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Insurance Ordinance 2000
INSURANCE ORDINANCE, 2000

PART I
PRELIMINARY

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:-

1. 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);
(xxvi)"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); "managing agent" has the meaning ascribed to that term in section 206 of the Companies Ordinance,
(xxxvii) 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 life insurance, other than investment-linked contracts, health contracts, group life contracts and group health contracts, under the terms and conditions of which the policy holder has an entitlement to participate in distributions by the life insurer of profits or surpluses;
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:
(i) a liability that has arisen under a policy of life insurance; or
(ii) 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;
(l) "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;
(lii) "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);
(lv) "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;
(lvi) "rules" means rules made under this Ordinance.
(lvii) "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);
(lviii) "SECP Act" means the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 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;
(lx) "State Life Insurance Corporation" means the corporation established under Article 11 of the Life Insurance (Nationalization) Order, 1972 (P.O. 10 of 1972);
lxi) "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.
(lxii) "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 (XLVII of 1984);
(lxiii) "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;
(lxiv) "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;
(lxv) "Tribunal" means the Tribunal constituted under section 121 of this Ordinance; and
(lxvi) "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.- (1)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 compulsory business;
(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;
(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 insurancecontracts 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.

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:
(i) the investments to which the policy is linked;
(ii) 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 sub-section 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.

8. 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.-(1).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 to cease entering into new insurance contracts.

10. Notification of grant or revocation of registration.- (1) 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.- (1) 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.

(2) 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.- (1).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.

14. Statutory and other funds of life insurance companies.- (1).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.- (1) 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) An apportionment made under this section shall only be made after the directors of the insurer have received the appointed actuary's written advice as to the fairness and equity of the proposed basis of allocation.

18. Disposition of assets of statutory funds.- (1) The assets of a statutory fund are only available for expenditure related to the conduct of the business of the statutory fund.

(2) Profits and losses of a statutory fund may only be dealt with in accordance with the applicable provisions of this Ordinance.

19. Prohibition of reinsurance between statutory funds.- (1)..Reinsurance between statutory funds maintained by one insurer is prohibited.

(2) For the purposes of this section, reinsurance between statutory funds shall be deemed to exist, (whether or not there is a written contract of reinsurance) where the following circumstances are present:
(a) part of the premium payable under a policy referable to one statutory fund is credited to another statutory fund ("the reinsuring fund") to which the policy is not referable; and
(b) a corresponding proportion of the liability under the policy is treated as a liability for the discharge of which the assets of the reinsuring fund are available.

20. Capital payments to life insurance statutory funds.- (1).A life insurer may at any time make a capital payment to a statutory fund.

(2) For the purposes of this section, a capital payment is an amount credited to a statutory fund that is not required to be credited to that fund and does not represent any part of the assets of another statutory fund.

(3) All capital payments made to a statutory fund in accordance with this section shall be credited in the records of the statutory fund to a ledger account clearly identified as capital contributed to the statutory fund.

21. Distribution of capital in a life insurance statutory fund.- (1).A distribution of capital, other than a distribution to holders of participating policies by way of bonus, shall not be made at any time at which any of the accounts identified in sub-sections (1) and (2) of section 22 have a debit balance.

(2) A distribution of capital, other than a distribution to holders of participating policies by way of bonus, shall not be made from a statutory fund unless the provisions of sub-sections (3) and (4) of section 35, after such distribution, are complied with.

(3) A distribution of capital contributed to a statutory fund may only be made after the directors of the insurer have received the appointed actuary's written advice as to the likely consequences of the proposed distribution.

(4) In providing his written advice under sub-section (3), the appointed actuary shall have regard, without limitation, to the effect of the proposed distribution on the compliance by the insurer with the provisions of this Ordinance relating to solvency and on the ability of the insurer to continue to comply with the provisions of this Ordinance relating to solvency in the context of its planned level of activity.

(5) Capital contributed to a statutory fund may only be distributed in the following ways:

(a) by transfer to the shareholders’ fund;
(b) by transfer to another statutory fund of the company; or
(c) by distribution as bonuses to holders of participating policies.

22. Allocation of surplus on life insurance business.- (1).An insurer conducting participating life insurance business shall, in the accounting records of the statutory fund or funds in which that business is carried on, maintain ledger accounts separately identifying the following:

(a) retained earnings on participating business attributable to participating policyholders;
(b) retained earnings on participating business attributable to shareholders but not distributable; and
(c) retained earnings on participating business distributable to shareholders.

(2) An insurer conducting business other than participating business shall in the accounting records of the statutory fund or funds in which that business is carried on maintain a ledger account identifying the retained earnings on business other than participating business.

(3) For the purposes of this section and section 23, the ledger accounts referred to in clauses
(a), (b) and (c) of sub-section (1) and in sub-section (2) are described for reasons of brevity as follows, respectively: (a) the A Account; (b) the B Account;
(c) the C Account; and
(d) the D Account.

(4) The ledger accounts identified in sub-sections (1) and (2) shall not be dealt with other than in accordance with the provisions of this section and section 23, or as the Commission may prescribe.

(5) Immediately following each investigation carried out in accordance with section 50, the insurer shall allocate, by debiting or crediting the accounts identified in sub-section (1) and sub-section (2) in each fund, the amount of surplus earned in that fund, in accordance with the provisions of this section.

(6) In this section, the term ‘surplus’ in respect of a year means the increase or decrease in that year of the excess of assets over liabilities (other than policyholder liabilities) of a statutory fund or of a separately identifiable part of a statutory fund, reduced by the increase and enhanced by the decrease (so far, in the case of a separately identifiable part of a statutory fund, as such increase or decrease is attributable to that separately identifiable part) in that year of:

(a) the amount of policyholder liabilities;
(b) the cumulative amount of capital contributed by the shareholders’ fund;
(c) the amount of the accounts identified in sub-sections (1) and (2); and
(d) the amount of any reserve required under this Ordinance to be maintained.

Explanation: All amounts referred to in this sub-section shall be determined in accordance with the accounting rules prescribed for the preparation of the statement of assets and liabilities referred to in sub-clause (i) of clause (a) of sub-section (1) of section 46.

(7) The surplus earned on participating contracts shall be allocated as follows between the A Account and the B Account:

(a) not less than ninety per cent. of the amount of surplus earned on participating contracts shall be allocated to the A Account; and
(b) the amount represented by the difference between the surplus earned on participating contracts and the amount referred to in clause (a) shall be allocated to the B Account.

Explanation: in a statutory fund which contains both participating and non-participating policies, the amount of surplus earned on participating contracts for the purposes of this section includes that element of surplus earned other than on participating contracts which is, on a fair and equitable basis, attributable to the participating policy holders having regard to the interest of participating policyholders in the undertakings of the statutory fund.

(8) Immediately following the allocation of surplus in accordance with sub-section (7), the amount of surplus adjustment in respect of that year shall be credited to the A Account and debited to the C Account:

Provided that where the amount of surplus adjustment exceeds the credit balance of the C Account the amount by which it exceeds that balance shall not be debited to the C Account but shall be debited to the B Account.

Provided further that where the amount of surplus adjustment, but for this proviso, exceeds the sum of the credit balance, if any, of the B Account and the credit balance, if any, of the C Account, the amount of surplus adjustment shall for the purposes of this sub-section only be equal to the sum of the credit balance, if any, of the B Account and the credit balance, if any, of the C Account.

(9) In this section, "surplus adjustment" means ninety per cent. of the sum of the following two amounts:

(a) the amount, if any, by which the total amount of management expenses brought to account in determining the surplus earned on participating contracts exceeds such total amount as is determined by the application of such percentages as may be prescribed by the Commission in regulations to first year and renewal premiums brought to account in determining that surplus; and

(b) the amount determined by applying for six months on a compound basis, to the amount if any determined in clause (a), the higher of:
(i) the investment earning rate of the statutory fund during the year, so far as concerns participating contracts; and
(ii) the average base rate during the year, calculated as at the final date of each month on a compound basis.

(10) The amount of surplus earned in each statutory fund during a year, and in respect of each statutory fund to which sub-section (1) applies the amounts of surplus earned on participating contracts during that year and surplus adjustment in respect of that year shall be certified by the insurer’s appointed actuary.

(11) All surplus other than surplus required to be dealt with under sub-section (7) shall be allocated to the D Account.

(12) The Commission may make rules for the administration of any matter in this section, not otherwise provided for.

23. Restriction on dividends and bonuses.- (1) No insurer carrying on life insurance business shall declare or pay any dividend to shareholders or make any payment in service of any debentures, other than from the shareholders’ fund.

(2) No insurer carrying on life insurance business shall appropriate from any statutory fund to the shareholders’ fund any amount other than:
(a) an amount from the C Account or the D Account; or
(b) a distribution of capital in accordance with section 21.

(3) No insurer carrying on life insurance business shall allocate, whether by way of cash payment, by addition to policy liabilities or otherwise, as bonuses to participating policy holders any amount other than:
(a) an amount from the A Account, or
(b) a distribution of capital by way of bonus in accordance with section 21.

(4) No amount may be credited to the C Account other than in accordance with the provisions of this section.

(5) An appropriation under sub-section (2) or an allocation of bonus under sub-section (3) may only be made after the directors of the insurer have received the appointed actuary's written advice as to the likely consequences of the proposed appropriation or allocation.

(6) In providing his written advice under sub-section (5), the appointed actuary shall have regard, without limitation, to the effect of the proposed appropriation or allocation on the compliance by the insurer with the provisions of this Ordinance relating to solvency and on the ability of the insurer to continue to comply with the provisions of this Ordinance relating to solvency in the context of its planned level of activity.

(7) At the time at which bonuses, other than distributions of capital by way of bonus in accordance with section 21, are allocated to participating policy holders, an amount determined in the following manner may, subject to sub-section (12), be debited to the B Account and the amount if any debited to the B Account shall be credited to the C Account:

(a) not more than one-ninth of the amount of such bonuses as have been allocated from the A Account; less
(b) the lower of:
(i) the amount if any of surplus adjustment debited to the B Account in accordance with the proviso to sub-section (8) of section 22; and (ii) the amount set out in clause (a) of this sub-section

(8) Where the business in a statutory fund contains investment contracts, not being participating contracts, under the terms of which the insurer has discretion to vary the amount of expenses charged under the policy, the transfer to the shareholders’ fund which may be made in any one year from the D Account in that statutory fund shall be reduced, to the extent of the balance in the D Account, by the amount of expense adjustment arising in the year ended on the preceding 31st December.

(9) For the purpose of sub-section (8), "expense adjustment" means such proportion as may be prescribed of the amount, if any, by which the total amount charged to all such policies to meet management expenses exceeds such total amount as is determined by the application of such percentages as may be prescribed by the Commission to first year and renewal premiums relating to such investment contracts:

Provided that, where investment contracts include supplementary benefits, the amount referred to in this sub-section shall be determined with reference to the premiums for the main contract only excluding such supplementary benefits;

Provided further that for the purposes of determining the amount of expense adjustment, the amount of management expenses charged to policies shall be determined in accordance with such basis as the Commission may prescribe.

(10) The amount of expense adjustment in each year in respect of each statutory fund to which sub-section (8) applies shall be certified by the appointed actuary.

(11) An insurer may, subject to sub-section (12), at any time make a transfer from the B Account, the C Account or the D Account to the credit of the A Account.

(12) No appropriation, allocation or transfer under sub-section (2) or sub-section (3) or under sub-section (7) or sub-section (11) shall be made if that appropriation, allocation or transfer would result in a debit balance in the ledger account from which the appropriation, allocation or transfer is made.

(13) The Commission may make rules for the administration of any matter in this section, not otherwise provided for.

24. Declaration of interim bonuses.- Notwithstanding anything to the contrary contained in this Ordinance, an insurer carrying on the business of life insurance shall be at liberty to declare an interim bonus or bonuses to policy holders whose policies mature for payment by reason of death or otherwise during the period between two investigations conducted in accordance with section 50, on the recommendation of the appointed actuary made in his report on the last preceding valuation.

25. Transitional provisions.- (1).All life insurance funds maintained under the repealed Act or under the Life Insurance Nationalisation Order, 1972 by an insurer carrying on life insurance business on the commencement date or succeeding to an insurer carrying on life insurance business on the commencement date shall, with effect on or before 31st December 2001, be converted into one or more statutory fund or funds.

(2) A conversion to a statutory fund or funds under this section shall be made in accordance with such criteria as may be prescribed by the Commission.

(3) For the period until 31st December 2001, an insurer carrying on life insurance business on the commencement date shall not be regarded as being in contravention of the Ordinance by reason only that the statutory funds required to be established under this Part have not been established.

26. Appointed actuary.- (1)..Every life insurer shall appoint an actuary as its appointed actuary.
(2) The Commission may on reasonable grounds disapprove such appointment and require the appointment of another actuary.

27. Responsibilities of appointed actuary.- (1).The appointed actuary shall be responsible to perform such duties as he may be assigned under this Ordinance.
(2) Such duties shall include:
(a) performing an annual investigation into the financial condition of a life insurer according to such scope, and reporting on such investigation in such terms as, may be prescribed by the Commission;
(b) providing written advice as to the equitable apportionment of revenues and expenses between funds and between policy holders within funds;
(c) certifying that the terms and conditions of a type of policy issued by a life insurer are sound and workable;
(d) certifying premium rates at the time of introduction of a new product and any change in these rates;
(e) certifying annually mortality, expenses and other charges under investment contracts; and
(f) such other duties as may be prescribed by the Commission.

(3) The appointed actuary of an insurer shall be entitled at any time to address or to make a report to the Board of Directors of the insurer, with respect to any matter which in the opinion of the appointed actuary requires to be brought to the attention of the Board of Directors.

(4) An appointed actuary shall not be dismissed from his office without the permission of the Commission, which shall not unreasonably be withheld.

(5) An appointed actuary who resigns his office shall inform the Commission of the reasons for his resignation and of any matters connected therewith which he believes should be brought to the attention of the Commission.

(6) An appointed actuary who is dismissed from his office shall inform the Commission of any matters connected with his dismissal which he believes should be brought to the attention of the Commission.

(7) An appointed actuary who resigns or is dismissed shall not be liable to any person for any statement properly made with due cause pursuant to sub-section (5) or sub-section (6).

28. Requirements as to capital.- (1).An insurer registered under this Ordinance to carry on insurance business shall have a paid-up capital of not less than the required minimum amount.

(2) For the purposes of this section, the required minimum amount is:
(a) one hundred and fifty million rupees, or such higher amount as may be prescribed by the Federal Government, for an insurer carrying on life insurance business; and
(b) eighty million rupees, or such higher amount as may be prescribed by the Federal Government, for an insurer carrying on non-life insurance business;

Provided that in respect of clause (a), for an insurer authorised to carry on life insurance business on the commencement date the required minimum amount shall not be less than one hundred million rupees by 31st December 2002 and one hundred and fifty million rupees or such higher amount as may be prescribed by 31st December 2004.

Provided further that in respect of clause (b), for an insurer authorised to carry on non-life insurance business on the commencement date the required minimum amount shall not be less than fifty million rupees by 31st December 2002 and eighty million rupees or such higher amount as may be prescribed by 31st December 2004.

Provided further that in respect of both clause (a) and clause (b), for the period until 31st December 2002, for an insurer authorised to carry on insurance business on the commencement date the required minimum amount shall be that set out in section 6 of the repealed Act.

(3) An insurer, not having a share capital, shall not be required to comply with this section.

29. Deposits.- (1).Every insurer shall, in respect of the insurance business carried on by him in Pakistan, deposit and keep deposited with the State Bank of Pakistan, in one of the offices in Pakistan of the State Bank of Pakistan for and on behalf of the Federal Government the required minimum amount specified in sub-section (2), either in cash or in approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in approved securities so estimated.

(2) For the purposes of this section the required minimum amount is, either:
(a) the higher of ten million rupees and ten per cent. (10%) of the insurer’s paid-up capital; or
(b) such amount as may be prescribed by the Commission:

Provided that the Commission may, subject to achievement of levels of solvency as required by this Ordinance, abolish the requirement for deposits specified by this section by reducing the required minimum amount to zero.

(3) A deposit made in cash shall be held by the State Bank of Pakistan to the credit of the insurer and shall except to the extent, if any, to which the cash has been invested in securities under sub-section (5), be returnable to the insurer in cash in any case in which, under the provisions of this Ordinance, a deposit is to be returned; and any profit or return (howsoever called or designated) accruing due and collected on securities deposited under sub-section (1) shall be paid to the insurer, subject only to deduction of the normal commission chargeable for the realisation of profit or return (however called or designated).

(4) The insurer may at any time replace any securities deposited by him under this section with the State Bank of Pakistan either by cash or by other approved securities or partly by cash and partly by other approved securities provided that such cash, or the value of such other approved securities estimated at the market rates prevailing at the time of replacement, or such cash together with such value, as the case may be, is not less than the value of the securities replaced estimated at the market rates prevailing when they were deposited.

(5) The State Bank of Pakistan shall, if so requested by the insurer:

(a) sell any securities deposited by him with the Bank under this section and hold the cash realised by such sale as deposit, or
(b) invest in approved securities specified by the insurer the whole or any part of a deposit held by it in cash or the whole or any part of cash received by it on the sale of or on the maturing of securities in which investment is so made as deposit, and may charge the normal commission on such sale or on such investment.

(6) Where sub-section (5) applies, if the cash realised by the sale of or on the maturing of the securities (excluding, in the former case, the profit or return (however called or described) accrued) falls short of the market value of the securities at the date on which they were deposited with the Bank, the insurer shall make good the deficiency by a further deposit either in cash or in approved securities estimated at the market value of the securities on the day on which they are deposited, or partly in cash and partly in approved securities so estimated, within a period of two months from the date on which the securities matured or were sold and, unless he does so. the insurer shall be deemed to have failed to comply with the requirements of this section as to deposits.

(7) If any part of a deposit made under this section is used in the discharge of any liability of the insurer, the insurer shall deposit such additional sum in cash or approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in such securities, as will make up the amount so used. The insurer shall be deemed to have failed to comply with the requirements of sub-section (1), unless the deficiency is supplied within a period of two months from the date when the deposit or any part thereof is so used for discharge of liabilities.

(8) The market value on the day of deposit of securities deposited in pursuance of any of the provisions of this Ordinance with the State Bank of Pakistan shall be determined by the State Bank of Pakistan whose decision shall be final.

30. Reservation of deposits.- (1).Any deposit made under section 29 shall be deemed to be part of the assets of the insurer but shall not be the subject of any encumbrance; nor shall it be available for the discharge of any liability of the insurer other than liabilities arising out of policies of insurance issued by the insurer, so long as any such liabilities remain undischarged; nor shall it be liable to attachment in execution of any decree except a decree obtained by a policy holder of the insurer in respect of a debt due upon a policy which debt the policy holder has failed to realise in any other way.

(2) Where a deposit is made in respect of life insurance business the deposit made in respect thereof shall be deemed to be a part of the assets of the shareholders’ fund.

(3) A deposit which, at the commencement date, was, under the repealed Act, an asset of a life insurance fund established under that Act, shall, on or before the date of conversion of that fund under section 25 be transferred to the shareholders’ fund against receipt of the full value of the deposit.

(4) In this section the term ‘full value of the deposit’ means the cash or the market value of other assets forming the deposit, as certified by the State Bank of Pakistan.

(5) For the period from the commencement date and until 31st December 2001, no insurer which was carrying on life insurance business on the commencement date or which succeeds to an insurer which was carrying on life insurance business on the effective date shall be regarded as being in contravention of the Ordinance by reason only that the statutory deposit required by this Part to be made in the shareholders’ fund has not been made either in part or in full, provided that the sum of the statutory deposit which has been made in the shareholders’ fund and the statutory deposit which was made in the life insurance fund under the repealed Act and continues to exist as at the relevant date is equal to or greater than the amount required by this Part to be made as a statutory deposit by the insurer.

31. Refund of deposits.- An insurer may at any time apply to the Commission for consent to return of such portion of the deposit as is in excess of any amount which the insurer is required under this Ordinance to keep deposited, and such consent shall not be unreasonably withheld.

32. Admissible Assets.- (1) For the purposes of this Part, the following are admissible assets:
(a) Government securities except to the extent that they are subject to any encumbrance;
(b) assets deposited with the State Bank of Pakistan under section 29; and
(c) assets, other than assets referred to in clause (a) or clause (b), not specified in sub-section (2) not to be admissible assets; and
(c) assets, being assets referred to in clause (g) of sub-section (2), in respect of which the Commission has declared that those assets are to be admissible for the purposes of this Part.

(2) For the purposes of this Part, subject to sub-section (1), the following are not admissible assets:

(a) in a statutory fund of a life insurer, a loan to, capital transfer to or other interest in the shareholders’ fund of the life insurer;
(b) in a statutory fund of a life insurer, any asset to the extent that it exceeds such percentage as may be prescribed by the Commission of the value of the fund (being the market value of assets less liabilities other than policyholder liabilities);
(c) in the shareholders’ fund of a life insurer, a loan to, capital transfer to or other interest in a statutory fund of the life insurer;
(d) loans (not being loans secured against life insurance policies) to directors, shareholders, agents or employees of the insurer, and accrued profit or return (however called or described) thereon:

Provided that a person holding less than one per cent. of the shares of the insurer shall not be considered to be a shareholder for the purposes of this clause.

Provided, further, that a loan and accrued profit or return (however called or described) thereon to an employee of an insurer, not being a director of the insurer, shall not be inadmissible by virtue only of the operation of this clause, to the extent that the loan is secured against immovable property.

(e) loans to life insurance policyholders of the insurer, to the extent that these, together with accrued profit or return (however called or described) thereon, exceed the surrender value of the policies against which they are secured;

(f) loans which are secured against immovable property, to the extent that they exceed, in the aggregate, such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(g) balances with, shares in, loans to or other amounts due from any body that is related to the insurer or to any director of the insurer;

(h) premiums due and payable to the insurer but not paid for more than three months from the date due and payable; Provided that in the case of a life insurer a premium which has not been paid shall be deemed to have been paid to the extent that the provisions of clause (b) of sub-section (4) of section 93 have been applied in respect of that premium;

(i) intangible assets, including but not limited to goodwill, brand names and capitalised establishment costs;

(j) deferred tax asset balances;

(k) amounts available to the insurer under guarantees;

(l) assets subject to encumbrances;

(m) unpaid share capital;

(n) any unit of immovable property, to the extent that it exceeds such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(o) immovable property, to the extent that it exceeds in total such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(p) shares in any one company or group of related companies, to the extent that they exceed such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(q) shares of listed companies, to the extent that they exceed, in the aggregate, such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(r) shares of companies (not being listed companies), to the extent that they exceed, in the aggregate, such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(s) immovable property and shares in the aggregate, to the extent that they exceed such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(t) loans to any person or group of related persons, to the extent that they exceed such percentage as may be prescribed by the Commission of the insurer’s total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders’ fund;

(u) (i) vehicles; (ii) office equipment and (iii) fixtures and fittings which are not immovable property;

(v) such assets as the Commission may prescribe; and

(w) assets which are declared by the Commission, pursuant to sub-section (9), not to be admissible assets of an insurer or of a life insurance statutory fund maintained by an insurer.

(3) The Commission may, in prescribing matters referred to in sub-section (2), make separate prescription in respect of insurers carrying on life insurance business and those carrying on non-life insurance business; and within the category of life insurance business may make separate prescription in respect of statutory funds which are required by this Ordinance to be established for the conduct of a particular category of life insurance business.

(4) For the purposes of this section, the provisions of clauses (p), (q) and (r) of sub-section (2) shall extend mutatis mutandis to investments made in shares (or equity securities by whatever name called) of a body corporate incorporated in a jurisdiction other than Pakistan.

(5) For the purposes of this section, immovable property is a "unit" where it is the smallest discrete parcel of immovable property, consisting of land or buildings and structures constructed thereon or both, owned by an insurer and is capable of being lawfully the subject of a transfer or other disposition of the whole of the legal and beneficial interest, without the necessity for any consent, licence, permit or approval from any governmental authority to divide or sub-divide the parcel in order to transfer or otherwise make a disposition of the whole of the legal and beneficial interest therein.

(6) In this section, "investments" includes all forms of shares, debentures, bonds, deposits and other securities and derivative instruments, and includes immovable property whether or not occupied by the insurer.

(7) For the purposes of this section, two or more persons are "related" if they are under common control, or if they are connected by an ownership interest of more than 49% or, if they are natural persons, they are members of the same family.

(8) A declaration by the Commission under clause (d) of sub-section (1):
(a) may be made on the application of the insurer;
(b) shall be made in writing to the insurer;
(c) shall not be made unless the Commission believes on reasonable grounds, having regard to the circumstances of the insurer, the interests of policyholders of the insurer, the nature of the assets in respect of which the application is made and the nature of the other assets and the liabilities of the insurer, that:
(i) such a declaration will not adversely affect the ability of the insurer to meet its liabilities, including policyholder liabilities, as they fall due;
(ii) such a declaration is not inconsistent with the principles of sound and prudent management of the insurer set out in section 12; and
(iii) such a declaration ought to be made;

(d) may be made in respect of the whole of the assets in respect of which application is made, or of such part thereof as the Commission may direct;
(e) shall be made subject to such conditions as the Commission may direct;
(f) shall have effect not more than three months from the date of such declaration; and
(g) shall remain in force for a period of not more than twelve months from the date at which the declaration has effect, unless revoked in writing by the Commission before the expiry of that time.

(9) A declaration by the Commission under clause (w) of sub-section (2):
(a) shall be made in writing to the insurer;
(b) shall not be made unless the Commission believes on reasonable grounds, having regard to the circumstances of the insurer, the nature of the assets and the nature of the other assets and the liabilities of the insurer, and after giving the insurer a chance to be heard, that the assets should be declared not to be admissible assets of that insurer or of a life insurance statutory fund of that insurer;
(c) shall have effect not less than three months from the date of such declaration; and
(d) shall continue until it is revoked in writing by the Commission.

33. Assets and liabilities in Pakistan.- (1) For the purposes of this Part, an asset is an asset in Pakistan if -
(a) it is immovable property situated in Pakistan;
(b) it is movable property (other than money, debts or other actionable claims) physically located in Pakistan and owned by and in the possession of a person resident in Pakistan and no person (other than the owner thereof) has any better right to possession thereof whether by virtue of an encumbrance or otherwise and is lawfully entitled to take it out of Pakistan or remove it from Pakistan;
(c) it is money or a debt or an actionable claim denominated or payable only in rupees in Pakistan; or
(d) it is money or a debt or an actionable claim denominated or payable in a currency other than rupees in respect of which any person has a right to sue and recover the same by proceedings in Pakistan or it is required by law to be received in Pakistan by or is payable to a person resident in Pakistan.

(2) For the purposes of this Part, where a liability is undertaken by a person under:
(a) a contract of insurance made in Pakistan or in respect of which a proposal was accepted or a policy issued in Pakista