XN000022-1990-06-06 — Page 11

WEDNESDAY, JUNE 6, 1990

"WE PROPOSE THEREFORE THAT A DIRECT

INSURANCE CONTRACT ISSUED BY AN UNAUTHORISED INSURER SHOULD BE ENFORCEABLE AT THE OPTION OF THE POLICY HOLDER.

"THUS THE POLICY HOLDER MAY CHOOSE EITHER TO ENFORCE OR TO VOID THE CONTRACT AND, IN THE LATTER CASE, TO RECOVER ANY CONSIDERATION PAID UNDER THE CONTRACT," HE SAID.

AS TO A REINSURANCE CONTRACT ENTERED INTO BY AN UNAUTHORISED INSURER, MR NENDICK SAID THE GOVERNMENT PROPOSED THAT IT SHOULD ALWAYS BE ENFORCEABLE.

"IF A REINSURANCE CONTRACT WERE NOT TO RE ENFORCEABLE BECAUSE OF A CONTRAVENTION BY EITHER CONTRACTING PARTY, INSURER OR REINSURER, + THIS COULD MATERIALLY AFFECT THE ABILITY OF THE INSURER TO MEET CLAIMS OF DIRECT POLICY HOLDERS," HE ADDED.

ON PRIOR APPROVAL OF A CONTROLLER, MR VENDICK EXPLAINED THAT THE ORDINANCE REQUIRED AN AUTHORISED INSURER TO NOTIFY THE INSURANCE AUTHORITY, IN ARREARS, OF ANY APPOINTMENT AS OR CHANGE IN THE CONTROLLER OF THE COMPANY.

FOR THE

PURPOSE OF THE ORDINANCE,

1 CONTROLLER WAS DEFINED AS A MANAGING DIRECTOR OR CHIEF EXECUTIVE OF AN INSURER OR ITS PARENT COMPANY, A PERSON WHOSE INSTRUCTIONS THE DIRECTORS OF THE INSURER OR ITS PARENT COMPANY WERE ACCUSTOMED TO FOLLOW, OR A "CONTROLLING SHAREHOLDER"

A PERSON KRO, ALONE OR WITH AN

ASSOCIATE OR NOMINEF, CONTROLLED 15 PER CENT OR MORE OF VOTING POWER OF THE INSURER OR ITS PARENT COMPANY.

THE

MR NENDICK SAID THAT UPON NOTIFICATION, THE INSURANCE AUTHORITY MIGHT OBJECT TO ANY PARTICULAR CONTROLLER IF IT APPEARED TO HIM THAT THAT CONTROLLER WAS NOT A FIT AND PROPER PERSON TO HOLD SUCH A POSITION.

"WE CONSIDER THIS ARRANGEMENT TO BE UNSATISFACTORY.

WE

BELIEVE IT IS IMPORTANT FOR THE INSURANCE AUTHORITY TO BE INFORMED BEFORE THE EVENT, RATHER THAN AFTER IT.

IN THE INTERESTS OF POLICY HOLDERS, A PERSON WHO IS NOT FIT AND PROPER SHOULD NOT BE IN LONTROL OF AN INSURER FOR EVEN A SHORT PERIOD OF TIME. HE ADDED.

PRIOR

MR NENDICK SAID THE GOVERNMENT THEREFORE PROPOSED THAT APPROVAL BE OBTAINED FROM THE INSURANCK AUTHORITY BEFORE ANY APPOINTMENT AS OR CHANGE IN CONTROLLER OF AN AUTHORISED INSURER TOOK PLACE.

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