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HMRC internal manual

General Insurance Manual

Regulatory framework: before the Financial Services and Markets Act 2000

The main regulatory legislation for insurance companies in force until December 2001 comprised the Insurance Companies Act 1982 (ICA 1982), and supporting secondary legislation.

ICA 1982 consolidated earlier legislation. It was substantially amended by the Insurance Companies (Third Insurance Directives) Regulations 1994 (SI1994/1696), which incorporated the Third Life and the Third Non-life Insurance Directives of 1992 into UK law.

ICA 1982 provided for the DTI (and later the Treasury) to authorise insurance companies to carry on general or long term insurance business. Authorisation could be restricted to reinsurance business only, or to particular classes of business. Section 6 ICA 1982 placed restrictions on ‘composite insurers’ which combine long term and general business, following the requirements of the First Life and Non-Life Directives.

In general, ICA 1982 set out the broad rules for supervision (and intervention where necessary) by the DTI; specified the different classes of business; provided for transfers of business between insurers; and set out the obligations of insurance companies and their directors. It also contained an important discretionary power in section 68 to allow the regulator to direct that some of the provisions in that Act (or regulations made under it) should be modified or should not apply to an insurance company.

Detailed rules on the conduct of insurance business, including the calculation of solvency margins and the valuation of assets and liabilities, were made in statutory instruments. As at 1 December 2001 the relevant instrument was the Insurance Companies Regulations 1994 (SI1994/1516) (as amended). Other regulations set out the requirements for equalisation reserves (the Insurance Companies (Reserves) Regulations 1996 (SI1996/946)), and the format of the ‘DTI return’ (the Insurance Companies (Accounts and Statements) Regulations 1996 (SI1996/943)).