Commonwealth Numbered Acts

CORPORATE LAW REFORM ACT 1992 No. 210 of 1992 - SECT 101

101. After section 562 of the Corporations Law the following section is
inserted: Application of proceeds of contracts of reinsurance

"562A.(1) This section applies where:

   (a)  a company is insured, under a contract of reinsurance entered into
        before the relevant date, against liability to pay amounts in respect
        of a relevant contract of insurance or relevant contracts of
        insurance; and

   (b)  an amount in respect of that liability has been or is received by the
        company or the liquidator under the contract of reinsurance.

"(2) Subject to subsection (4), if the amount received, after deducting
expenses of or incidental to getting in that amount, equals or exceeds the
total of all the amounts that are payable by the company under relevant
contracts of insurance, the liquidator must, out of the amount received and in
priority to all payments in respect of the debts mentioned in section 556, pay
the amounts that are so payable under those contracts of insurance.

"(3) Subject to subsection (4), if subsection (2) does not apply, the
liquidator must, out of the amount received and in priority to all payments in
respect of the debts mentioned in section 556, pay to each person to whom an
amount is payable by the company under a relevant contract of insurance an
amount calculated in accordance with the formula:
Particular amount owed
            Total amount owed      X       Reinsurance payment
where:
'Particular amount owed' means the amount payable to the person under the
relevant contract of insurance;
'Total amount owed' means the total of all the amounts payable by the company
under relevant contracts of insurance;
'Reinsurance payment' means the amount received under the contract of
reinsurance, less any expenses of or incidental to getting in that amount.

"(4) The Court may, on application by a person to whom an amount is payable
under a relevant contract of insurance, make an order to the effect that
subsections (2) and (3) do not apply to the amount received under the contract
of reinsurance and that that amount must, instead, be applied by the
liquidator in the manner specified in the order, being a manner that the Court
considers just and equitable in the circumstances.

"(5) The matters that the Court may take into account in considering whether
to make an order under subsection (4) include, but are not limited to:

   (a)  whether it is possible to identify particular relevant contracts of
        insurance as being the contracts in respect of which the contract of
        reinsurance was entered into; and

   (b)  whether it is possible to identify persons who can be said to have
        paid extra in order to have particular relevant contracts of insurance
        protected by reinsurance; and

   (c)  whether particular relevant contracts of insurance include statements
        to the effect that the contracts are to be protected by reinsurance;
        and

   (d)  whether a person to whom an amount is payable under a relevant
        contract of insurance would be severely prejudiced if subsections (2)
        and (3) applied to the amount received under the contract of
        reinsurance.

"(6) If receipt of a payment under this section only partially discharges a
liability of the company to a person, nothing in this section affects the
rights of the person in respect of the balance of the liability.

"(7) This section has effect despite any agreement to the contrary.

"(8) in this section:
'relevant contract of insurance' means a contract of insurance entered into by
the company, as insurer, before the relevant date.".