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LONG-TERM INSURANCE ACT
REGULATIONS UNDER THE LONG-TERM INSURANCE ACT 52 OF 1998
[Updated to 1 March 2015]
GoN R1492, G. 19495 (c.i.o 1 January 1999),
GoN R197, G. 20934 (c.i.o 1 March 2000),
GoN R164, G. 23105 (c.i.o 15 February 2002),
GoN R1208 and 1209, G. 25370 (c.i.o 1 September 2003),
GoN R1218, G. 29446 (c.i.o 1 December 2006),
GoN R186, G. 29681 (c.i.o 1 M arch 2007),
GoN R952, G. 31395 (c.i.o 1 January 2009),
GoN R1077, G. 34877 (c.i.o 23 December 2011, unless otherwise indicated),
GoN R170, G. 38507 (c.i.o 1 March 2015),
GoN R1437, G. 41334 (c.i.o 15 December 2017).
The Minister of Finance has under section 72 of the Long-term Insurance Act, 1998, made the regulations set out in the Schedule.
ARRANGEMENT OF REGULATIONS
PART 1
INTERPRETATION
PART 2
LIMITATION ON ASSETS
(Section 31)
2.2 General limitation on assets
2.3 Assets of asset-holding intermediary
2.4 Liabilities of asset-holding intermediary
2.5 Deemed assets
2.6 Futures contracts
2.7 Option contracts
2.8 Other derivatives
Table
CATEGORIES OF ASSETS
(Regulation 2.2)
PART 3
REMUNERATION
(Section 49)
PART 3A
LIMITATION ON REMUNERATION FOR RENDERING SERVICES AS INTERMEDIARY· POLICIES OTHER THAN POLICIES TO WHICH PART 3B APPLIES
3.1 Application of this Part 3A, and definitions
3.2 General limitations
3.3 Time of payment of commission
3.4 Maximum commission payable
3.5 Adjustment and refund of commission
3.6 Special provisions concerning fund and fund member policies
3.7 Commission when policy has different benefit components
3.8 Voidness of certain agreements
3.9 Special provisions concerning replacement investment policies
3.9A Special provisions concerning replacement risk policies
ANNEXURE 1
TABLE
ANNEXURE 2
SCALE A
1. Normal commission
2. Special commission
PART 3B
PART 3B
LIMITATION ON REMUNERATION FOR RENDERING SERVICES AS INTERMEDIARY – INVESTMENT POLICIES THAT STARTED ON OR AFTER 1 JANUARY 2009
3.10 Application of this Part 3B, and definitions
3.11 General prescriptions
3.12 Maximum commission
3.13 Time of payment of commission
3.14 Premium increases and additional premiums
3.15 Discounting of commission
3.16 Redirecting of commission
3.17 Adjustment and refund of commission
3.18 Replacement investment policies
LIMITATION ON REMUNERATION FOR BINDER FUNCTIONS
3.19 Application of this Part 3C, and definitions
3.20 General principles for determining remuneration for binder functions
3.21 Remuneration that may be offered or provided to a binder holder
3.22 Participation by a binder holder in profits attributable to the policies referred to in a binder agreement
PART 3D
NOTIFICATION OF CERTAIN ARRANGEMENTS WITH INDEPENDENT INTERMEDIARIES OR REPRESENTATIVES
3.24 Notification of certain arrangements with independent intermediaries or representatives
LIMITATION ON PROVISIONS OF CERTAIN POLICIES
4.1A Application of this Part
4.2 Limitations on policies
4.2A Maximum fees, penalties or any other charges on loans
4.3 General exclusion
REQUIREMENTS AND LIMITATIONS REGARDING THE VALUES AND BENEFITS OF POLICIES
POLICIES OTHER THAN POLICIES TO WHICH PART 5B APPLIES
5.1 Application of this Part 5A, and definitions
5.2 Basis for determination of values and benefits of policies
5.3 Fund member policies
5.4 Policies other than fund member policies
5.4A Deduction of administration charge
5.5 Interest on the excess amount
5.7 Delayed implementation
5.8 Amendments to actuarial basis and values
5.9 Variable premium increases in respect of policies to which this Part applies
INVESTMENT POLICIES THAT STARTED ON OR AFTER 1 JANUARY 2009
5.10 Application of this Part 5B, and definitions
5.11 Basis for determination of values and benefits of policies
5.12 Maximum charges that may be deducted
PART 5C
PRINCIPLES FOR CALCULATION OF CAUSAL EVENT CHARGES
5.15 General principles for the calculation of causal event charges
BINDER AGREEMENTS
6.1 Definitions and interpretation
6.2 Requirements, limitations and prohibitions relating to binder holders
6.2A Governance and oversight requirements
6.3 Requirements, limitations and prohibitions relating to binder agreements
6.6 Reporting requirements
6.7 Transitional arrangements
TITLE AND COMMENCEMENT
PART 1
INTERPRETATION
1.1 Definitions
In these regulations “the Act” means the Long-term Insurance Act, 1998, and any word or expression to which a meaning has been assigned in the Act shall have the meaning so assigned to it, and unless a different meaning is assigned elsewhere in these regulations—
[Para subs by reg 2(a) of GoN R1437 in G. 41334.]
“Companies Act” means the Companies Act, 2008 (Act 71 of 2008);
[“Companies Act” ins by reg 2(b) of GoN R1437 in G. 41334.]
“effective date” means the date referred to in regulation 8.2;
[“effective date” ins by reg 2(c) of GoN R1437 in G. 41334.]
“insurer” means a long-term insurer;
[“insurer” ins by reg 2(d) of GoN R1437 in G. 41334.]
“juristic person” includes—
(a) a company, close corporation or co-operative incorporated or registered in terms of legislation whether in the Republic or elsewhere;
(b) an association, partnership, club or other body of persons of whatever description, corporate or unincorporated; or
(c) a trust or trust fund;
[“juristic person” ins by reg 2(e) of GoN R1437 in G. 41334.]
“Part” means the applicable Part of these regulations;
“policy” means a long-term policy;
[“policy” ins by reg 2(f) of GoN R1437 in G. 41334.]
[“SAFEX” rep by reg 2(g) of GoN R1437 in G. 41334.]
“Schedule” means the applicable Schedule to the Act;
“section” means the applicable section of the Act.
LIMITATION ON ASSETS
2.1 Definitions
For the purposes of this Part and section 31 and, unless the context otherwise indicates—
“asset-holding intermediary”, in relation to a long-term insurer, means an undertaking, other than a company the shares of which are listed on a licensed stock exchange in the Republic—
(a) which is a subsidiary of the long-term insurer or would be its subsidiary if that insurer were a company;
(b) the management of the investments of which is under de facto control of the long-term insurer; and
(c) which has assets which are regarded and dealt with, for all intents and purposes, as if they were the assets of the long-term insurer;
“associated company” means a company—
(a) which is an associate, as defined in section 26(5), of a long-term insurer;
(b) which exercises control, as defined in section 26(6), over a long-term insurer; or
(c) over which a long-term insurer exercises control as defined in section 26(6),
other than a company which is an asset-holding intermediary or a property company;
“call option” means an option contract under which the holder of the option contract has the right but not an obligation, in accordance with the terms of the contract, to purchase (or to make a cash settlement in lieu thereof) the quantity of the underlying asset covered by the call option contract;
“convertible debenture” means a debenture which is convertible into equity shares of a company;
“equity shares” in relation to a company, means shares, excluding any part thereof which, neither as respects dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution;
[“equity shares” subs by reg 3(a) of GoN R1437 in G. 41334.]
“linked policy” means a long-term policy in relation to which the liabilities of the long-term insurer are linked liabilities as defined in section 33(2);
“long position” means long position as defined in the rules of SAFEX;
“market value”, in relation to an asset, means—
(a) in the case of an asset which is listed on a licensed stock exchange and for which a price was quoted on that stock exchange on the date as at which the value is calculated, the price last so quoted;
(b) in the case of an asset which is a long-term policy, the amount which on any day would be payable to the policyholder upon the surrender of the policy on that day;
(c) in any other case, the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length, as estimated by the long-term insurer, or by the Registrar if the Registrar is not satisfied with that estimate;
“multiple” means the futures contract’s unit of trading in its description;
“n.e.s.” means not elsewhere specified in this Part;
“net loans” means the positive amount (if any) by which the aggregate amount of loans made by a long-term insurer to its asset-holding intermediary, exceeds the aggregate amount of loans made to it by that asset-holding intermediary;
“property company” means a company—
(a) whose ownership of—
(i) immovable property; or
(ii) all of the shares in a company—
(aa) whose principal business consists of the ownership of immovable property; or
(bb) which exercises control, as defined in section 26(6), over a company whose principal business consists of the ownership of immovable property; or
(iii) a linked policy, to the extent that the policy benefits thereunder are determined by reference to the value of immovable property,
constitutes, in the aggregate, 50 per cent or more of the market value of its assets;
(b) which derives 50 per cent or more of its income, in the aggregate, from—
(i) investments in immovable property;
(ii) investments in another company which derives 50 per cent or more of its income from investments in immovable property; or
(iii) a linked policy to the extent that the policy benefits thereunder are determined by reference to the value of immovable property; or
(c) which exercises control, as defined in section 26(6), over a company referred to in paragraph (a) or (b);
“put option” means an option contract under which the holder of the option contract has the right but not an obligation in accordance with the terms of the contract to sell (or to make a cash settlement in lieu thereof) the quantity of the underlying asset covered by the put option contract;
“rules of SAFEX” means rules issued by SAFEX in terms of section 10(2)(b) read with section 17 of the Financial Markets Act, 2012 (Act 19 of 2012);
[“rules of SAFEX” subs by reg 3(b) of GoN R1437 in G. 41334.]
“SAFEX” means the South-African Futures Exchange;
[“SAFEX” ins by reg 3(c) of GoN R1437 in G. 41334.]
“shares” include share stock;
“short position” means short position as defined in the rules of SAFEX.
2.2 General limitation on assets
For the purposes of section 31(1), a long-term insurer shall have assets of the kinds specified in Schedule 1 having a market value which, when expressed as a percentage of the aggregate value of the relevant liabilities of the long-term insurer, does not exceed the percentage specified in column 2 of the Table to this Part in relation to the particular kinds or categories of assets specified in column 1 of that Table.
2.3 Assets of asset-holding intermediary
For the purposes of regulation 2.2 the assets of the kinds set out in Schedule 1 of an asset-holding intermediary of a long-term insurer, other than a claim thereof against that long-term insurer, shall be deemed to be assets of the long-term insurer—
(a) in place of the net loans made by it to the asset-holding intermediary, to the extent determined in accordance with the formula—
(b) in place of its shares, other than equity shares, in the asset-holding intermediary, to the extent determined in accordance with the formula—
(c) in place of its equity shares in the asset-holding intermediary, to the extent determined in accordance with the formula—
in which formulae—
2.4 Liabilities of asset-holding intermediary
For the purposes of regulation 2.2, the liabilities of an asset-holding intermediary of a long-term insurer, other than a claim of the long-term insurer against that asset-holding intermediary, shall be deemed to be liabilities of the long-term insurer to the extent determined in accordance with the formula—
in which formula—
2.5 Deemed assets
For the purposes of regulation 2.2, there shall be deemed as assets of a long-term insurer, or, where appropriate, its asset-holding intermediary, in place of the market value of an asset thereof which is a linked policy, those assets of the particular kind of categories specified in Schedule 1 to the extent, in respect of each such particular kind or category, of an amount which bears the same proportion to the market value of the linked policy as each of those kinds or categories of assets by reference to the value of which the policy benefits are to be determined, is stated in terms of the policy (or, if not so stated, is estimated by the long-term insurer which is liable under the policy), bears to the total of all of the assets to which the policy is linked.
2.6 Futures contracts
(1) For the purposes of regulation 2.2, a futures contract shall be deemed to be the asset or kind of asset to which the futures contract relates. The exposure in consequence of concluding a futures contract shall be included in the calculation of the overall exposure to the particular asset or category of assets concerned, and the assets of the kind specified in item 1, 2, 16(5)(d) or 18 of the Table to Schedule 1 shall be adjusted accordingly. The exposure arising from the use of a purchased futures contract (long position) shall be added, while assets of the kind specified in item 1, 2, 16(5)(d) or 18 of the Table to Schedule 1 shall be reduced, and the exposure arising from the use of a sold futures contract (short position) deducted from the particular asset or category of assets whilst the assets of the kind specified in item 1, 2, 16(5)(d) or 18 of the Table to Schedule 1 shall be increased.
(2) The balance of any margin deposit shall be deemed to be an asset of the kinds specified in items 2 and 16(5)(b) of the Table to Schedule 1.
(3) For the purposes of this regulation “exposure” means the number of contracts x multiple x current price, where the current price shall be the “mark-to-market” as defined in the rules of SAFEX on the reporting date.
2.7 Option contracts
(1) For the purposes of regulation 2.2, an option contract shall be deemed to be the asset or kind of asset to which the option contract relates. The exposure in consequence of concluding an option contract shall be included in the calculation of the overall exposure to the particular asset or category of assets concerned and the assets of the kind specified in item 1, 2, 16(5)(d) or 18 of the Table to Schedule 1 shall be adjusted accordingly. The exposure arising from the use of an option contract that results in a positive holding shall be added to the particular asset or category of assets while assets of the kind specified in item 1, 2, 16(5)(d) or 18 of the Table to Schedule 1 shall be reduced. The exposure arising from the use of an option contract that results in a negative holding shall be deducted from the particular asset or category of assets, while assets of the kind specified in item 1, 2, 16(5)(d) or 18 of the Table to Schedule 1 shall be increased. A positive holding constitutes a call option bought (long call) and a put option sold (short put), and a negative holding constitutes a call option sold (short call) and a put option bought (long put).
(2) The balance of any margin shall be deemed to be an asset of the kinds specified in items 2 and 16(5)(b) of the Table to Schedule 1.
(3) For the purposes of this regulation “exposure” means the number of contracts x delta x the market value of the underlying asset or kind of assets where “delta” represents the change in option contract premium associated with one percentage point move in the market price of the underlying asset.
2.8 Other derivatives
Any derivative in relation to which no basis for valuation has been provided in regulation 2.6 or 2.7 shall be—
(a) deemed to be the asset or kind of asset to which the derivative relates; and
(b) valued as determined by the Registrar.
(Regulation 2.2)
In this Table particular items or groups of items referred to in Schedule 1, or particular kinds of assets falling within the more general description of those categories in Schedule 1, are specified in column 1. The maximum permitted holding of those specified assets, calculated according to their market value and expressed as a percentage of the liabilities concerned, is specified in column 2.