7.1.1. Long-Term Insurance Funds to be established

An Insurer conducting Long-Term Insurance Business must either:

• (a) establish and maintain one or more Long-Term Insurance Funds; or
• (b) notify the AFSA that the Insurer is deemed to constitute a single Long-Term Insurance Fund.

7.1.2. Long-Term Insurance Fund

(1) Unless (2) applies, all the Long-Term Insurance Assets of an Insurer constitute its LongTerm Insurance Fund.

(2) Where an Insurer identifies particular Long-Term Insurance Assets in connection with different parts of its Long-Term Insurance Business, the assets identified in relation to each such part constitute separate Long-Term Insurance Funds of the Insurer.

7.1.3. Long-Term Insurance Assets

(1) An Insurer’s Long-Term Insurance Assets are the items in (2), adjusted to take account of:

• (a) outgo in respect of the Insurer’s Long-Term Insurance Business; and
• (b) any transfers made out of the Long-Term Insurance Fund in accordance with PINS

7.5.2 (Transfers of assets out of Long-Term Insurance Funds).

(2) The items are:

• (a) admissible assets identified by the Insurer as being available to cover liabilities arising under or in connection with Long-Term Insurance Business with due regard to generally accepted actuarial practice (including assets into which those assets have been converted) but excluding any assets identified as being held to cover liabilities in respect of subordinated debt;
• (b) any other assets identified by the Insurer as being available to cover its liabilities arising from Long-Term Insurance Business (including assets into which those assets have been converted) including, if the Insurer so elects, assets which are excluded under (a);
• (c) premiums and other receivables in respect of Long-Term Insurance Business;
• (d) other receipts of the Long-Term Insurance Business; and
• (e) all income and capital receipts in respect of the items set out in (2).

7.1.4. Insurer deemed to constitute Long-Term Insurance Fund to be treated as though it had established such fund

An Insurer that is deemed, in accordance with PINS 7.1.1(b), to constitute a single Long-Term Insurance Fund shall be treated for all purposes relating to these rules as though the Insurer had established a Long-Term Insurance Fund to which all of the assets and liabilities of the Insurer are attributed.

7.1.5. Treatment of Branches

An Insurer that is a Branch and that is subject to a regulatory requirement in another jurisdiction to arrange its affairs in a manner that is equivalent or substantially equivalent to the requirements of PINS 7.1.1 may make an application to the AFSA for that arrangement of its affairs to be deemed to constitute a Long-Term Insurance Fund.

Guidance

If the AFSA approves an application under PINS 7.1.5, it will give a written notice to the Branch stating the manner in which the arrangement will be deemed to constitute a Long-Term Insurance Fund.

7.2.1. Business to be attributed to Long-Term Insurance Funds

An Insurer must attribute all Long-Term Insurance Business that it conducts to a Long-Term Insurance Fund.

7.2.2. Attribution of General Insurance Contracts

(1) Except as allowed for in (2), an Insurer may not attribute General Insurance Contracts to a Long-Term Insurance Fund.

(2) An Insurer may attribute Contracts of Insurance in General Insurance Category 1 (Accident) and General Insurance Category 2 (Sickness) to a Long-Term Insurance Fund.

7.3.1. Separate identification of assets, liabilities, revenues and expenses

An Insurer that is required under PINS 7.1.1 (Long-Term Insurance Funds to be established) to establish and maintain one or more Long-Term Insurance Funds, or has attributed Contracts of Insurance in General Insurance Category 1 (Accident) or General Insurance Category 2 (Sickness) to a Long-Term Insurance Fund under PINS 7.2.2(2) (Attribution of General Insurance Contracts), must:

• (a) identify separately in its books and records the assets, liabilities, revenues and expenses attributable to that business; and
• (b) ensure those assets, liabilities, revenues and expenses are recorded separately and accounted for as Long-Term Insurance Fund.

7.3.2. Recording of assets, liabilities, revenues and expenses

An Insurer must record all assets, liabilities, revenues and expenses in respect of a Contract of Insurance that is attributed to a Long-Term Insurance Fund as assets, liabilities, revenues and expenses of that Long-Term Insurance Fund.

7.3.3. Attribution of assets not already attributed

An Insurer may at any time attribute any of its assets to a Long-Term Insurance Fund that were not previously attributed to such a Long-Term Insurance Fund.

7.3.4. Recording of revenues and expenses

All revenues and expenses arising by way of earnings, revaluation or other change to the assets and liabilities of a Long-Term Insurance Fund must be recorded as revenues and expenses, or movements in capital, of that Long-Term Insurance Fund.

7.4.1. Accounting and other records to be maintained

An Insurer must maintain adequate accounting and other records to identify

(1) the Contracts of Insurance attributed to a Long-Term Insurance Fund in accordance with PINS 7.2 (Attribution of contracts to a Long-Term Insurance Fund); and

(2) the assets, liabilities, revenues and expenses attributed to a Long-Term Insurance Fund in accordance with PINS 7.3 (Segregation of assets and liabilities).

7.5.1. Application of assets

An Insurer must ensure that, except as provided in PINS 7.5.2 to 7.5.6, assets that are attributable to a Long-Term Insurance Fund are applied only for the purposes of the business attributed to the Long-Term Insurance Fund.

7.5.2. Transfers of assets out of Long-Term Insurance Funds

An Insurer must ensure that assets attributable to a Long-Term Insurance Fund are not transferred so as to be available for other purposes of the Insurer except:

• (a) where the transfer constitutes appropriation of a surplus determined in accordance with PINS 9.1.3(4)(g) (Requirements for Financial Condition Report) and the transfer is performed within four months of the reference date of the Financial Condition Report that this determination forms part of;
• (b) where the transfer constitutes a payment of dividend or return of capital, in accordancewith PINS 7.5.4 (Payment of dividends by Insurer constituting a single Long-Term Insurance Fund);
• (c) where the transfer is made in exchange for other assets at fair value;
• (d) where the transfer constitutes reimbursement of expenditure borne on behalf of the LongTerm Insurance Fund and in respect of expenses attributable to the Long-Term Insurance Fund; or
• (e) where the transfer constitutes reattribution of assets attributed to the Long-Term Insurance Fund in error.

7.5.3. Assets of Long-Term Insurance Funds not to be distributed

An Insurer must not make any distribution by way of dividend, or return of capital assets attributable to a Long-Term Insurance Fund, if by doing so that would result in a breach of its obligations under PINS 5 (Capital adequacy requirements).

7.5.4. Payment of dividends by Insurer constituting a single Long-Term Insurance Fund

An Insurer that is deemed to constitute a single Long-Term Insurance Fund may only make a dividend or return of capital where:

• (a) the dividend or return of capital constitutes appropriation of a surplus determined in accordance with PINS 9.1.3(4)(g) (Requirements for Financial Condition Report), and either
• (b) the payment is made within four months of the reference date of the Financial Condition Report determining that surplus and does not cause the total aggregate amount of the dividends or returns of capital made by the Insurer since that reference date to exceed the amount of that surplus; or
• (c) the payment is made more than four months after the reference date of Financial Condition Report determining that surplus and does not cause the total aggregate amount of the dividends or returns of capital made by the Insurer since that reference date to exceed 50% of the amount of that surplus.

7.5.5. Assets not to be lent

An Insurer must not lend or otherwise make available for use for any other purposes of the Insurer, or any purposes of any party related to the Insurer, assets attributable to a Long-Term Insurance Fund.

7.5.6. Certain reinsurance-like arrangements prohibited

An Insurer may not enter into any arrangement, whether or not described as a Contract of Reinsurance, whereby a Long-Term Insurance Fund of the Insurer stands in the same relation to the Insurer as though the Insurer were the reinsurer in a Contract of Reinsurance in which the Long-Term Insurance Fund is the cedant.