SUMMARY PROVISIONS OF THE ST LUCIA INSURANCE ACT

SUMMARY PROVISIONS OF THE ST LUCIA INSURANCE ACT Chapter 12. 08

LEGISLATION GOVERNING REGULATION AND SUPERVISION OF INSURANCE BROKERS • Part 5 Sections 61 -79 • Sections 80 – 83 • Section 167 (statutory instrument 77/1995) – Regulations for the registration of Insurance Agents, Brokers and Insurance Salesmen • Statutory Instrument 126/2002 – insurance (Brokers Returns Forms) Regulations

SUMMARY OF PROVISIONS OF THE REGULATIONS • Requirement for Registration – Section 61 • Conditions for Registration –Section 64 & Regulations o Competence in particular class of insurance business o Must maintain professional Indemnity Insurance o Must comply with the requirement of passing examinations in accordance with Regulations 15 o May be exempted from examinations in accordance with Regulations 17

• Certificate of Registration o Valid for one year o To be renewed annually not later than 30 days before anniversary date o Persons who display invalid certificates commit an offence

• Submission of Audited Accounts – Section 69 and Regulation 11 o Time limit for submission – within 6 months of the end of each financial year o Documents to be submitted – 3 copies of: 1. 2. 3. 4. 5. Revenue Account Balance Sheet Profit & Loss Account Returns in the form prescribed in the Regulations – Brokers Returns Statement of Age wise analysis of premiums receivable and payable o Accounts must be audited by an auditor approved by the Registrar

• Client Trust Account – Regulation 12 o Every insurer shall keep a Client Trust Account o Reflects only transactions related to insurance o Auditors must confirm year end balance and operations o Presented in a note to the accounts • Liability for unlawful contracts – Section 73 o Personal liability for unlawful contracts

• Failure to pay over money to client or insurer – Section 79 o An insurance broker commits an offence when he receives money – Ø From an insurer for the account of an insured and fails to pay over the same within 14 days; or Ø From a client for the account of an insurer and fails to pay over the same less any commission and other deduction to which he or she may by agreement be entitled, within 30 days after demand for payment made in writing o Where an insurer at the request of an insurance broker provides cover to an insured, the insurance broker is liable to the insurer for the premium due in respect of such cover and such premium may be sued for and recovered from the insurance broker as a civil debt.

• Cancellation of Registration – Section 67 o Registrar may cancel the Registration of any broker once he is satisfied that: Ø Un-discharged bankrupt Ø Not exercising sound insurance principles and practices Ø Inefficiency Ø Unreasonable delay in transmitting moneys to the insurer or client Ø Non submission of accounts Ø Fraudulent and dishonest practices

• Areas of General Non-Compliance – Late registration; • Applications of re-registration MUST be submitted no later than 30 days before the anniversary date – Non-submission / late submission of Financial statements: • 6 months of the financial year-end is more than adequate – Liability for unlawful contracts: • Sec 73 makes the broker personally liable to the insured where a contract of insurance has been unlawfully made by or through him/her

• Areas of General Non-Compliance – Failure to remit premiums to the insurer • Policy position articulated at the 2009 AGM • Our analysis suggest deliberate suppressing of receivables and payables • Sec 79(2) provides for collection through civil debt – Client Trust account • A requirement of Sec 12 – Registration of Insurance agents, Insurance Brokers and Insurance Salesmen Regulations • Account to be used EXCLUSIVELY for those transactions related to insurance placed with the broker

– Client Trust Account (cont’d) • Transactions on the deposit side include: – Insurance Premiums (money) from a client for account of an insurer – Money from insurers for the account of an insured /clients (claims/refund) • Transactions on the withdrawal side include: – Remittance of premiums net of commission payable to insurers – Net commission to them as mentioned in (i) on premiums payable to insurers – Refund premiums if any to clients / insured – Payment of claims if any to clients / insured

• Areas of Specific Concern – Brokers receive money from clients but do not remit to insurers or agents – Under reporting or non reporting of premiums payable beyond 12 months period – Brokers do not provide postal address of their clients to insurers; • Impairs insurers capacity to issue “Notices of Cancellation” to policyholders.

• Areas of Specific Concern – Charging fees to the client without any proper disclosure. This is contrary to conventional practice that brokers operate on a commission basis and recover such fees from insurance companies. – Auditors act as an accountant of the brokers which creates a conflict of interest.