Insurance (Classes of Insurance Business) Directive, 2017

612 11th August, 2017

GOVERNMENT NOTICE NO. 43

INSURANCE ACT (CAP. 47:01)

INSURANCE (CLASSES OF INSURANCE BUSINESS) DIRECTIVE, 2017

ARRANGEMENT OF PARAGRAPHS

PARAGRAPH

1. Short title
2. Application
3. Interpretation

PART II—OBJECTIVES

4. Objectives

PART III—SPECIFIC REQUIREMENTS

5. Division of categories of insurance business into classes and sub classes
6. Upgrading and downgrading of licence

PART IIV—ENFORCEMENT

7. Remedial measures and administrative penalties

IN EXERCISE of the powers conferred by section 6 of the Insurance Act, I, DALITSO KABAMBE, PhD, Registrar of Financial Institutions, make the following Directive—

PART I—PRELIMINARY

Short title 1. This Directive may be cited as the Insurance (Classes of Insurance Business) Directive, 2017.

Application 2. This Directive shall apply to general and life insurance companies carrying on insurance business in Malawi.

Interpretation 3.—(1) In this Directive, unless the context otherwise requires—

Cap 47:01 "categories of insurance business" means categories of insurance business as described in section 6(1) of the Act;

"classes of insurance business" means classes and sub-classes of insurance business in paragraph 6 of this Directive;

"downgrading or upgrading of insurance licence" means the process by which, as the case may be, an insurer underwrites fewer or additional classes of insurance business than it was licensed for;

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"insurer" has the meaning ascribed to that term in the Act; and Cap.47:01

"Registrar" means the Registrar of Financial Institutions appointed under the Financial Services Act. Cap.44:05

PART II—OBJECTIVES

4. The objectives of this Directive are to— Objectives

(a) divide the categories of insurance business into classes and further into sub classes;

(b) facilitate the licensing of insurers according to classes of insurance business; and

(c) promote self-discipline in the management of insurance companies through efficient utilisation of capital resources relative to size, business mix and complexity of business.

PART III—SPECIFIC REQUIREMENTS

5. For purposes of section 6— Division of categories of (a) the category of general insurance business shall be divided insurance business into classes and further into sub classes as set out in the First Schedule; classes and and sub classes

(b) the category of life insurance business shall be divided into classes and further into sub classes as set out in the Second Schedule.

6.—(1) Where an insurer was licensed to carry on insurance business in Upgrading specific classes of insurance business, any step to underwrite additional and classes shall constitute a breach of its licence unless a written approval of the downgrading Registrar has been granted. of licence

(2) If an insurer submits a written request to underwrite additional classes of insurance business the Registrar may approve the request upon being satisfied that the insurer has sufficient capital and solvency to underwrite the requested class or classes of business in line with the relevant Directive on minimum capital and solvency requirements.

(3) Where an insurer's licence has been upgraded, the Registrar shall revoke the insurer's previous licence.

(4) An insurer shall not downgrade its insurance licence.

PART IV—ENFORCEMENT

7. Where the Registrar determines that an insurer has not met the Remedial requirements of this Directive, the Registrar shall impose administrative measures and penalties in accordance with the provisions of the Financial Services Act, to administrative penalties correct the situation, including a fine of one hundred percent of the gross Cap. 44:05 premium earned where an insurer underwrites a class of insurance business for which it is not authorised.

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FIRST SCHEDULE (para. 5 (a))

CLASSES AND SUB-CLASSES OF GENERAL INSURANCE BUSINESS

CLASS OF BUSINESS	SUB-CLASS OF BUSINESS
Aviation	Hull
	Cargo
	Liability
Engineering	Plant and machinery
	Erection all risks
	Contractor’s all risks
	Machinery breakdown
	Boiler and pressure vessels
	Deterioration of stock
	Electronic equipment
	Advanced loss of profit
Fire – domestic	Building
	Householders (content)
	Comprehensive package covers
Fire—industrial and commercial	Buildings
	Contents
	Plant and equipment
	(Consequential loss from fire) loss of profit
	Industrial all risks
Liability	Public liability
	Products liability
	Directors’ and officers’ liability
	Employers liability (workmen’s compensation)
	Other liabilities
Marine	Hull
	Cargo
	Liability
Motor—private	Comprehensive
	Third party fire and theft

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CLASS OF BUSINESS	SUB-CLASS OF BUSINESS
	Third party
	Act
Motor—commercial	Comprehensive
	Third party fire and theft
	Third party
	Act
Motor Traders	Internal
	External
Motor contingent
Personal accident	Death
	Permanent disability
	Temporary total disablement
	Medical expenses
Miscellaneous	Cash-in-transit
	Goods-in-transit
	Fidelity guarantee
	Burglary
	Bonds
	All risks
	Others
Medical/Health	Medical
Agriculture	Poultry
	Livestock
	Crop
	Hail
	Weather

For purposes of this Directive, the following definitions of classes of general insurance business as listed in this Schedule shall apply—

"Aviation insurance business" means the business of effecting and carrying out contracts of insurance—

(a) upon the aircraft or upon the machinery, tackle or furniture or equipment;

(b) against damage arising out of or in connection with the use of aircraft or against risks incidental to construction, repair or landing of aircraft, including airport owners’ liability and third party risks;

(c) against loss of life by accident, or injury by accident to aircrew members whilst

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performing their duties in accordance with their employment but does not include contracts of insurance in respect of risks of aviation in excess of loss or crew loss of licence.

"Engineering insurance business" means the business of effecting and carrying out contracts of insurance of various perils arising out of plant and machinery, such as explosion or collapse of boilers, breakdown and electrical or mechanical plant and lifts and cranes, and resultant damage to the insured’s surrounding property and liability to third parties arising therefrom, also including contracts of insurance in respect of contract works covering damage to property on site however caused and third party liability arising therefrom.

"Fire insurance business" means the business of effecting and carrying out contracts of insurance, otherwise than incidental to some other class of insurance business against loss of or damage to property due to fire, explosion, storm, and other occurrences customarily included among the risks insured against in fire insurance policies.

"Liability insurance business" means the business of effecting and carrying out contracts of insurance against risks of persons insured incurring liabilities to third parties, not being risks arising out, or in connection with the use of, vessels or aircraft or risks incidental to the construction, repair or docking of vessels or aircraft.

"Marine insurance business" means the business of effecting and carrying out contracts of insurance—

(a) upon vessels or upon the machinery, tackle, furniture or equipment;

(b) upon goods, merchandise or property of any description on board of vessels;

(c) upon the freight of, or any other interest in or relating to vessels;

(d) against liability arising out of, or in connection with, the use of vessels

(e) against risks incidental to construction, repair or docking of vessels, including third party risks;

(f) against transit risks (whether the transit is by sea, inland water, land or air, or partly one and partly another), including risks incidental to the transit insured from the commencement of the transit to the ultimate destination covered by the insurance; or

(g) against any other risks insurance against which is customarily undertaken in conjunction with, or as incidental to, the undertaking of such business as falls within this definition.

"Motor insurance business" means the business of effecting and carrying out contracts of insurance against loss of, damage to, or arising out of or in connection with the use of, motor vehicles, inclusive of third party risks but exclusive of transit risks.

"Personal Accident insurance business" means the business of effecting and carrying out contracts of insurance against risks of the personal insured sustaining injury as the result of an accident or of a specified class or dying as the result of an accident or of an accident of a specified class or becoming incapacitated in consequence of disease or of disease of a specified class, not being contracts of long-term insurance business.

"Theft insurance business" means the business of effecting and carrying out contracts of insurance against loss of or damage to property due to theft or any other cause not covered by any other class and shall include the insurance of cash in transit, fidelity

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guarantee insurance and all risks insurance.

"Workmen’s compensation insurance business" means the business of effecting and carrying out contracts of insurance against the liability of the employer to the employees in respect of any injury or disease arising out of and in the course of their employment.

"Medical insurance business" means the business of paying for medical expenses, including the business of covering disability or long-term nursing or custodial care needs.

"Miscellaneous insurance business" means the business of effecting and carrying out contracts of insurance which are not principally or wholly of any type included in other classes of business but shall include insurance of bonds of all types, insurance of livestock and crop insurance.

SECOND SCHEDULE (para 5 (b))

CLASSES AND SUB-CLASSES OF LIFE INSURANCE BUSINESS

CLASS OF BUSINESS	BRIEF DESCRIPTION
Term assurance	Protection policies for a limited period, for instance, level term; renewable term; convertible term; decreasing term; increasing term; unit linked term
Whole life assurance	Non-profit whole life
	With profit whole life
	Unit linked
Endowment life assurance	Non-profit endowments
	With profit endowments
	Unit linked endowments
	Pure endowments
Group Life assurance	Group life assurance
	Group credit insurance
	Group funeral life assurance
Annuities	Immediate annuity
	Deferred annuity
	Annuity term certain
	Guaranteed annuity
	Annuity for life
	Joint life and last survivor annuity
	Impaired life annuity
Income protection assurance	Income protection assurance

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CLASS OF BUSINESS	BRIEF DESCRIPTION
Critical illness	Critical illness
Business assurance	Key person insurance
	Director’s share protection
Deposit administration/ Guaranteed funds
Miscellaneous—classes not included under those above

For purposes of this Directive, the following definitions of classes of life insurance business as listed in this Schedule shall apply:

"Term assurance business" means the business of effecting and carrying out contracts to pay benefits in the event of death or any other event such as disability, critical illness, accident, etc of the life assured whenever within the term of the contract. The premiums/ cover may be fixed, increase, decrease or be unit linked. Term assurance policies may also be convertible and renewable.

"Whole life assurance business" means the business of effecting and carrying out contracts that pay a benefit on the death of the life assured whenever death occurs. The policies can be written on a with profit basis and participate in the sharing of the company’s profits mostly by way of annually declared revisionary bonuses to the policyholder guaranteed benefits. On a non profit basis, the policyholder is only paid the guaranteed sum assured at the end of the contract or upon death.

"Endowment life assurance business" means the business of effecting and carrying out contracts that pay a benefit on survival at maturity date otherwise upon death before maturity.

"Group life assurance business" means the business of effecting and carrying out contracts of providing death benefits to dependants on death of the insured, usually arranged on a one year renewable basis.

"Annuities business" means the business of effecting and carrying out contracts that pay out regular amounts of benefit on continued survival of the insured. upon death of the policyholder within the term of contract, benefit is payable to dependants according to policy terms. Payments may be level, variable, fixed or inflation linked to protect against the erosion of benefits by inflation. Annuity policies can also be made on a single life or joint life basis.

"Income protection assurance" business means the business of effecting and carrying out contracts that protect the insured or dependants from financial consequences of unwelcome events such as total and permanent disablement from carrying out one’s occupation.

"Critical illness" means the business of effecting and carrying out contracts that protect the insured or dependants from financial consequences in the event of specified critical illnesses.

"Deposit Administration or guaranteed funds" means the business of effecting and carrying out contracts where bonuses are allocated to the policyholder’s capital to reflect the investment experience of the company. The allocation may be smoothed to cushion policyholders against short-term fluctuations in investment returns.

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Made this 31st day of May, 2017.

(FILE REF. NO PFSP/6/3/11)

D. KABAMBE, PhD Registrar of Financial Institutions