Insurance Act 2003

Guide to the Insurance Act, 2003 for Businesses and Investors

This guide provides a practical overview of the regulatory framework governing insurers, insurance brokers, insurance agents and policyholder protection in The Gambia.

Introduction

The Insurance Act, 2003 regulates insurance business in The Gambia and places insurance institutions under the supervision of the Central Bank of The Gambia and the Commissioner of Insurance. The Act establishes licensing requirements, capital and solvency standards, governance requirements, consumer protection rules and intervention powers for troubled insurers.

For businesses and investors, the Act is designed to promote:

• Financial stability.

• Protection of policyholders.

• Transparency and accountability.

• Sound insurance market development.

1. Who May Conduct Insurance Business?

Licensing Requirement

No person may commence or carry on insurance business in The Gambia unless registered and licensed under the Act. s.5(1).

Only the following entities may be registered:

• Companies incorporated under Gambian law.

• Co-operative societies.

• Statutory corporations.

• Certain foreign corporations.

• Mutual insurance companies. s.6.

Penalty

Operating without registration may result in:

• A fine of not less than D50,000.

• Imprisonment for up to five years.

• Or both. s.5(2).

Investor Insight

The licensing framework creates barriers to entry intended to protect policyholders and preserve confidence in the financial sector.

2. Regulatory Oversight

Role of the Central Bank

The Central Bank of The Gambia is responsible for regulating and supervising insurance business. s.3.

The Commissioner of Insurance is responsible for:

• Registration of insurers.

• Market supervision.

• Inspections.

• Licensing of intermediaries.

• Setting industry standards.

• Monitoring compliance. s.4.

Why This Matters

Investors benefit from an active regulatory framework designed to identify financial weakness before it threatens policyholders.

3. Registration and Licensing of Insurers

Application Requirements

Applicants must submit:

• Constitutional documents.

• Ownership information.

• Business plans.

• Capital information.

• Proposed policy documents.

• Evidence of compliance with statutory requirements. s.7.

The Commissioner may approve registration only if satisfied that:

• The business will be conducted according to sound insurance principles.

• Capital requirements are met.

• Solvency requirements are satisfied.

• Management arrangements protect policyholders.

• Proposed insurance products are acceptable. s.8(1).

4. Capital and Solvency Requirements

Minimum Capital

Every insurer must maintain minimum capital requirements prescribed by law and regulation. s.11.

Insurers carrying on both life and non-life business must maintain enhanced capital requirements. s.11(2).

Investor Importance

Capital serves as the first line of defence against unexpected losses and claims.

Solvency Requirements

The Act empowers regulators to prescribe minimum solvency margins for insurers. s.12.

Where solvency falls below prescribed levels, the Commissioner may:

• Restrict business activities.

• Prohibit policy renewals.

• Limit new policy issuance. s.12(4).

Why Solvency Matters

A solvent insurer is more likely to honour future claims and policy obligations.

5. Statutory Deposits and Investment Requirements

Deposits with the Central Bank

Every insurer must maintain a statutory deposit with the Bank. s.13.

The deposit:

• Forms part of insurer assets.

• Cannot generally be assigned or charged.

• Protects policyholders.

• Cannot normally be used for unrelated liabilities. s.14.

Investment Requirements

The Government may require insurers to invest portions of their insurance funds in:

• Government securities.

• Approved Gambian investments. s.16.

Investor Consideration

These requirements strengthen local capital markets while helping ensure prudent asset allocation.

6. Financial Reporting and Governance

Record-Keeping

Insurers must maintain records relating to their business activities and financial position. s.17.

Where an insurer conducts multiple classes of insurance business, separate accounts must be maintained for different classes of insurance. s.18.

Life Assurance Funds

Life insurance funds must:

• Be maintained separately.

• Be protected from unrelated liabilities.

• Be invested separately.

• Be used solely for life assurance obligations. s.19.

Why This Matters

Life policyholders receive enhanced protection through segregation of assets.

Annual Reporting

Insurers must submit annually:

• Solvency certificates.

• Audited financial statements.

• Profit and loss accounts.

• Revenue accounts.

• Board and management reports. s.20.

7. Auditing Requirements

Independent Audits

Every insurer must appoint an auditor approved by the Bank. s.22(1).

The auditor must confirm:

• Proper records are maintained.

• Information obtained is adequate.

• Financial statements provide a true and fair view of the insurer's condition. s.22(4).

Investor Importance

Independent audits enhance confidence in the financial information presented by insurers.

8. Mergers, Acquisitions and Changes in Control

Regulatory Approval Required

No merger, amalgamation or transfer of control may occur without prior approval from the Bank. s.31(2).

The Bank must assess:

• Licensing requirements.

• Competition impacts.

• Public interest considerations. s.31(3).

Investor Significance

Acquisition of significant ownership interests is subject to regulatory scrutiny.

9. Insurance Brokers

Registration Requirements

Insurance brokers must:

• Be licensed.

• Be incorporated as limited liability companies.

• Maintain minimum paid-up capital.

• Maintain security deposits with the Bank. s.49(3).

Additional Requirements

Brokers must:

• Maintain professional indemnity insurance.

• Retain qualified personnel.

• Maintain business records.

• Operate trust accounts for client funds. ss.50, 52.

10. Insurance Agents

Insurance agents must be registered and licensed before acting for insurers. s.45.

Agents:

• Act on behalf of insurers.

• Must remit premiums promptly.

• Cannot represent unauthorised insurers. ss.46-47.

Consumer Protection

Knowledge acquired by an insurance agent is deemed to be knowledge acquired by the insurer. s.47(2).

11. Policyholder Protection

Premium Payment Rule

A valid insurance contract requires payment of the premium in advance. s.63(1).

Material Facts and Disclosure

Policyholders are generally not required to disclose information unless asked. s.72(1).

However, intentional concealment of material facts may permit an insurer to rescind a policy. s.72(2).

Misstatements

An insurer may not reject a claim merely because of an incorrect statement if:

• The statement was made honestly to the best of the insured's knowledge; or

• The fact was not material to the risk. s.74.

12. Troubled and Failing Insurers

Regulatory Intervention

The Bank may intervene where an insurer:

• Becomes financially unsound.

• Fails to maintain reserves.

• Is insolvent.

• Presents risks to policyholders. s.65.

Possible actions include:

• Restricting business.

• Removing directors or officers.

• Appointing advisers.

• Taking control of operations. ss.65-67.

Mergers and Restructuring

The Bank may direct a failing insurer to:

• Merge with another insurer.

• Consolidate operations.

• Transfer assets and liabilities. s.69.

Investor Importance

Regulatory intervention powers can significantly affect ownership rights and investment value.

13. Consumer Rights

Access to Information

Policyholders may inspect an insurer's balance sheet at the insurer's principal office. s.79(1).

They may also obtain copies on payment of the prescribed fee. s.79(3).

Complaints Bureau

The Bank must establish a complaints bureau for insurance-related complaints by members of the public. s.89.

Key Takeaways for Businesses and Investors

For Businesses

✅ Purchase cover only from properly licensed insurers. ss.5, 8.

✅ Verify that brokers and agents are registered. ss.45, 49.

✅ Understand disclosure obligations when applying for insurance. ss.72-74.

✅ Monitor insurer solvency and financial strength when selecting insurance providers. ss.12, 20, 22.

For Investors

✅ Assess capital adequacy and solvency levels carefully. ss.11-12.

✅ Review governance structures and regulatory compliance records. ss.4, 20, 22.

✅ Consider regulatory approval requirements for acquisitions and control transactions. s.31.

✅ Understand the broad intervention powers available to the Central Bank in relation to distressed insurers. ss.65-69.

Bottom Line: The Insurance Act, 2003 is designed to protect policyholders, promote insurer solvency, strengthen market confidence and provide a robust regulatory framework that benefits both businesses purchasing insurance and investors seeking opportunities in the insurance sector.