Act on insurance companies, pension undertakings and their activities etc. (Insurance Act)

FINANSTILSYNET The Financial Supervisory Authority of Norway Translation as of June 2013 This translation is for information purposes only. Legal authenticity remains with the official Norwegian version as published in Norsk Lovtidend. Act on insurance companies, pension undertakings and their activities etc. (Insurance Act) Cf. previous Act of 10 June 2005 No. 49 Part I Chapter 1 General provisions General provisions Section 1-1 Scope This Act applies to insurance companies, pension undertakings and the activities engaged in by such undertakings. Pension undertakings means pension funds and providers of defined contribution schemes. The rules of chapter 11 on transfers also apply to banks and to companies managing securities funds. The King may decide that the present Act shall apply to pension funds and may make further provision in that regard. Section 1-2 Insurance activity Insurance activity may only be engaged in by insurance companies and pension funds and in accordance with a licence granted under the rules of this Act. The term insurance and other terms or expressions carrying the same meaning may, in company names and marketing, only be used in respect of business activity which is, or which is operated in connection with, insurance. Section 1-3 Separation of insurance classes Life insurance companies may only write life insurance; see section 9-1. A life insurance company which has established a defined benefit pension scheme for an undertaking or for a group of undertakings operating a joint pension scheme may nonetheless also establish a defined contribution pension scheme for the same undertaking or for an undertaking forming part of the same group. Finanstilsynet may authorise life insurance companies to write other personal insurance. Life insurance companies may to a limited extent write reinsurance within classes for which a licence has been granted. 1

Non-life insurance companies may only write insurance which is regarded as non-life insurance; see section 12-1. Finanstilsynet may authorise non-life insurance companies to write life insurance in the form of pure risk insurance which under the terms of the agreement has a maximum term of one year and confers the right to a lump sum payment of compensation, or which fulfils other product requirements laid down in regulations made by the King. The King may by regulations make further provision concerning collective insurance (group insurance) related to mortality risk or to disability risk that is covered by the second sentence. Non-life insurance companies may to a limited extent write reinsurance within classes for which a licence has been granted. Credit insurance companies may only write credit insurance and reinsurance in credit insurance. Finanstilsynet may make further provision regarding what insurances are to be regarded as credit insurance. Under the rules of this Act credit insurance companies are regarded as non-life insurance companies and credit insurance as nonlife insurance, except where otherwise provided. Finanstilsynet shall decide in cases of doubt whether a class of insurance may or must be provided by life insurance, non-life insurance or credit insurance companies. Reinsurance companies may only write reinsurance. Section 1-4 Pension funds Pension funds may only offer group pension schemes and engage in other activity covered by section 7-1. Pension funds may also offer pension schemes pursuant to Act of 27 June 2008 no. 62 on individual pension schemes to members of a group pension scheme managed by the pension fund concerned. Pension funds which offer group pension schemes that are regarded as life insurance, see section 9-1, may not offer group pension schemes or assume other pension commitments that do not include an insurance element. A pension fund which has established a defined benefit pension scheme for an undertaking or for a group undertaking which has a joint pension scheme in the pension fund may nonetheless also establish a defined contribution pension scheme for the same undertaking or for an undertaking forming part of the same group. Pension funds which offer group pension schemes without an insurance element may not offer group pension schemes or assume other pension commitments that are regarded as life insurance. Section 1-5 Defined contribution pension undertakings Defined contribution pension undertakings may only offer group pension schemes and pension schemes under Act of 27 June 2008 no. 62 on individual pension schemes that do not contain an insurance element. Defined contribution pension undertakings may not offer other group pension schemes or assume other pension commitments that are regarded as life insurance. Section 1-6 Duty of confidentiality Employees and elected officers of an insurance company or pension undertaking are required to keep confidential any information they receive about the business or 2

private circumstances of others, unless they are obliged by law to disclose such information. The same applies to others who perform assignments for insurance companies or pension undertakings. The duty of confidentiality pursuant to the first subsection shall not prevent the board of directors or someone duly authorised by the board of directors from disclosing to other credit institutions information which the company has received in its capacity as a credit institution. The same applies to the disclosure of health and claims information to another insurance company or pension undertaking, unless restrictions on the right to disclose such information are imposed by the King. Nor shall the provisions of the first subsection prevent information being disclosed to the Labour and Welfare Administration pursuant to the National Insurance Act section 21-4(b) first subsection. Section 1-7 Elected officers and employees trading in financial instruments The Securities Trading Act sections 8-1 to 8-7 applies to elected officers and employees trading in financial instruments for own account. Section 1-8 Territorial extent of the Act This Act applies on the continental shelf and in Svalbard, except as otherwise required by Norway s obligations under international law. Part II Chapter 2 Insurance companies Licensing requirement Section 2-1 Licensing requirement An insurance company may not carry on business without a licence from the King, who may set conditions for the licence. An insurance company shall have its registered office and head office in Norway. A licence shall be refused unless the King is convinced that owners of qualified holdings are fit and proper to own such holdings and to exercise such influence in the undertaking as is conferred by the holdings. By ʿqualified holdingʾ is meant a holding which, calculated pursuant to the rules of the Financial Institutions Act section 2-2, represents 10 per cent or more of the capital or votes of the institution, or which otherwise enables the exercise of significant influence on the management of the institution and its activity. A licence shall be refused unless more than three quarters of the insurance company s share capital is subscribed via a capital issue not involving pre-emptive rights for shareholders or others. A licence shall be refused if any board member, the managing director or other person effectively in charge of the company: (a) is not presumed to have the necessary experience to discharge the position or office. (b) has been convicted of a criminal offence, and the offence gives cause to presume that the person concerned will not be able to fulfil the position or office in a proper manner, or 3

(c) in his position or in his performance of other offices has demonstrated such behaviour as to give cause to presume that the person will not be able to discharge the post or office in a proper manner. Where a licence is applied for under the first subsection, a criminal record certificate shall be presented pursuant to the Act on Police Records section 40 for persons holding a position or office as mentioned in the first sentence. A criminal record certificate pursuant to the Act on Police Records section 40 shall also be presented for persons who take up such a position or office after the date of the application. (These last two sentences pending) A licence shall otherwise be granted unless there is cause to presume: (a) that the company will not fulfil the requirements laid down in or pursuant to law, (b) that the start-up capital is not in reasonable proportion to the planned activity, or (c) that the granting of a licence will otherwise have detrimental effects for the policyholders or groups of policyholders. A licence shall be granted for one or more classes of insurance, or for part of a class. In the case of insurance companies engaged in direct insurance business, a licence shall be granted for specified insurance classes. The licence may be limited to a specific geographic area, to specific customer groups or by other means. The decision on an application for a licence under the first subsection, see third subsection, shall be communicated to the applicant within six months of the date of receipt of the application. If the application does not contain the information needed to decide whether a licence should be granted, the above period shall be reckoned from the date when such information was received. The licensing requirement under this section does not apply to companies whose head office is in another state in the European Economic Area. Section 2-2 Revocation of licence The King may revoke a licence or parts of it if: (a) the board of directors or other bodies of the insurance company are guilty of gross or repeated violation of their duties pursuant to law, regulations laid down pursuant to law, the conditions set pursuant to section 2-1 or the company s articles of association, (b) irregularities are present in the company s management, or other circumstances which give cause to fear conditions as mentioned in section 2-1 second subsection (a) and (c), (c) the insurance company no longer has an adequate financial basis, or (d) the insurance company no longer carries on active business in the class of insurance concerned. In the case of companies as mentioned in section 2-4 first subsection, a licence may also be revoked if the conditions of section 14-1 second subsection are no longer met. 4

Section 2-3 Licence application An application for a licence under section 2-1 for a new insurance company shall contain an operations plan for the company s first three years of operation. The operations plan shall contain: (a) an overview of the insurances to be offered by the company, (b) details of the company s capital, (c) a budget for establishment and administration expenses, (d) details of the principles to be applied for calculating premiums, (e) details of the plan regarding reinsurance arrangements, and (f) a forecast of financial position after three years operation. The application shall be accompanied by: (a) the company s articles of association, (b) a certified copy of the company s memorandum of association, (c) a certified copy of the minutes of the first general meeting, and (d) the name and address of the claims handling representatives to be nominated in each of the other EEA states if the company is to cover risk within the insurance class relating to civil liability for terrestrial motor vehicles, except where the company is only to cover the carrier s liabilities; see provisions established in pursuance of section 17 of the Act on liability for injury caused by a motor vehicle (Motor Vehicle Liability Act of 3 February 1961). Finanstilsynet may request further information and may make further provision regarding the content of licence applications. Section 2-4 Foreign and foreign-owned insurance companies A foreign insurance company may be granted a licence to carry on activity in Norway in accordance with the rules of chapter 14. The mediation of insurance to insurance companies which are not authorised to carry on activity in Norway is prohibited. The prohibition does not apply to non-life insurance related to business activities. The King may make further provision regarding insurance mediation. The King may by regulations prescribe the extent to which the provisions of the preceding subsection shall apply to insurance companies whose head office is in another state within the European Economic Area, and may make further provision regarding such companies activities in Norway. Chapter 3 General rules of company law Section 3-1 Forms of business organisation Insurance companies must be organised as private limited companies, public limited companies or mutual companies. Except where otherwise provided in or pursuant to this Act, the rules of the Private Limited Companies Act and the Public Limited Companies Act respectively apply to private limited insurance companies and public limited insurance companies. The Private Limited Companies Act section 3-5 first subsection third sentence and section 5

8-1 second subsection, and the Public Limited Companies Act section 3-5 first subsection third sentence and section 8-1 second subsection do not apply to insurance companies. Except where otherwise provided in or pursuant to this Act, the Private Limited Companies Act does not apply to mutual insurance companies. Section 3-2 Articles of association An insurance company s articles of association shall be approved by the King and may not be amended without the King s approval. The articles of association of a life insurance company shall contain rules for determining dividends on the share or guarantee capital. Section 3-3 Registration An insurance company shall be registered with the Register of Business Enterprises no later than six months after the granting of a licence pursuant to section 2-1. The registrar shall verify that the company is licensed to carry on business pursuant to section 2-1, and that its articles of association are approved pursuant to section 3-2. The Private Limited Companies Act section 2-20 applies to mutual insurance companies. Section 3-4 Company name An insurance company s name must contain the word insurance or other words or expression with the same meaning. Moreover, the form of business organisation must be clear from the company s name. Section 3-5 Special rules for groups of companies An insurance company may form part of a group of companies under the Act on Financing Activities and Financial Institutions section 2(a)-6 only if: (a) the parent company, the companies comprising the group or other holding company is not a credit insurance company, and (b) the parent company, the companies comprising the group, and in the event all other companies in the group to which the insurance company belongs, individually and collectively fulfil the conditions of section 6-1 and section 6-2 of this Act. The King may by regulations prescribe exceptions from the provisions of this subsection and make regulations to the effect that the group as a whole must also comply with other rules laid down in or pursuant to this Act. (c) the group has been established by licence granted pursuant to the Act on Financing Activities and Financial Institutions section 2(a)-3. Section 3-6 Merger, demerger etc. The merger and demerger of insurance companies and parent companies of insurance companies may not take place without authorisation from the King. The taking over or disposal of a substantial portion of the company s assets, including the insurance portfolio, is regarded as equivalent to a merger or demerger. The King shall decide in 6

cases of doubt what is to be regarded as significant portions of a company s assets. Section 13-1 second subsection first sentence applies. The acquisition of shares of an insurance company which is already licensed to carry on business under section 2-1 requires the King s approval where the acquisition entails that the company will form part of a group. Section 3-7 Increase of own funds Except as authorised by the King, own funds may not be reduced or increased by other means than retained profits. Conditions suited to safeguarding the interests to be protected by this Act and the Act on Financing Activities and Financial Institutions (of 10 June 1988 no. 40) may be attached to the authorisation. Section 3-8 Transfer of insurance portfolio The transfer of all or parts of a company s insurance portfolio requires authorisation from the King in cases where the insurance portfolio is written either under the rules on the right of establishment or under the rules on the freedom to provide services pursuant to the EEA Agreement, and it is desired to transfer the insurance portfolio to an insurance company whose head office is in the European Economic Area. The provision of the first sentence also applies where an insurance portfolio is transferred between insurance companies having their head offices in the same EEA state. The King makes further rules concerning transfers under the first subsection, including rules on: (a) necessary confirmations, authorisations etc from supervisory authorities in other EEA states (b) the company s duty to inform the policyholders (c) the policyholders right to cancel the insurance contract (d) publication of the transfer. The first and second subsections of this section apply to the transfer of an insurance portfolio from the branch of an insurance company whose head office is not in an EEA state to an insurance company established in Norway or in another EEA state. Chapter 4 Company law rules applying specifically to mutual insurance companies Section 4-1 Formation A mutual insurance company may be formed by one or more founders. The founders shall draw up, date and sign a document containing draft articles of association and provisions as mentioned in section 4-4. At least half of the founders shall be resident in Norway and shall have lived here for the past two years, unless the King makes an exception in the individual case. The state and Norwegian municipalities as well as Norwegian limited liability companies, cooperative societies, associations and foundations are regarded as equivalent to persons residing in Norway. The provision of the first sentence does not apply to citizens of states which are party to the EEA Agreement when they are resident in such a state. Neither does the first sentence apply to any legal person as mentioned in 7

the EEA Agreement Article 34 second paragraph that is established under the legislation of an EU member state or an EFTA state, and whose registered office (as provided by its articles of association), main administration or main undertaking is within the territory of an EU or EFTA state. Section 4-2 (Revoked by Act of 19 June 2009 no. 46) Section 4-3 Articles of association The articles of association shall, in addition to the items mentioned in section 5-1 first subsection, state: (a) Items specified in the Private Limited Companies Act section 2-2 first subsection nos. 1, 2, 3, 6 and 7. (b) The rules for membership, composition of the general meeting and voting rights at the general meeting. (c) The number of insurance contracts and the total amount of insurance that needs to be written in order for the company to commence operations. (d) The rules for the members mutual liability. (e) The rules for dissolving the company. (f) The rules for application of the annual profit and for covering any deficit. (g) The rules for when the general meeting shall be held. (h) The rules for who shall convene the general meeting, and how this shall be done. Section 4-4 Memorandum of association The memorandum of association shall in addition state: (a) The types of insurances. (b) When the statutory meeting must be held in order for writing of insurance contracts to be binding on the members. (c) The size of the guarantee fund, if any. (d) What portion of the guarantee fund shall, in the event, be paid up immediately and the rules for the guaranteeing company s obligation to make further payments to the guarantee fund. (e) The rules for payment of interest on and repayment of the guarantee fund, if any. (f) Rules, if any, to the effect that the guaranteeing company shall be entitled to exert influence on or oversee the insurance company. (g) Who shall pay the expenses of formation, and, in the event, remuneration to persons for work done in connection with the formation. Provisions not set forth in the memorandum of association may not be invoked against the company. Section 4-5 Invitation to take out insurance The provision of section 2-1 on the licensing requirement shall not prevent the enrolment of members where such enrolment is for the purpose of forming a mutual insurance company. The company shall incur no insurance liability, nor may premiums be collected, until the company is duly registered. 8

Section 4-6 Notice of the statutory meeting The founders shall summon the members to the statutory meeting which shall be held no later than six months after the memorandum of association has been signed. If this time-limit is exceeded, enrolment shall not be binding. Section 4-7 Statutory meeting The decision to form the company shall be taken at the statutory meeting. The enrolment list shall be made available to the enrolled members for at least one week before the statutory meeting at a location stated in the notice of the meeting. At the statutory meeting the founders shall present the memorandum of association and the list of enrolled members. If the number of insurances and the amount of insurance written fall short of what is required by the memorandum of association, see section 4-3(c), a decision to form the company may not be taken. In that case the amounts that have been paid in shall be refunded without delay. Before a decision to form the mutual insurance company can be taken, the statutory meeting shall have considered and decided any proposal that may have been put forward to amend the articles of association or the memorandum of association. The statutory meeting may nonetheless not adopt a decision that conflicts with the memorandum of association in cases as mentioned in section 4-3(b), (c), (d) and (e) or section 4-4(a), (c), (d) and (e). A proposal to form the company is deemed to be adopted when it is supported by a majority of the votes cast and by at least two-thirds of the capital represented at the statutory meeting. In the absence of such majority, formation of the company cannot take place. Once the company is formed, the general meeting shall appoint a control committee and, where required, a supervisory board or board of directors. Section 4-8 Apportionment of profits and losses Except where otherwise provided in the articles of association, profits and losses shall be apportioned on persons who were members in the same accounting period, in proportion to an estimated prepaid premium. The articles of association of a life insurance company may provide that the members shall not be liable for the company s liabilities, but that losses shall instead be apportioned by means of a pro rata reduction of insurance claims. Section 4-9 Liability towards third parties Members liability for a company s liabilities may only be invoked by the company. The company s claim for contributions from the members when apportioning losses may not be transferred, pledged as security or distrained on for debt. 9

Section 4-10 Cooperation Mutual companies may by means of cooperation agreements form group entities based on common company bodies established in articles of association, and the articles of association may in such case deviate from the rules of this Act and of the Act on Financing Activities and Financial Institutions. Chapter 5 The company s bodies etc. Section 5-1 Board of directors An insurance company shall have a board of directors of at least three members. The employees of the company shall be represented on the board of directors. The King may make further provision in this respect. A majority of the board of directors shall be persons who are not employed by the company or by companies in the same group. The chairman shall be appointed from among this majority. The articles of association shall contain rules concerning alternates. The board of directors shall be elected by the supervisory board. If the company does not have a supervisory board, the board of directors shall be elected by the general meeting. The right of the supervisory board or the general meeting to elect may be transferred by the articles of association to others, but not to the board of directors or its members. The rules of this section also apply to the parent company of a private limited insurance company or a public limited insurance company. In such cases the first subsection fourth and fifth sentence do not apply to the owned company. The King may authorise the owned insurance company to have the same board of directors as the owning company. Section 5-2 Managing director An insurance company shall have a managing director (chief executive). Section 5-3 Application of the Private Limited Companies Act to mutual companies The rules of the Private Limited Companies Act sections 6-1 to 6-3 and sections 6-6 to 6-34 apply to mutual insurance companies except as otherwise provided by the present Act. In the case of mutual insurance companies with more than 1,000 members at the time of the election of members of the board of directors, the Cooperative Societies Act section 69 applies. Section 5-4 Supervisory board At insurance companies with more than 50 employees a supervisory board shall be elected comprising 12 members or a higher number divisible by 3 which shall be fixed by the general meeting. Two thirds of the members with alternates shall be elected by the general meeting. The elected members shall in aggregate reflect the company s interest groups, customer structure and social role. The articles of association shall contain further rules in this respect. The articles of association may transfer the right to elect to others. 10

One third of the members with alternates shall be elected by and from among the employees in accordance with rules laid down by the King. The King may grant dispensation from the requirement that the company shall have a supervisory board. In that case the company s board of directors shall as far as possible be composed in accordance with the rules of this section. The supervisory board shall perform the tasks required of a corporate assembly under the Public Limited Companies Act sections 6-35 to 6-40, unless the company s articles of association give the supervisory board wider competence. The rules of the first, second, third and fifth subsections also apply to the parent company of a private limited insurance company or a public limited insurance company. Section 5-5 Control committee An insurance company shall have a control committee of at least three members and one alternate. Members and alternates shall be elected by the general meeting. One member of the committee shall satisfy the requirements set for judges under the Courts of Justice Act (of 13 August 1915 No. 5) section 54 second subsection. The election of this member shall be approved by Finanstilsynet. Finanstilsynet may grant dispensation from the provisions of the two previous sentences. Cooperating companies may have a common control committee. The rules of this section also apply to the parent company of a private limited insurance company or public limited insurance company. In such cases the King shall decide whether the first subsection shall apply to the owned company. The members of the control committee may not be chairman or deputy chairman of the supervisory board, member of the board of directors, alternate to the board of directors, the company s auditor or employee of the insurance company, or be as closely related or related by marriage to any of these as mentioned in the Public Administration Act section 6. Section 5-6 Control committee s tasks and authority The control committee shall oversee the activities of the insurance company, and ensure that it complies with laws, regulations and conditions, as well as with articles of association and resolutions of the company s decision-making bodies. The control committee may take up any company matter whatsoever for consideration. The control committee may at any time demand access to the company s records and documents, and request that elected officers/representatives and employees shall furnish such information as the committee considers necessary to enable it to discharge its duties. The supervisory board shall adopt instructions for the control committee. The instructions shall be approved by Finanstilsynet. 11

Section 5-7 Control committee s duty to submit reports The control committee shall keep a record of its meetings. The record shall be made known to the board of directors. The control committee shall submit a report to the supervisory board at least once a year. Should the committee become aware of material acts of negligence, errors or irregularities of substantial significance or scope or is of the opinion that the company has incurred major losses, it shall promptly take the matter up with Finanstilsynet. Section 5-8 General meeting Finanstilsynet shall take the place of the probate court in the exercise of powers mentioned in the Private Limited Companies Act section 5-8 second subsection and section 5-12 first subsection third sentence and the Public Limited Companies Act section 5-8 second subsection and section 5-12 second subsection. The provisions of the Private Limited Companies Act concerning the general meeting apply to mutual companies. Section 5-9 Audit and investigation The supervisory board shall elect one or more registered or state authorised auditors, and shall approve the remuneration of the auditor(s). If the company is required to have an audit committee pursuant to section 5-10, the audit committee s statement on the proposal for auditor shall be submitted to the supervisory board before the election. Finanstilsynet shall take the place of the probate court in the exercise of powers pursuant to the Private Limited Companies Act and the Public Limited Companies Act sections 5-25 to 5-27 and section 7-3. The rules of the Private Limited Companies Act chapter 7 and sections 5-25 to 5-27 and the Act on Auditing and Auditors apply to mutual companies. Section 5-10 Audit committee An audit committee shall be appointed at insurance companies. The audit committee is a preparatory and advisory working committee to the board of directors. Except as otherwise provided by Finanstilsynet, the first subsection shall not apply to any insurance company that is a wholly owned subsidiary in a financial group if the parent company has an audit committee that fulfils the requirements of the present Act. Owner entities as mentioned in the Financial Institutions Act section 2a-2(e) are not regarded as parent companies in this context. Finanstilsynet may by regulations or administrative decision make exemption from insurance companies' obligation to have an audit committee, and may make supplementary rules concerning the audit committee's composition and tasks. Section 5-11 Audit committee's tasks The audit committee shall: (a) prepare the board of directors' follow-up of the financial reporting process, 12

(b) monitor the internal control and risk management systems and, where such a function has been established, the company's internal audit, (c) maintain continuous contact with the company's appointed auditor regarding the audit of the annual financial statements, (d) assess and monitor the auditor's independence, see the Auditors Act chapter 4, including in particular the extent to which non-audit services delivered by the auditor or audit firm constitute a threat to their independence. Section 5-12 Appointment of audit committee and its composition The members of the audit committee shall be elected by and from among the members of the board of directors. Board members who are senior employees of the company may not be elected as members of the audit committee. The audit committee shall collectively have the competence necessary to carry out its tasks, given the company's organisation and business. At least one member of the audit committee shall be independent of the business and hold qualifications in accountancy or auditing. Except as otherwise provided by Finanstilsynet, the articles of association may stipulate that the entire board of directors shall function as the company's audit committee provided that the board of directors fulfils the requirements of the second subsection at all times. Chapter 6 The company s activities Section 6-1 Prohibition of other activities An insurance company may only carry on insurance activities and activities naturally associated with insurance activities. The provision of the first subsection does not prevent an insurance company from temporarily carrying on or participating in the operation of other activities to the extent necessary to cover claims or deal with a claim settlement. Finanstilsynet may require the company to cease such activities within a stipulated period. The King may make further provision concerning the type of activity insurance companies may engage in and make general or individual exceptions from the provision of the first subsection. Section 6-2 Holdings in and influence on other companies An insurance company may not own, or by voting represent, more than 15 per cent of the shares or units in a company carrying on activities which pursuant to section 6-1 may not be carried on by insurance companies. However, the prohibition does not apply where the overall value of such investment is less than the assets of the insurance company after deduction of technical provisions covering the insurance liabilities, provided that the financial risks associated with the investment are limited to the value of the investment concerned. The King may in special cases make exceptions from the provisions of this section and attach conditions to such exceptions. 13

The provisions of this section do not apply to the right of insurance companies to own shares or units in financial institutions. Investment firms, real estate agencies, companies which manage securities funds and foreign financial institutions are also regarded as financial institutions. Section 6-3 Capital adequacy requirement An insurance company shall have a capital ratio which at all times constitutes at least 8 per cent of the company s assets and the company s off-balance sheet commitments, calculated in accordance with risk-weighting principles. The King may prescribe: (a) a minimum amount of own funds, (b) rules on the calculation of capital adequacy, (c) what items are eligible for inclusion in own funds, (d) a percentage other than that mentioned in the first subsection to bring Norwegian provisions into line with international standards. Section 6-4 Solvency margin requirement An insurance company shall at all times have sufficient capital to cover the solvency margin in respect of the company s overall business. The King may issue regulations on the calculation of the solvency margin for, respectively, life insurance companies and non-life insurance companies, the capital that is eligible to fulfil the requirement and other factors with a bearing on the implementation of the solvency margin requirements. Section 6-5 Oversight of insurance companies solvency Finanstilsynet oversees insurance companies solvency. If a company no longer fulfils the requirements on capital adequacy or solvency margin, the King may order the company to cease writing new insurance policies. The King may also order the company to undertake specific dispositions with a view to fulfilling requirements on capital adequacy or solvency margin. The King may in special cases and for a limited period authorise the company to maintain a capital adequacy or solvency margin that is lower than prescribed. Section 6-6 Asset management An insurance company shall provide for prudent asset management. In order to ensure the fulfilment of its insurance liabilities, an insurance company shall see to it that assets covering the technical provisions are at all times appropriately and satisfactorily invested viewed in relation to the nature of the insurance liabilities and in terms of safety, risk diversification, liquidity and return. The King may make further provision regarding asset management. Should Finanstilsynet find that an insurance company has invested its capital contrary to law or regulations or in an otherwise unsatisfactory or evidently detrimental 14

manner, Finanstilsynet may order the company to change the investment within a stipulated period. Section 6-7 Insurance terms and conditions An insurance company shall employ insurance terms and conditions which are reasonable and adequate. Finanstilsynet shall check to ensure that the insurance terms and conditions employed fulfil this requirement. Finanstilsynet may prohibit the use of terms and conditions which Finanstilsynet deems to be inadequate or unreasonable. Section 6-8 Reinsurance An insurance company shall at all times have reinsurance which is adequate viewed in relation to the company s risk exposure and its financial position. The board of directors shall ensure that updated guidelines are in place for the nature and scope of the company s reinsurances and that the guidelines are complied with. Section 6-9 Commission and other payment for insurance mediation An insurance company is not entitled to pay commission or make other payment to an insurance broker in respect of an insurance mediation service provided to the company if the insurance intermediary by accepting such commission would be acting in contravention of the provisions of the Act of 10 June 2005 no. 41 on Insurance Mediation section 5-2a. The King may make further provision concerning the implementation and delimitation of the provisions of the first subsection, including provisions concerning insurance companies' right to apply special price tariffs to administrative services for insurances received by an insurance company from an insurance intermediary. Part III Chapter 7 Pension undertakings Pension funds Section 7-1 Pension fund Except as otherwise provided by section 7-2, a pension fund is an autonomous institution whose activity is based on one or more group pension schemes established by the enterprise or municipality which has set up the pension fund. The activity carried on may also include activity naturally related to such activity (related activity). Municipal pension schemes and pension schemes established under the rules of the Defined Benefit Occupational Pension Schemes Act and the Defined Contribution Occupational Pension Schemes Act, as well as other group pension schemes, are regarded as group pension schemes. Pension schemes established for members of an association of independent contractors and, in the event, their employees, are also regarded as group pension schemes (association pension schemes). 15

Issuance of paid-up policies, pension certificates or pension capital certificates to employees who have quit their job and ceased to be members of a pension scheme in the pension fund, as well as supplementary agreements to such pension rights, are also regarded as related activity. Where a pension fund is authorised to estabish group pension schemes which are regarded as life insurance, the insurance of disability or mortality risk related to the members of a group pension scheme within that pension fund is also regarded as related activity. Section 7-2 Pension funds for two or more companies/employers Companies, municipalities and other employers that are entitled to establish joint pension schemes under the Defined Benefit Occupational Pension Schemes Act chapter 12, the Defined Contribution Occupational Pensions Schemes Act chapter 10 or under section 10-2 of the present Act, may hold such a joint pension scheme in a pension fund. The requirement of a close relationship in the Defined Benefit Occupational Pension Schemes Act section 12-1 and Defined Contribution Occupational Pension Schemes Act section 10-1 applies to the establishment of joint pension funds for joint pension schemes not encompassed by these Acts. Two or more municipalities may agree to hold their pension schemes in the same pension fund (intermunicipal pension fund). The provisions of section 10-2 second and third subsections apply. Two or more independent undertakings may enter into an agreement to hold their pension schemes in the same pension fund (joint pension fund). The agreement shall in accordance with the rules of section 7-13 state: (a) which undertakings are covered by the agreement, (b) the base capital in the joint pension fund and what share each undertaking shall contribute to the joint pension fund, and rules concerning the obligation to contribute capital later, (c) the joint pension fund's paramount body with voting rights rules, (d) what types of collective pension schemes are to be offered by the joint pension fund, (e) further provisions on the consequences of acquisition and merger of undertakings that hold their pension scheme in the joint pension fund, (f) the period of notice for undertakings that intend to withdraw from the agreement, and rules concerning the right to exclude an undertaking from the joint pension fund and concerning settlement under section 7-13 fourth subsection when an undertaking withdraws from the joint pension fund. Termination shall in all events be possible at three months' notice with effect from the forthcoming year end, (g) whether the same premium tariff or different premium tariffs are to be applied to the various pension schemes in the joint pension fund. The King may make further provision concerning pension schemes and pension funds covered by this section, including regulations concerning municipalities' right to hold a pension scheme in an intermunicipal pension fund and undertakings' right to hold a pension scheme in a joint pension fund. Section 7-3 Licence A pension fund may not carry on activity without a licence granted by the King. 16

A pension fund may be granted a licence to establish group pension schemes regarded as life insurance, or a licence to establish group pension schemes not containing an insurance element. Conditions may be attached to the licence, including conditions which limit the activity which a pension fund may engage in. The provisions of section 2-1 second to fifth subsection, section 2-2 and section 2-3 apply. The King may make provision regarding foreign pension funds right to carry on activity in Norway and Norwegian pension funds right to engage in activity in another state. Section 7-4 Articles of association etc A pension fund shall have articles of association indicating at least: (a) the pension fund s name and registered office, (b) the pension fund s activity, including what forms of group pension schemes the pension fund is to establish, (c) minimum base capital requirement, (d) rules on the board of directors, chief executive officer and other bodies, (e) rules on the election of board members, board chair, other bodies and auditor, (f) rules on decisions concerning changes to the articles of association and merger, demerger and termination of the pension fund, (g) rules on dividend from base capital and other contributed capital. The articles of association of a joint pension fund shall in addition state: (a) which undertakings are participating in the joint pension fund, (b) the joint pension fund's base capital and what proportion each undertaking is to contribute to the joint pension fund, and rules concerning the obligation to contribute capital later, (c) if the board of directors is not to be the joint pension fund's paramount body, rules concerning the composition and election of a supervisory board for the joint pension fund, including representatives for occupationally active members and pensioners. The rules shall contain voting rules for the supervisory board. Appointment of the board of directors and of the auditor shall rest with the supervisory board. The articles of association shall state what matters are to be dealt with by the supervisory board. The provisions of the second subsection apply to intermunicipal pension funds in so far as appropriate. The articles of association and changes to the articles of association shall be approved by the King. Pension funds shall be registered in the Register of Business Enterprises. Section 3-3 first and second subsections applies. 17

Section 7-5 Capital structure A pension fund shall at all times have a minimum base capital of 10 times the national Insurance Fund s basic amount (G), unless a higher minimum requirement is stipulated in the fund s articles of association or licence terms. A pension fund may raise subordinated loan capital. A pension fund may issue equity certificates in accordance with rules laid down by the King. A pension fund s base capital and own funds may not, without authorisation from the King, be reduced or increased by other means than retained profits. Section 7-6 Board of directors and chief executive officer A pension fund shall have a board comprising at least three board members. If the fund s assets total NOK 100 million or more, the board shall have at least five board members. The board shall have at least one member without affiliation to the pension fund or to an employer, undertaking, association or other institution with a pension scheme in the pension fund. The members of a pension scheme in the pension fund shall be represented on the board of directors. Pensioners are regarded as members of the pension scheme. The pension fund shall have a chief executive officer who is not concurrently a member of the board. The chief executive officer shall be appointed by the board of directors. The rules of the Private Limited Companies Act sections 6-1 to 6-3, 6-6 to 6-15 and 6-19 to 6-34 apply insofar as they are appropriate. The Private Limited Companies Act section 6-17 applies if so provided by the licence terms. At least two board meetings each year shall be attended by both the auditor and responsible actuary of the pension fund. Section 7-7 Organisation of the activity A pension fund s activity and finances shall be kept legally separate from the activity of any employer, undertaking, association or other institution with a pension scheme in the pension fund. The board of directors shall arrange for proper organisation of the activity, including internal control systems. The board of directors may enter into agreements on the carrying out of insurance technical calculations, registration of members and rights and other specified work tasks covered by the day-to-day management of the activity. An asset management agreement may only be entered into with a bank or life insurance company licensed to carry on activity in Norway, and with an investment firm licensed to carry on portfolio management in Norway. The board of directors shall ensure that written guidelines for proper asset management are in place at all times, and shall review the guidelines at least once a 18

year. An account shall be prepared of the investment strategy including methods for measurement and management of investment risk and allocation of assets viewed in relation to the type and duration of the pension liabilities. Section 7-8 Relationship to the pension schemes and employer The rules governing a pension scheme shall be established by agreement between the pension fund and the employer. For the purposes of this section the parent company in a group, a municipality, an association and the governing body in an association pension scheme are also regarded as an employer. The rules in draft form shall be submitted to the pension fund s actuary for comment before the agreement is entered into. Where assets in a pension fund are to be managed as a special investment portfolio, the agreement shall stipulate the portfolio s composition, what right exists to change the portfolio and any other conditions that are required. The provisions concerning group pension schemes in the Insurance Contracts Act (of 16 June 1989 No. 69) apply insofar as they are appropriate. Section 7-9 Requirements on own funds etc A pension fund providing pension schemes which are regarded as life insurance shall at all times have adequate own funds and solvency margin. The provisions of sections 6-3 to 6-5 apply. A pension fund providing pension schemes without an insurance element shall at all times have adequate own funds. The provisions of sections 6-3 and 6-5 apply. An employer, undertaking, association or other institution with a pension scheme in a pension fund may contribute fresh capital to the pension fund to ensure that its financial position is at all times sound, and that the minimum requirements on base capital and other capital are fulfilled. The same applies to employers affiliated to an association pension scheme. The Act on guarantee schemes for banks and public administration etc., of financial institutions (Guarantee Schemes Act, of 6 December 1996 No. 75) chapters 3 and 4 applies to pension funds. Section 7-10 General rules for the activity The provisions of sections 6-1, 6-2, 6-6 to 6-8 and chapter 11 apply to pension funds. The provisions on life insurance in chapter 9 apply to pension funds licensed to establish pension schemes regarded as life insurance, except as otherwise provided in or pursuant to law. In the case of pension funds licensed to establish group pension schemes without an insurance element, the provisions of sections 9-3, 9-7 to 9-9, 9-15 to 9-18, 9-19, 9-23 and 9-24 apply insofar as they are appropriate. 19

The King may make further provision regarding pension funds activity, including rules to implement or delimit the provisions of this section. Section 7-11 Information requirements Members and pensioners shall be informed of changes in the rules governing their own pension scheme. Each year each member and pensioner shall receive a statement indicating the level of the pension rights accrued by the person concerned. Information shall also be provided on the pension fund s investment strategy if the result of the asset management is of direct significance for the size of the pension entitlement. Members and pensioners shall upon request be sent the pension fund s annual financial statements including the directors report. The same applies to the accounts for members and pensioners own pension scheme if there are two or more pension schemes in the pension fund. The King may make further provision regarding information to be provided to members and pensioners. Section 7-12 Merger, demerger and termination Merger, demerger and termination of a pension fund require authorisation from the King. A decision merge, demerge or terminate a pension fund shall be notified to the Register of Business Enterprises. The King may make further provision regarding merger, demerger and termination. The provisions of the Defined Benefit Occupational Pension Schemes Act chapters 13, 14 and 15 and the Defined Contribution Occupational Pension Schemes Act chapters 11, 12 and 13 apply insofar as appropriate, unless the King sets other conditions in his authorisation under the first subsection. Section 7-13 Special rules for joint pension funds The undertakings may, if unanimous, decide to permit a particular undertaking to join the agreement. An undertaking is entitled to withdraw from the joint pension fund in accordance with the the provisions of the agreement, see section 7-2 third subsection (f). If an undertaking is in significant breach of its obligations in the pension fund, the other undertakings may decide to exclude the undertaking from the joint pension fund and set a termination date; see section 7-2 third subsection (f). Where an undertaking is no longer to have its pension scheme in the joint pension fund, that part of the joint pension fund's assets that refer to the said undertaking on the termination date shall be assigned to the undertaking. The undertaking shall also be assigned part of the equity capital present in the joint pension fund on the termination date, calculated on the basis of the ratio between the premium reserve or the retirement pension capital for the undertaking's members and the premium reserve or the retirement pension capital for all members of the joint pension fund. The Defined Benefit Occupational Pension Schemes Act section 12-7 and the Defined 20