BRUNEI INTERNATIONAL FINANCIAL CENTRE

The Abode of Peace

The International Insurance and Takaful Order, 2001 (“IITO”)

Purpose and introduction

IITO is “An Order to provide for the licensing and regulation of persons carrying on international insurance business and international insurance-related activities, to provide for the security and protection of long-term international insurance business and to provide for matters incidental thereto or connected therewith”.  It deals with all classes of general and long-term international insurance and Takaful, including specifically, financial loss, all classes of captive, linked long-term, pension and annuity and re-insurance as well as Re-Takaful business.  It introduces statutory protection (in the absence of fraud) of all long-term products and funds transferred to such contracts, and redefines concepts of insurable interest and enforceability.

Administration of Order

The Authority appointed by His Majesty specifically for the purposes of administering and supervising the IITO is the Permanent Secretary of the Ministry of Finance, together with his delegates.  The Authority shall keep all information acquired in relation to its functions under the IITO confidential. (sections 3 & 4)

Insurance business and related activities

International insurance business (i.e. non-domestic business, conducted with non-residents, with the exception of re-insurance) must be carried on by an IBC or a foreign international company incorporated under the International Business Companies Order, 2000 (“IBCO”), a company incorporated under the (domestic) Companies Act (Chapter 39) or a company registered under Part IX of the Companies Act (Chapter 39), which holds a valid licence under IITO.   Further, no person (including a corporation) may carry on any business as an international insurance manager, international underwriting manager or international insurance broker unless he holds a licence relating to such business. (section 5)

Criteria for license to carry on international insurance business.

Subject to section 7 (discretion for Authority to require greater or permit a lesser amount), the working funds of an applicant shall meet requirements prescribed by the Minister by notice in the Gazette, and until so prescribed —

(a)                (a)               where the applicant proposes to carry on long-term insurance business (other than linked long-term business only), shall be at least Brunei $500,000 or its equivalent in any foreign currency;

(b)               (b)               where the applicant proposes to carry on only general insurance business, shall be at least $250,000 or its equivalent;

(c)                (c)                where the applicant proposes to carry on only re-insurance business, shall be at least $1,000,000 or its equivalent;

(d)               (d)               where the applicant proposes to carry on both general and long-term insurance business shall be at least $750,000 or its equivalent currency;

(e)                (e)                where the applicant proposes to carry on only international  captive insurance business shall be at least $75,000 or its equivalent in any foreign currency or,  if the applicant is a Dedicated Cell Company (under IBCO)  having two or more cells, at least  $75,000 or its equivalent in any foreign currency in respect of each cell;

(f)                 (f)                 where the applicant proposes to carry on only linked long-term business, shall be at least $100,000 or its equivalent in any foreign currency plus such amount (if any) as the applicant may deem prudent having regard to that portion of any linked long-term business under which the benefits payable exceed benefits determined by reference to the linked investment.

Every applicant must satisfy the Authority:

(i)                 (i)                 that it meets the prescribed requirements for working capital and that such specified working capital is certified held in a bank in Brunei Darussalam

(ii)               (ii)               its controllers, directors and chief executive officers must be approved

(iii)             (iii)             management with adequate knowledge and expertise must be established in Brunei Darussalam and at least one director must be a resident or a licensed international underwriting manager in Brunei Darussalam appointed.  (sections 6 & 7).

Variation of working funds requirements.

Section 7 provides that the Authority may, having regard to the nature, extent and volume of the international insurance business of an applicant specify in writing a greater  or a lesser amount of working funds; and specify an amount (not to exceed 60% of the amount specified under section 6) which may be provided by way of guarantee from a person and in a form acceptable to the Authority.

License application for international insurers

Every application for a licence must be submitted to the Authority in the prescribed form  accompanied by the prescribed  fee. (section 8)

Business plan and additional information

Every application must include a business plan for the first three years of operation; copies of the applicant’s constituent documents, where applicable a copy of the applicant's audited annual accounts for the 3 consecutive years immediately preceding the application, and in the case of a takaful or re-takaful provider, the names of the Shari'ah Council duly appointed to advise that provider. The Authority may request further or other information or documents. (sections 9 & 10)

Licence applications for international insurance managers, underwriters and brokers

Every applicant must satisfy the Authority that the controllers, directors and chief executive officers of the applicant are fit and proper persons having knowledge of the insurance related activities proposed to be conducted and is able to maintain sufficient funds to cover its expenses in the proposed activities for the period covered by its business plan.

Every application for a licence must be submitted to the Authority in the prescribed form  accompanied by the prescribed  fee. (section 11).

Register of licensees.

The Authority will keep a Register of all licensees and such Register is to be open to public inspection. (section 14)

Surrender of License

Detailed provision is made for surrender of a license and the consequences of so doing, and of revocation (section 16)

Notification of change of information.

All material changes in structure, ownership, controllers or senior personnel must be notified, and in the case of IBCs or domestic companies, approved. (section 18)

Annual Licence Fees

Annual Fees fall due on the anniversaries of the initial licence grant:

(section 19)

FINANCIAL REQUIREMENTS

Appointment of auditor and actuary.

Every licensee must appoint an approved auditor, and in the case of long-term business must also appoint an actuary. (Section 20)

Any shortfall must be reported to the Authority together with a short-term financial scheme to make good the deficiency for approval by the Authority.  The licensee must implement such approved scheme to the satisfaction of the Authority.  (Section 21)

Separate accounts to be kept by international insurers.

Every international insurer shall keep the accounts and funds in respect of each type of international insurance business separate. (Section 22)

Submission of financial statements.

Every licensee shall submit audited annual balance sheet, profit and loss account, revenue account and, in respect of life insurance business, a report setting out the actuarial valuation of its assets and liabilities to the Authority.

For a foreign international company a certified copy of its latest audited annual balance sheet in respect of its entire operations both in and outside the Brunei Darussalam is also required. (section 23)

Subsidiaries and offices of licensee.

Prior written consent of the Authority is required to open an office or establish any subsidiary in Brunei Darussalam or elsewhere. (section 24)

Restrictions on and duties of international insurance managers, international underwriting managers and international insurance brokers; Access to domestic Re-insurance Market

Services offered by a licensee are limited to those specified in the licence granted and may be provided only to other licensees under the Order.  Services can not be offered relating to domestic insurance business, but a licensed international insurance broker may, notwithstanding any other written law, handle the re-insurance of domestic insurance business. (sections 25 and 26)

List of international insurers to be supplied by international insurance managers and international underwriting managers.

A list of all international insurers for whom such licensed international insurance manager provides administrative services or licensed international underwriting manager provides underwriting services must be submitted to the Authority annually. (section 27)

Conduct of business.

Business must be conducted with due diligence and care in accordance with sound insurance principles, proper records and books of accounts must be kept follow accepted international accounting standards, all assets must be registered in the name of the international insurer, and the stationery and other documents of the international insurer must containing its name that it is licensed under the Order, together with the number of its licence. (section 28)

Misleading advertising        

No untrue or misleading information in any form, in relation to the laws of Brunei Darussalam or that of an international insurer's financial status or insurance or re-insurance plans or any other matter in respect of its international insurance business shall be published. (section 29)

Transfer of international insurance business.

International insurance business may be transferred to another insurer if the transfer is effected by a scheme provided that the other insurer is or becomes a licensed insurer.  The scheme must first be approved by the Authority in accordance with the provisions of the Order (section 30)

Winding-up of international insurer.

The Authority shall be made a party to any petition for the winding-up of any international insurer and may present a petition for winding-up on the grounds of its inability to meet any liabilities or when it suspends payment to its creditors.  Payment of unsecured debts in any winding-up shall be in accordance with the Order (section 31)

Notification of change of relevant particulars

Details of any material change in the particulars of a licensee after the granting of such licence shall, as soon as practicable, be given in writing to the Authority specifying the nature and circumstances of the change.

Notification of becoming new or increased controller.

For an IBC or company incorporated under the Companies Act (Chapter 39) any person who becomes an indirect 10 per cent, 20 per cent, 33 per cent, or majority controller of a licensee must have first obtained written approval of the Authority.

For a foreign international company or a company registered under Part IX of the Companies Act (Chapter 39) any changes of controller shall prior to the change be notified to the Authority in writing giving details of the changes. (section 33)

Notification of controllers etc. by licensee.

Annual written notice must be given to the Authority of the name of every person who is, to the knowledge of the licensee at the date of the notice, a controller of the licensee.  Such notice must contain information required by the Authority under the Order (section 35). 

Further functions of Minister and Authority; Mutual Assistance.

Under the general supervision of the Minister, the Authority is responsible for ensuring the proper administration of the Order. It has additional functions relating to regular returns and examination of records of any licensee to determine that the requirements of the Order are being met. The Authority may also assist a designated supervisory authority in the performance of any of its material supervisory functions. (section 37)

Power to obtain information and reports.

The Authority may request reports from a licensee for such periods and intervals and in such form as the Authority shall require.  Where necessary, it may nominate a suitably qualified person (e.g. approved accountant, legal counsel, actuary or other) to prepare such a report (section 38)

Notice to produce documents.

A licensee may be required to provide the Authority with such information or documents as the Authority may reasonably require. The licensee’s representatives may be asked to provide any explanation of these

Confidentiality on part of licensee.

Except as permitted by the Order, (e.g. where written permission to the disclosure is given or in case of Court proceedings), no licensee, officer or professional adviser of a licensee may give any information whatsoever regarding the affairs of a client/customer. A breach of such privacy is an offence, and also constitutes a breach of statutory duty actionable at the suit of any person who suffers loss or damage. (section 41)

Hearings in camera.

Proceedings may, if the Court, of its own motion or on the application of any party to the proceedings, so orders, be held in camera and the information shall be secret as between the Court and the parties thereto. Publication likely to lead to the identification of the parties may be forbidden.

Reports of the Court in respect of any proceedings held in camera must be edited to such extent as shall be necessary to preserve confidentiality.

Administrative notices.

The Authority shall publish statements setting out the criteria from time to time by reference to which the Authority proposes to exercise its functions under the Order, in the interests of transparency. (section 44).

Circumstances for communications to Authority by Auditor.

An auditor must notify the Authority of any information of which he becomes aware as auditor or in preparing any report under this Order where he has reasonable cause to believe that there has been a breach likely to be of material significance, or that a licence should be revoked, or the Authority should take other action, or that the continuous functioning of the licensee may be affected; or such as to lead to the auditor’s refusal to certify the accounts or to the expression of reservations. An auditor does not contravene his duty by reason of such communication made in good faith to the Authority (sections 45 & 46)

Regulatory powers of Authority.

Where a licensee has ceased to carry on business or is not operating its international insurance business in accordance with the Order the Authority can take various courses of action depending on the circumstances.  Prior to taking any action the Authority must give the licensee an opportunity to make representations why the course of action in question should not be taken; and, whether or not such representations are made, if the Authority does take a course of action the licensee may appeal to the Court against the taking of the action. (section 47).

PROTECTION OF LONG-TERM BUSINESS (Part VII)

Interpretation.

Covers any action or proceedings in any jurisdiction relating to a long-term premium payment to an insurer licensee hereunder in return for a contract or policy of long-term international insurance and any action or proceeding by a creditor alleging fraudulent conveyance, fraud or a cause of action sounding in fraud against a protected policy-holder.  A premium shall be deemed paid when it is transferred to an international insurance agent.  This Part operates subject to the provisions of any written law relating to money laundering or the recovery of proceeds of crime. (sections 48, 49).

Restrictions on proceedings.

A person who has paid a long-term premium to an insurer is protected from a creditor seeking to set aside a payment of any long-term premium unless it is determined by a final judgment of the Court in Brunei Darussalam, that the payment was made with the principal intent to defraud that creditor. The onus of proof lies on the creditor, and the proof must be beyond a reasonable doubt. Any such proceedings must be commenced within 2 years of the date of the payment of the relevant premium or installment.  A person shall not have imputed to him any intent to defraud a creditor by reason only that he is a policy holder, recipient of a benefit or is the settlor, trustee, protector or a beneficiary of a trust, a shareholder, director or officer of a company, a member of a partnership or other person or group of persons which is a beneficiary under the policy. This protection applies to claims, actions, proceedings and arbitrations against any person who has paid a long-term premium, policy holders, beneficiaries of policies insurers, and each of their successors, assigns, officers, directors, employers and agents. (Section 50)

Nature and extent of protection.

Except as above, and notwithstanding any law or the doctrines of equity to the contrary, no long-term business fund or funds are chargeable with or liable for any liability, obligation or loss arising from any general or other business of the insurer maintaining such account; the claims of any creditor or of any person, except as provided in Part VII or expressly in the policy; or any liability, obligation or loss arising from or primarily relating to any other policy holder of the insurer, whether that other policy holder is entitled to the protections of this Part or not.

Neither the cash, liquidation or residual value under any long-term policy, nor dividends or other income paid to, by or for any such account, are subject to any lien, charge, charging order, encumbrance, attachment or sequestration by any court except to the extent provided in a final order or judgment made under section 50. No residual interest of an insurer, or any interest of a beneficiary in or under a policy to which this Part applies is subject to any injunction, lien, charge, charging order, encumbrance, injunction, attachment or sequestration.

No judgment or order made by any court, tribunal, arbitration panel or government of any other country or jurisdiction which is contrary to Part VII is enforceable in Brunei Darussalam.

Extent of avoidance of payment of premium.

A transfer of a long-term premium may be set aside only as provided and to the extent necessary to satisfy the actual obligation to the creditor at whose instance the transfer has been set aside. Other creditors of the person may not benefit or be entitled to any presumption from any judgment or order in favour of a creditor against that person. (section 52).

Section 172 of Law of Property Act, 1925.

Section 172 of the Law of Property Act, 1925 of the United Kingdom, so far as it is in force in Brunei Darussalam by virtue of the Application of Laws Act (Chapter 2), has no application to a payment of a long-term premium. (section 53).

Benefits to enure to beneficiary.

Notwithstanding any other law or the doctrines of equity, except to the extent provided in a judgment under section 50, all money or benefits of any kind, to be paid or rendered to the insured, a policy holder or any beneficiary under any policy of long-term business shall enure to the benefit of the person or persons for whose use and benefit the insurance or annuity is designated in the policy or any person lawfully entitled to such benefit or part thereof; and be fully exempt from execution, attachment, garnishee order and other process:

However nothing in Part VII validates any disposition of property which is neither owned by, nor is the subject of a power of disposal with respect thereto vested in, the transferor or affecting the recognition of any foreign law in determining whether the transferor is the owner of such property or the holder of such a power. (section 54).

Protection regardless of revocability.

The protection provided by this Part applies without regard to whether the power to change a policy holder, beneficiary or other person entitled to a benefit is reserved to him or to any other person. (section 55)

Certain transfers excluded.

The statutory protection does not apply to a debt of the insured or beneficiary secured by a pledge, assignment or mortgage of the policy or its proceeds, operate to prevent the proper assignment of any money or benefits to be paid or rendered under a policy, or any rights under it in favour of any person in accordance with the terms of the policy or contract.

If a long-term policy contains a provision against assignment or commutation by any person entitled to a benefit thereunder of any benefits, or any rights therein, any attempted assignment or commutation is void.

The protections accorded by Part VII are in addition to the exemptions from execution, attachment, garnishee order and other process under the Order or under any other written law.

A long-term premium paid by or for an insurer into a protected premium account shall be conclusively presumed to be a premium payment for insurance, and no protected premium account shall be construed to be a trust account. (section 56)

Forfeiture of beneficiary’s rights in case of unlawfully bringing about death.

The interest of a person in a life policy is forfeited when such person is the principal or an accomplice in wilfully bringing about the death of the insured. In such a case, a contingent beneficiary named by the insured in the policy receives the insurance and if there is no contingent beneficiary named the nearest relative of the insured shall be entitled. (section 57)

Beneficiary may enforce policy or contract notwithstanding lack of privity.

Any person nominated to benefit under a policy shall have the full right and standing to enforce the terms of the same against the insurer who issued it. (section 58).

Insurable interest concept extended

Notwithstanding any written law or rule of law or equity, a person is without prejudice to any other insurable interest however arising, be deemed to have an insurable interest relative to any life insured under a policy of long-term business where he establishes that he is a beneficiary of a policy holder under a policy and the life insured has, without reserving his right to claim compensation, prior to the effecting of the policy, irrevocably agreed in writing that the policy may be effected upon his life, or the person effecting the policy has a legal liability or moral obligation, howsoever arising, to insure the life insured, or the life insured has irrevocably given his prior written consent to the effecting of a policy nominating a third party to be the recipient of benefits.

In any such case, the policy holder has, subject to the terms of the policy, full power of disposition in relation to the policy prior to the time or event at or upon which the insured risk has materialised.

No insurable risk is, however, deemed to arise where the terms of the policy are held by the Court to constitute or to further a result or event which is unlawful under any written law or is otherwise contrary to public policy in Brunei Darussalam. (section 59).

Provision of information to designated supervisory authority.

Exemptions from taxes and duties.

No taxes or duties of any description are levied, withheld or collected in respect of international insurance business of any licensee (includes insurer, managers, brokers, underwriters) of shares, and no filing or presentation of documents with or to any taxing or analogous authority in Brunei Darussalam is required.                The tax/duty exemption may, at no extra charge, be evidenced by a certificate issued by the Minister, any such certificate to be valid for a period of 10 years from its date. (section 60)

Miscellaneous

Part XI deals with miscellaneous matters such as recovery of fees payable to the Authority, indemnification of public officers, offences, power of the Minister to make regulations (including establishment of fidelity and/or compensation funds). The Authority is given power to issue guidelines to achieve transparency in licensing issues, and relating to such issues as asset maintenance and for any other administrative purpose.

Transitional provision.

Section 68 provides that subject to section 69(power of exemption) a person carrying on any business for which a licence is required under the Order has 12 months from the commencement comply therewith.

Exemptions from Order

The Authority may on such terms as it deems fit in each case exempt any person or business or class of persons or class of business from any of the provisions of the Order, guidelines or regulations. (section 69).

Limitation of laws relating to domestic insurance.

Nothing in any law relating to domestic insurance shall apply to the regulation or licensing exclusively international insurance business or to any business carried on in or from within Brunei Darussalam that is incidental thereto; and conversely the IITO does not apply to the regulation and licensing of persons carrying on exclusively domestic insurance business.            

Application of IBCO and Companies Act (Chapter 39).               

IBCO applies to a licensee which is an IBC or a foreign international company; and the Companies Act (Chapter 39) applies to a licensee which is incorporated or registered under that Act. Where there is any conflict or inconsistency between those statutes and IITO, the latter prevails.

Schedules

The Schedules define “controllers” and “subsidiary, holding, affiliated and controlling” companies

Regulations

The International Insurance and Takaful (Fees, Forms and Miscellaneous Provisions) Regulations make provision for the subjects mentioned in the title to the regulations.