publication of requirements 30
39. Power of Financial Secretary to bring civil proceedings on behalf of insurer 30
40. Withdrawal of authorization .........31
41. Offences under Part V ...............31

PART VI

INSOLVENCY AND WINDING
UP

42. Circumstances in which insurer deemed to be insolvent 32
43. Winding up of insurer under Companies Ordinance 32
44. Winding up on petition of Insurance Authority 32
45. Winding up of insurer with long term business 33
46. Continuation of long term business of insurer in liquidation 34
47. Winding up of insurers involved in transfer of business 35
48. Reduction of contracts as alternative to winding up 35
49. Winding up rules ....................36

PART VII

SPECIAL PROVISIONS RELATING To
LLOYDS

50. Requirements to be complied with by Lloyd's 36

PART VIII

EXEMPTIONS

51. Exempted persons ....................36

52. Limited exemption of insurer authorized to carry on business in United

Kingdom .............................37
53. Power of Governor in Council to exempt insurer 39





section................................... Page

PART VIIIA

SECRECY, DISCLOSURE OF
INFORMATION AND
EXAMINATIONS BY OUTSIDE
AUTHORITIES

53A.......................................Secrecy 39
53B.......................................Disclosure of information 40
53C.......................................Examination by external authorities 41

PART IX

SUPPLEMENTARY AND
TRANSITIONAL

54. Insurance Advisory Committee
.................................................. 41
55. Service of notices ...................... 42

55A.......................................Indemnity 42
56. Misleading statements etc. and false information; offences 42

57. Liability for offences by bodies corporate 1 1 43

58. Limitation of time for proceedings in respect of offences 43

58A.......................Validation of certain group policies
............................................... 43

59. Regulations ..........................43
60. (Amendments incorporated) ............44

61. Transitional and savings .............1 44

62. Transitional .........................45

63. Further transitional provision ....... 45

First Schedule. Classes of Insurance Business ....... 45

Second Schedule. Directors and Controllers 49
Third Schedule. Accounts and Statements .52







CHAPTER 41

INSURANCE COMPANIES

To regulate the carrying on of insurance business, to provide for the appointment of
an Insurance Authority, to confer powers of authorization and intervention on
the Insurance Authority in respect of insurers and to require insurers to furnish
financial statements and other information to the Insurance Authority; and for
matters incidental thereto or connected therewith.

[30 June 19831 L.N. 203183

Originally 6 of 1983 8 of 1985, L.N. 9118 74 qf 1985, 27 of 1986 4 of 1987, 41 of 1987, R.
Ed.

1987, 34 of 1988

PART I

PRELIMINARY

Short title

1. This Ordinance may be cited as the Insurance Companies Ordinance.

Interpretation

2. (1) In this Ordinance, unless the context otherwise requires

'annuities on human life' does not include superannuation allowances and
annuities payable out of any fund applicable solely to the relief and
maintenance of persons engaged or who have been engaged in any particular
profession, trade or employment, or of the dependants of such persons;

'authorized', in relation to an insurer, means authorized under section 8, or deemed
under section 6 1 (1) or (2) to be so authorized, to carry on insurance business,
and 'authorization' has the corresponding meaning;

'body corporate' includes a body incorporated outside Hong Kong;

'chief executive' has the meaning assigned to it by section 9(2);

'class', in relation to insurance business, means a class of insurance business
which under section 3 is relevant for the purposes of this Ordinance;

'company' has the meaning assigned to it by section 2(1) of the Companies
Ordinance (Cap. 32) and includes a company incorporated outside Hong Kong
to which Part XI of that Ordinance applies;

'controller' has the meaning assigned to it by section 9;

'director' includes any person occupying the position of director by whatever
name called;

'financial year', in relation to a body corporate, has the meaning assigned to it by
section 2(1) of the Companies Ordinance;





'general business' means insurance business not being long term business;

'gross premium income' has. the meaning assigned to it by section 10(4)(c);

'holding company' has the meaning assigned to it by section 2(7) of the
Companies Ordinance (Cap. 32);

Insurance Authority' means the Insurance Authority appointed under section 4;

'insurer' means a person carrying on insurance business but does not include
Lloyd's;

'long term business' means any of the classes of insurance business specified in
Part 2 of the First Schedule;

'Lloyd's' means the society.of underwriters known in the United Kingdom as
Lloyd's;

,,policy'

(a)in relation to long term business, includes an instrument evidencing a
contract to pay an annuity up on human life;

(b)in relation to insurance business of any other class, includes any policy
under which there is for the time being an existing liability already accrued
or under which a liability may accrue;

'policy holder' means the person who for the time being is the legal holder of a
policy for securing a contract with an insurer, and

(a)in relation to such long term business as consists in the granting of
annuities upon human life, includes an annuitant; and

(b)in relation to insurance business of any other kind, includes a person to
whom, under a policy, a benefit is due or a periodic payment is payable;

'premiums receivable' has the meaning assigned to it by section 10(5);

'prescribed' means prescribed by regulations made by the Governor in Council
under section 59;

'subordinated loan stock', in relation to a company, means a loan which in the
event of the winding up of the company is repayable by the company only after
all of the liabilities of the company, other than those in respect of share capital,
have been paid in full;

'subsidiary' has the meaning assigned to it by section 2(4), (5) and (6) of the
Companies Ordinance;

'valuation regulations' has the meaning assigned to it by section 8(4)(b).

(2) References in this Ordinance to an insurer include references to an insurer
formed or established in Hong Kong and carrying on insurance business outside
Hong Kong, whether or not the insurer is also carrying on insurance business in
Hong Kong.

(3) For the purposes of this Ordinance, a person shall be deemed to carry on a
class of insurance business in or from Hong Kong if





(a)he opens or maintains an office or agency in Hong Kong for the purpose
of carrying on that class of insurance business in or from Hong Kong; or

(b)he holds himself out as carrying on that class of insurance business in or
from Hong Kong.

(4) A person shall not be deemed to carry on insurance business in or from
Hong Kong by reason only that any person acts as his agent for the purpose of
settling claims under contracts of goods in transit insurance entered into wholly
outside Hong Kong in respect of goods consigned to Hong Kong.

(5) A person shall not be deemed to be within the meaning of any provision of
this Ordinance a person in accordance with whose directions or instructions the
directors of a company or other body corporate or any of them are accustomed to
act by reason only that the directors of the company or body act on advice given
by him in a professional capacity.

Classes of insurance business

3. The classes of insurance business relevant for the purposes of this
Ordinance shall be those specified in the First Schedule and the provisions of that
Schedule shall have effect accordingly.

Insurance Authority

4. (1) The Governor shall appoint a public officer to be the Insurance Authority
for the purposes of this Ordinance.

(2) The Governor may give directions generally or in a particular case with
respect to the exercise by the Insurance Authority of any of his functions under
this Ordinance, and the Insurance Authority shall comply with any such direction.

Register of insurers

5. (1) The Insurance Authority shall keep a register of authorized insurers
which shall contain

(a)the name, place of incorporation and year of first authorization (whether
under this Ordinance or any Ordinance repealed or amended by this
Ordinance) of every authorized insurer;

(b)in respect of each authorized insurer, the class or classes of insurance
business authorized to be carried on by such insurer including any
conditions imposed under section 8(1)(a) which impose restrictions on
the carrying on of such class or classes of insurance business by that
insurer; (Amended 34 of 1988s.2(a))

(c)where an authorized insurer ceases to effect contracts of insurance of any
description, or any requirement is imposed in respect thereof under
section 27, a note to that effect;

(d)where any requirement is imposed on an authorized insurer under section
30, or a provisional liquidator, liquidator or receiver is appointed, a note to
that effect; and





(e)where an authorized insurer ceases by virtue of a direction under section
40 to be authorized to carry on insurance business which is part of a class
of insurance business, a note to that effect. (Added 34 of 1988 s.2 )

(2) The register shall be kept at the office of the Insurance Authority or such
other place as he may specify by notice in the Gazette.

(3) Any person shall be entitled on payment of the prescribed fee-

(a)to inspect the register during ordinary office hours and take copies of any
entry therein;

(b)to obtain from the Insurance Authority a copy, certified by or under the
authority of the Insurance Authority to be correct, of any entry in the
register.

(4) The register required under this section may be kept by recording the
matters in question

(a) in bound books or any other legible form; or

(b)otherwise than in a legible form so long as the recording is capable of
being reproduced in a legible form,

but where such register is kept otherwise than by making entries in a bound book,
adequate precautions shall be taken for guarding against falsification and
facilitating its discovery.

PART 11

AUTHORIZATION

Restriction on carrying on of insurance business

6. (1) No person shall carry on any class of insurance business in or from Hong
Kong except

(a)a company authorized under section 8 to carry on that class of insurance
business;

(b) Lloyd's;

(e) an association of underwriters approved by the Governor in Council.

(2) An application for approval under subsection (1)(c) shall be addressed to
the Insurance Authority, and the applicant shall furnish such information in respect
thereof as the Insurance Authority may require.

(3) A person who contravenes subsection (1) commits an offence and is liable

(a)on conviction upon indictment to a fine of $1,000,000 and, in the case of
an individual, to imprisonment for 2 years; and

(b)on summary conviction to a fine of $100,000 and, in the case of an
individual, to imprisonment for 6 months,

together with, in either case, a fine of $1,000 for each day on which the offence
continues.





Application for authorization to carry on insurance business

7. (1) Any company may make application in writing to the Insurance
Authority for authorization to carry on any class of insurance business.

(2) The applicant shall furnish such information in such form as the Insurance
Authority may require for the purpose of determining the application together with
the particulars specified in the Second Schedule relating to every director or
controller of the applicant.

Authorization

8. (1) Upon application made by a company under section 7, the Insurance
Authority

(a)subject to paragraph (b), may authorize the company in writing to carry
on, subject to such conditions as he may impose, any class or classes of
insurance business; or

(b) (i) shall refuse the application if subsection (2) or (3) applies; or

(ii) may refuse the application on any other ground whether or not the
application has been refused on a ground under subparagraph (i).
(Replaced 41 of 1987 s. 2)

(2) The Insurance Authority shall not authorize a company under this section if
it appears to the Insurance Authority that any person who is a director or controller
of the company is not a fit and proper person to hold the position held by him.

(3) The Insurance Authority shall not authorize a company under this section
unless the following conditions are satisfied

(a)that, at the date of the application, the value of the assets of the company
exceeds the amount of its liabilities by not less than the relevant amount
within the meaning of section 10; and

(b)that in the case of a company having a share capital, the aggregate of the
amount paid up thereof and the amount of any subordinated loan stock of
the company and the amount paid up in respect of any redeemable
preference shares of the company is not less than

(i) except if subparagraph (ii) or (iii) applies to the company, $5,000,000
or its equivalent;

(ii) if the company intends to carry on both general business and long
term business, or carries on both general business and long term business
outside Hong Kong, $10,000,000 or its equivalent;

(iii) if the company intends to carry on any class of insurance business
(not being reinsurance business) relating to liabilities or risks in respect of
which persons are required by any Ordinance to be insured, $10,000,000 or
its equivalent; and

(e)that as regards each class of risks against which, in the course of carrying
on business, the company proposes to insure persons

(i) adequate arrangements are in force, or will be made, for the
reinsurance of risks of that class against which persons are, or are to be,
insured by the company in the course of carrying on business; or

(ii) it is justifiable not to make arrangements for that purpose; and





(d)that the company is, and will continue to be, able to meet its obligations
including obligations in respect of business other than the class of
insurance business in respect of which the application is made; and

(e)in the case of a company to which Part XI of the Companies Ordinance
(Cap. 32) applies, that it has complied with the provisions of that Part; and

that the company will be able to comply with such of the provisions of
this Ordinance as would be applicable to it; and

(g)that in the case of a company which carries on, or proposes to carry on,
some other form of business in addition to insurance business, the
carrying on of that other form of business in addition to insurance
business is not contrary to the interest of existing and potential policy
holders; and

(h) that the name of the company is not likely to deceive.

(4) For the purposes of subsection (3)(a)--

(a)in computing the amount of the liabilities of a company, all contingent and
prospective liabilities shall be taken into account but not liabilities in
respect of the company's share capital;

(b)the value of any assets and the amount of any liabilities shall be
determined in accordance with any applicable regulations made under
section 59(a) (in this Ordinance referred to as 'valuation regulations'),
and paragraph (a) shall have effect subject to any such regulations;

(e)if no such valuation regulations are applicable in the case of a company,
regard shall be had

(i) in determining the value of its assets, to their market value and the
cost of realizing such assets; and

(ii) in determining the amount of its liabilities, to the cost of the
settlement of such liabilities and, where the amount of any such liabilities
is assessed or estimated, to the experience of the company in carrying on
any relevant insurance business or of other persons carrying on the same
or similar insurance business.

Meaning of 'controller' in section 8(2)

9. (1) In section 8(2) 'controller', in relation to a company ('the applicant'),
means

(a)a managing director of the applicant or of a body corporate of which it is a
subsidiary;

(b)a chief executive of the applicant or of a body corporate, being an insurer,
of which it is a subsidiary;

(c) a person-

(i) in accordance with whose directions or instructions the directors of
the applicant or of a body corporate of which it is a subsidiary (or any of
them) are accustomed to act; or





(ii) who, alone or with any associate or through a nominee, is
entitled to exercise, or control the exercise of, one third or more of the
voting power at any general meeting of the applicant or of a body
corporate of which it is a subsidiary.

(2) Subject to subsection (3), in this section 'chief executive', in relation to the
applicant or a body corporate of which it is a subsidiary, means an employee of the
applicant or that body corporate, who, alone or jointly with others, is responsible
under the immediate authority of the directors for the conduct of the whole of the
insurance business of the applicant or that body corporate.

(3) In relation to an applicant incorporated outside Hong Kong-

(a)the reference in subsection (1)(a) to a managing director of the applicant
includes a reference to a person who is a managing director of the
applicant in respect of so much of its insurance business as is carried on
within Hong Kong; and

(b)the reference in subsection (1)(b) to a chief executive of the applicant
includes a reference to a person employed by the applicant who, alone or
jointly with others, is responsible (whether or not under the immediate
authority of the directors) for the conduct of the whole of the insurance
business carried on by the applicant within Hong Kong, not being a
person who

(i) is also responsible for the conduct of insurance business carried on
by the applicant elsewhere; and

(ii) has a subordinate who is responsible for the whole of the insurance
business carried on by the applicant within Hong Kong.

(4) In this section 'associate', in relation to any person, means-

(a) the wife or husband or minor child of that person;

(b) any body corporate of which that person is a director;

(c) any person who is an employee or partner of that person;

(d) if that person is a body corporate-

(i) any director of that body corporate;

(ii) any subsidiary of that body corporate;

(iii) any director or employee of any such subsidiary,

and for the purposes of this subsection 'child' includes a step-child.

Meaning of 'relevant amount' in section 8(3)

10. (1) For the purposes of section 8(3)(a), the relevant amount in the case of a
company carrying on or intending to carry on general business only shall be the
amount applicable to that company according to the following Table





TABLE

Case Amount Applicable

1. The relevant premium income of $2 million or its equivalent.
the company in its last preceding
financial year did not exceed $ 10
million or its equivalent.
2. The said income in that year One-fifth of the said income in that
exceeded $10 million but did not year.
exceed $50 million or its equivalent.

3. The said income in that year ex- The aggregate of $10 million
ceeded $50 million or its equivalent. and one-tenth of the amount by
which the said income in that year
exceeded $50 million or its
equivalent.

In the case of a company referred to in section 8(3)(b)(iii), the amount applicable
shall be not less than $4,000,000 or its equivalent.

(2) For the purposes of section 8(3)(a), the relevant amount in the case of a
company carrying on or intending to carry on long term business only is $2,000,000
or its equivalent.

(3) For the purposes of section 8(3)(a), the relevant amount in the case of a
company carrying on or intending to carry on both general business and long term
business is the aggregate of the following amounts--

(a)the amount which, if subsection (1) applied, would be the relevant amount
in the case of that company having regard only to its general business; and

(b) $2,000,000 or its equivalent.

(4) For the purposes of this section-

(a)in the case of a company whose last preceding financial year was not a
period of 12 months, the premium income in that financial year shall be
deemed to be the sum obtained by dividing the amount of premiums
receivable in that financial year by the number of days in that financial year
and multiplying the result by 365;

(b)the relevant premium income of a company in any financial year shall be
whichever is the greater of the following amounts

(i) an amount equal to 50% of the gross premium income of the
company in that financial year;

(ii) the amount obtained by deducting from its gross premium income
the amount of any premiums payable by the company in
respect of reinsurance;

(c)the gross premium income of a company in any financial year shall be the
amount of premiums receivable in that financial year in respect of all
insurance business other than long term business.

(5) In subsection (4)(a) and (e) 'premiums receivable', in relation to a financial
year, means the premiums paid or payable to an insurer in respect of





contracts written or renewed in that financial year before deducting commissions of
agents or brokers but after deducting any discounts specified in policies or refunds
of premiums made in respect of any termination or reduction of risks.

Appeal against refusal of authorization under section 8(2)

11. (1) Where the Insurance Authority refuses to authorize a company under
section 8 on the ground (or, if more than one, on grounds which include the ground)
that any person as mentioned in subsection (2) of that section is not a fit and proper
person to hold the position held by him, the Insurance Authority shall notify the
company in writing of that fact and the name of the person whose fitness is in
question.

(2) Where notice of a refusal is given to a company under subsection (1), a
copy thereof shall at the same time be sent by registered post to the person whose
fitness is in question; and if the company or that person is aggrieved by such
refusal the company or that person may, within 1 month from the date of the notice,
appeal in writing against such refusal so far as it is based on section 8(2) to the
Financial Secretary, who shall review the Insurance Authority's reasons for such
refusal and whose decision shall be final; but his decision shall not affect such
refusal so far as it is based on any additional ground under section 8(1)(b). (Amended
41 of 1987 s. 3)

(3) Where the Insurance Authority refuses to authorize a company under
section 8(1)(b)(ii), the Insurance Authority shall notify the company in Writing of
that refusal. (Added 41 of 1987s.3)

(4) Where notice of a refusal is given to a company under subsection (3) and
the company is aggrieved by such refusal, it may, within 1 month from the date of
the notice, appeal in writing against such refusal to the Financial Secretary, who
shall review the Insurance Authority's reasons for such refusal and whose decision
shall be final; but his decision shall not affect any refusal under section 8(1)(b)(i).
(Added 41 of 1987 s. 3)

Conditions imposed under section 8 may he revoked

12. (1) Where any authorization is granted subject to conditions imposed under
section 8(1)(a), the Insurance Authority may revoke any such conditions by notice
in writing given to the insurer concerned.

(2) Any condition referred to in subsection (1) which was in effect immediately
before the commencement of the Insurance Companies (Amendment) Ordinance
1988 (34 of 1988) shall continue to have effect until it is revoked under that
subsection.

(3) Where any condition referred to in subsection (1) is revoked under that
subsection, the Insurance Authority may direct that any matters recorded in respect
of that condition in the register kept under section 5 shall be erased.

(Replaced 34 of 1988 s. 3)

Fee payable upon authorization and annually thereafter

13. (1) A fee of $25,000 shall be paid to the Insurance Authority by

every authorized insurer- (Amended L.N. 91/85)





(a) not later than the date on which it is authorized; and

(b) annually not later than the anniversary of such date.

(2) Subsection (1) shall apply to an insurer deemed by virtue of section 61(1) to
be authorized under section 8 to carry on insurance business as if

(a) paragraph (a) were omitted; and

(b)in paragraph (b), for 'such date' there were substituted 'the date on
which it was first authorized to carry on insurance business under any
Ordinance repealed or amended by this Ordinance'.

(3) Where it appears to the Insurance Authority that an authorized insurer does
not intend to effect any contracts of insurance after any anniversary referred to in
subsection (1), the Insurance Authority may waive the payment of the fee payable
by the insurer under that subsection in respect of that and any subsequent
anniversary; but any such waiver may be revoked at any time by the Insurance
Authority by notice in writing to the insurer, with effect from the date of such notice.


Notification of change in particulars, and objection to
appointment of new director or controller

14. (1) Without prejudice to subsection (2), where any change takes place in
the particulars specified in respect of an authorized insurer in the application made
by that insurer under section 7 or any information furnished under that section, the
insurer shall, within 1 month from the date on which the change takes place, notify
the Insurance Authority thereof in writing and shall furnish the Insurance Authority
with such information in respect thereof as the Insurance Authority may require.

(2) Where any person becomes or ceases to be a director or controller of any authorized insurer, he shall forthwith deliver written
notice of that fact to the Insurance Authority containing the information specified
in the Second Schedule.


(3) Where any person becomes or ceases to be a director or controller of any
authorized insurer, he shall forthwith deliver written notice of that fact to the insurer
together with such information relating to himself as may be necessary to enable the
insurer to comply with subsection (2) as respects that fact.

(4) Subject to subsection (5), the Insurance Authority may, if it appears to ,him
that any person appointed as director or controller of an authorized insurer

is not a fit and proper person to be appointed to that position, serve a notice in
writing on the insurer stating

(a) that he objects to the appointment; and

(b)that he objects thereto on the ground that it appears to him that the person
so appointed is not a fit and proper person to be appointed to the position
in question.

(5) The following provisions shall apply in relation to a notice of objection
referred to in subsection (4)





(a)the Insurance Authority shall serve on the insurer and the person
concemed a preliminary written notice stating--

(i) that the Insurance Authority is considering the service on the

insurer of a notice of objection under that subsection on the ground
referred to in paragraph (b) thereof;

(ii) that the insurer and that person may, within 2 months from the date
of service of the preliminary notice, make written representations to the
Insurance Authority and, if the insurer or that person so requests, oral
representations to a public officer appointed for the purpose by the
Insurance Authority;

(b)the Insurance Authority shall not be obliged to disclose to the insurer or
to that person any particulars of the ground on which he is considering
the service on the insurer of the notice of objection;

(c)where representations are made under paragraph (a)(ii) the Insurance
Authority shall take them into consideration before serving the notice of
objection.

(6) If the insurer or the person concemed is aggrieved by the decision of the
Insurance Authority to serve a notice of objection under this section, the insurer or
person concerned may, within 1 month from the date on which the notice is served
on the insurer or person concemed as the case may be, appeal against the decision
to the Financial Secretary whose decision shall be final.

(7) In this section 'authorized insurer' does not include an insurer to which
section 52 applies except an insurer referred to in subsection (7) of that section.

(8) Any person who fails to comply with subsection (1), (2) or (3) commits an
offence and is liable to a fine of $100,000 and, in the case of an individual, to
imprisonment for 2 years, together with a fine of $1,000 for each day on which the
offence continues.

PART 111

ACCOUNTS AND
STATEMENTS

Appointment of auditor and actuary

15. (1) Every insurer shall appoint-

(a) as auditor of the insurer-

(i) a person who is qualified for appointment as auditor of a company
under the Professional Accountants Ordinance (Cap. 50) and is not
disqualified under section 140 of the Companies Ordinance (Cap. 32); or

(ii) in the case of an insurer incorporated outside Hong Kong, a person
qualified for appointment as auditor thereof under the law of the place of
its incorporation; or

(iii) a person acceptable to the Insurance Authority; and





(b)if the insurer carries on long term business, an actuary possessing the
prescribed qualifications or who is acceptable to the Insurance Authority,
as actuary to the insurer,

and whenever any such appointment comes to an end the insurer shall as soon as
practicable make a fresh appointment.

(2) A first appointment made
(a) under subsection (1)(a) shall be made-

(i) if the insurer is carrying on insurance business at the commencement
of this Ordinance, within 1 month from such commencement; or

(ii) if the insurer begins to carry on insurance business after such
commencement, within 1 month from beginning to do so; and

(b) under subsection (1)(b) shall be made---

(i) if the insurer is carrying on long term business at the commencement
of this Ordinance, within 1 month from such commencement;

(ii) if the insurer begins to carry on long term business after such
commencement, within 1 month from beginning to do so.

(3) An insurer making an appointment under subsection (1) shall within 1
month from making the appointment serve on the Insurance Authority a notice in
writing stating that fact and the name and qualifications of the person appointed.

(4) Whenever an appointment made by an insurer under subsection (1) comes
to an end, the insurer shall within 1 month from the ending of the appointment serve
on the Insurance Authority a notice in writing stating that fact and the name of the
person concerned.

(5) Any insurer which fails to comply with any of the provisions of this section
commits an offence and is liable to a fine of 510,000.

Keeping and preserving of proper books of account

16. (1) Without prejudice to the Companies Ordinance (Cap. 32), every insurer
shall cause to be kept proper books of account which may be kept either in a legible
form or in a non-legible form capable of being reproduced in a legible form; but
where any such books are kept otherwise than by making entries in a bound book,
adequate precautions shall be taken for guarding against falsification and
facilitating its discovery.

(2) Proper books of account, for the purposes of this section, are books of
account which (in themselves or, if kept under subsection (1) otherwise than in a
legible form, as reproduced in a legible form) sufficiently exhibit and explain all
transactions entered into by the insurer in the course of any business carried on by
the insurer.

(3) If any books of account required to be kept by this section are kept by an
insurer by recording the matters in question otherwise than in a legible form, any
power conferred by this Ordinance to require production of such books or to take
copies thereof or extracts therefrom shall be construed as including power to require
production of, and to take away, a reproduction of the recording or of the relevant
part of it in a legible form.





(4) Any books of account required to be kept by this section shall be
preserved by the insurer for 7 years from the end of the financial year to which the
last entry made or matter recorded therein relates.

Submission of financial information

17. (1) Every insurer shall, in accordance with section 20, submit to the
Insurance Authority accounts, statements and other information as required by the
Third Schedule, and the information so submitted shall be in accordance with any
applicable valuation regulations.

(2) The Insurance Authority may, at the request in writing of an insurer, modify
or vary any of the requirements of the Third Schedule in relation to that insurer in
such respects and for such period as the Insurance Authority and the insurer may
agree; and during any period when any such modification or variation is in force,
the reference in subsection (1) to the Third Schedule shall, as respects that insurer,
be construed as a reference to that Schedule as so modified or varied.

(3) Where under subsection (2) the Insurance Authority modifies or varies any
of the requirements of the Third Schedule in relation to an insurer, he shall, as soon
as practicable, publish a notice in the Gazette stating the name of the insurer and the
fact that that Schedule has been modified or varied under subsection (2) in relation
to that insurer.

Periodic actuarial investigation of insurer with long
term business

18. (1) Any insurer which carries on long term business-


(a)shall, once in every 2 years or at such shorter intervals as the Insurance
Authority may require, cause an investigation to be made into its financial
condition in respect of that business, including a valuation of its liabilities
in respect thereof, by the person who for the time being is its actuary
under section 15(1); and

(b)when such an investigation has been made, or when at any other time an
investigation into the financial condition of the insurer in respect of its
long term business has been made with a view to the distribution of
profits, or the results of which are made public, shall cause an abstract of
the actuary's report of the investigation to be made in the form specified in
the Third Schedule and shall submit such abstract to the Insurance
Authority in accordance with section 20.

(2) Where under subsection (1) an insurer causes an abstract to be made of the
report of an actuary on his investigation into the financial condition of the insurer in
respect of its long term business, the insurer shall prepare a statement containing
the information specified in the Third Schedule in respect of its long term business
at the date to which the accounts of the insurer are made up for the purposes of the
investigation and shall submit such statement to the Insurance Authority in
accordance with section 20.

(3) For the purposes of any investigation to which this section applies the
value of any assets and the amount of any liabilities shall be determined in
accordance with any applicable valuation regulations.





Statements of transactions of prescribed class or
description

19. (1) Classes or descriptions of agreements or arrangements appearing to the
Governor in Council as likely to be undesirable in the interests of policy holders may
be prescribed for the purposes of this section, and every insurer which enters into
an agreement or arrangement of a class or description so prescribed shall, within
such period as may be prescribed, furnish the Insurance Authority with a statement
containing such particulars of that agreement or arrangement as may be prescribed.

(2) Different classes or descriptions of agreements or arrangements may be
prescribed for the purposes of this section in relation to insurers of different classes
or descriptions.

(3) The whole or any part of any statement furnished to the Insurance
Authority under this section may be deposited by him with the Registrar of
Companies and may be published by the Insurance Authority in such ways as he
thinks appropriate.

Deposit of accounts etc. with Insurance Authority

20. (1) Any account, balance sheet, abstract, certificate or statement of an
insurer and any report of the auditor thereof required to be submitted to the
Insurance Authority under section 17 or 18 shall be in legible form, and 2 copies
shall be deposited with the Insurance Authority within 6 months after the close of
the period to which the account, balance sheet, abstract, certificate. statement or
report relates:

Provided that if in any case it is made to appear to the Insurance Authority that
the circumstances are such that a longer period than 6 months should be allowed,
the Insurance Authority may extend that period by such period not exceeding 3
months as he thinks fit.

(2) One of the copies of any document deposited under subsection (1) except
an auditor's report shall be a copy signed

(a) in any case
(i) where there are more than 2 directors of the insurer, by at least 2 of
those directors and, where there are not more than 2 directors, by all the
directors;

(ii) by a chief executive, if any, of the insurer or (if there is no chief
executive) by the secretary; and

(b)in the case of an abstract or statement referred to in section 18. by the
actuary who made the investigation to which the abstract relates or by
reference to which the statement was prepared.

(3) One of the copies of any auditor's report deposited under subsection (1)
shall be a copy signed by the auditor.

(4) The Insurance Authority shall consider the documents deposited under
subsection (1), and if any such document appears to him to be inaccurate or
incomplete in any respect he may communicate with the insurer with a view to the
correction of any such inaccuracies and the supply of deficiencies.





(5) There shall be deposited with every balance sheet of an insurer any report
on the affairs of the insurer submitted to the shareholders or policy holders of the
insurer in respect of the financial year to which the balance sheet relates.

(6) In this section any reference to an account or balance sheet includes a
reference to any statement or report annexed thereto giving information required by
virtue of section 17 to be so given and any certificate so annexed by virtue of that
section.

(7) Any insurer which fails to comply with any of the provisions of this section
commits an offence and is liable to a fine of $ 100,000 together with a fine of $500 for
each day on which the offence continues.

Documents to be deposited with Registrar of Companies

21. (1) Without prejudice to the Companies Ordinance (Cap. 32), where an
insurer which is a company submits to the Insurance Authority any account,
balance sheet, abstract, certificate or statement of the insurer or any report of the
auditor thereof required to be submitted under section 17 or 18, the insurer shall at
the same time deposit a copy of such account, balance sheet, abstract, certificate,
statement or report with the Registrar of Companies.

(2) Any insurer which fails to comply with subsection (1) commits an offence
and is liable to a fine of $100,000.

PART IV

LONG TERM BUSINESS

Separation of assets and liabilities attributable to long term
business

22. (1) Where an insurer carries on long term business-

(a) the insurer shall maintain an account in respect of that business; and

(b)the receipts of that business shall be entered in the account maintained
for that business and shall be carried to and form a separate insurance
fund with an appropriate name.

(2) An insurer which carries on long term business shall maintain such books
of account and other records as are necessary for identifying

(a)the assets representing the fund maintained by the insurer under
subsection (1)(b); and

(b) the liabilities attributable to that business.

(3) Any fund or funds maintained by an insurer in respect of its long term
business shall be so maintained that the value of the assets representing the fund or
funds (as determined in accordance with any applicable valuation regulations) shall
in the aggregate exceed the amount of the liabilities attributable to that business (as
so determined) by not less than 52,000,000 or its equivalent.





(4) An insurer which was carrying on long term business immediately before
the commencement of this Ordinance shall, in accordance with the Third Schedule,
make arrangements during the financial year of the insurer beginning next after the
commencement of this Ordinance for identifying the assets and liabilities of the
insurer as on the last day of that financial year which are attributable to its long term
business.

(5) Any insurer which fails to comply with any of the provisions of this section
commits an offence and is liable to a fine of $ 100,000 together with a fine of $500 for
each day on which the of-Fence continues.

Foreign insurers may he authorized to maintain an account
in relation to their Hong Kong business

22A. (1) Where an insurer which carries on long term business is incorporated
or formed outside Hong Kong, the Insurance Authority may, at the request in
writing of the insurer, authorize the insurer to maintain an account of long term
business carried on in Hong Kong in place of the account referred to in section 22(1)
and, if such an authorization is given, the insurer shall maintain an account of long
term business carried on in Hong Kong in accordance with that authorization.

(2) The Insurance Authority may, in giving his authorization under subsection
(1)

(a)modify or vary any of the requirements of the Third Schedule in its
application to the insurer as may be appropriate; and

(b)specify the period within which the insurer shall, in accordance with the
Third Schedule as modified or varied under paragraph (a), make
arrangements for identifying the assets and liabilities of the insurer which
are attributable to its long term business carried on in Hong Kong as on
such day as may be so specified.

(3) Subject to the terms of any authorization under subsection (1) and to
subsection (4), this Ordinance, with the exception of section 22(4), shall continue to
apply to an insurer in respect of whom such authorization is in force.

(4) Where an authorization under subsection (1) is in force in relation to any
insurer, any references in

(a)sections 22(1)(a) and (b), (2)(b) and (3), 23 and 45(2) and (5) to the long
term business of the insurer, or to the business of the insurer where this is
to be construed as a reference to its long term business, shall be construed
as a reference to the long term business of the insurer carried on in Hong
Kong;

(b)sections 22, 23 and 45 to the fund or funds maintained by the insurer in
respect of its long term business, shall be construed as a reference to the
fund or funds maintained by the insurer in respect of its long term business
carried on in Hong Kong.

(5) Where the Insurance Authority gives any authorization under subsection
(1) he shall, as soon as practicable, publish a notice in the Gazette stating the name
of the insurer and the fact that such authorization has been given.

(Added 4 of 1987 s. 2)





Application of assets of insurer with long term business

23. (1) Subject to subsections (2) and (3) and section 45(2), the assets
representing the fund or funds maintained by an insurer in respect of its long term
business shall be applicable only for the purposes of that business.

(2) Where the value of the assets mentioned in subsection (1) is shown, by an
investigation to which section 18 applies or which is made in pursuance of a
requirement imposed under section 32, to exceed the aggregate of the amount of the
liabilities attributable to the insurer's long term business and $2,000,000 or its
equivalent, the restriction imposed by that subsection shall not apply to so much of
those assets as represents the excess.

(3) Nothing in subsection (1) shall preclude an insurer from exchanging, at fair
market value, assets representing a fund maintained by the insurer in respect of its
long term business for other assets of the insurer.

(4) Any mortgage or charge shall be void to the extent to which it contravenes
subsection (1).

(5) For the avoidance of doubt it is hereby declared that money from a fund
maintained by an insurer in respect of its long term business may not be used for the
purposes of any other business of the insurer notwithstanding any arrangement for
its subsequent repayment out of the receipts of that other business.

(6) No insurer, and no body corporate of which an insurer is a subsidiary, shall
declare a dividend to shareholders at any time when the requirements of section
22(3) relating to any fund or funds maintained by the insurer in respect of its long
term business have ceased to be satisfied.

(7) Any insurer or body corporate which fails to comply with subsection (1) or
(6) commits an offence and is liable to a fine of $100,000 together with a fine of $500
for each day on which the offence continues.

Sanction of High Court for transfer of long term business '

24. (1) Where it is proposed to carry out a scheme under which the whole or
part of the long term business carried on in Hong Kong by an insurer ('the
transferor company') is to be transferred to another insurer ('the transferee
company') the transferor company or transferee company may apply to the High
Court, by petition, for an order sanctioning the scheme.

(2) The High Court shall not determine an application under this section unless
the petition is accompanied by a report on the terms of the scheme by an
independent actuary and the High Court is satisfied that the requirements of
subsection (3) have been complied with.

(3) The requirements referred to in subsection (2) are

(a) that a notice has been published in the Gazette and, except where the
High Court has otherwise directed, in an English language newspaper
and a Chinese language newspaper (being in each case
a newspaper specified in a list of newspapers approved by the Secretary for
Administrative Services and Information for the purposes of this
section stating that the application has been made and giving the





address of the offices at which, and the period for which, copies of the
documents mentioned in paragraph (d) will be available as required
by that paragraph; (Amended 34 of 1988 s. 4)

(b) except where the High Court has otherwise directed, that a statement-
(i) setting out the, terms of the scheme; and
(ii) containing a summary of the report mentioned in subsection (2)
sufficient to indicate the opinion of the actuary on the likely effects of
the scheme on the long term policy holders of the insurers concerned,

has been sent to each of those policy holders and to every member of
those insurers;

(c)that a copy of the petition, of the report mentioned in subsection (2)
and of any statement sent out under paragraph (b) has been served on
the Insurance Authority and that a period of not less than 21 days has
elapsed since the date of service;

(d)that copies of the petition and of the report mentioned in subsection (2)
have been open to inspection at offices in Hong Kong of the insurers
concemed or their representatives for a period of not less than 21 days
beginning with the date of the first publication of a notice in accord-
ance with paragraph (a).

(4) Each of the insurers concerned shall furnish a copy of the petition and
of the report mentioned in subsection (2) to any person who asks for one at any
time before an order sanctioning the scheme is made on the petition.

(5) On any petition under this section-

(a) the Insurance Authority; and

(b)any person (including any employee of the transferor company or the
transferee company) who alleges that he would be adversely affected
by the carrying out of the scheme,

shall be entitled to be heard.

(6) The High Court shall not make an order sanctioning the scheme
unless it is satisfied that the transferee company is, or immediately after the
making of the order will be, authorized to carry on any long term business to
be transferred under the scheme.

(7) No such transfer as is mentioned in subsection (1) shall be carried out
unless the scheme relating to the transfer has been sanctioned by the High Court
in accordance with this section; and no order shall be made under section 166
or 167 of the Companies Ordinance (Cap. 32) in respect of so much of any
compromise or arrangement as involves any such transfer.

(8) Any insurer which fails to comply with subsection (4) commits an
offence and is liable to a fine of $10,000.

Provisions supplementary to section 24

25. (1) Where the High Court makes an order under section 24 sanction-
ing a scheme the High Court may, either by that order or by any subsequent
order, make provision for all or any of the following matters-





(a)the transfer to the transferee company of the whole or any part of the
undertaking and of the property or liabilities of the transferor company;

(b)the allotting or appropriation by the transferee company of any shares,
debentures, policies or other like interests in the transferee company
which under the scheme are to be allotted or appropriated by the
transferee company to or for any person;

(c)the continuation by or against the transferee company of any legal
proceedings pending by or against the transferor company;

(d) the dissolution, without winding up, of the transferor company;

(e)such incidental, consequential and supplementary matters as are
necessary to secure that the scheme shall be fully and effectively carried
out.

(2) Where any such order provides for the transfer of property or liabilities,
that property shall, by virtue of the order, be transferred to and vest in, and those
liabilities shall, by virtue of the order, be transferred to and become the liabilities of,
the transferee company, and in the case of any property, if the order so directs,
freed from any mortgage or charge which is by virtue of the scheme to cease to
have effect.

(3) For the purposes of any provision requiring the delivery of an instrument of
transfer as a condition for the registration of a transfer of any property (including in
particular section 66 of the Companies Ordinance (Cap. 32)) an order which by virtue
of this section operates to transfer any property shall be treated as an instrument of
transfer.

(4) Where a scheme is sanctioned by an order of the High Court under section
24 the transferee company shall, within 10 days from the date on which the order is
made or such longer period as the Insurance Authority may allow, deposit 2 office
copies of the order with the Insurance Authority.

(5) Any person who fails to comply with subsection (4) commits an offence
and is liable to a fine of $10,000.

(6) In this section 'property' includes property, rights and powers of every
description; 'liabilities' includes duties, and 'shares' and 'debentures' have the
same meaning as in the Companies Ordinance.

PART V

POWERS OF INTERVENTION

Grounds on which powers are exercisable

26. (1) Any power conferred on the Insurance Authority by sections 27 to 35
shall be exercisable in relation to any insurer on any of the following grounds

(a)that the Insurance Authority considers the exercise of the power to be
desirable for protecting policy holders or potential policy holders of the
insurer against the risk that the insurer may be unable to meet its liabilities
or to fulfil the reasonable expectations of policy holders or potential
policy holders;





(b) that it appears to him--

(i) that the insurer has failed to satisfy an obligation to which it is or
was subject by virtue of this Ordinance or any Ordinance repealed
thereby;

(ii) that a body corporate of which it is a subsidiary has failed to satisfy
an obligation to which it is or was subject by virtue of section 23(6) or any
Ordinance repealed by this Ordinance;

(c)that it appears to him that the insurer has furnished misleading or
inaccurate information to the Insurance Authority under or for the
purposes of any provision of this Ordinance or any Ordinance repealed
thereby;

(d)that he is not satisfied that adequate arrangements are in force or will be
made for the reinsurance of risks against which persons are insured by the
insurer in the course of carrying on business, being risks of a class in the
case of which he considers that such arrangements are required;

(e)that there exists a ground on which he would be prohibited by section 8(2)
or (3)(b) from authorizing the insurer if it were to make application in that
behalf.

(2) Any power mentioned in subsection (1) shall also be exercisable in relation
to any insurer on the ground that the Insurance Authority is not satisfied that the
insurer is not to be deemed under section 42(1), for the purposes of section 177 or
327 of the Companies Ordinance (Cap. 32), to be unable to pay its debts.

(3) The power conferred on the Insurance Authority by section 34(2),(3)
and (4) shall also be exercisable on the ground that he considers the exercise of that
power to be desirable in the general interests of persons who are or may become
policy holders of an insurer.

(4) Any power conferred on the Insurance Authority by sections 27 to 32,

34(1) or 35 shall also be exercisable, whether or not any of the grounds specified
in subsections (1) and (2)exists, in relation to-

(a) any insurer authorized to carry on any class of insurance business;

(b)any insurer in the case of which a person has, after the commencement of
this Ordinance, become a controller within the meaning of section 9(1)(c),

if that power is exercised before the expiration of the period of 5 years ('the relevant
period') beginning on the latest date on which the insurer was so authorized or the
date on which that person became such a controller, as the case may be; but no
requirement imposed by virtue of this subsection shall continue in force after the
expiration of the period of 10 years from the beginning of the relevant period.

(5) The power conferred on the Insurance Authority by section 35 shall not be
exercisable except in a case in which he considers that the purpose mentioned in that
section cannot be *appropriately achieved by the exercise of the powers conferred
by sections 27 to 34 or by the exercise of those powers alone.





(6) The Insurance Authority shall, when exercising any power conferred by
sections 27 to 35, state the ground on which he is exercising it or, if he is exercising
it by virtue of subsection (4), that he is so exercising it; but this subsection shall not
apply where the Insurance Authority has given notice under section 36 or 37 of the
proposed exercise of the power.

(7) The grounds specified in subsections (1)(b) to (e), (2) and (3) are without
prejudice to the ground specified in subsection (1)(a).

Restrictions on new business

27. (1) The Insurance Authority may require an insurer---

(a)not to effect any contracts of insurance or contracts of insurance of a
specified description;

(b)not to vary any contracts of insurance of a specified description, being
contracts effected in the course of carrying on insurance business and in
force when the requirement is imposed.

(2) A requirement under this section may apply to contracts of insurance
whether or not the effecting of them falls within a class of insurance business which
the insurer is for the time being authorized to carry on.

Requirements about investments

28. (1) The Insurance Authority may require an insurer---

(a) not to make investments of a specified class or description;

(b)to realize, before the expiration of a specified period (or such longer period
as the Insurance Authority may allow), the whole or a specified
proportion of investments of a specified class or description held by the
insurer when the requirement is imposed.

(2) A requirement under this section may be framed so as to apply only to
investments which are (or, if made, would be) assets representing a fund or funds
maintained by the insurer in respect of its long term business or so as to apply only
to other investments.

Maintenance of assets in Hong Kong

29. (1) The Insurance Authority may require that assets of an insurer of a value
which at any time is equal to the whole or a specified proportion of the amount of its
domestic liabilities shall be maintained in Hong Kong, and, in imposing any such
requirement, he shall have regard to the insurer's arrangements for the reinsurance
of risks against which persons are insured by the insurer in the course of carrying
on business.

(2) The Insurance Authority may direct that for the purposes of any
requirement under this section assets of a specified class or description shall or
shall not be treated as assets maintained in Hong Kong.

(3) The Insurance Authority may direct that for the purposes of any
requirement under this section the domestic liabilities of an insurer, or such
liabilities of any class or description, shall be taken to be the net liabilities after
deducting any part of them which is reinsured.





(4) A requirement imposed under this section may be framed so as to
come into effect immediately after the day on which it is imposed or so as to
come into effect after the expiration of a specified period (or such longer period
as the Insurance Authority may allow).

(5) In this section any reference to a domestic liability of an insurer is a
reference to a liability of the business carried on by the insurer in Hong Kong.

(6) Subject to subsection (7), in computing the amount of any liabilities
for the purposes of this section all contingent and prospective liabilities shall be
taken into account but not liabilities in respect of share capital.

(7) For the purposes of this section the value of any assets and the amount
of any liabilities shall be determined in accordance with any applicable
valuation regulations; and subsection (6) shall have effect subject to any such
regulations.

Custody of assets

30. (1) The Insurance Authority may, in the case of an insurer on which a
requirement has been imposed under section 29, impose an additional require-
ment that the whole or a specified proportion of the assets to which the
requirement under that section applies shall be held by a person approved by
him for the purposes of the requirement under this section as trustee for the
insurer.

(2) Section 29(4) shall apply also to a requirement under this section.

(3) Assets of an insurer held by a person as trustee for an insurer shall be
taken to be held by such person in compliance with a requirement imposed
under this section if, but only if, they are assets in whose case the insurer has
given such person written notice that they are to be held by him in compliance
with such a requirement or they are assets into which assets in whose case the
insurer has given such person such written notice have, by any transaction or
series of transactions, been transposed by him on the instructions of the insurer.

(4) No assets held by a person as trustee for an insurer in compliance with
a requirement imposed under this section shall, so long as the requirement is in
force, be released except with the consent of the Insurance Authority.

(5) If a mortgage or charge is created by an insurer at a time when there is
in force a requirement imposed on the insurer by virtue of this section, being a
mortgage or charge conferring a security on any assets which are held by a
person as trustee for the insurer in compliance with the requirement, the
mortgage or charge shall, to the extent that it confers such a security, be void
against the liquidator and any creditor of the insurer.

Limitation of premium income

31. (1) The Insurance Authority may require an insurer to take all such
steps as are requisite to secure that the aggregate of the premiums-

(a)to be received by the insurer in consideration of the undertaking by it
during a specified period of liabilities in the course of carrying on
general business or any specified part of such business; or





(b)to be received by it in a specified period in consideration of the
undertaking by the insurer during that period of liabilities in the course of
carrying on long term business or any specified part of such business,

shall not exceed a specified amount.

(2) A requirement under this section may apply either to the aggregate
premiums to be received as mentioned in subsection (1) or to the aggregate of those
premiums after deducting any premiums payable by the insurer for reassuring the
liabilities in consideration of which the first-mentioned premiums are receivable.

Actuarial investigations

32. (1) The Insurance Authority may require an insurer which carries on long
term business

(a)to cause the person who for the time being is its actuary under section 15
to make an investigation into its financial condition (including a valuation
of its liabilities) in respect of that business, or any specified part of that
business, as at a specified date;

(b)to cause an abstract of that person's report of the investigation to be
made; and

(c)to prepare a statement of its long term business or of that part thereof as
at that date.

(2) For the purposes of any investigation made in pursuance of a requirement
under this section the value of any assets and the amount of any liabilities shall be
determined in accordance with any applicable valuation regulations.

(3) The form and contents of any abstract or statement made in pursue ance of
a requirement under this section shall be the same as for an abstract or statement
made under section 18.

(4) Two copies of any abstract or statement made in pursuance of a requirement
under this section shall be deposited by the insurer with the Insurance Authority on
or before such date as he may specify, and 1 of those copies shall be a copy signed
by the persons required to sign copies of abstracts or statements made under
section 18 which are deposited under section 20.

Acceleration of information required by accounting
provisions

33. (1) The Insurance Authority may require any documents which under
section 20 are required to be deposited with him by an insurer within the period
specified in that section to be deposited with him on or before a specified date
before the end of that period, being a date not earlier than 3 months before the end
of that period and not earlier than 1 month after the date on which the requirement is
imposed.





(2) The Insurance Authority may require any statement which under
section 19 is required to be furnished to him by an insurer within a period
prescribed under that section to be furnished to him on or before a specified
date before the end of that period.

Power to obtain information and require production of
documents
34. (1) The Insurance Authority may require an insurer to furnish him,
at specified times or intervals, with information about specified matters being, if
he so requires, information verified in a specified manner.
(2) The Insurance Authority may-
(a)require an insurer to produce, at such time and place as he may
specify, such books or papers as he may specify; or
(b)authorize any person, on producing (if required so to do) evidence of
his authority, to require an insurer to produce to him forthwith any
books or papers which that person may specify.
(3) Where by virtue of subsection (2) the Insurance Authority or a person
authorized by him has power to require the production of any books or papers
from any insurer, the Insurance Authority or that person shall have the like
power to require production of those books or papers from any person who
appears to him to be in possession of them; but where any person from whom
such production is required claims a lien on books or papers produced by him,
the production shall be without prejudice to the lien.

(4) Any power conferred by or by virtue of subsections (2) and (3) to
require an insurer or other person to produce books or papers shall include
power-
(a) if the books or papers are produced-
(i) to take copies of them or extracts from them; and
(ii) to require that person, or any other person who is a present or
past director, controller, auditor or actuary of, or is or was at any time
employed by, the insurer in question, to provide an explanation of any
of them;
(b)if the books or papers are not produced. to require the person who was
required to produce them to state, to the best of his knowledge and
belief, where they are.
(5) A statement made by a person in compliance with a requirement
imposed by virtue of this section may be used in evidence against him.
(6) References in this section to books and papers shall be construed as if
they were contained in the Companies Ordinance (Cap. 32).

Residual power to impose requirements for protection
of policy holders
35. Subject to section 26(5), the Insurance Authority may require an
insurer to take such action as appears to him to be appropriate for the purpose
of protecting policy holders or potential policy holders of the insurer against
the risk that the insurer may be unable to meet its liabilities or to fulfil the
reasonable expectations of policy holders or potential policy holders.





Requirement under section 35 to make deposit

35A. (1) Without limiting the generality of section 35, a requirement imposed
under that section on an insurer may include a requirement that the insurer

(a) shall make a deposit-

(i) of an amount of money specified in that requirement;

(ii) with a bank, or a bank belonging to a class of banks, specified in
that requirement;

(iii) in the name of the Insurance Authority as trustee for the insurer;
and

(iv) on a date not later than the date specified in that requirement;

(b)shall place in the custody of the Insurance Authority, on a date not later
than the date specified in that requirement, a receipt, or other document,
that evidences. to the satisfaction of the Insurance Authority, that the
deposit referred to in paragraph (a) has been made;

(e)shall keep the deposit referred to in paragraph (a) free from any charge
both on, and from, the day upon which that deposit is made; and

(d) shall not-

(i) take any action; or

(ii) issue any instruction to any bank at which the deposit referred to in
paragraph (a) is held from time to time,

which would result in the release of that deposit, or any part of that
deposit, to the insurer or to any other person.

(2) Nothing in subsection (1) shall prevent an insurer from using, in such
manner as it thinks fit, any interest earned on a deposit made under that subsection
by the insurer.

(3) If a charge is created or purported to be created by an insurer at a time when
there is in force a requirement under subsection (1), the charge shall, to the extent
that it is a charge or purports to be a charge on the deposit referred to in subsection
(1)(a) to which the requirement relates, be void against all persons.

(4) For the purposes of this section-

'charge' includes lien, encumbrance, equitable interest and third party rights;

'deposit' includes a renewal of a deposit.

(Added 74 of 1985 s. 2)

Accounts

35B. (1) The Insurance Authority shall cause proper accounts to be kept of all
transactions concerning deposits referred to in section 35A(1) and shall cause to be
prepared for every financial year a statement of such accounts which statement
shall be signed by the Insurance Authority.

(2) The accounts and the signed statement referred to in subsection (1) shall be
audited and certified by the Director of Audit, who may make such report thereon as
he may think fit.





(3) Section 16 of the Audit Ordinance (Cap. 122) shall not apply to any audit
carried out under subsection (2).

(Added 74 of 1985 s. 2)

Notice of proposed exercise of power under section 27

36. (1) Before exercising with respect to an insurer the power conferred by
section 27 the Insurance Authority shall serve on the insurer a written notice stating

(a)that the Insurance Authority is considering exercising that power and the
ground on which he is considering the exercise of the power; and

(b)that the insurer may, within the period of 1 month from the date of service
of the notice, make written representations to the Insurance Authority
and, if the insurer so requests, oral representations to a public officer
appointed for the purpose by the Insurance Authority.

(2) This section shall not apply if the ground on which the Insurance Authority
proposes to exercise the power relates (as provided in section 26(1)(e) ) to the
fitness of any person to hold the position of director or controller of the insurer.

(3) A notice under this section shall give particulars of the ground on which the
Insurance Authority is considering the exercise of the power except that no
particulars need be given if the ground is that mentioned in section 26(2).

(4) Where representations are made in accordance with this section the
Insurance Authority shall take them into consideration before exercising the power.

Notice of proposed exercise of powers on ground of unfitness

37. (1) Before exercising with respect to an insurer any power or powers
conferred by sections 27 to 35 on the ground (as provided in section 26(1)(e) ) that
any person who is a director or controller of the insurer is not a fit and proper
person to hold the position held by him, the Insurance Authority shall serve on that
person a written notice stating

(a)that the Insurance Authority is considering exercising a power or powers
conferred by those sections and the ground on which he is considering
the exercise of the power or powers; and

(b)that the person on whom the notice is served may, within the period of 1
month from the date of service of the notice, make written representations
to the Insurance Authority and, if that person so requests, oral
representations to a public officer appointed for the purpose by the
Insurance Authority.

(2) Unless the Insurance Authority, after considering any representations made
in accordance with subsection (1) by the person served with a notice under that
subsection, decides not to exercise the power or powers in relation to which the
notice was served, he shall before exercising the power or powers serve on the
insurer a written notice





(a)containing the matters mentioned in subsection (1)(a) and (b), taking
references to the person there mentioned as references to the insurer; and

(b)specifying the power or powers which he proposes to exercise and, if the
power or one of them is that conferred by section 35, specifying the
manner of its proposed exercise.

(3) A notice under this section shall give particulars of the ground on which
the Insurance Authority is considering the exercise of the power or powers in
question.

(4) Where representations are made in accordance with this section the
Insurance Authority shall take them into consideration before exercising the power
or powers in question.

(5) A requirement imposed on an insurer in the exercise of any power or powers
to which this section applies may be framed so as to come into effect after the
expiration of a specified period (or such longer period as the Insurance Authority
may allow) unless before the expiration of that period the person whose fitness is in
question has ceased to hold the position concerned.

(6) This section shall not apply, as respects any insurer, in relation to the exercise
of any power Conferred by sections 27 to 35 where it is exercised by the Insurance
Authority after serving notice under section 14(4) and (5) on the fitness
insurer and the person whose fitness is in question.

Rescission, variation and publication of requirements

38. (1) The Insurance Authority may rescind a requirement imposed under
sections 27 to 35 if it appears to him that it is no longer necessary for the
requirement to continue in force, and may from time to time vary any such
requirement.

(2) No requirement imposed by virtue of section 26(4) shall be varied after the
expiration of the relevant period mentioned therein except in a manner which relaxes
that requirement.

(3) A rescission under subsection (1) of a requirement imposed under section
27 may be limited so as to apply only to contracts of a specified description.

(4) Notice of the imposition of a requirement under the said section 27 and of
the rescission or variation of any such requirement shall be published by the
Insurance Authority in the Gazette and in such other ways as appear to him
expedient for notifying the public.

Power of Financial Secretary to bring civil proceedings on
behalf of insurer

39. (1) Section 147(3) of the Companies Ordinance (Cap. 32) shall have effect in
relation to an insurer as if the reference to the report there mentioned included a
reference to any information or document obtained under section 34.





(2) Where under a judgment given or decree pronounced in proceedings
brought by virtue of the said section 147(3) on behalf of an insurer a sum is
recovered in respect of a loss of assets representing a fund or funds maintained by
the insurer in respect of its long term business the court shall direct that the sum
shall be treated for the purposes of this Ordinance as assets of that fund or those
funds and this Ordinance shall have effect accordingly.

Withdrawal of authorization

40. (1) Where an authorized insurer ceases to carry on

(a) any insurance business;

(b) insurance business of any class; or

(c) insurance business which is part of any class,

the Insurance Authority may direct that it shall cease to be authorized to carry on

(i) insurance business;

(ii) insurance business of that class; or

(iii) insurance business which is that part of that class, as the case may be.
(Replaced 34 of 1988 s. 5)

(2) Where an insurer authorized to carry on insurance business of any class
has not at any time carried on insurance business

(a) of that class; or

(b) which is part of that class,

in or from Hong Kong, and at least 12 months have elapsed since the date of
authorization, the Insurance Authority may direct that it shall cease to be authorized
to carry on insurance business

(i) of that class; or

(ii) which is that part of that class, as the case may be. (Replaced 34 of 1988 s.
5)

(3) A direction under this section is without prejudice to a subsequent
authorization to carry on insurance business of a class to which the direction
relates.

(4) Where an authorized insurer ceases to be authorized to carry on insurance
business, the Insurance Authority may direct that any matters recorded in respect of
that insurer in the register kept under section 5 shall be erased.

(5) Where an authorized insurer ceases to be authorized to carry on insurance
business of any class, the Insurance Authority may direct that any matters recorded
in respect of that insurer in relation to that class in the register kept under section 5
shall be erased. (Added 34 of 1988 s. 5)

Offences under Part V

41. (1) Any person who





(a)makes default in complying with any requirement imposed under section
27, 28, 29, 30, 31, 32, 33, 34 or 35; or

(b)in purported compliance with a requirement imposed under section 34
furnishes information which he knows to be false in a material particular or
recklessly furnishes information which is false in a material particular,

commits an offence and is liable to-

(i) a fine of $100,000 and, in the case of an individual, to imprisonment for 2
years; and

(ii) in the case of an offence under paragraph (a), a fine of $500 for each day
on which the offence continues.

(2) Where a person is charged with an offence under subsection (1)(a) in
respect of his default in complying with a requirement imposed under section 34(2)
or (3) to produce any books or papers, it shall be a defence to prove that they were
not in his possession or control and that it was not reasonably practicable for him
to comply with the requirement.

PART VI

INSOLVENCY AND WINDING UP

Circumstances in which insurer deemed to he insolvent

42. (1) An insurer shall be deemed for the purposes of sections 177 and 327 of
the Companies Ordinance (Cap. 32) to be unable to pay its debts if at any time the
value of the assets of the insurer does not exceed the amount of its liabilities by the
relevant amount within the meaning of section 10.



(2) Nothing in this section shall be taken as affecting the manner in which, on a
winding up, any assets or liabilities are required to be dealt with by virtue of section
45.

Winding up of insurer under Companies Ordinance

43. The High Court (in this Part referred to as 'the Court') may order the
winding up, in accordance with the Companies Ordinance, of an insurer and the
provisions of that Ordinance shall apply accordingly subject to the modification
that the insurer may be ordered to be wound up on the petition of 10 or more policy
holders:

Provided that such a petition shall not be presented except by leave of the
Court, and leave shall not be granted until a prima facie case has been established to
the satisfaction of the Court and until security for costs for such amount as the
Court may think reasonable has been given.

Winding up on petition of Insurance Authority

44. (1) The Insurance Authority may present a petition for the winding up, in
accordance with the Companies Ordinance, of an insurer, being a company which
may be wound up by the Court under that Ordinance, on the ground





(a)that the company is unable to pay its debts within the meaning of sections
177 and 178 or section 327 of that Ordinance;

(b)that the company has failed to satisfy an obligation to which it is or was
subject by virtue of this Ordinance or any Ordinance repealed thereby; or

(c)that the company, being under the obligation imposed by section 16 with
respect to the keeping or preserving of proper books of account, has
failed to satisfy that obligation or to produce books kept in satisfaction of
that obligation.

(2) In any proceedings on a petition to wind up an insurer presented by the
Insurance Authority under subsection (1), evidence that the company was insolvent

(a)at the close of the period to which the accounts and balance sheet of the
company last deposited under section 20 relate; or

(b) at any date or time specified in a requirement under section 32 or 34,

shall be evidence that the company continues to be unable to pay its debts, unless
the contrary is proved.

(3) If, in the case of an insurer, being a company which may be wound up by
the Court under the Companies Ordinance (Cap. 32), it appears to the Insurance
Authority that it is expedient in the public interest that the company should be
wound up, he may, unless the company is already being wound up by the Court,
present a petition for it to be so wound up if the Court thinks it just and equitable for
it to be so wound up.

(4) Where a petition for the winding up of an insurer is presented by a person
other than the Insurance Authority, a copy of the petition shall be served on him
and he shall be entitled to be heard on the petition and to call, examine and cross-
examine any witness and, if he so thinks fit, support or oppose the making of a
winding-up order.

Winding up of insurer with long term business

45. (1) Unless the Court otherwise orders, an insurer which carries on long term
business shall not be wound up voluntarily; but no order shall be made under this
subsection unless notice of the application has been served on the Insurance
Authority who shall be entitled to be heard on the application and to call, examine
and cross-examine any witness and, if he so thinks fit, support or oppose the making
of the order.

(2) Section 23(1) shall not have effect in relation to the winding up of an insurer
to which section 22(1) applies but, subject to subsection (4) and to rules made by
virtue of section 49(2), in any such winding up

(a)the assets representing the fund or funds maintained by the insurer in
respect of its long term business shall be available only for meeting the
liabilities of the insurer attributable to that business;

(b)the other assets of the insurer shall be available only for meeting the
liabilities of the insurer attributable to its other business.





(3) Where the value of the assets mentioned in either paragraph of subsection
(2) exceeds the amount of the liabilities mentioned in that paragraph the restriction
imposed by that subsection shall not apply to so much of those assets as
represents the excess.

(4) In relation to the assets falling within either paragraph of subsection (2) the
creditors mentioned in section 200(1) and (2) of the Companies Ordinance (Cap. 32)
shall be only those who are creditors in respect of liabilities falling within that
paragraph; and any general meetings of creditors summoned for the purposes of
that section shall accordingly be separate general meetings of the creditors in
respect of the liabilities falling within each paragraph.

(5) Where under section 276(1) of the Companies Ordinance the Court orders
any money or property to be repaid or restored to an insurer or any sum to be
contributed to its assets then, if and so far as the wrongful act which is the reason
for the making of the order related to assets representing a fund or funds maintained
by the insurer in respect of its long term business, the Court shall include in the
order a direction that the money, property or contribution shall be treated for the
purposes of this Ordinance as assets of that fund or those funds and this Ordinance
shall have effect accordingly.

Continuation of long term business of insurer in liquidation

46. (1) This section has effect in relation to the winding up of an insurer being
a company carrying on long term business.

(2) The liquidator shall, unless the Court otherwise orders, carry on the long
term business of the insurer with a view to its being transferred as a going concern
to another insurer, whether an existing insurer or an insurer formed for that purpose;
and, in carrying on that business as aforesaid, the liquidator may agree to the
variation of any contracts of insurance in existence when the winding-up order is
made but shall not effect any new contracts of insurance.

(3) If the liquidator is satisfied that the interests of the creditors in respect of
liabilities of the insurer attributable to its long term business require the appointment
of a special manager of the insurer's long term business, he may apply to the Court,
and the Court may on such application appoint a special manager of that business
to act during such time as the Court may direct, with such powers, including any of
the powers of a receiver or manager, as may be entrusted to him by the Court.

(4) Section 216(2) and (3) of the Companies Ordinance shall apply to a special
manager appointed under subsection (3) as they apply to a special manager
appointed under that section.

(5) The Court may, if it thinks fit and subject to such conditions (if any) as it
may determine, reduce the amount of the contracts made by the insurer in the
course of carrying on its long term business.

(6) The Court may, on the application of the liquidator, a special manager
appointed under subsection (3) or the Insurance Authority, appoint an independent
actuary to investigate the long term business of the insurer and to report to the
liquidator, the special manager or the Insurance Authority, as the case may be, on
the desirability or otherwise of that business being continued and on any reduction
in the contracts made in the course of carrying on that business that may be
necessary for its successful continuation.





(7) Notwithstanding section 199(1)(a) of the Companies Ordinance (Cap. 32)
the liquidator may without either of the sanctions referred to therein make an
application in the name of and on behalf of the insurer under section 24.

Winding up of insurers involved in transfer of business

47. (1) Where the insurance business or any part of the insurance business of
an insurer has been transferred to an insurer under an arrangement in pursuance of
which the first-mentioned insurer ('the transferor company---) or the creditors
thereof has or have claims against the insurer to which the transfer was made ('the
transferee company'), then, if the transferee company is being wound up by the
Court, the Court shall, subject to this section, order the transferor company to be
wound up in conjunction with the transferee company, and may by the same or any
subsequent order appoint the same person to be liquidator for the 2 companies, and
make provision for such other matters as may seem to the Court necessary, with a
view to the companies being wound up as if they were one company.

(2) The commencement of the winding up of the transferee company shall, save
as otherwise ordered by the Court, be the commencement of the winding up of the
transferor company.

(3) In adjusting the rights and liabilities of the members of the several
companies between themselves, the Court shall have regard to the constitution of
the companies, and to the arrangements entered into between the companies, in the
same manner as the Court has regard to the rights and liabilities of different classes
of contributories in the case of the winding up of a single company, or as near
thereto as circumstances admit.

(4) Where any insurer alleged to be a transferor company is not in process of
being wound up at the same time as the transferee company, the Court shall not
direct the transferor company to be wound up unless, after hearing all objections (if
any) that may be urged by or on behalf of the company against its being wound up,
the Court is of opinion that the company is subsidiary to the transferee company,
and that the winding up of the company in conjunction with the transferee company
is just and equitable.

(5) An application may be made in relation to the winding up of any transferor
company in conjunction with a transferee company by any creditor of, or person
interested in, the transferee or transferor company.

(6) Where an insurer stands in the relation of a transferee company to one
company, and in the relation of a transferor company- to some other company, or
where there are several companies standing in the relation of transferor companies
to one transferee company, the Court may deal with any number of such companies
together or in separate groups, as it thinks most expedient, upon the principles laid
down in this section.

Reduction of contracts as alternative to winding up

48. In the case of an insurer which has been proved to be unable to pay its
debts, the Court may, if it thinks fit, reduce the amount of the contracts of the
insurer on such terms and subject to such conditions as the Court thinks just, in
place of making a winding-up order.





Winding up rides

49. (1) Rules may be made under section 296 of the Companies Ordinance (Cap.
32) for determining the amount of the liabilities of an insurer to policy holders of any
class or description for the purpose of proof in a winding up and generally for
carrying into effect the provisions of this Ordinance with respect to the winding up
of insurers.

(2) Without prejudice to the generality of subsection (1), rules under the said
section 296 may make provision for all or any of the following matters

(a)the identification of the assets and liabilities falling within section 45(2)(a)
or (b);

(b)the apportionment between the assets falling within section 45(2) of the
costs, charges and expenses of the winding up and of any debts of the
insurer having priority under section 265 of the Companies Ordinance;

(c)the determination of the amount of liabilities of any description falling
within paragraph (a) or (b) of section 45(2) for the purpose of establishing
whether or not there is any such excess in respect of that paragraph as is
mentioned in section 45(3);

(d)the application of assets within paragraph (a) of section 45(2) for meeting
the liabilities within that paragraph;

(e)the application of assets representing any such excess as is mentioned in
section 45(3).

PART VII

SPECIAL PROVISIONS RELATING To LLOYD'S

Requirements to he complied with by Lloyd's

50. (1) During any period when a member of Lloyd's is carrying on insurance
business in Hong Kong, Lloyd's shall have an authorized representative in Hong
Kong and shall notify the Insurance Authority of the name and address of any
person for the time being so authorized.

(2) In each year in which a member of Lloyd's carries on insurance business in
Hong Kong, the authorized representative of Lloyd's shall deposit with the
Insurance Authority a statement (as required by the Insurance Companies Act 1974
(1974 c. 49 U.K.) or any law amending or replacing that Act) summarizing the extent
and character of the insurance business done by the members of Lloyd's.

(3) Lloyd's'shall, upon depositing the statement referred to in subsection (2),
pay to the Insurance Authority through its authorized representative a fee equal to
the authorization fee specified in section 13.

PART VIII

EXEMPTIONS

Exempted persons

51. The following persons are exempted from the provisions of this Ordinance





(a)any body of persons, corporate or unincorporate, carrying on insurance
business in Hong Kong only

(i) whose gross premium income does not exceed $500,000 in any
financial year:

Provided that if the financial year of any such body is not a period of
12 months, the gross premium income of that body in that financial year
shall, for the purposes of this paragraph, be deemed to be the sum
obtained by dividing the amount of its gross premium income (within the
meaning of section 10(4)(c) ) by the number of days in that financial year
and multiplying the result by 365; and

(ii) which consists of persons who are bound together by custom,
religion, kinship, nationality or regional or local interest but who are not
so bound together or associated for the purpose of the acquisition by
them of gain;

(b)a person carrying on in Hong Kong reinsurance business only, other than

(i) a body corporate incorporated in Hong Kong;

(ii) a body corporate incorporated elsewhere which has a place of
business in Hong Kong or is represented in Hong Kong by an agent;

(iii) any other person or any partnership having a place of business in
Hong Kong;

(c)any registered trade union within the meaning of the Trade Unions
Ordinance (Cap. 332) which carries on insurance business limited to the
provision for its members of provident benefits or strike benefits;

(d)any registered co-operative society within the meaning of the Cooperative
Societies Ordinance (Cap. 33);

(e) the Hong Kong Export Credit Insurance Corporation;

any authorized institution licensed or registered under the Banking
Ordinance (Cap. 155) to the extent only that such institution carries on
insurance business of the nature specified in classes 16 and 17, or
comprised in groups 1 and 7, in the First Schedule solely for the purposes
of its banking business or deposit-taking business, as the case may be;
(Amended 27 of 1986 s. 137)

(g)the Credit Union League of Hong Kong incorporated under Part XI of the
Credit Unions Ordinance (Cap. 119).

Limited exemption of insurer authorized to carry
on business in United Kingdom

52. (1) Where the Insurance Authority, upon application by an insurer under
section 7(1), is satisfied that

(a)the insurer is carrying on any class of insurance business in the United
Kingdom and in respect thereof has complied with the Insurance
Companies Act 1974 (1974 e. 49 U.K.) or any law amending or replacing
that Act; and





(b)any person who is the controller of such insurer (within the meaning of
section 9(1) as extended by subsection (3) of that section) as respects so
much of its insurance business as is, or is intended to be, carried on in
Hong Kong is a fit and proper person to be such controller; and

(c)the insurer is, and will continue to be, able to meet its obligations
including obligations in respect of business other than the class of
insurance business in respect of which the application is made; and

(d) the name of the insurer is not likely to deceive,

the Insurance Authority may, notwithstanding Part 11, authorize the insurer under
section 8 to carry on the class of insurance business in respect of which the
application is made.

(2) Where an authorized insurer satisfies the conditions specified in subsection
(1)(a), (b), (c) and (d), the Insurance Authority may, upon application in writing by
such authorized insurer under this subsection, exercise the power conferred by
subsection (1) in relation to such authorized insurer notwithstanding that such
authorized insurer is authorized to carry on any class of insurance business in
respect of which the application is made; and references in this section to an insurer
authorized by virtue of subsection (1) shall include references to an authorized
insurer in relation to which that power is so exercised.

(3) An insurer authorized by virtue of subsection (1) shall, as respects such of
the requirements of Part 111 as relate to the Third Schedule, be deemed to comply
with such requirements in respect of any year if, but only if, the insurer submits to
the Insurance Authority, as soon as practicable, 2 copies in legible form of the
accounts and statements required to be submitted in respect of that year to the
Department of Trade in the United Kingdom under the Insurance Companies Act
1974 or any law amending or replacing that Act.

(4) Section 26(1)(d) and (4) shall not apply to an insurer authorized by virtue of
subsection (1).

(5) Where, in the exercise of his powers by the Secretary of State under the
Insurance Companies Act 1974 or any law amending or replacing that Act, any
requirement of a kind referred to in sections 27 to 35 is imposed upon, or any notice
of a kind referred to in section 14(4) or (5), 26, 36, 37 or 38 is delivered to or served
on, an insurer authorized by virtue of subsection (1), the insurer shall, as soon as
practicable, deliver a copy thereof to the Insurance Authority.

(6) If it appears to the Insurance Authority that an insurer authorized by virtue
of subsection (1) has ceased to satisfy any condition referred to in paragraph (a), (b)
or (c) of that subsection, the Insurance Authority may serve a notice in writing on
the insurer containing a statement to that effect and specifying the condition or
conditions which it appears to him the insurer has ceased to satisfy.

(7) Where the Insurance Authority serves a notice on an insurer under
subsection (6)-

(a)subsections (3) and (4) shall cease to have effect in relation to the insurer
as from the date of service of the notice; and





(b)the insurer shall, within 1 month from the date of service of the notice,
furnish to the Insurance Authority such information in such form as he
may require, together with the particulars specified in the Second
Schedule, relating to every person who, on that date, holds the position
of director or controller of the insurer; and

(c)section 14 shall apply to such insurer, and any information so furnished,
as from that date.

(8) Any insurer which fails to comply with subsection (5) commits an offence
and is liable to a fine of $10,000.

Power of Governor in Council to exempt insurer

53. (1) The Governor in Council may by order direct that, as respects any
insurer specified in the order, such provisions of this Ordinance as may be so
specified shall not apply to the insurer or shall apply to the insurer with such
modifications or variations as may be so specified.

(2) An order made under this section may be subject to conditions and may be
amended or revoked at any time by the Governor in Council.

(3) In this section 'insurer' includes Lloyd's.

PART VIIIA

SECRECY DISCLOSURE OF INFORMATION
AND
EXAMINATIONS BY OUTSIDE
AUTHORITIES

Secrecy

53A. (1) Except in the exercise of any function under this Ordinance or for the
carrying into effect of the provisions of this Ordinance, every person who has been
appointed under or who is or has been employed in carrying out or in assisting any
person to carry out the provisions of this Ordinance

(a)shall preserve and aid in preserving secrecy with regard to all matters
relating to the affairs of any insurer that may come to his knowledge in the
exercise of any function under this Ordinance;

(b)shall not communicate any such matter to any person other than the
person to whom such matter relates; and

(c)shall not suffer or permit any person to have access to any records in his
possession, custody or control or in the possession, custody or control of
any other person so appointed or employed.

(2) No person who receives information, in whatever form, submitted under
section 6, 7,14,17,18, 19, 20, 32, 33, 34, 50, 52 or 61(1)(a) shall be required to produce
to any court any document containing such information or to divulge or
communicate to any court any matter or thing coming under his notice in the
exercise of his functions under this Ordinance, except in the course of

(a) a prosecution for any offence;





(b)the determination by the High Court of an application under section 24; or

(c) a winding-up by the High Court under Part VI.

(3) Subsection (1) shall not apply to the disclosure of information-

(a)in the form of a summary compiled from similar or related information
provided by insurers if the summary is so compiled as to prevent
particulars relating to the business of any such insurer being ascertained
from it;

(b)with a view to the institution of, or otherwise for the purposes of, any
criminal proceedings or investigation, whether under this Ordinance or
otherwise, in Hong Kong;

(c) in connection with any civil proceedings arising out of this Ordinance;

(d)by the Insurance Authority, in respect of any auditor of an insurer, to

(i) the Registrar;

(ii) the Council; or
(iii) the Disciplinary Committee,

under the Professional Accountants Ordinance (Cap. 50) in respect of any
complaint to which section 34 of that Ordinance applies; or

(e)to the Financial Secretary, the Secretary for Monetary Affairs, any public
officer authorized by the Financial Secretary for the purposes of this
paragraph or the Disciplinary Committee referred to in paragraph (d)
where, in the opinion of the Insurance Authority, it is desirable or
expedient that the information should be so disclosed in the interests of
existing or potential policy holders or in the public interest.

(4) Any person who contravenes subsection (1) commits an offence and is
liable

(a)on conviction upon indictment to a fine of $ 100,000 and, in the case of an
individual, to imprisonment for 2 years; or

(b)on summary conviction to a fine of $50,000 and, in the case of an
individual, to imprisonment for 6 months.

(5) This section shall apply to-

(a) companies which make application under section 7;

(b) associations of underwriters; and

(c) Lloyd's,

as it applies to insurers.

(6) For the purposes of this section, 'function' includes a power and a duty.

Disclosure of information

53B. (1) Subject to subsection (2) and notwithstanding section 53A, the
Insurance Authority may, if he considers that it is in the interests of existing or
potential policy holders of an insurer, provide to the insurance supervisory





authority of a place outside Hong Kong which is, in his opinion, subject to
adequate secrecy provisions in that place, information on matters relating to the
affairs of an insurer---
(a)which is incorporated, or which has its principal place of business, in
that place;
(b)which is incorporated in or outside Hong Kong and which is a
subsidiary or associate of an insurer which is incorporated, or which
has its principal place of business, in that place; or
(e)which is incorporated in Hong Kong and which has, or is proposing to
establish, in that place-
(i) an office or agency for the purpose of carrying on any class of
insurance business in or from that place; or
(ii) a subsidiary or associate which is or would be subject to
supervision by that insurance supervisory authority.
(2) The Insurance Authority shall not provide any information under this
section relating to the affairs of any individual policy holder of an insurer.
(3) This section shall apply to Lloyd's as it applies to insurers.

Examination by external authorities
53C. (1) Any office or agency of an insurer, carrying on any class of
insurance business in or from Hong Kong, shall permit the insurance supervi-
sory authority of a place outside Hong Kong to examine its books, accounts
and transactions in Hong Kong if-
(a) that insurer-
(i) is incorporated, or has its principal place of business, in that
place; or
(ii) is incorporated in or outside Hong Kong and is a subsidiary or
associate of an insurer incorporated, or which has its principal place of
business, in that place; and
(b)that insurance supervisory authority has, subject to subsection (2), the
approval of the Insurance Authority to carry out such an examination.
(2) The Insurance Authority shall not give an approval referred to in
subsection (1)(b) except where in his opinion it is desirable or expedient that the
examination concerned should be carried out in the interests of existing or
potential policy holders or in the public interest.
(3) This section shall apply to Lloyd's as it applies to insurers.
(Part VIIIA added 34 of 1988 s. 6)

PART IX

SUPPLEMENTARY AND TRANSITIONAL

Insurance Advisory Committee
54. (1) There is hereby established an Insurance Advisory Committee
(the 'Advisory Committee') to advise the Governor on such matters relating to
the administration of this Ordinance or the carrying on of insurance business as
the Governor may refer to the Committee or as the Committee may consider to
be in the interests of the insurance industry in Hong Kong.





(2) The Advisory Committee shall consist of the chairman referred to in
subsection (3), the Insurance Authority (who shall be an ex officio member thereof)
and such other persons as the Governor may appoint to be members thereof, and
each such appointed member shall hold office for such period as the Governor may
determine.

(3) The Financial Secretary or his representative shall be the chairman of the
Advisory Committee and shall preside at all meetings thereof.

(4) A member of the Advisory Committee may resign at any time by notice in
writing addressed to the chairman.

(5) The Advisory Committee shall meet as often as may be necessary for the
consideration of any matter referred to in subsection (1) or as the chairman may, by
notice in writing to each member, direct.

(6) The procedure at a meeting of the Advisory Committee shall be such as the
chairman may determine.

Service of notices

55. Any notice to be served on any person under this Ordinance may be served
by post, and, without prejudice to section 8 of the Interpretation and General
Clauses Ordinance (Cap. 1), a letter containing that notice shall be deemed to be
properly addressed if it is addressed to that person at his last known business
address; and for the purposes of this section 'business address' means

(a)in relation to an insurer formed or established in Hong Kong, its registered
office in Hong Kong;

(b)in relation to an insurer formed or established outside Hong Kong, the
address of any person resident in Hong Kong who is authorized to accept
service of process in Hong Kong on behalf of that insurer;

(e)in relation to a member of Lloyd's, the address in Hong Kong of the
authorized representative of Lloyd's appointed under section 50.

Indemnity

55A. No liability shall be incurred by the Crown or any public officer as a result
of anything done or omitted to be done by a public officer bona fide in the exercise
or purported exercise of any functions conferred or imposed by or under this
Ordinance.

(Added 4 of 1987 s. 3)

Misleading statements etc. and false information; offences

56. (1) Any person who, by any statement, promise or representation which he
knows to be false, misleading or deceptive, or by any dishonest concealment of
material facts, or by the reckless making (dishonest or otherwise) of any statement,
promise or representation which is false, misleading or deceptive, induces or
attempts to induce another person to enter into or offer to enter into any contract of
insurance commits an offence and is liable to a fine of $50,000 and imprisonment for
12 months.





(2) Any person who causes or permits to be included in-

(a)any notice or statement or certificate served or furnished or sent out;
or
(b) any document or copy of any document deposited,

under any provision of this Ordinance a statement which he knows to be false
in a material particular or recklessly causes or permits to be so included any
statement which is false in a material particular commits an offence and is liable
to a fine of $100,000 and, in the case of an individual, to imprisonment for 2 years.

Liability for offences by bodies corporate

57. When at any time a body corporate commits an offence under this
Ordinance with the consent or connivance of, or because of neglect by, any
individual, the individual commits the like offence if at that time-

(a) he is a controller of the body corporate; or
(b)he is a director, manager, secretary or similar officer of the body
corporate or is purporting to act as such officer or as agent of such
body corporate; or

(c) the body corporate is managed by its members, of whom he is one.

Limitation of time for proceedings in respect of offences

58. Criminal proceedings for an offence under this Ordinance may be
instituted at any time before, but shall not be instituted after, the expiration of 2
years from the discovery of the offence by the Insurance Authority or 6 years
from the commission of the offence, whichever is the earlier.

Validation of certain group policies

58A. (1) Section 2 of the Life Assurance Act 1774 (1774 c. 48 U.K.)
(policy on life or lives or other event or events not valid unless name or names of
assured etc. inserted when policy is made) shall not invalidate a policy for the
benefit of unnamed persons from time to time falling within a specified class or
description if the class or description is stated in the policy with sufficient
particularity to make it possible to establish the identity of all persons who at
any given time are entitled to benefit under the policy.

(2) This section applies to policies effected before the commencement of
the Insurance Companies (Amendment) Ordinance 1985 (8 of 1985) as well as
to policies effected thereafter.
(Added 8 of 1985 s. 2)

Regulations

59. The Governor in Council may by regulations-

(a)provide for the determination of the value of the assets and the
amount of the liabilities of any insurer for the purposes of this
Ordinance;





(b)amend section 13(1) by altering the amount of the fee payable under
paragraph (a) or (b) thereof,

(c) amend the First, Second or Third Schedule;

(d)prescribe anything required or permitted to be prescribed under this
Ordinance;

(e) provide for the better carrying into effect of this Ordinance.

60. (Amendments incorporated)

Transitional and savings

61. (1) Any insurer who immediately before the commencement of this
Ordinance was authorized to carry on any insurance business under an Ordinance
repealed or amended by this Ordinance shall be deemed to be authorized under
section 8 of this Ordinance to carry on, as from the commencement of this
Ordinance, the appropriate corresponding business (within the meaning of Part 5 of
the First Schedule) if, but only if, within 3 months from the commencement of this
Ordinance (or such additional period as the Insurance Authority may allow in
writing in any particular case)

(a)the insurer furnishes to the Insurance Authority the particulars specified
in the Second Schedule relating to every director and controller of the
insurer; and

(b)in the case of an insurer which is a company to which Part XI of the
Companies Ordinance (Cap. 32) applies, the insurer has complied with the
provisions of that Part.

(2) Subject to subsection (1), any insurer who immediately before 7 May 1982
was carrying on insurance business ('former insurance business') and

(a)was exempted in respect of the carrying on of its former insurance
business by virtue of any provision in an Ordinance repealed or amended
by this Ordinance being a provision which provided for the exemption of
persons from the requirements of such Ordinance relating to the
authorization of insurers; or

(b)whose former insurance business or part thereof was such that none of
the Ordinances repealed or amended by this Ordinance required the
carrying on of its former insurance business or that part to be authorized
thereunder,

shall be deemed to be authorized under section 8 of this Ordinance to carry on the
classes of insurance business comprised in its former insurance business or, if
paragraph (b) applies to a part thereof only, that part for a period of 6 months
beginning on the commencement of this Ordinance and such additional period not
exceeding 6 months as the Insurance Authority may allow in writing in respect of
such insurer.

(3) Where an insurer referred to in subsection (1) or (2) is charged with an
offence under section 6 alleged to have been committed after the date on which the
period referred to in that subsection (including any additional period allowed
thereunder) expired, it shall be a defence for the insurer to show that any insurance
business alleged to have been carried on by the insurer after that date was carried
on only to the extent necessary to meet obligations under contracts entered into
before that date.





(4) The provisions of Part 111 and the Third Schedule relating to the
submission to or the deposit with the Insurance Authority of any accounts,
statements or other documents or information shall not, as respects any insurer
which was carrying on insurance business immediately before the commencement of
this Ordinance, have effect in respect of any period before the financial year of the
insurer which begins on or after such commencement; and any provision in an
Ordinance repealed by this Ordinance relating to the filing or deposit of any
accounts, statements or other documents or information shall, if such provision
applied to such insurer immediately before such commencement, continue to apply
to such insurer in respect of any such period as if that provision had not been
repealed.

(5) Any deposit made by an insurer under an Ordinance repealed or amended
by this Ordinance which was held by any person under that Ordinance immediately
before the commencement of this Ordinance shall, as from such commencement, be
held by the Insurance Authority as if such deposit had been made with the
Insurance Authority, and shall continue to be so held for such period not exceeding
6 months from such commencement as the Insurance Authority may determine.

(6) Any proceedings commenced under an Ordinance repealed by this
Ordinance, or by virtue of the exercise of any function conferred by that Ordinance,
and pending at the commencement of this Ordinance may be continued and
disposed of thereafter as if that Ordinance had not been repealed.

Transitional

62. The Insurance Companies (Amendment) (No. 2) Ordinance 1987 (41 of 1987)
('the amending Ordinance') shall apply to and in relation to any application made
under section 7 of this Ordinance before the commencement of the amending
Ordinance in respect of which no decision has been made under section 8 of this
Ordinance before that commencement as it applies to any application made under
section 7 of this Ordinance on or after that commencement.

(41 of 1987 s. 4 incorporated)

Further transitional provision

63. Section 5(1)(b) of this Ordinance as amended by section 2(a) of the
Insurance Companies (Amendment) Ordinance 1988 (34 of 1988) shall apply to an
authorized insurer whether authorized before, on or after the commencement of that
Ordinance.

(34 of 1988 s. 7 incorporated)

FIRST SCHEDULE [ss. 3, 51 & 611

CLASSES OF INSURANCE BUSINESS

PART 1

PRELIMINARY

1. The classes of insurance business specified in Parts 2 and 3 of this Schedule shall
constitute the classes of insurance business that are relevant for the purposes of this Ordinance.





2. An authorization under section 8, in describing the classes or parts of classes to which it
relates, may do so by reference to the appropriate groups specified in Part 4 of this Schedule.

3. If an insurer authorized to carry on long term business effects and carries out a contract of
insurance which combines long term business and additional business of the nature specified in
Part 3 of this Schedule in relation to class 1 or 2, the additional business shall as respects that
contract be regarded as long term business and not as general business.

4. Subject to paragraph 5, an insurer authorized to carry on a class of general business may,
in effecting and carrying out a contract of insurance against a risk ('the principal risk') within
that class, include in the contract provision whereby the insurer incidentally assumes liability
against a risk ('the ancillary risk') that is not within that class.

5. Paragraph 4 shall apply only if-

(a)the assumption of liability against the ancillary risk is included in the same contract as
that providing for the assumption of liability against the principal risk; and

(b)the ancillary risk is related to the principal risk and to the object, state, condition or
person that is insured against the principal risk; and

(c)the ancillary risk is not of the kind to which class 14 or 15 relates and is otherwise such
that insurance against it constitutes general business.

6. In classes 6 and 12 'vessels' includes hovercraft.

PART 2

CLASSES OF LONGS TERM
BUSINESS

Class Description Nature of Business
A Life and annuity Effecting and carrying out contracts of insurance on human life

or contracts to pay annuities on human life, but excluding (in
each case) contracts within class C below.

B Marriage and birth Effecting and carrying out contracts of insurance to provide a
sum on marriage or on the birth of a child, being contracts
expressed to be in effect for a period of more than 1 year.

c Linked long term Effecting and carrying out contracts of insurance on human life
or contracts to pay annuities on human life where the benefits
are wholly or partly to be determined by reference to the value
of, or the income from, property of any description (whether
or
not specified in the contracts) or by reference to fluctuations
in,
or in an index of, the value of property of any description
(whether or not so specified).
D Permanent health Effecting and carrying out contracts of insurance providing
specified benefits against risks of persons becoming incapaci-
tated in consequence of sustaining injury as a result of an
accident or of an accident of a specified class or of sickness or
infirmity, being contracts that-
(a) are expressed to be in effect for a period of not less than 5
years, or until the normal retirement age for the persons
concemed, or without limit of time, and
(b) either are not expressed to be terminable by the insurer, or
are expressed to be so terminable only in special circum-
stances mentioned in the contract.
E Tontines Effecting and carrying out tontines.

F Capital redemption Effecting and carrying out capital redemption contracts.







PART 3

CLASSES OF GENERAL
BUSINESS

Class Description Nature of Business
1 Accident Effecting and carrying out contracts of insurance providing

fixed pecuniary benefits or benefits in the nature of indemnity
(or a combination of both) against risks of the persons insured-





Class Description Nature of Business

(a)sustaining injury as the result of an accident or of an
accident of a specified class, or

(b)dying as the result of an accident or of an accident of a
specified class, or

(e)becoming incapacitated in consequence of disease or of
disease of a specified class,

inclusive of contracts relating to industrial injury and
occupational disease but exclusive of contracts failing within
class 2 below or class D above.

2 Sickness Effecting and carrying out contracts of insurance providing
fixed pecuniary benefits or benefits in the nature of indemnity
(or a combination of the two) against risks of loss to the
persons
insured attributable to sickness or infirmity, but exclusive of
contracts falling within class D above.
3 Land vehiclesEffecting and carrying out contracts of insurance against loss of
or damage to vehicles used on land, including motor vehicles
but excluding railway rolling stock.
4 Railway rollingEffecting and carrying out contracts of insurance against loss of
stock or damage to railway rolling stock.
5 Aircraft Effecting and carrying out contracts of insurance upon aircraft
or upon the machinery, tackle, furniture or equipment of
aircraft.
6 Ships Effecting and carrying out contracts of insurance upon vessels
used on the sea or on inland water, or upon the machinery,
tackle, furniture or equipment of such vessels.
7 Goods in transitEffecting and carrying out contracts of insurance against loss of
or damage to merchandise, baggage and all other goods in
transit, irrespective of the form of transport.
8 Fire and naturalEffecting and carrying out contracts of insurance against loss of
forces or damage to property (other than property to which classes 3
to
7 above relate) due to fire, explosion, storm, natural forces
other
than storm, nuclear energy or land subsidence.
9 Damage to Effecting and carrying out contracts of insurance against loss of
property or damage to property (other than property to which classes 3
to
7 above relate) due to hail or frost or to any event (such as
theft)
other than those mentioned in class 8 above.
10 Motor vehicleEffecting and carrying out contracts of insurance against dam-
liability age arising out of or in connection with the use of motor
vehicles
on land, including third-party risks and carrier's liability.
11 Aircraft liabilityEffecting and carrying out contracts of insurance against dam-
age arising out of or in connection with the use of aircraft,
including third-party risks and carrier's liability.
12 Liability for shipsEffecting and carrying out contracts of insurance against dam-
age arising out of or in connection with the use of vessels on the
sea or on inland water, including third-party risks and carrier's
liability.
13 General liabilityEffecting and carrying out contracts of insurance against risks
of the persons insured incurring liabilities to third parties, the
risks in question not being risks to which class 10, 11 or 12
above relates.
14 Credit Effecting and carrying out contracts of insurance against risks
of loss to the persons insured arising from the insolvency of
debtors of theirs or from the failure (otherwise than through






insolvency) of debtors of theirs to pay their debts when due.
15 Suretyship Effecting and carrying out-

(a)contracts of insurance against risks of loss to the persons
insured arising from their having to perform contracts of
guarantee entered into by them;





Class Description Nature of Business

(b)contracts for fidelity bonds, performance bonds,
administration bonds, bail bonds or customs bonds or
similar contracts of guarantee.

16 MiscellaneousEffecting and carrying out contracts of insurance against any of
financial loss the following risks, namely-

(a)risks of loss to the persons insured attributable to
interruptions of the carrying on of business carried on by
them or to reduction of the scope of business so carried on;

(b)risks of loss to the persons insured attributable to their
incurring unforeseen expense;

(c)risks neither falling within paragraph (a) or (b) above nor
being of a kind such that the carrying on of the business of
effecting and carrying out contracts of insurance against
them constitutes the carrying on of insurance business of
some other class.

17 Legal expenses Effecting and carrying out contracts of insurance against risks
of loss to the persons insured attributable to their incurring legal
expenses (including costs of litigation).
PART 4
GROUPS

Number Designation Composition
1 Accident and Classes 1 and 2.

health

2 Motor Class 1 (to the extent that the relevant risks are risks of the
person insured sustaining injury, or dying, as the result of
travelling as a passenger) and classes 3, 7 and 10.
3 Marine andClass 1 (to the said extent) and classes 4, 6, 7 and 12.
transport
4 Aviation Class 1 (to the said extent) and classes 5, 7 and 11.
5 Fire and other Classes 8 and 9.
damage to
property
6 Liability Classes 10, 11, 12 and 13.
7 Credit and Classes 14 and 15.
suretyship
8 General Classes 1 to 17 inclusive.
9 Long term Classes A to F inclusive.

PART 5

TRANSITIONAL
PROVISIONS

Where immediately before the commencement of this Ordinance an insurer was authorized
under an Ordinance repealed or amended by this Ordinance to carry on any of !he former classes
shown in column 1 of the table below, the appropriate corresponding business as respects that
insurer shall, for the purposes of this Ordinance, be the corresponding business shown in column
2 of the table.

TABLE

Former Classes Corresponding Business

Fire insurance business Group 5
Life insurance business Group 9






Marine insurance business Group 3
Motor vehicle insurance business Group 2





SECOND SCHEDULE [ss. 7, 14, 52(7) & 61]

DIRECTORS AND CONTROLLERS

Application of Second
Schedule

1. This Schedule sets out the information to be furnished or delivered by an insurer to the
Insurance Authority under this Ordinance in respect of every director and controller of the
insurer in the following cases

(a) under section 7, in support of an application for authorization under this Ordinance;

(b) under section 14, forthwith upon any change in any such director or controller;

(c)under section 52(7), within 1 month from the date of service of a notice under
subsection (6) of that section;

(d)under section 61(1), within 3 months of the commencement of this Ordinance (or such
additional period as may he allowed thereunder) in the case of an insurer authorized to
carry on insurance business under an Ordinance repealed or amended by this Ordinance.

Particulars of director or controller except on
cessation

2. Any particulars furnished or notice served by an insurer on the Insurance Authority
pursuant to section 7, 14(2), 52(7) or 61 of this Ordinance in respect of a director or controller
(not being a director or controller to whom paragraph 3 of this Schedule applies) shall contain

(a) in the case of an individual, the particulars in Form A in this Schedule;

(b) in the case of a body corporate, the particulars in Form B in this Schedule; and

(c) in the case of a partnership-

(i) the particulars in Form A in this Schedule in respect of each partner who is an
individual;

(ii) the particulars in Form B in this Schedule in respect of each partner which is a
body corporate.

Particulars of person ceasing to be director or
controller
3. A notice served by an insurer on the Insurance Authority pursuant to section 14(2) of this
Ordinance in respect of a person who ceases to be a director or controller shall contain the
particulars in Form C in this Schedule.

FORM A [para. 2, 2nd Sch.]

PARTICULARS REQUIRED IN RESPECT OF INDIVIDUALS WHO AM DIRECTORS OR
CONTROLLERS

Name of Insurer*
..................................

The following are particulars of-

...................

(b) ................... of which

. ...................... ...is a partner who became
Director/Controller/Chief Executive/Managing Director on
...........................................

.............................. (date).

1. Family name Other names

................ :
....................................................................

Any other name(s) by which he has been known or is known

2. Private address. 3. Date of birth.

Place of birth (including town or city).





4. Nationality, including a statement as to whether it was acquired by birth or
naturalization.

5. Qualifications and experience. including those relating to insurance and allied
matters.

6.Present occupation or employment and occupations and employment during the last 10
years, including the name of the employer, the nature of the business, the position held and
relevant dates.

7.Has he at any time been convicted of any criminal offence (other than an offence committed
when he was of or under the age of 16 years unless the same was committed within the last 10
years) by any court, including a military tribunal, in Hong Kong or elsewhere? If so, give full
particulars of the court by which he was convicted, the offence and the penalty imposed and
the date of the conviction.

8.Has he in the last 10 years, in Hong Kong or elsewhere, been censured, disciplined or publicly
criticized by any professional body to which he belongs or belonged or been dismissed from
any office or employment or refused entry to any profession or occupation? If so, give full
particulars.

9.Has he at any time been adjudicated bankrupt by a court in Hong Kong or elsewhere? If so,
give full particulars.

10.Has he at any time in the last 10 years failed to satisfy any debt adjudged due and payable by
him as a judgment-debtor under an order of a court in Hong Kong or elsewhere? If so, give full
particulars.

11.Has he, in connection with the formation or management of any body corporate or insurer,
been adjudged by a court in Hong Kong or elsewhere civilly liable for any fraud, misfeasance
or other misconduct by him towards such a body or insurer or towards any members thereof ?
If so, give full particulars.

12.Has any body corporate or insurer with which he was associated as director or controller in
the last 10 years, in Hong Kong or elsewhere, been compulsorily wound up or made any
compromise or arrangement with its creditors or ceased trading in circumstances where its
creditors did not receive or have not yet received full settlement of their claims, either whilst
he was associated with it or within one year after he ceased to be associated with it? If so, give
full particulars.

(Note:In relation to a body corporate which is not an insurer, 'controller' is to be construed
as a reference to a person who would, if he were a company, be a holding company of
that body in accordance with section 2(7) of the Companies Ordinance).

13. Of what bodies corporate or insurers-

(a) is he now a director or controller?

(b) has he been a director or controller at any time during the last 10 years?

14.Has he any other occupation other than that disclosed at items 6 and 13 above. If so, give full
details.

15.Give particulars of the circumstances (by reference to section 9(1) of the Insurance
Companies Ordinance) by virtue of which he became controller.

16.In carrying out his duties will he be acting on the directions or instructions of any other
person? If so, give full particulars.

I certify that the above information is complete and correct to the best of my knowledge
and belief.

Date .........................................................

Signed






.......................................................................
.......... (Individual named in paragraph 1
above.)

1 certify that +
............................................................................................................................. has
supplied
the above information and that in respect of* . .............................................................

.......................................... he is-

(a) Director/Controller/Chief Executive/Managing Director

(b) A partner in 1 ......................which
is Director/Controller/Chief Executive/Managing Director
Date

Signed ....
...................................................................
......... (Director/Secretary of the Insurer.)

Insert name of Insurer. Insert name of individual to
whom particulars relate. Insert name of partnership.
Delete W necessary





FORM B [para. 2, 2nd Sch.]

PARTICULARS REQUIRED IN RESPECT OF BODIES CORPORATE ~CH ARE
DIRECTORS OR CONTROLLERS

Name of Insurer* ..............................................................................................................

The following are particulars of a body corporate which became director, controller, chief
executive or managing director, or which is a partner in a partnership which became director,

controller, chief executive or managing director of the above-named Insurer on (date).

1. Name and address of body corporate and address of registered office (where different).

2. Principal business activity.

3. Address of principal place of business established in Hong Kong.

4. Date and place of incorporation.

5. Registered number (if any).

6. Full name and residential address of every director and every controller.

(Note:In relation to a body corporate which is not an insurer, 'controller- is to be construed
as a reference to a person who would, if he were a company, be a holding company of
that body in accordance with section 2(7) of the Companies Ordinance).

7. Name and address of main bank.

8. Accounts for the last 3 completed financial years and particulars of any reports, resolutions
and

other circulars issued to shareholders during the last 4 years-

9. Name, place of incorporation and principal business activities of all subsidiary companies and

of any holding company or ultimate holding company.

(Note: Shares held by a nominee are to be treated as shares held by his principal).

10 In the case of a company to which Part XI of the Companies Ordinance applies

(a)name(s) and addressees) of personas) residing in Hong Kong authorized to accept on
behalf of the company service of process and any notices;

(b) date of registration under Part XI of the Companies Ordinance.

11. Particulars of circumstances (by reference to section 9(1) of the Insurance Companies

Ordinance) by virtue of which the above-named body corporate became a controller.

12. Has any body corporate or insurer with which the above-named body corporate was
associated

as director or controller in the last 10 years, in Hong Kong or elsewhere, been compulsorily
wound up or made any compromise or arrangement with its creditors or ceased trading in
circumstances where its creditors did not receive or have not yet received full settlement of
their claims, either whilst the above-named body corporate was associated with it or within
one year after the above-named body corporate ceased to be associated with it? If so, give
full particulars.

(Note:In relation to a body corporate which is not an insurer, 'controller' is to be construed
as a reference to a person who would, if he were a company, be a holding company of
that body in accordance with section 2(7) of the Companies Ordinance).







I certify that the above information is complete and correct to the best of my knowledge
and belief and I certify that this notice is served with the knowledge and consent of the above-
named body corporate.

Date .........................................................
Signed .................................................................................

(Director/Secretaryt of body corporate.)

certify that the above particulars have been supplied by the above-named body corporate
and that in respect of *
......................................................................................................................

.............. 1

(a) the above-named body corporate is Director/Controller/Chief Executive/Managing
Director

(b) 1 ................................of which the

above-named body corporate is a partner is Controller

Date .........................................................
Signed .................................................................................

(Director/Secretaryt of the Insurer.)

Insert name of Insurer.
Delete as necessary. Insert
name of Partnership.





FORM C [para. 3, 2nd Sch.]

PARTICULARS REQUIRED UNDER SECTION 14(2) IN RESPECT OF
PERSONS CEASING TO BE DIRECTOR OR CONTROLLER

1. Name of Insurer of which person has ceased to be Director/Controller.

2. Name of person.*

3. Date on which person ceased to be Director/ Controller

4. Reason for ceasing to be Director/Controller.

Date .........................................................

Signed ........
......................................................................

(Director/ Secretary of the Insurer.)

Insert name of individual or body corporate.
Delete as necessary.

THIRD SCHEDULE [ss. 17, 18, 22, 50 &
521

ACCOUNTS AND STATEMENTS







PART 1: INTERPRETATION AND
PRELIMINARY

1. In this Schedule, unless the context otherwise requires-

accounting class of general business' and 'accounting class' mean respectively insurance
business falling under any of the headings given below, against which are shown the
corresponding classes of insurance business as defined in Part 3 of the First Schedule,

Corresponding
Accounting class classes of
insurance business
1. Accident and health 1,2

2. Motor vehicle (including damage to other land vehicles), 3,10
damage and liability
3. Aircraft, damage and liability 5,11
4. Ships, damage and liability 6,12
5. Goods in transit 7
6. Property damage 4,8,9
7. General liability 13
8. Pecuniary loss 14, 15, 16, 17
9. Non-proportional treaty reinsurance -
10. Proportional treaty reinsurance

'additional amount for unexpired risks' means the amount set aside by an insurer at the end of
its financial year, in addition to any unearned premiums, which is considered necessary to
meet the cost of claims and expenses of settlement arising from risks to be borne by the
insurer after the end of the financial year under contracts of insurance entered into before
the end of that year,

appointed actuary' means the person appointed as actuary to an insurer under section 15 of
this Ordinance;

appointed auditor' means the person appointed as auditor to an insurer under section 15 of this
Ordinance;

claim' means a claim against an insurer under a contract of insurance;

'claims equalization' means the amount set aside by an insurer as at the end of its financial year
for the purpose of being used to prevent exceptional fluctuations in the amounts charged to
revenue in subsequent financial years in respect of claims arising due to the occurrence of
events of an exceptional nature, that is to say, events not normally occurring every year;

'claims outstanding' means, unless otherwise specified, the amount set aside by an insurer as at
the beginning or end of its financial year as being an amount likely to be sufficient to meet





(a) claims in respect of incidents occurring-

(i) in the case of an amount set aside as at the beginning of the financial year, before
the beginning of that year; and

(ii) in the case of an amount set aside as at the end of the financial year, before the
end of that year,

being claims which have not been treated as claims paid and including claims relating to
business accounted for over a longer period than a financial year, claims the amounts of
which have not been determined and claims arising out of incidents that have not been
notified to the insurer; and

(b)expenses (such as, for example, legal, medical, surveying or engineering costs) which
have been incurred but not yet recorded as paid or which are likely to be incurred by the
insurer, whether through the employment of its own staff or otherwise, and are directly
attributable to the settlement of individual claims which relate to incidents occurring
before the beginning or the end of the financial year (as the case may be), whether or
not the individual claims in question are those mentioned above;

'claims paid', in relation to general business, means unless otherwise specified the amount that is
paid by an insurer in full or partial settlement of

(a)claims, including claims relating to business accounted for over a longer period than a
financial year; and

(b)expenses (such as, for example, legal, medical, surveying or engineering costs) which are
incurred by the insurer, whether through the employment of its own staff or otherwise,
and are directly attributable to the settlement of individual claims, whether or not the
individual claims in question are those mentioned above;

'claims paid and outstanding- means the amount obtained by taking the sum of the claims paid
during a financial year and the claims outstanding as at the end of that year and deducting
therefrom the claims outstanding as at the beginning of the year;

commission payable', in relation to a financial year of an insurer, means the amounts, whether
or not paid during that year, which are recorded during that year as due to intermediaries and
cedants in respect of the inception, amendment or renewal of contracts of insurance;

'contract of insurance' includes a contract of reinsurance;

'expenses of settling claims' means that part of an insurer's expenses which has been incurred in
respect of general business in the settlement of claims;

'expenses for settling claims outstanding' means the amount set aside by an insurer at the end of
its financial year as being an amount likely to be sufficient to meet that part of the insurer's
expenses which is likely to be incurred in respect of general business in the settlement of
claims in respect of incidents occurring before the end of that year other than expenses
which fall to be included under claims outstanding;

'fund', in relation to--

(a)general business recorded as commencing in any financial year of an insurer but
accounted for over a period longer than that financial year, means, during such period,
an amount not less than the aggregate amount of the premiums receivable during that
period (net of reinsurance premiums payable) reduced by the aggregate amount of the
claims paid (net of reinsurance recoveries), expenses for settling claims, commission
(net of reinsurance commission receivable) and premium taxes in respect of that
business and any management expenses attributable to the management of the fund and,
after the end of such period, means such amount as is considered necessary to discharge
the remaining obligations (net of reinsurance) in respect of that business;

(b)long term business, means the amount standing to the credit of an account maintained
in respect of that business in accordance with section 22 of this Ordinance;

'gross premiums', in relation to a financial year

(a)means premiums after deduction of discounts specified in policies or refunds of premium
made in respect of any termination or reduction of risks but before deduction of
premium for reinsurance ceded and of commission payable by the insurer; and

(b) includes premiums receivable by the insurer under reinsurance contracts accepted by the >
insurer;

'intermediary' means a person who in the course of any business or profession invites other
persons to make offers or proposals or to take other steps with a view to entering into
contracts of insurance with an insurer, other than a person who only publishes such
invitations on behalf of, or to the order of, some other person;





'management expenses' means expenses incurred in the administration of an insurer or its
business which are not commission payable and, in the case of general business, are not
included in claims paid, claims outstanding, expenses for settling claims and expenses for
settling claims outstanding;

'premiums' includes the consideration for the granting of an annuity;

'profit and loss account in relation to an insurer not trading for profit, means an income and
expenditure account;

'provision' means any amount written off or retained by way of providing for depreciation,
amortization, renewals or diminution in value of assets or retained by way of providing for
any known liability, including liabilities in respect of expenditure contracted for and all
disputed or contingent liabilities, the amount of which cannot be determined with substantial
accuracy;

'receivable', in relation to income during a financial year, means, unless otherwise specified,
such amounts as become due to the insurer, whether or not received by the insurer during
that year, including (where appropriate) income which has accrued;

'reinsurance' and 'reinsurer' include retrocession and retrocessionaire, respectively;

'reinsurance premiums payable'

(a)means the premiums recorded in an insurer's books during a financial year as due by it to
reinsurers in respect of reinsurance contracts commencing in that year or reinsurance
contracts commencing in earlier financial years but not accounted for in the insurer's
revenue account prior to that financial year, whether or not paid by the insurer during
that financial year, after deducting discounts, refunds and rebates of premiums as
recorded in the same period, and for the purpose of determining whether a premium is
due no account shall be taken of any credit arrangements made in respect thereof, and

(b)in the case of general business, includes, unless otherwise specified, unearned premium
portfolios and outstanding claims portfolios payable by the insurer under reinsurance
contracts ceded by the insurer, after deduction of any premium portfolios or loss
portfolios refunded to the insurer by reinsurers;

'reserve' includes any amount written off or retained other than by way of provision;

'unearned premiums- means the amount set aside by an insurer at the end of its financial year
out of premiums in respect of risks to be borne by the insurer after the end of the financial
year under contracts of insurance entered into before the end of that year.

2. All accounts and statements shall be produced in the English language or, if not so
produced, be accompanied by a complete English translation.

3. The inormation to be submitted under this Schedule shall be submitted in respect of the
total business of the insurer

4. (1) The accounts and statements to be submitted under Parts 3, 4 and 5 of this Schedule
shall be audited by the appointed auditor who shall annex to the accounts and statements a
certificate stating the relevant premium income of, and the relevant amount applicable to, the
insurer (within the meaning of section 10 of this Ordinance) and whether in the auditor's opinion
the value of the assets of the insurer exceeds its liabilities by that relevant amount, whether
proper records have been maintained in accordance with section 16 of this Ordinance and
whether the insurer's balance sheet, revenue account and profit and loss account and (if it is a
holding company submitting group accounts) the group accounts have been properly prepared in
accordance with the provisions of this Ordinance and whether in his opinion a true and fair view
is given

(a)in the case of the balance sheet, of the state of the insurer's affairs as at the end of its
financial year;

(b)in the case of the revenue account and profit and loss account (if it is not framed as a
consolidated revenue account and profit and loss account), of the insurer's profit or loss






for its financial year;

(c)in the case of group accounts submitted by an insurer which is a holding company, of
the insurer's interest therein,

but his opinion as to whether a true and fair view is so given may, where the valuation of any
asset or liability or the treatment of any income or expenditure of the insurer is in accordance
with any statutory provision which, in the case of that insurer, applied to the preparation of the
accounts and statements so submitted, be qualified in such respects as he may specify, indicating
the items affected by such valuation or treatment and the statutory provisions in question.

(2) If he considers it necessary the appointed auditor shall add to the certificate such
qualification, amplification or explanation as is appropriate.

(3) Arry information required to be submitted under this Schedule may be submitted in the
form of notes if, but only if, the information submitted can readily be interpreted as a whole and
the appointed auditor's certificate is attached.





5. (1) The information to be submitted in respect of long term business under Part 7 of this
Schedule shall be accompanied by a certificate by the appointed actuary stating whether

(a)in his opinion, proper records have been kept by the insurer adequate for the purpose of
the valuation of the liabilities of the long term business;

(b)he is satisfied that, as at the date to which the valuation relates, the value of the assets
identified as representing the long term business exceeded the aggregate of the amount
of the liabilities under long term business contracts and the amount of any other
liabilities of the insurer attributable to its long term business by not less than
$2,000,000 or its equivalent; and

(c)in his opinion there is a prudent and satisfactory relationship between the nature and
term of the assets and the nature and term of the liabilities.

(2) If he considers it necessary, the appointed actuary shall add to the certificate such
qualification, amplification or explanation as is appropriate.

6. Except to the extent that any statutory provisions have been followed in the preparation
thereof, there shall be annexed to the accounts and statements a supplementary statement or
statements describing in full and sufficient detail the accounting policies used in arriving at the
values of each and every asset and liability and in making any estimate, apportionment, reserve
or provision.

PART 2: DIRECTORS REPORT

7. There shall be attached to every balance sheet submitted under this Schedule a report by
the directors with respect to the profit or loss of the insurer for the financial year and the state
of the insurer's affairs as at the end thereof.

8. Every directors' report so attached shall be approved by the board of directors of the
insurer and signed on behalf of the board either by the chairman of the meeting at which it was
approved or by the secretary of the insurer.

9. The report shall-

(a)state the principal activities of the insurer and of its subsidiaries in the course of the
financial year and any significant change in those activities in that year;

(b)state the amount, if any, which the directors recommend should be paid by way of
dividend;

(c) state the amount, if any, which the directors propose to carry to reserves;

(d)if the insurer has no subsidiaries and has in the financial year made donations for
charitable or other purposes to a total amount of not less than $1,000 or its equivalent,
state the total amount of such donations;

(e)if the insurer has subsidiaries and the insurer and its subsidiaries have between them made
donations for charitable or other purposes to a total amount of not less than $ 1,000 or
its equivalent, state the total amount of such donations;

if significant changes in the assets of the insurer or of any of its subsidiaries have
occurred in the financial year, contain particulars of the changes;

(g)if, in the financial year, the company has issued any shares, state the reason for making
the issue, the classes of shares issued and, as respects each class of shares, the number
issued and the consideration received by the insurer for the issue;

(h)if, in the financial year, the insurer has issued or redeemed any debentures, state the
reason for making the issue or redemption, the classes of debentures issued or redeemed
and, as respects each class of debentures, the amount issued or redeemed and the
consideration received by the insurer;

(i)state the names of the persons who, at any time during the financial year, were






directors or controllers of the insurer;

(j) if, at the end of the financial year, there subsists a contract with the insurer or
with the

insurer's subsidiary or holding company or any subsidiary of the insurer's holding
company in which a director or controller of the insurer has, or at any time in that year
had, in any way, whether directly or indirectly, an interest, or there has, at any time in
that year ' subsisted a contract with the insurer in which a director or controller of the
insurer had, at any time in that year, in any way, whether directly or indirectly, an
interest (being, in either case, in the opinion of the directors, a contract of significance
in relation to the insurer's business and in which the director's or controller's interest is
or was material), contain

(i) a statement of the fact of the contract's subsisting or, as the case may be, having
subsisted;

(ii) the names of the parties to the contract (other than the insurer);





(iii) the name of the director or controller (if not a party to the contract);

(iv) an indication of the nature and value of the contract; and

(v) an indication of the nature and value of the director's or controller's interest in
the contract;

(k)state the amounts of any property transferred, payments made (whether for services or
otherwise), loans advanced to or obligations assumed during the financial year by or for
a director or controller of the insurer or his nominees or associates (within the meaning
of section 9 of this Ordinance);

(1)if, at the end of the financial year, there subsist arrangements to which the insurer or
the insurer's subsidiary or holding company or a subsidiary of the insurer's holding
company is a party, being arrangements whose objects are, or one of whose objects is,
to enable directors or controllers of the insurer to acquire benefits by means of the
acquisition of shares in, or debentures of, the insurer or any other body corporate, or
there have, at any time in that year, subsisted such arrangements as aforesaid to which
the insurer was a party, contain a statement explaining the effect of the arrangements
and giving the names of the persons who at any time in that year were directors or
controllers of the insurer and held, or whose nominees held, shares or debentures
acquired in pursuance of the arrangements;

(m)if, at the end of the financial year, the insurer, or the insurer together with any
associate (within the meaning of section 9 of this Ordinance) or through a nominee is
entitled to exercise or control the exercise of one third or more of the voting power of
any body corporate, state the name of the body corporate, the country of its
incorporation, its principal business activity, the number of shares so held and the
number issued, the amounts owing to the body corporate by the insurer and owing to the
insurer by the body corporate at the end of the financial year;

(n)state whether the insurer has, in the financial year, carried on insurance business (other
than reinsurance business) relating to liabilities or risks in respect of which persons are
required by any Ordinance to be insured;

(o) contain a summary of the material reinsurance arrangements effected by the insurer;
and

(p)contain particulars of any other matters, including events after the date of the balance
sheet, so far as they are material for the appreciation of the state of the insurer's
affairs.

PART 3: ADDITIONAL PROVISIONS RELATING TO AN INSURER

WHICH IS A HOLDING COMPANY

10. This Part shall apply to an insurer which is a holding company, whether or not it is
itself a subsidiary of another body corporate.

11. The consolidated balance sheet and profit and loss account shall combine the
information contained in the separate balance sheets and profit and loss accounts of the holding
company and of the subsidiaries dealt with by the consolidated accounts, but with such
adjustments as the circumstances justify.

12. Where any of the subsidiaries is an insurer, the consolidated revenue account shall
combine the information in the separate revenue accounts of the holding company and of the
subsidiary, with such adjustments as the circumstances justify.

13. Subject as aforesaid, the consolidated accounts shall, in giving the said information,
comply so far as practicable with the requirements of this Schedule as if they were the accounts
of an insurer.

PART 4: GENERAL PROVISIONS RELATING To BALANCE SHEET

14. The authorized share capital, issued share capital, assets and liabilities shall be






summarized in the balance sheet, with such particulars as are necessary to disclose the general
nature of the assets and liabilities, and there shall be specified

(a)any part of the issued share capital that consists of redeemable preference shares, the
earliest and latest dates on which the insurer has power to redeem those shares, whether
those shares must be redeemed in any event or are liable to be redeemed at the option
of the insurer and whether any (and, if so, what) premium is payable on redemption;

(b)so far as the information is not given in the profit and loss account under Part 5 of this
Schedule, any share capital on which interest has been paid during the financial year,
and the rate of interest;

(c) the amount of the share premium accounts; and

(d) particulars of any redeemed debentures which the company has power to reissue.

15. There shall be stated under separate headings, so far as they are not written off





(a) the preliminary expenses;

(b) any expenses incurred in connection with any issue of share capital or debentures;

(c) any sums paid by way of commission in respect of any shares or debentures;

(d) any sums allowed by way of discount in respect of any debentures; and

(c) the amount of the discount allowed on any issue of shares at a discount.

16. The assets and liabilities of the insurer shall be set out under the following headings and
shall reflect the identification of long term assets and liabilities as required by Part 6 of this
Schedule.

Assets

(a) Land and buildings-
Land held on a lease with an unexpired period of less than 10 years shall be separately
identified. Where land and buildings have been valued in the year, the name or
qualifications of the valuer, and the basis of valuation must he disclosed. For assets valued
previously, the year and amount of each valuation must be shown.

(b) Fixed interest securities-

(i) issued by, or guaranteed by, any Government or public authority; (ii) other fixed
interest securities (except those in associated or subsidiary companies) distinguishing
between listed and unlisted securities.

(c) Variable interest securities-

(i) issued by, or guaranteed by, any Government or public authority;
(ii) others.

(d) Other variable interest investments-

(i) equity shares (except those in associated or subsidiary companies) distinguishing
between listed and unlisted shares; (ii) holdings in unit trusts.

(e) Investments in associated or subsidiary companies-

(i) insurers(A) value of any shares held; (B) debts (other
than debts referred to in (g) below); (ii) non-insurers
value of any shares held; (B) debts.

The shares shall be analysed as listed and as unlisted, and the debts shall be analysed as
secured, as partly secured and as unsecured.

Loans secured by contracts of insurance issued by the insurer.

(g)Insurance debts (distinguishing between those due from associated or subsidiary
companies and those due from others)--

(i) premium income in respect of direct insurance but not yet paid to the insurer less
commission payable thereon;
(ii) amounts due under reinsurance contracts, distinguishing as between reinsurance
contracts accepted and reinsurance contracts ceded;
(iii) if material, recoveries due by way of salvage or from other insurers in respect of
claims paid other than recoveries under reinsurance contracts ceded.

(h) Debts not previously covered-

(i) fully secured;
(ii) partly secured;
(iii) unsecured.







(i) Deposit and current accounts with banks-

(i) fixed term deposits;
(ii) current accounts.

(j)Deposit and current accounts with deposit-taking companies registered or authorized by
any governmental agency

(i) fixed term;
(ii) at call.

(k) Cash.

(1) Computer equipment, office machinery, furniture, motor vehicles and other
equipment.





(m) Goodwill, patents, and trade marks.

(n) Other assets, to be separately specified if material.

With regard to assets where a provision is made for depreciation, amortization, renewal or
diminution in value, the amount so provided shall be recorded in respect of each asset.

Liabilities

(o) Long term business liabilities-(i) long term business funds; (ii) claims admitted but not
paid;

for each type of business specified in paragraph 25.

(p) Liabilities other than long term business(i)
unearned premiums; (ii) any additional
amount for unexpired risks;

(iii)claims outstanding before and after deducting amounts recoverable from
reinsurers(A) reported claims;

(B) claims incurred but not reported;

(iv) expenses of settling claims outstanding, if not included under (iii) above; (v) funds;
(vi) others.

(q) Other insurance liabilities-

(i) amounts due in respect of direct insurance except amounts which must be included
in (o) or (p) above;

(ii) amounts due to insurers and intermediaries under reinsurance treaties accepted,
except amounts which must be included in (o) or (p) above;

(iii) amounts due to reinsurers and intermediaries under reinsurance contracts ceded.

(r) Other liabilities(i) secured loans; (ii) unsecured
loans; (iii) subordinated loan stock; (iv)
taxation; (v) recommended dividend; (vi)
accrued cumulative preference share dividend;

(vii) other creditors.

17. The aggregate amounts respectively of reserves and provisions (other than provisions
for depreciation, amortization, renewal or diminution in value of assets) shall be stated under
separate headings.

18. There shall also be shown (unless it is shown in the profit and loss account or a
statement or report annexed thereto, or the amount involved is not material)

(a)where the amount of the reserves or of the provisions (other than provisions for
depreciation, amortization, renewal or diminution in value of assets) shows an increase
as compared with the amount at the end of the immediately preceding financial year,
the source from which the amount of the increase has been derived; and

(b) where-

(i) the amount of the reserves shows a decrease as compared with the amount at the
end of the immediately preceding financial year; or

(ii) at the end of the immediately preceding financial year the amount of the provisions
(other than provisions for depreciation, amortization, renewal or diminution in value of
assets) exceeded the aggregate of the sum since applied and amounts still retained for
the purposes thereof,







the application of the amounts derived from the difference.

19. If provision is made for claims equalization or to accommodate fluctuations in taxation,
or for any other purpose, it shall be stated. If any of the sum so set aside has been used during the
financial year for another purpose, the amount thereof and the purpose for which it has been so
used shall be stated.

20. Where any liability of the insurer is secured otherwise than by operation of law on any
assets of the insurer, the fact that the liability is so secured shall be stated

21. Where any of the insurer's debentures are held by a nominee of or trustee for the
insurer, the nominal amount of the debentures and the amount at which they are stated in the
books of the insurer shall be stated.





22. The following shall also be stated-

(a) where any person or class of persons has an option to subscribe for shares in the
insurer--
-

(i) the name of that person or the class of persons involved;

(ii) the period during which it is exercisable;

(iii) the price to be paid or shares subscribed for under it;

(b)the amount of any arrears of fixed cumulative dividends on the insurer's shares and the
period for which the dividends or, if there is more than one class, each class of them are
in arrear;

(e)particulars of any charge on the assets of the insurer to secure the liabilities of another,
including the amount secured;

(d)if it is material, the general nature of any other contingent liabilities not provided for
and the aggregate amount or estimated amount of those liabilities; and

(e)if it is material, the aggregate amount or estimated amount of authorized capital
expenditure so far as not provided for.

23. Except in the case of the first balance sheet, the corresponding amounts at the end of
the immediately preceding financial year shall be shown for all items.

PART 5: GENERAL PROVISIONS RELATING To REVENUE ACCOUNT
AND

PROFIT AND Loss
ACCOUNT
Revenue Account

24. (1) There shall be shown for each accounting class of general business---

(a) all gross premiums receivable by the insurer, distinguishing between-

(i) premiums from direct underwriting; and

(ii) premiums under reinsurance contracts accepted by the insurer;

(b)all reinsurance premiums payable by the insurer, distinguishing between cessions relating
to direct underwriting and retrocessions relating to reinsurance contracts accepted by the
insurer;

(e)all commissions payable by the insurer to agents, brokers or ceding companies,
distinguishing between those relating to premiums from direct underwriting and those
relating to premiums under reinsurance contracts accepted by the insurer;

(d) all commissions receivable by the insurer from reinsurers;

(e)all claims paid and outstanding, distinguishing between those relating to direct
underwriting and those relating to reinsurance contracts accepted by the insurer, and
showing--

(i) the gross amounts;

(ii) the amounts recoverable from reinsurers; and

(iii) the net amounts;
expenses of settling
claims;







(g) management expenses;

(h)unearned premiums and unexpired risks brought forward at the beginning of the financial
year and carried forward at the end of the year.

(2) An insurer---

(a)which undertakes business in accounting class 4 only in respect of risks relating to
hovercraft may account for such business in accounting class 3 if it also undertakes
business in that class;

(b)may include in accounting class 5 business covering liability for loss or damage to or of
goods in transit which would otherwise be included in accounting class 2 provided that
the policy does not cover damage to vehicles except as an ancillary risk as defined in the
First Schedule.

(3) Accounting classes 3,4 and 5 when accounted for on a 3-year basis shall also include
treaty reinsurance business in the corresponding classes. Subject thereto, the insurer may account
for all reinsurance business in accounting classes 9 and 10, or alternatively may combine all such
business with similar business falling within accounting classes 1 to 8 inclusive.

25. The following items (a) to (i) shall be shown, for long term business, for each of the
following types of business (i) to (vi) (which correspond to the classes of long term business in
Part 2 of the First Schedule)

(i) life and annuity business;

(ii) marriage and birth business;





(iii) linked long term business;

(iv) permanent health business;

(v) tontines;

(vi) capital redemption business:

Provided that if the appointed auditor certifies that the effect of business under any of the
types of business (ii) to (v) above is not material, such business may be accounted for under (i)
above;

(a) gross premiums receivable from-

(i) direct underwriting business;

(ii) reinsurance contracts accepted, distinguishing between premiums on new policies
and premiums on renewal policies and single premium policies and regular premium
policies;

(b) reinsurance premiums payable, distinguishing as in (a) above;

(e) commissions payable to agents, brokers or ceding insurers in respect of-

(i) direct underwriting business;

(ii) reinsurance contracts accepted,
distinguishing as in (a) above;

(d) commissions receivable from reinsurers, distinguishing as in (a) above;

(e) gross claims payable in respect of-

(i) direct underwriting business;

(ii) reinsurance contracts accepted, distinguishing between those payable on death, on
surrender, by way of lump sum on maturity or by way of periodic payments under the
contracts of insurance; claims recoverable from reinsurers, distinguishing as in (e)
above;

(g) interest or other income from long term business assets;

(h) dividends to policy holders;

(i) management and other expenses.

Profit and Loss Account

26. There shall be shown-

(a)the amounts respectively of income from listed investments and income from unlisted
investments;

(b)if a substantial part of the insurer's revenue for the financial year consists of rents from
land and buildings, the amount thereof (after deduction of ground-rents, rates and other
out-goings);

(e)any contribution to profits other than (a) and (b) above from sources other than
insurance business;

(d)the amount provided for depreciation, amortization, renewals or diminution in value of
assets;

(e) the amount of any provisions made other than provisions for depreciation,
amortization,






renewals or diminution in value of assets or, as the case may be, the amount withdrawn
from such provisions and not applied for the purposes thereof,
if, as respects any assets in whose case an amount is provided for depreciation,
amortization or diminution in value, an amount is provided for renewal thereof, the
last-mentioned amount shall be shown separately;

(g)if the amount provided for depreciation or diminution in value of any fixed assets
(other than investments) has been determined otherwise than by reference to the
amount of those assets as determined for the purpose of making up the balance sheet,
that fact shall be stated. Where land or buildings have been revalued and as a result of
the valuation there has been a change in the basis of depreciation in the period with
regard to the land or buildings, the effect of this change shall be disclosed, if material;

(h)the amount of interest on loans made to the insurer, whether on the security of
debentures or not;

(i) the amount of the charge for taxation;
the amounts respectively provided for redemption of share capital and for redemption
of
loans;

(k) the amount set aside or proposed to be set aside to, or withdrawn from, reserves;





(1) the amount, if material, charged in respect of the hire of plant and machinery;

(m) the aggregate amount of the dividends paid and proposed;

(n)the amount of any charge arising in consequence of the occurrence of an event in a
preceding financial year and of any credit so arising shall, if not included in a heading
relating to other matters, be stated under a separate heading;

(o)the amount of the remuneration of the auditors shall be shown under a separate
heading, and for the purposes of this paragraph, any sums paid by the insurer in respect
of the auditors' expenses shall be deemed to be included in the expression
'remuneration';

(p) (i) the aggregate amount of directors' emoluments;

(ii) if there are more than 3 directors, the aggregate amount of the emoluments of the
3 highest-paid directors;

(iii) the aggregate amount of compensation paid to any director or past director for
loss of office as director.

27. The following shall also be stated-

(a)if depreciation or replacement of fixed assets is provided for by some method other
than a depreciation charge or provision for renewals, or is not provided for, the method
by which it is provided for or the fact that it is not provided for, as the case may be;

(b) the basis on which the charge for taxation is computed;

(c)any special circumstances which affect liability in respect of taxation for the financial
year or liability in respect of taxation for succeeding financial years;

(d)except in the case of the first accounts, the corresponding amounts for the immediately
preceding financial year for all items shown in the revenue account and the profit and
loss account;

(e)any material respects in which any items shown in the revenue account or profit and
loss account are affected

(i) by transactions of a sort not usually undertaken by the insurer or otherwise by
circumstances of an infrequent or non-recurrent nature; or

(ii) by any change in the basis of accounting; or

(iii) by any correction of fundamental errors in any of the preceding financial years.

PART 6: ADDITIONAL REQUIREMENTS IN RESPECT OF INSURERS
CARRYING ON LONG TERMS BUSINESS

Identification of Long Term Assets and Liabilities

28. This Part sets out the method of identification of long term assets and liabilities required
under section 22 of this Ordinance.

29. All assets and liabilities not identified with its long term business at the end of the
financial year of the insurer beginning next after the commencement of this Ordinance shall be
so identified at that date ('the base date').

30. In the case of liabilities, the amount to be identified shall be the aggregate of the
following

(a)the amount of the long term business fund or funds carried forward in the insurer's
revenue account;

(b)the amounts of any accounting liabilities, reserves or provisions, other than those






mentioned in (a) above, shown in the insurer's balance sheet as attributable only to the
insurer's long term business;

(c)the amounts of any accounting liabilities, reserves or provisions, other than those
mentioned in (a) and (b) above, shown or included in the insurer's balance sheet in
relation to which there are records which identify them as attributable only to the
insurer's long term business.

31. In the case of assets, the assets to he identified shall be such proportion of the insurer's
total assets as the amount of the identified liabilities bears to the total liabilities of the insurer.
The insurer's total assets shall be valued at a fair market value on the base date, the amount of
the identified liabilities shall be determined as in paragraph 30, and the total liabilities of the
insurer shall be taken as including the share capital and reserves but excluding provisions or other
allowances in respect of depreciation, amortization, renewal or diminution in value (whether
actual or potential) of assets:





Provided that-

(a)the value of assets to be identified shall be not less than the aggregate of $2,000,000 or
its equivalent and the amount of the identified liabilities, and

(b)where the value of assets so identified is less than the aggregate of the values of the
assets which were already identified as attributable to the insurer` s long term business
on the base date, the latter shall be taken as the identified assets.

32. Assets and liabilities which were already identified as attributable to the insurer's long
term business on the base date or which are to be so identified on the base date shall be identified
as attributable to its long term business on the base date.

33. Assets acquired after the base date, to the extent that they are acquired out of receipts of
the insurer in respect of its long term business, shall be identified to that extent as attributable to
the insurer's long term business.

34. Where any assets which were identified as attributable to the insurer's long term business
in accordance with the above requirements have been disposed of, the proceeds of that disposal
shall be identified as assets attributable to the insurer's long term business.

35. Any income accruing from any asset of the insurer which falls to be identified as an asset
attributable to the insurer's long term business shall also be so identified.

36. (1) Every insurer to which this Part of this Schedule applies shall, not later than 6
months after the base date, deposit with the Insurance Authority a certificate that the insurer has
in accordance with this Part

(a)identified in accordance with the provisions of paragraphs 30 and 31 any assets and
liabilities which were not already identified on the base date as attributable to the
insurer's long term business;

(b)identified as assets attributable to the insurer's long term business all those assets which
are required to be so identified in accordance with paragraph 32; and

(e) established and maintained those books of account and other records which are required

. to be established and maintained by section 22 of this Ordinance,
and that certificate shall be signed by at least 2 directors of the insurer and the chief executive
thereof
or, in the case of an insurer which has no chief executive, by at least 2 directors and the secretary
thereof..

Provided that if in any case it is made to appear to the Insurance Authority that the
circumstances are such that a longer period than 6 months should be allowed for depositing the
certificate, he may extend that period by such period not exceeding 3 months as he thinks fit.

(2) There shall be annexed to every such certificate a report signed by the appointed auditor
stating whether--

(a) the insurer has complied with subparagraph (1)(a) and (b); and

(b) in his opinion, the insurer has complied with subparagraph (1)(c).

PART 7: INFORMATION To BE FURNISHED FOLLOWING
ACTUARIAL

INVESTIGATION UNDER SECTION 18 OR 32 OF THIS
ORDINANCE

37. The following forms and supplementary information shall be furnished in support of any
actuarial valuation required to be produced under section 18 or 32 of this Ordinance, and the
information hereinafter required shall be furnished for each type of business set out in paragraph
38(1) of this Schedule for each fund and in total.







38. (1) There shall be furnished in the Form LI below a revenue account for the period since
the last valuation or, in the case of an insurer which has made no valuation, since the
commencement of the business, for each of the following types of business (i) to (vi) (which
correspond to the classes of long term business in Part 2 of the First Schedule)--

(i) life and annuity business;

(ii) marriage and birth business;

(iii) linked long term business;

(iv) permanent health business;

(v) tontines;

(vi) capital redemption business:

Provided that if the appointed actuary certifies that the effect of business under any of the
types of business (ii) to (v) above is not material, such business may be accounted for under (i)
above.





FORM LI

REVENUE ACCOUNT OF ........(name of insurer)

in respect of class(es)* ................for the period commencing and ending

Amount of Funds on ....................Commissions Payable ............. ... ... ... ... ... ... ... ... ... ... XX

the beginning of the period ....... ... ... ... ... ... ... ... ... ... ... ... XX (i)
Direct Underwriting Business
................................ (ii) Reinsurance Contracts Accepted ...

Premiums Receivable................. ... ... ... ... ... ... ... ... ... ... ... XX

...................... XX
Reinsurance Net of.Claims Payable ... ... ... ... ... ... ... ... ... ... ... ...
... 1 ...
XX
GrossPremiums Reinsurance

Premiums Ceded Premium Recoverable
Gross from Net
(i) Direct Underwriting Business: Amount Reinsurers Amount

Single Premiums .............
Regular Premiums .......................(i) Direct Underwriting Business:
.......................On Death
.......................On Surrender
(ii) Reinsurance Contracts Accepted:.... By Way of Lump Sums
Single Premiums .......................on Maturity
Regular Premiums .......................By Way of Periodic
.......................Payments
..........XX
.......................(ii) Reinsurance Contracts Accepted:

Interest or Income from Long Term Business Assets . ... ... .. ... ... ... ... XX On Death

Commissions Receivable ............. ... ... ... ... ... ... ... ... ... ... XX On Surrender

Other Receipts (accounts to be specified) ... ... ... ... ... ... By Way of Lump Sums

XX on Maturity
By Way of Periodic
Payments

...............XX
Dividends to Policy holders ... ... ... ... ... ... ... ... ... ... ...
... ... XX

Other Payments (accounts to be specified) ... ... ... ... ... ... ... ... ... XX
Amount of Funds on

the end of the period ........ ---. ... ... ... ... ... ... ... ... ... XX

Transfer from Profit and Loss Account ....... ... ... ... ... ... ... ... ... XX Transfer to
Profit and Loss Account.......... ... ....... ... ... ... ... ... ...
XX
...............XX ......
XX

The classes referred to correspond to the classes of Long Term Business set out in Part 2 of the First Schedule.





(2) The following supplementary information shall be furnished with the Form L I above-

(a) the date up to which the valuation is made;

(b)the principles upon which the valuation and distribution of profits among the policy
holders are made, and whether these principles were determined by the instrument
constituting the insurer or by its regulations or bylaws or otherwise;

(c) the table or tables of mortality used in the valuation;

(d) the rate or rates of interest assumed in the calculations;

(e)the proportion of the annual premium income reserved as a provision for future
expenses and profit (if no such provision is made in respect thereof, a statement as to
what provision is made shall be furnished);

the time during which a policy must be in force in order to entitle the policy holders to
share in the profits;

(g) the results of the valuation, showing-

(i) the total amount of profit made by the insurer;

(ii) the amount of profit divided among the policy holders, and the number and amount
of the policies which participated;

(iii) the amount of profit brought forward from the previous valuation, the amount
thereof allotted to policy holders and shareholders.

39. (1) There shall be furnished in the Forms L2 and L3 below a statement of the liabilities
of the insurer under each of the types of business specified in paragraph 38(1) at the date of the
valuation, showing the number of policies, the amount assured and the amount of premiums
payable annually under each type of policy, both with and without participation in profits, and
the net liabilities and assets of the insurer, and the amount of any surplus or deficiency.





FORM L2
VALUATION SUMMARY OF ............(name of insurer)
for the period commencing .......and ending

3 4 5 6 7

Amount of
NumberAmount of sums assured Yearly premiumsValue of sums assured Amount Bases of
Class Type of insurance of or annuities per annum or annuities per annum Value of yearly of net
valuation
0including vested including vested net premiums

contracts reversionary bonuses office Net reversionary bonuses liability
premiums premiums
A (I) Life assurance other than annuities

(a) With participation in profits:

Whole life .................................................

Endowment ..............................................

Other types (to be specified) .....................

Total assurances with profits ....................

(b) Without participation in profits:

Whole life ...........

Endowment ..............................................

Other types (to be specified) .....................

Total assurances without profits ..............

Total assurances ..............................................

(II) Annuities

(a) With participation in profits:

Life annuities in course of payment

Deferred life annuities ......................

Other types (to be specified) .....................

Total annuities with profits ..............





1 2 3 4 5 6 7 8

Amount of
Number Amount of sums assured yearly premiums Value of sums assured Amount Bases
of
Class Type of insurance of 1 or annuities per annum or annuities per annum Value of yearly 1
of net valuation
including vested including vested net premiums liability
contractsreversionary bonusesoffice Net reversionary bonuses
premiums premiums
(b) Without participation in profits:
Life annuities in course of payment

Deferred fife annuities ... ... ... ...

Other types (to be specified) ... ... ...

Total annuities with profits ... ... ...

Total annuities ... ... ... ... ... . ...

B Marriage and birth

* Linked long term

* Permanent health

F Tontines

F Capital redemption

TOTALS

Notes

1 . The closes referred to correspond to the classes of Long Term Business set out in Part 2 of the First Schedule.

2. Within each class of insurance, the following are to he shown-

(i) direct business and reinsurances accepted;

(ii) reinsurances ceded; and
(iii) net retained business.

3.The entry under column 8 should either refer to details given as supplementary information or should state the mortality
tablesistatistical tables and rates of interest employed, as appropriate.

4. With regard to business falling within class A-

(i) separate summaries similar in form to the above must be furnished in respect of policies valued by different mortality
tables, or at different rates of interest; and

(ii) contracts the nature of which or the method of valuation of which makes it impossible or inappropriate to give the
information required in columns 4, 5 and 6 of any valuation summary
are to be shown separately and the reason stated.





FORM L3

Valuation Balance Sheet of as at 19

$
Net liability under long term insur- Long term insurance business funds

ance business (as per Form L2) (as per Balance Sheet)

Surplus ......................................... Deficiency ............
...........

(2) There shall be furnished with the Forms L2 and L3 above particulars of the average rate
of interest yielded by the assets whether invested or uninvested constituting the long term
business fund of the insurer, calculated upon the mean fund of each year during the period since
the last investigation.

https://oelawhk.lib.hku.hk/items/show/2286

1964

v5

41

68