Cap. 16 Art. 1712MPledge of life insurance policy.

(1)Rights under an insurance policy may be pledged by the policyholder in favour of any person as security for any obligation. The pledge of a policy shall be constituted by means of an instrument in writing entered into between the pledgor and the pledgee.

(2) The said pledge shall be binding on the insurer and third parties and the privilege as provided in Title XXIII shall arise only after notice of the pledge shall have been given in writing by the pledgor or the pledgee to the insurer or the insurer shall have acknowledged the pledge in writing.

(3) During the existence of a pledge, any assignment of the policy shall be subject to the pledge in favour of the pledgee. The rights of a pledgee are however subject to the rights of a designated beneficiary who has accepted the designation prior to the pledge. When a pledge is granted, the insurer shall be bound to inform the pledgee of any prior rights notwithstanding any duty of confidentiality.

(4) Subject to any prior rights, the pledgee of an insurance policy shall enjoy all the rights of the policyholder to receive notices under the policy, to receive any proceeds of the policy, when due, on maturity or earlier surrender and the right to exercise all options of the pledgor under the policy, except the designation of a beneficiary, but shall not be liable for the performance of any obligations of the policyholder towards the insurer unless otherwise expressly agreed in writing.

(5) Without prejudice to the right of the pledgee to apply for the judicial sale of the policy and notwithstanding the provisions of this Code, in the event of a default under the agreement between the pledgor and the pledgee and upon giving notice by judicial act to the pledgor and the insurer, the pledgee shall be entitled to:

(i) dispose of the policy to a third party; or

(ii) appropriate and acquire the policy himself, in settlement of the debt due to him or of part thereof, or at the best achievable price being not less than the fair value.

(6) For the purpose of the preceding sub-article, the value of the policy may be established by agreement between the pledgor and the pledgee after notice of default has been given by the pledgor to the pledgee and no prior agreement shall be valid: Provided that, in case of disagreement, the fair value for the sale or appropriation of the policy shall be determined -

(a) by a certified public accountant appointed by the Court or an arbitrator, if so agreed by the parties, on the application of the pledgee; or

(b) in such other manner as may be expressly agreed between the parties: Provided that if the fair value cannot be obtained the pledgee can apply to the Court or the arbitrator for approval for a sale or appropriation at a price which is less than the fair value as aforesaid, subject to such conditions as the Court or arbitrator may determine.

(7) In cases where there is a surrender value of the policy, the pledgee may also give notice to the pledgor and insurer requesting the surrender of the policy and the payment of the surrender value to the pledgee. The surrender value shall be that established by the insurer in accordance with the terms of the policy and notified to the parties.

(8) For the purposes of sub-articles (7) and (8), the value of the policy shall be that obtaining on the date of the proposed sale, appropriation or surrender.

(9) Any proceeds of the policy which exceed the debt due to the pledgee shall be returned to the pledgor.

(10) It shall be lawful for a policyholder to enter into more than one pledge agreement in relation to the same policy and the rules stated in this article shall apply to a second and further policy in the same way as they apply to the first policy but a subsequent pledge shall rank subject to previous pledges and other prior rights. In such case, a subsequent pledge shall be conditional on the existence of the prior pledge and no rights shall be exercisable by the subsequent pledgee until such time as the prior pledgee’s rights have been satisfied and, or terminated.

Title XII

OF GAMING AND BETTING