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  "title": "Insurance Ordinance, 2000",
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  "text": "Page 1 of 109 \r\n \r\n \r\n \r\nTHE INSURANCE ORDINANCE 2000 \r\n \r\n \r\n \r\n \r\n \r\nCONTENTS \r\n \r\nPART I \r\nPRELIMINARY \r\n1. Short title, extent and commencement. \r\n2. Definitions. \r\n3. Division of insurance business into life and nonlife. \r\n4. Classes of life and nonlife business. \r\n \r\nPART II \r\nPROVISIONS APPLICABLE TO INSURERS \r\n \r\n5. Persons eligible to transact insurance business. \r\n6. Registration of insurers. \r\n7. Commission may register insurer upon satisfaction. \r\n8. Inspection and supply of copies filed with Commission. \r\n9. Duration and revocation of registration. \r\n10. Notification of grant or revocation of registration. \r\n11. Conditions imposed on registered insurers. \r\n12. Criteria for sound and prudent management. \r\n13. Restriction on issue of certain life policies. \r\n \r\nPART III \r\nSTATUTORY FUNDS OF AND OTHER SPECIAL REQUIREMENTS FOR \r\nLIFE INSURANCE COMPANIES \r\n \r\n14. Statutory and other funds of life insurance companies. \r\n15. Establishment of statutory fund. \r\n16. Policies to be referable to specific statutory funds. \r\n17. Assets, liabilities, revenues and expenses of funds. \r\n18. Disposition of assets of statutory funds. \r\n19. Prohibition on reinsurance between statutory funds. \r\n20. Capital payments to life insurance statutory funds. \r\n21. Distribution of capital in a life insurance statutory fund. \r\n22. Allocation of surplus on life insurance business. \r\n23. Restriction on dividends and bonuses. \r\n\r\n \r\nPage 2 of 109 \r\n \r\n24. Declaration of interim bonuses. \r\n25. Transitional provisions. \r\n26. Appointed actuary. \r\n27. Responsibilities of appointed actuary. \r\n \r\nPART IV \r\nREQUIREMENTS AS TO CAPITAL AND STATUTORY DEPOSITS \r\n \r\n28. Requirements as to capital. \r\n29. Deposits. \r\n30. Reservation of deposits. \r\n31. Refund of deposits. \r\nPART V \r\nSOLVENCY REQUIREMENTS \r\n32. Admissible Assets. \r\n33. Assets and liabilities in Pakistan. \r\n34. Valuation of assets and liabilities. \r\n35. Net admissible assets of life insurers. \r\n36. Insurers of nonlife  insurance business to have assets in excess of minimum  solvency \r\n requirement. \r\n \r\n37. Prohibition of loan. \r\n38. Liability of directors, etc. for loss due to contraventions of sections 35, 36 or 37. \r\n39. Assets of insurer how to be kept. \r\n \r\nPART VI \r\nREINSURANCE ARRANGEMENTS \r\n \r\n40. Special definitions and conditions applicable to this Part. \r\n41. Requirement to effect and maintain reinsurance arrangements. \r\n42. Compulsory cession. \r\n43. Premiums and statements. \r\n44. Rules and regulations for the administration of compulsory surplus reinsurances. \r\n \r\nPART VII \r\nACCOUNTS AND AUDIT \r\n45. Books and records. \r\n46. Accounting and reporting. \r\n47. Compliance with companies laws relating to accounts, reports, etc. \r\n48. Audit. \r\n49. Special audit. \r\n50. Actuarial report. \r\n51. Submission of returns. \r\n52. Exemption from certain provisions of the Companies Ordinance, 1984. \r\n53. Furnishing reports. \r\n54. Abstract of proceedings of general meetings. \r\n55. Custody and inspection of documents and supply of copies. \r\n56. Power of Commission regarding returns. \r\n \r\nPage 3 of 109 \r\n \r\n57. Power of Commission to order actuarial report. \r\n58. Evidence of documents. \r\n \r\nPART VIII \r\nINVESTIGATION, DIRECTIVES, ETC. \r\n \r\n59. Power of Commission to order investigation. \r\n59. A Power of the Commission to undertake onsite inspection of insurance companies. \r\n60. Power of the Commission to give directions to the insurer. \r\n61. Power of Commission to call for information and access. \r\n62. Power of Commission to require plan. \r\n63. Power of Commission to issue direction to cease entering into new contracts of insurance. \r\n64. Power to require calling of meeting of directors, etc. \r\n65. Power to remove Chairman, Director, etc. of the insurer. \r\n66. Power to prescribe maximum levels of acquisition costs and maximum levels of management \r\n expenses. \r\nPART IX \r\nAMALGAMATION AND TRANSFER OF INSURANCE BUSINESS \r\n67. Approval of acquisition or transfer. \r\n68. Amalgamation and transfer of life insurance business. \r\n69. Sanction of amalgamation and transfer by Court. \r\n70. Statements required after amalgamation and transfer. \r\nPART X \r\nASSIGNMENT OR TRANSFER OF POLICIES AND NOMINATION \r\n71. Assignment and transfer of life insurance policies. \r\n72. Nomination by policy holder. \r\n73. Nomination under group life policies. \r\nPART XI \r\nMARKET CONDUCT \r\n74. Application of this Part only to direct insurance business. \r\n75. Duty of at most good faith. \r\n76. Insurer not to engage in misleading or deceptive conduct. \r\n77. Construction of ambiguities in favour of policy holder. \r\n78. Exclusion of provisions of Ordinance void; an offence. \r\n79. Remedies for nondisclosure or misrepresentation. \r\n80. Policy not to be called in question on ground of misstatement after two years. \r\n81. Tribunal may disregard avoidance in certain circumstances. \r\n82. Cancellation of a life insurance policy for fraudulent claim. \r\n83. Power of the Commission to prescribe rules for market conduct. \r\n84. Commission to have power to undertake compliance visits. \r\n85. Commission to have power to require a survey to be performed. \r\n86. Contractual stipulations for placing insurance with specific or named insurers. \r\n87. Provisions when not to constitute discrimination. \r\n \r\n \r\n \r\nPage 4 of 109 \r\n \r\nPART XII \r\nSURRENDER, LAPSE AND FOR FEITURE OF CERTAIN LIFE \r\nINSURANCE POLICIES \r\n88. Special definitions and interpretation for this Part. \r\n89. Acquisition of surrender value. \r\n90. Surrender of policy at policy holder’s option. \r\n91. Surrender of policy at insurer’s option. \r\n92. Paidup policy at policy holder’s option. \r\n93. Non for feiture. \r\nPART XIII \r\nINTERMEDIARIES \r\n94. This part to apply only to direct insurance business. \r\n95. Liability of Insurer for act or omissions of agent. \r\n96. Persons acting as agents. \r\n97. Minimum qualifications for agents. \r\n98. Insurer to maintain register of agents. \r\n99. Payments by and to insurance agent. \r\n100. Duty to disclose agency. \r\n101. Restriction on life insurance agents, becoming directors of life insurance companies. \r\n102. Insurance brokers to be licensed. \r\n103. Brokers to be presumed agents under certain circumstances; liability of brokers when not so \r\n presumed. \r\n104. Ownership and management interests inter se of brokers and insurers prohibited. \r\n105. Broker’s duty to disclose relationships. \r\n106. Payments by and to insurance brokers. \r\n107. Requirements in respect of persons ceasing to act as insurance brokers. \r\n108. Basis for payment of remuneration by insurers to insurance brokers. \r\n109. Insurance brokers to report annually to Commission. \r\n110. Power to inspect insurance agents and insurance brokers. \r\n111. Persons permitted to act as insurance surveyors. \r\n112. Licensing of insurance surveyors. \r\n113. Registration of authorised surveying officers. \r\n114. Classes of insurance surveying. \r\nPART XIV \r\nSPECIAL PROVISIONS OF LAW \r\n115. Application of Pakistan law to policies issued in Pakistan. \r\n116. Payment of money into Tribunal. \r\n117. Small Disputes Resolution Committees. \r\n118. Payment of liquidated damages on late settlement of claims. \r\n119. Supply of copies of proposals and medical reports. \r\n120. Prohibition of business on dividing principle. \r\nPART XV \r\nINSURANCE TRIBUNAL \r\n121. Constitution of the Tribunal. \r\n \r\nPage 5 of 109 \r\n \r\n122. Powers of Tribunal. \r\n123. Procedure of the Tribunal. \r\n124. Appeal. \r\nPART XVI \r\nINSURANCE OMBUDSMAN \r\n125. Appointment of Insurance Ombudsman. \r\n126. Terms and conditions of Insurance Ombudsman. \r\n127. Jurisdiction, functions and powers of Insurance Ombudsman. \r\n128. Reference to Insurance Ombudsman by Court. \r\n129. Procedure for making complaints. \r\n130. Recommendations for implementation. \r\n131. Power to call for Information. \r\n132. Duties of insurers. \r\n133. Duty and power of the Insurance Ombudsman to report to the Commission. \r\n134. Report of Insurance Ombudsman. \r\nPART XVII \r\nAPPOINTMENT OF ADMINISTRATORS \r\n135. When Administrator for management of insurance business may be appointed. \r\n136. Powers and duties of the Administrator. \r\n137. Powers of Administrator respecting property liable to attachment under section 160. \r\n138. Cancellation of contracts and agreement. \r\n139. Termination of appointment of Administrator. \r\n140. Finality of decision of appointing Administrator. \r\n141. Penalty for withholding document or property from Administrator. \r\n142. Protection of action taken under sections 135 to 139. \r\nPART XVIII \r\nWINDING UP \r\n143. Winding up by the Court. \r\n144. Voluntary winding up. \r\n145. Court may order continuation of life insurance business. \r\n146. Court may appoint special manager of life insurance business. \r\n147. Court may appoint independent actuary. \r\n148. Powers of Court to reduce contracts of life insurance. \r\n149. Commission empowered to apply for directions. \r\n150. Commission entitled to notice and hearing. \r\n151. Commission entitled to obtain information. \r\n152. Determination of insurance liabilities. \r\n153. Application of statutory fund assets. \r\n154. Winding up secondary companies. \r\n155. Return of deposits. \r\nPART XIX \r\nOFFENCES AND PENALTIES \r\n156. Penalty for default in complying with, or acting in contravention of this Ordinance. \r\n157. Penalty for transacting insurance business in contravention of sections 5, 6 and 29. \r\n \r\nPage 6 of 109 \r\n \r\n158. Penalty for false statement in document. \r\n159. Wrongfully obtaining or withholding property. \r\n160. Power of Tribunal to order restoration of property of insurer or compensation in certain cases. \r\n161. Notice to Commission and hearing. \r\n162. Previous sanction of Commission for institution of proceedings. \r\n163. Power of Court to grant relief. \r\nPART XX \r\nMISCELLANEOUS \r\n164. Service of notices. \r\n165. Insurance of interests in Pakistan. \r\n166  Insurance of public property. \r\nPART XXI \r\nRULES AND REGULATIONS \r\n167  Power to make rules and regulations. \r\nPART XXII \r\nREPEAL AND SAVINGS \r\n168  Repeal. \r\n169  Repealed Act to apply to certain insurers ceasing to enter into new contracts before  \r\n commencement of this Ordinance. \r\n170  Savings. \r\n171  Exemptions. \r\n172  Removal of difficulties. \r\n \r\n \r\nPage 7 of 109 \r\n \r\nTHE INSURANCE ORDINANCE 2000 \r\nOrdinance No. XXXIX of 2000 \r\n[19th August, 2000] \r\nAn Ordinance to regulate the business of the insurance industry to ensure the protection of the \r\ninterests of insurance policy holders and to promote sound development of the insurance industry \r\nand for matters connected therewith and incidental thereto; \r\nWHEREAS, it is expedient to repeal and re-enact the law relating to the business of \r\ninsurance; \r\nAND WHEREAS the National Assembly and the Senate stand suspended in pursuance of \r\nProclamation of Emergency of the fourteenth day of October, 1999, and the Provisional Constitution \r\nOrder No. 1 of 1999; \r\nAND WHEREAS the President is satisfied that circumstances exist which render it necessary \r\nto take immediate action; \r\nNOW, THEREFORE, in pursuance of the Proclamation of Emergency of the fourteenth day \r\nof October, 1999, and Provisional Constitution Order No. 1 of 1999, as well as Order No. 9 of 1999, \r\nand in exercise of all powers enabling him in that behalf, the President of the Islamic Republic of \r\nPakistan is pleased to make and promulgate the following Ordinance:— \r\n1. Short title, extent and commencement. —(1) This Ordinance may be called the \r\nInsurance Ordinance, 2000. \r\n(2) It extends to the whole of Pakistan. \r\n(3) It shall come into force at once. \r\n2. Definitions. In this Ordinance, unless there is anything repugnant in the subject or \r\ncontext,— \r\n \r\n(i)  “actuary” means a person possessing such actuarial qualifications as may be \r\nprescribed; \r\n(ii)  “appointed actuary” means the actuary required to be appointed by a life \r\ninsurer pursuant to the provisions of section 26 of this Ordinance; \r\n(iii)  “approved securities” means Government securities, and any other security \r\ncharged on the revenues of the Federal Government or of a Provincial \r\nGovernment, or guaranteed fully as regards principal and profit or return \r\n(however called or designated) by the Federal Government or a Provincial \r\nGovernment; and any debenture or other security for money issued under the \r\nauthority of any Act of the Federal Legislature or any Provincial Legislature \r\nby or on behalf of the trustees of the port of Karachi; any security issued under \r\nthe authority of any Act of Parliament or of a Provincial Assembly; and any \r\n \r\nPage 8 of 109 \r\n \r\nsecurity specified as an approved security for the purpose of this Ordinance by \r\nthe Federal Government by notification in the official Gazette; \r\n(iv)  “approved auditor” means an auditor approved by the Commission for the \r\npurpose of performing the functions assigned to auditors under this Ordinance; \r\n(v)  “auditor” means a person qualified under the provisions of section 254 of the \r\nCompanies Ordinance, 1984, (XLVII of 1984) to act as an auditor of \r\ncompanies; \r\n(vi)  “authorised person” means, in the case of a company, a director, including the \r\nchief executive, (by whatever name called), or in the case of insurers being \r\nbodies corporate incorporated outside Pakistan and continuing business as \r\nsuch after the commencement of this Ordinance, the closest comparable \r\nequivalent thereto, under the laws of the place of incorporation of such foreign \r\nbody corporate; \r\n(vii)  “banking company” has the meaning assigned to the term in clause (a) of \r\nsection 2 of the Banking Companies (Recovery of Loans, Advances, credits \r\nand Finance) Act, 1997; (XV of 1997) \r\n(viii)  “base rate” means the effective annual rate implied by the most recent \r\nrepurchase rate that is published from time to time in a circular issued by the \r\nSecurities Department of the State Bank of Pakistan for six months Pakistan \r\nTreasury Bills, or, if such rate is not available, the most recent repurchase rate \r\nfor six months Short Term Federal Bonds, or, if neither of such rates is \r\navailable, the most recent repurchase rate for any other short term paper issued \r\nby the Federal Government of an approximately similar tenor, whether in \r\naddition to or in substitution for any of the foregoing; \r\n(ix)  “Board” means the Policy Board established under section 12 of the SECP \r\nAct; \r\n(x)  “borrower” has the meaning assigned to the term in clause (c) of section 2 of \r\nthe Banking Companies (Recovery of Loans, Advances, Credits and Finances) \r\nAct, 1997; (XV of 1997) \r\n(xi)  “certified” in relation to any copy or translation of a document required to be \r\nfurnished by or on behalf of an insurer means certified by an authorised person \r\non behalf of such insurer to be a true copy or a correct translation, as the case \r\nmay be; \r\n(xii)  “class of business” means a classification of insurance business having similar \r\ncharacteristics, into which life insurance or non-life insurance may be divided; \r\n(xiii)  “Commission” means the Securities and Exchange Commission of Pakistan \r\nconstituted under section 3 of the SECP Act;  \r\n[(xiv) “company” has the meaning assigned to it in clause (7) of sub-section (1) of \r\nsection 2 of the Companies Ordinance, 1984 and includes an existing company \r\n \r\nPage 9 of 109 \r\n \r\nas defined in clause (15) of sub-section (1) of section 2 of the Companies \r\nOrdinance, 1984; (XLVII of 1984)] \r\n(xv)  “continuous disability contract” means a contract under which a benefit is \r\npayable in the event of: \r\n(i)  the death, by a cause specified in the contract, of the person whose life \r\nis insured (the “insured”); or \r\n(ii)  injury to, or disability of, the insured as a result of accident or sickness; \r\nor \r\n(iii)  the insured being found to have a specified medical condition or \r\ndisease; \r\n(xvi) “Court” means the principal civil Court of original jurisdiction in a District, \r\nand includes a High Court in exercise of its ordinary civil jurisdiction; and in \r\nrelation to Part IX and Part XVIII shall have the meaning as in section 7 of the \r\nCompanies Ordinance, 1984; (XLVII of 1984) \r\n(xvii)  “customer” has the meaning assigned to the term in clause (d) of section 2 of \r\nthe Banking Companies (Recovery of Loans, Advances, Credits and Finances) \r\nAct, 1997; (XV of 1997) \r\n(xviii)  “direct”, in relation to the business of insurance, means insurance other than \r\nreinsurance; \r\n(xix)  “domestic insurance policy” means a contract of insurance that provides \r\ninsurance cover in respect of loss of or damage to a building used primarily \r\nand principally as a residence for the policy holder, for persons with whom the \r\npolicy holder has a family or personal relationship or for both the policy \r\nholder and such persons, or loss of or damage to the contents of such a \r\nbuilding, or both; \r\n(xx)  “duly attested” means attested in the manner required for financial or future \r\nobligations by Article 17 of the Qanun-e-Shahadat Order, 1984; (P.O 10 of \r\n1984) \r\n(xxi)  “electronic media” includes the internet, radio, television, tapes, cassettes, all \r\nforms of electronic recording media including computer diskettes and CD-\r\nROMs; \r\n(xxii) “encumbrance” in relation to any property, movable or immovable, means any \r\nmortgage, charge (fixed or floating), hypothecation, pledge, assignment or \r\ntransfer by way of security, or any other form of security or ownership interest \r\nless than absolute legal and beneficial ownership; \r\n(xxiii) “eligible person” means a person specified in clauses (a) and (b) of sub-section \r\n(1) of section 5; \r\n \r\nPage 10 of 109 \r\n \r\n(xxiv) “finance” has the meaning assigned to the term in clause (e) of section 2 of the \r\nBanking Companies (Recovery of Loans, Advances, Credits and Finances) \r\nAct, 1997; (XV of 1997) \r\n(xxv) “Government securities” means Government securities as defined in the \r\nSecurities Act, 1920; (X of 1920) \r\n(xxvi) “group” in relation to contracts of life insurance, including health insurance, \r\nmeans contracts having a term not dependent on the termination or \r\ncontinuation of human life, under which the benefits are payable to a member \r\nof a group defined in the contract on the happening to that member during the \r\nterm of the contract of a contingency defined in the contract, not being a \r\ncontingency which is bound to happen; \r\n(xxvii) “insurance” means the business of entering into and carrying out policies or \r\ncontracts, by whatever name called, whereby, in consideration of a premium \r\nreceived, a person promises to make payment to another person contingent \r\nupon the happening of an event, specified in the contract, on the happening of \r\nwhich the second-named person suffers loss, and includes reinsurance and \r\nretrocession: \r\nProvided that a contract of life insurance shall be deemed to be a \r\ncontract of insurance notwithstanding that it may not comply with the \r\ndefinition set-out in this clause; \r\n(xxviii) “insurance broker” means a person carrying on the business of insurance \r\nbrooking; \r\n(xxix) “insurance brooking” means the arrangement of insurance for reward by a \r\nperson other than an agent of an insurance company; \r\n(xxx) “Insurance Ombudsman” means the officer appointed by the Federal \r\nGovernment under section 125; \r\n(xxxi)  “insurer” means: \r\n(i)  any company or other body corporate carrying on the business of \r\ninsurance, which is a company or other body corporate incorporated \r\nunder any law for the time being in force in Pakistan; and \r\n(ii)  any body corporate incorporated under the law of any jurisdiction \r\noutside Pakistan carrying on insurance business which carries on that \r\nbusiness in Pakistan. \r\n(xxxii) “investment contract” means a contract of insurance, providing for benefits to \r\nbe paid on death or on a specified date or dates before death where the benefits \r\npaid are calculated by reference to either a running account or units under the \r\ncontract whether or not the minimum value of that account or those units is \r\nguaranteed and providing for the account to be increased during the currency \r\nof the contract; \r\n \r\nPage 11 of 109 \r\n \r\n(xxxiii) “investment-linked” in relation to life insurance means investment contracts, \r\nthe principal object of which is the provision of benefits calculated by \r\nreference to units, the value of which is related to the market value of a \r\nspecified class or group of assets of the party by whom the benefits are to be \r\nprovided; \r\n(xxxiv) “lender” means a person inside or outside Pakistan carrying on the business of \r\nadvancing money by way of loans or finance and includes a banking company; \r\n(xxxv) “listed company” means a company, a body corporate or corporation \r\n(including a body corporate or corporation incorporated outside Pakistan) or \r\nother body whose securities are allowed to be traded on a stock exchange \r\n(inside or outside Pakistan); \r\n(xxxvi) “loan” has the meaning assigned to the term in clause (f) of section 2 of the \r\nBanking Companies (Recovery of Loans, Advances, Credits and Finances) \r\nAct, 1997; (XV of 1997) \r\n(xxxvii) “managing agent” has the meaning ascribed to that term in section 206 of the \r\nCompanies Ordinance, 1984. (XLVII of 1984) \r\n(xxxviii) “member of the family” in relation to any person, means the husband or a \r\nwife, the dependent father, mother, brother or sister, or a minor son or \r\nunmarried daughter of that person; \r\n(xxxix) “mutual insurance company” means an insurer, being a company incorporated \r\nunder the law of Pakistan or any country or state other than Pakistan, which \r\nhas no share capital and of which, by its constitution, only and all policy \r\nholders are members; \r\n(xl)  “National Insurance Corporation” means the corporation established under the \r\nNational Insurance Corporation Act, 1976; \r\n(xli)  “officer” has the meaning assigned to that expression in clause (24) of sub-\r\nsection (1) of section 2 of the Company Ordinance, 1984; (XLVII of 1984) \r\n(xlii)  “Pakistan Insurance Corporation” means the corporation established under the \r\nPakistan Insurance Corporation Act, 1952; (XXXVIII of 1952) \r\n(xliii)  “participating”, in reference to life insurance business, means contracts of life \r\ninsurance, other than investment-linked contracts, health contracts, group life \r\ncontracts and group health contracts, under the terms and conditions of which \r\nthe policy holder has an entitlement to participate in distributions by the life \r\ninsurer of profits or surpluses; \r\nExplanation.— a benefit paid under a policy is not a distribution of profit or surplus if the \r\nbenefit is determined according to the terms and conditions of the contract and is not subject to the \r\nexercise of discretion by the insurer; \r\n \r\nPage 12 of 109 \r\n \r\n(xliv) “permanent capital fund” means a fund that is established in the records of a life \r\ninsurance company not having a share capital, and which contains that part of \r\nthe assets and liabilities of a life insurer which is attributed to it and is not \r\nattributed to any statutory fund maintained by that life insurer; \r\n(xlv)  “policy” means a contract of insurance; \r\n(xlvi)  “policy holder” means the person to whom a policy is issued or, in the case of \r\na policy of life insurance, the person to whom the whole of the interest of the \r\npolicy holder in the policy is assigned once and for all, but does not include an \r\nassignee thereof whose interest in the policy is defeasible or is for the time \r\nbeing subject to any condition; \r\n(xlvii)  “policyholder liability”, in relation to life insurance, means: \r\n(i)   a liability that has arisen under a policy of life insurance; or \r\n(ii)  a liability that, subject to the terms and conditions of a policy, will arise \r\non the happening of an event, or at a time, specified in the policy; \r\n(xlviii) “prescribed” means prescribed by rules made under section 167; \r\n(xlix)  “private motor property damage policy” means a contract of insurance that \r\nprovides insurance cover in respect of loss of or damage to a motor vehicle or \r\nof the contents of a motor vehicle used primarily and principally as a means of \r\nprivate transport by the policy holder, by persons with whom the policy holder \r\nhas a family or personal relationship, or by both the policy holder and such \r\npersons; \r\n(1)  “private company” has the meaning assigned to it in clause (28) of sub-section \r\n(1) of section 2 of the Companies Ordinance, 1984; (XLVII of 1984) \r\n(li)  “public company” has the meaning assigned to that expression in clause (30) \r\nof sub-section (1) of section 2 of the Companies Ordinance, 1984, (XLVII of \r\n1984) or an existing company which is not a private company or a subsidiary \r\nof a private company; \r\n(lii)  “reinsurance” means a contract of insurance under which the event, specified \r\nin the contract, contingent upon the happening of which, payment is promised \r\nto be made to the policy holder thereunder, is payment by the policy holder of \r\na claim or claims made against that policy holder under another contract or \r\ncontracts of insurance issued by that policy holder; \r\n(liii)  “regulations” means regulations made under this Ordinance; \r\n(liv)  “repealed Act” means the Insurance Act, 1938; (IV of 1938) \r\n(lv)  “retrocession” means a contract of reinsurance under which the event, \r\nspecified in the contract, contingent upon the happening of which, payment is \r\npromised to be made to the policy holder thereunder, is payment by the policy \r\n \r\nPage 13 of 109 \r\n \r\nholder of a claim or claims made under another contract or contracts of \r\nreinsurance issued by that policy holder; \r\n(lvi)  “rules” means rules made under this Ordinance; \r\n(lvii)  “scheduled bank” has the meaning assigned to it in clause (m) of section 2 of \r\nthe State Bank of Pakistan Act, 1956; (XXXIII of 1956) \r\n(lviii)  “SECP Act” means the Securities and Exchange Commission of Pakistan Act, \r\n1997; (XLII of 1997) \r\n(lix)  “shareholder’s fund” means a fund that is established in the records of a life \r\ninsurance company and which contains that part of the assets and liabilities of \r\na life insurer which is attributed to it and is not attributed to any statutory fund \r\nmaintained by that life insurer; (P.O 10 of 1972 \r\n(lx)  “State Life Insurance Corporation” means the corporation established under \r\nArticle 11 of the Life Insurance (Nationalization) Order, 1972; \r\n(lxi)  “statutory fund” means a fund that is established in the records of a life \r\ninsurer and which relates solely to the life insurance business of that life \r\ninsurer or a particular part of that life insurance business; \r\n(lxii)  “subsidiary” or “subsidiary company” has the meaning assigned to it in clause \r\n(38) of sub-section (1) of section 2 of the Companies Ordinance, 1984; \r\n(XLVII of 1984) \r\n(lxiii)  “surveyor” means a person (by whatever name called) who examines the \r\ngoods, property or any interests insured under a contract of non-life insurance \r\nto express an independent opinion as to the cause, extent, location and amount \r\nof any loss incurred or claimed to be incurred under that contract; \r\n(lxiv)  ‘Takaful” means a scheme based on mutual assistance in compliance with the \r\nprovisions of Islamic shariah, and which provides for mutual financial aid and \r\nassistance to the participants in case of occurrence of certain contingencies \r\nand whereby the participants mutually agree to contribute to the common fund \r\nfor that purpose; \r\n(Ixv)  “Tribunal” means the Tribunal constituted under section 121 of this \r\nOrdinance; and \r\n(lxvi)  “unit”, except in section 32, means a notional share in the net value of a \r\nspecified class or group of assets of a statutory fund of an insurer carrying on \r\nlife insurance business, the value of which is to be used as a basis for \r\ndetermination of the benefits payable under an investment linked contract. \r\n3. Division of insurance business into life and non-life.—(1) For the purposes of this \r\nOrdinance insurance business is divided into life insurance business and non-life insurance business. \r\n \r\nPage 14 of 109 \r\n \r\n(2) Subject to sub-sections (3), (4) and (5), the effecting and carrying out of any or all of the \r\nfollowing type of contracts shall constitute the carrying on of life insurance business; namely:— \r\n(a)  a contract of insurance that provides for the payment of money, on the death \r\nof a person or on the happening of a contingency dependent on the termination \r\nor continuance of human life; \r\n(b)  a contract of insurance that is subject to payment of premiums for a term \r\ndependent on the termination or continuance of human life; \r\n(c)  a contract of insurance that provides for the payment of an annuity for a term \r\ndependent on the continuance of human life; \r\n(d)  a contract that provides for the payment of an annuity for a term not \r\ndependent on the continuance of human life but exceeding the period of one \r\nyear; \r\n(e)  a contract providing an indemnity for medical expenses; \r\n(f)  a continuous disability income contract; \r\n(g)  an investment contract; and \r\n(h)  such contracts as may be prescribed. \r\n(3) Notwithstanding anything in this Ordinance to the contrary, the effecting and carrying out \r\nof a contract whose principal object is one of life insurance business, but which contains related and \r\nsubsidiary provisions of a non-life insurance nature, shall be taken to constitute the carrying on of \r\nlife insurance business. \r\n(4) Notwithstanding anything in this Ordinance to the contrary, the effecting and carrying out \r\nof a contract that provides for the payment of money on the death of a person shall not constitute the \r\ncarrying on of life insurance if the contract is effected and carried out by an insurer who is registered \r\nto carry on non-life insurance business; and both of the following conditions exist: \r\n(a)   by the terms of the contract, the duration of the contract is to be not more than \r\none year; and \r\n(b)   payment is only to be made in the event of death by accident. \r\n(5) Notwithstanding anything in this Ordinance to the contrary, the effecting and carrying out \r\nof a contract that provides for the payment of money in the event of a person suffering loss, other \r\nthan death, attributable to accident, sickness or infirmity shall not constitute the carrying on of life \r\ninsurance if the contract is effected and carried out by an insurer who is registered to carry on non-\r\nlife insurance business; and by the terms of the contract, the duration of the contract is to be not more \r\nthan one year. \r\n(6) All contracts of insurance which are not, in accordance with the provisions of the \r\nforegoing sub-sections, classified as life insurance contracts, shall be classified as non-life insurance \r\ncontracts. \r\n \r\nPage 15 of 109 \r\n \r\n4. Classes of life and non-life business.—(1) For the purposes of this Ordinance, the \r\nfollowing shall be the classes of business into which life insurance business is divided: \r\n(a)  Class 1 being ordinary life business; \r\n(b)  Class 2 being capital redemption business; \r\n(c)  Class 3 being pension fund business; and \r\n(d)  Class 4 being accident and health business. \r\n(2) For the purposes of sub-section (1)— \r\n(a)  “ordinary life business” means effecting and carrying out contracts of life \r\ninsurance other than contracts included in Class 2, Class 3 or Class 4; \r\n(b)  “capital redemption business” means effecting and carrying out capital \r\nredemption contracts; \r\n(c)  “pension fund business” means effecting and carrying out contracts of life \r\ninsurance that are maintained for the purposes of a pension or retirement \r\nscheme and are owned by trustees under the scheme; and \r\n(d)  “accident and health business” means effecting and carrying out contracts of \r\ninsurance providing fixed pecuniary benefits or benefits in the nature of \r\nindemnity or a combination of both, against risks of the policy holder or a \r\nperson for whose benefit the contract was made— \r\n(i)  sustaining injury as a result of an accident; \r\n(ii)  becoming incapacitated in consequence of an accident or disease; or \r\n(iii)  suffering loss, including medical expenses, attributable to accident, \r\nsickness or infirmity. \r\n(3) For the purposes of this Ordinance, the following shall be the classes of business into \r\nwhich non-life insurance business is divided: \r\n(a)  for direct and facultative reinsurance business; \r\n(I)  Class 1 being fire and property damage business; \r\n(ii)  Class 2 being marine, aviation and transport business; \r\n(iii)  Class 3 being motor third party compulsory business; \r\n(iv)  Class 4 being liability business; \r\n(v)  Class 5 being workers’ compensation business; \r\n \r\nPage 16 of 109 \r\n \r\n(vi)  Class 6 being credit and suretyship business; \r\n(vii)  Class 7 being accident and health business; and \r\n(viii)  Class 8 being agriculture insurance including crop insurance; \r\n(ix)  Class 9 being miscellaneous business; \r\n(b)  for treaty reinsurance business: \r\n(i)  Class 9 being proportional treaty business; and \r\n(ii)  Class 10 being non-proportional treaty business. \r\n(4) For the purposes of sub-section (3). \r\n(a)  “fire and property damage business” means effecting and carrying out \r\ncontracts of insurance against loss to the policy holder arising from loss of or \r\ndamage to property, other than as contained in class 2; \r\n(b)  “marine, aviation and transport business” means effecting and carrying out \r\ncontracts of insurance against loss to the policy holder arising from: \r\n(i)  loss of or damage to, or arising out of or in connection with the use of: \r\n(a)  means of transport, including motor vehicles and railway rolling stock used \r\non land, vessels used on the sea or on inland waters, and aircraft; or \r\n(b)  the machinery, tackle, furniture or equipment of those means of transport; \r\nincluding third party risks and carrier’s liability but excluding risks contained \r\nin class 3 or class 5; or \r\n(ii)  loss of or damage to merchandise, baggage and all other goods in \r\ntransit, irrespective of the form of transport; \r\n(c)  “motor third party compulsory business” means effecting and carrying out \r\ncontracts of insurance against loss to the policy holder arising from liabilities \r\nincurred to third parties arising out of or in connection with the use of motor \r\nvehicles on land, as specified in the Motor Vehicles Act, 1939; (IV of 1939) \r\n(d)  “liability business” means effecting and carrying out contracts of insurance \r\nagainst loss to the policy holder arising from liabilities incurred to third \r\nparties, other than in respect of risks specified in class 2, class 3 or class 5; \r\n(e)  “workers’ compensation business” means effecting and carrying out contracts \r\nof insurance against loss to. the policy holder arising from liabilities incurred \r\nto workers arising out of or in connection with the employment of the workers \r\nby the insured persons; \r\n(f)  “credit and suretyship business” means effecting and carrying out: \r\n \r\nPage 17 of 109 \r\n \r\n(i)  contracts of insurance against loss to the policy holder arising from \r\nfailure, whether through insolvency or otherwise, of debtors to pay \r\ndebts when they fall due; or \r\n(ii)  contracts of insurance against loss to the policy holder arising from his \r\nhaving to perform contracts of guarantee entered into by him; or \r\n(iii)  contracts for fidelity bonds, performance bonds, administration bonds, \r\nbail bonds, custom bonds or similar contracts of guarantee; \r\n(g)  “accident and health business” means effecting and carrying out contracts of \r\ninsurance, the  duration of which under the contract is not more than one year, \r\nproviding fixed pecuniary benefits or benefits in the nature of indemnity or a \r\ncombination of both, against risks of the policy holder or a person for whose \r\nbenefit the contract was made; \r\n(i)  sustaining injury as a result of an accident; \r\n(ii)  dying as a result of an accident; \r\n(iii)  becoming incapacitated in consequence of a disease; or \r\n(iv)  suffering loss, including medical expenses, attributable to sickness or \r\ninfirmity; but excluding contracts of a type included in class 5; \r\n(h)   “agriculture insurance” means effecting and carrying out contracts of \r\ninsurance against loss to the policyholder arising from loss of or damage to \r\nagriculture related property including crops; \r\n(i)   “miscellaneous business” means effecting and carrying out contracts of \r\ninsurance of types not included in any other class; \r\n(j)   “proportional treaty business” means effecting and carrying out of contracts of \r\ntreaty reinsurance, whether obligatory or otherwise, of such a nature that a \r\nproportion of premium or of a separately identified part of premium on \r\ninsurance contracts which are the subject matter of the treaty is payable to the \r\nreinsurer by the cedent and an identical proportion of claims or of a separately \r\nidentified part of claims on those contracts is payable to the cedent by the \r\nreinsurer, and including without limitation treaties of quota-share and surplus \r\nclassifications; and \r\n(k)   “non-proportional treaty business” means effecting and carrying out of \r\ncontracts of treaty reinsurance, not being contracts of a type included in Class  \r\n9. \r\n(5) The Commission may, by rules, prescribe sub-classes of business into which any of those \r\nset out in sub-section (1) and sub-section (3) may be divided. \r\n \r\nPage 18 of 109 \r\n \r\n(6) The Federal Government may, by rules, prescribe any class of business set out in sub-\r\nsection (1) or sub-section (3), or sub-class of business prescribed under sub-section (5), as a \r\nrestricted class or sub-class as the case may be. \r\nPart II \r\nPROVISIONS APPLICABLE TO INSURERS \r\n5. Persons eligible to transact insurance business.—(1) After the commencement date no \r\nperson other than: \r\n(a)   a public company; or \r\n(b)  a body corporate incorporated under the laws of Pakistan (not being a private \r\ncompany or the subsidiary of a private company); shall start any insurance \r\nbusiness in Pakistan. \r\n(2) After the commencement date no person other than an eligible person or the branch of a \r\nbody corporate incorporated in any jurisdiction outside Pakistan, which, immediately before the \r\ncommencement of this Ordinance, was registered to carry on and was carrying on such business in \r\nPakistan, shall, after the expiry of one year from such commencement, continue such business. \r\n(3) An insurer, being a body corporate incorporated in a jurisdiction outside Pakistan and \r\nregistered to carry on and carrying on insurance business in Pakistan at the commencement of this \r\nOrdinance, may, within six months of such commencement take steps to transfer the business of such \r\nan insurer to a new public company pursuant to a scheme of arrangement under the provisions of \r\nsections 284 to 287 of the Companies Ordinance, 1984 and the applicable provisions of this \r\nOrdinance, and all such provisions shall apply mutatis mutandis as if the business in Pakistan of such \r\nan insurer is being carried on by a public company incorporated in Pakistan. \r\n6. Registration of insurers.—(1) No eligible person shall, after the commencement of this \r\nOrdinance, begin or, after the expiry of six months from the commencement date, continue, to carry \r\non any insurance business in Pakistan, unless such eligible person has obtained from the Commission \r\na certificate of registration to carry on insurance business under this Ordinance, and that registration \r\nhas not been revoked. \r\n(2) A certificate of registration issued to an insurer under section 3 or section 3A of the \r\nrepealed Act shall be deemed, for the purposes of this section, to constitute registration under this \r\nOrdinance, during the period until the expiry of such existing registration or one year from the \r\ncommencement date for this section whichever is earlier; and National Insurance Corporation, \r\nPakistan Insurance Corporation and State Life Insurance Corporation shall be deemed, for the \r\npurposes of this section, to have been so registered, such registration to continue until one year from \r\nthe commencement date. \r\n(3) During the period of six months from the commencement date, the Commission may on \r\nthe application of an insurer registered under the repealed Act as at the commencement date extend, \r\nfor the purposes of this section, the validity of the certificate of registration held by the insurer for a \r\nperiod not exceeding six months from the date on which that certificate of registration would \r\notherwise have expired. \r\n \r\nPage 19 of 109 \r\n \r\n(4) An eligible person required to register under this Ordinance, may make an application to \r\nthe Commission for registration as a person authorised to carry on life insurance business or non-life \r\ninsurance business as the case may be. \r\n(5) An application for registration shall be made in writing, in either the English or the Urdu \r\nlanguage and shall be signed by authorised persons on behalf of an eligible person. \r\n(6) An application for registration shall contain such information and shall be accompanied \r\nby such documents, reports, certificates and other matters as may be prescribed. \r\n(7) An application for registration made by an insurer carrying on insurance business at the \r\ncommencement date shall include a plan for the achievement of compliance by the insurer with the \r\npaid-up capital and solvency levels set out in Part IV and Part V of this Ordinance by the dates set \r\nout in those Parts. \r\n(8) An application for registration as a person authorised to carry on life insurance business \r\nshall in all cases include or be accompanied by: \r\n(a)  a statement of the rates, advantages, terms and conditions of life insurance \r\npolicies proposed to be offered by the applicant, including without limitation \r\nwhere the policy acquires a surrender value, the basis on which the surrender \r\nvalue is determined, and including without limitation in the case of \r\ninvestment-linked policies a description of: \r\n(i)   the investments to which the policy is linked; \r\n(ii)   the basis on which the benefits payable under the policy are \r\ndetermined; \r\n(iii)  the frequency with which and basis by which the unit values are \r\ndetermined; and the values attributed to units at the time of purchase \r\nand sale; \r\n(iv)  the basis by which values are attributed to units at the time of and for \r\nthe purpose of purchase and sale; \r\n(v)   the basis on which expenses attributed to the policy are determined; \r\nand \r\n(vi)  the basis on which charges for mortality attributed to the policy are \r\ndetermined; \r\n(b)  a business plan setting out the expected premium income, expenses and results \r\nof the applicant for a period of not less than ten years from the date at which \r\nauthorisation is proposed to be obtained; \r\n(c)  a copy of any written, electronic or other material proposed to be issued by the \r\napplicant for mass communication or for communication with a policy holder \r\nor prospective policy holder, in respect of life insurance policies proposed to \r\nbe offered by the applicant; \r\n \r\nPage 20 of 109 \r\n \r\n(d)  a statement by the appointed actuary that the terms and conditions of the life \r\ninsurance contracts proposed to be entered into are sound and workable; and \r\n(e)  a statement by the appointed actuary that the business plan has been prepared \r\naccording to principles which appear to him to be reasonable and sound. \r\n(9) Where an applicant has made an application under this section for registration and, before \r\nregistration is granted or refused, a change occurs in the particulars specified in the application or in \r\nthe matters contained in a document required to accompany the application, the applicant shall, \r\nwithin 14 days after the occurrence of the change, give to the Commission notice in writing signed \r\nby any two authorised persons and specifying particulars of the change. \r\n(10) An applicant shall not:— \r\n(a)  make an application under this section; or \r\n(b)  give to the Commission a notice under sub-section (9), that is false or \r\nmisleading in a material particular. \r\n7. Commission may register insurer upon satisfaction.—(1) Where an application for \r\nregistration is received by the Commission under section 6, the Commission may, subject to sub-\r\nsection (2) and sub-section (3), register the insurer as authorised to carry on life insurance business \r\nor authorised to carry on non-life insurance business as the case may be, if the Commission is \r\nsatisfied that: \r\n(a)  the provisions of this Ordinance relating to minimum paid-up share capital \r\nrequirements have been complied with; \r\n(b)  the provisions of this Ordinance relating to minimum statutory deposits have \r\nbeen complied with; \r\n(c)   the provisions of this Ordinance relating to minimum solvency requirements \r\nhave been complied with; \r\n(d)   the provisions of this Ordinance relating to the effecting of reinsurance \r\narrangements have been complied with; \r\n(e)   the applicant is, and is likely to continue to be, able to meet its liabilities; \r\n(f)   the applicant meets, and is likely, to continue to meet, criteria for sound and \r\nprudent management including without limitation those set out in section 12; \r\n(g)  the applicant has appointed an auditor recognised by the Commission as \r\nappropriately qualified to audit the business of life or non-life insurance as the \r\ncase may be; \r\n(h)   the applicant has, if it proposes to carry on life insurance business, appointed \r\nan actuary as its appointed actuary, and the Commission does not disapprove \r\nthat appointment; \r\n \r\nPage 21 of 109 \r\n \r\n(i)   the applicant is, and is likely to continue to be, able to comply with such other \r\nof the provisions of this Ordinance as are applicable to it; and \r\n(j)   on the basis of the information provided by the application and any other \r\ninformation received by the Commission, the application ought to be granted. \r\n(2) The Commission shall not grant a certificate of registration if the granting of that \r\ncertificate would not be in accordance with policy decisions made by the Federal Government. \r\n(3) The Commission shall not grant registration to any applicant where the grant of such \r\nregistration would result in an insurer carrying on both life insurance and non-life insurance \r\nbusiness. \r\n(4) Where the Commission is not satisfied with respect to all or any of the matters referred to \r\nin sub-section (1), it shall refuse an application.— \r\n(5) Within thirty days of receipt of an application for registration, or such longer period as \r\nmay be prescribed, the Commission shall, in writing, notify the applicant that the application has \r\nbeen granted or refused, as the case may be; except that: \r\n(a) if the Commission so notifies the applicant in writing before the expiry of the \r\nperiod of thirty days referred to in this sub-section, the period of thirty days shall be \r\nextended to ninety days or such longer period as may be prescribed; and \r\n(b) if the application is deficient in any technical particular, and the Commission so \r\nnotifies the applicant before the expiry of the period of thirty days referred to in this \r\nsub-section, the application for registration shall not, for the purposes of this sub-\r\nsection, be treated as received until the applicant has amended the deficiency so \r\nnotified. \r\n(6) The Commission may, on granting registration, specify any class, classes, sub-class or \r\nsub-classes of business prescribed as restricted under sub-section (6) of section 4 as a class, classes, \r\nsub-class or sub-classes of business which the insurer is not authorised to carry on. \r\n(7) The Commission may at any time require a registered insurer or an insurer deemed under \r\nthis Ordinance to be registered, to comply with such conditions, not inconsistent with the provisions \r\nof this Ordinance, as the Commission may specify in writing: \r\nProvided that conditions imposed under this sub-section shall be imposed only where the \r\nCommission believes on reasonable grounds that such conditions are desirable for the protection of \r\nthe policy holders and potential policy holders of the insurer and such conditions shall not be \r\nimposed in such a manner as to restrict unreasonably the commercial liberty of any insurer as against \r\nother insurers or such as to impose an unreasonable burden upon any insurer: \r\nProvided also that conditions shall not be imposed under this sub-section without giving an \r\ninsurer to whom the conditions would apply not less than thirty days’ written notice of intention to \r\nimpose such conditions, or without giving such insurer an opportunity to be heard. \r\n8. Inspection and supply of copies filed with Commission. Any person may on payment of \r\nthe prescribed fee inspect such of the documents filed by an insurer with the Commission under \r\n \r\nPage 22 of 109 \r\n \r\nsection 6 as may be prescribed, and may obtain a copy of any such document or part thereof on \r\npayment in advance at the prescribed rate for the making of the copy. \r\n9. Duration and revocation of registration.—(1) Registration under this Ordinance to carry \r\non insurance business shall continue until it is revoked. \r\n(2) Where the Commission is requested in writing by an insurer to revoke the registration of \r\nthat insurer to carry on insurance business, the commission may by a written instrument revoke that \r\nregistration. \r\n(3) Registration under this Ordinance to carry on insurance business shall not be revoked \r\nunless the Commission is satisfied that adequate provision has been made for the irrevocable transfer \r\nto a registered insurer of all insurance liabilities incurred by the insurer seeking revocation of \r\nregistration under the preceding sub-section. \r\n(4) Nothing in this section shall prevent the Commission from exercising the powers \r\navailable to it under section 63 to direct a registered insurer to cease entering into new insurance \r\ncontracts. \r\n10. Notification of grant or revocation of registration.—(1) Where registration under the \r\npreceding provisions of this Part is granted or revoked, the Commission shall cause notice of the \r\ngrant (including any limitations as to classes of business which may be underwritten) or revocation \r\nof registration to be published in the Gazette. \r\n(2) Where registration under the preceding provisions of this Part is granted, the Commission \r\nshall issue to the insurer a written certificate of registration, which certificate shall be surrendered to \r\nthe Commission on revocation of registration. \r\n(3) The Commission may, on payment of the prescribed fee, issue a duplicate certificate of \r\nregistration to replace a certificate of registration to replace a certificate lost, destroyed or mutilated, \r\nor in any other case where it is of opinion that the issue of a duplicate certificate is necessary. \r\n11. Conditions imposed on registered insurers.—(1) An insurer registered under this \r\nOrdinance shall at all times ensure that: \r\n(a)   the provisions of this Ordinance relating to minimum paid-up share capital \r\nrequirements are complied with; \r\n(b)   the provisions of this Ordinance relating to minimum statutory deposits have \r\nbeen complied with; \r\n(c)   the provisions of this Ordinance relating to minimum solvency requirements \r\nare complied with; \r\n(d)   the provisions of this Ordinance relating to the obtaining of reinsurance \r\narrangements are complied with; \r\n(e)   the insurer is, and is likely to continue to be, able to meet its liabilities; \r\n \r\nPage 23 of 109 \r\n \r\n(f)   the insurer meets, and is likely to continue to meet, criteria for sound and \r\nprudent management including without limitation those set out in section 12; \r\n(g)   the insurer has appointed an auditor recognised by the Commission as \r\nappropriately qualified to audit the business of life or non-life insurance as the \r\ncase may be; and \r\n(h)   the insurer is, and is likely to continue to be, able to comply with such other \r\nof the provisions of this Ordinance as are applicable to it. \r\n(2) An insurer registered under this Ordinance shall be deemed to have undertaken to abide \r\nby the decisions of any small disputes resolution committee constituted under section 117. \r\n(3) An insurer registered under this Ordinance shall pay to the Commission, on or before the \r\nfifteenth day of January in every calendar year, an annual supervision fee of the greatest of: \r\n(a)   Rs. 100,000; \r\n(b)   one rupee per thousand of gross direct premium written in Pakistan during the \r\ncalendar year preceding the calendar year ended on the previous 31st day of \r\nDecember; or \r\n(c)   such amount as may be prescribed. \r\n12. Criteria for sound and prudent management.—(1) For the purposes of this Ordinance, \r\nthe following shall, without limitation, be recognised as criteria for sound and prudent management \r\nof an insurer or applicant for registration as a person authorised to carry on insurance business: \r\n(a)   the business of the insurer or applicant is carried on with integrity, due care \r\nand the professional skills appropriate to the nature and scale of its activities; \r\n(b)   each director and officer of (in the case of an applicant which is a body \r\ncorporate  incorporated outside Pakistan) the principal officer in Pakistan of \r\nthe insurer or applicant is a fit and proper person to hold that position; \r\n(c)   the insurer or applicant is directed and managed by a sufficient number of \r\npersons who are fit and proper persons to hold the positions which they hold; \r\n(d)  the insurer or applicant maintains adequate accounting and other records of its \r\nbusiness; and \r\n(e)   the insurer or applicant maintains adequate systems of control of its business \r\nand records. \r\nExplanation: A person is a fit and proper person who possesses such experience and \r\nqualifications as are appropriate for the duties for which he is responsible, and conducts those duties \r\nwith due diligence and skill. A person is not a fit and proper person to hold the position of Chairman, \r\nor of Chief Executive or principal officer in Pakistan, of an insurance company if that person does \r\nnot have experience or qualifications of direct relevance to the conduct of insurance operation. A \r\nperson is not a fit and proper person if the association of that person with the insurer is or is likely, \r\n \r\nPage 24 of 109 \r\n \r\nfor whatever reason, to be detrimental to the interest of the insurer or of the policy holders, or is \r\notherwise undesirable. \r\n(2) Accounting and other records shall not be regarded as adequate for the purposes of clause \r\n(d) of sub-section (1) unless they are such as: \r\n(a)  to enable the business of the insurer or applicant to be prudently managed; and \r\n(b)  to enable the insurer or applicant to comply with the obligations imposed on it \r\nby or under this Ordinance. \r\n(3) In determining whether any systems of control are adequate for the purposes of clause (e) \r\nof sub-section (1), the Commission shall have regard to the functions and responsibilities for those \r\nsystems which are held by the persons who are responsible for the direction * and management of \r\nthe insurer or applicant and to whom clause (b) of sub-section (1) applies. \r\n(4) The insurer or applicant shall not be regarded as conducting its business in a sound and \r\nprudent manner if it fails to conduct its business with due regard to the interests of policy holders and \r\npotential policy holders. \r\n(5) The insurer or applicant shall not be regarded as conducting its business in a sound and \r\nprudent manner if it: \r\n(a)  fails to satisfy an obligation to which it is subject by virtue of this Ordinance; \r\nor \r\n(b)  fails to supervise the activities of a subsidiary with due care and diligence and \r\nwithout detriment to the insurer’s or applicant’s business. \r\n(6) No insurer shall appoint a managing agent for the conduct of its business. \r\n13. Restriction on issue of certain life policies.—(1) No insurer shall offer any policy or \r\ncontract in respect of life insurance business other than those described in the prescribed documents \r\nfiled with the Commission under subsection (6) or sub-section (8) of section 6 or an amendment to \r\nsuch prescribed documents filed with the Commission under subsection (9) of section 6, unless the \r\ninsurer has, not less than thirty days prior to such offer, furnished to the Commission in respect of \r\nsuch contracts the particulars and materials specified in subsection (8) of section 6. \r\n(2) The Commission may, within thirty days of such submission, require the insurer in \r\nwriting to make such changes in the particulars and materials as the Commission may direct, and \r\nwhere the Commission does so direct the insurer shall not be taken to have complied with sub-\r\nsection (1) until the insurer has complied with the direction of the Commission. \r\nPart III \r\nSTATUTORY FUNDS OF AND OTHER SPECIAL REQUIREMENTS FOR LIFE \r\nINSURANCE COMPANIES \r\n \r\nPage 25 of 109 \r\n \r\n14. Statutory and other Funds or insurance companies. —(1) An insurer carrying on the \r\nbusiness of life insurance shall at all times maintain at least one statutory fund in respect of its life \r\ninsurance business. \r\n(2) An insurer that carries on life insurance business consisting of the provision of \r\ninvestment-linked benefits shall maintain one or more statutory funds exclusively for that business. \r\n(3) An insurer that carries on life insurance business consisting of the provision of capital \r\nredemption business shall maintain one or more statutory funds exclusively for that business. \r\n(4) An insurer that carries on life insurance business consisting of the provision of pension \r\nfund business shall maintain one or more statutory funds exclusively for that business. \r\n(5) An insurer that carries on life insurance business consisting of the provision of accident \r\nand health insurance business shall maintain one or more statutory funds exclusively for that \r\nbusiness. \r\n(6) An insurer that carries on life insurance business outside of Pakistan shall maintain one or \r\nmore statutory funds exclusively for that business. \r\n(7) An insurer that carries on life insurance business of such class or sub-class as may be \r\nprescribed by the Commission for the purposes of this sub-section shall maintain one or more \r\nstatutory funds exclusively for that business. \r\n(8) Statutory funds may not be divided or amalgamated without the approval of the \r\nCommission. \r\n(9) The Commission may direct a life insurer to amalgamate or transfer a life statutory fund \r\nwhere the Commission believes on reasonable grounds that amalgamation or transfer is required for \r\nthe protection of the interests of policy holders. \r\n(10) An insurer having a share capital and carrying on life insurance business shall maintain a \r\nshareholders’ fund. \r\n(11) An insurer not having a share capital and carrying on life insurance business, shall \r\nmaintain in its records a permanent capital funds. \r\n(12) In this Ordinance, a reference to the shareholders’ fund shall be deemed to include a \r\nreference to the permanent capital fund, and provisions which are applicable to the shareholders’ \r\nfund shall apply mutatis mutandis to the permanent capital fund. \r\n15. Establishment of statutory fund. Whenever an insurer establishes a statutory fund for \r\nits life insurance business, the insurer shall give the Commission, not later than thirty days prior to \r\nthe establishment of the fund, written notice (in such form, as may be prescribed by the Commission) \r\nof: \r\n(a) the establishment of the fund; \r\n(b) the date on which the fund was established; \r\n \r\nPage 26 of 109 \r\n \r\n(c) the nature of the life insurance business of the company to which the fund \r\nrelates; and \r\n(d) such other matters as are prescribed. \r\n16. Policies to be referable to specific statutory funds.—(I) A life insurance policy issued \r\nby an insurer by an insurer carrying on life insurance business shall be referable to one or more \r\nstatutory funds: \r\nProvided that a policy which is not investment-linked shall be referable to one statutory fund \r\nonly; \r\nProvided further that if: \r\n(a)   a contract (“the supplementary contract”) which is supplementary to the policy \r\n(“the principal policy”) is of a type which would but for the preceding proviso \r\nbe required by section 14 to be referable to a different statutory fund from that \r\nto which the principal policy is referable, and \r\n(b)   the premium attributable to such supplementary contract exceeds the premium \r\nattributable to the principal policy, the supplementary contract shall be \r\nreferable to that different statutory fund. \r\n(2) A policy document shall specify the statutory fund or statutory funds to which die policy \r\nis referable. \r\n(3) A provision in a policy document that a policy is referable to two or more statutory funds \r\nis not effective unless it specifies: \r\n(a)   the benefits under the policy that are to be provided out of each fund; and \r\n(b)   either: \r\n(i)   the proportion of the premium that is related to the benefits to be \r\nprovided out of each fund and is to be credited to the fund; or \r\n(ii)   the way in which that proportion is to be calculated. \r\n(4) The statutory fund or funds to which a policy is referable may be changed by endorsement \r\nto the policy document. \r\n(5) If a change is made, in accordance with the foregoing sub-section, to the statutory fund or \r\nfunds to which a policy is referable, the insurer shall effect such transfer of assets between the \r\nstatutory funds concerned as may be determined by the appointed actuary in accordance with such \r\nprinciples as may be prescribed. \r\n17. Assets, liabilities, revenues and expenses of funds.—(1) All assets, liabilities, revenues \r\nand expenses of a life insurer shall be referable to one or more funds of the insurer. \r\nExplanation: In this section the word ‘fund’ means a statutory fund or the shareholders’ fund. \r\n \r\nPage 27 of 109 \r\n \r\n(2) All amounts received by a life insurer in respect of the business of a statutory fund shall \r\nbe credited to that fund. \r\n(3) All assets and investments related to the business of a statutory fund shall be included in \r\nthat fund. \r\n(4) All liabilities (including policy liabilities) of a life insurer arising out of the conduct of the \r\nbusiness of a statutory fund shall be treated as liabilities of that fund. \r\n(5) All assets, liabilities, revenues and expenses of a life insurer which are referable to the \r\nshareholders’ fund and which are not attributed to a statutory fund shall be attributed to the \r\nshareholders’ fund. \r\n(6) If an asset, a liability, a revenue or an expense of a life insurer is referable to two or more \r\nstatutory funds, or is referable in part to a statutory fund or funds but is also referable to the \r\nshareholders’ fund, the insurer shall apportion such asset, liability, revenue or expense on a fair and \r\nequitable basis between the funds to which it is referable. \r\n(7) Disposition of assets of statutory funds. An apportionment made under this section shall \r\nonly be made after the directors of the insurer have received the appointed actuary’s written advice \r\nas to the fairness and equity of the proposed basis of allocation. \r\n18. Disposition of assets of statutory funds.—(1) The assets of a statutory fund are only \r\navailable for expenditure related to the conduct of the business of the statutory fund. \r\n(2) Profits and losses of a statutory fund may only be dealt with in accordance with the \r\napplicable provisions of this Ordinance. \r\n19. Prohibition of reinsurance between statutory funds.—(1) Reinsurance between \r\nstatutory funds maintained by one insurer is prohibited. \r\n(2) For the purposes of this section, reinsurance between statutory funds shall be deemed to \r\nexist, (whether or not there is a written contract of reinsurance) where the following circumstances \r\nare present: \r\n(a) part of the premium payable under a policy referable to one statutory fund is \r\ncredited to another statutory fund (“the reinsuring fund”) to which the policy is \r\nnot referable; and \r\n(b) a corresponding proportion of the liability under the policy is treated as a \r\nliability for the discharge of which the assets of the reinsuring fund are \r\navailable. \r\n20. Capital payments of life insurance statutory funds.—(1) A life insurer may at any time \r\nmake a capital payment to a statutory fund. \r\n(2) For the purposes of this section, a capital payment is an amount credited to a statutory \r\nfund that is not required to be credited to that fund and does not represent any part of the assets of \r\nanother statutory fund. \r\n \r\nPage 28 of 109 \r\n \r\n(3) All capital payments made to a statutory fund in accordance with this section shall be \r\ncredited in the records of the statutory fund to a ledger account clearly identified as capital \r\ncontributed to the statutory fund. \r\n21. Distribution of capital in a life insurance statutory fund.—(1) A distribution of \r\ncapital, other than a distribution to holders of participating policies by way of bonus, shall not be \r\nmade at any time at which any of the accounts identified in sub- sections (1) and (2) of section 22 \r\nhave a debit balance. \r\n(2) A distribution of capital other than a distribution to holders of participating policies by \r\nway of bonus, shall not be made from a statutory fund unless the provisions of sub-sections (3) and \r\n(4) of section 35, after such distribution, are complied with. \r\n(3) A distribution of capital contributed to a statutory fund may only be made after the \r\ndirectors of the insurer have received the appointed actuary’s written advice as to the likely \r\nconsequences of the proposed distribution. \r\n(4) In providing his written advice under sub-section (3), the appointed actuary shall have \r\nregard, without limitation, to the effect of the proposed distribution on the compliance by the insurer \r\nwith the provisions of this Ordinance relating to solvency and on the ability of the insurer to continue \r\nto comply- with the provisions of this Ordinance relating to solvency in the context of its planned \r\nlevel of activity. \r\n(5) Capital contributed to a statutory fund may only be distributed in the following ways: \r\n(a)  by transfer to the shareholders’ fund; \r\n(b)  by transfer to another statutory fund of the company; or \r\n(c)  by distribution as bonuses to holders of participating policies. \r\n22. Allocation of surplus on life insurance business.—(1) An insurer conducting \r\nparticipating life insurance business shall, in the accounting records of the statutory fund or funds in \r\nwhich that business is carried on, maintain ledger accounts separately identifying the following: \r\n(a) retained earnings on participating business attributable to participating \r\npolicyholders; \r\n(b) retained earnings on participating business attributable to shareholders but not \r\ndistributable; and \r\n(c) retained earnings on participating business distributable to shareholders. \r\n(2) An insurer conducting business other than participating business shall in the accounting \r\nrecords of the statutory fund or funds in which that business is carried on maintain a ledger account \r\nidentifying the retained earnings on business other than participating business. \r\n(3) For the purposes of this section and section 23, the ledger accounts referred to in clauses \r\n(a), (b) and (c) of subsection (1) and in sub-section (2) are described for reasons of brevity as \r\nfollows, respectively: \r\n \r\nPage 29 of 109 \r\n \r\n(a)  the A Account; \r\n(b)  the B Account; \r\n(c)  the C Account; and \r\n(d)  the D Account. \r\n(4) The ledger accounts identified in sub-sections (1) and (2) shall not be dealt with other \r\nthan in accordance with the provisions, of this section and section 23, or as the Commission may \r\nprescribe. \r\n(5) Immediately following each investigation carried out in accordance with section 50, the \r\ninsurer shall allocate, by debiting or crediting the accounts identified in sub-section (1) and sub-\r\nsection (2) in each fund, the amount of surplus earned in that fund, in accordance with the provisions \r\nof this section. \r\n(6) In this section, the term ‘surplus’ in respect of a year means the increase or decrease in \r\nthat year of the excess of assets over liabilities (other than policyholder liabilities) of a statutory fund \r\nor of a separately identifiable part of a statutory fund, reduced by the increase and enhanced by the \r\ndecrease (so far, in the case of a separately identifiable part of a statutory fund, as such increase or \r\ndecrease is attributable to that separately identifiable part) in that year of:. \r\n(a)  the amount of policyholder liabilities; \r\n(b)  the cumulative amount of capital contributed by the shareholders’ fund; \r\n(c)  the amount of the accounts identified in sub-sections (1) and (2); and \r\n(d)  the amount of any reserve required under this Ordinance to be maintained. \r\nExplanation: All amounts referred to in this subsection shall be determined in accordance \r\nwith the accounting rules prescribed for the preparation of the statement of assets and liabilities \r\nreferred to in sub-clause (i) of clause (a) of sub-section (1) of section 46. \r\n(7) The surplus earned on participating contracts shall be allocated as follows between the A \r\nAccount and the B Account: \r\n(a)  not less than ninety per cent of the amount of surplus earned on participating \r\ncontracts shall be allocated to the A Account; and \r\n(b)  the amount represented by the difference between the surplus earned on \r\nparticipating contracts and the amount referred to in clause (a) shall be \r\nallocated to the B Account. \r\nExplanation: In a statutory fund which contains both participating and non-participating \r\npolicies, the amount of surplus earned on participating contracts for the purposes of this section \r\nincludes that element of surplus earned other than on participating contracts which is, on a fair and \r\nequitable basis, attributable to the participating policy holders having regard to the interest of \r\nparticipating policyholders in the undertakings of the statutory fund. \r\n \r\nPage 30 of 109 \r\n \r\n(8) Immediately following the allocation of surplus in accordance with sub-section (7), the \r\namount of surplus adjustment in respect of that year shall be credited to the A Account and debited to \r\nthe C Account: \r\nProvided that where the amount of surplus adjustment exceeds the credit balance of the C \r\nAccount the amount by which it exceeds that balance shall not be debited to the C Account but shall \r\nbe debited to the B Account: \r\nProvided further that where the amount of surplus adjustment, but for this proviso, exceeds \r\nthe sum of the credit balance, if any, of the B Account and the credit balance, if any, of the C \r\nAccount, the amount of surplus adjustment shall for the purposes of this sub-section only be equal to \r\nthe sum of the credit balance, if any, of the B Account and the credit balance, if any, of the C \r\nAccount. \r\n(9) In this section, “surplus adjustment” means ninety per cent of the sum of the following \r\ntwo amounts: \r\n(a)  the amount, if any, by which the total amount of management expenses \r\nbrought to account in determining the surplus earned on participating contracts \r\nexceeds such total amount as is determined by the application of such \r\npercentages as may be prescribed by the Commission in regulations to first \r\nyear and renewal premiums brought to account in determining that surplus; \r\nand \r\n(b)  the amount determined by applying for six months on a compound basis, to \r\nthe amount if any determined in clause (a), the higher of: \r\n(i)  the investment earning rate of the statutory fund during the year, so far \r\nas concerns participating contracts; and \r\n(ii)  the average base rate during the year, calculated as at the final date of \r\neach month on a compound basis. \r\n(10) The amount of surplus earned in each statutory fund during a year, and in respect of each \r\nstatutory fund to which subsection (1) applies the amounts of surplus earned on participating \r\ncontracts during that year and surplus adjustment in respect of that year shall be certified by the \r\ninsurer’s appointed actuary. \r\n(11) All surplus other than surplus required to be dealt with under sub-section (7) shall be \r\nallocated to the D Account. \r\n(12) The Commission may make rules for the administration of any matter in this section, not \r\notherwise provided for. \r\n23. Restriction on dividends and bonuses.—(1) No insurer carrying on life insurance \r\nbusiness shall declare or pay any dividend to shareholders or make any payment in service of any \r\ndebentures, other than from the shareholders’ fund. \r\n(2) No insurer carrying on life insurance business shall appropriate from any statutory fund to \r\nthe shareholders’ fund any amount other than: \r\n \r\nPage 31 of 109 \r\n \r\n(a)  an amount from the C Account or the D Account; or \r\n(b)  a distribution of capital in accordance with section 21. \r\n(3) No insurer carrying on life insurance business shall allocate, whether by way of cash \r\npayment, by addition to policy liabilities or otherwise, as bonuses to participating policy holders any \r\namount other than: \r\n(a)  an amount from the A Account, or \r\n(b)  a distribution of capital by way of bonus in accordance with section 21. \r\n(4) No amount may be credited to the C Account other than in accordance with the provisions \r\nof this section. \r\n(5) An appropriation under sub-section (2) or an allocation of bonus under sub-section (3) \r\nmay only be made after the directors of the insurer have received the appointed actuary’s written \r\nadvice as to the likely consequences of the proposed appropriation or allocation. \r\n(6) In providing his written advice under sub-section (5), the appointed actuary shall have \r\nregard, without limitation, to the effect of the proposed appropriation or allocation on the compliance \r\nby the insurer with the provisions of this Ordinance relating to solvency and on the ability of the \r\ninsurer to continue to comply with the provisions of this Ordinance relating to solvency in the \r\ncontext of its planned level of activity. \r\n(7) At the time at which bonuses, other than distributions of capital by way of bonus in \r\naccordance with section 21, are allocated to participating policy holders, an amount determined in \r\nthe following manner may, subject to sub-section (12), be debited to the B Account and the amount \r\nif any debited to the B Account shall be credited to the C Account: \r\n(a)  not more than one-ninth of the amount of such bonuses as have been allocated \r\nfrom the A Account; loss \r\n(b)  the lower of: \r\n(i)  the amount if any of surplus adjustment debited to the B Account in \r\naccordance with the proviso to sub-section (8) of section 22; and \r\n(ii)  the amount set out in clause (a) of this subsection. \r\n(8) Where the business in a statutory fund contains investment contracts, not being \r\nparticipating contracts, under the terms of which the insurer has discretion to vary the amount of \r\nexpenses charged under the policy, the transfer to the shareholders’ fund which may be made in any \r\none year from the D Account in that statutory fund shall be reduced, to the extent of the balance in \r\nthe D Account, by the amount of expense adjustment arising in the year ended on the preceding 31st \r\nDecember. \r\n(9) For the purpose of sub-section (8), “expense adjustment” means such proportion as may \r\nbe prescribed of the amount, if any, by which the total amount charged to all such policies to meet \r\nmanagement expenses exceeds such total amount as is determined by the application of such \r\n \r\nPage 32 of 109 \r\n \r\npercentages as may be prescribed by the Commission to first year and renewal premiums relating to \r\nsuch investment contracts: \r\nProvided that, where investment contracts include supplementary benefits, the amount \r\nreferred to in this sub-section shall be determined with reference to the premiums for the main \r\ncontract only excluding such supplementary benefits: \r\nProvided further that for the purposes of determining the amount of expense adjustment, the \r\namount of management expenses charged to policies shall be determined in accordance with such \r\nbasis as the Commission may prescribe. \r\n(10) The amount of expense adjustment in each year in respect of each statutory fund to \r\nwhich sub-section (8) applies shall be certified by the appointed actuary. \r\n(11) An insurer may, subject to sub-section (12), at any time make a transfer from the B \r\nAccount, the C Account or the D Account to the credit of the A Account. \r\n(12) No appropriation, allocation or transfer under subsection (2) or sub-section (3) or under \r\nsub-section (7) or subsection (11) shall be made if that appropriation, allocation or transfer would \r\nresult in a debit balance in the ledger account from which the appropriation, allocation or transfer is \r\nmade. \r\n(13) The Commission may make rules for the administration of any matter in this section, not \r\notherwise provided for. \r\n24. Declaration of interim bonuses. Notwithstanding anything to the contrary contained in \r\nthis Ordinance, an insurer carrying on the business of life insurance shall be at liberty to declare an \r\ninterim bonus or bonuses to policy holders whose policies mature for payment by reason of death or \r\notherwise during the period between two investigations conducted in accordance with section 50, on \r\nthe recommendation of the appointed actuary made in his report on the last preceding valuation. \r\n \r\n25. Transitional provisions.—(1) All life insurance funds maintained under the repealed Act \r\nor under the Life insurance Nationalization Order, 1972 by an insurer carrying on life insurance \r\nbusiness on the commencement date or succeeding to an insurer carrying on life insurance business \r\non the commencement date shall, with effect on or before 31st December 2001, be converted into \r\none or more statutory fund or funds. \r\n(2) A conversion to a statutory fund or funds under this section shall be made in accordance \r\nwith such criteria as may be prescribed by the Commission. \r\n(3) For the period until 31st December 2001, an insurer .carrying on life insurance business \r\non the commencement date shall not be regarded as being in contravention of the Ordinance by \r\nreason only that the statutory funds required to be established under this Part have not been \r\nestablished. \r\n26. Appointed acturary.—(1) Every life insurer shall appoint an actuary as its appointed \r\nactuary. \r\n \r\nPage 33 of 109 \r\n \r\n(2) The Commission may on reasonable grounds disapprove such appointment and require \r\nthe appointment of another actuary. \r\n27. Responsibilities of appointed actuary. —(1) The appointed actuary shall be responsible \r\nto perform such duties as he may be assigned under this Ordinance. \r\n(2) Such duties shall include : \r\n(a)  performing an annual investigation into the financial condition of a life insurer \r\naccording to such scope, and reporting on such investigation in such terms as, \r\nmay be prescribed by the Commission; \r\n(b)  providing written advice as to the equitable apportionment of revenues and \r\nexpenses between funds and between policy holders within funds; \r\n(c)  certifying that the terms and conditions of a type of policy issued by a life \r\ninsurer are sound and workable; \r\n(d)  certifying premium rates at the time of introduction of a new product and any \r\nchange in these rates; \r\n(e)  certifying annually mortality, expenses and other charges under investment \r\ncontracts; and \r\n(f)  such other duties as may be prescribed by the Commission. \r\n(3) The appointed actuary of an insurer shall be entitled at any time to address or to make a \r\nreport to the Board of Directors of the insurer, with respect to any matter which in the opinion of the \r\nappointed actuary requires to be brought to the attention of the Board of Directors. \r\n(4) An appointed actuary shall not be dismissed from his office without the permission of the \r\nCommission, which shall not unreasonably be withheld. \r\n(5) An appointed actuary who resigns his office shall inform the Commission of the reasons \r\nfor his resignation and of any matters connected therewith which he believes should be brought to \r\nthe attention of the Commission. \r\n(6) An appointed actuary who is dismissed from his office shall inform the Commission of \r\nany matters connected with his dismissal which he believes should be brought to the attention of the \r\nCommission. \r\n(7) An appointed actuary who resigns or is dismissed shall not be liable to any person for any \r\nstatement properly made with due cause pursuant to sub-section (5) or sub-section (6). \r\nPart IV \r\nREQUIREMENTS AS TO CAPITAL AND STATUTORY DEPOSITS \r\n28. Requirements as to capital.—(1) An insurer registered under this Ordinance to carry on \r\ninsurance business shall have a paid-up capital of not less than the required minimum amount. \r\n \r\nPage 34 of 109 \r\n \r\n(2) For the purposes of this section, the required minimum amount is: \r\n(a)  one hundred and fifty million rupees, or such higher amount as may be \r\nprescribed by the Federal Government, for an insurer carrying on life \r\ninsurance business; and \r\n(b)  eighty million rupees, or such higher amount as may be prescribed by the \r\nFederal Government, for an insurer carrying on non-life insurance business: \r\nProvided that in respect of clause (a), for an insurer authorised to carry on life insurance \r\nbusiness on the commencement date the required minimum amount shall not be less than one \r\nhundred million rupees by 31st December 2002 and one hundred and fifty million rupees or such \r\nhigher amount as may be prescribed by 31st December 2004: \r\nProvided further that in respect of clause (b), for an insurer authorised to carry on non-life \r\ninsurance business on the commencement date the required minimum amount shall not be less than \r\nfifty million rupees by 31st December 2002 and eighty million rupees or such higher amount as may \r\nbe prescribed by 31st December 2004: \r\nProvided further that in respect of both clause (a) and clause (b), for the period until 31st \r\nDecember 2002, for an insurer authorised to carry on insurance business on the commencement date \r\nthe required minimum amount shall be that set out in section 6 of the repealed Act. \r\n(3) An insurer, not having a share capital, shall not be required to comply with this section. \r\n29. Deposits—(1) Every insurer shall, in respect of the insurance business carried on by him \r\nin Pakistan, deposit and keep deposited with the State Bank of Pakistan, in one of the offices in \r\nPakistan of the State Bank of Pakistan for and on behalf of the Federal Government the required \r\nminimum amount specified in sub-section (2), either in cash or in approved securities estimated at \r\nthe market value of the securities on the day of deposit, or partly in cash and partly in approved \r\nsecurities so estimated. \r\n(2) For the purposes of this section the required minimum amount is, either:— \r\n(a)  the higher of ten million rupees and ten per cent, (10%) of the insurer’s paid-\r\nup capital; or \r\n(b)  such amount as may be prescribed by the Commission: \r\nProvided that the Commission may, subject to achievement of levels of solvency as required \r\nby this Ordinance, abolish the requirement for deposits specified by this section by reducing the \r\nrequired minimum amount to zero. \r\n(3) A deposit made in cash shall be held by the State Bank of Pakistan to the credit of the \r\ninsurer and shall except to the extent, if any, to which the cash has been invested in securities under \r\nsub-section (5), be returnable to the insurer in cash in any case in which, under the provisions of this \r\nOrdinance, a deposit is to be returned; and any profit or return (howsoever called or designated) \r\naccruing due and collected on securities deposited under sub-section (1) shall be paid to the insurer, \r\nsubject only to deduction of the normal commission chargeable for the realisation of profit or return \r\n(however called or designated). \r\n \r\nPage 35 of 109 \r\n \r\n(4) The insurer may at any time replace any securities deposited by him under this section \r\nwith the State Bank of Pakistan either by cash or by other approved securities or partly by cash and \r\npartly by other approved securities provided that such cash, or the value of such other approved \r\nsecurities estimated at the market rates prevailing at the time of replacement, or such cash together \r\nwith such value, as the case may be, is not less than the value of the securities replaced estimated at \r\nthe market rates prevailing when they were deposited. \r\n(5) The State Bank of Pakistan shall, if so requested by the insurer: \r\n(a)  sell any securities deposited by him with the Bank under this section and hold \r\nthe cash realised by such sale as deposit, or \r\n(b)  invest in approved securities specified by the insurer the whole or any part of \r\na deposit held by it in cash or the whole or any part of cash received by it on \r\nthe sale of or on the maturing of securities in which investment is so made as \r\ndeposit, and may charge the normal commission on such sale or on such \r\ninvestment. \r\n(6) Where sub-section (5) applies, if the cash realised by the sale of or on the maturing of the \r\nsecurities (excluding, in the former case, the profit or return (however called or described accrued) \r\nfalls short of the market value of the securities at the date on which they were deposited with the \r\nBank, the insurer shall make good the deficiency by a further deposit either in cash or in approved \r\nsecurities estimated at the market value of the securities on the day on which they are deposited, or \r\npartly in cash and partly in approved securities so estimated, within a period of two months from the \r\ndate on which the securities matured or were sold and, unless he does so the insurer shall be deemed \r\nto have failed to comply with the requirements of this section as to deposits. \r\n(7) If any part of a deposit made under this section is used in the discharge of any liability of \r\nthe insurer, the insurer shall deposit such additional sum in cash or approved securities estimated at \r\nthe market value of the securities on the day of deposit, or partly in cash and partly in such securities, \r\nas will make up the amount so used. The insurer shall be deemed to have failed to comply with the \r\nrequirements of sub-section (1), unless the deficiency is supplied within a period of two months from \r\nthe date when the deposit or any part thereof is so used for discharge of liabilities. \r\n(8) The market value on the day of deposit of securities deposited in pursuance of any of the \r\nprovisions of this Ordinance with the State Bank of Pakistan shall be determined by the State Bank \r\nof Pakistan whose decision shall be final. \r\n30. Reservation of deposits.—(1) Any deposit made under section 29 shall be deemed to be \r\npart of the assets of the insurer but shall not be the subject of any encumbrance; nor shall it be \r\navailable for the discharge of any liability of the insurer other than liabilities arising out of policies of \r\ninsurance issued by the insurer, so long as any such liabilities remain undischarged; nor shall it be \r\nliable to attachment in execution of any decree except a decree obtained by a policy holder of the \r\ninsurer in respect of a debt due upon a policy which debt the policy holder has failed to realise in any \r\nother way. \r\n \r\n(2) Where a deposit is made in respect of life insurance business the deposit made in respect \r\nthereof shall be deemed to be a part of the assets of the shareholders’ fund. \r\n \r\n \r\nPage 36 of 109 \r\n \r\n(3) A deposit which, at the commencement date, was, under the repealed Act, an asset of a \r\nlife insurance fund established under that Act, shall, on or before the date of conversion of that fund \r\nunder section 25 be transferred to the shareholders’ fund against receipt of the full value of the \r\ndeposit. \r\n \r\n(4) In this section the term ‘full value of the deposit’ means the cash or the market value of \r\nother assets forming the deposit, as certified by the State Bank of Pakistan. \r\n \r\n(5) For the period from the commencement date and until 31st December 2001, no insurer \r\nwhich was carrying on life insurance business on the commencement date or which succeeds to an \r\ninsurer which was carrying on life insurance business on the effective date shall be regarded as being \r\nin contravention of the Ordinance by reason only that the statutory deposit required by this Part to be \r\nmade in the shareholders’ fund has not been made either in part or in full, provided that the sum of \r\nthe statutory deposit which has been made in the shareholders’ fund and the statutory deposit which \r\nwas made in the life insurance fund under the repealed Act and continues to exist as at the relevant \r\ndate is equal to or greater than the amount required by this Part to be made as a statutory deposit by \r\nthe insurer. \r\n \r\n31. Refund of deposits. An insurer may at any time apply to the Commission for consent to \r\nreturn of such portion of the deposit as is in excess of any amount which the insurer is required under \r\nthis Ordinance to keep deposited, and such consent shall not be unreasonably withheld. \r\n \r\nPart V \r\nSOLVENCY REQUIREMENTS \r\n \r\n32. Admissible Assets.—(1) For the purposes of this Part, the following are admissible \r\nassets: \r\n \r\n(a)  Government securities except to the extent that they are subject to any \r\nencumbrance; \r\n \r\n(b)  assets deposited with the State Bank of Pakistan under section 29; and \r\n \r\n(c)  assets, other than assets referred to in clause (a) or clause (b), not specified in \r\nsub-section (2) and \r\n \r\n(d)  assets,1* * * in respect of which the Commission has declared that those \r\nassets are to be admissible for the purposes of this Part. \r\n \r\n(2) For the purposes of this Part, subject to sub-section (1), the following are not admissible \r\nassets: \r\n(a)  in a statutory fund of-a life insurer, a loan to, capital transfer to or other \r\ninterest in the shareholders’ fund of the life insurer; \r\n \r\n \r\n1omitted by Act IV of 07, s.19(w.e.f.01.7.2007) \r\n \r\nPage 37 of 109 \r\n \r\n(b)  in a statutory fund of a life insurer, any asset to the extent that it exceeds such \r\npercentage as may be prescribed by the Commission of the value of the fund \r\n(being the market value of assets less liabilities other than policyholder \r\nliabilities); \r\n(c)  in the shareholders’ fund of a life insurer, a loan to, capital transfer to or other \r\ninterest in a statutory fund of the life insurer; \r\n(d)  loans (not being loans secured against life insurance policies) to directors, \r\nshareholders, agents or employees of the insurer, and accrued profit or return \r\n(however called or described) thereon: \r\nProvided that a person holding less than one per cent of the shares of \r\nthe insurer shall not be considered to be a shareholder for the purposes of this \r\nclause: \r\nProvided, further, that a loan and accrued profit , or return (however \r\ncalled or described) thereon to an employee of an insurer, not being a director \r\nof the insurer, shall not be inadmissible by virtue only of the operation of this \r\nclause, to the extent that the loan is secured against immovable property:  \r\n(e)  loans to life insurance policyholders of the insurer, to the extent that these, \r\ntogether with accrued profit or return (however called or described) thereon, \r\nexceed the surrender value of the policies against which they are secured; \r\n(f)  loans which are secured against immovable property, to the extent that they \r\nexceed, in the aggregate, such percentage as may be prescribed by the \r\nCommission of the insurer’s total investments or, in the case of a life insurer, \r\nsuch percentage as may be prescribed by the Commission of the-total \r\ninvestments of the relevant statutory fund or shareholders’ fund; \r\n(g)  balances with, shares in, loans to or other amounts due from any body that is \r\nrelated to the insurer or to any director of the insurer; \r\n(h)  premiums due and payable to the insurer but not paid for more than three \r\nmonths from the date due and payable: \r\nProvided that in the case of a life insurer a premium which has not \r\nbeen paid shall be deemed to have been paid to the extent that the provisions \r\nof clause (b) of sub-section (4) of section 93 have been applied in respect of \r\nthat premium; \r\n(i)  intangible assets, including but not limited to goodwill, brand names and \r\ncapitalised establishment costs; \r\n(j)  deferred tax asset balances; \r\n(k)  amounts available to the insurer under guarantees; \r\n \r\nPage 38 of 109 \r\n \r\n(l)  assets subject to encumbrances; \r\n(m)  unpaid share capital; \r\n(n)  any unit of immovable property, to the extent that it exceeds such percentage \r\nas may be prescribed by the Commission of the insurer’s total investments or, \r\nin the case of a life insurer, such percentage as may be prescribed by the \r\nCommission of the total investments of the relevant statutory fund or \r\nshareholders fund; \r\n(o)  immovable property, to the extent that it exceeds in total such percentage as \r\nmay be prescribed by the Commission of the insurer’s total investments or, in \r\nthe case of a life insurer, such percentage as may be prescribed by the \r\nCommission of the total investments of the relevant statutory fund or \r\nshareholders’ fund; \r\n(p)  shares in any one company or group of related companies, to the extent that \r\nthey exceed such percentage as may be prescribed by the Commission of the \r\ninsurer’s total investments or, in the case of a life insurer, such percentage as \r\nmay be prescribed by the Commission of the total investments of the relevant \r\nstatutory fund or shareholders’ fund; \r\n(q)  shares of listed companies, to the extent that they exceed, in the aggregate, \r\nsuch percentage as may be prescribed by the Commission of the insurer’s total \r\ninvestments or, in the case of a life insurer, such percentage as may be \r\nprescribed by the Commission of the total investments of the relevant statutory \r\nfund or shareholders’ fund; \r\n(r)  shares of companies (not being listed companies), to the extent that they \r\nexceed, in the aggregate, such percentage as may be prescribed by the \r\nCommission of the insurer’s total investments or, in the case of a life insurer, \r\nsuch percentage as may be prescribed by the Commission of the total \r\ninvestments of the relevant statutory fund or shareholders’ fund; \r\n(s)  immovable property and shares in the aggregate, to the extent that they exceed \r\nsuch percentage as may be prescribed by the Commission of the insurer’s total \r\ninvestments or, in the case of a life insurer, such percentage as may be \r\nprescribed by the Commission of the total investments of the relevant statutory \r\nfund or shareholder’s fund; \r\n(t)  loans to any person or group of related persons, to the extent that they exceed \r\nsuch percentage as may be prescribed by the Commission of the insurer’s total \r\ninvestments or, in the case of a life insurer, such percentage as may be \r\nprescribed by the Commission of the total investments of the relevant statutory \r\nfund or shareholders’ fund; \r\n(u)  (i)  vehicles; \r\n(ii)  office equipment; and \r\n \r\nPage 39 of 109 \r\n \r\n(iii)  fixtures and fittings which are not immovable property; \r\n(v)  such assets as the Commission may prescribe; and \r\n(w)  assets which are declared by the Commission, pursuant to sub-section (9), not \r\nto be admissible assets of an insurer or of a life insurance statutory fund \r\nmaintained by an insurer. \r\n(3) The Commission may, in prescribing matters referred to in sub-section (2), make separate \r\nprescription in respect of insurers carrying on life insurance business and those carrying on non-life \r\ninsurance business; and within the category of life insurance business may make separate \r\nprescription in respect of statutory funds which are required by this Ordinance to be established for \r\nthe conduct of a particular category of life insurance business. \r\n(4) For the purposes of this section, the provisions of clauses (p), (q) and (r) of sub-section \r\n(2) shall extend mutatis mutandis to investments made in shares (or equity securities by whatever \r\nname called) of a body corporate incorporated in a jurisdiction other than Pakistan. \r\n(5) For the purposes of this section, immovable property is a “unit” where it is the smallest \r\ndiscrete parcel of immovable property, consisting of land or buildings and structures constructed \r\nthereon or both, owned by an insurer and is capable of being lawfully the subject of a transfer or \r\nother disposition of the whole of the legal and beneficial interest, without the necessity for any \r\nconsent, license, permit or approval from any governmental authority to divide or sub-divide the \r\nparcel in order to transfer or otherwise make a disposition of the whole of the legal and beneficial \r\ninterest therein. \r\n(6) In this section, “investments” includes all forms of shares, debentures, bonds, deposits \r\nand other securities and derivative instruments, and includes immovable property whether or not \r\noccupied by the insurer. \r\n(7) For the purposes of this section, two or more persons are “related” if they are under-\r\ncommon control, or if they are connected by an ownership interest of more than 49% or, if they are \r\nnatural persons, they are members of the same family. \r\n(8) A declaration by the Commission under clause (d) of sub-section (1): \r\n(a)  may be made on the application of the insurer; \r\n(b)  shall be made in writing to the insurer; \r\n(c)  shall not be made unless the Commission believes on reasonable grounds, \r\nhaving regard to the circumstances of the insurer, the interests of policyholders \r\nof the insurer, the nature of the assets in respect of which the application is \r\nmade and the nature of the other assets and the liabilities of the insurer, that: \r\n(i)  such a declaration will not adversely affect the ability of the insurer to \r\nmeet its liabilities, including policyholder liabilities, as they fall due; \r\n(ii)  such a declaration is not inconsistent with the principles of sound and \r\nprudent management of the insurer set out in section 12; and \r\n \r\nPage 40 of 109 \r\n \r\n(iii)  such a declaration ought to be made; \r\n(d)  may be made in respect of the whole of the assets in respect of which \r\napplication is made, or of such part thereof as the Commission may direct; \r\n(e)  shall be made subject to such conditions as the Commission may direct; \r\n(f)  shall have effect not more than three months from the date of such \r\ndeclaration; and \r\n(g)  shall remain in force for a period of not more than twelve months from the \r\ndate at which the declaration has effect, unless revoked in writing by the \r\nCommission before the expiry of that time.  \r\n(9) A declaration by the Commission under clause (w) of sub-section (2): \r\n(a)  shall be made in writing to the insurer; \r\n(b)  shall not be made unless the Commission believes on reasonable grounds, \r\nhaving regard to the circumstances of the insurer, the nature of the assets and \r\nthe nature of the other assets and the liabilities of the insurer, and after giving \r\nthe insurer a chance to be heard, that the assets should be declared not to be \r\nadmissible assets of that insurer or of a life insurance statutory fund of that \r\ninsurer; \r\n(c)  shall have effect not less than three months from the date of such declaration; \r\nand \r\n(d)  shall continue until it is revoked in writing by the Commission. \r\n33. Assets and liabilities in Pakistan. —(1) For the purposes of this Part, an asset is an asset \r\nin Pakistan if— \r\n(a)  it is immovable property situated in Pakistan; \r\n(b)  it is movable property (other than money, debts or other actionable claims) \r\nphysically located in Pakistan and owned by and in the possession of a person \r\nresident in Pakistan and no person (other than the owner thereof) has any \r\nbetter right to possession thereof whether by virtue of an encumbrance or \r\notherwise and is lawfully entitled to take it out of Pakistan or remove it from \r\nPakistan; \r\n(c)  it is money or a debt or an actionable claim denominated or payable only in \r\nrupees in Pakistan; or \r\n(d)  it is money or a debt or an actionable claim denominated or payable in a \r\ncurrency other than rupees in respect of which any person has a right to sue \r\nand recover the same by proceedings in Pakistan or it is required by law to be \r\nreceived in Pakistan by or is payable to a person resident in Pakistan. \r\n \r\nPage 41 of 109 \r\n \r\n(2) For the purposes of this Part, where a liability is undertaken by a person under: \r\n(a)  a contract of insurance made in Pakistan or in respect of which a proposal was \r\naccepted or a policy issued in Pakistan, not being a contract. \r\n(i)  that relates only to a liability contingent upon an event that can happen \r\nonly outside Pakistan, not being a liability that the person has \r\nundertaken to satisfy in Pakistan; or \r\n(ii)  where the person carries on insurance business both in and outside \r\nPakistan, that relates only to a liability that the person has undertaken \r\nto satisfy outside Pakistan; or \r\n(b)  a contract of insurance made outside Pakistan or in respect of which a proposal was \r\naccepted or a policy issued outside Pakistan where any part of the negotiations or \r\narrangements leading to the making of the contract, to the acceptance of the proposal \r\nor to the issue of the policy took place or were made in Pakistan, being a contract: \r\n(i)  that relates to a liability contingent upon an event that can happen only in \r\nPakistan; or \r\n(ii)  where the person carries on insurance business both in and outside Pakistan, \r\nthat relates to a liability that the person has undertaken to satisfy in Pakistan; \r\nthat liability is a liability in Pakistan. \r\n34. Valuation of assets and liabilities.—(1) For the purposes of this Part, assets and \r\nliabilities shall, subject to sub-section (2), be valued in accordance with such accounting rules as may \r\nbe prescribed by the Commission. \r\n(2) For the purposes of this Part, as at any date (the “balance date”) to which a statement of \r\nassets and liabilities (however called or described) is made-up: \r\n(a)  no asset of an insurer shall be valued at more than the amount, net of \r\ntransaction costs incurred by the transferer, at which it could be transferred in \r\nan orderly market in a transaction between two willing but not anxious parties; \r\n(b)  no liability of an insurer, not being a policyholder liability, shall be valued at \r\nless than the amount, including transaction costs incurred by the transferer, at \r\nwhich it could be transferred in an orderly market in a transaction between two \r\nwilling but not anxious parties; \r\n(c)  the liability for outstanding claims of a non-life insurer shall not be valued at \r\nless than the expected settlement cost, including settlement expenses, of all \r\nclaims incurred by the insurer but not paid as at the balance date, whether or \r\nnot those claims have been reported to the insurer as at that date, and including \r\nprudent but reasonable provision for adverse development in that expected \r\nsettlement cost after balance date; and \r\n \r\nPage 42 of 109 \r\n \r\n(d)  the liability for unexpired risk of a non-life insurer shall not be valued at less \r\nthan the sum of the unearned premium reserve and the premium deficiency \r\nreserve, where: \r\n(i)  the unearned premium reserve is the unexpired portion of the premium \r\nwhich relates to business in force at the balance date; and \r\n(ii)  the premium deficiency reserve is the amount if any by which the \r\nexpected settlement cost, including settlement expenses but after \r\ndeduction of expected reinsurance recoveries, of claims expected to be \r\nincurred after the balance date in respect of policies in force at the \r\nbalance date, exceeds the unearned premium reserve. \r\n(3) The Commission may prescribe guidelines for the estimation of amounts set-out in sub-\r\nsection (2). \r\n35. Net admissible assets of life insurers.—(1) A life insurer shall at all times maintain in its \r\nshareholders’ fund a surplus of admissible assets in Pakistan over liabilities in Pakistan of not less \r\nthan the required minimum amount. \r\n(2) For the purposes of the preceding sub-section, the required minimum amount is seventy-\r\nfive million rupees or such higher amount as may be prescribed: \r\nProvided that for the period from the commencement date and until 31st December 2004, in \r\nrespect of an insurer which is authorised to carry on insurance business on the commencement date, \r\nthis sub-section shall apply as if the amount of seventy-five million rupees specified therein shall be \r\nsubstituted by the amount of thirty million rupees. \r\n(3) A life insurer shall, in each statutory fund maintained by it for the conduct of business \r\nother than investment-linked business, maintain at all times a surplus of admissible assets in Pakistan \r\nover liabilities in Pakistan, other than policyholder liabilities, equal to or greater than the amount of \r\npolicyholder liabilities calculated in accordance with such principles as may be prescribed by the \r\nCommission. \r\n(4) A life insurer shall, in each statutory fund maintained by it for the conduct of investment-\r\nlinked business, maintain at all times a surplus of admissible assets in Pakistan over liabilities in \r\nPakistan, other than policyholder liabilities, equal to or greater than a sum calculated in accordance \r\nwith such principles as may be prescribed by the Commission. \r\n(5) A life insurer shall, in each statutory fund maintained by it, maintain at all times, in each \r\ncurrency in which the policy liabilities of that statutory fund are denominated, a surplus of \r\nadmissible assets denominated in such currency over liabilities including policyholder liabilities \r\ndenominated in such currency, in an amount to be determined in accordance with such provisions in \r\nthis respect as the Commission shall prescribe. \r\n(6) Where a life insurer has issued policies the benefits under which are payable in a currency \r\nother than Pakistan Rupees, securities denominated in that currency and issued and guaranteed as to \r\nprincipal and profit or return (however called or designated) by the Government of the country in \r\nwhose currency such benefits are expressed, shall be deemed for the purposes of this section to be \r\nadmissible assets of a statutory fund to which such policies are referable. \r\n \r\nPage 43 of 109 \r\n \r\n(7) The Federal Government may prescribe a percentage or percentages of the assets of the \r\nshareholders’ fund of a life insurer, or of a statutory fund of a life insurer, other than a statutory fund \r\nwhich contains only investment-linked policies, which shall be invested in Government securities, or \r\nin a combination of Government securities and other approved securities. \r\n(8) The aggregate of percentages prescribed under subsection (7) shall not exceed forty per \r\ncent. \r\n36. Insurers of non-life insurance business to have assets in excess of minimum solvency \r\nrequirement.—(1) An insurer registered under this Ordinance to carry on non-life insurance \r\nbusiness shall at all times have admissible assets in Pakistan in excess of its liabilities in Pakistan of \r\nan amount greater than or equal to the minimum solvency requirement. \r\n(2) An insurer incorporated in Pakistan and registered under this Ordinance to carry on non-\r\nlife insurance shall at all times have admissible assets in excess of its liabilities of an amount greater \r\nthan or equal to the minimum solvency requirement. \r\n(3) For the purposes of this section, the minimum solvency requirement is the greatest of: \r\n(a)  such required minimum amount as may be prescribed by the Commission; \r\n(b)  such percentage as may be prescribed by the Commission of its earned \r\npremium revenue in the preceding twelve months, net of reinsurance expense \r\nsubject to a maximum deduction for reinsurance of fifty per cent of the gross \r\nfigure; and \r\n(c)  such percentage as may be prescribed by the Commission of the sum of its \r\nliability for unexpired risk and its liability for outstanding claims, net of \r\nreinsurance subject to a maximum deduction for reinsurance in each case of \r\nfifty per cent of the gross figure: \r\nProvided that in the case of an insurer incorporated in a jurisdiction outside Pakistan the \r\namounts set-out in clauses (b) and (c) of this subsection shall be calculated with reference to the \r\nearned premium revenue, unexpired risk liability and outstanding claims liability and related \r\nreinsurance balances of that insurer in respect of its insurance business in Pakistan only. \r\n(4) The Commission may direct an insurer not to deal with any specified asset for any \r\nspecified period of time in order to ensure compliance by the insurer with the provisions of this Part. \r\n37. Prohibition of loan.—(1) No insurer shall grant to, or to any member of the family of, \r\nany director, chief executive, appointed actuary, or auditor of the insurer any loan or temporary \r\nadvance, whether secured by an encumbrance of property or otherwise except a loan, secured by a \r\nlife policy issued by the insurer, of not more than eighty per cent of the surrender value of that \r\npolicy. \r\n(2) Except with the prior approval of the Board of Directors at a regularly convened meeting \r\nby the vote of not less than two thirds of the total number of directors, no insurer shall grant any loan \r\nor temporary advance to any firm or company in which any director, manager, actuary, auditor or \r\nofficer of the insurer, or any member of the family of such director, manager, actuary, auditor or \r\nofficer has any interest as proprietor, partner, director, manager or managing agent: \r\n \r\nPage 44 of 109 \r\n \r\nProvided that no such approval shall be required if the loan is secured by a life policy issued \r\nby the insurer and is an amount not exceeding eighty per cent of the surrender value of that policy. \r\n(3) The director concerned shall not vote at, or otherwise participate in the proceedings of the \r\nmeeting of the Board considering the grant of any such loan or advance as is referred to in sub-\r\nsection (2). \r\n(4) Where any event occurs giving rise to circumstances the existence of which at the time of \r\nthe grant of any subsisting loan or temporary advance would have made such grant a contravention \r\nof sub-section (1) or sub-section (2), such loan shall, notwithstanding any contract to the contrary, be \r\nrepaid within three months from the occurrence of such event and in case of default, the director, \r\nmanager, actuary, auditor or officer concerned shall, without prejudice to any other penalty to which \r\nhe may be liable, cease to hold office with the insurer granting the loan or advance on the expiry of \r\nthe said three months. \r\n(5) Nothing in sub-section (1) or sub-section (2) shall apply to loans or advances granted by \r\nan insurer to a banking company or to a subsidiary company (being an insurer) or to any insurer to \r\nwhich the insurer granting the loan or advance is a subsidiary company. \r\n(6) Nothing in sub-section (I) shall apply to any stipend paid to any insurance agent while he \r\nis undergoing a course of training approved by the Federal Government. \r\n(7) The provisions of section 195 of the Companies Ordinance, 1984, (XLVII of 1984) shall \r\nnot apply to a loan granted to a director of an insurer being a company, if the loan is one granted on \r\nthe security of a policy on which the insurer bears risk and the policy was issued to the director on \r\nhis own life, and the loan is of an amount not more than eighty per cent of the surrender value of the \r\npolicy. \r\n(8) Except as otherwise provided in this section, an insurer may make a loan or temporary \r\nadvance to an employee or agent of that insurer in accordance with such conditions as may be \r\nprescribed by the Commission. \r\n(9) With effect from the commencement date, no loan or temporary advance granted under \r\nthis section by a life insurer to an employee or an agent of the insurer, other than a loan granted on \r\nthe security of a policy issued to the employee or agent on his own life and on which the insurer \r\nbears risk, shall be made other than from the shareholders’ fund of the insurer. \r\n38. Liability of directors, etc. for loss due to contraventions of sections 35, 36 or 37. If by \r\nreason of a contravention of any of the provisions of sections 35, 36 or 37, any loss is sustained by \r\nthe insurer or by the policy holders, every director, manager or officer of the insurer who is \r\nknowingly a party to such contravention shall, without prejudice to any other penalty to which he \r\nmay be liable under this Ordinance, be jointly and severally liable to make good the amount of such \r\nloss. \r\n 39. Assets of insurer how to be kept. None of the assets in Pakistan of any insurer shall, \r\nexcept in the case of deposits made with the State Bank of Pakistan under section 29, or in the case \r\nof assets, other than deposits, with a scheduled bank acting as a custodian, be kept otherwise than in \r\nthe corporate name and under the direct control of the Insurer and, in the case of assets of a statutory \r\nfund of a life insurer, in the name of the statutory fund. \r\n \r\n \r\n \r\nPage 45 of 109 \r\n \r\nPart VI \r\nREINSURANCE ARRANGEMENTS \r\n40. Special definition and conditions—(l) applicable to this part. In this Part: \r\n(a)  “Company” means the Pakistan Reinsurance Company Limited; and \r\n(b)  “net retention” means the part of the sum insured in respect of any one risk \r\nwhich is retained by an insurer to his own account. \r\n(2) This Part, other than section 41, shall cease to have effect on the happening of either of \r\nthe following events: \r\n(a)  the effective date of a direction by the Commission to the Company to cease \r\nentering into new contracts of insurance; or \r\n(b)  the Federal Government ceasing to hold a controlling ownership interest in the \r\nCompany. \r\n(3) A provision of this part, other than section 41, shall not have effect with respect to an \r\ninsurer if and to the extent that complying with that provision would cause that insurer to contravene \r\na provision of section 11 or section 41. \r\n(4) For the purposes of this Part other than section 41 and this section, the Company is not an \r\ninsurer. \r\n41 Requirement to effect and maintain reinsurance arrangements. —(1) An insurer shall \r\neffect and shall at all times maintain such reinsurance arrangements as are, in the opinion of the \r\ndirectors (or such other person or body responsible for conducting the management and business of \r\nthe insurer), formed on reasonable grounds, having regard to the exposures of the insurer in respect \r\nof individual contracts accepted and in respect of aggregate losses arising out of individual events, \r\nadequate to ensure continuing compliance by the insurer with the provisions of this Ordinance \r\nrelating to solvency. \r\n(2) Every insurer shall submit to the Commission, in the manner prescribed by the \r\nCommission and not less than one month prior to the coming into effect, or as soon as practicable \r\nthereafter, of any treaty reinsurance arrangement entered into by the insurer as cedent, such features \r\nof that reinsurance arrangement as may be prescribed by the Commission. \r\n(3) Where any reinsurance treaty the particulars of which have been submitted to the \r\nCommission under sub-section (2) is altered or any new treaty reinsurance arrangement is made after \r\nthe submission of the information under sub-section (2), the insurer concerned shall submit to the \r\nCommission, in the manner prescribed by the Commission, particulars of such alteration in the treaty \r\nor such new treaty reinsurance arrangement within one month of such alteration or arrangement and \r\nshall submit such further information, or clarification as the Commission may require. \r\n(4) The Commission may, at any time and after giving the insurer an opportunity of being \r\nheard, for reasons to be recorded in writing, direct the insurer to make such modifications in his \r\nreinsurance arrangements as the Commission may specify. \r\n \r\nPage 46 of 109 \r\n \r\n(5) The Federal Government may make rules, not inconsistent with sub-section (1), \r\ngoverning the reinsurance outside Pakistan, other than on a treaty basis, of insurance business \r\nunderwritten by an insurer in Pakistan. \r\nExplanation: For the purposes of this section, “reinsurance” includes “retrocession”. \r\n42. 1[*   *  * * * * *] \r\n(2) The Federal Government may, by notification in the official Gazette, direct that every \r\ninsurer shall offer to reinsure with the Company such proportion as is determined on such basis as \r\nmay be specified in such notification of its direct non-life insurance business which is in excess of \r\nthe aggregate of: \r\n(a)  the insurer’s net retention; \r\n(b)  the sum insured required to be reinsured under subsection (1); and \r\n(c)  the sum insured otherwise reinsured with the Company or with any other \r\ninsurer in Pakistan but excluding any part reinsured outside Pakistan. \r\n(3) The reinsurance set out in sub-section 1[(2)] shall for the purposes of this Ordinance \r\nconstitute a treaty contract of reinsurance between the insurer and the Company, operating on a risks \r\nattaching basis. \r\n(4) Whoever contravenes the foregoing provisions of this section shall be punishable with a \r\nfine which may extend to ten thousand rup ees and with a further fine which may extend to one \r\nthousand rupees for every day after the day on which the contravention continues. \r\n \r\n(5) The Federal Government may, by notification in the official Gazette and on reasonable \r\ngrounds, exempt any insurer and the Company from the preceding requirements of this section so far \r\nas concerns any part of any class or sub-class, of business. \r\n \r\n43. Premium and statements. Every insurer shall 1[having re-insurance with Pakistan Re -\r\ninsurance Company Ltd.,], pay the amoun t payable on account of reinsurance with the Company as \r\nrequired under sub-section 1[2] Of section 42, within such period as may be prescribed by regulations \r\nand in default of such paym ent shall be liable to pay the C ompany for the period during which the \r\ndefault continues a penalty calculated on the amount of the defaulted premium at the base rate \r\nprevailing on the date on which the default first occurred. \r\n \r\n(2) Every insurer shall submit to the Company in such manner and form and within such \r\nperiod as may be prescribed by regulations, a statement relating to his business reinsured with the \r\nCompany under sub-section 1[2] of section 42. \r\n \r\n(3) Whoever contravenes sub -section (1) or sub -section (2) shall be punishable with a fine \r\nwhich may extend to ten thousand  rupees and with a further fine which may extend to one thousand \r\nrupees for every day after the day on which the contravention continues. \r\n \r\n1 Omitted, ins. and subs. by Act IV of 07, S. 19 (w.e.f. 1-7-07) \r\n \r\n \r\nPage 47 of 109 \r\n \r\n(4) The Company may call for or examine or cause to be examined such relevant accounts, \r\nbooks, documents, memoranda or other records of an insurer as it may reasonably require for the \r\npurpose of verifying the correctness of the claims, declarations, returns, statements or other \r\ninformation submitted to it by that insurer. \r\n \r\n(5) An insurer shall, when called upon to do so under subsection (4), produce and make freely \r\naccessible to the. Company or to its representative duly authorised in this behalf such accounts, \r\nbooks, documents, memoranda or other records as are in his possession or control, and shall \r\notherwise facilitate the examination thereof. \r\n \r\n(6) Whoever willfully obstructs the Company or any person authorised by it in the exercise of \r\nits or his power or performance of functions under sub-section (4), or fails without reasonable cause \r\nto comply with a request made thereunder, or who, being an insurer, fails otherwise to comply with a \r\nduty imposed on that insurer under sub-section (5), shall, in respect of each occasion on which any \r\nsuch obstruction or failure takes place, be punishable with fine which may extend to fifty thousand \r\nrupees. \r\n \r\n44. Rules and regulations for the administration of compulsory 1[Surplus] reinsurance. \r\n—(1) The Federal Government may make such rules and regulations and issue such notifications as \r\nare necessary for the administration of section 42 and section 43. \r\n \r\n(2) Rules, regulations and notifications, made under the authority of the Pakistan Insurance \r\nCorporation Act 1952 for the purposes of section 26 of that Act and in force as at the commencement \r\ndate, shall be deemed to have been made under the provisions of the preceding sub-section and shall \r\napply mutatis mutandis except in so far as and to the extent that they conflict with the provisions of \r\nthis Ordinance. \r\n \r\nPart VII \r\nACCOUNTS AND AUDIT \r\n45. Books and records.—(1) Every insurer, in respect of all insurance business transacted by \r\nhim, and in the case of an insurer incorporated in a jurisdiction outside Pakistan in respect of the \r\ninsurance business transacted by the insurer in Pakistan, shall maintain proper books and records. \r\n(2) Books, accounts and records in respect of insurance business transacted in Pakistan shall \r\nbe maintained in Pakistan and in either the English or the Urdu language. \r\n(3) For the purposes of this Ordinance, proper books and records shall include without \r\nlimitation: \r\n(a)  a register or record of policies, in which shall be entered, in respect of every \r\npolicy issued by the insurer, the name and address of the policy holder, the \r\ndate when the policy was effected and a record of any transfer, assignment or \r\nnomination of which the insurer has notice; \r\n \r\n \r\n1Ins. by Act IV of 07, S. 19 (w.e.f. 1-7-07) \r\n \r\nPage 48 of 109 \r\n \r\n(b)  a register or record of claims, in which shall be entered every claim made \r\ntogether with the date of the claim, the name and address of the claimant and \r\nthe date on which the claim was discharged; or, in the case of a claim which is \r\nrejected, the date of rejection and the grounds therefor; and \r\n(c)  such other books and records as may from time to time be prescribed. \r\n(4) For the purposes of this Ordinance, the expression “books” includes— \r\n(a)  a register; \r\n(b)  accounts or accounting records, however compiled, recorded or stored; \r\n(c)  a document; and \r\n(d)  any other record of information. \r\n(5) A book that is required by this Ordinance or the Companies Ordinance, 1984 to be kept or \r\nprepared by an insurer may be kept or prepared- \r\n(a)  by making entries in a bound or loose-leaf book; \r\n(b)  by recording or storing the matters concerned by means of a mechanical, \r\nelectronic or other device; or \r\n(c)  in any other manner approved by the Commission. \r\nProvided that the matters recorded or stored are capable, at any time, of being reproduced in a \r\nwritten form or a reproduction of those matters is kept in a written form approved by the \r\nCommission. \r\n(6) An insurer shall take all reasonable precautions, including such precautions, if any, as \r\nmay be prescribed, for guarding against damage to, destruction of or falsification of or in, and for \r\ndiscovery of falsification of or in, any book or part of a book required to be kept or prepared by an \r\ninsurer. \r\n46. Accounting and reporting.—(1) Every insurer shall at the expiration of each year \r\nprepare and deliver to the Commission with reference to that year annual statutory accounts \r\ncomprising the following statements duly audited by an approved auditor; \r\n(a)  in the case of a life insurer,— \r\n(i)  a statement of assets and liabilities for each statutory fund operated by \r\nthe life insurer arid the shareholders’ fund; \r\n(ii)  a statement of profits and losses for the shareholders’ fund; \r\n(iii)  a statement of cash flows for each statutory fund operated by the life \r\ninsurer and the shareholders’ fund; \r\n \r\nPage 49 of 109 \r\n \r\n(iv)  a revenue account for each statutory fund operated by the life insurer; \r\n(v)  a statement of premiums for each statutory fund operated by the life \r\ninsurer; \r\n(vi)  a statement of claims for each statutory fund operated by the life \r\ninsurer; \r\n(vii)  a statement of expenses for each statutory fund operated by the life \r\ninsurer; \r\n(viii)  a statement of investment income for each statutory fund operated by \r\nthe life insurer; \r\n(ix)  such other statements as may be prescribed by the Federal \r\nGovernment. \r\neach in such form as may be prescribed by the Commission and prepared in accordance with such \r\nregulations as are issued by the Commission from time to time in this behalf; \r\n(b)  in the case of a non-life insurer, \r\n(i)  a statement of assets and liabilities; \r\n(ii)  a statement of profits and losses; \r\n(iii)  a statement of cash flows;  \r\n(iv)  a statement of premiums; \r\n(v)  a statement of claims; \r\n(vi)  a statement of expenses; \r\n(vii)  a statement of investment income; \r\n(viii)  a statement of claims analysis; \r\n(ix)  a statement of exposures; and \r\n(x)  such other statements as may be prescribed by the Federal \r\nGovernment; \r\neach in such form as may be prescribed by the Commission and prepared in accordance with such \r\nregulations as are issued by the Commission from time to time in this behalf. \r\n(2) Every insurer shall furnish, to the Commission, following the last day of December, \r\nMarch, June and September in each year, a statement of assets and liabilities in the form and \r\nprepared in accordance with the regulations prescribed under the preceding sub-section made up as \r\nof that date and such statement shall be certified by a principal officer of the insurer: \r\n \r\nPage 50 of 109 \r\n \r\nProvided that an actuarial valuation of policyholder liabilities as at the date to which such \r\nstatement is made up in not required by virtue of this sub-section alone, and that the regulations \r\nprescribed under this sub-section shall provide for the determination of the value which is to be \r\nattributed to policyholder liabilities for the purposes of this sub-section. \r\n(3) In the case of an insurer registered to conduct life insurance business, such statement shall \r\nbe furnished separately in respect of each statutory fund maintained by the life insurer and in respect \r\nof the shareholders’ fund. \r\n(4) The statements referred to in the foregoing subsections shall be prepared in respect of all \r\ninsurance business transacted by an insurer except that in the case of an insurer incorporated in a \r\njurisdiction outside Pakistan, the statement shall be prepared in respect of the insurance business \r\ntransacted by the insurer in Pakistan. \r\n(5) In the case of a life insurer having in force policies which are investment-linked, the \r\nstatement referred to in subsection (2) shall be accompanied by a statement, signed in the case of a \r\ncompany by any two directors and the principal officer of the company, and in the case of an insurer \r\nincorporated in a jurisdiction outside Pakistan, by its principal officer in Pakistan and any two \r\ndirectors (or the closest comparable officer equivalent thereto), containing the following particulars \r\nin respect of its investment-linked business; \r\n(a)  the assets underlying the units linked to policies in force; \r\n(b)  the values assigned to each such asset: \r\n(c)  the valuation placed on the units; and \r\n(d)  the amount of any provisions made in determining the valuation. \r\n(6) The statements referred to in sub-section (I) shall be signed, in the case of a company, by \r\nthe chairman, if any, and two directors and the principal officer of the company, or in the case of an \r\ninsurer incorporated in a jurisdiction outside Pakistan, by its principal officer in Pakistan and any two \r\ndirectors (or the closest comparable officer equivalent thereto) and shall be accompanied by a \r\nstatement containing the names and descriptions of the persons in charge of the management of the \r\nbusiness during the period to which such accounts and statements refer; by a report by such persons \r\non the affairs of the business during that period; and a statement by such persons signed by the same \r\npersons who have signed the accounts that; \r\n(a)  in their opinion the annual statutory accounts of the insurer set out in the \r\nforms attached to the statement have been drawn up in accordance with the \r\nOrdinance and any rules made thereunder; \r\n(b)  the insurer has at all times in the year complied with the provisions of the \r\nOrdinance and the rules made thereunder relating to paid-up capital, solvency \r\nand reinsurance arrangements; and \r\n(c)  as at the date of the statement,’ the insurer continues to be in compliance with \r\nthe provisions of the Ordinance and the rules made thereunder relating to paid-\r\nup capital, solvency and reinsurance arrangements. \r\n \r\nPage 51 of 109 \r\n \r\n47. Compliance with companies laws relating to accounts, reports, etc.—(1) Every \r\ninsurer being a company shall deliver to the Commission in such manner as may be prescribed such \r\nadditional copies as may be prescribed of all accounts, documents, reports and returns filed under the \r\nCompanies Ordinance, 1984 at the same time as they are required to be filed thereunder. \r\n(2) An insurer incorporated in a jurisdiction outside Pakistan registered as an insurer shall \r\ncomply with all applicable requirements of Part XIV of the Companies Ordinance, 1984 and shall \r\nprovide to the Commission in such manner as may be prescribed such additional copies as may be \r\nprescribed of all accounts, documents, reports and returns filed thereunder at the same time as they \r\nare required to be filed under the Companies Ordinance, 1984. (XLVII of 1984) \r\n(3) In addition to the requirements of the foregoing subsection, an insurer which is an insurer \r\nincorporated in a jurisdiction outside Pakistan, shall also provide to the Commission, not later than \r\nthirty days from such date on which such insurer is required to provide such information to any \r\ngovernmental or independent regulatory authority in accordance with the laws of the jurisdiction of \r\nits incorporation or other applicable law in the country in which it has its corporate seat or principal \r\nplace of business, a copy of the annual accounts prepared under the laws of the place of its \r\nincorporation and a copy of any public document which shows or purports to show the annual profit \r\nor state of affairs of the insurer in respect of its business in Pakistan. \r\n(4) Any materials required to be provided under the provisions of sub-sections (2) and (3), if \r\nnot in either the English or the Urdu language, shall be accompanied by certified copies (in such \r\nnumber as may be required under the Companies Ordinance, 1984 or as may otherwise be prescribed \r\nby the Commission) of an English translation thereof. \r\n48. Audit.—(1) Every insurer shall appoint an auditor who shall be; \r\n(a)  approved by the Commission as qualified to perform audits of insurance \r\ncompanies; and \r\n(b)  authorised under the Companies Ordinance to perform audits of public \r\ncompanies. \r\n(2) The auditor shall in respect of the statements required to be provided pursuant to sub-\r\nsection (1) of section 46 express an opinion as to whether; \r\n(a)  the statement accurately reflect the books and records of the company; \r\n(b)  the company has maintained proper books and records; \r\n(c)  the statements present fairly the state of affairs of the company as at the \r\nbalance date and the result of the company for the financial year ended on that \r\ndate; \r\n(d)  in the case of a life insurer, the apportionment required to be performed under \r\nsection 17 has been performed in accordance with the advice of the appointed \r\nactuary; and \r\n(e)  the statements have been prepared in accordance with this Ordinance. \r\n \r\nPage 52 of 109 \r\n \r\n(3) The opinion required to be expressed by an auditor under sub-section (2) shall be \r\nexpressed in writing and a copy of the opinion shall be attached by the insurer to the statements to \r\nwhich it relates, when those statements are delivered to the Commission. \r\n(4) The auditor shall in the audit of all such accounts and statements have the powers of, \r\nexercise the functions vested in, and discharge the duties and be subject to the liabilities and \r\npenalties imposed on, auditors of companies by sections 255, 256, 257, and 260 of the Companies \r\nOrdinance 1984. \r\n49. Special audit.—(1) The Commission may at its discretion appoint an auditor, approved \r\nby the Commission as qualified to perform audits of insurance companies but not being the auditor, \r\nor a partner of the auditor appointed by the insurance company concerned, to perform an \r\ninvestigation of such accounts and statements’ books and records of an insurer as the Commission \r\nmay direct. \r\n(2) An auditor appointed under this section shall have a right of access to all such books of \r\naccount, registers, vouchers, correspondence and other documents of the insurer, and shall be entitled \r\nto require from the directors and officers of this insurer such information and explanation, as may be \r\nnecessary for the performance of his functions and duties under this section. \r\n(3) Every report prepared by an auditor or auditors appointed under this section shall be \r\nsubmitted to the Commission. \r\n(4) An auditor appointed under this section shall be paid by the insurer such fees as may be \r\nprescribed. \r\n(5) The fee payable by an insurer under sub-section (4) shall be paid to the auditor within \r\nsuch time as may be specified by the Commission. \r\n \r\n50. Actuarial report.—(1) Every insurer carrying on life insurance business shall, in respect \r\nof the life insurance business transacted by it, as at the end of each year cause an investigation to be \r\nmade by the appointed actuary into the financial condition of the life insurance business carried on \r\nby it, including a valuation of its policyholder liabilities in respect thereto and shall cause the report \r\nof the appointed actuary to be made in accordance with such conditions as may be prescribed by the \r\nCommission. \r\n(2) The provisions of sub-section (1) regarding the making of a report shall apply whenever \r\nat any other time an investigation into the financial condition of the insurer is made with a view to \r\nthe distribution of profits or an investigation is made of which the results are made public. \r\n(3) There shall be appended to every such report as is referred to in sub-section (1) or sub-\r\nsection (2) a certificate signed by the principal officer of the insurer that full and accurate particulars \r\nof every policy under which there is a liability either actual or contingent have been furnished to the \r\nappointed actuary for the purpose of the investigation. \r\n(4) The financial condition report prepared under subsection (1) shall include a statement, \r\nprepared in conformity with such conditions as may be prescribed in this behalf, of the life insurance \r\nin force at the date to which the accounts of the insurer are made up for the purposes of such report. \r\n \r\nPage 53 of 109 \r\n \r\n(5) The financial condition report prepared under subsection (1) shall include a statement of \r\nthe minimum actuarial reserve for policyholder liabilities calculated in the manner and on the basis \r\nprescribed by the Commission in this behalf. \r\nExplanation: In this section, the “minimum actuarial reserve for policyholder liabilities” \r\nmeans, for each statutory fund of the insurer, the amount of policyholder liabilities referred to in sub-\r\nsection (3) of section 35 or the sum referred to in sub-section (4) of section 35, whichever is \r\napplicable to that statutory fund. \r\n(6) If for any statutory fund the amount which, in the opinion of the appointed actuary, \r\nrepresents a realistic valuation of policyholder liabilities existing at balance date, including prudent \r\nbut reasonable provision for adverse development in those liabilities after balance date, is greater \r\nthan the minimum actuarial reserve for policyholder liabilities for the statutory fund, the financial \r\ncondition report prepared under sub-section (1) shall include a statement of that amount. \r\n(7) The Commission may require an insurer, or insurers generally, to cause an actuarial \r\ninvestigation to be conducted in such manner as may be prescribed in respect of such class or sub-\r\nclass of non-life insurance business as may be prescribed, and to provide the Commission with a \r\ncopy of the actuary’s report on that investigation. \r\n \r\n51. Submission of returns.—(1) The audited statements and report referred to in sub-\r\nsections (1) and (5) of section 46 and the report and statement referred to in section 50, including any \r\nreport referred to in sub-section (7) of section 50, shall be furnished as returns to the Commission in, \r\nsuch manner as may be prescribed by the Commission, but in any case including at least one printed \r\ncopy, within four months from the end of the period to which they refer: \r\nProvided that the Commission may on application by an insurer extend the time allowed by \r\nthis sub-section for the furnishing of such returns by a further period not exceeding one month. \r\n(2) The statement referred to in sub-section (2) of section 46 shall be furnished as a return to \r\nthe Commission in such manner as may be prescribed by the Commission, but in any case including \r\nat least one printed copy, within six weeks from the date to which it is made up: \r\nProvided that the Commission may on application by an insurer extend the time allowed by \r\nthis sub-section for the furnishing of such returns by a further period not exceeding fifteen days. \r\n(3) One printed copy of the returns shall be signed in the case of a company by the chairman \r\nand two directors and by the principal officer of the company and, if the company has a chief \r\nexecutive (by whatever name called), also by him, and in the case of the report and statement \r\nreferred to in section 50 by the actuary who carried out the investigation. \r\n(4) Until 31st December 2000, this section shall apply as though the periods of four months \r\nand six weeks contained therein shall be substituted respectively by periods of six months and eight \r\nweeks. \r\n52. Exemption from certain provisions of the Companies Ordinance, 1984 .—(1) The \r\nCommission may prescribe a form of balance sheet, profit and loss account, revenue account and any \r\nother statement required to be filed by life insurers for the purposes of sub -section (5) of section 233 \r\n \r\nPage 54 of 109 \r\n \r\nof the “Companies Ordinance, 1984, (XLVII of 1984) and filing made in such form shall satisfy the \r\nrequirements of that sub-section. \r\n(2) The statements required to be filed by life insurers for the purposes of sub-section (5) of \r\nsection 233 of the Companies Ordinance, 1984, (XLVII of 1984) shall be deemed to include the \r\nfollowing statements, each in. such form as may be prescribed by the Commission: \r\n(a)  a statement by the appointed actuary of his opinion as to whether the \r\npolicyholder liability included in the balance sheet has been determined in \r\naccordance with the provisions of this Ordinance; \r\n(b)  a statement by the appointed actuary of his opinion as to whether each \r\nstatutory fund of the insurer complies with the solvency requirements of this \r\nOrdinance; \r\n(c)  a statement by the directors of the insurer of their opinion as to whether each \r\nstatutory fund of the insurer complies with the solvency requirements of this \r\nOrdinance; and \r\n(d)  such other statements as may be prescribed by the Commission. \r\n53. Furnishing reports. Every insurer shall furnish to the Commission a certified copy of \r\nevery report on the affairs of the insurer which is submitted to the members or policy holders of the \r\ninsurer immediately after its submission to the members or policy holders, as the case may be. \r\n54. Abstract of proceedings of general meetings. Every insurer, being a company or body \r\ncorporate incorporated under any law for the time being in force in Pakistan, shall furnish to the \r\nCommission a certified copy of the minutes of the proceedings of every general meeting as entered \r\nin the Minutes Book of the insurer within thirty days from the holding of the meeting to which it \r\nrelates. \r\n55. Custody and inspection of documents and supply of copies.—(1) Every return \r\nfurnished to the Commission, or a certified copy thereof shall be kept by the Commission and shall \r\nbe open to inspection; and any person may procure a copy of any such return, or of any part thereof, \r\non payment of such fee as may be prescribed. \r\n(2) A printed or certified copy of the accounts, statements and report furnished in accordance \r\nwith the provisions of section 46 shall, on the application of any shareholder or policy holder made at \r\nany time within two years from the date on which the document was so furnished be supplied, to him \r\nby the insurer within fourteen days when the insurer is a company or body corporate incorporated in \r\nPakistan and in any other case within one month of such application. \r\n(3) A copy of the memorandum and articles of association of the insurer, if a company, shall \r\non the application of any policy holder, be supplied to him by the insurer on payment of such fee as \r\nmay be prescribed. \r\n56. Power of Commission regarding returns. If it appears to the Commission that any \r\nreturn furnished to it under the provisions of this Ordinance is inaccurate or defective in any material \r\nparticular, it may: \r\n \r\nPage 55 of 109 \r\n \r\n(a)  require from the insurer such further information, certified if the Commission \r\nso directs by an auditor or actuary, as the Commission may consider necessary \r\nto correct or supplement such return; \r\n(b)  call upon the insurer to submit for its examination at the principal place of \r\nbusiness of the insurer in Pakistan any book of account, register or other \r\ndocument or to supply any statement which the Commission may specify in a \r\nnotice served on the insurer for the purpose; \r\n(c)  examine any officer of the insurer on oath in relation to the return; or \r\n(d)  decline to accept any such return unless the inaccuracy has been corrected or \r\nthe deficiency has been supplied before the expiry of one month from the date \r\non which the requisition asking for correction of the inaccuracy or supply of \r\nthe deficiency was delivered to the insurer and if the Commission declines to \r\naccept any such return, the insurer shall be deemed to have failed to comply \r\nwith the provisions of section 46 or section 51 relating to the furnishing of \r\nreturns. \r\n57. Power of Commission to order actuarial report.—(1) If it appears to the Commission \r\nthat a report prepared under section 50 does not properly indicate the condition of the affairs of the \r\ninsurer, the Commission may after giving notice to the insurer and giving him an opportunity to be \r\nheard, cause an investigation to be made into the financial condition of the insurer as at such date as \r\nthe Commission may specify, at the expense of the insurer, by an actuary appointed by the insurer \r\nfor this purpose and approved by the Commission and the insurer shall place at the disposal of the \r\nactuary so appointed and approved all the material required by the actuary for the purposes of the \r\ninvestigation within such period, not being less than three months, as the Commission may specify. \r\n(2) Subject to sub-section (3), the provisions of subsections (1), (4), (5) and (6) of section 50, \r\nand of sub-section (I) of section 50 shall apply in relation to an investigation under this section: \r\nProvided that the report and statement prepared as the result of such investigation shall be \r\nfurnished by such date as the Commission may specify. \r\n(3) Where the report first referred to in sub-section (1) was prepared pursuant to sub-section \r\n(7) of section 50, subsection (2) shall not apply, and the provisions of sub-section (7) of section 50 \r\nshall apply in relation to an investigation under this section: \r\nProvided that the report prepared as the result of such investigation shall be furnished by such \r\ndate and in such manner as the Commission may specify. \r\n58. Evidence of documents.—(1) Every return furnished to the Commission, which has been \r\ncertified by the Commission to be a return so furnished, shall be deemed to be a return so furnished. \r\n(2) Every document, purporting to be certified by the Commission to be a copy of a return so \r\nfurnished, shall, be deemed to be a copy of that return and shall be received in evidence as if it were \r\nthe original return, unless some variation between it and the original return is proved. \r\n \r\n \r\n \r\nPage 56 of 109 \r\n \r\nPart VIII \r\nINVESTIGATION, DIRECTIVES, ETC. \r\n \r\n59. Power of Commission to order investigation.—(1) If the Commission believes upon \r\nreasonable grounds that an insurer is or is likely to become unable to meet its liabilities or that there \r\nhas been or is likely to be a contravention of the provisions of the Ordinance or the rules made \r\nthereunder by the insurer, it may investigate the affairs of an insurer and wherever necessary, employ \r\nan auditor or actuary or both for assisting it in any such investigation. \r\n \r\n(2) An investigation under sub-section (I) shall be commenced and carried out in accordance \r\nwith the provisions of Part VIII of the SECP Act: \r\n \r\nProvided that for the purposes of this section, the words “the Court referred to in Part II of the \r\nOrdinance” contained in sub-section (1) of section 34 of the SECP Act shall be read as though they \r\nwere omitted and replaced with the words “the Tribunal”. \r\n \r\n(3) When an investigation is made under this section, the Commission may, after giving an \r\nopportunity to the insurer to make a representation in writing or be heard in person, by order in \r\nwriting require the insurer to take such action in respect of any matter arising out of the investigation \r\nas it may consider on reasonable grounds to be necessary to secure compliance with the provisions of \r\nthis Ordinance. \r\n \r\n1[59A. Power of the Commission to undertake onsite inspection of insurance \r\ncompanies,—(1) The Commission may undertake onsite inspections of an insurer to ensure that the \r\nrequirements of sound and prudent management are being fulfilled by the insurer and the insurer is \r\ncomplying with the requirements of the ordinance and the rules made there under. \r\n \r\n(2) On-site inspections shall be conducted with such frequency as the commission may deem \r\nappropriate. \r\n \r\n(3) All officers and agents of the company, including lawyers, auditors and actuaries shall \r\nsupply all information, documents and assistance that may be required by the Commission in the \r\ncourse of the inspection. \r\n \r\n(4) The inspectors shall have the right to enter any company premises during conduct of the \r\ninspections, and may search, seize, take possession of any record, object, article, material whether \r\nelectronic or otherwise, account bocks or other documents, including any travel or other personal \r\ndocuments which may be used as evidence. \r\n \r\n(5) Except where the Commission believes that the record may be destroyed by the insurer, \r\nthe Commission shall give two week written notice to the insurer before undertaking an on-site \r\ninspection] \r\n \r\n60. Power of the Commission to give directions to the insurer.___(1) The Commission \r\nmay, if it believes on reasonable grounds that an insurer registered under this Ordinance has failed, \r\nor is about to fail, to comply with the conditions of registration set out in section 11, issue to the \r\ninsurer such directions, not otherwise provided for in this Ordinance, as it believes on reasonable \r\ngrounds to be necessary to protect the interests of the policy holders of the insurer. \r\n \r\n1Ins. By Act IV of 07, s.19 (w.e.f. 1-7-07). \r\n \r\nPage 57 of 109 \r\n \r\n(2) The Commission may, on representation made in this behalf, or on its own motion, \r\nmodify, or cancel any direction issued under sub-section (1) and may, in so modifying or cancelling \r\na direction, impose such conditions as it may deem on reasonable grounds to be appropriate under \r\nthe circumstances. \r\n(3) Every insurer shall comply with any direction issued under sub-section (1) or such \r\ndirection as modified under sub-section (2) subject to such further conditions, if any, as may be \r\ncomposed. \r\n(4) The Federal Government may, by rules made in this behalf, provide: \r\n(a)  for the procedures which the Commission shall follow with respect to all or \r\nany of the matters set out in subsections (1) and (2): \r\nProvided that no powers shall be exercised under sub-section (1) until such rules, consonant \r\nwith the provisions of sub-sections (3) and (4) of section 22 of the SECP Act, have been made; and \r\n(b)  for any other matter supplementary or incidental to or consequential on the \r\nmatters aforesaid for which provision requires to be made by rules. \r\n61. Power of Commission to call for information and access.—(1) The Commission may \r\nby notice in writing direct any insurer to supply the Commission, within such period-as the notice \r\nmay specify, with any information relating to its insurance business which the Commission may \r\nreasonably require. \r\n(2) The Commission may direct that any information supplied under sub-section (1) shall be \r\ncertified by the principal officer of the insurer, by an independent auditor or in the case of a life \r\ninsurer by the insurer’s appointed actuary. \r\n(3) The Commission may by notice in writing direct the chief executive or principal officer of \r\nthe insurer to discuss with the Commission any matter pertaining to the business or management of \r\nthe insurer. \r\n(4) The Commission may by notice in writing require the insurer to allow any officers of the \r\nCommission nominated for the purpose to observe, for such period as the Commission may specify, \r\nthe manner in which the affairs of the insurer or of any of its offices or branches are being conducted. \r\n62. Power to commission to require plan.—(1) The Commission may direct an insurer to \r\nprepare, present to its directors and to the Commission, and to report to its directors and to the \r\nCommission on the implementation of, a plan for action to rectify or to prevent an actual or \r\napprehended contravention by the insurer of the conditions of registration set out in section 11. \r\n(2) The Commission may in making a direction under sub-section (1) direct that such a plan \r\nor report on the implementation thereof contain such information and be accompanied by such \r\nopinions or certificates as the Commission shall specify. \r\n63. Power of Commission to issue direction to cease entering into new contracts of \r\ninsurance. (1) The Commission may issue a direction to cease entering into new contracts of \r\ninsurance if it believes on reasonable grounds that an insurer registered Under this Ordinance has \r\nfailed, or is about to fail, to comply with the conditions of registration set out in section 11. \r\n \r\nPage 58 of 109 \r\n \r\n(2) The Commission shall issue a direction to cease entering into new contracts of insurance \r\nif: \r\n(a)  a petition is presented for the winding up of the insurer and has not been \r\nwithdrawn or vacated within a period of sixty days; \r\n(b)  the whole of the business of an insurer has been transferred to any person; \r\n(c)  the Tribunal has made an order that a direction be given to that insurer to \r\ncease entering into new contracts of insurance; or \r\n(d)  the insurer has failed to comply with a directive issued under this Ordinance \r\nconcerning a contravention of the Ordinance or the rules made thereunder, \r\nwithin the time specified in the Ordinance or, if not so specified, within the \r\ntime specified in the directive or three months, whichever is longer, and the \r\ndirective had stated that the failure to comply would lead to a direction to \r\ncease entering into new contracts of insurance: \r\nProvided that a direction shall not be issued under clause (d) without giving the insurer an \r\nopportunity to be heard. \r\n(3) A direction to cease entering into new contracts of insurance shall have effect one month \r\nfrom the date of the direction unless a later date is specified in the direction. \r\n(4) A direction to cease entering into new contracts of insurance shall be accompanied by a \r\nstatement of the reasons for the direction. \r\n(5) A direction to cease entering into new contracts of insurance shall only be revoked if the \r\nreasons for the direction as given in the statement required to be given by the preceding subsection \r\nshall have ceased to exist. \r\n(6) An insurer shall not be in contravention of a direction to cease entering into new contracts \r\nof insurance by reason only that the insurer continues to carry out its obligations under contracts of \r\ninsurance entered into before the direction came into effect. \r\n64. Power to require calling of meeting of directors, etc. If the Commission is satisfied that \r\nsuch action is necessary for the purposes of procuring action by an insurance company, or of \r\nsatisfying itself that appropriate action is being taken or after an investigation under section 56, the \r\nCommission may by order in writing and on such terms and conditions as may be specified therein: \r\n(a)  require an insurance company to call a meeting of its directors for the purpose \r\nof considering any matter relating to, or arising out of the affairs of the \r\ninsurer; \r\n(b)  require the insurer to allow any officer of the Commission deputised for the \r\npurpose to attend, and to speak at, any meeting of the Board of Directors of \r\nthe insurer or of any committee or other body constituted by the insurer and to \r\nfurnish such officer with a copy of the proceedings of such meeting; or \r\n \r\nPage 59 of 109 \r\n \r\n(c)  require the insurer to send in writing to the Commission all notices of, and \r\nother communication relating to, any meeting of the Board of Directors of the \r\ninsurer, or of any committee or other body constituted by the insurer. \r\n65. Power to remove Chairman, Director, etc.—(1) of the insurer. If, after the completion \r\nof a special audit under section 49 or investigation under section 59, or otherwise on reasonable \r\ngrounds, the Commission has reason to believe that a person holding the office of Chief Executive, \r\nChairman, director, manager or principal officer, by whatever name called (including the principal \r\nofficer in Pakistan of an insurer incorporated in a jurisdiction outside Pakistan), of an insurer has \r\ncontravened the provisions of any law (including, in the case of a company any such person having \r\nbecome disqualified under the provisions of section 187 of the Companies Ordinance) and that the \r\ncontravention is of such a nature that the association of such person with the insurer or insurance \r\nbroker is or is likely to be detrimental to the interest of the insurer or of the policy holders, or is \r\notherwise undesirable, such person not being a fit and proper person. \r\n1* * * \r\n(2) 1[the commission may make an order that such person shall cease to hold the office with \r\nthe insurer with effect from said date, become vacant provided that for public section insurance \r\ncompany or corporation i.e. National Insurance Company Ltd., Pakistan Re-insurance Company \r\nLtd., and State Life Corporation of Pakistan the commission may make a recommendation only to a \r\nFederal Government for the purpose.] \r\n(3) An order under sub-section [1]1 in respect of any person may also provide that he shall \r\nnot, without the previous, permission in writing of the 1[commission] in any way, directly, or \r\nindirectly, be concerned with, or take part in the management of the insurer or any other insurer for \r\nsuch period not exceeding five years as may be specified in the order. \r\n(4) No order under sub-section 1[1] shall be made in respect of any person without giving him \r\nan opportunity of being heard unless the 1[commission] is of the opinion that any delay in making the \r\norder would be detrimental to the interest of the insurer or of the policy holders. \r\n(5) The foregoing provisions of this section shall apply to insurance brokers as they apply to \r\ninsurers and to such other insurance intermediaries as the Federal Government may specify by \r\nnotification in the Gazette. \r\n66. Power to prescribe maximum levels of ac quisition costs and maximum levels of \r\nmanagement expenses. —(1) The Commission may make rules limiting the total amount of \r\nacquisition costs which may be incurred by an insurer in a year. \r\n(2) The Commission may make rules limiting the total amount of manage ment expenses \r\nwhich may be incurred by an insurer in a year. \r\n(3) Rules made under sub -section (1) or sub -section (2) shall apply to all insurers to whom \r\nthe Ordinance applies: \r\n \r\n1 Subs omitted by Act IV of 07, S. 19 (w.e.f. 1-7-07) \r\n \r\n \r\nPage 60 of 109 \r\n \r\nProvided that the rules may differentiate between different categories of insurance business \r\nfor the purposes of determining limits. \r\n(4) The power conferred by this section shall expire on 31st December next following the \r\ndate five years form the commencement date and all rules made under this section shall be repealed \r\non the expiry of that power. \r\n(5) For the purposes of this section: \r\n(a)  “acquisition costs” means such costs as may be prescribed, incurred in \r\nacquiring insurance policies and in maintaining such policies, and includes \r\nwithout limitation all forms of remuneration paid to insurance agents and \r\nbrokers; and \r\n(b)  “management expenses” means all expenses incurred by an insurer, not being \r\nreinsurance expenses or claims expenses or expenses directly referable to \r\nclaims, and includes without limitation acquisition costs as defined in this sub-\r\nsection. \r\nPart IX \r\nAMALGAMATION AND TRANSFER OF INSURANCE BUSINESS \r\n67. Approval of acquisition or transfer.—(1) Any proposed transaction for the acquisition \r\nof a shareholding of more than ten per cent. (10%) in an insurance company, or, in the case of a non-\r\nlife insurer, of the whole or any part exceeding ten per cent, (measured by either the premium \r\nincome or the sum of the liabilities for unearned premium and outstanding claims and the premium \r\ndeficiency reserve proposed to be acquired) of the business located in Pakistan of an insurer (whether \r\nin one or a number of related transactions and whether at the same or different times) shall not \r\nproceed unless, on application by the transferor or, approval is given by the Commission. \r\nExplanation: A number of transactions shall be deemed to be related if there being more than \r\none purchaser, those purchasers are acting together or in concert or if, in all the facts and \r\ncircumstances of the case, there is such a relationship between the purchasers or such common \r\npurpose between them so that it would be reasonable to conclude that the transactions are related. \r\n(2) The application required under sub-section (1) shall be made in such form and shall be \r\naccompanied by such documents as may be prescribed. \r\n(3) The Commission may, within 15 days from the receipt of the application, require the \r\napplicant to submit such further documents and information as may be required for it to make an \r\ninformed decision about the transaction in the interests of policy holders and shareholders and the \r\napplicant shall provide the same within a period of seven days or such later period as the applicant \r\nmay in writing request. \r\n(4) If after sixty days of the receipt of the application or the receipt of any additional material \r\nunder sub-section (3), approval has not been granted or a notice given to the applicant declining \r\napproval, the Commission shall be deemed to have given its approval. \r\n \r\nPage 61 of 109 \r\n \r\n(5) Approval given or deemed to be given by the Commission under this section shall not \r\npreclude the necessity of obtaining any such approval or consent required to be obtained from the \r\nCommission under the provisions of any other applicable law. \r\n68. Amalgamation and transfer of life insurance business.—(1) No life insurance business \r\nof an insurer shall be transferred to any person or transferred to or amalgamated with the life \r\ninsurance business of any other insurer except in accordance with a scheme prepared under this \r\nsection and sanctioned by the Court having jurisdiction over one or other of the parties concerned. \r\n(2) Any scheme prepared under this section shall set out the agreement under which the \r\ntransfer or amalgamation is proposed to be effected, and shall contain such further provisions as may \r\nbe necessary for giving effect to the scheme. \r\n(3) Before an application is made to the Court to sanction any such scheme, notice of the \r\nintention to make the application together with a statement of the nature of the amalgamation or \r\ntransfer, as the case may be, and of the reason therefore shall, at least sixty days before the \r\napplication is made, be sent to the Commission, and certified copies, four in number, of each of the \r\nfollowing documents shall be furnished to the Commission, and other such copies shall, during the \r\nsixty days aforesaid be kept open for the inspection of the members and policy holders at the \r\nprincipal and branch offices and chief agencies of the insurers concerned, namely:— \r\n(a)  a draft of the instrument under which it is proposed to effect the amalgamation \r\nor transfer; \r\n(b)  statements of assets and liabilities in respect of the insurance business of each \r\nof the insurers concerned in such amalgamation or transfer, prepared in the \r\nform prescribed by the Commission and in accordance with regulations issued \r\nby the Commission from time to time in respect of the completion of that \r\nform; \r\n(c)  an actuarial report on the financial condition of the life insurance business of \r\neach of the insurers so concerned, prepared in accordance with the regulations \r\nissued by the Commission from time to time in respect of the completion of \r\nthat report; \r\n(d)  a report on the proposed amalgamation or transfer, prepared by an \r\nindependent actuary who has never been professionally connected with any of \r\nthe parties concerned in the amalgamation or transfer at any time in the five \r\nyears preceding the date on which he signs his report; \r\n(e)  any other reports on which the scheme of amalgamation or transfer was \r\nfounded. \r\n(4) The statements of assets and liabilities and reports referred to in clauses (b) (c) and (d) of \r\nsub-section (3) shall all be prepared as at the date to which the amalgamation or transfer, if \r\nsanctioned by the Court, is to take effect, which date shall not be more than twelve months before the \r\ndate on which the application to the Court referred to in that sub-section is made. \r\n69. Sanction of amalgamation and transfer by Court. When any application such as is \r\nreferred to in sub-section (3) of section 68 is made to the Court, the Court shall cause, if for special \r\n \r\nPage 62 of 109 \r\n \r\nreasons it so directs, notice of the application to be sent to every person resident in Pakistan or in a \r\nnon-Acceding State who is the holder of a life policy of any insurer concerned and shall cause a \r\nstatement of the nature and terms of the amalgamation or transfer, as the case may be, to be \r\npublished in such manner and for such period as it may direct, and, after hearing the directors and \r\nsuch policy holders as apply to be heard any and other persons whom it considers entitled to be \r\nheard, may sanction the arrangement, if it is satisfied that no sufficient objection to the arrangement \r\nhas been established and shall make such consequential orders as are necessary to give effect to the \r\narrangement, including orders as to the disposal of any deposit made under section 29: \r\nProvided that:— \r\n(a)  no part of any deposit made under section 29 by any party to the \r\namalgamation or transfer shall be returned except where, after sanction is \r\ngiven to the arrangement, the whole of the deposit to be made by the insurer \r\ncarrying on the amalgamation business or the person to whom the business is \r\ntransferred is completed. \r\n(b)  only so much shall be returned as is no longer required to complete the deposit \r\nlast mentioned in clause (a); and  \r\n(c) while the deposit last mentioned in clause (a) remains uncompleted, no \r\naccession, resulting from the arrangement, to the amount already deposited by \r\nthe insurer carrying on the amalgamated business or the person to whom the \r\nbusiness is transferred shall be appropriated as payment or part payment of \r\nany installment of deposit subsequently due from him under section 29. \r\n70. Statements required after amalgamation and transfer . Where an amalgamation takes \r\nplace between any two or more insurers, or where any business of an insurer is transferred, whether \r\nin accordance with a scheme confirmed by the Court or otherwise, the insurer carrying on the \r\namalgamated business or the person to whom the business is transferred, as the case may be, shall, \r\nwithin three months from the date of the  completion of the amalgamation or transfer, furnish in \r\nduplicate to the Commission:— \r\n(a)  a certified copy of the scheme, agreement or deed under which the \r\namalgamation or transfer has been effected; \r\n(b)  a declaration signed by every party concerned or in the case of a company by \r\nthe chairman and by the principal officer that to the best of their belief every \r\npayment made or to be made to any person whatsoever on account of the \r\namalgamation or transfer is therein fully set forth and that no other payments \r\nbeyond those set forth have been made or are to be made either in money, \r\npolicies, bonds, valuable securities or other property by or with the knowledge \r\nof any party to the amalgamation or transfer; and \r\n(c)  where the amalgamation or transfer has not been made in accordance with a-\r\nscheme sanctioned by the Court under section 69; \r\n(i)  statements of assets and liabilities in respect of the insurance business \r\nof each of the insurers concerned in such amalgamation or transfer, \r\nprepared in the form prescribed by the Commission and in accordance \r\n \r\nPage 63 of 109 \r\n \r\nwith regulations issued by the Commission from time to time in \r\nrespect of the completion of that form; and \r\n(ii)  certified copies of any other reports on which the scheme of \r\namalgamation or transfer was founded. \r\nPart X \r\nASSIGNMENT OR TRANSFER OF POLICIES AND NOMINATION \r\n71. Assignment and transfer of life insurance policies.—(1) A transfer or assignment of a \r\npolicy of life insurance, whether with or without consideration, may be made only by an \r\nendorsement upon the policy itself or by a separate instrument, signed in either case, by the transfer \r\nor by the assignor or his duly authorised agent and duly attested, specifically setting forth the fact of \r\ntransfer or assignment. \r\n(2) The transfer or assignment shall be complete and effectual upon the execution of such \r\nendorsement or instrument duly attested but, except where the transfer or assignment is in favour of \r\nthe insurer, shall not be operative as against an insurer and shall not confer upon the transferee or \r\nassignee, or his legal representative, any right to use for the amount of such policy or the moneys \r\nsecured thereby until a notice in writing of the transfer or assignment and either the said endorsement \r\nor instrument itself or a copy thereof certified to be correct by both transferor and transferee or their \r\nduly authorised agents have been delivered to the insurer: \r\nProvided that where the insurer maintains one or more places or business in Pakistan such \r\nnotice shall be delivered only at the place in Pakistan mentioned in the policy for the purpose or at \r\nhis principal place of business in Pakistan. \r\n(3) The date on which the notice referred to in sub-section (2) is delivered to the insurer shall \r\nregulate the priority of all claims under a transfer or assignment as between persons interested in the \r\npolicy and where there is more than one instrument of transfer or assignment the priority of the \r\nclaims under such instruments shall be governed by the order in which the notices referred to in sub-\r\nsection (2) are delivered. \r\n(4) Upon the receipt of the notice referred to in subsection (2), the insurer shall record the fact \r\nof such transfer or assignment together with the date thereof and the name of the transferee or the \r\nassignee and shall, on the request of the person by whom the notice was given, or of the transferee or \r\nassignee, grant a written acknowledgment of the receipt of such notice, and any such \r\nacknowledgment shall be conclusive evidence against the insurer that he has duly received the notice \r\nto which such acknowledgment relates. \r\n(5) Subject to the terms and conditions of the transfer or assignment, the insurer shall, from \r\nthe date of the receipt of the notice referred to in sub-section (2) recognize the transferee or assignee \r\nnamed in the notice as the only person entitled to benefit under the policy, and such person shall be \r\nsubject to all liabilities and equities to which the transferor or assignor was subject at the date of the \r\ntransfer or assignment and may institute any proceedings in relation to the policy without obtaining \r\nthe consent of the transferor or assignor or making him a party to such proceedings. \r\n(6) Notwithstanding any law or custom having the force of law to the contrary, an assignment \r\nin favour of a person made with the condition that it shall be inoperative or that the interest shall pass \r\nto some other person on the happening of a specified event during the lifetime of the person whose \r\n \r\nPage 64 of 109 \r\n \r\nlife is insured, and an assignment in favour of the survivor or survivors of a number of persons shall \r\nbe valid. \r\n(7) No transferee or assignee of a life insurance policy issued by a mutual insurance company \r\nshall become a member of that company by reason only of such transfer or assignment. \r\n72. Nomination by policy holder.—(1) The holder of a policy of life insurance on his own \r\nlife, may, when effecting the policy or at any time before the policy matures for payment, nominate \r\nthe person or persons to whom the money secured by the policy shall be paid in the event of his \r\ndeath: \r\nProvided that where any nominee is a minor, it shall be lawful for the policy holder to appoint \r\nin the prescribed manner any person to receive the money secured by the policy in the event of his \r\ndeath during the minority of the nominee. \r\n(2) Any such nomination in order to be effectual shall, unless it is incorporated in the text of \r\nthe policy itself, be made by an endorsement on the policy communicated to the insurer and \r\nregistered by him in the record relating to the policy and any such nomination may, at any time \r\nbefore the policy matures for payment, be cancelled or changed by an endorsement or a further \r\nendorsement or a will, as the case may be, but unless notice in writing of any such cancellation or \r\nchange has been delivered to the insurer the insurer shall not be liable for any payment under the \r\npolicy made bona fide by him to a nominee mentioned in the text of the policy or registered in \r\nrecords of the insurer. \r\n(3) The insurer shall furnish to the policy holder a written acknowledgment of having \r\nregistered a nomination or a cancellation or change thereof. \r\n(4) A transfer or assignment of a policy made in accordance with section 71 shall \r\nautomatically cancel a nomination: \r\nProvided that the assignment of a policy to the insurer who bears the risk on the policy at the \r\ntime of the assignment in consideration of a loan granted by that insurer on the security of the policy \r\nwithin its surrender value, or its reassignment on repayment of the loan shall not cancel a \r\nnomination, but shall affect the right of the nominee only to the extent of the insurer’s interest in the \r\npolicy: \r\nProvided further that the assignment of a policy to a party other than the insurer who bears \r\nthe risk on the policy at the time of the assignment, in consideration of a loan granted by that person \r\non the security of the policy within its surrender value shall not cancel a nomination but shall \r\nsuspend it, to the extent of the interest of that person in the policy, until such time as the policy is       \r\nre-assigned on repayment of the loan. \r\n(5) Where the policy matures for payment during the lifetime of the person whose life is \r\ninsured or where the nominee or, if there are more nominees than one, all the nominees die before \r\nthe policy matures for payment, the amount secured by the policy shall be payable to the policy \r\nholder or his heirs or legal representatives or the holder of a succession certificate, as the case may \r\nbe. \r\n \r\nPage 65 of 109 \r\n \r\n(6) Where the nominee or, if there are more nominees than one, a nominee or nominees, \r\nsurvive the person whose life is insured the amount secured by the policy shall be payable to such \r\nsurvivor or survivors. \r\n(7) The provisions of this section shall not apply to any policy of life insurance to which \r\nsection 6 of the Married Women’s Property Act, 1874, (III of 1874) applies or has at any time \r\napplied: \r\nProvided that where a nomination made before the commencement of this Ordinance, in \r\nfavour of the wife of the person who has insured his life or of his wife and children or any of them, is \r\nexpressed, whether or not on the face of the policy, as being made under this section, the said section \r\n6 shall be deemed not to apply or not have applied to the policy. \r\n73. Nomination under group life policies.—(1) A person whose life is insured under a \r\ncontract of group life insurance may at any time nominate the person or persons to whom the money \r\nsecured by the policy shall be paid in the event of his death: \r\nProvided that where any nominee is a minor, it shall be lawful for the person whose life is \r\ninsured to appoint in the prescribed manner any person to receive the money secured by the policy in \r\nthe event of his death during the minority of the nominee. \r\n(2) A nomination made under sub-section (1) shall be made in such manner as may be \r\nprescribed. \r\nPART XI \r\n \r\nMARKET CONDUCT \r\n74. Application of this Part only to direct insurance business. The provisions of this Part \r\nshall apply only to direct insurance business. \r\n75. Duty of utmost good faith.—(1) A contract of insurance is a contract based on the \r\nutmost good faith and there shall be implied in such a contract a provision requiring each party to it \r\nto act towards the other party, in respect of any matter arising under or in relation to it, with the \r\nutmost good faith. \r\n(2) If reliance by a party to a contract of insurance on a provision of the contract would be to \r\nfail to act with the utmost good faith, the party may not rely on the provision. \r\n(3) In deciding whether reliance by an insurer on a provision of the contract of insurance \r\nwould be to fail to act with the utmost good faith, the Tribunal shall have regard to any notification \r\nof the provision that was given to the policy holder, whether or not the insurer was required by this \r\nOrdinance to give such notification. \r\n(4) The effect of this section is not limited or restricted in any way by any other law, \r\nincluding the subsequent provisions of this Part, but this section does not have the effect of imposing \r\non a policy holder, in relation to the disclosure of a matter to the insurer, a duty other than the duty of \r\ndisclosure. \r\n \r\nPage 66 of 109 \r\n \r\n76. Insurer not to engage in misleading or deceptive conduct. —(I) An insurer shall not, in \r\nthe course of its business as an insurer, engage in conduct that is misleading or deceptive or is likely \r\nto mislead or deceive. \r\n(2) The inclusion in an insurance policy of unusual terms tending to limit the liability of the \r\ninsurer, without the express acknowledgement of the policy holder, shall constitute misleading or \r\ndeceptive conduct. \r\n(3) Nothing contained in sub-section (2) shall be taken a limiting by implication the \r\ngenerality of sub-section (1). \r\n(4) Where a policy holder has relied upon any representations by an insurer or by an agent of \r\nan insurer which are incorrect in any material particular, inasmuch as it has the effect of misleading \r\nor deceiving the policy holder in entering into a policy, the policy holder shall be entitled to obtain \r\ncompensation from the insurer for any loss suffered. \r\n(5) Notwithstanding the provisions of the foregoing subsection, the Commission shall also \r\nhave the power to levy a fine on the insurer which shall be equal to the lesser of twice the loss \r\ndetermined to be suffered by the policy holder under the foregoing sub-section and ten million \r\nrupees. \r\n77. Construction of ambiguities in favour of policy holder.—(1) Any ambiguity in a \r\ncontract of insurance shall not be capable of being construed in a manner which is contrary to the \r\ninterests of the policy holder. \r\n(2) An insurer or an insurance intermediary shall: \r\n(a) when drafting policy documentation, make reasonable efforts to use plain \r\nlanguage; and \r\n(b) when drafting proposal forms and claim forms, make reasonable efforts to \r\nensure that it identifies in those documents the usual information the insurer \r\nordinarily requires to be disclosed; and that those documents are in plain \r\nlanguage and provide instructions where necessary on how the-questions \r\nshould be answered; and comply with the law. \r\n(3) Failure to comply with foregoing sub-section shall be an absolute bar and shall preclude \r\nan insurer from refusing payment of a claim on grounds of non-compliance or nondisclosure by the \r\npolicy holder, where it may reasonably be determined that the non-compliance or non-disclosure \r\nresulted from inadequate understanding by the policy holder of the language of the policy, proposal \r\nor claim form as a result of such failure. \r\n78. Exclusion of provisions of Ordinance void; an offence. Where any provision in a \r\ncontract of insurance has the effect of modifying or excluding, to the prejudice of any person other \r\nthan the insurer, any applicable provision of this Ordinance, any such provision shall be void and the \r\ninsurer shall be liable to punishment for an offence under this Ordinance. \r\n79. Remedies for non-disclosure or misrepresentation.—(1) This section shall apply where \r\nthe person who became the policy holder under a contract of insurance upon the contract being \r\nentered into: \r\n \r\nPage 67 of 109 \r\n \r\n(a)  failed to comply with the duty of disclosure; or \r\n(b)  made a misrepresentation to the insurer before the contract was entered into. \r\n(2) The insurer may not avoid a contract of insurance by reason only of the failure to comply \r\nwith the duty of disclosure or the misrepresentation if: \r\n(a)  the insurer would have entered into the contract, for the same premium and on \r\nthe same terms and conditions, even if the insured had not failed to comply \r\nwith the duty of disclosure or had not made the misrepresentation before the \r\ncontract was entered into; or \r\n(b)  the failure to comply with the duty of disclosure or the misrepresentation was \r\nnot fraudulent: \r\nProvided that in circumstances to which clause (b) refers, the insurer shall be entitled to be \r\nplaced, in such manner, not otherwise inconsistent with this subsection, as may be prescribed, in a \r\nposition in which the insurer would have been if the failure had not occurred or the misrepresentation \r\nhad not been made. \r\n(3) Subject to sub-section (2), if the failure was fraudulent or the misrepresentation was made \r\nfraudulently, the insurer may avoid the contract. \r\n(4) Nothing in this section shall affect any right of an insurer to recover damages from any \r\nperson in respect of loss suffered by the insurer as a result of a fraudulent act by that person, or any \r\ncriminal liability to which any person may be subject by reason of a fraudulent act by that person. \r\n80. Policy not to be called in question on ground of mis-statement after two years. \r\nNotwithstanding anything is section 79, no policy of life insurance effected before the \r\ncommencement date of this Ordinance shall after the expiry of two years from the commencement \r\ndate of this Ordinance and no policy of life insurance effected after the commencement date shall, \r\nafter the expiry of two years from the date on which it was effected, be called in question by an \r\ninsurer on the ground that a statement made in the proposal for insurance or in any report of a \r\nmedical officer, or referee, or friend of the policy holder, or in any other document leading to the \r\nissue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a \r\nmaterial matter or suppressed facts which it was material to disclose and that it was fraudulently \r\nmade by the policy holder and that the policy holder knew at the time of making it that the statement \r\nwas false or that it suppressed facts which it was material to disclose: \r\nProvided that nothing in this section shall prevent the insurer from calling for proof of age at \r\nany time if he is entitled to do so, and no policy shall be deemed to be called in question merely \r\nbecause the benefits payable under the policy are adjusted on subsequent proof that the age of the life \r\ninsured was incorrectly stated in the proposal. \r\n81. Tribunal may disregard avoidance in certain circumstances.—(1) In any proceedings \r\nby the policy holder a respect of a contract of insurance that has been avoided on the ground of \r\nfraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation, the Tribunal \r\nmay, if it would be harsh and unfair not to do so, but subject to this section, disregard the avoidance \r\nand, if it does so, shall allow the policy holder to recover the whole, or such part as the Tribunal \r\n \r\nPage 68 of 109 \r\n \r\nthinks just and equitable in the circumstances, of the amount that would have been payable if the \r\ncontract had not been avoided. \r\n(2) The power conferred by sub-section (1) may be exercised only where the Tribunal is of \r\nthe opinion that, in respect of the loss that is the subject of the proceedings before the Tribunal, the \r\ninsurer has not been prejudiced by the failure or misrepresentation or, if the insurer has been so \r\nprejudiced, the prejudice is minimal or insignificant. \r\n(3) In exercising the power conferred by sub-section (1), the Tribunal: \r\n(a)  shall have regard to the need to deter fraudulent conduct in relation to \r\ninsurance; and \r\n(b)  shall weigh the extent of the culpability of the policy holder in the fraudulent \r\nconduct against the magnitude of the loss that would be suffered by the policy \r\nholder if the avoidance were not disregarded, but may also have regard to any \r\nother relevant matter. \r\n(4) The power conferred by sub-section (1) applies only in relation to the loss that is the \r\nsubject of the proceedings before the Tribunal, and any disregard by the Tribunal of the avoidance \r\ndoes not otherwise operate to reinstate the contract. \r\n82. Cancellation of a life insurance policy for fraudulent claim.—(1) Notwithstanding \r\nanything to the contrary in this Ordinance, a policy of life insurance may be cancelled in accordance \r\nwith this section by reason that a person having or purporting to have rights under the policy has \r\nmade a claim under the policy which is fraudulent. \r\n(2) A life insurer may apply to the Tribunal for consent to cancel a policy of life insurance in \r\naccordance with this section. \r\n(3) The life insurer shall give written notice to the policy holder and to any person identified \r\nin the application for consent that an application for consent under sub-section (2) is to be made. \r\n(4) Where the Tribunal is satisfied with respect to the matters contained in sub-section (1), \r\nthe Tribunal shall give its consent and the insurer may at any time thereafter cancel the policy by \r\nwritten notice to the policy holder. \r\n(5) Where a policy is cancelled under this section, the Tribunal may on the application of a \r\nperson having an interest under the policy award to any person such amount as is just and equitable \r\nunder the circumstances. \r\n83.Power of the Commission to prescribe rules for market conduct.—(1) The \r\nCommission may make rules, not inconsistent with this Part, to govern the conduct of insurers, \r\npolicy holders and intermediaries in the insurance market in Pakistan. \r\n(2) A provision of a Rule made under this section which applies to a contract of insurance to \r\nwhich it is relevant and which is entered into after the commencement date of that Rule shall be \r\ndeemed to constitute a condition of that contract. \r\n \r\nPage 69 of 109 \r\n \r\n84. Commission to have power to undertake compliance visits. The Commission may, in \r\naccordance with procedures prescribed by rules, make visits to the offices and branches of insurers \r\nand inspect books, records and papers for the purpose of ensuring compliance with the provisions of \r\nthis Part (Market Conduct) and Part XIII (Intermediaries). \r\n85. Commission to have power to require a survey to be performed.—(I) The \r\nCommission may make rules requiring that an independent survey be conducted, in accordance with \r\nthe provisions of the Ordinance, in respect of such class or classes of insurance claims meeting such \r\ncriteria as may be prescribed by the Commission. \r\n(2) A survey conducted pursuant to rules make under sub-Rule (1) shall be conducted at the \r\nexpense of the insurer and a copy of the report of the surveyor shall be provided to the policy holder. \r\n(3) The provisions of this section shall not operate to limit, curtail, diminish or extinguish any \r\nliability of the insurer to which the insurer would otherwise have been subject \r\n86. Contractual stipulations for placing insurance with specific or named insurers.—(1) \r\nIn respect of any contract or arrangement under which one party to the contract or arrangement \r\nrequires another party to the contract or arrangement to procure, effect and pay for or reimburse the \r\ncosts of effecting insurance of any property, liability, life or anything connected with any thereof, it \r\nshall be unlawful to stipulate, expressly or impliedly, directly or indirectly, that the insurance which \r\nis to be procured and effected as a condition of the contract must be placed with any specific or \r\nnamed insurer or insurers, other than insurers specified generally as a class according to objective \r\ncriteria based on financial strength. \r\n(2) Any such stipulation in or arising out of or connected with any such contract or \r\narrangement made after the commencement date shall be void and any such stipulation in or arising \r\nout of or connected with any such contract or arrangement made before the commencement of this \r\nOrdinance shall thereafter be subject to the provisions of this section. \r\n(3) If there is any connection or association between a lender and the insurer it shall be \r\ndisclosed to the policy holder together with any commissions received by the lender from the insurer \r\nin respect of the insurance contract. Disclosure shall in each case be made prior to the making of the \r\ncontract. \r\n(4) It shall be unlawful for insurance to be taken out by a lender without the knowledge and \r\nconsent of the borrower or customer, unless the borrower or customer having undertaken to do so, \r\nhas without good cause and for reasons beyond his control failed to comply with his obligations in \r\nthis respect. \r\n(5) Notwithstanding anything contained in this section, until 31st December 2002 lenders \r\nmay prescribe a listing of unacceptable insurers by name, provided that no insurer which complies \r\nwith the paid-up capital requirements set out in section 28 of this Ordinance, excluding the provisos \r\nto sub-section (2) of that section, may be included on that list. \r\n87. Provisions when not to constitute discrimination. Notwithstanding anything contained \r\nin any other law for the time being in force, provisions in respect of the terms and conditions of \r\ninsurance policies, shall not constitute discrimination provided that differentiation contained therein \r\nis based on reasonable classification and: \r\n \r\nPage 70 of 109 \r\n \r\n(a)  is based on actuarial and statistical data from a source on which it is \r\nreasonable to rely; and \r\n(b)  is reasonable having regard to the data and any other relevant factors. \r\nThe onus of proving that the insurer has complied with this section shall lie upon the insurer. \r\nPart XII \r\nSURRENDER, LAPSE AND FORFEITURE OF CERTAIN LIFE INSURANCE POLICIES \r\n88. Special definition and interpretation for this Part.—(1) For the purposes of this Part, a \r\n“relevant policy” is a policy of life insurance under which the whole of the benefits become payable \r\neither on, or at a fixed interval or intervals after, the occurrence of a contingency which is bound to \r\noccur. \r\n(2) In this Part, an amount due under a relevant policy includes a premium due under that \r\npolicy but unpaid. \r\n89. Acquisition of surrender value.—(1) A relevant policy which has been in force for not \r\nless than two years shall have a surrender value which shall be calculated in accordance with the \r\nterms of the policy. \r\n(2) In the case of a policy issued before the commencement date and still in force \r\nimmediately after the commencement date, the surrender value shall not at any time be less than the \r\nsurrender value of the policy immediately before the commencement date. \r\n(3) Where under the terms of a policy the basis of calculation of the surrender value may be \r\nvaried at the discretion of the insurer, the basis of calculation shall be furnished to the Commission \r\nand no variation shall be made therefrom unless the insurer has, not less than sixty days before the \r\ndate of such variation, furnished to the Commission a statement of the proposed variation and the \r\nreasons for that variation, accompanied by a statement by the appointed actuary of his opinion as to \r\nthe appropriateness of the proposed variation. \r\n(4) When an insurer furnishes to the Commission the matters referred to in the preceding sub-\r\nsection relating to a proposed variation, the Commission may within sixty days direct the insurer to \r\nmake such changes in the proposed variation as it believes on reasonable grounds to be necessary for \r\nthe protection of the interests of policy holders of the insurer, and the insurer shall comply with any \r\nsuch direction. \r\n90. Surrender of policy up policy holder’s option.—(1) The holder of a relevant policy \r\nwhich has been in force for not less than two years may make, in writing, a request to the insurer to \r\nsurrender the policy. \r\n(2) Subject to sub-section (3) and sub-section (4), within one month of receiving a request \r\nunder sub-section (1), such request not having been withdrawn by the policy holder, the insurer shall \r\npay to the policy holder an amount equal to the surrender value of the policy less the amount of any \r\ndebt owed to the insurer under, or secured by, the policy. \r\n(3) If an insurer, within fifteen days of receiving a request under sub-section (1), \r\ncommunicates m writing with the policy holder to request the policy holder to consider the \r\n \r\nPage 71 of 109 \r\n \r\nadvantages of maintaining the policy and to seek professional advice if appropriate, the period of one \r\nmonth referred to in sub-section (2) shall be extended by fifteen days so far as concerns that request. \r\n(4) The Tribunal may, on application by an insurer, issue a written order suspending or \r\nvarying the insurer’s obligation to make payments under sub-section (2), where the Tribunal is \r\nsatisfied that such suspension or variation is necessary in-order to avoid prejudice to: \r\n(a)  the financial stability of the insurer; or \r\n(b)  the interests of the policy holders of the insurer. \r\n(5) An order issued under sub-section (3) shall: \r\n(a)  be valid for such period as the Tribunal may determine; and \r\n(b)  be subject to such conditions as the Tribunal may determine. \r\n91. Surrender of policy at insurer’s option.—(1) A policy which has acquired a surrender \r\nvalue shall not be surrendered other than at the request of the policy holder except as set out in this \r\nsection. \r\n(2) Where the total amount of all debts owed to the insurer under, or secured by, a relevant \r\npolicy exceeds the surrender value of that policy, the insurer may issue to the policy holder a written \r\nnotice: \r\n(a)  setting out the amount owed to the insurer under, or secured by the policy at \r\nthe date of the notice (‘the debt’); \r\n(b) setting out the surrender value of the policy at the date of the notice; and \r\n(c)  stating that the policy will be surrendered at the end of 30 days after the \r\nnotice was issued to the policy holder and the surrender value applied against \r\nthe debt, if the excess of the debt over the surrender value is not paid to the \r\ninsurer before the expiry of that period. \r\n(3) Where at least 30 days have elapsed between the issue of a notice set out in sub-section \r\n(2) and the excess of the debt over the surrender value has not been paid to the insurer, the insurer \r\nmay by written notice to the policyholder effect surrender of the policy and apply the surrender value \r\nagainst the debt, which shall to the extent of the surrender value be extinguished. \r\n92. Paid-up policy at policy holder’s option. —(1) An insurer shall, within one month from \r\nreceipt of an application in writing by the holder of a relevant policy which has been in force for not \r\nless than two consecutive years, make the policy paid-up. \r\n(2) If an insurer, within fifteen days of receiving an application under sub-section (1). communicates \r\nin writing with the policy holder to request the policy holder to consider the advantages of \r\nmaintaining the policy in full force and to seek professional advice if appropriate, the period of one \r\nmonth referred to in sub-section (1) shall be extended by fifteen days so far as concerns that \r\napplication. \r\n \r\nPage 72 of 109 \r\n \r\n(3) A policy which is made paid-up shall have a paid-up sum insured, which, subject to \r\nclause (b) of sub-section (5),— \r\n(a)  shall include in full all subsisting reversionary bonuses that have already attached to \r\nthe policy; and \r\n(b)  shall, where the policy is one on which the maximum number of premiums payable is \r\nfixed and the premiums are of uniform amount and paid at uniform intervals, be, \r\nbefore the inclusion of such bonuses not less than such amount as is prescribed. \r\n(4) A policy made paid-up under this section shall not be entitled by virtue only of this \r\nsection to participate in any surplus declared distributable after the conversion of the policy into a \r\npaid-up policy. \r\n(5) If, when an application is made to an insurer under sub-section (1) to have a policy paid-\r\nup, the policy holder owes a debt to the insurer under the policy, or a debt owed by the policy holder \r\nto the insurer is secured by the policy, the insurer may either: \r\n(a)  treat the debt as a debt secured by the paid-up policy; or \r\n(b)  in calculating the paid-up sum insured, take the debt into account in such manner as is \r\napproved as equitable by the appointed actuary. \r\n(6) If in calculating the paid-up sum insured, a debt is taken into account in accordance with \r\nclause (b) of sub-section (5), the debt is discharged. \r\n93. No forfeiture.—(I) A relevant policy is not liable to be forfeited only because of the non-\r\npayment of a premium (the “‘overdue premium”) if— \r\n(a)  the policy has been in force for at least two years; and \r\n(b)  the surrender value of the policy exceeds the total of: \r\n(i)  the amount of the overdue premium; and \r\n(ii)  the total of any other amounts owed to the insurer under, or secured by, the \r\npolicy. \r\n(2) For the purposes of clause (b) of sub-section (1), the surrender value of the policy shall be \r\ncalculated as at the day on which the overdue premium falls due and shall be calculated as though the \r\npremium has been paid. \r\n(3) When the holder of a policy to which this section applies fails to pay a premium due \r\nunder that policy, the insurer shall, before the expiry of three months from the date on which that \r\npremium in respect was payable but not paid, give notice to the policy holder informing him of the \r\noptions available to him. \r\n(4) Notwithstanding anything to the contrary in the policy, the options available to the policy \r\nholder under this section shall include without limitation two of the following, namely:— \r\n \r\nPage 73 of 109 \r\n \r\n(a)  the policy shall be paid up in accordance with this Part; \r\n(b)  the surrender value of the policy shall be applied to the payment of the premium due \r\nuntil the surrender value is exhausted; \r\n(c)  the policy shall be surrendered in accordance with this Part; and \r\n(d)  the policy shall be surrendered, and the company shall issue to the policy holder a \r\ncontract from term life insurance for a term to be specified by the policy holder and a \r\nsum insured determined on the basis of the surrender value of the policy surrendered \r\nless the amount of any debt owed to the company under, or secured by, the policy. \r\n(5) Notwithstanding anything to the contrary in the policy, the action taken by the insurer \r\nwith respect to the policy shall be— \r\n(a)  if a course of action not stated in the notice issued under sub-section (3) is agreed in \r\nwriting between the insurer and the policy holder, after the policy holder has received \r\nthe notice,1 that course of action; \r\n(b)  if the policy holder agrees in writing to an option contained in the notice issued under \r\nsub-section (3), that course of action; \r\n(c)  if the policy holder does not respond to the notice issued under sub-section (3), and \r\nafter making reasonable efforts the insurer is unable to contact the policy holder: \r\n(i)  if the policy holder has elected in writing, either at the time of taking the \r\npolicy or at any time thereafter before the cessation of the payment of \r\npremium, that a course of action should be taken; that course of action; \r\notherwise \r\n(ii)  if a course of action (not being the course of action set out in clause (b) of sub-\r\nsection (4) is stated in the policy, that course of action; otherwise \r\n(iii)  the course of action set out in clause (a) of sub-section (4). \r\n(6) No commission shall be payable to any person in respect of the following, namely:— \r\n(a)  the application of the surrender value to the payment of premiums in \r\naccordance with clause (b) of sub-section (4); and \r\n(b)  the issue of a contract of term insurance under clause (d) of sub-section (4). \r\n \r\n \r\nPart XIII \r\nINTERMEDIARIES \r\n94. This Part to apply only to direct insurance business. The provisions of this Part shall \r\napply only to direct insurance business. \r\n \r\nPage 74 of 109 \r\n \r\n95. Liability of Insurer for act or omissions of agent.—(1) Every insurer shall, so far as \r\nrelates to a contract of insurance entered into by the insurer through an agent, be liable to the policy \r\nholder for the acts or omissions of that agent as though that agent were an employee of the insurer, in \r\ncircumstances where the policy holder has relied in good faith on the agent and as a consequence has \r\nsuffered loss or damage. Liability shall be absolute and shall not be capable of being contracted out \r\nof, either in the agency agreement or on a policy, proposal or other document. \r\n(2) For the purposes of this Part, any person who, for remuneration arranges insurance cover \r\nfor a policy holder or intending policy holder, and who is not a registered insurance broker, shall be \r\npresumed to be the agent of the insurer in relation to any matter relating to insurance. \r\n(3) The provisions of the foregoing sub-section shall not operate to limit, curtail, diminish or \r\nextinguish any liability of the insurer to which the insurer would otherwise have been subject. \r\n96. Persons acting as agents.—(1) It shall be unlawful for any person to act as an agent in \r\nrespect of an insurer if that person, or, in the case of a body corporate, any director of the body \r\ncorporate, or officer of the body corporate engaging in the business of insurance agency: \r\n(a)  is a minor; \r\n(b)  has been found of unsound mind by a Court of competent jurisdiction; \r\n(c)  has been found guilty, within the five years preceding the present date, of \r\ncriminal misappropriation or criminal breach of trust, cheating or forgery or an \r\nabetment of or attempt to commit any such offence by a Court of competent \r\njurisdiction; \r\n(d)  has served any custodial sentence imposed by a Court of competent \r\njurisdiction, ending within the five years preceding the present date; \r\n(e)  has been found guilty by a Court of competent jurisdiction of any offence \r\ninvolving insurance; or \r\n(f)  has been otherwise declared as disqualified by the Tribunal, other than for a \r\nterm which had expired prior to the present date. \r\n(2) It shall be unlawful for any person to act as an agent in respect of an insurer except under \r\na contract in writing. \r\n(3) Any person who acts as agent in breach of this section, and any insurer who knowingly \r\npermits him to act as agent, shall be guilty of an offence. \r\n(4) A contract of agency shall include, and if it does not, shall be deemed to include, as a \r\ncondition, that the agent must obtain the permission of the insurer before entering into a contract of \r\nagency with any other insurer while the contract with the first or any other insurer remains in force. \r\n(5) A contract of agency which does not disclose any existing contracts of agency with other \r\ninsurers shall be deemed to include a warranty that no other such contracts exist. \r\n \r\nPage 75 of 109 \r\n \r\n97. Minimum qualifications for agents. The Commission may prescribe minimum \r\nqualifications for persons appointed as insurance agents, which may extend to educational \r\nrequirements, experience in the industry and membership of an approved trade or professional \r\norganisation. \r\n98. Insurer to maintain register of agents.—(1) An insurer shall maintain a register of all \r\nagents employed by the insurer, containing such particulars as may be prescribed: \r\nProvided that in the case of an insurer deemed to be registered at the commencement date, the \r\nparticulars required by section 43 of the repealed Act to be contained in the register maintained under \r\nthat section of the repealed Act shall be deemed to constitute the particulars required to be \r\nmaintained under this sub-section, for a period of one year from the commencement date. \r\n(2) Prior to appointing a person as its agent, and at intervals of not more than twelve months \r\nthereafter during the time the person continues to act as its agent, an insurer shall obtain from that \r\nperson in such form as may be prescribed, a declaration in respect of the following matters: \r\n(a)  the information provided by him for inclusion in the register referred to in sub-\r\nsection (1) is complete and correct; \r\n(b)  he has complied with the requirements of the Ordinance concerning the \r\nqualifications of agents; and \r\n(c)  such other matters as may be prescribed. \r\n(3) It shall be an offence for an insurer to use an agent who has not been included on the \r\nregister referred to in subsection (1), or to use an agent who has not made the declaration referred to \r\nin sub-section (2), or knowingly to use an agent who has made a false declaration. \r\n99. Payments by and to insurance agents.—(1) Any sums received by an insurance agent \r\nfrom a policy holder or an insurer, other than remuneration payable to the agent by the insurer, shall \r\nbe deemed to be held on trust for the insurer. Payment by a policy holder to an insurance agent shall \r\nbe deemed to constitute payment to the insurer. \r\n(2) Any payment to which sub-section (1) applies shall be passed on to the insurer or the \r\npolicy holder (as the case may be) as soon as practicable and in any case not later than two weeks \r\nfrom receipt by the agent. \r\n(3) No insurance agent shall, except with the approval of the insurer who is the agent’s \r\nprincipal, pay to or receive from a policy holder or intending policy holder any sums in relation to a \r\ncontract of insurance: \r\nProvided that this sub-section shall not operate to relieve any person form a liability to which \r\nthat person is otherwise subject by the operation of this Ordinance, \r\n(4) It shall be unlawful for an agent to deduct from premiums paid by and received from a \r\npolicy holder any sums on account of commission due to the agent. \r\n \r\nPage 76 of 109 \r\n \r\n(5) No payment of commission or other remuneration to an insurance agent shall be made \r\notherwise than by a crossed cheque, pay order or electronic funds transfer or in such other manner as \r\nmay be prescribed: \r\nProvided that this sub-section shall not apply to payments to an agent which do not in the \r\naggregate in one year exceed the sum of five thousand rupees. \r\n100. Duty to disclose agency. An agent acting for an insurer shall disclose to the policy \r\nholder or intending policy holder the fact that he acts as an agent for that insurer and any relationship \r\nbetween the agent and the insurer. \r\n101. Restriction on life insurance agents, becoming directors of life insurance \r\ncompanies.—(1) No insurance agent who solicits or procures life insurance business shall be eligible \r\nto be or remain a director of any insurance company carrying on life insurance business unless he \r\nsuspends such solicitation or procurement. \r\n(2) Any insurance agent who contravenes the provisions of sub-section (1) shall cease to be a \r\ndirector and shall be disqualified from acting as an insurance agent, for such period as the Tribunal \r\nmay determine. \r\n102. Insurance brokers to be licensed.—(1) It shall be unlawful for any person to act as or \r\ndescribe himself or hold himself out or permit himself to be described or held out as an insurance \r\nbroker in respect of direct insurance business unless he holds a current insurance broker’s license \r\nissued by the Commission. \r\n(2) No person who is not a company shall be eligible to be licensed as an insurance broker. \r\n(3) An insurance broker’s license may only be issued by the Commission to a company \r\nwhich complies with such minimum requirements as may be prescribed by the Government in \r\nrespect of: \r\n(a)  paid-up capital; \r\n(b)  statutory deposits; \r\n(c)  professional indemnity insurance; and \r\n(d)  such other matters as may be prescribed. \r\n(4) An application for an insurance broker’s license shall be made in the prescribed form, and \r\nshall be accompanied by the following documents, namely:— \r\n(a)  the memorandum and articles of the broker; \r\n(b)  evidence of professional indemnity insurance; \r\n(c)  a declaration in a prescribed form to the effect that neither the applicant nor” \r\nany director or principal officer of the applicant is disqualified from holding \r\nhis office as such; \r\n \r\nPage 77 of 109 \r\n \r\n(d)  a letter of support from not fewer than five registered insurers in the \r\nprescribed form, each, signed, on behalf of the insurer, by a duly authorised \r\nrepresentative; \r\n(e)  evidence of payment of the prescribed fee; and \r\n(f)  such other evidence and documents as may be prescribed. \r\n(5) An insurance broker’s license shall be issued initially for a period of one year and may on \r\napplication in the prescribed form be renewed annually. \r\n(6) The Commission may cancel or refuse to issue or renew a broking license, where the \r\nCommission believes on reasonable grounds that the broker has contravened a provision of the \r\nOrdinance, including without limitation that the broker has failed to maintain prescribed minimum \r\nlevels of paid-up capital, statutory deposit or professional indemnity insurance. \r\n(7) The Commission may apply for an order from the Tribunal, that a person is disqualified \r\nfrom acting as an insurance broker, or as a director or principal officer of an insurance broker, if it \r\ndemonstrates on reasonable grounds that the activity of the person as an insurance broker or as a \r\ndirector or principal officer of an insurance broker would be detrimental to the interests of \r\npolicyholders. \r\n103. Brokers to be presumed agents under certain circumstances;—(1) liability of \r\nbrokers when not so presumed. A licensed insurance broker shall be presumed to act as the agent \r\nof any insurer with which such broker has a contract of agency, so far as relates to any policies \r\nplaced by that broker with that insurer, and the insurer shall be liable for the conduct or misconduct \r\nof the broker with respect to such policies. \r\n \r\n(2) Where a licensed insurance broker is not, by virtue of the foregoing sub-section, \r\npresumed to act as the agent of an insurer, the broker shall be liable to the policy holder and the \r\ninsurer shall not be liable for the conduct or misconduct of the broker as distinct from itself or its \r\nagents, except as otherwise provided in this Ordinance. \r\n104. Ownership and management interests inter se of brokers and insurers prohibited. \r\nNo insurer and no director of an insurer shall hold any direct or indirect ownership interest in an \r\ninsurance broker or take part in the management or direction of an insurance broker, and vice versa. \r\n105. Broker’s duty to disclose relationships.—(1) A licensed insurance broker shall \r\ndisclose to the policy holder or intending policy holder any relationship between the broker and any \r\ninsurer. \r\n(2) A licensed insurance broker, in placing business with an insurer with whom the broker \r\nhas a contract of agency, shall, before the contract of insurance is effected, inform the intending \r\npolicy holder of both the existence of the contract of agency and that the broker is acting as the agent \r\nof the insurer in respect of all matters concerning the contract of insurance. \r\n106. Payments by and to insurance brokers.—(1) Any sums received by an insurance \r\nbroker from a policy-holder or an insurer, other than remuneration payable to the broker by the \r\ninsurer, shall be deemed to be held on trust for the insurer. Payment by a policy holder to an \r\ninsurance broker shall be deemed to constitute payment to the insurer. \r\n \r\nPage 78 of 109 \r\n \r\n(2) Any amount held by an insurance broker for payment to the policy holder shall be paid to \r\nthe policy holder as soon as practicable and in any case in not less than two weeks. \r\n(3) Any amount held by an insurance broker for payment to the insurer shall unless the \r\ninsurer has previously agreed otherwise in writing be paid to the insurer as soon as practicable. \r\n(4) Any payment of money (other than premium) from an insurance broker to an insurer or \r\nvice versa shall be made by crossed cheque, pay order or electronic funds transfer. \r\n107. Requirements in respect of persons ceasing to act as insurance brokers.—(1) A \r\ncompany ceasing to act as an insurance broker shall maintain, for such period as may be prescribed, \r\nsuch minimum level of professional indemnity insurance in respect of liabilities arising from its \r\nactivities as an. insurance broker to which the company may be subject, as may be prescribed. \r\n(2) No company formerly acting as an insurance broker may be voluntarily wound up during \r\nthe period prescribed in the preceding sub-section. \r\n108. Basis for payment of remuneration by insurers to insurance brokers. —(1) A \r\nlicensed insurance broker shall not receive from an insurer or from a person on behalf of an insurer a \r\ngift, gratuity, benefit or other reward (however described) except as remuneration for services \r\nrendered to the insurer: \r\n(a)  in arranging or effecting a particular contract of insurance; \r\n(b)  in connection with dealing with or settling a claim under a particular contract \r\nof insurance; or \r\n(c)  otherwise than in connection with the broker arranging or effecting contracts \r\nof insurance or dealing with or settling; claims under contracts of insurance. \r\n(2) An insurer shall not pay to an insurance broker, and an insurance broker shall not receive \r\nfrom an insurer, in respect of the arranging or effecting of contracts of insurance by that insurance \r\nbroker with the insurer, remuneration at a rate or on a basis that has been varied having regard to any \r\none or more of the following: \r\n(a)  the number of contracts so arranged or effected; \r\n(b)  the total amount of premiums paid or payable under such contracts; \r\n(c)  the total amount of sums insured under such contracts. \r\n109. Insurance brokers to report annually to Commission. A licensed insurance broker \r\nshall make an annual report to the Commission. Such report shall include audited accounts of the \r\ninsurance broking business and such other information and statements as may be prescribed, each in \r\nsuch format as may be prescribed. \r\n110. Power to inspect insurance agents and insurance brokers. The Commission may, in \r\naccordance with procedures prescribed by rules, visit the premises of an insurance broker or of an \r\nagent of an insurance company, to establish compliance by the broker, or the agent, or any insurer of \r\n \r\nPage 79 of 109 \r\n \r\nwhich the broker or agent is agent, with the provisions of this law relating to insurance contracts, \r\nbrokers and agents. \r\n111. Persons permitted to act as insurance surveyors. (1) Subject to sub-section (2), it \r\nshall be unlawful for any person to act for remuneration as a surveyor, loss adjuster, or loss assessor \r\n(by whatever title called) unless such person is: \r\n(a)  an adjuster of aviation or maritime losses; or \r\n(b) a person licensed as a surveyor under this Ordinance. \r\n(2) Nothing in this section shall prevent— \r\n(a)  the performance in the course of his employment by an employee of an insurer \r\nof activities of the nature of insurance surveying for that insurer; or \r\n(b)  the expression in the course of his general professional practice of an expert \r\nopinion on the nature, cause or quantum of an insurance loss by an advocate, \r\nsolicitor, accountant, actuary or other professional person engaged in a \r\nprofession other than surveying. \r\n112. Licensing of insurance surveyors.—(1) The Commission may, on application by a \r\nperson, grant to that person a license, having a term of not more than twelve months, to act as a \r\nsurveyor, where the Commission is satisfied that that person is qualified under this section to be \r\ngranted such a license. \r\n(2) A licence granted under the preceding sub-section (or renewed under this sub-section) \r\nmay be renewed for a term of not more than twelve months on application made by the holder of the \r\nlicence prior to expiry of the licence, where the Commission is satisfied that such person is qualified \r\nunder this section to be granted such a licence. \r\n(3) No person shall be entitled to apply for or to hold a license as a surveyor under this \r\nOrdinance unless the following conditions are fulfilled at the date of the application and at all times \r\nduring which the license is held: \r\n(a)  the person is a company with a prescribed minimum share capital; \r\n(b)  the person carries professional indemnity insurance at such level as may be \r\nprescribed; \r\n(c)  reports issued in respect of surveys conducted by the person are signed by \r\nnatural persons, registered under section 113 as authorised surveying officers; \r\n(d)  reports issued in respect of surveys conducted by the person contain such \r\ninformation and comply with such conditions as may be prescribed; \r\n(e)  the person is a member of such approved professional association as may be \r\nprescribed; and \r\n(f)  the person complies with such other conditions as may be prescribed: \r\n \r\nPage 80 of 109 \r\n \r\nProvided that a person, including a firm, who or which was, immediately prior to the \r\ncommencement date, the holder of a certificate of registration under section 44A(4) of the repealed \r\nAct, shall be exempt, subject to such conditions as may be prescribed, from compliance with the \r\nconditions set out in this subsection: \r\nProvided further that the application of such exemption to a person shall cease permanently \r\nand immediately on that person ceasing to hold such a certificate or to hold a license issued under \r\nthis section in renewal of such a certificate: \r\nProvided further that such exemption shall cease permanently and absolutely at the expiry of \r\nfive years from the commencement date, from which date no firm and no natural person shall be \r\nlicensed as a surveyor: \r\nProvided further that such exemption shall not be available to any person in respect of the \r\nrequirement for a license to act as an insurance surveyor in a class of insurance surveying for which a \r\ncertificate of registration under section 44A (4) of the repealed Act was not held by such person as at \r\nthe commencement date. \r\n(4) An application for a license or for renewal of a license under this section shall contain \r\nsuch information and be accompanied by such documents as may be prescribed. \r\n(5) A person licensed as a surveyor who becomes aware that he has ceased, or is about to \r\ncease, to comply with any condition of that license shall, within one week of becoming aware of \r\nsuch non-compliance, notify the Commission Of the circumstances surrounding such non-\r\ncompliance, and his license shall stand suspended as at the date falling one week after the date on \r\nwhich he became aware, or should reasonably have become aware, of the non-compliance. Such \r\nsuspension of a license shall continue until the Commission is satisfied that the person has taken such \r\naction as the Commission believes on reasonable grounds to be necessary to remove the causes of the \r\nnon-compliance, or until the term of the license expires, whichever is earlier. \r\n(6) If the Commission believes on reasonable grounds that a licensed surveyor has failed to \r\ncomply, or has ceased to comply, with a condition of his license, the Commission may by notice to \r\nthe licensed surveyor of not less than two weeks cancel that license: \r\nProvided that a license shall not be cancelled under this sub-section without giving the holder \r\nof the license an opportunity to be heard. \r\n(7) A person who purports to act as a licensed surveyor during the period during which his \r\nlicense is suspended, or following cancellation of his license, shall be guilty of an offense and liable \r\non conviction to a fine not exceeding one million rupees. \r\n113. Registration of authorised surveying officers.—(1) The Commission may, on \r\napplication by a person, register that person for a term of not more than twelve months as an \r\nauthorised surveying officer, where the Commission is satisfied that such person is qualified to be \r\nregistered under this section. \r\n(2) Registration granted under the preceding sub-section (or renewed under this sub-section) \r\nmay be renewed for a term of not more than twelve months on application made by the person \r\nregistered prior to expiry of registration, where the Commission is satisfied that the person is \r\nqualified under this section to be so registered. \r\n \r\nPage 81 of 109 \r\n \r\n(3) No person shall be entitled to apply to be registered, or to be or remain registered, as an \r\nauthorised surveying officer unless the following conditions are fulfilled at the date of the application \r\nand at all times during which the person is registered— \r\n(a)  the person is a natural person; \r\n(b)  the person is a director, officer or employee of a company licensed as a \r\nsurveyor under this Ordinance; and \r\n(c)  the person has such qualifications as may be prescribed : \r\nProvided that a natural person who was, immediately prior to the commencement date, the \r\nholder of a certificate of registration under section 44A (4) of the repealed Act, shall be deemed, \r\nsubject to such conditions as may be prescribed, to possess the qualifications required under clause \r\n(c) of this sub-section: \r\nProvided further that the application of the first proviso to this sub-section to a person shall \r\ncease permanently and immediately on that person ceasing to hold such a certificate or to be \r\nregistered under this section on renewal of such a certificate: \r\nProvided further that the first proviso to this subsection shall cease to apply permanently and \r\nabsolutely at the expiry of five years from the commencement date: \r\nProvided further that the first proviso to this sub-section shall not apply to any person in \r\nrespect of the requirement for registration under this Ordinance as an authorised surveying official in \r\na class of insurance surveying for which a certificate of registration under section 44A (4) of the \r\nrepealed Act was not held as at the commencement date. \r\n(4) An application for registration or for renewal of registration under this section shall \r\ncontain such information and be accompanied by such documents as may be prescribed. \r\n(5) A person registered as an authorised surveying officer who becomes aware that he has \r\nceased, or is about to cease, to comply with any condition of that registration shall, within seven days \r\nof becoming aware of such non-compliance, notify the Commission of the circumstances \r\nsurrounding such noncompliance, and his registration shall stand suspended as at the date falling \r\nseven days from the date on which he became aware, or should reasonably have become aware, of \r\nthe non-compliance; and such suspension of a registration shall continue until the Commission is \r\nsatisfied that the person has taken such action as the Commission believes on reasonable grounds to \r\nbe necessary to remove the causes of the non-compliance, or until the term of the registration \r\nexpires, whichever is earlier. \r\n(6) If the Commission believes on reasonable grounds that an authorised surveying officer \r\nhas failed to comply, or has ceased to comply, with a condition of his registration, the Commission \r\nmay by notice to the authorised surveying officer of not less than fourteen days cancel that \r\nregistration: \r\nProvided that a registration shall not be cancelled under this sub-section without giving the \r\nperson concerned an opportunity to be heard. \r\n \r\nPage 82 of 109 \r\n \r\n(7) A person who purports to act as an authorised surveying officer during the period when \r\nhis registration is suspended, or following cancellation of his registration, shall be guilty of an \r\noffense and liable on conviction to a fine not exceeding one hundred thousand rupees. \r\n114. Classes of insurance surveying. Surveyors and authorised surveying officers may be \r\nclassified into such classes or sub-classes as may be prescribed, and, if so classified, separate \r\napplication shall be made and separate licenses and certificates issued in respect of each such class or \r\nsub-class. \r\nPart XIV \r\nSPECIAL PROVISIONS OF LAW \r\n115. Application of Pakistan law to policies issued in Pakistan. The holder of a policy of \r\ninsurance issued by an insurer in respect of insurance business transacted in Pakistan after the \r\ncommencement of this Ordinance shall have the right, notwithstanding anything to the contrary \r\ncontained in the policy or in any agreement relating thereto, to receive payment in Pakistan of any \r\nsum secured thereby and to sue for any relief in respect of the policy in any Tribunal; and if the suit \r\nis brought in Pakistan any question of law arising in connection with any such policy shall be \r\ndetermined according to the law in force in Pakistan: \r\nProvided that nothing in this section shall apply to a policy of marine insurance. \r\n116. Payment of money into tribunal.—(1) Where in respect of any policy of life insurance \r\nmaturing for payment an insurer is of opinion that by reason of conflicting claims to or insufficiency \r\nof proof of title to the amount secured thereby or for any other adequate reason it is impossible \r\notherwise for the insurer to obtain a satisfactory discharge for the payment of such amount, the \r\ninsurer may before the expiry of nine months from the date of the maturing of the policy or, where \r\nthe circumstances are such that the insurer cannot be immediately aware of such maturing, from the \r\ndate on which notice of such maturing is given to the insurer, apply to pay the amount into the \r\nTribunal within the jurisdiction of which is situated the place at which such amount is payable under \r\nthe terms of the policy or otherwise. \r\n(2) A receipt granted by the Tribunal for any such, payment shall be a satisfactory discharge \r\nto the insurer for the payment of such amount. \r\n(3) An application for permission to make a payment into the Tribunal under this section \r\nshall be made by a petition verified by an affidavit signed by a principal officer of the insurer setting \r\nforth the following particulars, namely:— \r\n(a)  the name of the insured person and his address; \r\n(b)  if the insured person is deceased, the date and place of his death; \r\n(c)  the nature of the policy and the amount secured by it; \r\n(d)  the name and address of each claimant so far as is known to the insurer with \r\ndetails of every notice of claim received; \r\n(e)  the reasons why in the opinion of the insurer a satisfactory discharge cannot be \r\nobtained for the payment of the amount; and \r\n \r\nPage 83 of 109 \r\n \r\n(f)  the address at which the insurer may be served with notice of any proceeding \r\nrelating to disposal of the amount paid into the Tribunal. \r\n(4) An application under this section shall not be entertained by the Tribunal if the \r\napplication is made before the expiry of six months from the maturing of the policy by survival, or \r\nfrom the date of receipt of notice by the insurer of the death of the person insured, as the case may \r\nbe. \r\n(5) If it appears to the Tribunal that a satisfactory discharge for the payment of the amount \r\ncannot otherwise be obtained by the insurer it shall allow the amount to be paid into the Tribunal and \r\nshall invest the amount in Government securities pending its disposal. \r\n(6) The insurer shall transmit to the Tribunal every notice of claim received after the making \r\nof the application under subsection (3), and any payment required by the Tribunal as costs of the \r\nproceedings or otherwise in connection with the disposal of the amount paid into the Tribunal shall \r\nas to the costs of the application under sub-section (3) be borne by the insurer and as to any other \r\ncosts be in the discretion of the Tribunal. \r\n(7) The Tribunal shall cause notice to be given to every ascertained claimant of the fact that \r\nthe amount has been paid into the Tribunal, and shall cause notice at the cost of any claimant \r\napplying to withdraw the amount to be given to every other ascertained claimant. \r\n(8) The Tribunal shall decide all questions relating to the disposal of claims to the amount \r\npaid into the Tribunal. \r\n117. Small Disputes Resolution Committees.—(1) The Federal Government shall constitute \r\none or more Small Disputes Resolutions Committees to arbitrate disputes arising between an insurer \r\nand a policy holder. \r\n(2) The constitution and procedure of the Committees shall be prescribed by rules made by \r\nthe Federal Government, and the Arbitration Act, 1940, (X of 1940) or any re-enactment thereof \r\nshall not apply to such Committees. \r\n(3) No person shall be appointed a member of the Committee if he has any interest (as \r\ndefined in sub-section (1) of section 16 of the SECP Act) in the subject matter of the arbitration. \r\n(4) The Committees shall only have jurisdiction in respect of life insurance policies not being \r\ngroup life policies, domestic insurance policies and private motor insurance policies in respect of \r\nclaims the pecuniary value of which shall be limited to a sum to be prescribed: \r\nProvided that the Committees shall not have jurisdiction in respect of claims made under \r\nprivate motor insurance policies for loss to the policy holder arising from liabilities incurred to third \r\nparties arising out of or in connection with the use of motor vehicles on land, as specified in the \r\nMotor Vehicles Act, 1939. (IV of 1939) \r\n118. Payment of liquidated damages on late settlement of claims.—(1) It shall be an \r\nimplied term of every contract of insurance that where payment on a policy issued by an insurer \r\nbecomes due and the person entitled thereto has complied with all the requirements, including the \r\nfiling of complete papers, for claiming the payment, the insurer shall, if he fails to make the payment \r\nwithin a period of ninety days from the date on which the payment becomes due or the date on which \r\n \r\nPage 84 of 109 \r\n \r\nthe claimant complies with the requirements, whichever is later, pay as liquidated damages a sum \r\ncalculated in the manner as specified in sub-section (2) on the amount so payable unless he proves \r\nthat such failure was due to circumstances beyond his control. \r\nExplanation: for the purposes of this sub-section, failure or delay by any person in making \r\npayment (including without limitation payment under a contract of reinsurance) to an insurer shall \r\nnot constitute circumstances beyond the control of the insurer. . \r\n(2) The liquidated damages payable under sub-section (1) shall be payable for the period \r\nduring which the failure continues and shall be calculated at monthly rests at the rate five percent \r\nhigher than the prevailing base rate. \r\n119. Supply of copies of proposals and medical reports. Every insurer shall, on application \r\nby a policy holder and on payment of such fee as may be prescribed, supply to the policy holder \r\ncertified copies of the questions put to him and his answers thereto contained in his proposal for \r\ninsurance and in any medical report supplied in connection therewith \r\n120. Prohibition of business on dividing principle. No insurer shall after the \r\ncommencement of the Ordinance, begin or carry on, any business upon the dividing principle, that is \r\nto say, on the principle that the benefit, secured by a policy is not fixed but depends either wholly or \r\npartly on the results of a distribution of certain sums amongst policies becoming claims within \r\ncertain time-limits, or on the principle that the premiums payable by a policy holder depend wholly \r\nor partly on the number of policies becoming claims within certain time-limits: \r\nProvided that nothing in this section shall be deemed to prevent an insurer from allocating \r\nbonuses to holders of participating policies of life insurance in accordance with the provisions of this \r\nOrdinance, either as reversionary additions to the sums insured or as immediate cash bonuses or \r\notherwise: \r\nProvided further that nothing in this section shall apply to the business of Takaful insurance \r\ncarried on by an insurer in accordance with laws established for the conduct of Takaful business. \r\nPart XV \r\nINSURANCE TRIBUNAL \r\n121. Constitution of the Tribunal.—(1) The Federal Government shall constitute a Tribunal \r\nor Tribunals in consultation with the Commission and shall in respect of each Tribunal so constituted \r\nspecify the territorial limits within which, or the class or classes of cases in respect of which each \r\nsuch Tribunal shall exercise jurisdiction under this Ordinance: \r\nProvided that the Federal Government may by notification in the official Gazette confer all or \r\nany of the powers of the Tribunal on any District or Additional District and Sessions Judge of an area \r\nwhere for any reason it may not be expedient to constitute a separate Tribunal, and in doing so the \r\nFederal Government shall also specify the composition and pecuniary and territorial limits of such a \r\nTribunal. \r\n(2) The Tribunal shall consist of a Chairperson who shall be a serving or retired judge of the \r\nHigh Court and not less than two members being persons of ability and integrity who have such \r\nknowledge or experience of life insurance, non-life insurance, actuarial science, finance, economics, \r\n \r\nPage 85 of 109 \r\n \r\nlaw, accountancy, administration or other discipline as would, in the opinion of the Federal \r\nGovernment, enable them to discharge the duties and functions of members of the Tribunal. \r\n(3) To constitute a sitting of a Tribunal the presence of the Chairperson and at least one other \r\nmember shall be necessary. \r\n(4) A Tribunal shall not merely by reason of a change in its composition, or the absence of \r\nany member from any sitting, be bound to recall and rehear any witness who has given evidence, and \r\nmay act on the evidence already recorded by or produced before it. \r\n(5) A Tribunal may hold its sitting at such places within its territorial jurisdiction as the \r\nChairperson may decide from time to time. \r\n(6) No act or proceeding of a Tribunal shall be invalid by reason only of the existence of a \r\nvacancy in, or defect in the constitution of the Tribunal. \r\n122. Powers of Tribunal.—(1) A Tribunal shall: \r\n(a)  in the exercise of its civil jurisdiction, have in respect of a claim filed by a \r\npolicy holder against an insurance company in respect of, or arising out of a \r\npolicy of insurance, all the powers vested in a civil Court under the Code of \r\nCivil Procedure, 1908; (Act V of 1908) \r\n(b)  in the exercise of its criminal jurisdiction, try the offenses punishable under \r\nthis Ordinance and shall, for this purpose, have the same powers as are vested \r\nin the Court of Sessions under the Code of Criminal Procedure, 1898; (Act V \r\nof 1898) \r\n(c)  exercise and perform such other powers and functions as are, or may be, \r\nconferred upon, or assigned to it, by or under this Ordinance; and \r\n(d)  in all matters with respect to which procedure has not been provided for in \r\nthis Ordinance, follow the procedure laid down in the Code of Civil \r\nProcedure, 1908 (Act V of 1898) or the Code of Criminal Procedure, 1898 as \r\nthe case may be. \r\n(2) The jurisdiction of a Tribunal shall not extend to appeals to which section 33 and section \r\n34 of the SECP Act apply. \r\n(3) No Court other than a Tribunal shall have or exercise any jurisdiction with respect to any \r\nmatter to which the jurisdiction of a Tribunal extends under this Ordinance, including a decision as \r\nto the territorial limits arid the execution of a decree, order or judgment passed by a Tribunal: \r\nProvided that for the purposes of this section a Small Claims Settlement Committee \r\nestablished under section 117 shall not be deemed to be a Court. \r\n123. Procedure of the Tribunal.—(1) A Tribunal shall for the purpose of the trial of an \r\napplication, follow such procedure as may be prescribed and have the same powers as are vested in a \r\ncivil court trying a suit under the Code of Civil Procedure, 1908 in respect of: (Act V of 1908). \r\n \r\nPage 86 of 109 \r\n \r\n(a)  summoning and enforcing the attendance of any person and examining him on \r\noath; \r\n(b)  requiring the discovery and production of documents and material objects; \r\n(c)  receiving evidence on affidavits; and \r\n(d)  issuing commissions for the examination of witnesses or documents. \r\n(2) If, in the course of the trial of an application, any one of its members ceases to hold office, \r\nor is, for any reason, unable to attend the sittings of that Tribunal, the trial shall continue \r\nnotwithstanding such vacancy, and the decision may be given by the remaining members. \r\n(3) If upon any matter requiring the decision of the Tribunal there is a difference of opinion \r\namong its members, the opinion of the majority shall prevail and the decision of that Tribunal shall \r\nbe expressed in terms of the view of the majority: \r\nProvided that where the members are equally divided on any point it shall be decided in \r\naccordance with the views of the Chairperson. \r\n(4) The decision of a Tribunal shall be given in writing and shall be signed by the \r\nChairperson. \r\n(5) A Tribunal shall give a copy of the decision to each party to the dispute and shall also \r\nforward a copy to the Commission. \r\n(6) A Tribunal shall, upon an application made in this behalf by any party to a dispute \r\nadjudicated by it and on payment of such fee not exceeding one rupee for every one hundred words, \r\nand subject to such conditions, as may be prescribed, furnish certified copies of its proceedings or of \r\nany document submitted to or produced before it. \r\n124. Appeal.—(I) Subject to the right of appeal conferred by subsection (2) hereof, the \r\ndecision of the Tribunal on any application shall be final and shall not be questioned in any Court or \r\nbefore any other authority. \r\n(2) Any party aggrieved by a decision of the Tribunal may, if the amount of the claim in \r\ndispute or the penalty prescribed, as the case may be, is not less than one hundred thousand rupees, \r\nprefer an appeal to the High Court within a period of thirty days from the date of such decision. \r\n(3) An appeal under sub-section (2) shall be heard by a Bench of not less than two judges of \r\nthe High Court having territorial jurisdiction over the relevant Tribunal. \r\nPart XVI \r\nINSURANCE OMBUDSMAN \r\n125. Appointment of Insurance Ombudsman.—(1) As soon as may be, after the \r\ncommencement of this Ordinance, the Federal Government shall appoint an Insurance Ombudsman. \r\n \r\nPage 87 of 109 \r\n \r\n(2) The Insurance Ombudsman shall be a natural person having high integrity and ability and \r\nunimpeachable insurance or legal credentials, and shall not at the date of his appointment be more \r\nthan seventy years of age. He shall not be a shareholder of an insurance company. \r\n(3) The Insurance Ombudsman shall hold office for a period of four years from the date of his \r\nappointment unless he resigns earlier or is disqualified or removed in accordance with sub-section \r\n(2) or (3) of section 126. He shall not be eligible for any extension of tenure or for re-appointment \r\nunder any circumstances whatsoever. \r\n(4) Any vacancy occurring in the office of the Insurance Ombudsman shall be filled within \r\nsixty days of the occurrence of such vacancy. \r\n(5) The Insurance Ombudsman shall not hold any other office of profit in the service of \r\nPakistan or occupy any other position carrying the right to remuneration for the rendering of service, \r\nand shall not during the two years immediately prior to his appointment have held any office in any \r\nbody corporate carrying on insurance business in Pakistan. \r\n126. Terms and conditions of Insurance Ombudsman.—(1) The Insurance Ombudsman \r\nshall be entitled to the same salary and allowances as a Judge of a High Court. \r\n(2) The Insurance Ombudsman may at any time resign his office by giving written notice to \r\nthe Commission of not less than three months. \r\n(3) The Insurance Ombudsman shall be disqualified from holding his office and his \r\nappointment may be revoked if: \r\n(a)  he has been convicted of an offense involving moral turpitude; \r\n(b)  he has been guilty of misconduct; \r\n(c)  he has been or is adjudged insolvent; \r\n(d)  he is incapable of discharging his duties by reason of physical, physiological \r\nor mental unfitness and has been so declared by a registered medical \r\npractitioner appointed by the commission; \r\n(e)  he is disqualified by virtue of holding an office (other than that of Insurance \r\nOmbudsman) for which he receives remuneration; or \r\n(f)  he fails to discharge diligently or impartially his duties under this Ordinance: \r\nProvided that, unless a disqualification referred to in this sub-section arises from the \r\njudgement or a court or tribunal of competent jurisdiction under any relevant provision of applicable \r\nlaw, the appointment of an Insurance Ombudsman shall not be revoked without an enquiry by an \r\nimpartial person or body of persons constituted in accordance with such procedure as may be \r\nprescribed by rules made by the Federal Government, and such rules shall provide for a reasonable \r\nopportunity for him to be heard in his defence. \r\n(4) The Insurance Ombudsman shall be provided with a secretariat to be appointed in \r\nconsultation with the Commission. Appointments to the secretariat may be made on deputation from \r\n \r\nPage 88 of 109 \r\n \r\nthe Commission or other insurance companies or otherwise on the basis of professional \r\nqualifications. The costs of the secretariat shall be shared by insurance companies in such \r\nproportions as may be determined by the Commission. \r\n127. Jurisdiction, functions and powers of Insurance Ombudsman.—(1) The Insurance \r\nOmbudsman may on a complaint by any aggrieved person undertake any investigation into any \r\nallegation of mal-administration on the part of any insurance company: \r\nProvided that the Insurance Ombudsman shall not have any jurisdiction to investigate or \r\ninquire into any matters which. \r\n(a)  are within the jurisdiction of the Office of the Wafaqi Mohtasib under the \r\nEstablishment of the Office of Wafaqi Mohtasib (Ombudsman) Order, 1983 ; \r\nor (P.O.1 of 1983) \r\n(b)  are sub-judice before a court of competent jurisdiction or tribunal or board in \r\nPakistan on the date of the receipt of a complaint, reference or motion by him. \r\n(2) For the purposes of this section “mal-administration” includes— \r\n(a) a decision, process, recommendation, act of omission or commission which: \r\n(i)  is contrary to law, rules or regulations or is a departure from \r\nestablished practice or procedure, unless it is bona fide and for valid \r\nreasons; or \r\n(ii)  is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or \r\ndiscriminatory; or \r\n(iii)  is based oh irrelevant grounds; or \r\n(iv)  involves the exercise of powers, or the failure or refusal to do so, for \r\ncorrupt or improper motives, such as, bribery, jobbery, favoritism, \r\nnepotism and administrative excesses; and \r\n(b) corruption, nepotism, neglect, inattention, inordinate delay, incompetence, inefficiency \r\nand ineptitude in the administration or discharge of duties and responsibilities. \r\n(3) Notwithstanding anything contained in sub-section (1), the Insurance Ombudsman shall \r\nnot accept for investigation any complaint which is brought by or on behalf of an insurance company \r\nand which relates to a contract of reinsurance. \r\n(4) Notwithstanding anything contained in sub-section (1), the Insurance Ombudsman shall \r\nnot accept for investigation any complaint by or on behalf of an employee of an insurance company \r\nconcerning any matters relating to the insurance company in respect of any personal grievance \r\nrelating to his service therein. \r\n(5) For carrying out the objectives of this Ordinance and, in particular for ascertaining the \r\nroot causes of corrupt practices and injustice, the Insurance Ombudsman may arrange for studies to \r\nbe made or research to be conducted and may recommend appropriate steps for their eradication. \r\n \r\nPage 89 of 109 \r\n \r\n128. Reference to Insurance Ombudsman by Court. If at any time during the pendency of \r\na case, a Court or Tribunal trying a case relating to an insurance company is of the opinion that the \r\nmanagement of the insurance company has prima facie acted in a mala fide manner, or in violation \r\nof insurance rules and regulations, it may make reference to the Insurance Ombudsman for inquiring \r\ninto the matter and passing such order in accordance with the provisions hereof as he may deem fit: \r\nProvided that the making of a reference shall not prevent the Court or Tribunal from deciding \r\nthe claim before it on its merits. \r\n129. Procedure for making complaints.—(1) A complaint shall be made on solemn \r\naffirmation or oath in writing addressed to the Insurance Ombudsman. The complaint shall set out \r\nthe full particulars of the transaction complained of and the name and address of the complainant. \r\n(2) Prior to making a complaint the complainant shall intimate in writing to the concerned \r\ninsurance company his intention of filing a complaint and if the insurance company either fails to \r\nrespond, or makes a reply which is unsatisfactory to the complaint, within a period of one month, the \r\ncomplainant may file a complaint at any time thereafter within a further period of three months: \r\nProvided that the Insurance Ombudsman may, if satisfied that there were reasonable grounds \r\nfor the delay in filing the complaint, condone the delay and entertain the complaint. \r\n(3) The Insurance Ombudsman may adopt any procedure as he considers appropriate for \r\ninvestigating a complaint: \r\nProvided that he shall not pass any order against an insurance company without first giving it \r\na notice and an opportunity to be heard. \r\n(4) Subject to section 128, the Insurance Ombudsman shall not have any power to issue an \r\norder in the nature of a stay order or to entertain any complaints if the matter is pending before a \r\nCourt, Tribunal or other legal forum. \r\n(5) The Insurance Ombudsman may reject a complaint summarily or he may accept the same \r\nor pass any other order he deems fit: \r\nProvided that in each case he shall pass a reasoned order for his decision. \r\n(6) The Federal Government may further prescribe rules for the conduct of proceedings in \r\nrelation to complaints brought before the Insurance Ombudsman. \r\n130. Recommendations for implementation.—(1) In the event the Insurance Ombudsman \r\ncomes to the conclusion that the complaint is justified, in part or in whole, he shall try and facilitate \r\nan amicable resolution or settlement by resort to mediation and failing that communicate his findings \r\nto the concerned insurance company with the direction— \r\n(a)  to reconsider the matter; \r\n(b)  to modify or cancel the earlier decision, action or failure to take appropriate \r\naction; \r\n \r\nPage 90 of 109 \r\n \r\n(c)  to pay reasonable compensation to the complainant as fixed by the Insurance \r\nOmbudsman; \r\n(d)  to take the requisite steps to improve the functioning or efficiency of the \r\ninsurance company; or \r\n(e)  to take such other remedial steps or actions as may be specified by the \r\nInsurance Ombudsman. \r\n(2) Any insurance company, or official of an insurance company or a complainant aggrieved \r\nby an order passed by the Insurance Ombudsman may file an appeal With the Commission within \r\nthirty days which shall pass any order thereon it deems fit. \r\n(3) Any order passed by the Insurance Ombudsman which has not been appealed against, or \r\nany order passed by the Commission in appeal, as the case may be, shall become final and operative \r\nand. if not implemented shall render the insurance company concerned liable to such action \r\nincluding the (2) imposition of a fine or penalty as the Commission may deem fit, and in relation to \r\nan insurance company officer, to the appropriate disciplinary or other proceedings. \r\n(4) Nothing contained herein shall prevent a complainant from filing a suit against an \r\ninsurance company in the event his complaint is rejected. \r\n131. Power to call Information. The Insurance Ombudsman shall have the power for \r\npurposes of disposing a case, to require an insurance company to disclose to him any information \r\nsubject to the following conditions, namely:— \r\n(a)  the Insurance Ombudsman shall make every endeavour to ensure that \r\ninsurance confidentiality is maintained as required by insurance law and \r\nprocedure and shall, take no action which is violative thereof; \r\n(b)  the Insurance Ombudsman may call for any or all such documents which are \r\nrelevant or pertinent for purposes of deciding a complaint: \r\nProvided that he shall not be entitled to call for unrelated documents which may compromise \r\nthe insurance company’s position in relation to other customers: \r\nProvided further that in cases where the Insurance Ombudsman is investigating cases of \r\ncorruption, he shall have a greater latitude in relation to the inspection of documents; and \r\n(c)  in the event of an insurance company refusing to furnish information, or \r\ncopies of relevant documents, the Insurance Ombudsman may draw an \r\nadverse inference and comment on the same in his findings. \r\n132. Duties of insurer.—(1) An insurer shall at all times co-operate with the Insurance \r\nOmbudsman and with any person properly authorized by him, in the conduct of an investigation by \r\nthe Insurance Ombudsman into a complaint which has been brought before him. \r\n(2) An insurer that obstructs, through its wilful act or failure to act, any investigation by the \r\nInsurance Ombudsman shall be guilty of an offense. \r\n \r\nPage 91 of 109 \r\n \r\n133. Duty and power of the Insurance Ombudsman to report to the Commission.—(1) \r\nWhere the Insurance Ombudsman has reason to believe during the course of his investigation into a \r\ncomplaint brought before him, or finds as a result of his investigation that an insurer has— \r\n(a)  failed to comply with this Ordinance; or \r\n(b)  failed to act in good faith; or \r\n(c)  acted in such a manner as to bring the insurance industry into disrepute; \r\nhe shall make a report on that matter to the Commission in such manner as the Commission may \r\nprescribe. \r\n(2) The Insurance Ombudsman may make a report to the Commission on any matter arising \r\nfrom his investigation into a complaint brought before him, in which he deems it fit or proper to do \r\nso. \r\n(3) The Insurance Ombudsman may, in a report made under sub-section (1) or under sub-\r\nsection (2), make recommendations as to action to be taken including without limitation an \r\ninvestigation by the Commission, or the taking of the requisite steps or legal proceedings against an \r\ninsurance company which has acted in violation of insurance laws, rules, regulations, procedures, or \r\ndirectives of the Commission. \r\n134. Report of Insurance Ombudsman.—(1) The Insurance Ombudsman shall prepare and \r\nsubmit to the Federal Government on or before the 31st March in every year following the \r\ncommencement date a report setting out a review of the activities of his office during the preceding \r\n(2) The Insurance Ombudsman shall also submit a report or reports to the Federal \r\nGovernment containing the results of such inquiries as he may be directed to conduct by the Federal \r\nGovernment from time to time. \r\n(3) All reports submitted by the Insurance Ombudsman shall be published and released to the \r\npublic unless he directs otherwise for reasons to be recorded. \r\nPart XVII \r\nAPPOINTMENT OF ADMINISTRATORS \r\n135. When Administrator for management of insurance business may be appointed. —\r\n(1) If at any time the Commission has reason to believe that an insurer carrying on insurance \r\nbusiness is acting in a manner likely to be prejudicial to the interest of holders of insurance policies it \r\nmay, after giving an opportunity to the insurer to be heard, appoint an Administrator to manage the \r\naffairs of the insurer under the direction and control of the Commission. \r\n(2) The Administrator shall receive such remuneration as the Commission may prescribe and \r\nthe Commission may at any time cancel the appointment and appoint some other person as \r\nAdministrator. \r\n \r\nPage 92 of 109 \r\n \r\n(3) The management of the business of the insurer shall as on and after the date of \r\nappointment of the Administrator vest in such Administrator but except with the leave of the \r\nCommission the Administrator shall not issue any further policies. \r\n(4) As on and after the date of appointment of the Administrator any person vested with any \r\nsuch management immediately prior to that date shall be divested of that management. \r\n(5) The Commission may issue such directions to the Administrator as to his powers and \r\nduties as the Commission deems desirable in the circumstances of the case, and the Administrator \r\nmay apply to the Commission at any time for instructions as to the manner in which he shall conduct \r\nthe management of the business of the insurer or in relation to any matter arising in the course of \r\nsuch management. \r\n136. Power and duties  of the Administrator.—(1) The Administrator shall conduct the \r\nmanagement of the business of the insurer with the greatest economy compatible with efficiency and \r\nshall, as soon as may be possible, file with the Commission a report stating his opinion as to which \r\nof the following courses is in the circumstances most advantageous to the general interest of the \r\nholders of insurance policies:— \r\n(a)  the transfer of the business of the insurer to some other insurer; \r\n(b)  the carrying on of its business by the insurer (in case of life insurance \r\nbusiness whether with the policies of the business continued for the original \r\nsum insured with the addition of the bonuses that attach to the policies or for \r\nreduced amounts); \r\n(c)  the winding up of business of the insurer; or \r\n(d)  such other course as he deems advisable. \r\n(2) On the filing of the report with the Commission, the Commission may take such action, \r\nnot inconsistent with the other provisions of this Ordinance, as it thinks fit for promoting the interest \r\nof the holders of insurance policies in general. \r\n(3) Any order passed by the Commission under subsection (2) shall be binding on all persons \r\nconcerned, and shall have effect notwithstanding anything in the Memorandum or Articles of \r\nAssociation of the insurer, if a company. \r\n137. Powers of Administrator respecting property.—(1) liable to attachment under \r\nsection 160. If the Administrator is satisfied that any person has rendered himself liable to be \r\nproceeded against under section 146, he may, pending the institution of proceedings against such \r\nperson under that section, by order in writing prohibit him or any other person from transferring or \r\notherwise disposing of any property which, in the opinion of the Administrator, would be liable to \r\nattachment in proceedings under that section. \r\n(2) Any person aggrieved by an order made by the Administrator under sub-section (1) may, \r\nwithin fourteen days from the date on which the order is served on him, appeal against such order to \r\nthe Tribunal. \r\n \r\nPage 93 of 109 \r\n \r\n(3) An order made by the Administrator under sub-section (1) shall, subject to any order \r\nmade by the Tribunal on appeal, be in force for a period of three months from the date of the order \r\nunless before the expiry of the said period, an application is made under sub-section (1) of section \r\n160 to the Court competent to exercise jurisdiction under that sub-section, and when such an \r\napplication is made, the order shall, subject to any order made by the Court, continue in force as if it \r\nwere an order of attachment made by that Court in proceedings under that section. \r\n(4) An order made by the Administrator under this section shall— \r\n(a)  in the case of an order affecting a corporation or firm, be served in the manner \r\nprovided for the service of summons in rule 2 of Order XXIX or rule 3 of the \r\nOrder XXX, as the case may be, in the First Schedule to the Code of Civil \r\nProcedure, 1908; (Act V of 1908) and \r\n(b)  in the case of an order affecting a person not being a corporation or firm, be \r\nserved on such person, \r\n(i)  personally, by delivering or tendering to him the order, or \r\n(ii)  by post, or \r\n(iii)  where the person cannot be found, by leaving a copy of the order with \r\nsome adult male member of his family or by affixing such copy to \r\nsome conspicuous part of The premises in which he is known to have \r\nlast resided or carried on business or personally worked for gains, and \r\nevery such order shall also be published in the official Gazette. \r\n(5) If any question arises whether a person was duly served with an order under sub-section \r\n(4) the publication of the order in the official Gazette shall be conclusive proof that the order was so \r\nserved, and a failure to comply with the provisions of clause (a) or clause (b) of sub-section (4) shall \r\nnot affect the validity of the order. \r\n(6) Notwithstanding anything contained in this section, any property in respect of which an \r\norder has been made by the Administrator may, with the previous permission of the Administrator \r\nand subject to such terms and conditions as he may impose, be transferred or otherwise disposed of. \r\n(7) Notwithstanding anything contained in any other law for the time being in force, the \r\ntransfer or other disposition of any property in contravention of any order made by the Administrator \r\nunder this section or of any terms and conditions imposed by him shall be void. \r\n(8) For the purpose of enabling him to form an opinion as to whether any property would be \r\nliable to attachment in proceedings under section 1860 (Act XLV of 1860) or for the purpose of \r\nenabling him to institute proceedings under that section, the Administrator may require any person to \r\nfurnish information on such points or matters as, in the opinion of the Administrator may be relevant \r\nfor the purpose, and any person so required shall be deemed to be legally bound to furnish such \r\ninformation within the meaning of section 176 of the Pakistan Penal Code. \r\n(9) The Administrator shall have all the powers of a civil court under the Code of Civil \r\nProcedure, 1908, (Act V of 1908) while trying a suit in respect of the following matters, namely:— \r\n \r\nPage 94 of 109 \r\n \r\n(a)  summoning and enforcing the attendance of witnesses and examining them on \r\noath; \r\n(b)  requiring the production of documents; and \r\n(c)  receiving evidence on affidavits; \r\nand any proceeding before the Administrator under this section shall be deemed to be a judicial \r\nproceeding within the meaning of section 193 and 228 of the Pakistan Penal Code 1860. (Act XLV \r\nof 1860) \r\n(10) Save as provided in this section of in section 160, and notwithstanding anything \r\ncontained in any other law for the time being in force— \r\n(a)  no suit or other legal proceeding shall lie in any Court to set aside or modify \r\nany order of the Administrator or the Federal Government made under this \r\nsection; and \r\n(b)  no Court shall pass any decree, grant any injunction or make any other order \r\nwhich shall have the effect of nullifying or affecting in any way any such \r\norder. \r\n138. Cancellation of contracts and agreement. The Administrator may, at any time during \r\nthe continuance of his appointment with respect to any insurer and after giving an opportunity to the \r\npersons concerned to be heard, cancel or vary (either unconditionally or subject to such conditions as \r\nhe thinks fit to impose) any contract or agreement (other than a policy) between the insurer and any \r\nother person which the Administrator is satisfied is prejudicial to the interests of holders of insurance \r\npolicies. \r\n139. Termination of appointment of Administrator. If at any time it appears to the \r\nCommission that the purpose of the order appointing the Administrator has been fulfilled or that for \r\nany reason it is undesirable that the order of appointment should remain in force, the Commission \r\nmay cancel the order and thereupon the Administrator shall be divested of the management of the \r\ninsurance business which shall, unless otherwise directed by the Commission, again vest in the \r\nperson in whom it was vested immediately prior to the date of appointment of the Administrator. \r\n140. Finality of decision of appointing Administrator. Any order or decision of the \r\nCommission made in pursuance of section 135 or section 139 shall be final and shall not be called in \r\nquestion in any Court or Tribunal. \r\n141. Penalty for withholding document or property from Administrator. If any director \r\nor officer of the insurer or any other person fails to deliver to the Administrator any books of \r\naccount, registers or any other documents in his custody relating to the business of the insurer the \r\nmanagement of which has vested in the Administrator, or retains any property of such insurer, he \r\nshall be punishable with imprisonment which may extend to six months, or with fine which may \r\nextend to one million rupees, or with both. \r\n142. Protection of action taken under sections 135 to 139.—(1) No suit, prosecution or \r\nother legal proceeding shall lie against an Administrator for anything which is in good faith done or \r\nintended to be done in pursuance of section 135, section 136, section 137 or section 138. \r\n \r\nPage 95 of 109 \r\n \r\n(2) No suit or other legal proceeding shall lie against the Commission for any damage caused \r\nOr likely to be caused by anything which is in good faith done or intended to be done under section \r\n135, section 136 or section 139. \r\nPart XVIII \r\nWINDING UP \r\n143. Winding up by the Court.—(I) The Court may order the winding up in accordance \r\nwith the Companies Ordinance, 1984, (XLVII of 1984) of any insurance company and the provisions \r\nof that Ordinance shall, subject to the provisions of this Ordinance, apply accordingly. \r\n(2) The Court may, provided that it is satisfied that such order is in the interests of the policy \r\nholders of the company, order the winding up of an insurance company; \r\n(a)  on the grounds set out in section 305 of the Companies Ordinance 1984, \r\n(XLVII of 1984) but subject always to the provisions of this Ordinance; \r\n(b)  if with the sanction of the Court previously obtained a petition in this behalf is \r\npresented by shareholders not less in number than one-tenth of the whole body \r\nof shareholders and holding not less than one-tenth of the whole share capital \r\nor by not less than fifty policy holders holding participating policies of life \r\ninsurance other than paid up policies, that have been in force for not less than \r\nthree years and have a total sum insured, including bonuses added to the sum \r\nassured of not less than fifty million rupees; or \r\n(c)  if the Commission, who is hereby authorised to do so, applies in this behalf to \r\nthe Court on any of the following grounds, namely:— \r\n(i)  that the company having failed to comply with any requirement of this \r\nOrdinance has continued such failure or having contravened any \r\nprovision of this Ordinance has continued such contravention for a \r\nperiod of three months after notice of such failure or contravention has \r\nbeen conveyed to the company by the Commission; \r\n(ii)  that it appears from the returns furnished under the provisions of this \r\nOrdinance, or from the results of any investigation made thereunder, or \r\nfrom a report made by any Administrator appointed thereunder that the \r\ncompany- is insolvent; or \r\n(iii)  that the continuance of the company is prejudicial to the interests of \r\nthe policy holders. \r\n(3) An insurance company in respect of which a winding up order is made shall immediately \r\ncease to enter into new contracts of insurance, whether in life or non-life insurance. \r\n(4) All contracts of non-life insurance issued by an insurer which are in force at the date of an \r\norder for the winding up of the insurer, shall stand cancelled as at the date of the order or at such \r\nlater date as may be specified in the order. \r\n \r\nPage 96 of 109 \r\n \r\n144. Voluntary winding up. Notwithstanding anything contained in the Companies \r\nOrdinance, 1984, (XLVII of 1984) an insurance company shall not be wound up voluntarily unless it \r\nhas first transferred or otherwise made provision for the settlement of its liabilities incurred under \r\ninsurance contracts, and its registration has been revoked. \r\n145. Court may order continuation of life insurance business.—(1) The liquidator of an \r\ninsurer carrying on life insurance shall, if the Court so orders, carry on the life insurance business, or \r\nthe life insurance business carried on in any one or more statutory funds, of the insurer with a view to \r\nits being transferred as a going concern to another insurance (being a company) registered under this \r\nOrdinance, whether an existing company or a company formed for that purpose. \r\n(2) If an order is given under sub-section (1), and has not been revoked, each statutory fund \r\nto which the order applies shall be considered for the purposes of the liquidation to constitute a \r\nsingle asset of the insurer, and no assets of any such statutory fund shall be applied in the winding up \r\nof the insurer, neither shall any liabilities of any such statutory fund share in any distribution of \r\nassets upon winding up. \r\n(3) In carrying on the life insurance business in any statutory fund of an insurer in accordance \r\nwith an order of a Court under sub-section (1), the liquidator may, subject to the provisions of this \r\nOrdinance, agree to the variation of any contracts of insurance in existence when the winding up \r\norder is made but shall not effect any new contracts of insurance. \r\n146. Court may appoint special manager of life insurance business.—(1) If the liquidator \r\nof a life insurer is satisfied that the interests of policyholders require the appointment of a special \r\nmanager of the insurer’s life insurance business, he may make application to the Court to appoint a \r\nspecial manager. \r\n(2) The Court may, on an application made under subsection (1), appoint a special manager \r\nof the insurer’s life insurance business to act during such time as the Court may direct, with such \r\npowers, including any of the powers of a receiver or manager, as may be entrusted to him by the \r\nCourt. \r\n147. Court may appoint independent actuary.—(1) The Court may, on the application of \r\nthe liquidator, of a special manager appointed under section 146 or of the Commission, appoint an \r\nactuary (not being the insurer’s appointed actuary at any time during the five years prior to the \r\ninsurer entering into liquidation) to investigate the life insurance business of the insurer according to \r\nsuch scope as the Court shall direct, but including without limitation:— \r\n(a)  the desirability or otherwise of that business being continued; and that \r\nproposed application, including details of the proposed application. \r\n(b)  any reduction in the contracts made in the course of carrying on that business \r\nthat may be necessary for its successful continuation. \r\n(2) An actuary appointed under sub-section (1) shall report to the liquidator, the special \r\nmanager or to the Court and within such time as the Court may direct, on any investigation \r\nconducted by the actuary pursuant to this section. \r\n148. Power of Court to reduce contract of life insurance. —(1) Where an insurer is in \r\nliquidation, the Court may make an order reducing the amount of the insurance contracts of the \r\n \r\nPage 97 of 109 \r\n \r\ninsurer upon such terms and subject to such conditions as the Court believes to be in the interests of \r\nthe policy holders of the insurer; \r\n(2) This section applies also to the business of a statutory fund of a life insurer which is being \r\ncarried on by a liquidator pursuant to an order made by the Court under section 145. \r\n(3) An application for an order under this section may be made either by the liquidator, or by \r\nor on behalf of the company or by a policy holder, or by the Commission; and the Commission and \r\nany person whom the Court thinks likely to be affected shall be entitled to be heard on any such \r\napplication. \r\n149. Commission empowered to apply for directions.—(1) The Commission may apply to \r\nthe Court for directions regarding any matter arising in connection with or upon the winding-up of an \r\ninsurer. \r\n(2) Before making an application under sub-section (1), the Commission shall give the \r\nliquidator and the special manager (if any) written notice of that proposed application, including \r\ndetails of the proposed application. \r\n(3) The liquidator and the special manager shall be entitled to be heard on the application. \r\n150. Commission entitled to notice and hearing.—(1) Before making an application to the \r\nCourt in relation to a matter arising in connection with or upon the winding-up of an insurer, a \r\nliquidator or a special manager shall give the Commission not less than fifteen days written notice of \r\n(2) The Commission shall be entitled to be heard on the application. \r\n151. Commission entitled to obtain information.—(1) The Commission may in writing \r\nrequest a liquidator or a special manager to provide such information as the Commission may deem \r\nnecessary, in relation to the winding up of an insurer. \r\n \r\n(2) The liquidator or special manager shall comply with the request within fifteen days or, \r\nsuch further period as the Commission shall, on application made to it for extension of time for \r\nproviding such information, grant. \r\n152. Determination of insurance liabilities. —(1) This section shall not apply to the life \r\ninsurance business of a statutory fund of a life insurer in respect of which an order has been made by \r\nthe Court under section 145 to continue that business, and that order has not been \r\n(2) In the winding up of an insurer the liquidator shall— \r\n(a)  by examination of the books and records of the insurer, identify persons \r\nappearing by those books and records to be entitled to or interested in the \r\npolicies granted by the insurer; \r\n(b)  determine the value of the liability of the insurer to each such person; and \r\n(c)  give notice of such value to those persons in such manner as the Court may \r\ndirect. \r\n \r\nPage 98 of 109 \r\n \r\n(3) A determination under clause (b) of sub-section (2) shall be made in accordance with the \r\ndirections of the Court— \r\n(4) In giving directions under sub-section (3) the Court shall, and in making the \r\ndetermination under the clause (b) of sub-section (2) the liquidator shall have regard to— \r\n(a)  the surrender value of life insurance contracts; \r\n(b)  the amount of surplus, if any, that has been allocated for the benefit of \r\nparticipating life insurance policyholders; and \r\n(c)  the premium paid, the pattern of risk and the length of the unexpired portion of \r\ncontracts of non-life insurance. \r\n(5) Any person to whom notice is given under clause (c) of sub-section (2) shall be bound by \r\nthe value stated in that notice unless he gives notice of his intention to dispute such value in such \r\nmanner and within such time as may be specified by applicable rules and failing which by an order \r\nof the Court. \r\n153. Application of statutory fund assets.—(1) This section, other than sub-sections (6) and \r\n(7), does not apply to a statutory fund of a life insurer in respect of which an order has been made \r\nunder section 145 to continue the life insurance business of that statutory fund, and that order has not \r\nbeen revoked. \r\n(2) In the winding up of an insurance company carrying on life insurance business, the assets \r\nand the liabilities of each statutory fund of the insurer shall be ascertained separately from the value \r\nof the assets and liabilities of each other statutory fund or of the shareholders’ fund. \r\n(3) Subject to this section, in the winding-up of a life insurer, the assets of a statutory fund \r\nshall first be applied in accordance with section 405 of the Companies Ordinance in discharging \r\npreferential payments given priority under that section. \r\n(4) Sub-section (3) shall have effect only to the extent that creditors of the company which \r\nhave statutory preference under section 405 of the Companies Ordinance, 1984, (XLVII of 1984) in \r\nrespect of liabilities which are liabilities that are referable to the business of the statutory fund. \r\n(5) If any assets of the statutory fund remain after the application of subsection (3), the assets \r\nshall be applied according to the following rules, namely:— \r\n(a)  the assets shall be applied first in discharge of policy liabilities of the insurer \r\nreferable to the statutory fund; \r\n(b)  if any assets remain, they shall be applied in discharge of other liabilities that \r\nare referable to the business of the statutory \r\n(c)  if, after the application of assets according to clauses (a) and (b), any assets of \r\nthe statutory fund remain, those assets are to be applied in such manner as the \r\nCourt directs; \r\n \r\nPage 99 of 109 \r\n \r\n(d)  directions given for the purpose of clause (c) are to be such directions as the \r\nCourt considers equitable, having regard in decreasing order of preference to: \r\n(i)  the interests of the holders of policies referable to the statutory fund; \r\n(ii)  the interests of the holders of policies referable to statutory funds of \r\nthe insurer other than the statutory fund; \r\n(iii)  the interests of creditors of the company other than creditors of the \r\nstatutory fund whose debts have not been discharged by the application \r\nof assets according to clause (b); and \r\n(iv)  the interests of shareholders of the company. \r\n(6) If a liability of the company— \r\n(a)  is referable to two or more statutory funds (including a statutory fund or funds \r\nreferred to in sub-section (1);or \r\n(b)  is referable in part to a statutory fund or statutory funds (including in both \r\ncases a statutory fund referred to in sub-section (1)) but is also related to the \r\nshareholders’ fund; \r\nthe liquidator may apportion the liability so as to determine the part of the liability that is to be borne \r\nby each of the statutory funds or by the statutory fund or funds and the shareholder’s fund, as the \r\ncase may be on a fair and equitable basis. \r\n(7) In making an apportionment under sub-section (6), the liquidator shall comply with any \r\ndirections of the Court. \r\n(8) The part of the amount so determined in relation to a statutory fund is to be treated as a \r\nliability of the insurer that is referable to the business of the fund. \r\n154. Winding up secondary companies.—(1) Where the insurance business or any part of \r\nthe insurance business of an insurance company has been transferred to another insurance company \r\nunder an arrangement in pursuance of which the first mentioned company (in this section referred to \r\nas the secondary company) or the creditors thereof has or have claims against the company to which \r\nsuch transfer was made (in this section referred to as the principal company) then, if the principal \r\ncompany is being wound up by or under the supervision of the Court, the Court shall (subject as \r\nhereinafter mentioned) order the secondary company to be wound up in conjunction with the \r\nprincipal company and may be the same or any subsequent order appoint the same person to be \r\nliquidator for the two companies and make provision for such other matters as may seem to the Court \r\nnecessary with-a view to the companies being wound up as if they were one company. \r\n(2) The commencement of the winding up of the principal company shall, save as otherwise \r\nordered by the Court, be the commencement of the winding up of the secondary company. \r\n(3) In adjusting the rights and liabilities of the members of the several companies among \r\nthemselves the Court shall have regard to the constitution of the companies and to the arrangements \r\nentered into between the companies in the same manner as the Court has regard to the rights and \r\n \r\nPage 100 of 109 \r\n \r\nliabilities of different classes of contributories in the case of the winding up of a single company or \r\nas near thereto as circumstances admit. \r\n(4) Where any company alleged to be secondary is not in process of being wound up at the \r\nsame time as the principal company to which it is alleged to be secondary, the Court shall not direct \r\nthe secondary company to be wound up, unless, after hearing all objections (if any) that may be \r\nurged by or on behalf of the company against its being wound up, the Court is of opinion that the \r\ncompany is secondary to the principal company and that the winding up of the company in \r\nconjunction with the principal company is just and equitable. \r\n(5) An application may be made in relation to the winding up of any secondary company in \r\nconjunction with the principal company by any creditor of, or person interested in, the principal or \r\nsecondary company. \r\n(6) Where a company stands in the relation of a principal company to one insurance company \r\nand in the relation of a secondary company to some other insurance company or where there are \r\nseveral insurance companies standing in the relation of secondary companies to one principal \r\ncompany, the Court may deal with any number of such companies together or in separate groups as it \r\nthinks most expedient upon the principle laid down in this section. \r\n155. Return of deposits. In the winding up of an insurer the liquidator shall apply to the \r\nCourt for an order for the return of the deposit made by the insurer under section 29 and the Court \r\nshall on such application order a return of the deposit subject to such terms and conditions as it shall \r\ndirect: \r\nProvided that in the case of a deposit made under section 29 which by virtue of this \r\nOrdinance is deemed to be an asset of a statutory fund in respect of which an order has been made \r\nunder section 145 to continue the life insurance business of that statutory fund and that order has not \r\nbeen revoked, the Court shall not order the return of that deposit. \r\nPart XIX \r\nOFFENCES AND PENALTIES \r\n \r\n156. Penalty for default in this Ordinance or acting in contravention of this ordinance . \r\nExcept as otherwise provided in this Ordinance, any insurer who makes default in complying with or \r\nacts in 1[or any direction made by the Commission shall have the power to impose fine on the \r\ninsurer] company, who is knowingly a party to the default, shall be punishable with fine which may \r\nextend to one million rupees and, in the case of a continuing default, with an additional fine which \r\nmay extend to ten thousand rupees for every day during which the default continues. \r\n \r\n157. Penalty for transacting insurance business in contravention of sections 5, 6 and 29. \r\n—(1) Any insurer or any person acting on behalf of an insurer, who carries on any class of insurance \r\nbusiness in contravention of any of the provisions of sections 5, 6 and 29, or does any one or more of \r\nthe acts constituting the business of insurance in relation to any insurance business carried on in \r\ncontravention of any of the said sections shall be punishable with fine which may extend to two \r\nmillion rupees. \r\n \r\n1Ins. by Act IV of 07, s.19 (w.e.f. 1-7-2007) \r\n \r\nPage 101 of 109 \r\n \r\n(2) Any person knowingly taking out a policy of insurance with any insurer or person guilty \r\nof an offence under sub-section (1) shall be punishable with fine which may extend to five hundred \r\nthousand rupees: \r\nProvided that nothing in sub-section (1) or sub-section (2) shall apply to the business of \r\nreinsurance between an insurer in Pakistan and an insurer not having an office in Pakistan. \r\n158. Penalty for false statement in document. Except as otherwise provided in this \r\nOrdinance, whoever, in any return, report, certificate, balance-sheet or other document, required by \r\nor for the purposes of any of the provisions of this Ordinance, wilfully makes a statement false in any \r\nmaterial particular, knowing it to be false, shall be punishable 1[by the commission] with fine which \r\nmay extend to one million rupees, \r\n159. Wrongfully obtaining or withholding property.—(1) Any director, or other officer or \r\nemployee of an insurer who wrongfully obtains possession of any property of the insurer or having \r\nany such property in his possession wrongfully withholds it or wilfully applies it to purposes other \r\nthan those expressed or authorised by this Ordinance, shall, on the complaint of the Commission \r\nmade after giving the insurer not less than fifteen days’ notice of its intention, or on the complaint of \r\nthe insurer or any member or any policy holder thereof, be punishable with fine which may extend to \r\none million rupees and may be ordered by the Court trying the offense to deliver up or refund within \r\na time to be fixed by the Court any such property improperly obtained or wrongfully withheld or \r\nwilfully misapplied and in default to suffer imprisonment for a period not exceeding two years. \r\n(2) For the purposes of this section, property of a life insurance statutory fund maintained by \r\nan insurer is property of that insurer. \r\n160. Power of Tribunal to order restoration of property insurer or compensation in \r\ncertain cases.—(1) If, on the application of the Commission or an Administrator appointed under \r\nsection 135 or an insurer or any policy holder or any member of an insurance company or the \r\nliquidator of an insurance company (in the event of the insurance company being in liquidation), the \r\nTribunal is satisfied: \r\n(a)  that any insurer (including in any case where the insurer is an insurance \r\ncompany any person who has taken part in the promotion or formation of the \r\ninsurance company or any past or present director, managing agent, manager, \r\nsecretary or liquidator) or any officer, employee or agent of the insurer,— \r\n(i)  has misapplied or retained or become-liable or become accountable for \r\nany money or property of the insurer; or \r\n(ii)  has been guilty of any misfeasance or breach of trust in relation to the \r\ninsurer; or \r\n \r\n(b)  that any person, whether he is or has been in any way connected with the \r\naffairs of the insurer or not, is in wrongful possession of any money or \r\nproperty of the insurer or having any such money or property in his possession \r\nwrongfully withholds it or has converted it to any use other than that of the \r\ninsurer; \r\n \r\n1Ins, Omitted by Act IV of 07, S. 19 (w.e.f. 1-7-07) \r\n \r\nPage 102 of 109 \r\n \r\nthe Tribunal may examine any such insurer, director, managing agent, manager, secretary or \r\nliquidator or any such officer, employee or agent of the insurer or such other person, as the case may \r\nbe, and may compel him to contribute such sums to the assets of the insurer by way of compensation \r\nin respect of the misapplication, retainer, misfeasance or breach of trust as the Tribunal thinks fit, or \r\nto pay such sum as may be found due from him in respect of any money or property of the insurer for \r\nwhich he is liable or accountable or to restore any money or property of the insurer or any part \r\nthereof, as the case may be; and the Tribunal shall have power to order the payment of damages at \r\nsuch rate and from such time as specified in section 118 or as the Tribunal may otherwise deem fit. \r\n(2) Without prejudice to the provisions contained in subsection (1) or sub-section (3), where \r\nit is proved that any money or property of an insurer has disappeared or has been lost, the Tribunal \r\nshall presume that every person in charge of, or having a disposing power over, such money or \r\nproperty at the relevant time (Whether a director, manager, principal officer or any other officer) has \r\nbecome accountable for such money or property within the meaning of sub-clause (i) of clause (a) of \r\nsub-section (1), and the provisions of that sub-section shall apply accordingly, unless such person \r\ndemonstrates to the satisfaction of the Tribunal that the money or property has been utilised or \r\ndisposed of in the ordinary course of the business of the insurer and for the purpose of that business \r\nand in accordance with the provisions of this Ordinance, or that he took all reasonable steps to \r\nprevent the disappearance or loss of such money or property or otherwise satisfactorily accounts for \r\nsuch disappearance or loss. \r\n(3) Where the insurer is an insurance company and any of the acts referred to in clauses (a) or \r\n(b) of sub-section (1) has been committed by any person, every person who was at the relevant time \r\na director, managing agent, manager, liquidator, secretary or other officer of the insurance company \r\nshall, for the purposes of that sub-section be deemed to be liable for that act in the same manner and \r\nto the same extent as the person who has committed the act, unless he proves that act was committed \r\nwithout his consent or connivance and was not facilitated by any neglect or omission on his part. \r\n(4) For the purposes of this section, money or property of an insurer includes money or \r\nproperty of a life insurance statutory fund maintained by that insurer, and any sum paid to or money \r\nor property restored to or liquidated damages paid to an insurer in accordance with sub-section (1) \r\nwhich relate to the money or property of a statutory fund shall be applied to that statutory fund. \r\n(5) Where at any stage of the proceedings against any person under this section (hereinafter \r\nreferred to as the delinquent), the Tribunal is satisfied by affidavit or otherwise:— \r\n(a)  that a prima facie case has been made out against the delinquent; and \r\n(b)  that it is just and proper so to do in the interest of the policy holders of an \r\ninsurer or of the members of an insurance company, \r\nthe Tribunal may direct the attachment of:— \r\n(i)  any property of the insurer in the possession of the delinquent; \r\n(ii)  any property of the delinquent which belongs to him or is deemed to \r\nbelong to him within the meaning of sub-section (6); or \r\n(iii)  any property transferred by the delinquent within two years before the \r\ncommencement of proceedings under sub-section (1) or during the \r\n \r\nPage 103 of 109 \r\n \r\npendency of such proceedings, if the Tribunal is satisfied by affidavit \r\nor otherwise that the transfer was otherwise than in good faith and for \r\nconsideration. \r\n(6) For the purposes of sub-section (5), the following classes of property shall be deemed to \r\nbelong to a delinquent:— \r\n(a)  any property standing in the name of any person which by reason of the \r\nperson being connected with the delinquent, whether by way of relationship or \r\notherwise, or on account of any other relevant circumstances appears to belong \r\nto the delinquent; \r\n(b)  the property of a private company in respect of the affairs of which the \r\ndelinquent, by himself or through his nominees, relatives, partners or persons \r\ninterested in any shares of the company is able to exercise or is entitled to \r\nacquire control, whether direct or indirect. \r\nExplanation.—For the purposes of this section a person shall be deemed to be a nominee of a \r\ndelinquent, if, whether directly or indirectly, he possesses on behalf of the delinquent, or may be \r\nrequired to exercise on the direction or on behalf of the delinquent, any right or power which is of \r\nsuch a nature as to enable the delinquent to exercise or to entitle the delinquent to acquire control \r\nover the company’s affairs. \r\n(7) Any claim to any property attached under this section or any objection to such attachment \r\nshall be made by an application to the Tribunal and it shall be for the claimant or objector to adduce \r\nevidence to show that the property is not liable to attachment under this section, and the Tribunal \r\nshall proceed to investigate the claim or objection in a summary manner. \r\n(8) When disposing of an application under sub-section (1), the Tribunal shall, after giving all \r\npersons who appear to it to be interested in any property attached under this section an Opportunity \r\nof being heard, make such order as it thinks fit respecting the disposal of any such property for the \r\npurpose of effectively enforcing any liability under this section, and all such persons shall be deemed \r\nto be parties to the proceedings under this section. \r\n(9) In any proceedings under this section the Tribunal shall have full powers and exclusive \r\njurisdiction to decide all questions of any nature whatsoever arising thereunder and in particular, \r\nwith respect to any property attached under this section and no other Tribunal shall have jurisdiction \r\nto decide any such question in any suit or other legal proceeding. \r\n(10) In making any order with respect to the disposal of the property of any private company \r\nreferred to in clause (b) of subsection (6), the Tribunal shall have due regard to the interests of all \r\npersons interested in such property other than the delinquent and persons referred to in that clause. \r\n(11) This section shall apply notwithstanding that the act is one for which the person \r\nconcerned may be criminally liable. \r\n(12) In proceedings under this section the Tribunal shall have all the powers which a Court \r\nhas under section 418 of the Companies Ordinance, 1984. (XLVII of 1984) \r\n \r\nPage 104 of 109 \r\n \r\n(13) The Tribunal entitled to exercise jurisdiction under this section shall be the Tribunal \r\nwithin whose jurisdiction the registered office of the insurer is situate and any proceedings under this \r\nsection pending immediately before the commencement of this Ordinance in any Court shall, on such \r\ncommencement, stand transferred to the Tribunal. \r\n(14) A Tribunal may, with the approval of the High Court exercising territorial jurisdiction \r\nover it, make rules providing for— \r\n(a)  the manner is which equiries and proceedings may be held under this section; \r\nand \r\n(b)  any other matter for which provision has to be made for enabling the Tribunal \r\neffectively to exercise its jurisdiction under this section. \r\n161. Notice to Commission and hearing. —(1) When application is made to the Tribunal \r\nfor the making of any order to which this section applies the Tribunal shall, unless the Commission \r\nhas itself made the application or has been made a party thereto, send a copy of the application \r\ntogether with intimation of the date fixed for the hearing thereof to the Commission, and shall give \r\nthe Commission an opportunity of being heard. \r\n(2) The orders to which this section applies are the following namely:— \r\n(a)  an order for the attachment in execution of a decree of any deposit made \r\nunder section 29; \r\n(b)  an order under section 155 for the return of any such deposit; \r\n(c)  an order under section 69 sanctioning any arrangement for the transfer or \r\namalgamation of life insurance business or any order consequential thereon; \r\nand \r\n(d)  an order for the winding up of an insurance company. \r\n162.Previous sanction of Commission for institution of proceedings. —(1) Except where \r\nproceedings are instituted by the Commission no proceedings under this Ordinance against an insurer \r\nor any director, manager or other officer of an insurer shall be instituted by any person unless he has \r\nprevious thereto obtained the sanction of the Commission (which shall not unreasonably be \r\nwithheld) to the institution of such proceedings. \r\n(2) Where the proceedings are not initiated by the Commission or the Commission has not \r\nbeen made a party, the Tribunal shall before proceeding further in the matter give notice to the \r\nCommission and shall not proceed to hear and decide the matter without giving the Commission the \r\nopportunity of participating in the proceedings and being heard. \r\n163. Power of Court to grant relief. If in any proceedings, civil or criminal, it appears to the \r\nCourt or the Tribunal hearing the case that a person is or may be liable in respect of negligence, \r\ndefault, breach of duty or breach of trust but that he has acted honestly and reasonably and that \r\nhaving regard to all the circumstances of the case he ought fairly to be excused for the negligence, \r\ndefault, breach of duty or breach of trust, the Court or the Tribunal may relieve him either wholly or \r\npartly from his liability on such terms as it may think fit. \r\n \r\nPage 105 of 109 \r\n \r\nPart XX \r\nMISCELLANEOUS \r\n164. Service of notices.—(1) Any process or notice required to be served on an insurer shall \r\nbe sufficiently served if addressed to any person registered with the Commission as a person \r\nauthorised to accept notices on behalf of the insurer and left at, or sent by registered post to, the \r\naddress of such person as registered with the Commission. \r\n(2) Any notice or other document which is by this Ordinance required to be sent to any policy \r\nholder may be addressed and sent to the person to whom notices respecting such policy are usually \r\nsent and any notice so addressed and sent shall be deemed to be notice to be holder of such policy: \r\nProvided that, where any person claiming to be interested in a policy as transferee, assignee \r\nor nominee has given to an insurer notice in writing of his interest, any notice which is by this \r\nOrdinance required to be sent to policy holders shall also be sent to such person at the address \r\nspecified by him in his notice. \r\n165. Insurance interests in Pakistan.—(1) The Federal Government may make rules, not \r\ninconsistent with this Ordinance, imposing conditions on the ability of any person to insure outside \r\nPakistan any risk or part thereof in respect of any property or interests which are located in Pakistan \r\nat the time the insurance is effected. \r\n(2) The Federal Government may make rules, not inconsistent with this Ordinance, imposing \r\nconditions on the ability of any insurer to issue life insurance policies denominated in currencies \r\nother than the Pakistan Rupee to persons who are citizens of Pakistan and resident in Pakistan at the \r\ntime the insurance is effected. \r\n166. Insurance of public property.—(1) This section applies to direct non-life insurance of \r\npublic property. \r\n(2) In this section— \r\n(a)  “Company” means the National Insurance Company Limited; \r\n(b)  “public property” means: \r\n(i)  any property, movable or immovable, which belongs to, or the safety \r\nof which is the legal responsibility of,— \r\n(A)  the Federal Government, a Provincial Government or a local \r\nauthority or statutory corporation; or \r\n(B)  any company, firm, undertaking, institution, organisation or \r\nother establishment which is managed or controlled by the \r\nFederal or a Provincial Government or local authority or \r\nstatutory corporation or in which such Government, by itself or \r\njointly with a local authority or corporation or company \r\nmanaged or controlled by it, holds a controlling financial share \r\nor interest or which is specified by the Federal Government for \r\nthe purposes of this clause; and \r\n \r\nPage 106 of 109 \r\n \r\n(ii)  a project financed out of an external loan, or with external aid until it \r\nreaches: \r\n(A)  in the case of an industrial project, the stage at which it is \r\ncapable of commencing normal production; and \r\n(B)  in the case of any other project, the stage at which it is capable \r\nof being put to the use for which it is intended; and \r\n(c)  “statutory corporation” means a body corporate, other than a company, \r\nestablished or set up by the Federal Government or a Provincial Government \r\nin pursuance of any law. \r\n(3) Subject to the provisions of sub-sections (4) and (5), all insurance business relating to any \r\npublic property, or to any risk or liability appertaining to any public property, shall be placed with \r\nthe Company only and shall not be placed with any other insurer; \r\nProvided that marine, aviation and transport insurance relating to goods the import of which \r\nis financed out of an external loan, or with external aid, may, at the option of the importer, be placed \r\nwith any insurer authorised to carry out such insurance business in the country giving the loan or aid. \r\n(4) The Federal Government may— \r\n(a)  by order in writing exempt from compliance with subsection (3) any property \r\nor liability to which that subsection applies; or \r\n(b)  by notification in the official Gazette exclude from the application of sub-\r\nsection (3) such property or liability as is specified in that notification. \r\n(5) If the Company declares in writing that it is not able, by virtue of the operation of a \r\nprovision of this Ordinance or for any other reason, to enter into a contract of insurance to which \r\nsub-section (3) refers, the property or liability which is the subject of that proposed contract of \r\ninsurance shall be exempted from the provisions of sub-section (3) to the extent of the insurance \r\nproposed to be obtained by means of that contract of insurance. \r\n(6) Any person who insures, and any insurer which accepts insurance of, any property or \r\nliability, knowing such insurance to be in contravention of sub-section (3), shall be guilty of an \r\noffence: \r\nProvided that no person shall be in contravention of subsection (3) by reason only of that sub-\r\nsection becoming applicable to property or liability to which it was not applicable at the time that a \r\ncontract of insurance in respect of that property or liability was taken out. \r\n(7) The Federal Government may, by notification in the official Gazette, make rules, \r\nregulations and notifications, not inconsistent with the provisions of this Ordinance, for carrying out \r\nthe purposes of this section. \r\n(8) Rules, regulations and notifications, made under the authority of the National Insurance \r\nCorporation Act 1976 for the purposes of section 10 of that Act and in force as at the commencement \r\ndate, shall be deemed to have been made under the provisions of the preceding sub-section and shall \r\n \r\nPage 107 of 109 \r\n \r\napply mutatis mutandis except in so far as and to the extent that they conflict with the provisions of \r\nthis Ordinance. \r\n(9) This section shall have effect until the earliest of the following dates: \r\n(a)  the effective date of a notification by the Federal Government in the official \r\nGazette that this section no longer has effect; \r\n(b)  the effective date of a direction by the Commission to the Company to cease \r\nentering into new contracts of insurance; and \r\n(c)  the effective date at which the Federal Government ceases to hold a \r\ncontrolling ownership interest in the Company. \r\nPart XXI \r\nRULES AND REGULATIONS \r\n167. Power to make rules and regulations.—(1) The Federal Government may, subject to \r\nthe condition of previous publication by notification in the official Gazette, make rules to carry out \r\nthe purposes of this Ordinance. \r\n(2) The power of the Federal Government to make rules in respect of matters expressly \r\nrequired in this Ordinance to be prescribed by the Commission, shall be deemed to have been hereby \r\ndelegated to the Commission, who may, subject to the condition of previous publication by \r\nnotification in the official Gazette, and subject to the condition of previous approval by the Board, \r\nmake rules in respect of such matters and in respect of any other matters which are required to be or \r\nmay be prescribed under this Ordinance, which the Federal Government may, in exercise of the \r\npower hereby conferred, in writing, published in the Gazette, delegate to the Commission. \r\n(3) The powers of the Board and of the Commission to make regulations, which is conferred \r\nby section 40 of the SECP Act, shall extend to the making of such regulations as may be required to \r\ncarry out the purposes of this Ordinance. \r\nPart XXII \r\nREPEAL AND SAVINGS \r\n168. Repeal. The Insurance Act, 1938 (IV of 1938) is hereby repealed. \r\n169. Repealed Act to apply to certain insurers ceasing to enter into new contracts before \r\ncommencement of this Ordinance.—(1) Sections 28, 29, 36 of this Ordinance shall not apply to an \r\ninsurer in relation to any insurance business where such insurer has ceased, before the \r\ncommencement of this Ordinance, to enter into- any new contracts of insurance and notwithstanding \r\nthe repeal of the repealed Act, the like provisions of the repealed Act shall for so long as he \r\ncontinues to have any liability under any such contracts, apply to such insurer and any contracts \r\nwritten by him prior to the commencement date: \r\nProvided that hot later than one month after the commencement date such insurer has given \r\nto the Commission notice of having ceased to write new contracts and with such notice provides to \r\nthe Commission: \r\n \r\nPage 108 of 109 \r\n \r\n(a)  details of all policies which remain in force as at the commencement date; \r\n(b)  details of all claims reported to the insurer which have not been fully and \r\nfinally settled as at the commencement date; \r\n(c)  a statement of assets and liabilities in the form prescribed as at a date not \r\nearlier than three months before the commencement date; \r\n(d)  if the insurer carries on or has carried on non-life insurance, a report certified \r\nby an actuary estimating the ultimate settlement cost, inclusive of expenses of \r\nsettlement, of claims incurred by the insurer under non-life insurance policies \r\nissued by it, whether or not reported, as at the date to which the statement of \r\nassets and liabilities is made up; \r\n(e)  if the insurer carries on or has carried on life insurance business, a report in \r\nthe form prescribed, certified by an actuary, on the financial condition of the \r\nlife insurance business carried on by the insurer, as at the date to which the \r\nstatement of assets and liabilities is made up; and \r\n(f)  such other particulars as may be prescribed. \r\n(2) An insurer to which sub-section (1) applies shall in each year submit to the Commission, \r\nat the time it submits its annual statutory accounts, statements as follows: \r\n(a)  details of all policies which remain in force as at 31st December in the year to \r\nwhich the annual statutory accounts relate; and \r\n(b)  details of all claims reported which have not been fully and finally settled as at \r\n31st December in the year to which the annual statutory accounts relate. \r\n(3) Within fifteen days of the insurer ceasing to have any policies in force, an insurer to \r\nwhich sub-section (1) applies shall give notice to the Commission to that effect and thereafter the \r\ninsurer shall not be required to submit the statement identified in clause (a) of sub-section (2). \r\n(4) For the purposes of this section, a policy is in force as at a date if the policy has not lapsed \r\nor been cancelled with effect on or before that date, and either— \r\n(a)  the term stipulated in the policy during which premium is to be paid has not \r\nexpired, on or before that date; or \r\n(b)  the term stipulated in the contract during which an insured event may occur \r\nhas not expired, on or before that date. \r\n(5) For the avoidance of doubt, a policy of life insurance which has been paid up is a policy \r\nin force for the purposes of this section. \r\n170. Savings. —(1) Nothing in this Ordinance shall affect the liability of an insurer, being a \r\ncompany, to comply with the provisions of the Companies Ordinance, 1984, (XLVII of 1984) in \r\nmatters not otherwise specifically provided for this Ordinance. \r\n \r\nPage 109 of 109 \r\n \r\n(2) Save as otherwise provided in this Ordinance, nothing in this Ordinance shall affect or be \r\ndeemed to affect anything done, investigation or proceedings commenced, order, rule, regulation, \r\nappointment, document or agreement made, fee prescribed or charged, resolution passed, direction \r\ngiven, proceedings taken, or instrument executed or issued under or pursuant to the repealed Act or \r\nany law amended or repealed by this Ordinance and any such thing, action, investigation, \r\nproceedings, order, rule, regulation, appointment, document or agreement, fee, resolution, direction, \r\nproceedings or instrument shall, if in force at the commencement date for this section and not \r\ninconsistent with any of the provisions of this Ordinance, continue in force and have effect as if it \r\nhad been respectively done, taken, commenced, made, prescribed, charged, directed, passed, given, \r\nexecuted or issued under this Ordinance or any other laws as amended by this Ordinance. \r\n(3) Save as otherwise provided in this Ordinance, all debts and obligations incurred or \r\ncontracts entered into or rights acquired and all matters and things engaged to be done by, with or for \r\nthe Federal Government under or pursuant to the repealed Act before the commencement date shall \r\nbe deemed to have been incurred, entered into, acquired or engaged to be done by, with or for the \r\nCommission, as the case may be. \r\n(4) Until the establishment of a Tribunal or Tribunals under this Ordinance, sections 47C to \r\n47L, both inclusive and section 110 of the repealed Act shall continue to have effect in relation to the \r\ncases already filed or pending before the Claims Settlement Board or Insurance Appellate Tribunal \r\nand shall be determined and decided in according with the law in force immediately before the \r\ncommencement date. \r\n(5) All suits and other legal proceedings instituted by or against the Federal Government \r\nunder or pursuant to the repealed Act before the Commencement date shall be deemed to be suits and \r\nproceedings by or against the Commission as the case may be and may proceed and be dealt with \r\naccordingly. \r\n171. Exemptions.—(1) Nothing in this Ordinance shall apply to any insurance business \r\ncarried on by the Federal or by a Provincial Government. \r\n \r\n(2) For the purposes of this section, insurance business carried on by a body corporate shall \r\nnot be deemed to be insurance business carried on by the Federal or by a Provincial Government by \r\nvirtue only of the fact that the Federal or Provincial Government holds a controlling ownership \r\ninterest in the body corporate. \r\n \r\n(3) Any provision in any other law which exempts an insurer to which this Ordinance applies \r\nfrom compliance with this Ordinance or which requires such an insurer to contravene this Ordinance \r\nshall be void to the extent of that exemption or requirement. \r\n \r\n172. Removal of difficulties. If any difficulty arises in giving effect to the provisions of this \r\nOrdinance, the Federal Government may, by notification in the official Gazette, make such provision \r\nor order as may appear to it to be necessary for the purpose of removing the difficulty: \r\n \r\n1[* * * * * * *] \r\n \r\n \r\n \r\n \r\n \r\n1Proviso omitted by Act IV of 07, S. 19 (w.e.f. 1-7-07)",
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