Article 15-1. Prohibition on granting preferential terms to persons connected with an insurance (reinsurance) organization by special relations of the Law on Insurance Activities

Home / RLA / Article 15-1. Prohibition on granting preferential terms to persons connected with an insurance (reinsurance) organization by special relations of the Law on Insurance Activities

1. An insurance (reinsurance) organization is prohibited from granting preferential terms to persons who have special relations with an insurance (reinsurance) organization.

2. Granting preferential terms to a person connected with an insurance (reinsurance) organization by special relations means making a transaction with a person connected with an insurance (reinsurance) organization by special relations, or in his interests, which, by its nature, purpose, characteristics and risk, an insurance (reinsurance) organization would not make with a person not connected with a special relationship with her, namely:

1) the application of the insurance tariff is lower or the insurance payment is higher than for other policyholders;

2) payment for the acquired property and (or) services to a person connected with an insurance (reinsurance) organization by special relations at a price higher than payment for similar acquired property and (or) services to third parties under a transaction or a set of transactions, the value of which exceeds the amount established by a regulatory legal act of the authorized body;

3) the sale of property to a person with a special relationship with an insurance (reinsurance) organization at a value lower than the sale of similar property to third parties or below the market value or the value indicated in the valuation report (in the absence of a market value);

4) making transactions previously classified by the authorized body as transactions with preferential terms by using a reasoned judgment.

Additional criteria for classifying transactions as transactions with preferential terms are established by a regulatory legal act of the authorized body.

2-1. Persons connected with an insurance (reinsurance) organization by special relations are recognized as:

1) an official or a senior employee, the first head and chief accountant of a branch of this insurance (reinsurance) organization, as well as their spouses and close relatives;

2) a natural or legal person who is a major participant in this insurance (reinsurance) organization, or an official of a major participant in an insurance (reinsurance) organization, as well as their spouses and close relatives;

3) a legal entity in which the persons specified in subitems 1) and 2) of this paragraph own ten or more percent of the outstanding shares (less preferred and repurchased shares) or shares in the authorized capital or are officials;

4) affiliated companies of an insurance (reinsurance) organization;

5) a natural or legal person who meets the criteria of being associated with an insurance (reinsurance) organization in a special relationship established by a regulatory legal act of the authorized body.

The authorized body has the right to classify an individual or a legal entity as having special relations with an insurance (reinsurance) organization by using a reasoned judgment. In this case, this individual or legal entity is recognized as an insurance (reinsurance) organization with a special relationship with it from the date the insurance (reinsurance) organization receives the appropriate supervisory response from the authorized body.

For the purposes of this article, an independent director, a national managing holding company that is a shareholder of an insurance (reinsurance) organization, and legal entities with ten or more percent of the shares (stakes in the authorized capital) owned by such a national managing holding company, as well as legal entities, are not recognized as persons associated with an insurance (reinsurance) organization., in which an official of an insurance (reinsurance) organization, who is an independent director, is an independent director in the management bodies, as well as other persons defined by the regulatory legal act of the authorized body.

For the purposes of recognizing persons associated with a branch of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan as special relations:

The insurance (reinsurance) organization in subparagraph 2) of the first part of this paragraph means an insurance (reinsurance) organization that is a non-resident of the Republic of Kazakhstan.;

An insurance (reinsurance) organization in subitems 4) and 5) of Part one of this paragraph means a branch of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan.

Affiliated persons of a branch of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan are recognized as affiliated persons of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan, recognized as such in accordance with the legislation of the state of which the non-resident insurance (reinsurance) organization of the Republic of Kazakhstan is a resident.

A branch of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan keeps records of its affiliated companies based on information provided by a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan.

3. Excluded by the Law of the Republic of Kazakhstan dated December 28, 2011 No. 524-IV (effective after ten calendar days after its first official publication).

4. A transaction with a person having a special relationship with an insurance (reinsurance) organization is made subject to the requirements of paragraph 1 of this article only by decision of the board of directors of the insurance (reinsurance) organization.

The requirement of the first part of this paragraph does not apply to transactions with a person connected with an insurance (reinsurance) organization by special relations, the standard terms of which are established by the legislation of the Republic of Kazakhstan and (or) were previously approved by the board of directors of the insurance (reinsurance) organization and apply to similar transactions with third parties.

The waiver of the rights of claims in respect of assets provided (placed) to persons (with persons) connected (connected) with an insurance (reinsurance) organization by special relations is carried out with subsequent notification of the general meeting of shareholders.

The person specified in paragraph 2-1 of this article shall not take part in the consideration and decision-making on any transaction between an insurance (reinsurance) organization and:

by themselves;

by any of his close relatives or his spouse;

any legal entity in which he or any of his close relatives, his spouse is an official (with the exception of an independent director) or a major participant.

A decision of the board of Directors on any transaction between an insurance (reinsurance) organization and a person with a special relationship with an insurance (reinsurance) organization may be made only after the Board of Directors has reviewed all its terms.

For the purposes of applying the requirements of this paragraph to a branch of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan, the board of directors of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan means the relevant governing body of a non-resident insurance (reinsurance) organization of the Republic of Kazakhstan.

4-1. Excluded by the Law of the Republic of Kazakhstan dated 07/02/2018 No. 168-VI (effective from 01.01.2019).

5. An insurance (reinsurance) organization is obliged to provide the National Bank with information on persons associated with an insurance (reinsurance) organization by special relations, as well as on all transactions concluded with these persons, in accordance with the procedure, terms and forms provided for by regulatory legal acts of the National Bank in coordination with the authorized body.

5-1. Excluded by the Law of the Republic of Kazakhstan dated 07/02/2018 No. 168-VI (effective from 01.01.2019).

6. The requirements of this article apply to insurance holdings, with the exception of:

1) non-residents of the Republic of Kazakhstan who are an insurance holding company, a person who has the characteristics of an insurance holding company, if one of the following conditions is met:

the presence of an individual credit rating not lower than the A rating of one of the rating agencies, the list of which is established by the authorized body, as well as written confirmation from the financial supervisory authority of the country of origin of the insurance holding company, a person with the characteristics of an insurance holding company, that these non-resident persons of the Republic of Kazakhstan are subject to consolidated supervision;

the existence of an agreement between the authorized body and the relevant supervisory authority of a foreign state on the exchange of information, as well as the minimum required rating of one of the rating agencies. The minimum rating and the list of rating agencies are established by a regulatory legal act of the authorized body.;

2) insurance holdings, which are bank holdings that are part of banking conglomerates.

The Law of the Republic of Kazakhstan dated December 18, 2000 No. 126.

President

Republic of Kazakhstan

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