Insurance Act Flashcards
What is the lock-in period (restriction period) for the sale or pledge of promoter shares of an insurance company?
Within five years from the date of establishment of the insurance company.
Under what exceptional situations can promoter shares be sold amongst promoters within 5 years of the establishment of an insurance company?
- Arising a special circumstance due to emergence of any obstruction or hindrance in the operation of insurer,
- or a promoter shareholder is included on the blacklist as per prevailing laws.
What constitutes “Special Circumstances” in the context of selling promoter shares within 5 years?
A situation in which:
- Board meeting not conducted for 3 consecutive terms due to lack of quorum,
- or Situation of not reaching into any conclusion arises due to conflict amongst promoters/directors.
What is required to sell or pledge shares by a promoter of an insurance company after 5 years from establishment?
Conditions and limitations shall be as prescribed by NIA.
Under what circumstances is an insurer restricted from declaring and distributing dividends to its shareholders?
- It has not recovered all of its Preliminary expenses and Accumulated losses up to the preceding fiscal year,
- It has not maintained Risk bearing fund or reserve fund as prescribed by this Act and Authority,
- It has not maintained minimum paid up capital pursuant to Section 36,
- It has not maintained the proportion of assets and liabilities pursuant to Section 42,
- The shares set aside for general public are not allotted and fully paid up.
What approval is required before an insurer can declare a dividend?
Prior approval from NIA must be obtained.
Who is required to pay regulatory fees?
Every insurer
What is the rate of regulatory fees payable by an insurer?
0.75% of total premium earned.
What is the rate of regulatory fees for an insurance company operating micro-insurance business?
To the tune of 0.5% of total insurance premium annually earned.
Chairperson - Independent Director?
No. Independent directors cannot be Chairperson.
Family Directors - Limit?
Max 1 director per family in similar insurance businesses.
Director Vacancy Filling (Non-Institutional/Alternate)?
Board of Director until next general meeting.
Director Vacancy - Time Limit to Fill?
35 days.
Director Tenure - Max Years? (Section 48)
4 years.
Director Re-appointment/Re-nomination?
No restriction.
Independent Director Tenure - One Term?
Yes
Independent Director Re-appointment?
Restricted.
Independent Director - Appointed By?
Board of directors.
Independent Director - Qualification?
Qualification and experience as per Section 49.
Independent Director - Appointment Info Furnished Where?
First General Meeting after appointment.
Chairperson Appointment?
Directors appoint from amongst themselves.
Director Appointing Authority - Generally?
General Meeting.
Director Appointing Authority - Before 1st AGM?
Promoters.
Director Appointing Authority - Share held by Govt/Institution etc.?
Institution can appoint directors in proportion to shareholding.
[Insurance Director Quals] What disqualifications for a Director relate to their Personal Status & Capacity?
- Age: Under 25 years old.
- Disability: Physical or mental disability preventing service.
- Insolvency: Bankrupt under prevailing laws.
[Insurance Director Quals] What disqualifications for a Director relate to their Past Actions & History?
- Blacklisted: Blacklisted & <3 years since removal.
- Tax Default: Failure to clear taxes.
- Criminal Conviction: Serious crimes (theft, fraud etc.) & <5 yrs since sentence end.
- Regulatory Action: Regulatory action & <5 yrs since action.
- Govt Dues/Imprisonment/Fines: Unpaid Govt dues, imprisonment, or fines.
- Insurance Authority Punishment: Punished by Insurance Authority for directive violation & <3 yrs elapsed.
[Insurance Director Quals] What disqualifications for a Director relate to their Conflicts of Interest & Incompatible Roles?
- Incumbent Director Conflict: Director in other financial institutions/insurers (or promoter group of another insurer).
- Auditor/Consultant Conflict: Conflict of interest (auditor, consultant, partnership with the insurer).
- Stock Exchange Member: Stock Exchange/merchant banker member.
- Director in Other Insurer: Director in another insurer.
- Articles of Assoc. Disqualification: Disqualified by insurer’s Articles of Association (shareholding).
- Minimum Shares Not Acquired: Minimum director shares not acquired.
- Public Post/Govt Employee: Nepal Govt. public post/employee (or in Govt-owned financial institutions).
[Insurance Director Quals] Quickest Path? (Experience-Based)
- 5 years Work Experience
- Level: Director or Office Bearer
- Sectors: Foreign/Local Insurer, Bank, Financial Institution, Related Corporate Body, or Officer level in Govt. of Nepal/Organized Institution.
[Insurance Director Quals] Need Degree? Bachelor’s Scenario?
- Bachelor’s Degree (any subject)
- AND 3 years Work Experience
- Level: Director or Office Bearer
- Sectors: Foreign/Local Insurer, Bank, Financial Institution, Related Corporate Body, or Officer level in Govt. of Nepal/Organized Institution.
[Insurance Director Quals] Education Alone Enough? Which Degrees?
- EITHER Chartered Accountancy (CA) Degree
- OR Master’s Degree in: Insurance, Monetary, Banking, Finance, Commerce, Public Administration, Statistics.
Disqualification of CEO for insurance company
Engaged In (Current Roles and Activities):
* Former Chairperson of the Board.
* Recent CEO (< 6 months ago).
* Director or related to Directors of the insurer.
* Insurance intermediary.
* Auditor/consultant of the insurer.
* Securities dealer/member.
* Financial interest in the insurer.
* Incumbent in public office.
Punishment and (Legal/Disciplinary Penalties):
* Blacklisted (and < 3 years since release).
* Imprisoned (and < 3 years since sentence completion).
* Convicted of serious criminal offense (embezzlement, fraud, etc.).
Extra (Other Disqualifications):
* Unable to serve as Director (illness).
* Foreign Permanent Residency.
(Insurance Act, 2079) - Insurer:
A person or entity licensed to carry on insurance business.
(Insurance Act, 2079) - Insured:
The person whose life or property is insured with the insurer.
(Insurance Act, 2079) - Insurance:
A contract where the insured transfers the cost of potential loss to the insurer in exchange for premium.
(Insurance Act, 2079) - Insurance Agent:
A person licensed by the Authority to solicit and procure insurance business.
(Insurance Act, 2079) - Insurance Broker:
A corporate body licensed by the Authority to arrange insurance contracts on behalf of clients.
(Insurance Act, 2079) - Surveyor:
A person licensed by the Authority to make a financial valuation of the destroyed property and includes an adjuster and a person who makes a valuation of losses.
(Insurance Act, 2079) - Actuary:
A person having prescribed qualifications and appointed by the Insurer for assessing and calculating the liabilities of the Insurance Business.
(Insurance Act, 2079) - Nepal Insurance Authority:
The regulatory body established under the Insurance Act, 2079.
