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Insurance
Ordinance
Table
of Contents Insurance Ordinance 2000 - Text
INSURANCE ORDINANCE, 2000 TABLE OF CONTENTS
PART I
PRELIMINARY
1.
Short title, extent and commencement
2.
Definitions
3.
Division of insurance business into life and non-life
4. Classes of life and non-life business
PART II
PROVISIONS APPLICABLE TO INSURERS
5.
Persons eligible to transact insurance business
6.
Registration
of insurers
7.
Commission may register insurer upon satisfaction
8.
Inspection and supply of copies filed with Commission
9.
Duration
and revocation of registration
10.
Notification of grant or revocation of registration
11.
Conditions imposed on registered insurers
12.
Criteria for sound and prudent management
13. Restriction on issue of certain life policies
PART III
STATUTORY FUNDS OF AND
OTHER SPECIAL
REQUIREMENTS FOR
LIFE INSURANCE COMPANIES
14.
Statutory and other funds of life insurance companies
15.
Establishment
of statutory fund
16.
Policies to be referable to specific statutory funds
17.
Assets, liabilities, revenues and expenses of funds
18.
Disposition of assets of statutory funds
19. Prohibition on reinsurance between statutory funds
20.
Capital
payments to life insurance statutory funds
21.
Distribution
of capital in a life insurance statutory fund
22.
Allocation of surplus on life insurance business
23.
Restriction on dividends and bonuses
24.
Declaration of interim bonuses
25.
Transitional provisions
26.
Appointed
actuary
27. Responsibilities of appointed actuary
PART IV
REQUIREMENTS AS TO CAPITAL AND
STATUTORY DEPOSITS
28.
Requirements as to capital
29.
Deposits
30.
Reservation of deposits
31. Refund of deposits
PART V
SOLVENCY REQUIREMENTS
32.
Admissible assets
33.
Assets and liabilities in Pakistan
34.
Valuation of assets and liabilities
35.
Net admissible assets of life insurers
36.
Insurers of non-life insurance business to have assets
in excess of minimum solvency
requirement
37.
Prohibition of loan
38.
Liability of directors, etc for loss due to
contraventions of sections 35,36 or 37
39. Assets of insurer how to be kept
PART VI REINSURANCE ARRANGEMENTS
40.
Special definitions and conditions applicable to this
Part
41.
Requirement
to effect and maintain reinsurance arrangements
42. Compulsory cession
43.
Premiums
and statements
44. Rules and regulations for the administration of compulsory reinsurances
PART VII ACCOUNTS AND AUDIT
45.
Books and records
46.
Accounting
and reporting
47.
Compliance with companies laws relating to accounts,
reports, etc.
48.
Audit
49.
Special audit
50.
Actuarial report
51.
Submission of returns
52.
Exemption from certain provisions of the Companies
Ordinance, 1984
53.
Furnishing reports
54.
Abstract of proceedings of general meetings
55.
Custody and inspection of documents and supply of copies
56.
Power of Commission regarding returns
57.
Power
of Commission to order actuarial report
58. Evidence of documents
PART VIII INVESTIGATION, DIRECTIVES, ETC.
59.
Power of Commission to order investigation
60.
Power of the Commission to give directions to the insurer
61.
Power of Commission to call for information and access
62.
Power of Commission to require plan
63.
Power of Commission to issue direction to cease entering
into new contracts of insurance
64.
Power to require calling of meeting of directors etc.
65.
Power
to remove Chairman, Director, etc. of the insurer
66. Power to prescribe maximum levels of acquisition costs and maximum levels of management expenses
PART IX
AMALGAMATION AND TRANSFER OF INSURANCE BUSINESS
67.
Approval
of acquisition or transfer
68.
Amalgamation and transfer of life insurance business.
69.
Sanction
of amalgamation and transfer by Court.
70. Statements required after amalgamation and transfer
PART X
ASSIGNMENT OR TRANSFER OF POLICIES AND
NOMINATION
71.
Assignment and transfer of life insurance policies
72.
Nomination by policy holder
73. Nomination under group life policies
PART XI
MARKET CONDUCT
74.
Application of this Part only to direct insurance
business
75.
Duty of utmost good faith
76.
Insurer not to engage in misleading or deceptive conduct
77.
Construction of ambiguities in favour of policy holder
78.
Exclusion of provisions of Ordinance void; an offence
79.
Remedies for non-disclosure or misrepresentation
80.
Policy not to be called in question on ground of
mis-statement after two years
81.
Tribunal
may disregard avoidance in certain circumstances
82.
Cancellation of a life insurance policy for fraudulent
claim
83.
Power of the Commission to prescribe rules for market
conduct
84.
Commission to have power to undertake compliance visits
85.
Commission to have power to require a survey to be
performed
86.
Contractual stipulations for placing insurance with
specific or named insurers
87. Provisions when not to constitute discrimination
PART XII
SURRENDER, LAPSE AND FORFEITURE OF
CERTAIN LIFE
INSURANCE POLICIES
88.
Special
definitions and interpretation for this Part
89.
Acquisition of surrender value
90.
Surrender of policy at policy holder's option
91.
Surrender
of policy at insurer's option
92.
Paid-up policy at policy holder's option
93. Non-forfeiture
PART XIII
INTERMEDIARIES
94.
This Part to apply only to direct insurance business
95.
Liability of Insurer for act or omissions of agent
96.
Persons acting as agents
97.
Minimum qualifications for agents
98.
Insurer
to maintain register of agents
99.
Payments by and to insurance agents
100.
Duty to disclose agency
101.
Restriction on life insurance agents, becoming directors
of life insurance companies
102.
Insurance
brokers to be licensed
103.
Brokers to be presumed agents under certain
circumstances; liability of brokers when not
so
presumed
104.
Ownership
and management interests inter se of brokers and insurers prohibited
105.
Broker's duty to disclose relationships
106.
Payments
by and to insurance brokers
107.
Requirements in respect of persons ceasing to act as
insurance brokers
108.
Basis
for payment of remuneration by insurers to insurance brokers
109.
Insurance
brokers to report annually to Commission
110.
Power
to inspect insurance agents and insurance brokers
111.
Persons
permitted to act as insurance surveyors
112.
Licensing of insurance surveyors
113. Registration of authorised surveying officers
114. Classes of insurance surveying
PART XIV
SPECIAL PROVISIONS OF LAW
115.
Application of Pakistan law to policies issued in
Pakistan
116.
Payment of money into Tribunal
117.
Small Disputes Resolution Committees
118.
Payment of liquidated damages on late settlement of
claims
119.
Supply of copies of proposals and medical reports
120. Prohibition of business on dividing principle
PART XV
INSURANCE TRIBUNAL
121.
Constitution
of the Tribunal
122.
Powers of Tribunal
123.
Procedure
of the Tribunal
124. Appeal
PART XVI
INSURANCE OMBUDSMAN
125.
Appointment of Insurance Ombudsman
126.
Terms and conditions of Insurance Ombudsman
127.
Jurisdiction, functions and powers of Insurance Ombudsman
128.
Reference to Insurance Ombudsman by Court
129.
Procedure for making complaints
130.
Recommendations for implementation
131.
Power to call for information
132.
Duties of insurers
133.
Duty and power of the Insurance Ombudsman to report to
the Commission
134. Report of Insurance Ombudsman
PART XVII
APPOINTMENT OF ADMINISTRATORS
135.
When Administrator for management of insurance business
may be appointed
136.
Powers
and duties of the Administrator
137.
Powers
of Administrator respecting property liable to attachment under section 160
138.
Cancellation
of contracts and agreement
139.
Termination
of appointment of Administrator
140.
Finality of decision of appointing Administrator
141.
Penalty
for withholding document or property from Administrator
142. Protection of action taken under sections 135 to 139
PART XVIII
WINDING UP
143.
Winding
up by the Court
144.
Voluntary winding up
145.
Court may order continuation of life insurance business
146.
Court may appoint special manager of life insurance
business
147.
Court may appoint independent actuary
148.
Powers of Court to reduce contracts of life insurance
149.
Commission empowered to apply for directions
150.
Commission entitled to notice and hearing
151.
Commission entitled to obtain information
152.
Determination of insurance liabilities
153.
Application of statutory fund assets
154.
Winding up secondary companies
155. Return of deposits
PART XIX
OFFENCES AND PENALTIES
156.
Penalty for default in complying with, or acting in
contravention of this Ordinance
157.
Penalty for transacting insurance business in
contravention of sections 5, 6 and 29
158.
Penalty for false statement in document
159.
Wrongfully
obtaining or withholding property
160. Power of Tribunal to order restoration of property of insurer or compensation in certain cases
161.
Notice to Commission and hearing
162.
Previous sanction of Commission for institution of
proceedings
163. Power of Court to grant relief
PART XX
MISCELLANEOUS
164.
Service of notices
165.
Insurance
of interests in Pakistan
166. Insurance of public property
PART XXI
RULES AND REGULATIONS
167. Power to make rules and regulations
PART XXII
REPEAL AND SAVINGS
168.
Repeal
169.
Repealed Act to apply to certain insurers ceasing to
enter into new contracts before
commencement
of this Ordinance
170.
Savings
171.
Exemptions
172. Removal of difficulties
AN ORDINANCE
To regulate the business of the insurance industry to
ensure the
protection of the interests of insurance policy holders and to promote
sound development of the insurance
industry and for matters connected therewith and incidental thereto;
WHEREAS, it is expedient to repeal and
re-enact the law
relating to the business of insurance;
AND WHEREAS the National Assembly and
the Senate stand
suspended in pursuance of Proclamation of Emergency of the fourteenth day of October,
1999, and the Provisional Constitution Order No. 1 of 1999; AND WHEREAS the
President is satisfied that circumstances exist which render it necessary to
take immediate action; NOW, THEREFORE, in
pursuance of the proclamation of Emergency of the fourteenth day of October,
1999, and Provisional
Constitution Order No. 1 of
1999, as well as Order No. 9 of 1999, and in exercise of all powers enabling
him in that behalf, the President of
the Islamic
Republic of Pakistan is pleased to make and promulgate the following
Ordinance:-
PART I
PRELIMINARY
Short title, extent and commencement.- (1)
This Ordinance may
be called the Insurance Ordinance, 2000.
(2)
It extends to the whole of Pakistan.
(3)
It shall come into force at once.
2. Definitions.-
In this Ordinance,
unless there is anything repugnant in the subject or context,-
(i) "actuary" means a person possessing such
actuarial qualifications as may be prescribed;
(ii) "appointed actuary" means the actuary
required to be appointed by a life insurer pursuant to
the provisions of section 26 of this Ordinance;
(iii) "approved securities" means Government
securities, and any other security charged on the revenues of the Federal
Government or of a Provincial Government, or guaranteed fully as regards
principal and profit or return (however called or designated) by the Federal
Government or a Provincial Government; and any debenture or other
security for money
issued under the authority of any Act of the Federal
Legislature or any
Provincial Legislature by or on behalf of the trustees
of the port of
Karachi; any security issued under the authority of any Act of Parliament or of
a Provincial Assembly; and any security specified as
an approved
security for the purpose of this Ordinance by the Federal
Government by
notification in the official Gazette;
(iv) "approved auditor" means an auditor
approved by the Commission for the purpose of performing the functions assigned to
auditors under this
Ordinance;
(v) "auditor" means a person qualified under
the provisions of section 254 of the Companies Ordinance, 1984 (XLVII of 1984), to act as
an auditor of
companies;
(vi) "authorised person" means, in the case
of a company, a director, including the chief executive, (by whatever name called),
or in the case of
insurers being bodies corporate incorporated outside Pakistan and
continuing business
as such after the commencement of this Ordinance, the closest comparable equivalent thereto, under
the laws of the place of incorporation of such foreign body corporate;
(vii) "banking company" has the meaning
assigned to the term in clause (a) of section 2 of the Banking Companies (Recovery of Loans,
Advances,
Credits and Finances) Act, 1997 (XV of 1997);
(viii) "base rate" means the effective annual
rate implied by the most recent repurchase rate that is published from time to time in a
circular issued by the
Securities Department of the State Bank of Pakistan for
six months Pakistan
Treasury Bills, or, if such rate is not available, the
most recent repurchase rate for six months Short Term Federal Bonds, or, if
neither of such rates is available, the most recent repurchase rate for any
other short term paper
issued by the Federal Government of an approximately
similar tenor,
whether in addition to or in substitution for any of the foregoing;
(ix) "Board" means the Policy Board
established under section 12 of the SECP Act;
(x) "borrower" has the meaning assigned to
the term in clause (c) of section 2 of the Banking Companies (Recovery of Loans, Advances,
Credits and
Finances) Act, 1997 (XV of 1997);
(xi) "certified" in relation to any copy or
translation of a document required to be furnished by or on behalf of an insurer means
certified by an
authorised person on behalf of such insurer to be a true copy or a
correct translation, as the case may be;
(xii) "class of business" means a
classification of insurance business having similar characteristics, into which life insurance or
non-life insurance
may be divided;
(xiii) "Commission" means the Securities and
Exchange Commission of Pakistan
constituted under section 3 of the SECP Act;
(xiv) "company" has the meaning assigned to
it in clause (7) of sub-section (1) of section 2 of the Companies
Ordinance, 1984 and includes an existing company as defined in clause (15) of
sub- section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984);
(xv) "continuous disability contract" means a contract under which a benefit is payable in the event of:
(i) the
death, by a cause specified in the contract, of the person whose life is insured (the
"insured"); or
(ii) injury
to, or disability of, the insured as a result of accident
or sickness; or
(iii) the insured being found to have a
specified medical condition or disease;
(xvi) "Court" means the principal civil Court of original jurisdiction in a District, and includes a High Court in exercise of its ordinary civil jurisdiction; and in relation to Part IX and Part XVIII, shall have the meaning as in section 7 of the Companies Ordinance, 1984 (XLVII of 1984);
(xvii) "customer"
has the meaning assigned to the term in clause (d) of section 2 of the Banking Companies (Recovery of Loans, Advances,
Credits and Finances) Act, 1997 (XV of 1997);
(xviii) "direct", in relation to the business
of insurance, means insurance other than reinsurance;
(xix) "domestic insurance policy" means a
contract of insurance that provides
insurance cover in respect of loss of or damage to a
building used
primarily and principally as a residence for the policy holder, for
persons with whom the policy holder has a family or personal relationship, or
for both
the policy holder and such persons, or loss of or damage to the
contents of such a
building, or both;
(xx) "duly attested" means attested in the
manner required for financial or future obligations by Article 17 of the Qanun-e-Shahadat
Order, 1984
(P.O. 10 of 1984);
(xxi) "electronic media" includes the
internet, radio, television, tapes, cassettes, all forms of electronic recording media including
computer diskettes and
CD-ROMs;
(xxii) "encumbrance" in relation to any property, movable or
immovable, means any mortgage, charge (fixed or
floating), hypothecation, pledge,
assignment or transfer by way of security, or any other form of
security or ownership interest less than
absolute legal and beneficial ownership;
(xxiii) "eligible person" means a person
specified in clauses (a) and (b) of sub- section (1) of
section 5;
(xxiv) "finance"
has the meaning assigned to the term in clause (e) of section 2
of the Banking Companies (Recovery of
Loans, Advances, Credits and Finances) Act, 1997 (XV of 1997);.
(xxv) "Government securities" means
Government securities as defined in the Securities Act,
1920 (X of 1920);
(xx vi) "group" in relation to contracts of life insurance, including health insurance, means contracts having a term not dependent on the termination or continuation of human life, under which the benefits are payable to a member of a group defined in the contract on the happening to that member during the term of the contract of a contingency defined in the contract, not being a contingency which is bound to happen;
(xxvii) "insurance" means the business of entering into and carrying out policies or contracts, by whatever name called, whereby, in consideration of a premium received, a person promises to make payment to another person contingent upon the happening of an event, specified in the contract, on the happening of which the second-named person suffers loss, and includes reinsurance and retrocession:
Provided that a contract of life insurance
shall be deemed to be a
contract of insurance notwithstanding that it may not
comply with
the definition set out in this clause;
(xxviii) "insurance broker" means a
person carrying on the business of insurance broking;
(xxix) "insurance broking" means the
arrangement of insurance for reward by a person other than an
agent of an insurance company;
(xxx) "Insurance Ombudsman" means the officer
appointed by the Federal Government under
section 125;
(xxxi) "insurer" means:
(i)
any company or other body corporate carrying on the business of
insurance, which is
a company or other body corporate incorporated
under any law for the time being in
force in Pakistan; and
(ii) any body
corporate incorporated under the law of any jurisdiction
outside Pakistan carrying on insurance business which
carries on that business in Pakistan.
(xxxii)
"investment
contract" means a contract of insurance, providing for benefits to be paid on death or on a specified date or
dates before death where the benefits paid are calculated by reference to
either a running
account or units under the contract whether or not the minimum value of
that account or those units is guaranteed and providing for the account to be
increased during the currency of the contract;
(xxxiii)
"investment-linked" in
relation to life insurance means investment contracts, the principal object of
which is the provision of benefits calculated by reference to units, the value of
which is related to the
market value of a specified class or group of assets of
the party by whom
the benefits are to be provided;
(xxxiv)
"lender"
means a person inside or outside Pakistan carrying on the business of advancing money by way of loans or finance
and includes a banking company;
(xxxv) "listed company" means a company, a
body corporate or corporation (including a body corporate or corporation incorporated
outside Pakistan)
or other body whose securities are allowed to be traded on a stock
exchange (inside or
outside Pakistan);
(xxxvi)
"loan" has
the meaning assigned to the term in clause (f) of section 2 of
the Banking Companies (Recovery of Loans,
Advances, Credits and Finances) Act, 1997
(XV of 1997);
(xxxvii)
"managing agent" has the
meaning ascribed to that term in section 206 of
the Companies Ordinance, 1984 (XLVII
of 1984);
(xxxviii)
"member of the family" in
relation to any person, means the husband or a
wife, the dependent father, mother,
brother or sister, or a minor son or
unmarried daughter of that person;
(xxxix)
"mutual
insurance company" means an insurer, being a company incorporated under the law of Pakistan or any country or
state other than
Pakistan, which has no share capital and of which, by its constitution,
only and all policy holders are members;
(xl)
"National
Insurance Corporation" means the corporation established under the National
Insurance Corporation Act, 1976;
(xli)
"officer"
has the meaning assigned to that expression in clause (24) of sub-section (1) of section 2 of the Companies Ordinance,
1984 (XLVII of
1984);
(xlii)
"Pakistan
Insurance Corporation" means the corporation established under the Pakistan
Insurance Corporation Act, 1952 (XXXVIII of 1952);
(xliii)
"participating",
in reference to life insurance business, means contracts of
Explanation:
a benefit paid under a policy is not a
distribution of
profit or surplus if the benefit is determined according to the terms and conditions of the contract and is not subject to the
exercise of discretion by the insurer;
(xliv) "permanent capital fund" means a fund
that is established in the records of a life insurance company not having a share capital,
and which
contains that part of the assets and liabilities of a life insurer
which is
attributed
to it and is not attributed to any statutory fund maintained by that life
insurer;
(xlv)
"policy"
means a contract of insurance;
(xlvi)
"policy
holder" means the person to whom a policy is issued or, in the case of a policy of life insurance, the person to whom
the whole of the interest of the policy holder in the policy is assigned once
and for all, but
does not include an assignee thereof whose interest in the policy is
defeasible or is for the time being subject to any condition;
(xlvii)
"policyholder
liability", in relation to life insurance, means:
a liability that has arisen under a policy of life
insurance; or
a liability that, subject to the terms and conditions of a
policy, will arise
on the happening of an event, or at a time, specified in the policy;
(xlviii)
"prescribed" means
prescribed by rules made under section 167;
(xlix)
"private motor
property damage policy" means a contract of insurance that provides insurance cover in respect of loss of or
damage to a motor
vehicle or of the contents of a motor vehicle used primarily and
principally as a means of private transport by the policy holder, by
persons with whom
the policy holder has a family or personal
relationship, or by both the policy
holder and such persons;
(I) "private company" has the meaning assigned to it
in clause (28) of sub- section (1) of section 2 of the Companies Ordinance, 1984
(XLVII of
1984);
(li) "public company" has the meaning
assigned to that expression in clause
(30) of sub-section (1) of section 2 of the Companies
Ordinance, 1984
(XLVII of 1984), or an existing company which is not a private company
or a subsidiary of a
private company;
(Hi) "reinsurance" means a contract of
insurance under which the event, specified in the contract, contingent upon the happening
of which,
payment is promised to be made to the policy holder thereunder, is
payment by the
policy holder of a claim or claims made against that policy holder under
another contract or contracts of insurance issued by that policy holder;
(liii) "regulations" means regulations made
under this Ordinance.
(liv) "repealed Act" means the Insurance Act, 1938 (IV of 1938);
(Iv) "retrocession" means a contract of reinsurance under which the event, specified in the contract, contingent upon the happening of which, payment is promised to be made to the policy holder thereunder, is payment by the policy holder of a claim or claims made under another contract or contracts of reinsurance issued by that policy holder;
(Ivi)
"rules"
means rules made under this Ordinance.
(Ivii)
"scheduled
bank" has the meaning assigned to it in clause (m) of section 2 of the State Bank
of Pakistan Act, 1956 (XXXIII of 1956);
(Iviii)
"SECP Act"
means the Securities and Exchange Commission of Pakistan
Act, 1997(XLIIof
1997);
(lix)
"shareholders'
fund" means a fund that is established in the records of a life insurance company and which contains that part of
the assets and liabilities of a life insurer which is attributed to it and is
not attributed to any statutory fund maintained by that life insurer;
(Ix)
"State Life
Insurance Corporation" means the corporation established under Article 11 of the Life Insurance (Nationalization)
Order, 1972 (P.O. 10 of 1972);
(Ixi)
"statutory
fund" means a fund that is established in the records of a life insurer and which relates solely to the life insurance
business of that life
insurer or a particular part of that life insurance
business.
(Ixii)
"subsidiary"
or "subsidiary company" has the meaning assigned to it in clause (38) of sub-section (1) of section 2 of the
Companies Ordinance,
1984(XLVIIof 1984);
(Ixiii)
"surveyor"
means a person (by whatever name called) who examines the goods, property or any interests insured under a
contract of non-life insurance to express an independent opinion as to the
cause, extent,
location and amount of any loss incurred or claimed to be incurred under
that contract;
(Ixiv)
"Takaful"
means a scheme based on mutual assistance in compliance with the provisions of Islamic shariah, and which provides
for mutual financial aid and assistance to the participants in case of
occurrence of certain contingencies and whereby the participants mutually agree
to contribute to the common fund for that purpose;
(Ix v)
"Tribunal"
means the Tribunal constituted under section 121 of this Ordinance; and
(Ixvi)
"unit",
except in section 32, means a notional share in the net value of a specified class or group of assets of a statutory fund of
an insurer carrying
on life insurance business, the value of which is to be
used as a basis for
determination of the benefits payable under an investment
linked
contract.
3. Division
of insurance business into life and non-life.- (1)
For the purposes of this Ordinance insurance business is divided
into life insurance business and non-life insurance business.
(2) Subject to sub-sections (3), (4) and (5), the
effecting and carrying out of any or all of the following type of contracts shall
constitute the carrying on of life insurance business; namely:-
(a) a contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life;
(b) a contract of insurance that is subject to payment of
premiums for a term dependent on the termination or continuance of human life;
(c) a contract of insurance that provides for the payment of an annuity for a term dependent on the continuance of human life;
(d) a contract that provides for the payment of an annuity for a term not dependent on the continuance of human life but exceeding the period of one year;
(e)
a contract providing an indemnity for medical expenses;
(f)
a continuous disability income contract;
(g) an investment contract; and
(h) such contracts as may be prescribed.
(3)
Notwithstanding anything in this Ordinance to the
contrary, the
effecting
and carrying out of a contract whose principal object is one of
life insurance business, but which contains related and subsidiary
provisions of a non-life insurance nature, shall be taken to constitute the
carrying on of life insurance business.
(4)
Notwithstanding anything in this Ordinance to the
contrary, the
effecting
and carrying out of a contract that provides for the payment of
money on the death of a person shall not constitute the carrying on of life
insurance
if the contract is effected and carried out by an insurer who is
registered to carry on non-life insurance business; and both of the
following
conditions exist:
(a)
by the terms of the contract, the duration of the
contract is
to be not more than one year; and
(b)
payment is only to be made in the event of death by
accident.
(5)
Notwithstanding anything in this Ordinance to the
contrary, the
effecting
and carrying out of a contract that provides for the payment of
money in the event of a person suffering loss, other than death,
attributable
to accident, sickness or infirmity shall not constitute the
carrying
on of life insurance if the contract is effected and carried out by
an
insurer who is registered to carry on non-life insurance business; and
by the
terms of the contract, the duration of the contract is to be not more
than one year.
(6)
All contracts of insurance which are not, in accordance
with the
provisions
of the foregoing sub-sections, classified as life insurance
contracts,
shall be classified as non-life insurance contracts.
4. Classes
of life and non-life business.-
(l)For the purposes of this Ordinance, the following shall be the classes of
business into which life
insurance business is divided:
(a)
Class 1 being ordinary life business;
(b)
Class 2 being capital redemption business;
(c)
Class 3 being pension fund business; and
(d)
Class 4 being accident and health business.
(2) For the purposes of sub-section
(1) -
(a)
"ordinary life business" means effecting and
carrying out
contracts of life insurance other than contracts included in
Class 2, Class 3 or Class 4;
(b)
"capital redemption business" means effecting
and carrying
out
capital redemption contracts;
(c)
"pension fund business" means effecting and
carrying out
contracts
of life insurance that are maintained for the
purposes
of a pension or retirement scheme and are owned
by trustees under the scheme; and
(d) "accident and health business" means 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 policy holder or a person for whose benefit the contract was made -(i) sustaining injury as a result of an accident;
(ii) becoming incapacitated in consequence of an accident or disease; or
(iii) suffering loss, including medical expenses, attributable to accident, sickness or infirmity
(3) For the purposes of this Ordinance, the following
shall be the classes of
business into which non-life insurance business is divided:
(a) for direct and facultative reinsurance business;
(i) Class 1 being fire and property damage business;
(ii) Class 2 being marine, aviation and transport business;
(iii) Class 3 being motor third party compulsorybusiness;
(iv) Class 4 being liability business;
(v) Class 5 being workers' compensation business;
(vi) Class 6 being credit and suretyship business;
(vii) Class 7 being accident and health business; and
(viii) Class 8 being agriculture insurance including crop insurance;
(ix) Class 9 being miscellaneous business;
(b) for treaty reinsurance business:
(i) Class 9 being proportional treaty business; and
(ii)
Class 10 being non-proportional treaty business.
(4) For the purposes of sub-section (3).-
(a)
"fire and property damage business" means effecting and
carrying out contracts of insurance against loss to the policy holder arising
from loss of or
damage to property, other than as contained in
class2;
(b) "marine, aviation and transport
business" means effecting
and carrying out contracts of insurance against loss to the
policy holder arising from:
(i) loss of or damage to, or arising out of
or in connection with the use of:
(a)
means of transport, including motor vehicles
and
railway rolling stock used on land,
vessels used on the sea or on inland waters,
and
aircraft; or
(b)
the machinery, tackle, furniture or equipment
of
those means of transport;
including third party risks and carrier's liability but
excluding risks
contained in class 3 or class 5: or
(ii)
loss of or damage to merchandise, baggage and all
other goods in
transit, irrespective of the form of
transport;
(c)
"motor third party compulsory business" means
effecting
and carrying out contracts of insurance against loss to the
policy holder arising from liabilities incurred to third
parties
arising out of or in connection with the use of motor
vehicles
on land, as specified in the Motor Vehicles Act,
1939
(IV of 1939);
(d)
"liability business" means effecting and
carrying out
contracts of insurance against loss to the policy holder
arising
from liabilities incurred to third parties, other than
in
respect of risks specified in class 2, class 3 or class 5;
(e)
"workers' compensation business" means
effecting and
carrying
out contracts of insurance against loss to the
policy holder arising from liabilities incurred to
workers
arising
out of or in connection with the employment of the
workers by the
insured persons;
(f) "credit and suretyship business" means
effecting and
carrying out:
(i) contracts of insurance against loss to
the policy holder arising from failure, whether through
insolvency or
otherwise, of debtors to pay debts
when they fall due; or
(ii)
contracts of insurance against loss to the policy
holder arising from his having to perform contracts
of guarantee
entered into by him; or
(iii)
contracts for fidelity bonds, performance bonds,
administration bonds, bail bonds, custom bonds or similar
contracts of guarantee;
(g) "accident and health business" means
effecting and
carrying out contracts of insurance,
the duration of which
under the contract is not more than
one year, providing
fixed pecuniary benefits or benefits in the nature of
indemnity or a combination of both,
against risks of the
policy holder or a person for whose
benefit the contract
was made;
(i)
sustaining injury as a result of an accident;
(ii) dying as
a result of an accident;
(iii) becoming incapacitated in consequence of a
disease;
or
(iv)
suffering loss, including medical expenses,
attributable to sickness or infirmity;
but excluding contracts of a type included in class 5;
(h) "agriculture insurance" means
effecting and carrying out
contracts of insurance against loss to the policyholder
arising from loss of or damage to agriculture related
property including
crops;
(i) "miscellaneous business" means
effecting and carrying out
contracts of insurance of types not included in any
other class;
(j) "proportional treaty business"
means effecting and carrying out of contracts of treaty reinsurance, whether
obligatory or otherwise, of such a nature that a proportion of premium or
of a separately
identified part of premium on insurance contracts which are the subject matter
of the treaty is payable to the reinsurer by the cedant and an identical
proportion of claims or of a separately identified part of claims on those
contracts is payable to the cedant by the reinsurer, and including without
limitation treaties of
quota-share and surplus classifications; and
(k) "non-proportional treaty
business" means effecting and
carrying out of contracts of treaty reinsurance,
not being contracts of a type included in Class 9.
(5)
The Commission may, by rules, prescribe sub-classes of
business into
which
any of those set out in sub-section (1) and sub-section (3) may be
divided.
(6)
The Federal Government may, by rules, prescribe any
class of business
set
out in sub-section (1) or sub-section (3), or sub-class of business
prescribed
under sub-section (5), as a restricted class or sub-class as the
case may be.
PART II
PROVISIONS
APPLICABLE TO INSURERS
5. Persons eligible to transact insurance
business.-. (1)
After the
commencement date no person other than:
(a)
a public company; or
(b)
a body corporate incorporated under the laws of Pakistan
(not
being a private company or the subsidiary of a private
company); shall start any insurance business in Pakistan.
(2) After the commencement date no person other than
an eligible person
or the branch of a body corporate incorporated in any jurisdiction outside
Pakistan, which, immediately before the commencement of this
Ordinance, was registered to carry on and was carrying on such business
in Pakistan, shall, after the expiry
of one year from such commencement,
continue such business.
(3) An insurer, being a body corporate incorporated in
a jurisdiction outside
Pakistan and registered to carry on and carrying on insurance business in
Pakistan at the commencement of this
Ordinance, may, within six months
of such commencement take steps to
transfer the business of such an
insurer to a new public company pursuant to a scheme of arrangement
under the provisions of sections 284 to 287 of the Companies Ordinance,
1984 and the applicable provisions of this Ordinance, and all such
provisions shall apply mutatis
mutandis as if the business in Pakistan of
such an insurer is being carried on by a public company incorporated in
Pakistan.
6. Registration
of insurers.-(1) No
eligible person shall, after the commencement of this Ordinance, begin or, after the
expiry of six months from the commencement date, continue, to carry on any
insurance business
in Pakistan, unless such eligible person has obtained
from the Commission
a certificate of registration to carry on insurance business under this
Ordinance, and that registration has not been revoked.
(2)
A certificate of registration issued to an insurer under
section 3 or
section 3A of the repealed Act shall be deemed, for the purposes of this
section,
to constitute registration under this Ordinance, during the period
until
the expiry of such existing registration or one year from the
commencement
date for this section whichever is earlier; and National
Insurance
Corporation, Pakistan Insurance Corporation and State Life
Insurance
Corporation shall be deemed, for the purposes of this section,
to
have been so registered, such registration to continue until one year
from the
commencement date.
(3)
During the period of six months from the commencement
date, the
Commission may on the application of an insurer registered under the
repealed
Act as at the commencement date extend, for the purposes of
this section, the validity of the certificate of registration held by the
insurer
for a period not exceeding six months from the date on which that
certificate of registration would otherwise have expired.
(4)
An eligible person required to register under this
Ordinance, may make
an
application to the Commission for registration as a person authorised
to carry on life insurance business or non-life insurance business as the
case
may be.
(5)
An application for registration shall be made in writing,
in either the
English or the Urdu language and shall be signed by authorised persons on behalf
of an eligible person.
(6)
An application for registration shall contain such
information and shall
be
accompanied by such documents, reports, certificates and other
matters
as may be prescribed.
(7)
An application for registration made by an insurer
carrying on
insurance
business at the commencement date shall include a plan for the
achievement
of compliance by the insurer with the paid-up capital and
solvency
levels set out in Part IV and Part V of this Ordinance by the
dates set out in those Parts.
(8)
An application for
registration as a person authorised to carry on life
insurance business shall in all cases include or be accompanied by:
(a) a statement of the rates, advantages, terms and
conditions
of life insurance policies proposed
to be offered by the
applicant, including without
limitation where the policy
acquires a surrender value, the basis on which the surrender
value is determined, and including
without limitation in the
case of investment-linked policies a
description of:
the investments to which the policy is linked; the basis on which the benefits payable under the
policy are determined;
(iii) the frequency with which and basis by which the unit values are determined; and the values attributed to units at the time of purchase and sale;
(iv) the basis by which values are attributed to units at the time of and for the purpose of purchase and sale; (v) the basis on which expenses attributed to the policy are determined; and
(vi) the basis on which charges for mortality
attributed to the policy are determined;
(b)
a business plan setting out the expected premium income,
expenses and results of the applicant for a period of not less
than ten years from the date at which authorisation is
proposed
to be obtained;
(c)
a copy of any written, electronic or other material
proposed
to be
issued by the applicant for mass communication or
for
communication with a policy holder or prospective
policy holder, in respect of life insurance policies proposed
to be
offered by the applicant;
(d)
a statement by the appointed actuary that the terms and
conditions of the life insurance contracts proposed to be
entered
into are sound and workable; and
(e)
a statement by the appointed actuary that the business
plan
has
been prepared according to principles which appear to
him to be reasonable and sound.
(9)
Where an applicant
has made an application under this section for
registration
and, before registration is granted or refused, a change occurs
in the
particulars specified in the application or in the matters contained
in a
document required to accompany the application, the applicant shall,
within 14 days after the occurrence of the change, give to the
Commission notice in writing signed by any two authorised persons and
specifying particulars of the change.
(10)
An applicant shall
not:-
(a)
make an application under this section; or
(b)
give to the Commission a notice under sub-section (9);
that
is false or misleading in a material particular.
7. Commission
may register insurer upon satisfaction.-(1)
Where an
application for registration is received by the
Commission under section 6, the Commission may, subject to sub-section (2) and
sub-section (3),
register the insurer as authorised to carry on life insurance business
or authorised
to carry on non-life insurance business as the case may be, if the Commission
is satisfied that:
(a)
the provisions of this Ordinance relating to minimum
paid-
up
share capital requirements have been complied with;
(b)
the provisions of this Ordinance relating to minimum
statutory
deposits have been complied with;
(c)
the provisions of this Ordinance relating to minimum
solvency requirements have been complied with;
(d)
the provisions of this Ordinance relating to the
effecting of
reinsurance arrangements have been complied with;
(e)
the applicant is, and is likely to continue to be, able
to meet
its liabilities;
(f)
the applicant meets, and is likely to continue to meet,
criteria
for sound and prudent management including
without
limitation those set out in section 12;
(g)
the applicant has appointed an auditor recognised by the
Commission
as appropriately qualified to audit the
business
of life or non-life insurance as the case may be;
(h) the
applicant has, if it proposes to carry on life insurance business, appointed an actuary as its appointed actuary,
and the Commission does not disapprove that appointment;
(i) the
applicant is, and is likely to continue to be, able to comply with such other of the provisions of this
Ordinance
as are applicable to it; and
(j) on the basis of the
information provided by the application
and any other information received by the
Commission, the
application ought to be granted.
(2)
The Commission shall not grant a certificate of
registration if the
granting
of that certificate would not be in accordance with policy
decisions
made by the Federal Government.
(3)
The Commission shall not grant registration to any
applicant where the
grant
of such registration would result in an insurer carrying on both life
insurance
and non-life insurance business.
(4)
Where the Commission is not satisfied with respect to all
or any of the
matters
referred to in sub-section (1), it shall refuse an application.
(5)
Within thirty days of receipt of an application for
registration, or such
longer period as may be prescribed, the Commission shall, in writing,
notify
the applicant that the application has been granted or refused, as
the
case may be; except that:
(a) if the Commission so notifies the applicant in writing before the expiry of the period of thirty days referred to in this sub-section, the period of thirty days shall be extended to ninety days or such longer period as may be prescribed;
and
(b)
if the application is deficient in any technical
particular,and
the Commission so notifies the applicant before the
expiry of the period of thirty days referred to in this sub
section, the application for registration shall not, for the
purposes
of this sub-section, be treated as received until the
applicant has amended the deficiency so notified.
(6)
The Commission may, on granting registration, specify any
class,
classes, sub-class or sub-classes of business prescribed as restricted under
sub-section (6) of section 4 as a class, classes, sub-class or sub-classes of
business which the insurer is not authorised to carry on.
(7)
The Commission may at any time require a registered
insurer or an
insurer deemed under this Ordinance to be registered, to comply with
such
conditions, not inconsistent with the provisions of this Ordinance, as
the
Commission may specify in writing:
Provided that conditions imposed under this sub-section
shall be
imposed
only where the Commission believes on reasonable grounds that such conditions
are desirable for the protection of the policy holders and potential policy
holders of the insurer and such
conditions shall not be imposed in such a
manner as to restrict
unreasonably the commercial liberty of any insurer as
against
other
insurers or such as to impose an unreasonable burden upon
any insurer;
Provided also that conditions shall not be imposed under
this subsection without giving an insurer to whom the conditions would
apply not less than
thirty days' written notice of intention to
impose such conditions, or without
giving such insurer an opportunity to be heard.
Inspection and supply of copies filed with
Commission.-
Any person
may on payment of
the prescribed fee inspect such of the documents filed by an insurer with the
Commission under section 6 as may be prescribed,
and may obtain a copy of any such
document or part thereof on payment in advance at the prescribed rate for the
making of the copy.
9. Duration and revocation of registration.-(l
)..Registration
under this Ordinance to carry on insurance business shall continue
until it is revoked.
(2)
Where the Commission is requested in writing by an
insurer to revoke
the registration
of that insurer to carry on insurance business, the
Commission
may by a written instrument revoke that registration.
(3)
Registration under this Ordinance to carry on insurance
business shall
not be
revoked unless the Commission is satisfied that adequate provision
has
been made for the irrevocable transfer to a registered insurer of all
insurance liabilities incurred by the insurer seeking revocation of
registration
under the preceding sub-section.
(4)
Nothing in this section shall prevent the Commission
from exercising
the
powers available to it under section 63 to direct a registered insurer tocease entering into new insurance contracts.
10. Notification
of grant or revocation of registration.-(l)
Where registration under the preceding provisions of this Part
is granted or
revoked, the Commission shall cause notice of the grant (including any
limitations as to
classes of business which may be underwritten) or
revocation of
registration to be published in the Gazette.
(2) Where registration under the preceding provisions
of this Part is granted, the Commission shall issue to
the insurer a written certificate of registration, which certificate shall be
surrendered to the Commission on
revocation of registration.
(3) The Commission may, on payment of the prescribed
fee, issue a duplicate certificate of registration to replace a certificate of
registration to replace a certificate lost, destroyed or mutilated, or in any
other case where it is
of opinion that the issue of a duplicate certificate is
necessary.
11. Conditions
imposed on registered insurers.-(l)
An insurer registered under this Ordinance
shall at all times ensure that:
(a)
the provisions of this Ordinance relating to minimum
paid-
up
share capital requirements are complied with;
(b)
the provisions of this Ordinance relating to minimum
statutory
deposits have been complied with;
(c)
the provisions of this Ordinance relating to minimum
solvency
requirements are complied with;
(d)
the provisions of this Ordinance relating to the
obtaining of
reinsurance arrangements are complied with;
(e)
the insurer is, and is likely to continue to be, able to
meet
its liabilities;
(f)
the insurer meets, and is likely to continue to meet,
criteria
for sound and prudent management including without
limitation those set out in section 12;
(g)
the insurer has appointed an auditor recognised by the Commission as appropriately qualified to audit the
business
of life or non-life insurance as the case may be;
and
(h) the insurer is, and is likely to continue to be, able to comply with such other of the provisions of this Ordinance as are applicable to it.
(I)
An insurer registered under this Ordinance shall be
deemed to have
undertaken to abide by the decisions of any small disputes resolution
committee constituted under section 117.
(3)
An insurer registered under this Ordinance shall pay to
the
Commission,
on or before the fifteenth day of January in every calendar
year,
an annual supervision fee of the greatest of:
(a)
Rs. 100,000;
(b)
one rupee per thousand of gross direct premium written in
Pakistan
during the calendar year preceding the calendar
year
ended on the previous 31st day of December; or
(c)
such amount as may be prescribed.
12. Criteria for sound and prudent management.-(1)
For the purposes of
this Ordinance, the following shall, without limitation,
be recognised as criteria for sound and prudent management of an insurer or
applicant for
registration as a person authorised to carry on insurance business:
(a) the
business of the insurer or applicant is carried on with
integrity, due care and the professional skills
appropriate to the nature and scale of its activities;
(b)
each director and officer or (in the case of an
applicant
which is a body corporate incorporated outside Pakistan)
the
principal officer in Pakistan of the insurer or applicant
is a
fit and proper person to hold that position;
(c)
the insurer or applicant is directed and managed by a
sufficient
number of persons who are fit and proper
persons
to hold the positions which they hold;
(d)
the insurer or applicant maintains adequate accounting and
other
records of its business; and
(e) the insurer or applicant maintains adequate systems of control of its business and records.
Explanation:
A person is a fit and proper person who
possesses
such experience and qualifications as are appropriate for the duties for
which he is responsible, and conducts those duties with due diligence and
skill. A person is not a fit and proper person to hold
the position of
Chairman, or of Chief Executive or principal officer in Pakistan, of an
insurance company if that person does not have experience or qualifications of
direct relevance to the conduct of insurance operations. A person is not a fit
and proper person if the association of that person with the insurer is or is
likely, for whatever reason, to be detrimental to the interest of the insurer
or of the policy holders, or is otherwise undesirable.
(2) Accounting and other records shall not be regarded
as adequate for the
purposes of clause (d) of sub-section (1) unless they are such as:
(a)
to enable the business of the insurer or applicant to be
prudently managed; and
(b)
to enable the insurer or applicant to comply with the
obligations
imposed on it by or under this Ordinance.
(3) In determining whether any systems of control are
adequate for the
purposes of clause (e) of sub-section
(1), the Commission shall have
regard to the functions and
responsibilities for those systems which are
held by the persons who are
responsible for the direction and
management of the insurer or
applicant and to whom clause (b) of sub
section (1) applies.
(4)
The insurer or applicant shall not be regarded as
conducting its business
in a sound and prudent manner if it fails to conduct its business with due
regard
to the interests of policy holders and potential policy holders.
(5)
The insurer or applicant shall not be regarded as
conducting its business
in a sound and prudent manner if it:
(a)
fails to satisfy an obligation to which it is subject by
virtue
of
this Ordinance; or
(b)
fails to supervise the activities of a subsidiary with
due care
and
diligence and without detriment to the insurer's or
applicant's business.
(6) No insurer shall appoint a managing agent for the conduct of its business.
13. Restriction on issue of certain life
policies.-(l)..No
insurer shall offer
any policy or contract in respect of life insurance
business other than
those described in the prescribed documents filed with
the Commission under sub-section (6) or sub-section (8) of section 6 or an
amendment to
such prescribed documents filed with the Commission under sub-section
(9) of section 6,
unless the insurer has, not less than thirty days prior to such offer, furnished to the Commission in respect of
such contracts the
particulars and materials specified in sub-section (8)
of section 6.
(2) The Commission may, within thirty days of such
submission, require
the insurer in writing to make such changes in the particulars and materials as the Commission may direct, and where the Commission does so direct the insurer shall not be taken to have complied with sub-section (1) until the insurer has complied with the direction of the Commission.
PART III
STATUTORY FUNDS OF AND OTHER SPECIAL REQUIREMENTS FOR
LIFE INSURANCE COMPANIES
14. Statutory and other funds of life insurance
companies.-
(l)..An insurer carrying on the business of
life insurance shall at all times maintain at least one statutory fund in
respect of its life insurance business.
(2)
An insurer that carries on life insurance business
consisting of the
provision
of investment-linked benefits shall maintain one or more
statutory
funds exclusively for that business.
(3)
An insurer that carries on life insurance business
consisting of the
provision
of capital redemption business shall maintain one or more
statutory funds exclusively for that business.
(4)
An insurer that carries on life insurance business
consisting of the
provision
of pension fund business shall maintain one or more statutory
funds
exclusively for that business.
(5)
An insurer that carries on life insurance business
consisting of the
provision
of accident and health insurance business shall maintain one or
more statutory funds exclusively for that business.
(6)
An insurer that carries on life insurance business
outside Pakistan shall
maintain
one or more statutory funds exclusively in respect of that
business.
(7)
An insurer that carries on life insurance business of
such class or sub
class as may be prescribed by the Commission for the purposes of this
sub-section shall maintain one or more statutory funds exclusively in
respect of that business.
(8)
Statutory funds may not be divided or amalgamated
without the approval
of the Commission.
(9)
The Commission may direct a life insurer to amalgamate
or transfer a life
statutory fund where the Commission believes on reasonable grounds that
amalgamation
or transfer is required for the protection of the interests of
policy holders.
(10)
An insurer having a share capital and carrying on life
insurance business
shall
maintain a shareholders' fund.
(11)
An insurer not having a share capital and carrying on
life insurance
business,
shall maintain in its records a permanent capital fund.
(12) In this Ordinance, a reference to the
shareholders' fund shall be deemed to include a reference to the permanent capital fund, and
provisions
which are applicable to the shareholders' fund shall apply mutatis
mutandis
to the permanent
capital fund.
15. Establishment of statutory fund.-
Whenever an insurer establishes a statutory fund for its life insurance business, the
insurer shall give the
Commission, not later than thirty days prior to the
establishment of the
fund, written notice (in such form as may be prescribed
by the
Commission)
of:
(a)
the establishment of the fund;
(b)
the date on which the fund was established;
(c)
the nature of the life insurance business of the company
to
which
the fund relates; and
(d)
such other matters as are prescribed.
16. Policies to be referable to specific statutory funds.-(l) A life insurance policy issued by an insurer carrying on life insurance business shall be referable to one or more statutory funds:
Provided that a policy which is not investment-linked
shall be referable to one statutory fund only;
Provided further that if:
(a)
a contract ("the supplementary contract")
which is
supplementary
to the policy ("the principal policy") is of a
type which would but for the preceding proviso be required
by
section 14 to be referable to a different statutory fund
from that to which the principal policy is referable, and
(b)
the premium attributable to such supplementary contract
exceeds
the premium attributable to the principal policy, the supplementary contract shall be referable to that
different
statutory fund.
(2)
A policy document shall specify the statutory fund or
statutory funds to
which
the policy is referable.
(3)
A provision in a policy document that a policy is
referable to two or more
statutory funds is not effective unless it specifies:
(a)
the benefits under the policy that are to be provided out
of
each fund; and
(b)
either:
(i) the proportion of the premium that is related to the benefits to be provided out of each fund and is to be credited to the fund; or
(ii) the way in which that proportion is to
be calculated.
(4)
The statutory fund or funds to which a policy is
referable may be changed
by endorsement to the policy document.
(5) If a change is made, in accordance with the foregoing sub-section, to the statutory fund or funds to which a policy is referable, the insurer shall effect such transfer of assets between the statutory funds concerned as may be determined by the appointed actuary in accordance with such principles as may be prescribed.
17. Assets, liabilities, revenues and expenses of funds.- (1) All assets, liabilities, revenues and expenses of a life insurer shall be referable to one or more funds of the insurer.
Explanation: in this section the word 'fund' means a statutory fund or the shareholders' fund.
(2)
All amounts received by a life insurer in respect of the
business of a
statutory fund shall be credited to that fund.
(3) All assets and investments related to the business of a statutory fund shall be included in that fund.
(4)
All liabilities (including policy liabilities) of a life
insurer arising out of
the
conduct of the business of a statutory fund shall be treated as
liabilities
of that fund.
(5)
All assets, liabilities, revenues and expenses of a life
insurer which are
referable
to the shareholders' fund and which are not attributed to a
statutory fund shall be attributed to the shareholders' fund.
(6)
If an asset, a liability, a revenue or an expense of a
life insurer is referable
to two
or more statutory funds, or is referable in part to a statutory fund
or funds but is also referable to the shareholders' fund, the insurer shall
apportion
such asset, liability, revenue or expense on a fair and equitable
basis between the funds to which it is referable.
(7)