Who Is Motor Vehicles Insurance Limited (MVIL)?

Anyone injured on a Papua New Guinea road will deal with one organisation: Motor Vehicles Insurance Limited. Older judgments call it “the Trust” or “MVIT”; the Act calls it “the successor company”; everyone else calls it MVIL. These are the same scheme under three names, and the history explains some odd features of the current law.

The Motor Vehicles Insurance (PNG) Trust, 1974 to 1998

The original Act of 1974 created a statutory body, the Motor Vehicles Insurance (PNG) Trust, in Part II. It was not an ordinary insurer. The licensed insurance companies operating in the country were required to participate in a Motor Vehicles Insurance Fund, sharing the premiums and the losses through annual “pool accounts”. If the Fund ran a deficit, the Trust could call on the insurers to make it up; if it ran a surplus, the insurers shared it.

The arrangement broke down in the 1990s. The Motor Vehicles Insurance (PNG) Trust (Administrative Arrangements) Act 1996 records in its preamble that most licensed insurers wished to stop acting as “statutory underwriters” of the Trust, and that the uncertainty about who owned the accumulated surplus had to be resolved. The Act made a final distribution to the participating insurers of K21,600,000 in Class B shares in Pacific International Reinsurance Corporation, and repealed the provisions that had allowed the Trust to call on insurers for deficits or required it to distribute surpluses. From then on the Trust stood on its own premium income.

The companion Motor Vehicles (Third Party Insurance) (Amendment) Act 1996 reconstituted the Trust’s board and, in a new section 14(1A), gave the Trust power to incorporate companies under the Companies Act to carry out its functions. That was the seed of MVIL.

The successor company, 1998

Part XII of the Act, headed “Transfer of Undertaking of the Successor Company”, allowed the Minister to appoint a transfer date and nominate a company incorporated under the Companies Act as the successor company. On the transfer date all assets, liabilities, contracts, licences and pending proceedings of the Trust passed to that company (section 67), and the company was to be wholly owned by the State (section 66). The transfer took effect on 14 January 1998.

Section 71 then fixed the position for good: on and from 1 January 1999 Motor Vehicles Insurance Ltd, company registration number 1-29221, “is deemed to be, and to have been at all times on and from that date, the successor company”, and all claims arising from third party covers, whether before or after that date, are claims against MVIL. The same section records that MVIL had amalgamated with PNGBC Ltd and PNGBC Holding Co No 1 Ltd with effect from 31 December 1998, which is why the older banking group appears in the history. Part II of the Act, which created the Trust, was repealed.

The 2002 reform

The Compulsory Third Party Motor Vehicles Insurance Industry Act 2002 completed the transition. It vested the old Fund in MVIL as of 1 January 2002 (section 32), declared compulsory third party insurance a regulated industry under the Independent Consumer and Competition Commission Act 2002, and inserted Part V, which makes the ICCC the principal regulator and gives it power to take over MVIL’s operations if it breaches its licence (see who regulates MVIL). It also empowered the Privatization Commission to sell the shares in MVIL (section 69), and gave MVIL an exclusive right to provide compulsory third party insurance for five years from any privatisation (section 72(1A)). The privatisation never happened; the shares remained with the State’s holding bodies, and the long-running litigation between the Independent Public Business Corporation and MVIL over an “equity monetisation contract” — see Motor Vehicles Insurance Ltd v Nominees Niugini Ltd [2015] PGSC 22; SC1435 — concerned exactly that State shareholding.

Is MVIL “the State”?

For a claimant this question has a practical edge. In Gabriel v Motor Vehicle Insurance Ltd [2017] PGNC 122; N6777 the National Court traced this same history and held that MVIL is “the State” for the purposes of the Claims By and Against the State Act 1996, so that a judgment creditor could not garnishee its bank account. Timot v Motor Vehicles Insurance Ltd [2019] PGNC 408; N8088 reached the same conclusion, describing MVIL as a State entity wholly owned by the government and providing an essential service. The consequences for enforcing a judgment are discussed later in this series.

What MVIL does day to day

MVIL collects the third party premium when a vehicle is registered, directly in the Central Traffic Registry area and through agents elsewhere (section 49(1)); agents must remit what they collect monthly (section 36). It must keep at least K4,000,000 in cash with a licensed bank to meet claims, and a deposit with the Bank of Papua New Guinea of the greater of K100,000 or ten per cent of its net premium income (section 42). It receives the written notifications that owners and drivers must give after an accident (section 53), receives claimants’ notices of intention to claim (section 54(6)), investigates, settles or defends claims (section 58), and pays Basic Protection Compensation awards made against it (Chapter 296, section 20).