Supplement to the Republic of Zambia Government Gazette dated Friday, 30th December, 2022 1407 GOVERNMENT OF ZAMBIA STATUTORY INSTRUMENT NO. 105 OF 2022 The Insurance Act, 2021 (Act No. 38 of 2021) The Insurance (General) Regulations, 2022 ARRANGEMENT OF REGULATIONS PART I PRELIMINARY PROVISIONS Regulation 1. Title 2. Interpretation 3. Non-application of Regulations PART II LICENSING OF INSURERS, REINSURERS AND INTERMEDIARIES 4. Application 5. Classes of long-term and general insurance business 6. Application for licence for insurers and reinsurers 7. Consideration of application for insurer and reinsurer 8. Grant of insurance and reinsurance licence 9. Application for insurance brokering licence 10. Grant of insurance brokering licence 11. Application for an intermediary licence 12. Grant of intermediary licence 13. Consideration of application for intermediaries 14. Restriction on business of insurance brokers 15. Restriction on business of insurance agency business 16. Restriction on licence of intermediary Copies of this Statutory Instrument can be obtained from the Government Printer, P.O. Box 30136, 10101, Lusaka, Price K136.00 each 1408 Statutory Instruments 30th December, 2022 17. Amendment of Licence 18. Lost or damaged Licence 19. Suspension and cancellation of Licence 20. Register of Licensees PART III FIT AND PROPER PERSON 21. Criteria of fit and proper person 22. Appointment of directors and officers 23. Qualifications of senior officers PART IV CAPITAL ADEQUACY AND INSOLVENCY 24. Solvency margin and capital adequacy requirements 25. Determination of available capital 26. Minimum capital adequacy for general licensed insurer or reinsurer 27. Minimum capital adequacy for long term insurer or reinsurer 28. Determination of ordinary capital adequacy requirement for long term insurer or reinsurer 29. Determination of liabilities 30. Reserves for unexpired risk 31. Reserves for outstanding claims 32. Investment concentration limits 33. Solvency Statement 34 Transitional period of this Part PART V GENERAL PROVISIONS 35. Commencement of business after issuance of licence 36. Request for information 37. Shareholding 38. Fees 39. Guidelines SCHEDULES 30th December, 2022 Statutory Instruments 1409 IN EXERCISE of the powers contained in section 179 of the Insurance Act, the following Regulations are made: 1. These Regulations may be cited as the Insurance (General) Regulations, 2022. 2. In these Regulations, unless the context otherwise requires— Title Interpretation “365th method” means a method that assumes that the risk is spread evenly over the 365 days of a year of cover; “affiliate” means any one of two companies (a) which is a subsidiary of the other; (b) which is a holding company of the other; or (c) both of which are subsidiaries of another company; “Authority” has the meaning assigned to the word in the Act; “available capital” means the excess assets that remain after total liabilities and disallowable assets are removed; “beneficial owner” has the meaning assigned to the words in the Companies Act, 2017; “best estimate assumption” means an assumption that— (a) is realistic; (b) depends on the nature of the business concerned; (c) reflects anticipated experience with no provision for risk of adverse deviations; and (d) is determined by immediate past experience, or modified by any knowledge or expectation of the future; “capital adequacy requirement” means an amountthat shall ensure that the liabilities of the insurer under each policy is less than the amount that shall become available to policyholders when an insurer ceases to operate or make new business; “capital adequacy requirement ratio” means the ratio of available capital to minimum capital requirements; “chain ladder method” means a technique that uses past experience data to forecast or determine the amount of claim reserves that an insurer or reinsurer should maintain; “claims not reported” means a reserve in respect of the claims that occurred before the end of the financial year that have not been reported; Act No. 10 of 2017 1410 Act No. 41 of 2016 Statutory Instruments 30th December, 2022 “collective investment scheme” has the meaning assigned to the words under the Securities Act, 2016; “compulsory margins” means the margins that are used to determine the value of liabilities as provided in the Fifth Schedule; “disallowable assets” means— (a) goodwill and other intangible assets; (b) deferred tax income or expenses and current tax assets or future income tax credits; (c) branding and research and development costs; (d) assets pledged to support credit facilities obtained by related parties; (e) any asset title which is held by a person other than the insurer or reinsurer; (f) any asset that is a mortgage or charged for the benefit of a person other than the insurer; (g) a guarantee given to the insurer, other than a guarantee given by a reinsurer; (h) loans to agents, directors, associates, related parties and shareholders of the insurer or reinsurer; (i) surplus or deficit of right of use assets over lease liability; (j) prepayments; (k) receivables from related parties; (l) receivables outstanding from insurance brokers for more than fourteen days; (m) merchandise inventory and corporate stationary; (n) any implicit accounting assets; (o) deferred acquisition costs; or (p) any other assets that the Authority may determine; “fit and proper person” means a person who meets the criteria set out in regulation 21; “minimum capital adequacy requirement” means the capital that is required to be held by an insurer or reinsurer under regulations 26 and 27; 30th December, 2022 Statutory Instruments 1411 “general insurance business” means insurance business comprising the classes of business specified in regulation 5; “intermediary engagement policy” means a policy developed by an insurer outlining detailed requirements for the engagement of intermediaries; “long term insurance business” means insurance business comprising the classes of business specified in regulation 5; “property” includes direct investment in investment properties, mortgages, land and building for an insurer’s own use; “ordinary capital adequacy requirement” means a factor based approach that establishes capital that is needed to be held in respect of each major risk category isolated and whose formula and list of categories is set out in the Fifth Schedule; “related party” means a person that is related to a licensee if that person has control or significant influence over the licensee or is a senior officer; “reserves for unexpired risk” means a reserve to cover the claims and expenses relating to unexpired periods of risk for which the insurer has already received premiums that are considered inadequate; “termination capital adequacy requirement” means the summation of the lapse capital adequacy requirement and the surrender capital adequacy requirement where— (a) the lapse capital adequacy requirement, for policies without surrender value, is the amount required to ensure that no policy has a negative liability, where liability refers to the statutory liability before considering any other capital adequacy requirements; and (b) the surrender capital adequacy requirement is the amount required to ensure that a policy’s liability is not less than its current surrender value, provided that for a policy which cannot be surrendered or transferred from the long term insurer, the amount is zero; “shareholder” has the meaning assigned to words in the Companies Act, 2017; “senior officers” has the meaning assigned to the words in the Act; Act No. 10 of 2017 1412 Statutory Instruments 30th December, 2022 “significant shareholder” means a person who holds at least ten percent of ordinary shares or has voting rights exceeding ten percent in a licensee; “solvency margin” means the excess of available capital over minimum capital requirements; and “undertaking” means a commitment, business contingency recovery plan or promise. Nonapplication of regulations 3. These Regulations shall not apply to microinsurance. PART II LINCESING OF INSURERS, REINSURERS AND INTERMEDIAIRES Application 4. This Part shall apply to a person making an application for the following types of insurance services: (a) insurance; (b) reinsurance; (c) insurance brokering; (d) loss adjustering (e) risk surveyor; (f) assessor; (g) claims agency; (h) insurance agency; and (i) underwriting agency. Classes of long-term and general insurance business Application for insurance or reinsurance licence 5. Long term insurance business and General insurance business shall comprise of the classes and sub classes of insurance business set out in the First Schedule. 6. (1) A person who intends to provide an insurance or reinsurance service shall apply to the Authority for an insurance or reinsurance licence in Form I set out in the Second Schedule on payment of a fee set out in the Third Schedule. (2) An application referred to in subregulation (1), shall be accompanied by— (a) a certified copy of the applicant’s certificate of incorporation, certificate of share capital and articles of association; (b) the details of the beneficial owners; (c) a group structure, in the case of an applicant that has an affiliate, associate holding or subsidiary company, showing 30th December, 2022 Statutory Instruments (i) the affiliate, associate holding or subsidiary company; (ii) the position of each affiliate, associate holding or subsidiary company; (iii) the relationship between the affiliate, associate holding or subsidiary company and the applicant; (iv) the shareholding held by each affiliate, associate holding or subsidiary company; (v) a general description of the activities of each affiliate, associate holding or subsidiary company; and (vi) (d) the details of significant shareholders including beneficial owners; the details of proposed auditors and actuaries; (e) a board resolution appointing the principal officer; (f) a power of attorney executed in favour of the proposed principal officer; (g) a complete application for approval of appointment for the principal officer, director and senior officer; (h) a complete fit and proper test questionnaire for a significant shareholder; (i) the business plan and financial statement projections covering a minimum period of five years; (j) the proposed premium rates that the applicant intends to apply for each class of business; (k) a certificate by an actuary that the premium rates, terms and conditions are suitable and sustainable for long term insurance business; (l) the most recent audited financial statements of the applicant including the audited financial statements of the applicant’s holding company and the consolidated group financial statements, if any; (m) details of the proposed reinsurance arrangement in the case of an insurer or the proposed retrocession arrangement in the case of a reinsurer; (n) a proposed intermediary engagement policy; (o) proof of adequate funds to meet the minimum capital adequacy requirement; (p) a declaration of the source of funds of the applicant; 1413 1414 Statutory Instruments 30th December, 2022 (q) proof of directors and officers liability cover to the sum assured of the minimum capital adequacy requirement; and (r) proof of membership to the Insurers Association of Zambia. (3) An insurer making an application under subregulation (1) shall indicate the category and class of insurance business the applicant intends to engage in. Consideration of application for insurer and reinsurer Grant of insurance and reinsurance licence 7. The Authority shall, when considering an application under regulation 6, satisfy itself that (a) the applicant’s ownership, corporate and management structure, governance framework, procedures and controls or proposed procedures and controls, financial resources and its proposed reinsurance or retrocession arrangements, are appropriate having regard to the proposed insurance business of the applicant; and (b) the applicant’s significant shareholders, directors and proposed senior officers are fit and proper persons who satisfy the criteria of the fit and proper persons specified under regulation 21. 8. (1) The Authority shall, where the applicant meets the requirements of the Act and these Regulations, approve an application under regulation 6 and issue the applicant with an insurance or reinsurance licence in Form II set out in the Second Schedule. (2) The Authority shall, where the Authority rejects an application under regulation 6, notify the applicant in Form III set out in the Second Schedule. Application for insurance brokering licence 9. (1) A person who intends to provide an insurance brokering service shall apply to the Authority for an insurance brokering licence in Form IV set out in the Second Schedule on payment of a fee set out in the Third Schedule. (2) An application referred to in subregulation (1), shall be accompanied by— (a) a certified copy of the company’s certificate of incorporation, certificate of share capital, and articles of association; (b) a group structure, in the case of an applicant that has an affiliate, associate holding or subsidiary company indicating 30th December, 2022 Statutory Instruments 1415 (i) the affiliate, associate holding or subsidiary company; (ii) the position of each affiliate, associate holding or subsidiary company; (iii) the relationship between the affiliate, associate holding or subsidiary company and the applicant; (iv) the shareholding held by each affiliate, associate holding or subsidiary company; (v) a general description of the activities of each affiliate, associate holding or subsidiary company; and (vi) the details of significant shareholders including beneficial owners; (c) the details of proposed auditors; (d) a board resolution appointing the principal officer; (e) a power of attorney executed in favour of the proposed principal officer; (f) a complete application for approval of appointment for the principal officer, director and senior officer; (g) a complete fit and proper test questionnaire for a significant shareholder; (h) the business plan and financial projections, covering a minimum period of three years; (i) evidence of separate client and operations bank accounts; (j) proof of sufficient funds for operations as the Authority may determine; (k) a declaration of the source of funds of the applicant; (l) proof of professional indemnity and fidelity guarantee cover to the sum assured as the Authority may determine; and (m) proof of membership to the Insurance Brokers Association of Zambia. 10. (1) The Authority shall, where the applicant meets the requirements of the Act and these Regulations, approve an application under regulation 9 and issue the applicant with an insurance brokering licence in Form V set out in the Second Schedule. (2) The Authority shall, where the Authority rejects an application under regulation 9, notify the applicant in Form III set out in the Second Schedule. Grant of insurance brokering licence 1416 Application for an intermediary licence Statutory Instruments 30th December, 2022 11. (1) A person who intends to provide an insurance service of loss adjustering, risk surveyor, assessor, insurance agency, underwriting agency or claims agency shall apply to the Authority for an intermediary licence in Form VI set out in the Second Schedule on payment of a fee set out in the Third Schedule. (2) An application referred to in subregulation (1), shall be accompanied by— (a) a certified copy of the company’s certificate of incorporation, certificate of share capital and articles of association, in the case of a company; (b) proof of registration of a business name, in the case of an individual; (c) a board resolution appointing the principal officer, in the case of a company; (d) a power of attorney executed in favour of the proposed principal officer; (e) a complete application for approval of appointment for the principal officer, director and senior officer; Grant of Intermediary licence (f) a complete fit and proper test questionnaire for a significant shareholder; and (g) any other documents as the Registrar may determine. 12. (1) The Authority shall, where the applicant meets the requirements of the Act and these Regulations, approve an application under regulation 11 and issue the applicant with an intermediary licence in Form VII set out in the Second Schedule. (2) The Authority shall, where the Authority rejects an application under regulation 11, notify the applicant in Form III set out in the Second Schedule. Consideration of application for intermediaries 13. The Authority shall, when considering an application under regulations 9 and 11, satisfy itself that the applicant’s principal officer, shareholders, directors and proposed senior officers are fit and proper persons that satisfy the requirement of fit and proper persons specified under regulation 21. Restriction on business of insurance brokers 14. An insurance broker shall carry on business, other than insurance brokerage, if— (a) the Registrar has, in writing, approved the business as reasonably ancillary to the insurance brokeragecarried on by the insurance broker; and 30th December, 2022 (b) Statutory Instruments 1417 the proportion of turnover of the insurance broker attributable to the non insurance business does not exceed a specified percentage as determined by the Authority. 15. (1) A licensed insurance agent shall not act on behalf of more than one insurer in the same category of insurance business. (2) Despite the generality of subregulation (1), a licensed insurance agent may act as an agent for a long term insurer and a general insurer. Restriction on insurance agency business 16. The Authority shall not issue a licence to a licensed intermediary to carry on an insurance service that the licensed intermediary is not licensed to carry on. Restriction on licence of intermediary 17. A licensee may, within the validity of the licence, apply to the Authority for an amendment to the licence in Form VIII set out in the Second Schedule on payment of a fee set out in the Third Schedule. Amendment of licence 18. A licensee whose licence is lost or damaged shall apply to the Authority for a duplicate licence in Form IX set out in the Second Schedule on payment of a fee set out in the Third Schedule. Lost or damaged licence 19. (1) The Authority shall, where the Authority intends to suspend or cancel a licence issued under these Regulations, notify the licensee of its intention to suspend or cancel the licence in Form X set out in the Second Schedule. Suspension and cancellation of licence (2) The Authority shall notify a licensee of the Authority’s decision to suspend or cancel a licence in Form XI set out in the Second Schedule. 20. The Authority shall establish and maintain a register of licensees which shall contain the following: (a) the name, address and contact details of a licensee; (b) the category of insurance business of a licensee; (c) whether a licensee is an individual operating under a business name or a company; (d) the licence reference number of a licensee; (e) types of insurance service or other service indicated in the licence; (f) date of approval of the licence; and (g) any other details as the Authority may determine. Register of licensees 1418 Statutory Instruments 30th December, 2022 PART III FIT AND PROPER PERSON Criteria of fit and proper person 21. (1) A shareholder shall be considered to be a fit and proper person if that shareholder— (a) demonstrates financial soundness; (b) discloses sources of funding; (c) has access to additional capital; (d) has integrity demonstrated through personal or corporate character references; (e) is not declared bankrupt; (f) has not been convicted of an offence involving fraud, dishonesty or other financial crimes under the Act or any other written law; and (g) has no record of misconduct in the financial sector. (2) A director or senior officer shall be considered to be a fit and proper person if that director or senior officer— (a) demonstrates competence, skill and experience; (b) has integrity demonstrated through personal or corporate character references; (c) is not declared bankrupt; (d) has not been convicted of an offence involving fraud, dishonesty or other financial crimes under the Act or any other written law; and (e) has no record of misconduct in the financial sector. Appointment of directors and senior officers 22. (1) A licensee that appoints a director, chief executive officer and other senior officers, shall apply to the Registrar for approval of each appointment in Form XII set out in the Second Schedule. (2) The Registrar shall, in considering an application under subregulation (1), determine whether the appointed person is a fit and proper person in accordance with regulation 21. (3) A licensee shall notify the Registrar, in writing, when there is a change in the details submitted in the application referred to under subregulation (1). 30th December, 2022 Statutory Instruments 1419 (4) The Registrar may, where the Registrar has reason to believe that the information submitted in the application referred to in subregulation (1) has changed, request the licensee to resubmit Form XII. (5) The Registrar shall, where the Authority approves an application under subregulation (1) and the application meets the requirements of the Act and these Regulations, issue an approval of appointment in Form XIII set out in the Second Schedule. (6) The Registrar shall, where the Registrar rejects an application under subregulation (1), inform the applicant within fourteen days from the date of the decision of rejection in Form XIII set out in the Second Schedule. 23. (1) A senior officer shall meet the qualifications set out in the Fourth Schedule. (2) A senior officer who immediately before the appointed date was appointed in accordance with the repealed Act shall, within a period of four years, comply with this regulation. Qualifications of senior officers PART IV CAPITAL ADEQUANCY AND SOLVENCY 24. (1) A licensed insurer or reinsurer shall have a solvency margin of at least ten percent. (2) A licensed insurer or reinsurer shall maintain a capital adequacy requirement ratio of at least one hundred and fifty percent. (3) Capital adequacy requirement shall be determined using the method set out in the Fifth Schedule. (4) A licensed insurer or reinsurer shall, where a licensed insurer or reinsurer projects capital adequacy requirement ratio and solvency margin is likely to fall below the margins referred to in subregulations (1) and (2), notify the Authority, in writing, and provide an undertaking of how the licensed insurer or reinsurer intends to address and restore the financial soundness of that licensed insurer or reinsurer. (5) The Authority may approve an undertaking submitted under subregulation (4), if the Authority is satisfied that the undertaking shall address and restore the financial soundness of the insurer or reinsurer. (6) An undertaking approved by the Authority under subregulation (5) shall have effect as if the undertaking were a directive of the Authority. Solvency margin and capital adequacy requirements 1420 Determination of available capital Statutory Instruments 30th December, 2022 25. (1) A licensed insurer or reinsurer shall, in determining available capital, use a method set out in the Fifth Schedule. (2) A licensed insurer or reinsurer shall consider the following in determining available capital: (a) permanence of assets or capital elements; (b) ability of capital resources to absorb losses when required; (c) availability of capital resources or assets; and (d) Minimum capital adequacy for licensed general insurer or reinsurer absence of encumbrances. 26. A licensed general insurer or reinsurer shall have the required minimum capital which shall be the higher of— (a) an amount determined by aggregating capital required for (i) balance sheet assets set out in the Fifth Schedule; (ii) investing above concentration limit as set out in the Fifth Schedule; (iii) policy liabilities which shall be ten percent of the aggregate of unexpired risk reserve, claims incurred but not settled and claims not reported reserves; (iv) catastrophes which shall be a provision of five percent of the preceding year’s net claims on all classes of insurance; (v) reinsurance ceded as set out in the Fifth Schedule; (vi) operational risks which shall be a provision of five per cent of the total earned premium for the current reporting period; and (vii) guarantees issued to contract holders which shall be fifteen percent of the sum guaranteed; or (b) Minimum capital adequacy for long term insurer or reinsurer an amount representing a paid up share capital requirement set out in the Fifth Schedule. 27. A licensed long term insurer or reinsurer shall have a required minimum capital which shall be the higher of (a) the termination capital adequacy requirement; (b) the ordinary capital adequacy requirement; or (c) an amount representing a paid up share capital set out in the Fifth Schedule. 30th December, 2022 Statutory Instruments 28. (1) A long term insurer or reinsurer shall, in determining the ordinary capital adequacy requirement, take into account major risk categories faced by the insurer or reinsurer. (2) Despite subregulation (1), a long term insurer or reinsurer shall consider the following risk factors when determining the ordinary capital adequacy requirement: (a) lapse risk for policies with no surrender value; (b) surrender risk; 1421 Determination of ordinary capital adequacy requirement for long term insurer or reinsurer (c) mortality, morbidity and medical fluctuation risk; (d) annuitant mortality fluctuation risk; (e) mortality, morbidity and medical assumption risk; (f) expense fluctuation risk; (g) investment risk; (h) credit risk; (i) operational risk; and (j) any other risk the actuary or Authority may determine. (3) Subject to subregulations (1) and (2), an actuary of a licensed long term insurer shall aggregate the ordinary capital adequacy requirement risk factors and adjust the results using the method set out in the Fifth Schedule. (4) An actuary shall, when using the method in subregulation (3), consider the effect of the decrease in the fair value of assets backing computations together with any credit risk associated with the assets. 29. (1) A licensed long term insurer or reinsurer shall, in determining the value of liabilities, use compulsory margins set out in the Fifth Schedule. (2) A licensed insurer or reinsurer shall, for the purposes of determining the value of liabilities, take into account the following: (a) premiums to be received in the future; (b) assumptions regarding future investment returns, bonus declarations, expenses, mortality experience, morbidity experience, lapses, surrenders, and other relevant factors, which assumptions— (i) shall be best estimate assumptions; Determination of liabilities 1422 Statutory Instruments 30th December, 2022 (ii) shall take into account the reasonable expectations of policyholders and any established practices of an insurer for payment of benefits; and (iii) may be modified further by discretionary margins based on the expected experience to ensure the prudent release of profit; (c) the cost of any options that may be available to the policyholder under the terms of each policy; (d) the minimum level of financial resilience through the determination of a capital adequacy requirement; (e) the yield curve issued through guidelines by the Authority to discount future cash flows; and (f) the full value of bonuses, already accumulated or to be paid out on death. (3) The method of calculating the value of liabilities referred to under subregulation (1) shall— Reserves for Unexpired risks (a) not be subject to arbitrary changes from one period to another; and (b) recognise profit over the duration of each policy. 30. (1) A licensed insurer shall calculate the unearned premium reserves, for the purposes of section 61 of the Act, using the 365th method or a method that assumes that premium is earned equally over the duration of the insurance contract. (2) A licensed insurer shall, when using the method under subregulation (1), take into account the following: (a) gross and net written premium; (b) the net written premium less any commissions paid to intermediaries; (c) a class of insurance business; and (d) an aggregate of classes of insurance business. (3) A licensed insurer shall, where the licensed insurer determines that the premium charged is insufficient to cover unexpired risks, using the method referred to in subregulation (1), calculate an additional reserve in respect of unexpired risks. Reserves for outstanding claims 31. (1) A licensed insurer shall, for the purposes of section 62 of the Act, make provisions for claims not reported using the chain ladder method. 30th December, 2022 Statutory Instruments 1423 (2) A licensed insurer shall, when using the method under subregulation (1), take into account the conditions specified under regulation 30(2). (3) A licensed insurer shall, where the licensed insurer determines that the provision for claims not reported is insufficient to cover outstanding claims using the method referred to in subregulation (1), calculate an additional reserve in respect of those outstanding claims. 32. (1) A licensed insurer shall, for the purposes of investment of funds, apply the concentration limit set out in the Fifth Schedule. Investment concentration limits (2) Despite subregulation (1), a licensed insurer shall not invest in derivatives, hedge funds or speculative investments except where a specific request s made for risk management purposes and prior approval is granted by the Authority. (3) A licensed insurer shall not invest outside the Republic without the prior approval of the Authority. 33. (1) A licensed insurer shall submit a solvency statement in accordance with section 65(4) of the Act. Solvency Statement (2) The solvency statement referred to under subregulation (1) shall disclose the following: (a) a summary of the sources of data used highlighting any limitations in that data; (b) the assumptions and methodology used to— (i) calculate the value of liabilities for all classes of business and the value of assets for all classes of investment; and (ii) determine sensitivity analysis, product pricing, experience investigations, surplus distribution, policyholder reasonable benefit expectations and risk management; and (c) a summary of the reinsurance arrangements. 34. A licensed insurer or reinsurer shall comply with this Part within a period of three years from the date of commencement of these regulations. Transitional period of this Part 1424 Statutory Instruments 30th December, 2022 PART V GENERAL PROVISIONS Commencement of business after issuance of licence Request for information 35. (1) An applicant granted a licence under these Regulations shall commence business within one hundred and eighty days from the date of issuance of the licence. (2) The Authority may, where an applicant granted a licence under these Regulations does not commence business within the period specified in subregulation (1), vary, suspend or cancel the licence, and inform the licensee, in writing, accordingly. 36. The Registrar may request for information from— (a) a former and current shareholder, director, senior officer or other employee of a licensee; (b) a former licensee; or (c) an applicant. Shareholding 37. A licensed insurer, reinsurer or insurance broker who immediately before the commencement date of the Act was licensed in accordance with the repealed Act, shall comply with section 49 of the Act within a period of four years from the date of commencement of these Regulations. Fees 38. (1) The fees set out in the Third Schedule are the fees payable for matters specified therein. (2) A licensee shall pay the licence fee set out in the Third Schedule annually. Guidelines 39. The Authority may issue guidelines for the purposes of fit and proper persons, and capital adequacy and solvency requirements. 30th December, 2022 Statutory Instruments 1425 FIRST SCHEDULE (Regulation 5) CATEGORIES AND CLASSES OF INSURANCE BUSINESS PART I – LONG TERM INSURANCE BUSINESS Class No. Class Name Description of Class Sub-Classes Definition Insurance policies in which a person, in return for a premium, undertakes to provide policy benefits, contingent on human life, that guarantee a fixed or variable payment or benefits stipulated in the policy and includes a reinsurance policy in respect of such a policy. 1. Annuity insurance 2. Life Assurance A policy in which a person, in return for a premium, undertakes to provide policy benefits upon, and exclusively as a result of, a life event or pay specified benefits for a period, and includes a reinsurance policy in respect of such a policy. Sub–Classes Breakdown (a) annuity certain; (b) temporary annuity; (c) guaranteed annuity; (d) capital protected annuity; or (e) any other ancillary to annuity insurance Ordinary Life Insurance: Policies of insurance contingent on human life, including policies that pay a benefit to a beneficiary at the end of the policy term or if the insured dies. Group Life Insurance: Policies to pay Lump Sums to employees/ formeremployees, creditors or other individuals that relate to the issuing of or the undertaking of liability under a Group term or Group Credit policies. (a) term life insurance; (b) whole life assurance; (c) endowment s; (d) income (e) (f) (g) (h) (i) protection; group life; group term; credit life; group credit life; or any other ancillary to life assurance 1426 3. 4. Statutory Instruments Investment Linked Life Insurance Disability Insurance A policy in which the policy benefits is not guaranteed by the long-term insurer and determined solely by reference to the value of particular assets or categories of assets which are specified in the policy and are actually held by or on behalf of the insurer specifically for the purposes of the policy; A policy in which a person, in return for a premium, undertakes to provide policy benefits upon a disability event and includes a reinsurance policy in respect of such a policy. 5. Health Insurance A policy in terms of which a person, in return for a premium, undertakes to provide specified policy benefits as a result of injury through an accident or of sickness or infirmity, including critical illness and long-term care and includes a reinsurance policy in respect of such a policy but excludes hospital cash plans; 6. Other long Miscellaneous insurance policies, term insurance not included in classes 1 to 5 above that the Authority determines constitutes long term insurance business. 30th December, 2022 (a) unit-linked policies; (b) linked investment policies; (c) non-linked investment policies; or (d) any other ancillary to investment linked life insurance (a) partial disability; (b) permanent disability; or (c) any other ancillary to disability insurance. 30th December, 2022 Statutory Instruments 1427 PART II – GENERAL INSURANCE BUSINESS Class No. 1. Class Name Property insurance Description of Class Sub-Classes Definition Insurance policies in which Fire Insurance: Policies of a person, in return for a insurance against loss or damage premium, undertakes to to property, and consequential provide policy benefits if losses, due to fire, explosion, an event, contemplated in storm and other natural perils and the policy as a risk relating other perils customarily included to the use, ownership, loss in fire insurance policies. of or damage to movable or immovable property and includes a reinsurance policy in respect of such a policy. Theft Insurance: Policies of insurance against loss or damage to property due to theft or any other cause not covered under any other class, including consequential losses. 2. Transport Insurance A policy in which a person, Marine Insurance: Policies of insurance against— in return for a premium, undertakes to provide (a) loss of or damage policy benefits if an event, to marine craft or contemplated in the policy the equipment or as a risk relating to the fittings of marine possession, use or craft; or ownership of a vessel, (b) loss or damage arising out of aircraft or other craft or for or in the conveyance of persons connection with the or goods by air, space, land freight, use, or water, or to the storage, construction or treatment or handling of repair of marine goods so conveyed or to be craft, including so conveyed, occurs; and third party risks, includes a reinsurance carrier’s liability policy in respect of such a and medical policy expenses for the injury of occupants of a marine craft, including crew. Aviation Insurance: Policies of insurance against— (a) loss of or damage to aircraft or aircraft equipment or fittings; (b) loss or damage arising out of or in connection with the use of aircraft, or the construction Sub–Classes Breakdown (a) fire insurance domestic (including house owners and householders); (b) fire insurance industrial and commercial; (c) burglary, all risks and other theft insurance; (d) cash in transit; fire and allied perils; (e) asset all risks; or (a) any other ancillary to property insurance. (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) marine hull; marine cargo; goods in transit; aircraft damage and loss; aircraft third party losses; loss of flying licence for pilots marine open cover; marine specific; craft and motor boat; single inland; transit aviation; or any other ancillary to transport insurance. 1428 Statutory Instruments 30th December, 2022 Aviation Insurance: Policies of insurance against— (a) loss of or damage to aircraft or aircraft equipment or fittings; (b) loss or damage arising out of or in connection with the use of aircraft, or the construction or repair of aircraft, including third party risks, carrier’s liability, airport owner’s liability and medical expenses for the injury or loss of life of occupants of an aircraft, including aircrew; or (c) goods in transit. 3. 4. Motor Insurance Liability Insurance insurance. A policy in which a person, Motor Insurance: Policies of insurance against— in return for a premium, undertakes to provide (a) loss of or damage to motor policy benefits if an event, vehicles; or contemplated in the policy as a risk relating to the (b) loss or damage arising out of or in connection with the use possession, use or of motor vehicle, including ownership of a motor third party risks, carrier’s vehicle, occurs; and liability and medical expenses includes a reinsurance for the injury of occupants of policy in respect of such a a motor vehicle. policy (a) third party; (b) full third party; (c) comprehensive A policy in which a person, Employer’s Liability: Policies of in return for a premium, insurance against the liability of undertakes to provide an employer to the employee in policy benefits if an event, relation to any injury or disease contemplated in the policy arising out of, or in the course as a risk relating to the of, their employment. incurring of a liability, otherwise than as part of a Liability Insurance: Policies of policy relating to a risk insurance against risks of the more specifically person insured incurring liability contemplated in another to third parties (excluding any definition in this section, risk to which any other class of occurs; and includes a non-life insurance relates). reinsurance policy in respect of such a policy. (a) public liability; (b) professional insurance; (d) motor private; (e) motor commercial (f) motor cycle; (g) motor public service vehicle; (h) yellow card; or (i) any other ancillary to motor insurance indemnity; (c) product liability; (d) financial loss liability; (e) directors and officers’ liability (f) employment practice; or (g) any other ancillary to liability insurance. 30th December, 2022 5. 6. 7. 8. Engineering Insurance Accident Insurance Guarantee Insurance Other general insurance Statutory Instruments A policy in which a person, in Policies of insurance against— return for a premium, undertakes to provide policy (a) loss or damage to plant and benefits if an event machinery; contemplated in the policy as a risk relating to (b) loss or damage arising out of the use or operation of plant (a) the possession, use or and machinery, including loss ownership of machinery of or damage to surrounding property of the insured, or equipment, other than liability to third parties for a motor vehicle, in the damage to property, injury or carrying on of a loss of life; or business; (b) the erection of buildings or other structures or the (c) loss or damage arising out of undertaking of other contract work in relation to works; or plant and machinery, installation of (c) the including damage to property machinery or on site and third party risks. equipment, occurs; and includes a reinsurance policy in respect of such a policy; A policy in which a person, in return for a premium, undertakes to provide policy benefits if a disability event, health event, or death event, contemplated in the policy as a risk occurs and includes a reinsurance policy in respect of such a policy, but excludes a policy of which the contemplated policy benefits are(a) something other than a stated sum of money; (b) are to be provided upon a person having incurred, and to defray expenditure in respect of any health service obtained as a result of the health event concerned; or (c) to be provided to any provider of a health service in return for the provision of such service. A policy in which a person, other than a bank, in return for a premium, undertakes to provide policy benefits if an event, contemplated in the policy as a risk relating to the failure of a person to discharge an obligation, occurs; and includes a reinsurance policy in respect of such a policy. Miscellaneous insurance policies, not included in classes 1 to 7 above that the Authority determines constitutes general insurance business. Policies of insurance that provide fixed pecuniary benefits or benefits in the nature of an indemnity or both against risks of the person insured — (a) sustaining accidental injury; (b) dying as a result of an accident; 1429 (a) contractor’s all risks; (b) engineering insurance; (c) mining engineering; (d) plant all risks; (e) machinery breakdown; machinery breakdown and deterioration of stock; or (g) any other ancillary to engineering insurance. (f) (a) personal accident insurance; (b) group person accident; (c) personal accident or (d) any other ancillary to accident insurance. (c) becoming incapacitated as a result of disease; and (d) attributable to sickness or infirmity. (a) performance bond (b) customs bond; (c) advance payment bonds; or (d) retention bond;or (e) any other ancillary to guarantee insurance. 1430 Statutory Instruments 30th December, 2022 SECOND SCHEDULE (Regulations 6, 8, 9, 10, 11, 12, 17, 18, 19 and 22) Form I (Regulation 6) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 APPLICATION FOR AN INSURANCE/REINSURANCE LICENCE A. GENERAL INFORMATION 1. Name of Applicant: ………………………………………………… 2. Business Type: [ ] Long term Insurer [ ] General Insurer [ ] Reinsurer 3. Business proposed to be carried on (See First Schedule): Class Name Sub-Class 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Other Business: ………………………………………………………………………………………... Physical Address ……………………………………..…………………………………………….... Postal Address: ……………………..…………………………………………………………….….. Telephone Number: …..……………………………………………….………………………….…. Email address: ………………………………………………………………………….……………. Name of the person lodging the application: ...................................................................................................................................... Name and contact telephone number of the contact person: ..................................................................................................................................... Countries in which applicant carries on insurance business: (a) Physical and postal address: …………….………………….………………… (b) Telephone No: ……………………………………..................................... (c) Email Address…………………………………….............................. 30th December, 2022 11. 3. # Branches if any: Location Postal Address Statutory Instruments Physical address Phone numbers 1431 Branch Manager B. GENERAL OWNERSHIP INFORMATION (1) Limited Company 12. 4. Provide Shareholders information in the table below: Name Country of Physical Telephone incorporation and Postal number Address Percentage of Shares (a) Provide ownership structure of company (a structural chart and explanatory note) (b) Briefly state the nature and purpose the business of the holding company. ……………………………………………………………………………………………… (c) Indicate the source of funds used by the shareholder/beneficial owner to finance the applicant Attach the following documents: i. Audited financial statements for the past 3 financial years ii. Company profile iii. Certified true copy of Certificate of incorporation iv. Certified true copy Articles of association v. Declaration of Compliance with minimum capital adequacy requirements vi. Evidence of Paid Up Capital made by each shareholder vii. Attach evidence of compliance to the Capital adequacy requirements viii. Minimum Paid up Share capital (attach copies of board minutes, return on allotment of shares, company receipts, bank statements, etc.) 2. Natural Person Shareholder information in the table below: Provide Provide Shareholder information in the table below: Name Nationality Physical and Telephone Postal number Address Attach: A complete Fit and Proper Test Questionnaire. Percentage of Shares 1432 C. 1. 13. Statutory Instruments 30th December, 2022 BENEFICIAL OWNERSHIP INFORMATION Provide particulars of the beneficial owner of the company Name of Nationality Physical Email Telephon No. of Beneficia and postal address e number Controlling l Owner address Shares/Intere sts Profession and average annual income Attach the following: i. National identification with photo ii. Proof of Residence (utility bill, tenancy agreement etc.) iii. Provide documentary evidence of the source of funds used to finance the applicant company D. GOVERNANCE STRUCTURE (a) Name of Board Chairperson: ……………………………………………………..…………........................................ .. (b) Date of Appointment: ……………….……………………………………..………………………………… …. (c) Profession: ..………………………………………………………………………………………… .. (d) Other Boards: ……………………………………………………………..……………..…………….. . (e) Other Board members: Full Names Date of Profession Executive or Other Board Appointment Non-Executive memberships (f) Provide the Board Charter (g) Proposed Board committees …………………………………………………………………………………………………….………… …………………………………………………………………………………… E. MANAGEMENT 14. Attach a signed and approved chart of the organizational structure 15. Name of Proposed Chief Executive Officer: ……………………………………………………………………………………………….. (Attach the following) i. The application for approval of appointment; and ii. Power of attorney in favour of the proposed Chief Executive Officer. 16. Senior Staff Position Name i. Qualifications Years Of Experience Attach the application for approval of appointment; 30th December, 2022 Statutory Instruments 1433 17. Actuary Name: ……………………………………………………….……………………….… Qualifications: …………………………………………………………………………. Physical and postal address: ………………………………………………………........ Date of appointment of Actuary: ……...................................………………………….. 18. External Auditor Name: ………………………………………………………………………………….. Qualifications: ……………………………………………………………………..…. Physical and postal address: ………………………………………................................ Date of appointment: ……………………………..…………………………………..... PRODUCTS 19. Attach documentation in respect of products that the insurer intends to launch immediately after being granted a license as per Authority Product Approval Guidelines. 20. Give a brief summary of the reinsurance arrangements. .................................................................................................................................................................................................................................... G. FINANCIAL SOUNDNESS 21. Attach a schedule of applicant insurer’s assets and liabilities as at the date closest to the application date, indicating where such assets and liabilities are located and the value of each asset. H. BUSINESS AND RISK MANAGEMENT 22. Submit a five year business plan for the entity. 23. Submit the intermediary engagement policy. 24. Provide documented key policies and procedures of the applicant. 25. Provide a description of the reinsurance and investment policies and procedures or other risk management programmes. 26. Provide a Treat Customers Fairly (TCF) policy and procedure. 27. Provide an Anti-money Laundering and Countering of Terrorism policy and procedures. 28. Attach evidence of membership to the Insurers Association of Zambia. DECLARATION We, ....................................................................................… hereby apply for a licence under the Insurance Act No. 38 of 2021 and declare the above particulars to be true and correct. We hereby further declare that the company does not intend to carry on any other business other than insurance business for which it is seeking registration. Date………………………………… …………………………………... Authorised Director (1) ……………………………… Authorised Director (2 1434 Statutory Instruments 30th December, 2022 Form II (Regulation 8(1)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 INSURANCE OR REINSURANCE LICENCE The Pensions and Insurance Authority pursuant to its authority under section 12 of the Insurance Act, 2021 hereby grants this licence to: Company Name: …………………………………………….......................... Address: ……………………………………………………..…............................ (1) The type of insurance service applied for. Category of Licence (1):.……………………………………………………............ Date of Issue: ………………………………………………............................ This licence is subject to the provisions of the Insurance Act, 2021, the Regulations thereunder and the Conditions hereby given and shall remain valid from the date of issue unless varied, suspended or revoked. Classes of insurance business: 1……………………………………………………………………………………… 2………………………………………………………………………………………. 3……………………………………………………………………………………...... 4……………………………………………………………………………………...... (2) Registrar of the Authority ……………………………………………………………… Registrar 30th December, 2022 Statutory Instruments 1435 Form IV (Regulation 8(1)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 APPLICATION FOR A LICENCE AS AN INSURANCE BROKER A. GENERAL INFORMATION 1. Name of Applicant: ……………………………………………………………….……. 2. Type of Licence (Tick) Insurance Broker Reinsurance Broker Postal Address: ……………………………………………………………………….... Physical Address: ………………………………………………………………………. Company email address: …………………………………………………………….….. Telephone lines: ………………………………………………………………………... Other countries in which the company carries out insurance business? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 8. Does the company carry on any business other than insurance brokerage? Yes No 3. 4. 5. 6. 7. If yes, provide details of business and indicate annual turnover ………………………………………………………………………………………………… …………………………………………………………..…….. 9. Branches in Zambia, if any: Location Postal Address Physical address Phone numbers Branch Manager 1436 Statutory Instruments 30th December, 2022 B - GENERAL OWNERSHIP INFORMATION 1. Limited Company Shareholder Provide Shareholder information in the table below: Name Country of incorporation Physical Telephone and Postal number Address Percentage of Shares 2. Briefly state the nature and purpose of the business of the holding company, if any. ………………………………………………………………………………………………… ………………………………………………………………………………………………… …………………… Attach the following documents: i. ii. iii. iv. v. vi. vii. viii. Fit and Proper Test Questionnaire for significant shareholder. A detailed three year business plan which should include income statement forecast, statement of financial position and projected cash flows. Audited financial statements for the past three financial years for the holding company, if any. Company profile of the applicant. Certified true copy of Certificate of Incorporation. Certified true copy Articles of association. Attach evidence of sufficient funds for operations. Attach group structure of the company (affiliate, associate holding or subsidiary company). 2. Natural Person Provide Shareholder information in the table below: Name Nationality Physical Telephone and Postal number Address Attach: A complete Fit and Proper Test Questionnaire. Percentage of Shares 30th December, 2022 Statutory Instruments 1437 C - BENEFICIAL OWNERSHIP INFORMATION Provide particulars of the beneficial owner of the company Attach the following: (i) National identification with photo (ii) Proof of Residence (utility bill, tenancy agreement etc.) (iii) Provide documentary evidence of the source of funds used to finance the applicant company D - GOVERNANCE STRUCTURE Board Chairperson 1. Name of Board Chairperson: ……………………………………… 2. Date of appointment, profession and which other Board the chairperson is currently serving? Date: ………………………………….………………………………... Profession: ..…………………………………………………………… Other Boards: ………………………………………………..…..…… Directors 3. Name Fill in the details of the Directors of the Applicant Date of Appointment Profession State Country of Other (Executive or Residence directorship NonExecutive) Attach the Board Charter 1438 Statutory Instruments 30th December, 2022 E. MANAGEMENT 1. Name of proposed Chief Executive Officer? …………………………………………………………………………………….… 2. Names of other senior staff Position Name Qualifications Years of experience Attach the following: i. ii. Power of attorney executed in favour of principal officer, and The application for approval of appointment. F – AUDITORS 1. Name and address of auditors ………………………………………………………………………………………..….. G – GENERAL BACKGROUND 1. Has your company been convicted, whether in Zambia or elsewhere, of an offence involving fraud or dishonesty, or convicted of an offence against the Insurance Act or any regulations made under that Act? Yes No If your answer in 1 is yes, attach details in brief. H – SUPPORTING DOCUMENTATION 1. Bank accounts: attach confirmations from the bank, copies of statements and panels of signatures 2. Premium management system: Attach a write-up of policies & procedures 3. Assets and Liabilities: attach detailed lists, valuation reports, evidence of ownership, copies of bills or Policies, etc. 4. Professional indemnity and fidelity guarantee: attach evidence of insurance for the next financial year. 5. Three year Business Plans and internal control 6. Three year projected financial statements: attach projected balance sheets, income statements and cash flow statements 7. Membership with the Insurance Brokers Association of Zambia: attach evidence of having applied to be a member DECLARATION We …………………………………………hereby apply for a licence under the Insurance Act and declare the above particulars to be true and correct. Date………………………………………………………… …………………………………….…… Authorised Director (1) ….……..……………………………… Authorised Director (2) 30th December, 2022 Statutory Instruments 1439 Form V (Regulation 10(1)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 INSURANCE BROKERING LICENCE The Pensions and Insurance Authority pursuant to its authority under Section 12 of the Insurance Act, 2021 hereby grants this licence to: Company Name: …………………………………………….......................... Address: ……………………………………………………..…………………… (1) The type of insurance service applied for. Category of Licence (1):.………………………………………………………… Date of Issue: ………………………………………………........................... This licence is subject to the provisions of the Insurance Act, 2021, the Regulations thereunder and the Conditions hereby given and shall remain valid from the date of issue unless varied, suspended or revoked. (2) Registrar of the Authority ……………………………………………………………… Registrar (2) 1440 Statutory Instruments 30th December, 2022 Form VI (Regulation 11(1)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (Licensing) Regulations, 2022 (Tick under applicable category) Insurance Agent Risk Surveyor Loss Assessor Claims Agent Insurance Agent Loss Adjustor Underwr iting Agent PART A (GENERAL DETAILS) 1. Name of Applicant: ………………………….……………………………….. 1. Registered Office Physical Address………………………………………………….………………………… Postal Address…………………………………Telephone No …………….……... Email……………………………………..…Cellphone No………………….….. Branches if any Location Postal Address Physical address phone numbers Branch Manager 30th December, 2022 Statutory Instruments 1441 PART B: INCORPORATION STATUS 1. Legal Form of Applicant Natural Person Limited Company 2. Attach a certified copy of registration of business name 1. Attach a certified copy of certificate of incorporation or Articles of Association for companies PART C – SHAREHOLDERS, BENEFICIAL OWNERS, DIRECTORS AND SENIOR STAFF # Name *Provide particulars of Shareholders and Directors* Status in Domicile Nationality No. of shares Company Attach the following: i. Fit and Proper Test Questionnaire for shareholders; and ii. Application for approval of appointment for directors. # *Provide Particulars of the beneficial owner of the company* Name of Beneficial Owner/s No. of Controlling Nationality Shares Attach: Fit and Proper Test Questionnaire 1442 Statutory Instruments # Name 30th December, 2022 *Provide Particulars of Senior Staff* Position Qualifications Attach: The application for approval of appointment for each chief executive officer and senior staff 4. Insurance Agents and Underwriting Agents - Business Particulars a) Attach the agency agreement between the applicant and the insurer. b) Attach Assessment or standard forms to use to disclose the services to be provided and the scale of fees to be charged ………………………………………………………………………………………… I hereby certify that the statements contained herein are true and accurate to the best of my knowledge and belief. Any alterations in particulars stated herein shall be promptly communicated to the Registrar. Signed on this………………. .day of ......………………….20……..... …………………………………….. Applicant (Principal Officer) Applicable to insurance agents DECLARATION BY PRINCIPAL OFFICER OF REGISTERED INSURER TO BE REPRESENTED (1) I, ..........................................................hereby certify that to the best of my knowledge and belief the above particulars and declaration are true and correct and that the applicant has undergone a period of training in the class or classes of insurance business he will require to transact and that he is competent to explain the conditions of the policies issued by this Company. I further declare that the applicant is a fit and proper person. Name of Insurer (1) …………… Name of Insurer (2)…………. ……………………………………. Signature of Principal Officer Date....................................... ............................................... Insurer’s Stamp (1) ….……………………………….. Signature of Principal Officer Date……………………………… ……………………………….. Insurer’s Stamp (2) 5. Loss Adjustor, Assessor, Claims Agent, Risk Surveyor- Business Particulars Attach Assessment or standard forms/Policies to be used to disclose the services to be provided and the method and scale of fees to be charged I hereby certify that the statements contained herein are true and accurate to the best of my knowledge and belief. Signed on this……………….. day of ......………………….20.... ……..……………………………………..... Applicant (Principal Officer) 30th December, 2022 Statutory Instruments 1443 Form VII (Regulation 12(1)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 INTERMEDIARY LICENCE The Pensions and Insurance Authority pursuant to its authority under Section 12 of the Insurance Act, 2021 hereby grants this licence to: Company Name: ……………………………………………......................................... Address: ……………………………………………………..………………………..…… (1) The type of insuranc e service applied for. Category of Licence (1):.………………………………………………………………… Date of Issue: ……………………………………………….................................. This licence is subject to the provisions of the Insurance Act, 2021, the Regulations thereunder and the Conditions hereby given and shall remain valid from the date of issue unless varied, suspended or revoked. ……………………………………………………………… Registrar 1444 Statutory Instruments 30th December, 2022 Form VIII Regulation 17) (To be completed in triplicate) The Insurance Act, 2021 (Act No. 38 of 2021) The Insurance (General) Regulations, 2022 APPLICATION FOR AMENDMENT OF LICENCE Shaded fields for official use only Information Required 1. 2. 3. 4. Application Number: Date/Time ο Information Provided Name(s) of applicant(s) Date of initial application Reason for amendment Proposed amendments to application (a) (b) (c) (d) (e) (f) 5. Appendices (Please attach relevant supporting documentation) Appendix No. 1 Appendix No. 2 Appendix No. 3 Receipt number Name: Signature of applicant (individual or authorized representative): To be signed by authorized officer Name: Signature of officer: STAMP 30th December, 2022 Statutory Instruments 1445 Form ix (Regulation 18 (Regulation 1 The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 APPLICATION FOR DUPLICATE LICENCE Please complete in block letters Shaded fields for official use only Application No. Date and Time Information Required 1. Name of Licensee 2. Licence No. 3. Address (a) Physical address (b) Postal address 4. Contact details (a) Telephone No. 5. ο Information Provided (b) Mobile phone No. (c) Email address Appendix Affidavit of loss, damage or otherwise of original licence Name of applicant (individual or authorised representative): Signature : ………………………………………………… Date: ………………………… FOR OFFICIAL USE ONLY Received by: ……………………………………………………… Officer (Name and Signature) …………….………... Date Amount Received: ………………………………………………….……..……. Receipt No.: ………………………………………………………….………….…….… Remarks: ………………………………………………………………………... …………..……………………………………………………………. OFFICIAL STAMP 1446 Statutory Instruments 30th December, 2022 Form X (Regulation 19(1) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 1. Here insert the full names and address of licensee 2. Here insert the Licence No. 3. Here insert the number of days NOTICE OF INTENTION TO SUSPEND/CANCEL A LICENCE TO (1) ………………………………………………………………………………………. IN THE MATTER OF (2) ……………………………………………………. you are notified that the Authority intends to *suspend/cancel your licence under the Insurance Act, 2021 on the following grounds: (a) ………………………………………………………………………………… (b) ………………………………………………………………………………… (c) ………………………………………………………………………………… . Accordingly, you are requested to show cause why your licence should not be *suspended/cancelled and to take action to remedy the breaches set out in paragraphs …………………………………... (above) within (3) ……………………… days of receiving this notice. Failure to remedy the said breaches shall result in the *suspension/cancellation of your licence. Dated this……………………day of……………………………….20……….. …………………………… The Registrar 30th December, 2022 Statutory Instruments 1447 Form XI (Regulation 19(2)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 Here insert the full names and address of licensee 2. Here insert the Licence No. 1. NOTICE OF SUSPENSION/CANCELLATION OF LICENCE TO (1) ………………………………………………………………………………………. IN THE MATTER OF (2) ……………………………………………………. you are notified that your licence has been suspended/cancelled on the following grounds: (a) ……………………………………………………………………………… (b) ……………………………………………………………………………… (c) ……………………………………………………………………………… Dated this……………………day of……………………………….20……….. …………………………… The Registrar 1448 Statutory Instruments 30th December, 2022 Form XII (Regulation 22(1)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 APPLICATION FOR APPROVAL OF APPOINTMENT (1) birth, descent, registration or adoption include a certified copy 1. Name of company in connection with which this application is being completed (“the corporate entity”) ........................................................................................................................ 2. Please state in what capacity you are completing this application, e.g. as a shareholder, current or prospective director, chief executive officer, chief financial officer, chief underwriter, etc. ......................................................................................................................... 3. Please describe the particular duties and responsibilities attaching to the position(s) that you hold or will hold. If you are completing this form in the capacity of director, indicate whether, in your position as director, you have or will have executive responsibility for the management of the company's business. In addition, please provide a copy of your detailed curriculum vitae: ......................................................................................................................... 4. VITAL STATISTICS Personal Details: Title and surname: ………………………………………………………… Full first name(s):……………………………………………….…………… Any other name(s) or surname(s) by which you have been previously known: …………………………………….………………………………… Marital Status: …………………………..………………………………..…. Name of Spouse: ………………….………………………...………………. Nationality and how it was acquired (1): …………………..…………........… Passport/NRC No. (2): ………..……………………………………………… 30th December, 2022 (1) Attach certified true copies of qualifications Statutory Instruments 1449 Contact Details: Current physical business address: …………………………………..……. Residential address: ……………………………………................................ Postal address: ………………………………………………………...…..… Previous residential addresses during the last 10 years: ……………........…………………………………………………………...... Telephone number: …………………………….…………………..……….. Cell phone number: ………………………………………………..………... Email address: ……………….……………………………………….……... 5. QUALIFICATIONS (3) Institution Qualification Year Obtained 6. MEMBERSHIP To be completed by significant shareholders The name(s) of the professional body/bodies Date of admission as member Details of current or previous complaints or disciplinary action against you, if any. 7. SOURCE OF CAPITAL (4) Declare the full extent of the capital that have been invested in the company in respect of which this application is being completed. Source Savings & Other personal investments Dividend/sale of assets Gift; bequeathed/inherited funds; insurance policies. Legal awards Policies/consultancy/ other services Debt/loan (list salient repayment terms and capacity to service the loan as submitted to the creditor) Other sources ( specify) Details (name of source; description of transaction; transaction dates; etc) 1450 Statutory Instruments 30th December, 2022 1. BUSINESS INTERESTS 8. Declare the full extent of your interest in other businesses: Name of institution(s) (company or other) Period of association Are you a director or an executive officer and since when? Do you have any direct or indirect interest representing 10 per cent or more of the issued capital that is now registered, or has applied for authorization, under the Act? If so give particulars What other institutions have you been a shareholder, director, chief executive officer, chief financial officer or chief underwriter at any time during the past 10 years? Give relevant dates: (1) Do not 9. 2. include the following offences: • Any offence committed when you were 18 years or younger, unless this was in the last ten years; • All road traffic offences for 10. 3. which you were fined; or ο·ο Conviction 4. with a 11. sentence of imprisonment for a period of 5. 12. less than 6 months COURT CONVICTIONS OR PROCEEDINGS Please list any previous court convictions or pending court proceedings against you and the nature of the offences (5): The nature of the offence Date when the conviction was made The penalty (e.g. fine, imprisonment or both fine and imprisonment) that was imposed Have you ever been removed from an office of trust as a result of misconduct? If yes, please give details ………………………………………………….………………………………… Have you ever been convicted of any offence involving dishonesty, including fraud, theft, forgery, perjury, or forged a document? If yes, please give details. ………………………………………………………………………….……… Have you ever been convicted of an offence in connection with the formation or management of a company or corporation? If yes, please give details. ………………………………………………………………………............ 13. 6. Have you ever been disqualified by the court to be a director of a company? If yes, please give details. 30th December, 2022 Statutory Instruments 1451 ………………………………………………………………………………… 1. Have you ever applied for approval as a director or similar position in Zambia or any other 12. 13. 2. 14. 3. 15.4. 16.5. 17.6. 18.7. country and the application was declined? If yes, please give details. ………………………………………………………………………………… Have you ever been a director or shareholder with control of an institution when it was liquidated or placed under judicial management? If yes, please provide details of the matter. .................................................................................................... Have you, in Zambia or elsewhere, been censured, disciplined, warned against some conduct, or made the subject of a court order at the instigation of a regulatory authority or any professional body to which you belong or belonged, or have you ever held a practicing certificate subject to conditions? If so, give particulars: ………………………………………………………………………………… Have you, in Zambia or elsewhere, been dismissed from any office or employment or subject to disciplinary proceedings by your employer or barred from entry to any profession or occupation? If so, give particulars: ……………………………………………………………………………….… Have you, or has any corporate body, partnership or unincorporated institution which you are, or have been, associated as a director or executive officer, been subject of an investigation, in Zambia or elsewhere, by or at the instigation of a government department or agency, professional association or other regulatory body if so, give particulars: …………………………………………………………………………….…… Has any body corporate, partnership or unincorporated institution with which you were associated as a director or executive officer, in Zambia or elsewhere, been wound up, made subject to an administration order, otherwise made any compromise or arrangement with its creditors or ceased trading, either while you were associated with it or within one year after you ceased to be associated with it, or has anything analogous to any of these events occurred under the laws of any other jurisdiction? If so, give particulars: …………………………………………………………………………..……… Have you ever been declared bankrupt (either provisionally or finally) by a court in Zambia or elsewhere, or has a bankruptcy petition ever been served on you or have you applied to take the benefits of a written law for the relief of bankruptcy? If so, give particulars: …………………………………………………………………………..……… 19.8. Have you been concerned with the management or conduct of the affairs of any institution that, by reason of any matter relating to a time when you were so concerned, has been censured, warned as to future conduct, disciplined or made the subject of a court order at the instigation of any regulatory authority in Zambia or elsewhere? If so, give particulars: ……………………………………………………………………………..…… 20.9. In carrying out your duties will you be acting on the directions or instructions of any other individual or institution? If so, give particulars: …………………………………………………………………………….…… 1452 Statutory Instruments 30th December, 2022 1. Have you been concerned with the management or conduct of the affairs of any 21. institution that, by reason of any matter relating to a time when you were so concerned, has been censured, warned as to future conduct, disciplined or made the subject of a court order at the instigation of any regulatory authority in Zambia or elsewhere? If so, give particulars: ……………………………………………………………………………..…… 22. 2. In carrying out your duties will you be acting on the directions or instructions of any other individual or institution? If so, give particulars: …………………………………………………………………………….…… 3. Do you, or does any associate of whom you are aware, undertake business with this 23. institution? If so, give particulars: ………………………………………………………………………………… 4. How many shares in the institution are registered in the name of an associate? If 24. applicable, give name(s) in which registered and class of shares: …………………………………………………………………………………… 5. Do you, or does any associate, hold any shares in the institution as trustee or 25. nominee? If so, give particulars: …………………………………………………………………………………… 6. Are any of the shares in the institution mentioned in reply to questions 24 and 25 26. equitably or legally charged or pledged to any party? If so, give particulars: …………………………………………………………………………………… 27. 7. What proportion of the voting power at any general meeting of the institution (or of another body corporate of which it is a subsidiary) are you or any associate entitled to exercise or control the exercise of? …………………………………………………………………………………. 28. 8. If the exercise of the voting power at any general meeting of the institution, or of another body corporate of which it is a subsidiary, is or may be controlled by one or more of your associates, give the proportion of the voting power so controlled in each case and the identity of each associate. ……………………………………………………………………….………… 9. Are you currently, or do you, other than in a professional capacity, expect to be, 29. engaged in any litigation in Zambia or elsewhere? If so, give particulars: ………………………………………………………………………………… 10. Do you have a basic knowledge and understanding of the risks to which insurance 30. entities are exposed? ………………………………………………………………………………… 11. Have you acquainted yourself with, and do you understand, the extent of the rights 31. and powers, as well as your responsibilities and duties as a director of the institution, as contained in the applicable law? (To be completed only by directors or prospective directors.) ………………………………………………………………………………..… 30th December, 2022 Statutory Instruments 1453 DECLARATION I ........................................................... hereby declare the following: This statement consists of…........... pages, each signed by me. The content of this declaration is true to the best of my knowledge and belief. I am aware that should it be submitted as evidence and I know that something appears therein that I know to be false or believe not to be true; I may be liable to prosecution. I undertake, that for as long as I continue to be a director or executive officer of the institution, I will notify the Registrar of any changes to, or affecting the completeness or accuracy of the information supplied by me as soon as possible, but in any event not later than 21 days from the day that the changes come to my attention. I know and understand the content of this declaration. I have */do not have* objections to taking the prescribed oath. I consider the prescribed oath to be binding */not binding* on my conscience. ............................................. Signature of deponent I certify that the above statement was taken before me and that the deponent has acknowledged that he*/she knows and understands the content of this statement. This statement was sworn to*/affirmed before me and the deponent's signature was placed thereon in my presence at.............. on this ........day of................ two thousand and................................................ ……………….……………………………. Commissioner for Oaths 1454 Statutory Instruments 30th December, 2022 Form XIII (Regulations 22(5) and 22(6)) The Insurance Act, 2021 (Act No. 38 of 2021) _____________ The Insurance (General) Regulations, 2022 APPROVAL/REJECTION OF APPOINTMENT 1.Here insert the full names and address of applicant (2) insert the licensee for which the appointment relates TO (1) .............................................................................................................. IN THE MATTER OF that your (2) application ................................................... you are notified for approval of appointment has been APPROVED/REJECTED on the following grounds: (a) ................................................................................................................. (b) ……………………………………………………………………….… (c) ………………………………………………………………………..… Dated this ................... day of ......................................... 20.................. ............................................... Registrar 30th December, 2022 Statutory Instruments 1455 THIRD SCHEDULE (Regulations 6, 9, 11, 17, 18 and 38) Prescribed Fees Item 1. Fee Units Application and Annual licence fee: Insurance/Reinsurance 20,000 Insurance Brokering/Loss Adjustering/Underwriting Agent 10,000 Insurance Agency 4,000 Claims Agent/Risk Surveyor/Assessor 6,000 2. Search of Register 3. Amendment of a licence 4. Duplicate licence 300 1,000 500 1456 Statutory Instruments 30th December, 2022 FOURTH SCHEDULE (Regulation 23) QUALIFICATIONS OF SENIOR OFFICERS Type of Licensee Insurer/Reinsurer Required qualification Chief Executive Officer – Minimum of a degree in Insurance studies, Business Studies, Economics, Accounting, Finance, Engineering, Actuarial Science or equivalent. Member of the Insurance Institute of Zambia 10 years’ management experience in the financial sector, at least 5 of which shall be in insurance business. Chief Financial Officer – Association of Chartered Certified Accountants /Chartered Institute of Management Accountants/Chartered Accountant Zambia or equivalent qualifications approved by Zambia Institute of Chartered Accountants and a member of Zambia Institute of Chartered Accountants. 7 years’ post qualifying experience in a Finance Role Chief Operating Officer – Degree in Insurance studies, Business Studies, Economics, Accounting, Finance, Engineering, Actuarial Science or equivalent. 7 years’ experience in an underwriting role Member of the Insurance Institute of Zambia Insurance Broker Minimu m Experie nce Chief Executive Officer – Diploma in Insurance Studies Member of the Insurance Institute of Zambia Chief Financial Officer /Accountant – member of Zambia Institute of Chartered Accountants 7 years’ management experience in the financial sector, at least 5 of which are in insurance business. None 23rd December, 2022 Insurance Agent Claims agent Statutory Instruments Chief Executive Officer – Certificate of competence in insurance and a member of Insurance Institute of Zambia Member of the Insurance Institute of Zambia Chief Executive Officer – Diploma in Insurance Studies or in their field of specialty Member of the Insurance Institute of Zambia Risk surveyor Chief Executive Officer – Diploma in insurance studies, risk management or field in which they are to be licensed. 1457 None 5 years’ experience in the insurance industry handling claims 5 years’ experience in risk surveying Member of the Insurance Institute of Zambia Loss Adjustor Chief Executive Officer – Diploma in insurance or risk management Member of the Insurance Institute of Zambia Assessor Chief Executive Officer – Diploma in their fields of specialty and a competence certificate in insurance Member of the Insurance Institute of Zambia Underwriting Agent Chief Executive Officer – Diploma in insurance studies, Business Studies, Economics, Accounting, Finance, Engineering, Actuarial Science or equivalent. Member of the Insurance Institute of Zambia 5 years’ experience in loss adjustering 5 years’ experience in the insurance industry 7 years’ experience in the insurance industry 1458 Statutory Instruments 30th December, 2022 FIFTH SCHEDULE (Regulations 24, 25, 26, 27, 28, 29 and 32) CAPITAL ADEQUACY REQUIREMENTS Capital Adequacy Requirement (CAR) = (Available Capital/Minimum Capital Requirement) x 100% πΆπ΄π = (i) Available Capital (AC ) Minimum Capital Adequacy Requirement (MCR ) x 100% AVAILABLE CAPITAL Available Capital = Total Balance Sheet Assets – Disallowable Assets – Total Balance Sheet Liabilities Where 1. Total balance sheet asset represents total value of assets derived from International Financial Reporting Standards audited statement of financial position; 2. Disallowable assets shall be deducted from the total value of balance sheet assets; and 3. Total Balance Sheet Liabilities represents total value of liabilities derived from International Financial Reporting Standards audited statement of financial position. Notes The available capital of a licensed insurer or reinsurer shall be divided into Tier 1 and Tier 2 capital. (ii) Tier 1 capital shall be the aggregate of issued and fully paid-up ordinary shares, share premiums and retained profits; and shall be supported by the balance sheet assets of cash and cash equivalents, government securities or fixed term deposits. (iii) Tier 2 capital shall be the aggregate of cumulative irredeemable preference shares, capital stocks and other similar capital instruments, undisclosed general reserves, subordinated term debts and revaluation reserves for properties. The available capital of a licensed insurer or reinsurer shall be at least seventy-five percent of Tier 1 capital. 30th December, 2022 (ii) MINIMUM CAPITAL Statutory Instruments ADEQUANCY REQUIREMENTS 1459 FOR GENERAL INSURERS AND REINSURERS a. Minimum Capital Requirement (MCR) = Capital required for balance sheet assets (CBA) + Capital required for investing above concentration limits (CIL)+ Capital for policy liabilities (CPL) + Capital required for Catastrophe risks (CCR) + Capital required for reinsurance ceded (CRC)+ Capital required for Operational risks (COR) + Capital required for guarantee liabilities (CRG) Where 1. CBA = BA * F1 2. CIL = (I – IL) * F1 3. CPL = (UPR + OCR + IBNR)*10% 4. CCR = NC * 5% 5. CRC = RC * F2 6. COR = NEP * 5% 7. CGL = GL* 15% Therefore MCR = ∑ [(BA * F1) + ((I-IL)*F1) + ((UPR + OCR+ IBNR)*10%) + (NC * 5%) + (RC*F2) + (NEP*5%) + (GL*15%)] Where 1. BA means the total balance sheet assets; 2. F1 means the risk factor provided in Table 1 below; 3. I means value of investment in an allowable investment; 4. IL means investment concentration limits provided in Table 2 below; 5. UPR, IBNR and OCR means the reserves provided under regulations 30 and 31 of these Regulations and Section 62 of the Act respectively; 6. NC means the preceding year’s gross claims on all classes of business; 7. RC means reinsurance value ceded to various reinsurers; 8. F2 means the risk factor provided in Table 3 below; 9. NEP means the preceding year’s net earned premium on all classes of business; 10. GL means the total sum insured of the guarantee policies or Policies issued by a licensed general insurer. 1460 Table 1: Statutory Instruments 30th December, 2022 Factors for determination of capital required for balance sheet assets and investments above concentration limits For purposes of regulation 26, a licensed insurer shall use the factors provided below to determine the capital required for balance sheet assets and investing above concentration limits. FACTOR ASSET DESCRIPTION (F1) 0% 2% 3% 4% 8% 10% 15% 30% 40% ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· ο· Cash Deposits in an institution licensed under the Banking and Financial Services Act Government Securities Investment income due and accrued from Government Securities Receivables from other insurance companies Receivable outstanding for less than 8 months from re-insurers Receivables outstanding from the Government of the Republic Premiums receivable for less than 60 days Deposits in excess of 25% limits per institution licensed under the Banking and Financial Services Act Term deposits, Bonds and Debentures expiring or redeemable in one year Term deposits, Bonds and Debentures expiring or redeemable in one year or less from Corporations Residential Mortgage Term deposits, Bonds and Debentures expiring or redeemable in one year or more from Corporations Commercial Mortgage Other secured loans Loans to Corporations Premiums outstanding for 60 days to 1 year Preference shares Receivables from Corporations Shares in listed companies Investment in collective investment schemes Investment Properties Other investments income due and accrued from listed companies Receivables from related companies outstanding for less than 12 months Shares in unlisted companies Land and Building for insurer’s own use Other investments income due and accrued from unlisted companies Investments in related companies Outstanding receivables from re-insurers for more than 8 months but less than 1 year Premiums outstanding between 1 year and 2 years Receivables from the related companies outstanding for less than twelve months For assets classified as “Other Assets” the lesser of o Other Assets capital requirement using this capital charge; or o 1% of Total Assets 30th December, 2022 100% UNLISTED Statutory Instruments 1461 ο· ο· ο· ο· Unsecured loans Assets situated outside Zambia Loans to related companies Loans to directors, Agents and their Associates (including those from related companies) ο· Outstanding premiums for more than 2 years ο· Outstanding receivables from re-insurers for more than 1 year ο· Outstanding receivables from related companies for more than 1 year ο· Fixed assets in excess of their written down values ο· Any excess of “Other Assets” over 1% of total assets. New assets, not currently listed, shall be categorized according to their inherent risk and this categorization shall be agreed with the Authority. ASSETS MULTIPLE CATEGORIES Where information is not available to determine the redemption/maturity of an asset, and the asset falls in more than one category, insurers must use the category with the highest capital factors for that asset. Table 2: Investment concentration limits for licensed insurers For purposes of regulations 26 (a) (ii) and 32, a licensed insurer shall apply the concentration limits set out below GENERAL INSURANCE LONG-TERM INSURANCE 1. Government Securities and Cash 100% 100% 2. 100% 100% 3. Deposits in Institutions Regulated by Bank of Zambia (institutional limit of 25%) Listed Equity 10% 15% 4. Unlisted Equity 5% 5% 5. Related Party Investments 5% 5% 6. Debt Securities – Secured & Listed 5% 10% 7. Debt Securities – Unsecured & Unlisted 2% 5% 8. Investment in Fixed Properties 10% 15% 9. Collective Investment Schemes 0% 7.5% 1462 Table 3: Statutory Instruments 30th December, 2022 Factors for determination of capital required for reinsurance ceded For purposes of regulation 26 (a)(v), a licensed insurer shall use the factors provided below to determine the capital required for reinsurance ceded. RATING AGENCY REINSURANCE RATING Standard & Poors’ Above A BBB Below B Moody’s Above A Bbb Below Bbb AM Best Above B+ B,B- Below B- Fitch Corporation Above A BBB Below BBB GCR Above A- B,B- Below B- Ceding Ratio Capital Charge on Premium Ceded (F2) For first 50% 0% 15% 100% Above 50% 10% 25% 100% NOTES: The following cessions shall not attract any capital charge: 1. Mandatory cessions to ZEP-RE and Africa-Re as provided under Section 78 of the Act; 2. Mandatory cessions to a National Reinsurance Company as provided under Section 77 of the Act; 3. Amounts ceded to locally incorporated reinsurance companies, provided that the amount ceded does not exceed 25% of total 4. Amounts ceded with local licensed reinsurers. premium ceded per reinsurer; and 30th December, 2022 b. Statutory Instruments 1463 Paid up share capital requirement For purposes of regulation 26(b) and 27(c), the paid up share capital requirement is as follows – Table 4 Entity (ii) Amount (K) General Insurers 10,000,000.00 Long term Insurers 12,000,000.00 Reinsurers 20,000,000.00 DETERMINATION OF MINIMUM CAPITAL ADEQUACY REQUIREMENT FOR LONG TERM INSURERS Minimum Capital Adequacy Requirement (MCR) = termination capital adequacy requirement (TCAR) or ordinary capital adequacy requirement (OCAR) or the paid up share capital Where: 1. MCR is the higher of TCAR, OCAR or paid up share capital; 2. TCAR is as defined in regulation 2; 3. OCAR is as calculated in Table 5 below; and 4. The paid up share capital is as indicated in Table 4 above. Table 5 Determination of ordinary capital adequacy requirement for long term insurer or reinsurer For purposes of regulation 28, the actuary of the long term insurer shall apply the following formulas to determine the ordinary capital requirement: Determination of Ordinary Capital Adequacy requirement The ordinary capital adequacy requirement (OCAR) shall be determined by the formula below; ππΆπ΄π = IOCAR (1 − K) Where: i. “IOCAR” is the intermediate capital adequacy requirement that takes into consideration a fall in the fair value of assets backing the ordinary capital requirement and associated credit risk of those assets determined using the following formulae; 1464 Determination of Ordinary Capital Adequacy requirement Statutory Instruments 30th December, 2022 The ordinary capital adequacy requirement (OCAR) shall be determined by the formula below; ππΆπ΄π = IOCAR (1 − K) Where: i. “IOCAR” is the intermediate capital adequacy requirement that takes into consideration a fall in the fair value of assets backing the ordinary capital requirement and associated credit risk of those assets determined using the following formulae; ii. Items “a” to “i” refers to individual risk components of the ordinary capital adequacy requirement that shall be determined as shown below. o o o o o o o o o “a” is the lapse risk (for policies with no surrender values); “b” is the surrender risk; “c” is the mortality, morbidity and medical fluctuation risk; “d” is the Annuitant mortality fluctuation risk; “e” is the mortality, morbidity and medical assumption risk; “f” is the expense fluctuation and assumption risk; “g” is the investment risk; “h” is the credit risk; “i” is the operational and other risks and i. ii. “g” - factor considers the resilience risk of assets backing the ordinary capital adequacy requirement and shall be calculated using the resilience capital adequacy requirement percentages described under the investment risk category below. “h” – factor considers the credit risk of assets backing the ordinary capital adequacy requirement and shall be calculated as follows; Where: ο· “fi” is the factor for credit rating “I” as given in Table 1 below; and 30th December, 2022 Statutory Instruments 1465 Intermediate capital adequacy requirements (IOCAR) risk categories for determining the ordinary capital adequacy requirement Item (a): Lapse risk (for policies with no surrender values) (1) The lapse risk capital requirement shall be equal to 40 percent of the amount required to ensure that no policy has a negative liability before taking into account the effect of any negative bonus stabilization reserve. (2) The actuary of the licensed insurer shall consider additional margins where: (a) the office’s lapse experience fluctuates significantly from year to year or the trend in lapses has been worsening over time; and (b) the typical level of base lapses is in excess of the requirement outlined in (1) above. Item (b): Surrender risk (1) The surrender risk capital requirement shall be equal to 20 percent of the amount required to ensure that no policy’s liability, before taking into account the effect of any negative bonus stabilisation reserve, is less than its current surrender value. (2) For policies that cannot be surrendered or transferred from the long-term insurer, the amount shall be zero. (3) The long term insurer shall consider additional margins to the factor where: (a) material surrender values are guaranteed; (b) the insurer has created expectations of stabilised future surrender values at the point of sale or in regular correspondence with policyholders; and (c) the typical level of surrenders is in excess of 10% of in-force policies per annum. 1466 Item (c): Mortality, morbidity and medical fluctuation risk Statutory Instruments 30th December, 2022 (1) In providing for fluctuations in experience over the valuation period, the insurer shall set the medical fluctuation risk Intermediate ordinary capital requirement at (3) three times the mortality fluctuation risk IOCAR. (2) The following factors shall be used in determining this requirement: Where: ο· ο· “n” is number of lives assured in the category (net of lives fully reinsured); and “p” is annual risk premium on the valuation basis or expected strain (net of reinsurance). (3) The licensed insurer shall consider the following when applying the formulas above: (a) The above formulas assume typical spreads of risks, where this is not the case, the licensed insurer shall consider calculating separate fluctuation capital adequacy requirements for different homogeneous groups and set aside the sum of these capital requirements; (b) The fluctuation risk can be decreased by considering suitable reinsurance, where the long term insurer’s statutory actuary considers it necessary; (c) The licensed insurer should note that mortality includes funeral benefits and accident benefits; (d) Morbidity includes lump sum disability benefits, dread disease benefits and income protection benefits; (e) Medical includes hospital cash plans and major medical benefits; (f) The licensed insurer shall further note the annual risk premium on the valuation basis or expected strain (net of reinsurance), “p” above and should include any relevant option premiums. 30th December, 2022 Item (d): Annuitant mortality fluctuation risk Statutory Instruments 1467 (1) The annuitant mortality fluctuation capital adequacy requirement shall be equal to; Where: ο· ο· Item (e): Mortality, Morbidity and Medical assumption risk “r” is the statutory valuation method reserves for the relevant (i.e. where mortality plays a role) annuity portfolios on the valuation date; and “n” is number of annuitants in the relevant category. (1) The mortality, morbidity, medical assumption capital adequacy requirement (also referred to as AIDS assumption) shall be equal to onethird of the best estimate AIDS liability. (2) Where the long term insurer has performed adequate modelling on item (c) (i.e. mortality, morbidity and the medical fluctuation risk) in addition to medical compulsory margins and the results leads to a requirement which exceeds 95 percent confidence interval, no mortality, morbidity and medical assumption capital adequacy requirement apart from the AIDS above is thus deemed necessary. (3) In an addition to (1) one above, the licensed insurer must consider additional amounts for the following;- (a) (b) (c) (d) (e) new types of benefits; new distribution channels; insufficient experience data being available; experience worsening over time; or any other relevant factor. 1468 Item (f): Expense fluctuation and assumption risk Statutory Instruments 30th December, 2022 (1) The expense fluctuation capital adequacy requirement shall be equal to 10% of all renewal expenses in the previous year (excluding commission and other related acquisition costs). (2) The insurer shall, in addition to the above amount, consider additional factors where: (a) new business figures historically have deviated by more than 20% from budgets or expenses are unpredictable; (b) the insurer is rapidly growing and expenses are unpredictable; or (c) the life insurer has recently launched a new class of policy with a substantially different expense structure to existing Policies; and (d) lines of business not discounted on a cash flow bases. Item (g): Investment Risk (1) The investment risk capital adequacy requirement shall be equal to the greater of item (gi) and item (gii), as defined below; Item (gi): Resilience Capital Adequacy Requirement (a)The long term insurer must consider the valuation of assets assuming a fall in the fair values of the assets backing the liabilities on the valuation date for purpose of the resilience Capital Adequacy Requirement to test the robustness of the financial position of a longterm insurer in the face of volatile market conditions on parameters listed below; Type of asset Fall in fair value Equities LUSE All Share dividend yield below 4% 30% fall in value LUSE All Share dividend yield 5% or above 20% fall in value LUSE All Share dividend yield at 4% or above, but below 5% Interpolate between 20% and 30% Fixed property 15% fall in value 30th December, 2022 Statutory Instruments 1469 Fixed interest Impact of 25% relative increase/decrease in yield to maturity (i.e. when yields are 10%, test resilience to both 7.5% and 12.5% yield environments) Inflation linked Securities Impact of increase/decrease in real yield to maturity by factor of 25% of real yield to maturity (i.e., a real yield of 4% increases to 5%). Cash and similar floating No change in value interest rate assets Other assets 35% fall in value Foreign currency Same as for domestic assets subject to a minimum of denominated assets 20% fall in value Note 1: For fixed interest and inflation linked bonds, the long term insurer shall determine whether an increase or decrease will lead to the highest Capital Adequacy Requirements on total life fund. The Statutory Actuary must use the yield movement that produces the highest CAR. Note 2: For assets not listed in this table, for example unlisted holdings and preference shares, the licensed insurer shall be guided by the fall in fair value of the closest equivalent(s) listed above. (a)The resilience Capital Adequacy Requirement shall be determined as follows: (A0 – L0) – (A1 – L1) = L1 – A1 Where: L0 = is the Statutory valuation method liabilities (including any bonus stabilisation reserves) at the valuation date. A0 = L0 (i.e. the assets necessary to back the liabilities at the valuation date) L1 = Statutory valuation method liabilities after the assumed fall in fair value (before deduction of the absolute value of any negative bonus stabilisation reserve), reduced by the effect of any proposed management actions e.g. lower bonus rates. A1 = Value of the assets (A0) after the assumed fall in fair value 1470 Statutory Instruments 30th December, 2022 Notes: (a) Assume that fair values will not recover (within a short period). (b) For options and futures, the long-term insurer’s exposure to the relevant assets (e.g. equities) must be taken into account when calculating this requirement. (c) For fixed income assets, long-term insurer must determine whether an increase or decrease will lead to the highest capital adequacy requirements on the total life fund the insurer must use the yield movement that produces the highest capital adequacy requirement. (d) Where share capital invested in foreign assets is used to cover the OCAR, assume that these foreign assets have the same assumed fall as Zambia Kwacha denominated assets, but with an allowance for exchange rate volatility and subject to a minimum fall of 20% per asset class. This in turn implies that any offshore assets used will result in a minimum “up-ratio factor” of 20% in the determination of OCAR from IOCAR. (1) Item (gii): Worse investment return Capital Adequacy Requirement (a) The licensed insurer shall assume a 15 percent relative reduction in future investment - “worse investment return” scenario or assume a future investment return equal to 0.85x the valuation assumption. (b) The worse investment return shall be equal to or determined as follows: Capital, Adequacy Requirement (A0 – L0) – (A1 – L1) = L1 – A1 Where: L0 = Statutory valuation method liabilities (including any stabilization reserves) at the valuation date bonus A0 = L0 (i.e. the assets necessary to back the liabilities at the valuation date) L1 = Statutory valuation method liabilities assuming the worse investment return scenario (before deduction of the absolute value of any 30th December, 2022 Item (i): Credit Risk Statutory Instruments (1) The credit risk capital adequacy requirement item shall consider the inability or unwillingness of a counterparty to fully meet its on- or offbalance sheet contractual obligations inherent in various assets held by the long-term insurer. (2) For each of the discretionary participation and non-profit components the credit risk capital adequacy requirement shall be equal to: ∑ππ₯π₯ π’(ππ’ × πππ’ ) Where: ο· Fi = is the factor for credit rating I as given in the table below; and ο· MVi = is the market value of the aggregate holding of assets with credit rating I backing each of the non-profit and discretionary policy liability portfolios. (3) The long-term insurer shall use the credit risk factor table below to determine the credit risk capital adequacy requirement. 1471 1472 Statutory Instruments 30th December, 2022 Factor (f) Duration in years Credit Rating cash 1 2 AAA 0.10% 0.14% 0.27% AA+ 0.10% 0.14% 0.27% AA 0.19% 0.26% 0.44% AA0.27% 0.36% 0.58% A+ 0.49% 0.65% 0.96% A 0.68% 0.91% 1.28% A0.80% 1.07% 1.48% BBB+ 1.08% 1.44% 1.92% BBB 1.37% 1.83% 2.38% BBB2.60% 2.75% 3.42% BB+ 2.56% 3.41% 4.15% BB 3.27% 4.36% 5.17% BB4.35% 5.81% 6.69% B+ 5.68% 7.58% 8.50% B 7.96% 10.62% 11.55% B10.10% 13.47% 14.42% CCC+ 14.47% 19.29% 20.17% CCC 15.38% 20.51% 21.33% CCC15.86% 21.15% 21.91% Table 1: Credit Risk Factors 3 0.40% 0.40% 0.62% 0.80% 1.27% 1.66% 1.89% 2.40% 2.92% 4.09% 4.89% 5.99% 7.58% 9.42% 12.49% 15.36% 21.05% 22.15% 22.67% 5 0.65% 0.65% 0.98% 1.24% 1.88% 2.40% 2.70% 3.35% 4.01% 5.43% 6.37% 7.62% 9.36% 11.26% 14.35% 17.26% 22.82% 23.80% 24.19% 10 1.30% 1.30% 1.88% 2.34% 3.42% 4.26% 4.73% 5.75% 6.74% 8.78% 10.06% 11.70% 13.80% 15.87% 19.02% 21.99% 27.22% 27.91% 27.98% 15 1.94% 1.94% 2.78% 3.44% 4.96% 6.11% 6.77% 8.14% 9.46% 12.14% 13.76% 15.78% 18.24% 20.47% 23.69% 26.73% 31.62% 32.02% 32.02% 20 2.58% 2.58% 3.68% 4.54% 6.49% 7.97% 8.80% 10.54% 12.19% 15.49% 17.46% 19.86% 22.68% 25.08% 28.36% 31.46% 36.02% 36.13% 36.12% Table 1: Credit Risk Factors (1) (4) The credit ratings shall be based on Standard and Poor’s International Scale and local Currency rating, where other rating agencies and methods are used, the long term insurer shall use factors corresponding to the comparable S&P International Scale, Local Currency rating. (2) (5) Where the instrument does not have a credit rating but the asset is exposed to a credit-rated counterparty, then the exposure to the counterparty is aggregated and this shall constitutes MVi. (3) Where there is no rating for an instrument, or the credit counterparty has not been rated, an (6) internal company rating may be used. (7) For government debt and debt instruments carrying an explicit Zambian Government guarantee (4) and issued in the Zambia Kwacha, a factor of 0% shall be applied. (5) The following assets shall be considered by the long term insurer when determining the credit (8) risk exposure of assets - (a) Bonds and short-term deposits (promissory notes, letters of credit, convertibles, etc) (b) Preference shares (if not allowed for as an equity investment in determining (gi) above) (c) Risk profile of the business (d) The capital levels required by rating agencies for the company’s required credit rating (e) The capital levels being maintained by competitors (f) How the capital itself is invested (g) The relative level of the investment markets at the time 30th December, 2022 (ii) (iv) Statutory Instruments 1473 DETERMINATION OF LIABILITIES For the purposes of regulation 29, the actuary of the insurer shall determine the value of liabilities in accordance with the table below: Risk Compulsory Margin as a Percentage of the Base Assumption Mortality 7.5% (increase for assurance, decrease for annuities Morbidity 10% Health Events 15% Lapses 25% Interest rate 0.50 percentage points per year in the management fee, or an equivalent asset-based or investment performance-based margin Termination of disability income benefits in payment 10% of claims reserve Surrenders 10% (increase or decrease in surrender rate depending on which alternative gives rise to an increase in liability of the policy concerned) Expenses 10% Expense inflation 10% (of the estimated escalation rate) Charges under linked life Policies A reduction of 0.25 percentage points LUSAKA 13th December, 2022 [MF/IDM/101/39/1] DR S. MUSOKOTWANE, Minister of Finance and National Planning 1474 Statutory Instruments 30th December, 2022