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  1. Point in time
    2006-08-31

AUTH 3.12 Specific obligations: applicants seeking to carry on insurance business

AUTH 3.12.1G

Under threshold condition 1 (Legal status) (see COND) and additional restrictions imposed under the Insurance Directives, an applicant seeking Part IV permission to carry on the regulated activities of effecting or carrying out contracts of insurance must be an incorporated company other than a limited liability partnership, a registered friendly society or a registered industrial and provident society.2

AUTH 3.12.2G

An applicant seeking to carry on insurance business should note the restrictions inPRU 7.6.13 R4 which relate to the carrying on of other commercial business.21

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AUTH 3.12.3G
  1. (1)

    As a result of these restrictions, the FSA will grant an applicant seeking to carry on insurance businessPart IV permission for insurance business, and any other regulated activities, only to the extent they are not restricted under PRU. 4

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  2. (2)

    For example, it may be appropriate for an applicant to apply for the regulated activity of accepting deposits. Also, an applicant seeking to carry on long-term insurance business may need to apply for certain designated investment business activities arising directly from the long-term insurance business it proposes to carry on. If the FSA gives an applicant Part IV permission for insurance business and other regulated activities, these other regulated activities will be subject to limitations, as appropriate, so as to comply with PRU 7.6.13 R.42

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AUTH 3.12.4G

Applicants should also be aware that the FSA will not grant Part IV permission to carry on both long-term and general insurance business, unless:

  1. (1)

    the applicant's business will be restricted to reinsurance; or

  2. (2)

    the applicant's general insurance business will be restricted to accident or sickness contracts (or both).

Friendly societies and reinsurance

AUTH 3.12.5G

Friendly societies are subject to the conditions and restrictions on reinsurance business under the Friendly Societies Act 1974 (registered friendly societies) and the Friendly Societies Act 1992 (incorporated friendly societies). A registered friendly society or an incorporated friendly society may only effect and carry out contracts of reinsurance if the conditions and restrictions set out in the relevant Friendly Societies Act are met. These include that:

  1. (1)

    the approval of the actuary of the friendly society (A) is required;

  2. (2)

    the friendly society is carrying on (and continues to carry on) direct insurance business of the same class; and

  3. (3)

    the reinsurance is provided only to another friendly society (B).

The FSA will, therefore, not grant a friendly society a Part IV permission to carry on pure reinsurance business.

Contracts written on an ancillary and supplementary basis

AUTH 3.12.6G

Part IV permission to effect or carry out certain classes of contracts of insurance includes permission to effect or carry out certain classes of general insurance contracts on an ancillary or supplementary basis. In applying for Part IV permission to carry on insurance business, applicants will need to determine the specified investments for which Part IV permission will be necessary, having regard to whether certain classes of contract may qualify to be effected or carried out on an ancillary or supplementary basis. If they do, there is no need to apply for Part IV permission to effect or carry out those contracts (that is, the contracts which are eligible to be effected or carried out on an ancillary or supplementary basis) and an applicant should not do so.

AUTH 3.12.7G

Part IV permission to effect or carry out life and annuity contracts includes permission to effect or carry out accident or sickness contracts (or both) on a supplementary basis (see article 1(1)(c) of the First Life Directive).

AUTH 3.12.8G

Part IV permission to effect or carry out any class of general insurance contract includes permission to effect or carry out any other class of general insurance contract on an ancillary basis other than credit, suretyship or, except as provided in AUTH 3.12.9 G, legal expenses insurance (see part C of the Annex to the First Non-Life Directive). However, a friendly society may not effect or carry out any general insurance contracts, whether or not on an ancillary basis, other than those permitted under the Friendly Societies Act 1992.

AUTH 3.12.9G

Part IV permission to effect or carry out any class of general insurance contract includes permission to effect or carry out legal expenses contracts when AUTH 3.12.10 G is met and:

  1. (1)

    if the main risk relates solely to the provision of assistance provided for persons who fall into difficulties while travelling, while away from home or while away from their permanent residence; or

  2. (2)

    where it concerns disputes or risks arising out of, or in connection with, the use of sea-going vessels.

AUTH 3.12.10G

A contract of insurance will qualify to be effected or carried out on an ancillary basis if:

  1. (1)

    the business in question is to be the subject of the same contract as the principal business and concerns the same object; and

  2. (2)

    the risks covered are connected to the principal risk.

AUTH 3.12.11G

In determining the classes of specified investments for which Part IV permission is required, and those which may qualify to be written on an ancillary or supplementary basis, an applicant may need to take professional advice and may also wish to discuss this with a member of the Enquiries and Applications Department (Applications team).3

AUTH 3.12.12G

The application for Part IV permission will need to provide information about the insurance business to be carried on by the applicant in the classes of specified investments for which Part IV permission is requested and also that qualifying to be carried on on an ancillary or supplementary basis.

Reporting requirements

AUTH 3.12.13G

An applicant for Part IV permission which includes insurance business should be aware that specific reporting requirements apply during its first three years of operation (see SUP App 2)

Applicants seeking to carry on insurance business with a head office outside the United Kingdom (other than EEA firms or Treaty firms)

AUTH 3.12.14G

In addition to AUTH 3.18, where an applicant for Part IV permission which has its head office outside the United Kingdom seeks to carry on insurance business in the United Kingdom, the following guidance is of relevance.

AUTH 3.12.15G

An applicant which has its head office outside the United Kingdom (other than an EEA firm, Treaty firm or a Swiss general insurance company) should note the requirement in IPRU(INS) 8.34R to appoint a chief executive (that is, the person who alone or jointly with one or more others, is responsible for the conduct of its business in the United Kingdom) and an authorised UK representative (see COND 2.6 (Additional Conditions) for the additional conditions which apply to non-EEA insurers and SUP 15.4 (Notified persons) for rules on notifications by overseas firms).2

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AUTH 3.12.16G

A Swiss general insurance company seeking to establish a branch in the United Kingdom should note the requirement referred to4 inCOND 2.6.1 D4 to appoint an authorised UK representative for the United Kingdom.

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AUTH 3.12.17G

An applicant with its head office outside the United Kingdom (other than an EEA firm or a Treaty firm) seeking permission to carry on direct or both direct and reinsurance business in the United Kingdom should note that specific prudential requirements apply PRU)4.

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