Deletion and substitution of regulation 17
12.  Regulation 17 of the principal Regulations is deleted and the following regulation substituted therefor:
Letter of credit
17.—(1)  Where any transfer of assets of an insurance fund under regulation 11(6) shall cause the claim liabilities of the syndicate concerned in respect of the insurance fund to exceed the available balances in the insurance fund, the administrator shall, prior to such transfer, establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority a letter of credit, the value of which shall be not less than the difference between the claim liabilities and the available balances in the insurance fund.
(2)  Where a letter of credit has been established and furnished to the Authority under paragraph (1) in respect of an insurance fund and any subsequent transfer of assets of the insurance fund under regulation 11(6) shall cause the claim liabilities of the syndicate concerned in respect of the insurance fund to exceed the sum of —
(a)the total value of all letters of credit in respect of the insurance fund which remain in force, if any; and
(b)the available balances in the insurance fund,
the administrator shall, prior to such transfer —
(i)establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority a letter of credit, the value of which shall be not less than the difference between the claim liabilities, and the aggregate of the available balances in the insurance fund and the total value of all letters of credit referred to in sub-paragraph (a); or
(ii)subject to paragraph (5), cancel all letters of credit referred to in sub-paragraph (a), and establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority a letter of credit, the value of which shall be not less than the difference between the claim liabilities and the available balances in the insurance fund.
(3)  For the purposes of paragraphs (1) and (2), the claim liabilities of the syndicate in respect of the insurance fund, the available balances in the insurance fund and the value of any letter of credit referred to in paragraph (2) ( a) shall be determined as at the end of the quarter immediately preceding the date of transfer.
(4)  Where, as at the end of any quarter, the claim liabilities of any syndicate in respect of an insurance fund exceeds the sum of —
(a)the total value of all letters of credit in respect of the insurance fund which remain in force, if any; and
(b)the available balances in the insurance fund,
the administrator shall, within 7 weeks from the last day of that quarter —
(i)establish and furnish to the Authority, or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority, a letter of credit, the value of which shall be not less than the difference between the claim liabilities, and the aggregate of the available balances in the insurance fund and the total value of all letters of credit referred to in sub-paragraph (a);
(ii)increase or procure that the Service Company increases, the available balances in the insurance fund by an amount not less than the difference between the claim liabilities, and the aggregate of such available balances and the total value of all letters of credit referred to in sub-paragraph (a); or
(iii)subject to paragraph (5), cancel all letters of credit referred to in sub-paragraph (a), and establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority, a letter of credit, the value of which shall be not less than the difference between the claim liabilities and the available balances in the insurance fund.
(5)  Any letter of credit required to be furnished to the Authority under paragraph (2)(ii) or (4)(iii) shall be so furnished before any letter of credit referred to in paragraph (2)(a) or (4)(a), as the case may be, is cancelled.
(6)  The Authority may call on any letter of credit furnished under paragraph (1), (2) or (4) in respect of a syndicate to satisfy any valid claim in respect of a policy issued under these Regulations, by a Service Company on behalf of that syndicate, which remains unpaid 30 days after the issue of a notice by the Authority under paragraph (7).
(7)  Before calling on a letter of credit furnished under paragraph (1), (2) or (4), the Authority shall give the administrator notice in writing of its intention to do so and identify in the notice the letter of credit which is intended to be called upon and the valid claim in respect of which the letter of credit is intended to be applied.
(8)  In this regulation, unless the context otherwise requires —
“available balances”, in relation to an insurance fund, means the aggregate amount of cash and deposits in the insurance fund which is not repatriated for the year of account and which is available to meet the claim liabilities of the syndicate concerned;
“letter of credit” means an irrevocable standby letter of credit issued in favour of the Authority by a bank licensed under the Banking Act (Cap. 19) in such form as the Authority may require;
“year of account” means the year to which a risk is allocated and to which all premiums and claims in respect of that risk are attributed, as determined by the calendar year in which the risk is written.”.