MT
Regulations, 2000
Table of Provisions (88)
Statutory Text (88 Articles)
L.N. 102 of 2000
INSURANCE BUSINESS ACT
(CAP. 403)
Insurance Business (Companies Assets and Liabilities)
Regulations, 2000
IN exercise of the powers conferred by sections 11, 14, 16, 17, 18,
63 and 64 of the Insurance Business Act, the Minister of Finance, after
consultation with the Malta Financial Services Centre, has made the
following regulations:-
PART I - PRELIMINARY
(1) These regulations may be cited as the Insurance Business Citation and
(Companies Assets and Liabilities) Regulations, 2000.
commencement.
(2) These regulations shall come into force on the 1st
January, 2001.
(Regulation 8)
LONG TERM BUSINESS SOLVENCY MARGIN: FIRST AND SECOND
CALCULATIONS
1. In this Schedule-
"first calculation" and "second calculation" have the meaning given in
paragraph 2 of this Schedule.
Long term business classes I, II and IX
2. (1) For long term business of class I, II or IX the required margin of solvency
shall be determined by taking the aggregate of the results arrived at by applying the
calculation described in sub-paragraph (2) of this paragraph ("the first calculation")
and the calculation described in sub-paragraphs (3) to (6) of this paragraph ("the second
calculation").
(2)
For the first calculation -
(a) there shall be taken a sum equal to 4 per centum of the mathematical
reserves for direct business and reinsurance acceptances without any deduction
for reinsurance cessions,
(b) the amount of the mathematical reserves at the end of the last preceding
financial year after the deduction of reinsurance cessions shall be expressed as a
percentage of the amount of those mathematical reserves before any such
deduction, and
(c) the sum mentioned in indent (a) of this sub-paragraph shall be
multiplied -
(i) where the percentage arrived at under indent (b) of this sub-
paragraph is greater than 85 per centum (or, in the case of a pure reinsurer,
50 per centum), by that greater percentage, and
(ii) in any other case, by 85 per centum (or, in the case of a pure
reinsurer, 50 per centum).
(3)
For the second calculation-
(a)
there shall be taken, subject to sub-paragraphs (4) to (6) of this paragraph,
a sum equal to 0.3 per centum of the capital at risk for contracts on which the
capital at risk is not a negative figure,
(b) the amount of the capital at risk at the end of the last preceding financial
year for contracts on which the capital at risk is not a negative figure, after the
deduction of reinsurance cessions, shall be expressed as a percentage of the amount
of that capital at risk before any such deduction, and
(c) the sum arrived at under indent (a) of this sub-paragraph shall be
multiplied -
(i) where the percentage arrived at under indent (b) of this sub-
paragraph is greater than 50 per centum, by that greater percentage, and
(ii)
in any other case, by 50 per centum.
(4) Where, in a case other than that of a pure reinsurer, a contract provides
for benefits payable only on death within a specified period and is valid for a period of
not more than three years from the date when the contract was first made, the percentage
to be taken for the purposes of indent (a) of sub-paragraph (3) of this paragraph shall
be 0.1 per centum; and where the period of validity from that date is more than three
years but not more than five years, the percentage to be so taken shall be 0.15 per
(5) For the purposes of sub-paragraph (4) of this paragraph, the period of
validity of the contract evidencing a group policy is the period from the date when the
premium rates under the contract were last reviewed for which the premium rates are
guaranteed.
(6) In the case ofpure reinsurers, the percentage to be taken for the purposes
of indent (a) of sub-paragraph (3) of this paragraph shall be 0.1 per centum.
For the purposes of the second calculation, the capital at risk is -
(7)
(a) in any case in which an amount is payable in consequence of death
other than a case falling within indent (b) of this sub-paragraph, the amount payable
on death, and
(b) in any case in which the benefit under the contract in question consists
of the making, in consequence of death, of the payment of an annuity, payment of
a sum by instalments or any other kind of periodic payments, the present value of
that benefit,
less in either case the mathematical reserves in respect of the relevant contracts.
(8) When the amount of the mathematical reserves referred to in indent (a)
of sub-paragraph (2) of this paragraph, or the amount of the capital at risk referred to in
indent (a) of sub-paragraph (3) thereof, is to be calculated for the purposes of determining
the required margin of solvency, the day as on which that amount is calculated shall be
the same as that as on which the margin of solvency is determined; and the mathematical
reserves referred to in sub-paragraph (7) of this paragraph shall also be calculated as
on that day when the capital at risk in question is that referred to in indent (a) of sub-
paragraph (3) of this paragraph, but shall be calculated as at the end of the last preceding
financial year when the capital at risk in question is that referred to in indent (b) of sub-
paragraph (3) thereof.
Long term business classes III, VII and VIII
3. (1) For long term business of class TIl, VII or VITI the required margin of
solvency shall be determined in accordance with sub-paragraphs (2) to (5) of this
paragraph.
(2) In so far as an authorised company bears an investment risk, the first
calculation shall be applied.
(3)
In so far as-
(a)
an authorised company bears no investment risk, and
(b) the total expired and unexpired term of the relevant contract exceeds
five years, and
(c) the allocation to cover management expenses in the relevant contract
has a fixed upper limit which is effective as a limit for a period exceeding five
years,
the first calculation shall be applied, but as if indent (a) of sub-paragraph (2) of paragraph
2 of this Schedule contained a reference to 1 per centum instead of 4 per centum.
(4) If neither sub-paragraph (2) nor sub-paragraph (3) of this paragraph
applies, then, subject to sub-paragraph (5) of this paragraph, the required margin of
solvency is zero.
(5) Where an authorised company covers a death risk, a sum arrived at by
applying the second calculation (sub-paragraphs (4) and (5) of paragraph 2 of this
Schedule being disregarded) shall be added to any required margin of solvency, including
a required margin of solvency of zero, arrived at under sub-paragraph (2), (3) or (4) of
this paragraph.
Long term business classes IV and VI
4. For long term business of class IV or VI the required margin of solvency
shall be determined by applying the first calculation.
Long term business class V
5. For long term business of class V the required margin of solvency shall be
equal to 1 per centum of the assets of the relevant tontine.
(I)
In these regulations, unless the context otherwise Interpretation.
reqUlres-
"the Act" means the Insurance Business Act;
"the 1981 Act" means the Insurance Business Act, 1981 Cap. 290.
repealed by the Act;
"appointed date" shall be construed in accordance with
subsection (3) of section 69 of the Act;
"authorised company" means a company authorised under
section 7 of the Act to carry on business of insurance and "insurance
company" shall be construed accordingly;
"cede" and "cession", in relation to business of reinsurance,
include retrocede and retrocession;
"Central Bank of Malta" and "the Central Bank" mean the
Central Bank of Malta established by section 3 of the Central Bank
of Malta Act and includes any of its appointed agents;
"deposit back arrangement", in relation to any contract of
reinsurance, means an arrangement whereby an amount is deposited
by the reinsurer with the cedant;
"gross premiums", in relation to an authorised company and
a financial year -
(a) means premiums after deduction of discounts,
refunds and rebates of premium but before deduction of
premiums for reinsurance ceded and before deduction of
commission payable by the company, and
(b) includes premiums receivable by the company
under reinsurance contracts accepted by the company;
"hypothec" shall be construed in accordance with Sub-title II
of Title XXIII of the Civil Code;
"linked long term contract" means a contract of the kind
described in paragraph 2, Roman number III, of the Second
Schedule to the Act;
"Malta Financial Services Centre" and "the Centre" mean
the Malta Financial Services Centre established by section 3 of
the Malta Financial Services Centre Act and appointed under
section 3 of the Act to be the Competent Authority for the purposes
of the Act;
"Malta Stock Exchange" means the Malta Stock Exchange
established by section 3 of the Malta Stock Exchange Act;
"Maltese liri" means Maltese liri or their equivalent in other
currencies acceptable to the Centre;
"mathematical provisions" and "mathematical reserves" mean
the provision made by a company authorised to carry on long tenn
business to cover liabilities (excluding liabilities which have fallen
due and liabilities arising from deposit back arrangements) arising
under or in connection with contracts for long term business;
"mutual" means an insurance company which is a body
corporate having no share capital (except a wholly owned
subsidiary with no share capital but limited by guarantee);
"pure reinsurer" means -
(a) a company whose head office is in Malta and whose
business is restricted to business of reinsurance; and
(b) a company whose head office is in a country outside
Malta and whose business in or from Malta is restricted to
business of reinsurance;
"Registrar of Companies" means the person appointed under
subsection (1) of section 400 of the Companies Act, 1995;
"Schedule" means Schedule to these regulations;
"technical provisions" means the amount, net of the amount
recoverable by an authorised company under contracts of
reinsurance ceded by it (but excluding any rights of recovery in
respect of insurance liabilities already discharged by the company),
set aside by the company to meet its liabilities under or in
connection with contracts of insurance; and includes mathematical
provisions;
"undertaking" has the same meaning as is assigned to it by
subsection (1) of section 2 of the Companies Act, 1995;
"zone of countries" means a zone of countries as may be
detennined by an Insurance Directive made by the Centre by virtue
of sub-section (3) of section 4 of the Act for the purposes of any
provision of any regulation made under the Act,
and the words and expressions which are also used in the Act have the
same meanings as in the Act.
(2) In these regulations any reference to "long tenn fund or
funds" shall be deemed to be a reference to "technical provisions" which
an authorised company establishes and maintains under the Act in respect
of long tenn business.
PART II - MAINTENANCE OF ASSETS IN MALTA
(Regulation 8)
GENERAL BUSINESS SOLVENCY MARGIN: FIRST METHOD OF
CALCULATION
(PREMIUM BASIS)
In this Schedule-
1. "incepted" refers to the time when the liability to risk of a company under a
contract of insurance commenced and, for this purpose, a contract providing
continuous cover shall be deemed to commence on each anniversary date of the
contract;
"receivable", in relation to an authorised company, a financial year and a
premium, means due to the company in respect of contracts of insurance incepted
during that financial year, whether or not the premium is received during that
financial year;
"recoverable", in relation to an authorised company and a financial year,
means recorded in the company's books as due in that year, whether or not the
company has received any payment.
2. The gross premiums receivable in respect of the company's entire general
business for the last preceding financial year shall be aggregated.
3. From the aggregate arrived at under paragraph 2 of this Schedule there shall
be deducted -
(a)
any taxes included in the premiums mentioned in paragraph 2 of this Schedule,
(b) any levies that are related to premiums and are recorded in the company's
books as payable in the last preceding financial year in respect of general business.
4. The amount arrived at under paragraph 3 of this Schedule shall be multiplied
by twelve and divided by the number of months in the financial year.
5. If the amount arrived at under paragraph 4 of this Schedule is more than 5
million Maltese liri, it shall be divided into two portions, the former consisting of 5
million Maltese liri, and the latter comprising the excess.
6. Where there has been a division into two portions .pursuant to paragraph 5 of
this Schedule, there shall be calculated and added together 18 per centum and 16 per
centum of the two portions respectively; and where there has been no such division,
there shall be calculated 18 per centum of the amount arrived at under paragraph 4 of
this Schedule.
7. In the case of general business consisting of health insurance based on actuarial
principles, paragraph 6 of this Schedule shall apply with the substitution of "6 per
centum" for "18 per centum" and "5 1/3 per centum" for "16 per centum", but only if
all the necessary conditions are satisfied.
8. For the purposes of paragraph 7 of this Schedule, the necessary conditions
are the following -
(a) the gross premiums receivable shall be calculated on the basis of sickness
tables appropriate to business of insurance;
(b)
the reserves shall include provision for increasing age;
(c) an additional premium shall be collected in order to set up a safety
margin of an appropriate amount;
(d) it shall not be possible for the insurer to cancel the contract after the
end of the third year of insurance;
(e) the contract shall provide for the possibility of increasing premiums or
reducing payments during its currency.
9. Where paragraph 7 of this Schedule applies to a company whose general
business consists partly of health insurance based on actuarial principles and partly of
other business, the procedure provided in paragraphs 2 to 7 of this Schedule shall
operate separately for each part of the general business, so as to produce a sum under
paragraph 7 thereof for the health insurance and a sum under paragraph 6 thereof for
the other business.
10. (1) If the provision for claims outstanding at the end of the last preceding
financial year exceeds the provision for claims outstanding at the beginning of that
year, the amount of the excess shall be added to the amount of claims paid in the last
preceding financial year.
(2) If the provision for claims outstanding at the beginning of the last
preceding financial year exceeds the provision for claims outstanding at the end of that
year, the amount of the excess shall be deducted from the amount of claims paid in the
last preceding financial year.
11. (1) For the purposes of paragraph 10 ofthis Schedule, the amount ofclaims
paid, in relation to an authorised company and a financial year, is the amount that is
recorded in the company's books as at the end of the financial year-
(a) in relation to general business classes 1 to 17, as paid by it (whether or
not payment has been effected in that year) in full or partial settlement of the claims
described in sub-paragraph (2) of this paragraph and the expenses described in sub-
paragraph (3) thereof, or,
(b) in relation to general business class 18, as being the costs borne by the
company (whether or not borne in that year) in respect of the assistance given,
less (in either case) any recoverable amounts within the meaning of sub-paragraph (4)
of this paragraph.
(2) The claims mentioned in sub-paragraph (1) of this paragraph are claims
under contracts of insurance (and under contracts of reinsurance accepted by the
company) including claims relating to business accounted for over a longer period
than a financial year.
(3) The expenses mentioned in sub-paragraph (1) of this paragraph are
expenses (such as, for example, legal, medical, surveying or engineering costs) which
are incurred by the company, whether through the employment of its own staff or
otherwise, and are directly attributable to the settlement of individual claims, whether
or not the individual claims in question are those mentioned in that sub-paragraph.
(4) Recoverable amounts for the purposes of sub-paragraph (1) of this
paragraph are amounts recoverable by the company in respect of the claims mentioned
in that sub-paragraph or other claims, including amounts recoverable by way of salvage,
amounts recoverable from third parties and amounts recoverable from other insurers
but excluding amounts recoverable in respect of reinsurance ceded by the company
Provided that the exclusion of the amounts recoverable in respect of reinsurance ceded
does not apply to the Recognised Insurance Body known as Lloyd's.
12. (1) For the purposes of paragraph 10 of this Schedule, the provision for
claims outstanding, in relation to an authorised company and a financial year, is (subject
to any applicable valuation regulations) the amount set aside by the company as at the
beginning or end of the financial year as being an amount likely to be sufficient to
meet-
(a)
the claims described in sub-paragraph (2) of this paragraph, and
the expenses described in sub-paragraph (3) thereof,
(b)
less any recoverable amounts within the meaning of sub-paragraph (4) of this paragraph.
(2) The claims mentioned in sub-paragraph (1) of this paragraph are claims
under contracts of insurance (and under contracts of reinsurance accepted by the
company) in respect of incidents occurring -
(a) in the case of an amount set aside as at the beginning of the financial
year, before the beginning of that year, and
(b) in the case of an amount set aside as at the end of a financial year,
before the end of that year,
being claims which have not been treated as claims paid and including claims relating
to business accounted for over a longer period than a financial year, claims the amounts
of which have not been detennined and claims arising out of incidents that have not
been notified to the company.
(3) The expenses mentioned in sub-paragraph (1) of this paragraph are
expenses (such as, for example, legal, medical, surveying or engineering costs) which
are likely to be incurred by the company, whether through the employment of its own
staff or otherwise, and are directly attributable to the settlement of individual claims,
whether or not the individual claims in question are those mentioned in that sub-
paragraph.
(4) Recoverable amounts for the purposes of sub-paragraph (1) of this
paragraph are amounts estimated by the company to be recoverable by it in respect of
the claims mentioned in that sub-paragraph, including amounts recoverable by way of
salvage, amounts recoverable from third parties and amounts recoverable from other
insurers but excluding amounts recoverable in respect of reinsurance ceded by the
company
Provided that the exclusion of the amounts recoverable in respect of reinsurance ceded
does not apply to the Recognised Insurance Body known as Lloyd's.
13. From the amount detennined under sub-paragraph (1) or (2) of paragraph
10 of this Schedule there shall be deducted the total sum recoverable in respect of that
amount under reinsurance contracts ceded.
14. The amount determined under paragraph 13 of this Schedule shall be
expressed as a percentage of the amount determined under sub-paragraph (1) or (2) of
paragraph 10 of this Schedule.
15. The sum arrived at under paragraph 6 or 7 of this Schedule or the aggregate
of the sums arrived at under those paragraphs, as the case may be, shall be multiplied -
(a) where the percentage arrived at under paragraph 14 of this Schedule is
greater than 50 per centum but not greater than lOOper centum, by the percentage
so arrived at,
(b) where the percentage so arrived at is greater than 100 per centum, by
lOOper centum, and
(c)
in any other case, by 50 per centum.
TmRD SCHEDULE
(Regulation 8)
GENERAL BUSINESS SOLVENCY MARGIN: SECOND METHOD OF
CALCULATION
(CLAIMS BASIS)
1. In this Schedule "reference period", in relation to an authorised company,
means either -
(a)
the three last preceding financial years, or
(b) the seven last preceding financial years if more than one-half of the
gross premiums receivable in that period were in respect of all or any of the
following, namely, storm (as included in general business class 8), hail (as included
in general business class 9), frost (as included in general business class 9) and
credit (as included in general business class 14).
2. If a company has not been in existence long enough to acquire a reference
period, this Schedule shall be deemed to give a lower result than that given by the
Second Schedule and shall otherwise not apply to the company.
3. (1) If the provision for claims outstanding at the end of the reference period
exceeds the provision for claims outstanding at the beginning of the reference period,
the amount of the excess shall be added to the amount of claims paid in the reference
period.
(2) If the provision for claims outstanding at the beginning ofthe reference
period exceeds the provision for claims outstanding at the end of the reference period,
the amount of the excess shall be deducted from the amount of claims paid in the
reference period.
(3) For the purposes of this paragraph, the expressions "amount of claims
paid" and "provision for claims outstanding" have, in relation to a reference period,
the same meaning as they have in paragraph 10 of the Second Schedule in relation to a
financial year.
4. The aggregate obtained under sub-paragraph (1) or (2) of paragraph 3 of this
Schedule shall be divided by the number of months in the reference period and multiplied
by twelve.
5. If the amount arrived at under paragraph 4 of this Schedule is more than 3.5
million Maltese liri, it shall be divided into two portions, the fonner consisting of 3.5
million Maltese liri and the latter comprising the excess.
6. Where there has been a division into two portions pursuant to paragraph 5 of
this Schedule, there shall be calculated and added together 26 per centum and 23 per
centum of the two portions respectively; and where there has been no such division,
there shall be calculated 26 per centum of the amount arrived at under paragraph 4 of
this Schedule.
7. In the case of general business consisting of health insurance based on actuarial
principles, paragraph 6 of this Schedule shall apply with the substitution of "8 2/3 per
centum" for "26 per centum" and "7 2/3 per centum" for "23 per centum", but only if
all the necessary conditions are satisfied.
8. The necessary conditions for the purposes of paragraph 7 of this Schedule
are the same as those set out in paragraph 8 of the Second Schedule.
9. In a case of the kind mentioned in paragraph 9 of the Second Schedule, that
paragraph shall apply (with the necessary modifications) so as to produce separate
sums under paragraphs 6 and 7 of this Schedule.
10. The sum arrived at under paragraph 6 or 7 of this Schedule or the aggregate
of the sums arrived at under those paragraphs, as the case may be, shall be multiplied
by the same percentage as is applicable for the purposes of paragraph 15 of the Second
Schedule.
Pursuant to paragraph (b) of subsection (l) of section 10 of Mainten~ce
the Act, a company whose head office is in Malta applying for an ~:~~ ~e
:a
~uthorisation to c~ ~n,.or which is aut?orised to carry on, business of
msurance shall mamtam m Malta at all times during the continuance of in Malta.
the authorisation, as respects the business the company applies to carry
on, or is authorised to carry on, the amount of the guarantee fund which
the company is required to maintain under section 16 of the Act.
(Regulation 14)
MINIMUM GUARANTEE FUND
Long term business
1. Subject to paragraph 7 of this Schedule, the minimum guarantee fund for
long term business shall be -
(a)
in the case of a mutual, 300,000 Maltese liri.
(b)
in any case other than a mutual, 400,000 Maltese liri, and
General business
2. Subject to paragraphs 3 to 7 of this Schedule, the minimum guarantee fund
for general business shall be the amount shown in the table below as applicable to the
general business class for which the relevant company is authorised (or the highest
such amount if the company is authorised for more than one class).
Amount
General Business Class
200,000 Maltese liri
Class 10,11,12,13,14 or 15
150,000 Maltese liri
Class 1,2,3,4,5,6,7,8,16 or 18
100,000 Maltese liri
Class 9 or 17
3. In the case where the risks covered fall within class 14 of Part I of the Third
Schedule to the Act and where the annual amount of premiums or contributions of the
company due in respect of that class for each of the preceding three financial years
exceeded 1,250,000 Maltese liri or 4 per centum of the total amount of premiums or
contributions receivable by the company, for the amount of Maltese liri given in the
table in paragraph 2 of this Schedule there shall be substituted the amount of 700,000
Maltese liri.
4. Where a company carrying on credit insurance business is required to increase
the amount of Maltese liri pursuant to paragraph 3 of this Schedule, the company shall
have -
a period of three years in which to bring the fund up to 500,000 Maltese liri;
a period of five years to bring the fund up to 600,000 Maltese liri;
a period of seven years to bring the fund up to 700,000 Maltese liri;
such periods to run from the date on which the criteria set out in paragraph 3 of this
Schedule are fulfilled.
5. A company authorised for part of a class shall, for the purposes of paragraph
2 of this Schedule, be regarded as authorised for the whole of the class.
6. In the case of a mutual, the minimum guarantee fund required by paragraphs
2 to 5 of this Schedule shall be reduced by 25 per centum.
Long term business and general business
7. In relation to a Malta margin of solvency maintained under paragraph (b) of
subsection (2) of section 14 of the Act, the minimum guarantee fund for long term
business or general business shall be one-half of the amount arrived at by applying the
foregoing provisions of this Schedule.
FIFfH SCHEDULE
(Regulation 24)
PERSONS ACTING AS CUSTODIAN OF ASSETS
1. The persons listed in this Schedule shall act as custodian of assets for the
purposes of section 18 of the Act and hold in custody for companies' account assets of
a description specified and assigned to their exclusive custody in this Schedule.
2. (1) The Central Bank of Malta shall act as custodian of assets ofthe following
description -
(a) investments approved by the Centre listed or dealt in on a foreign stock
exchange or regulated market acceptable to the Centre; and
(b) currency deposits acceptable to the Centre in a bank or credit institution
of first class standing lawfully carrying on the business of banking in a country
outside Malta.
(2) Any document of title of assets of such description shall be made in the
name of the Central Bank of Malta for the account of the company and be deposited
with and held in custody by the Central Bank as custodian for the company.
3. (1) Any bank or credit institution lawfully carrying on the business of
banking in Malta shall act as custodian of assets consisting of currency deposits whether
such deposits are in Maltese lira or any other convertible currency.
(2) Any such deposits shall be made in the name of the Malta Financial
Services Centre for the account of the company.
4. For the purposes of this Schedule -
"bank" and "credit institution" have the meaning given in paragraph (2) of
regulation 6 of the regulations;
"convertible" has the meaning given in paragraph (2) of regulation 6 of the
regulations;
"deposit" has the meaning given in paragraph (2) of regulation 6 of the
regulations;
"regulated market" has the meaning given in paragraph (1) of regulation 48
of the regulations.
Pursuant to paragraph (c) of subsection (1) of section 11 of
the Act, a company whose head office is in a country outside Malta
applying for an authorisation to carry on, or which is authorised to carry
on, business of insurance shall maintain in Malta at all times during the
continuance of the authorisation, as respects the business the company
applies to carry on, or is authorised to carry on, in Malta, assets of an
amount mentioned in regulation 5 of these regulations.
(Regulation 36)
SCHEDULED CLASSES
Corresponding general
Scheduled class
business classes
1 Aviation
1 (d), 5, 11
1 (d), 6, 12
2 Marine
3 Property
4,8,9
(1) Where a company to which regulation 4 of these
regulations applies proposes to carry on, or carries on, in Malta, long
term business, the amount of assets which the company is required to
maintain in Malta in accordance with that regulation shall be of not less
than twenty-five per centum and not more than seventy-five per centum
as the Centre may, from time to time, either generally or specifically,
determine of -
(a) in the case of a company which proposes to carry on
that business, the gross premiums estimated to be written by the
company in Malta in the first twelve months in the scheme of
operations relating to that business submitted by the company;
(b)
in the case of a company which carries on that business
(i) the gross premiums written by the company in Malta
as regards that business with respect to the immediately
preceding financial year, or
(ii) the mathematical provisions with respect to that
business written by the company in Malta as at the close of
the immediately preceding financial year
whichever is the greater amount.
(2) Where a company as aforesaid applies to carry on, or
carries on, in Malta, general business, the amount of assets which the
company is required to maintain in Malta in accordance with regulation
4 of these regulations shall be of -
(a) in the case of a company which proposes to carry on
that business, not less than forty per centum of the gross premiums
estimated to be written by the company in Malta in the first twelve
months in the scheme of operations relating to that business
submitted by the company;
(b) in the case of a company other than the Recognised
Insurance Body known as Lloyd's which carries on that business
(i) not less than the amount ofthe company's provision
for unearned premiums with respect to that business written
by the company in Malta, or
(ii) not less than forty per centum of the gross
premiums written by the company in Malta as regards that
business with respect to the immediately preceding financial
year
whichever is the greater amount;
(c) in the case of the Recognised Insurance Body known as
Lloyd's which carries on that business, not less than forty per
centum of the gross premiums written by Lloyd's in Malta as
regards that business with respect to the immediately preceding
financial year.
(3) For the purposes of paragraph (2) of this regulation,
"provision for unearned premiums", in relation to general business, shall
comprise the amount representing that part of gross premiums written
which is estimated to be earned in the following financial year or any
subsequent financial years.
(4) Any amount of assets required by any provision of this
regulation to be maintained in Malta for the purposes of regulation 4 of
these regulations shall be of not less than the amount of the appropriate
guarantee fund which a company is required to maintain in Malta under
subsection (1) of section 16 of the Act.
(Regulation 41)
METHODS OF CALCULATING THE EQUALISATION RESERVE
PART I
Methods of calculating transfers in
1. Amounts to be transferred to the equalisation reserve at the end of a financial
year shall be calculated in accordance with paragraphs 2 to 3 of this Schedule.
2. For business falling within a business group, the amount to be transferred to
the equalisation reserve shall be the percentage specified in the table contained in
paragraph 3 of this Schedule of net premiums written in that financial year including
adjustments in respect of all previous financial years in respect of that business.
3. The table referred to in paragraph 2 of this Schedule is as follows
Business group
Percentage of net premiums written
3%
A
3%
B
c
6%
D
75%
E
11%
PART II
Methods of calculating transfers out
4. Amounts to be transferred from the equalisation reserve at the end of a fmancial
year shall be calculated in accordance with paragraphs 5 to 9 of this Schedule.
5. The company shall determine the amount (the "abnormal loss"), if any, by
which net claims paid plus the increase (or less the decrease) in the net technical
provisions (exclusive of any change in claims handling expenses and any equalisation
reserve) in that financial year plus adjustments in respect of all previous fmancial
years in respect of that business exceed the percentage specified in the table contained
in paragraph 7 of this Schedule of net premiums written in that financial year plus
adjustments in respect of all previous financial years in respect of that business.
6. For the purposes of paragraph 5 of this Schedule, if net premiums earned or
net premiums written, as the case may be, in respect of any business in any financial
year are negative, their value shall be deemed to be zero for the purposes of calculating
the abnormal loss in respect of that business.
7. The table referred to in paragraph 5 of this Schedule is as follows
Business group Percentage of net premiums
earned/written
A
72.5%
B
72.5%
c
95%
D
25%
E
100%
8. The abnormal loss for each business group shall be aggregated and shall,
subject to paragraph 9 of this Schedule, be the amount to be transferred from the
equalisation reserve.
9. If the abnormal loss in respect of any business group pursuant to paragraph 8
of this Schedule exceeds the relevant business group maximum at that date, the loss to
be aggregated in respect of that business group shall be the business group maximum.
PART III
Method of calculating business group maximum
10. The maximum reserve applicable to a business group (the "business group
maximum") at the end of a financial year shall be calculated in accordance with
paragraph 11 of this Schedule.
11. (1) The business group maximum at the end of a financial year shall be
the percentage specified in the following table of average net premiums written in
respect of that business group
Business group
Percentage of average net premiums
written
A
20%
B
20%
C
40%
D
600%
E
75%
(2) For the purposes of sub-paragraph (1) of this paragraph, the "average
net premiums written" in respect of a business group means -
(a) in the case of a company which has carried on business falling within
that business group for no less that five [mancial years, the average amount of net
premiums written in respect of that business in a [mancial year, calculated on the
basis of the last financial year and the previous four financial years;
(b) in the case of a company which has carried on business falling within
that business group for less than five financial years, the average amount of net
premiums written in respect of that business in a financial year, calculated on the
basis of the last financial year and any previous financial years ending on or after
the appointed date.
(3) For the purposes of sub-paragraph (2) of this paragraph, if any of the
financial years which the company is required to take into account for the calculation
of average net premiums written is an accounting period of more or of. less than a
period of twelve months, pursuant to subsection (3) of section 164 of the Companies
Act, 1995, the value of net premiums written in that financial year shall be the amount
represented by the formula -
NPW x 365
d
where-
NPW means net premiums written in the financial year concerned; and
d means the number of days falling in that financial year.
Method of calculating the maximum reserve
12. The maximum reserve at the end of a financial year shall be the aggregate
value of the business group maxima as calculated in accordance with paragraph 11 of
this Schedule.
PART IV
Method of calculating business group alternative maximum
13. (1) The alternative maximum reserve applicable to a business group (the
"business group alternative maximum") at the end of a financial year shall be calculated
in accordance with paragraph 11 of this Schedule subject to the following modification.
(2)
In sub-paragraph (1) thereof -
(a) reference to "business group maximum" shall be deemed to be a
reference to "business group alternative maximum"; and
(b) the table of percentage of average net premiums written contained
therein shall be substituted with the following table
Business Group
Percentage of average net
premiums written
A
40%
B
40%
c
80%
D
600%
E
100%
Method of calculating the alternative maximum reserve
14. The alternative maximum reserve at the end of a financial year shall be the
aggregate value of the business group alternative maxima as calculated in accordance
with paragraph 11 of this Schedule as modified by paragraph 13 thereof.
(1) The assets mentioned in regulations 3 and 4 of these Kind of assets
regulations shall be assets of the following kind and shall be treated to to in be
be assets of that kind only if they satisfy the conditions applicable to
assets of that kind -
(a) an asset consisting of an approved security where the
issuer is established in Malta or a country falling within the zone
of countries if the security is in the name of, and held in custody
for the company's account by, the Central Bank of Malta;
(b) an asset consisting of a currency deposit in Maltese lira
or any convertible foreign currency with a bank or credit institution
lawfully carrying on the business of banking in Malta ifthe deposit
is in the name of the Malta Financial Services Centre for the
company's account or pledged by the company concerned in favour
of the Malta Financial Services Centre and the document
constituting the pledge is delivered to the Centre;
(c) an asset consisting of a currency deposit in Maltese lira
or any convertible foreign currency with a foreign bank or credit
institution of fIrst class standing lawfully permitted in the country
where the deposit is held to carry on the business of banking
acceptable to the Centre if the deposit is in the name of the Central
Bank of Malta for the company's account;
(d) an asset consisting of a listed investment on the Malta
Stock Exchange, if the investment is pledged in favour of the Malta
Financial Services Centre and the document constituting the pledge
is registered by the company concerned with the Central Securities
Depository of the Malta Stock Exchange and delivered to the
Centre.
(2)
For the purpose of paragraph (1) of this regulation -
"approved security" has the same meaning as in
paragraph (1) of regulation 48 of these regulations;
"bank" and "credit institution", in relation to local
currency deposits, have the same meaning as is assigned to
them by subsection (1) of section 2 of the Banking Act, 1994;
"convertible", in relation to any currency, has the same
meaning as is assigned to it by section 2 of the Central Bank
of Malta Act;
"deposit", in relation to any currency, has the same
meaning as is assigned to it by subsection (1) of section 2 of
the Banking Act, 1994.
PART III - MARGINS OF SOLVENCY
(Regulation 47)
METHOD OF CALCULATING THE EQUALISATION
RESERVE FOR CREDIT INSURANCE BUSINESS
1. The company shall maintain a credit insurance equalisation reserve to which
shall be charged, at the end of each financial year, any technical deficit arising in
respect of credit insurance business during that financial year.
2. Subject to paragraph 4 of this Schedule, such reserve shall at the end of each
financial year receive seventy-five per centum of any technical surplus arising in respect
of credit insurance business, subject to a limit of twelve per centum of net premiums
written during that financial year until the reserve has reached one hundred and fifty
per centum of the highest annual amount of net premiums written during the previous
five financial years.
3. For the purposes of this Schedule, technical surplus or technical deficit in
respect of credit insurance business for a financial year means the amount by which
the aggregate of net premiums written and other technical income exceeds, or falls
short of, net claims paid plus the increase (or less the decrease) in the net technical
provisions (exclusive of any change in the credit insurance equalisation reserve) and
net operating expenses.
4. In determining any technical surplus referred to in paragraph 2 of this Schedule
the calculation shall be made before tax and before any transfer to or from the credit
insurance equalisation reserve. Investment income shall not be included in these
calculations.
In this Part of these regulations -
"implicit items" has the meaning given by paragraph (5) of
regulation 9 of these regulations and "implicit item" shall be
construed accordingly;
"required margin of solvency" means a margin of solvency
required by section 14 of the Act;
"zillmerising" means the method known by that name for
modifying the net premium reserve method of valuing a long term
business policy by increasing the part of the future premiums for
which credit is taken so as to allow for initial expenses.
(Regulation 51)
VALUE OF DEPENDANTS
PART I
THE SUPPLEMENTARY AMOUNT
1. Subject to sub-paragraph (1) of paragraph 2 of this Schedule, the
supplementary amount in relation to assets of a relevant description held by a dependant
of the insurance company shall be determined in accordance with the following formula
A=BxD
C
in which-
A
is the supplementary amount;
B is the amount by which the value of assets of that description held by the
dependant, excluding any long term business assets of the dependant if it is an
insurance company, exceeds the permitted limit applicable to the dependant in
relation to those assets;
C is the aggregate of the amount specified in B above and of the amounts
by which the value of assets of the same description, held by other relevant
dependants, excluding any long term business assets of a dependant which is an
insurance company, exceeds respectively the permitted limits applicable to such
other relevant dependants in relation to those assets;
D
is-
(a) where the insurance company holds no assets of the same
description of the relevant class, the amount of the permitted limit that would
be applicable to the insurance company in relation to such assets were it to
hold them; and
(b) where the insurance company holds assets of the same description
of the relevant class, the amount by which the permitted limit applicable to
the insurance company in relation to those assets exceeds the value of those
assets.
2. (1) Where for the purpose of determining any supplementary amount in
accordance with paragraph 1 of this Schedule the insurance company cannot reasonably
(a)
the value of any asset of a relevant dependant, or
(b) the amount of the permitted limit applicable in relation to any asset of
a relevant dependant,
the asset in question shall be left out of account for that purpose.
In this Part of this Schedule -
(2)
"relevant dependant" means -
(a) where this Schedule is being applied in relation to the
determination of the value of a share in, or debt due or to become due
from, a dependant of the insurance company which is a long term
business asset of the insurance company, any dependant of the insurance
company
(i) a share in which, or in any company of which it is a
dependant, is a long term business asset of the insurance company,
or
(ii) from which a debt is due, or will become due, to the
insurance company which is a long term business asset of that
company; and
(b)
in any other case, any dependant of the insurance company
(i) a share in which, or in any company of which it is a dependant, is
a general business asset of the insurance company, or
(ii) from which a debt is due, or will become due, to the insurance
company which is a general business asset of that company.
PART II
FURTHER PROVISIONS AND MODIFICATIONS OF THE REGULATIONS
APPLICABLE WITH RESPECT TO THE DETERMINATION OF THE
VALUE OF DEPENDANTS
3. (1) This paragraph applies where, for the purpose of ascertaining the value
of the assets of the subject company under regulation 51 of the regulations, any
determination falls to be made in accordance with the said regulation 51 of the value of
the assets of a dependant of the insurance company, a share in which, or a debt due or
to become due from which, is an asset of the subject company; and references herein to
a determination of the value of assets of a dependant to which this paragraph applies
are references to any such determination.
(2) Paragraph (4) of the said regulation 51 shall not apply with respect to a
determination of the value of assets of a dependant to which this paragraph applies.
(3) Where, in the case of a determination of the value of assets of a
dependant to which this paragraph applies -
(a) the dependant is an insurance company and has general business assets
of a relevant description or is not an insurance company and has assets of a relevant
description,
(b) the value of such assets exceeds the permitted limit applicable to the
dependant in relation to those assets, and
(c) any controller ofthe dependant has no assets of the same description of
the relevant class, or has assets of the same description of the relevant class and
their value is less than the permitted limit applicable to that controller in relation
to those assets,
then, for the purposes of such determination, there shall be added to the permitted limit
applicable to the dependant in relation to the assets referred to in indent (a) ofthis sub-
paragraph, an amount equal to the supplementary amount or, if there is more than one
such controller, to the aggregate ofthe supplementary amounts, determined with respect
to any such controller in accordance with Part I of this Schedule, subject, where the
controller is not the insurance company, to the modifications specified in sub-paragraph
(5) of this paragraph.
(4)
In this paragraph, "a controller" means, in relation to a dependant -
(a)
the insurance company,
(b)
the subject company, if it is an insurance company, and
(c) a dependant of the insurance company which is an insurance company
and of which the subject company is a dependant.
(5) Where sub-paragraph (3) of this paragraph is being applied in relation
to a controller, other than the insurance company -
(a) Part I of this Schedule, as applied in accordance with the said sub-
paragraph (3), shall have effect as if, for the reference to the insurance company,
there were substituted references to the controller, and
(b) the references to assets being of a relevant class in the said sub-paragraph
(3) and in Part I of this Schedule, as so applied, shall be construed as referring to
long term business assets of the controller, if the said sub-paragraph (3) is being
applied in connection with the determination of the value of a long term business
assets of the controller, and to general business assets of the controller, in any
other case.
4. The modifications of these regulations applicable (in addition to that specified
in sub-paragraph (2) of paragraph 3 of this Part of this Schedule) with respect to the
determination of the value of the assets of the subject company where it is not an
insurance company are as follows -
(a) these regulations shall apply to the subject company as if it were an
insurance company and its assets were being valued for the purpose specified in
paragraph (1) ofregulation 49 of the regulations;
(b)
paragraph (2) of regulation 49 of the regulations shall not apply; and
(c)
regulation 61 of the regulations shall not apply.
5. In this Schedule, "subject company" means the dependant of the insurance
company the value of whose assets is being determined in accordance with paragraph
(2) or (3) (as the case may be) of regulation 51 of the regulations.
(1) Subject to paragraphs (2) to (5) of this regulation, the Dete~ationof
margin of solvency to be maintained by an authorised company shall =::y~f
be determined -
(a) as regards long term business, in accordance with the
provisions of the First Schedule, and
(b) as regards general business, by taking the greater of the
two sums resulting from the application of the two methods of
calculation set out in the Second and Third Schedules respectively.
(2) Where an authorised company is required to maintain
a Malta margin of solvency, the Malta margin of solvency shall be
determined by applying paragraph (1) of this regulation, but only to
business carried on in Malta.
.
(3) For a contract to which subsection (3) of section 5 of
the Act applies, the required margin of solvency shall be determined by
taking the aggregate of the results arrived at by applying -
(a) in the case of so much of the contract as is within any
class of long term business, the appropriate method of calculation
set out in the First Schedule for that class, and
(b) in the case of so much of the contract as is within general
business class 1 or 2, the method of calculation set out in the Second
Schedule (excluding paragraphs 7,8 and 9).
(4) Where an authorised company carries on long term
business and owing to the nature of that business more than one margin
of solvency is produced in respect of that business by the operation of
this Part of these regulations, the margins in question shall be aggregated
as regards the company in order to arrive at t~e company's required
margin of solvency for long term business.
(5) Where an authorised company carries on both long term
business and general business and is accordingly required to maintain
separate margins of solvency in respect of the two kinds of business -
(a) these regulations shall apply for determining the margin
of solvency for each kind of business separately, and
(b) assets other than those representing the fund or funds
maintained by the company in respect of its long term business, if
they are not included among the assets covering the liabilities and
the margin of solvency relating to the company's general business,
may be included among the assets taken into account in covering
the liabilities and the margin of solvency for the company's long
term business.
(6) Notwithstanding anything contained in the foregoing
paragraphs of this regulation, in the case of a company whose head
office is in a country outside Malta, the margin of solvency to be
maintained by the authorised company shall be determined as respects
long term business and general business in accordance with the
provisions of the law or regulations of the country of its head office
governing the margins of solvency of insurance companies and that
determination shall, for the purposes of this Part of these regulations,
be deemed to have been determined by this regulation provided that the
Centre is satisfied that such provisions do not materially detract from,
or are otherwise as prudent as, the main objects of the provisions of this
Part of these regulations and the company produceS annually to the
Centre a certificate of solvency issued by the overseas regulatory
authority of that country.
(Regulation 61)
ASSETS TO BE TAKEN INTO ACCOUNT ONLY TO A SPECIFIED
EXTENT
PART I
EXCESS EXPOSURE: METHOD OF CALCULATION
1. Unless the context otherwise requires, words and expressions contained in
this Schedule bear the same meaning as in Parts IX and X of the regulations.
2. For the purposes of this Schedule -
"business amount" means -
(a) for a company carrying on only general business, the general
business amount;
(b) for a company carrying on only long tenn business, the long tenn
business amount;
(c) for a company carrying on both general business and long tenn
business, in the case of its general business assets, the general business amount
and in the case of its long tenn business assets, the long tenn business amount.
"connected company" of any company means -
(a)
that company's holding company;
(b)
a subsidiary of that company;
(c)
a subsidiary of the holding company of that company.
"counterparty" in relation to a company means -
(a)
anyone individual;
(b)
anyone unincorporated body of persons;
(c)
anyone company not being a member of a group;
(d) any group of companies excluding any companies within the group
which are dependants of the insurance company; or
(e) any government of a state as the Centre may, from time to time, either
generally or specifically, approve for such purpose together with all the public
bodies, local authorities or nationalised industries of that state,
in which the insurance company has made investments or against whom it has rights
whether in pursuance of a contract entered into by the insurance company or otherwise;
and reference to dealings with or by a counterparty includes dealings with or by any
person or body of persons included within the definition of counterparty;
"counterparty exposure" shall be determined in accordance with paragraph
13 of this Part of this Schedule;
"debts due or to become due" includes any debts which would become due
if the insurance company were to exercise any right to which it is entitled to
require payment or repayment of the same;
"diversified contract for differences" means a contract for differences whose
value does not depend to a significant extent on fluctuations in the value of, or
income from, assets or any of the descriptions in paragraphs 1 to 9, 11 or 13 to 19
of Part II of this Schedule and "undiversified contract for differences" shall be
construed accordingly;
"excess concentration with a number of counterparties" shall be determined
in accordance with paragraph 17 of this Part of this Schedule;
"general business amount" means the aggregate of the company's insurance
liabilities (net of reinsurance) in respect of general business and an amount equal
to whichever is the greater of 200,000 Maltese liri or 20 per centum of the general
premium income;
"group" has the same meaning as is assigned to the term "group company"
in subsection (l) of section 2 of the Companies Act, 1995.
"hybrid security" means a debt security, other than an approved security, the
terms of which provide, or have the effect that, or contain an option which if
exercised by the issuer would have the effect that the holder does not or would
not have an unconditional entitlement to payment of interest and repayment of
capital in full within seventy-five years of the relevant date;
"index linked liabilities" means insurance liabilities in respect of index linked
benefits;
"insurance liabilities" means amounts calculated in accordance with Part X
of the regulations in respect of those items shown at C and D under the heading
"Liabilities" listed in the balance sheet format set out immediately following
paragraph 15 of the First Schedule to the Insurance Business (Companies Accounts)
Regulations, 2000;
"long term business amount" means the amount of the company's insurance
liabilities in respect of long term business (net of reinsurance ceded and excluding
property linked liabilities), together with-
(a) the amount of the required margin of solvency determined in
accordance with the First Schedule to the regulations (or the amount of the
minimum gurantee fund if greater determined in accordance with regultion
14 of, and the Fourth Schedule to, the regulations) less the amount of any
implicit item valued in accordance with regulations 10 to 12 (or regulation
15) of the regulations; and
(b) the amount of any deposit-back in connection with a contract of
reinsurance in respect of long term business,
save that for the purposes of assessing compliance with the permitted asset exposure
limit, it shall further exclude index linked liabilities;
"permitted asset exposure limit" has the meaning set out in paragraph 3 of
this Part of this Schedule;
"permitted counterparty exposure limit" has the meaning set out in paragraph
4 of this Part of this Schedule;
"property linked liabilities" means insurance liabilities in respect of property
linked benefits;
"readily realisable" in relation to a listed investment means a listed investment
to which paragraph (3) of regulation 55 of the regulations either does not apply or
applies by reason only that -
(a) the listing of the investment has been temporarily suspended
following receipt of price sensitive information by the stock exchange on
which the investment is listed or the regulated market on which facilities for
dealing have been granted; or
(b) the extend of the holding would prevent an orderly disposal of the
investment for an amount equal to or greater than 97.5 per cent of the market
value;
"short term deposit" means a sum of money which may be withdrawn at the
discretion of the lender without penalty or loss of accrued interest by giving notice
of withdrawal of one month or less.
3. The permitted asset exposure limit for assets of any of the descriptions in any
paragraph of Part II of this Schedule is the percentage of the business amount set out
immediately below that paragraph. In the case of an asset which is not covered by any
of the descriptions in Part II of this Schedule (other than a derivative contract) the
permitted asset exposure limit is nil.
4. The permitted counterparty exposure limit is-
(a) where the counterparty is an individual or an unincorporated body of
persons, 5 per centum of the business amount;
(b) where the counterparty is a counterparty of the type mentioned in sub-
paragraph (e) in the definition of counterparty, 5 per centum of the business amount;
(c)
where the counterparty is a body corporate or group, each of
(i)
20 per centum of the business amount;
(ii) 10 per centum of the business amount or such lower amount as the
company may decide where the exposure arises other than by reason that
debts are due or to become due as a result of short term deposits made with
an approved credit institution;
(iii) 5 per centum of the business amount where the exposure is other
than to bodies which are approved counterparties.
Calculation of exposure to assets
5. A value shall be ascribed to assets of each description which shall be an amount
determined in accordance with the provisions of Part IX of the regulations, or where
the assets are of a description for the valuation of which no provision is made in Part IX
of the regulations, an amount which would reasonably be paid by way of consideration
for an immediate assignment or transfer of such assets. The amount by which the
company is exposed to assets of each description shall be determined by adjusting the
value of the assets in accordance with paragraphs 6 to 11 of this Part of this Schedule.
Adjustments in respect of futures contracts
6. The figure arrived at under paragraph 5 of this Part of this Schedule in respect
of assets of each description shall be increased or decreased by the value of assets of
that description which the company is deemed to have acquired or disposed of pursuant
to a futures contract.
7. For the purposes of paragraph 6 of this Part of this Schedule, the company
shall be deemed to have acquired or disposed of assets pursuant to a futures contract if,
at the relevant date, it has entered into (and not closed out) a futures contract which-
(a)
provides for the acquisition of assets by that company; or
(b)
is listed and provides for the disposal of assets by the company; or
(c) is not listed but provides for the disposal of assets by the company to
an approved counterparty and it is prudent to assume that such disposal will take
place within one year of the relevant date.
Adjustments in respect of options
8. The figure arrived at under paragraphs 5 to 7 of this Part of this Schedule in
respect of assets of each description shall be increased or decreased by the value of
assets of that description which the company is deemed to have acquired or disposed
of pursuant to an option.
9. For the purposes of paragraph 8 of this Part of this Schedule, the company
shall be deemed to have acquired or disposed of assets pursuant to an option if, at the
relevant date, it is a party to an option and it is prudent to assume that the option will be
exercised and the option is one which -
provides for the acquisition of assets by the company; or
(a)
(b)
is listed and provides for the disposal of assets by the company; or
(c) is not listed but provides for the disposal of assets by the company to
an approved counterparty and it is prudent to assume that such disposal will take
place within one year of the relevant date.
Adjustments in respect of initial margins
9A. The figure arrived at under paragraphs 5 to 9 of this Part ofthis Schedule in
respect of assets of each description shall be increased by an amount representing the
value of any assets of that description which have been transferred by the company by
way of initial margin.
Adjustments in respect of an undiversified contract for differences or a
contract or asset having the effect of a derivative contract
10. The amount arrived at in accordance with paragraphs 6 to 9A of this Part of
this Schedule shall be increased or decreased by an amount representing the value of
assets which the company is deemed to have acquired or disposed of under -
(a)
an undiversified contract for differences; or
(b) a contract or asset other than a diversified contract for differences which
has the effect of a derivative contract.
11. For the purposes of paragraph 10 of this Part of this Schedule, the company
shall be deemed to have achieved the effect of such contract by entering into appropriate
futures contracts or options. The assets deemed to be acquired or disposed of shall be
dealt with in accordance with the provisions in paragraphs 6 and 8 respectively.
Excess asset exposure
12. The amount by which the company is exposed to assets of a particular
description in excess of the permitted asset exposure limit shall be calculated by
subtracting the permitted asset exposure limit for assets of that description from the
corresponding amount of the exposure, calculated in accordance with paragraphs 5 to
11 of this Part of this Schedule. For this purpose, exposure to assets shall be excluded
to the extent that such exposure has caused the recognition of excess exposure to assets
of a different description. If the figure arrived at is negative, it shall be taken to be
zero.
Calculation of exposure to a counterparty
13. Subject to paragraphs 14 and 15 ofthis Part of this Schedule, the value of all
investments (determined in accordance with regulation 55 of the regulations) issued
by anyone counterparty and the value of all rights (determined in accordance with
regulations 52, 59 and 60 of the regulations) against that counterparty, in each case up
to the amount of the appropriate permitted asset exposure limit, shall be aggregated.
Where the counterparty is an issuer of a collective investment scheme falling within
sub-paragraph (c) of paragraph (1) of regulation 56 of the regulations, the value of
units or other beneficial interest in the collective investment scheme shall be included.
14. Where an insurance company has rights in respect of an obligation to be
fulfilled by a counterparty and -
(a)
the obligation is a secured obligation which
(i) is secured by cash deposited with, or a letter of credit established
with, or securities issued by, or a guarantee provided by, an approved credit
institution or an approved financial institution; and
(ii)
is due to be fulfilled within 12 months of the relevant date; or
(b) the obligation is a secured obligation which is secured by listed securities
which are readily realisable or by approved securities which in either case
(i) have been deposited with an approved credit institution or an
approved financial institution; and
(ii) are beneficially owned by the counterparty but will not be available
for the benefit of creditors generally in the event of the winding-up of the
counterparty,
the aggregation required by paragraph 13 ofthis Part of this Schedule need not include
the value of such rights.
15. If the insurance company has liabilities to the counterparty which may be
offset against the above-mentioned assets in accordance with generally accepted
accounting concepts, bases and policies or other generally accepted methods appropriate
for insurance companies, then, such liabilities may be offset for the purposes of the
aggregation required by paragraph 13 of this Part of this Schedule.
Excess counterparty exposure
16. The amount by which the company is exposed to a counterparty in excess
of the permitted counterparty exposure limit shall be calculated by subtracting from
the amount of the exposure to such counterparty the amount of the permitted
counterparty exposure limit for such counterparty. If the figure arrived at is negative,
it shall be taken to be zero. If the company is exposed to a counterparty in excess of
the permitted counterparty exposure limit in more than one of the circumstances set
out in sub-paragraph (c) of paragraph 4 of this Part of this Schedule, it shall make the
deduction required under sub-paragraph (b) of paragraph (1) of regulation 61 of the
regulations only in respect of the circumstances leading to the greatest excess exposure.
Excess concentration with a number of counterparties
17. Where there is exposure to a counterparty of the type mentioned in indent
(ii) of sub-paragraph (2) of paragraph 4 of this Part of this Schedule, 40 per centum of
the business amount shall be deducted from the aggregate of such exposures. The
amount so arrived at shall be the excess concentration with a number of counterparties.
Where this amount is negative it shall be taken to be zero. For the purposes of this
paragraph -
(a) exposure to a counterparty shall be taken into account only up to the
level of the permitted counterparty exposure limit for that counterparty; and
(b) exposure to a counterparty shall not be taken into account if it does not
exceed 5 per centum of the business amount; and
(c) exposure to a counterparty shall not be taken into account if the
corresponding permitted counterparty exposure limit does not exceed 5 per centum
of the business amount.
PART II
DESCRIPTION OF ASSET AND CORRESPONDING BUSINESS AMOUNT
1. A piece of land or a number of pieces of land (or an interest in such pieces of
land) to which in the most recent proper valuation of such pieces of land an aggregate
value is ascribed which is greater than the value of each of such pieces of land valued
separately -
(a)
in the case of general business amount
(i)
value of a piece of land
10%
(ii)
aggregate value of a number of pieces of land
20%
(b)
in the case of long term business amount
(i)
value of a piece of land
10%
aggregate value of a number of pieces of land
(ii)
30%
1 A. A reversionary interest or a remainder not falling within paragraph 1 of this
1 %
Part of this Schedule
2. All debts due or to become due from anyone individual being debts which
are fully secured on any dwelling or any land appurtenant thereto owned or to be
purchased by the individual and used or to be used by him for his own residence 1%
3. All debts due or to become due from an individual, other than debts specified
in paragraph 2 of this Part of this Schedule
1/4 %
4. All unsecured debts (other than debts arising under the terms of debt securities
or debts from a regulated institution) due or to become due from anyone counterparty
other than an individual, body corporate or group
1 %
5. All unsecured debts (other than debts arising under the terms of debt securities
or debts from a regulated institution) due or to become due from anyone company,
taken together with all such debts due or to become due from a connected company of
that company
1 %
6. All unsecured debts (other than debts arising under the terms of debt securities
or debts from an approved counterparty) due or to become due from anyone regulated
institution, taken together with all such debts due or to become due from a connected
2 1 12%
company of that institution
7. All debts, other than debts arising under the terms of debt securities, due or
to become due from anyone counterparty which is not an approved counterparty taken
together with all such debts due or to become due from any connected company (other
than an approved counterparty) of that counterparty
10%
8. All debts, other than short-term deposits with an approved credit institution
or debts arising under the terms of debt securities, due or to become due from anyone
approved counterparty, taken together with all such debts due or to become due from
any connected company of that approved counterparty
15%
9. All debts due or to become due from an approved credit institution (or a
connected company of that institution) taken together
30%
10. The aggregate of debts of the descriptions in paragraphs 3,4 and 5 of this
Part of this Schedule
5%
11. All investments of a kind which may be valued in accordance with regulation
55 of the regulations (other than secured debt securities, debt securities (other than
hybrid securities) issued by a regulated institution or investments which are listed and
readily realisable) issued by anyone issuer taken together with -
(a) all units or other beneficial interests in a collective investment scheme
falling within sub-paragraph (b) of paragraph (1) of regulation 56 of the regulations
issued by that issuer; and with
(b) all investments of the kinds mentioned in this paragraph issued by a
connected company of that issuer
1%
12. The aggregate of assets of any of the descriptions in paragraphs 1A and 11
of this Part of this Schedule
15%
13. All shares and hybrid securities issued by anyone issuer taken together
with all such securities issued by a connected company of that issuer
10%
14. All securities issued by anyone issuer which is not an approved counterparty
taken together with all securities issued by a connected company, other than an approved
counterparty, of that issuer
5%
15. All securities issued by anyone counterparty
10%
All holdings in anyone licensed collective investment scheme or recognised
16. 15%
scheme
17. All cash
3%
18. All computer equipment
5%
19. All office machinery (other than computer equipment) taken together with
2 1/2%
all furniture, motor vehicles and other equipment
(1) Where an authorised company has assets equal to or in
excess of its liabilities, then, in addition to any other applicable valuation
regulations, paragraphs (2) to (5) ofthis regulation shall have effect for
determining the extent to which the value of the assets exceeds the
amount of liabilities in connection with the required margin of solvency.
(2)
Where-
(a) a company has issued shares some or all of which are
not fully paid and the total paid-up value of all the shares is equal
to or greater than one quarter of their nominal value or, in the case
uf shares issued at a premium, of the aggregate of their nominal
value and the premium, or
(b)
at least one quarter of the fund of a mutual is paid up,
an amount not greater than half the total value of the amounts unpaid
may be taken into account as an asset; and for the purposes of this
paragraph a share shall not be regarded as fully paid if there are any
amounts due but unpaid thereon.
(3) Notwithstanding paragraph (2) of regulation 64 of these
regulations, where a company has issued cumulative preference shares,
liabilities in respect of such shares may be left out of account, in
aggregate up to 50 per centum of the required margin of solvency save
that liabilities in respect of shares which are redeemable -
(a) in the case of a company whose head office is in Malta,
for the purposes of section 115 of the Companies Act, 1995; and
(b) in the case of a company whose head office is in a
country outsi.:le Malta, for the purposes of provisions contained in
the law of the country of its head office governing the regulation
of companies and other commercial partnerships which do not
materially detract from the main objects of the provisions of the
said section,
may be left out of account, in aggregate only up to 25 per centum of the
required margin of solvency.
(4) In the case of a mutual carrying on general business,
any claim which the mutual has against its members by way of a call
for supplementary contributions for a financial year shall have its full
value for that financial year, subject to the limitation that the value shall
not exceed the lesser of -
(a) 50 per centum of the difference between the maximum
contributions and the contributions called in, or
(b)
50 per centum of the required margin of solvency.
(5) The items mentioned in regulations 10 to 12 of these
regulations (which relate to future profits, zillmerising and hidden
reserves and shall be known as "implicit items") shall have no value
except with the approval of the Centre given in writing upon application
with supporting documentation made to it by a company in writing in
that behalf; but in pursuance of such an approval -
(a) any of the implicit items may be valued in accordance
with the said regulations 10 to 12 as respects long term business,
and
(b) the implicit item relating to hidden reserves may be
valued in accordance with regulation 12 as respects general
business.
(1) The implicit item relating to future profits may be valued
at not more than 50 per centum of the full amount of future profits.
(2) For the purposes of paragraph (1) of this regulation, the
full amount of future profits shall be obtained by multiplying the
estimated annual profit by a factor which shall as nearly as may be
represent the average number of years remaining to run on policies but
shall, if it exceeds 10, be reduced to 10.
(3)
For the purposes of paragraph (2) of this regulation -
(a) the estimated annual profit shall be taken to be one-fifth
of the profits made in long term business over a period of five
years ("the relevant period") ending on the last day of the most
recent financial year for which a valuation under section 23 of the
Act has been carried out, substantial items of an exceptional nature
being excluded, and
(b) the average number ofyears remaining to run on policies
shall be calculated -
(i) by multiplying the number of years to run on each
policy by the actuarial value of the benefits payable under
the policy, adding together the products so obtained and
dividing the total by the aggregate of the actuarial values of
the benefits payable under all the policies, or
(ii) by an approximation to this method of calculation
suitable to the circumstances of the case, including, where
appropriate, an approximation involving the grouping of
contracts,
appropriate allowance being made in either case for premature
termination of contracts.
(4) For the purposes of sub-paragraph (a) of paragraph (3)
of this regulation -
(a) where a valuation under section 23 of the Act has been
carried out annually in relation to the relevant period, the profits
made in long term business for any particular year of the relevant
period shall be taken to be the surplus (if any) arising in the long
term fund since the last such valuation, and the profits so made for
that period shall be taken to be the aggregate of those surpluses
less any deficiencies in the long term fund during that period;
(b) where an authorised company has carried on long term
business throughout the relevant period but valuations under section
23 of the Act have not been made annually in that period, the profits
so made for that period shall be taken to be the aggregate of
surpluses arising in the long term fund since the last valuation
preceding the relevant period less any deficiencies in the long term
fund since that last valuation, except that the surplus or deficiency
arising in the period ending with the first valuation within the
relevant period shall be proportionately reduced to allow for any
period of time falling outside the relevant period;
(c) where an authorised company has not carried on long
term business throughout the relevant period, the profits made in
long term business for the relevant period shall be taken to be the
aggregate of any surpluses arising in the long term fund during
that part of the relevant period for which long term business was
carried on less any deficiencies in the long term fund during that
part of that period.
(1) Where zillmerising is appropriate but either is not =i~ ~tems
practised or is at a rate less than the loading for acquisition costs included
in the premium, then, subject to paragraph (6) of this regulation, the
implicit item relating to zillmerising may be valued at an amount not
exceeding the difference between -
(a) the non-zillmerised or partially zillmerised figure for
mathematical reserves maintained by the company concerned, and
(b) a figure for mathematical reserves (not less than those
required by Part X of these regulations) zillmerised at a rate equal
to the loading for acquisition costs included or allowed for in the
premium.
(2) Where zillmerising is not practised, then, subject to
paragraph (6) of this regulation, the value given by paragraph (1) of
this regulation (less any amount relating to temporary assurances) shall
not exceed 3.5 per centum of the aggregate of the difference between -
(a)
the relevant capital sums for long term business activities,
and
(b) the mathematical reserves (excluding mathematical
reserves for temporary assurances).
(3) Where zillmerising is practised but is at a rate less than
the loading for acquisition costs, then, subject to paragraph (6) of this
regulation, the value given by paragraph (l) of this regulation (less any
amount relating to temporary assurances) together with the difference
between the partially zillmerised mathematical reserves and the non-
zillmerised mathematical reserves shall not exceed 3.5 per centum of
the aggregate of the difference between -
(a)
the relevant capital sums oflong term business activities,
and
(b) the mathematical reserves (excluding mathematical
reserves for temporary assurances).
(4) In paragraphs (2) and (3) of this regulation "relevant
capital sums" means -
(a)
for whole life assurances, the sum assured,
(b) for policies where a sum is payable on maturity
(including policies where a sum is also payable on earlier death),
the sum payable on maturity,
(c) for deferred annuities, the capitalised value of the annuity
at the vesting date (or the cash option if it is greater),
(d) for capital redemption contracts, the sums payable at
the end of the contract period, and
(e) for linked long term contracts, notwithstanding sub-
paragraphs (a) to (d) of this paragraph, the lesser of -
(i)
the amount for the time being payable on death,
and
(ii) the aggregate of the value for the time being of the
units allocated to the contract (or, where entitlement is not
denoted by means of units, the value for the time being of
any other measure of entitlement under the contract equivalent
to units) and the total amount of the premiums remaining to
be paid during such of the term of the contract as is appropriate
for zillmerising or, if such premiums are payable beyond the
age of seventy-five, until that age,
excluding in all cases any vested reversionary bonus and any capital
sums for temporary assurances.
(5) Where, under the contract relating to any such business
as is mentioned in paragraph (4) of this regulation, the payment of
premiums is to stop before the sum assured becomes due, then,
notwithstanding the said paragraph (4), "relevant capital sums" in
paragraphs (1) to (3) of this regulation shall be taken to mean the
mathematical reserves appropriate for that contract at the end of the
premium-paying term.
(6)
For the purposes of this regulation-
(a) reserves for vested reversionary bonuses shall not be
regarded as mathematical reserves, and
(b) the result given by paragraph (1), (2) or (3) of this
regulation shall be reduced by the amount of any undepreciated
acquisition costs brought into account as an asset.
The implicit item relating to hidden reserves, if it consists of Implicit items
h 1 ·dd en reserves resu 1 tmg
.
f rom t h e un d erestlmatlOn
.
.
f
d hidden reserves.
0 assets an
overestimation of liabilities (other than mathematical reserves), may,
in so far as the hidden reserves in question are not of an exceptional
nature, be given its full value.
PART IV - GUARANTEE FUND AND MINIMUM
GUARANTEE FUND
Interpretation.
In this Part of these regulations -
"implicit items" shall be construed in accordance with
regulation 7 of these regulations;
"required margin of solvency" means a margin of solvency
required by section 14 of the Act.
(1) For the purposes of section 16 of the Act, there is hereby Amount of the
minimum
prescribed an amount (the "minimum guarantee fund") arrived at in guarantee fund.
accordance with the Fourth Schedule; and the amount of assets of the
guarantee fund required to be maintained in Malta by an authorised
company under that section shall be not less than the amount of the
minimum guarantee fund.
(2) In the case of long term business, the required margin
of solvency is that arrived at in accordance with paragraph (4) of
regulation 8 of these regulations.
(3) In the case of long tenn business, items that are not
implicit items must be at least large enough to cover either the minimum
guarantee fund or 50 per centum of the guarantee fund, whichever is
the greater.
The provisions of regulations 9 to 12 of these regulations
shall apply to a guarantee fund and a minimum guarantee fund in the
same manner and to the same extent as they apply to a required margin
of solvency.
PART V - CURRENCY MATCHING, LOCALISATION
(1) Where in the case of an authorised company the
company's liabilities in any particular currency exceed 5 per centum of
its total liabilities, the company shall hold sufficient assets in that
currency to cover at least 80 per centum of the company's liabilities in
that currency.
(2) Where an authorised company carries on both long tenn
business and general business, the requirements of paragraph (1) of
this regulation apply to the assets and liabilities of each kind of business
separately.
(3) Where the contract of insurance expresses any liability
in tenns of a particular currency, that liability shall be regarded as a
liability in that currency.
(4)
For the purposes of this regulation -
"assets", except in the case of assets of the kind referred
to in paragraph (2) of regulation 49 of these regulations, means
assets valued in accordance with Part IX of these regulations;
and
"liabilities" means provision by an authorised company
to cover liabilities arising under or in connection with contracts
of insurance (not being liabilities relating to business of
insurance excluded by regulation 21 of these regulations).
(5) For the purposes of this regulation references to assets
in a currency shall be construed as references to assets expressed in or
capable of being realised (without exchange risk) in that currency; and
an asset is capable of being realised (without exchange risk) in a currency
if it is reasonably capable of being realised in that currency without risk
that changes in exchange rates would reduce the cover of liabilities in
that currency.
(6) The provisions of this regulation have effect subject to
regulations 17 to 19 of these regulations,
(l) In so far as the liabilities for property linked benefits Matching: property
an d III d ex I' III k e db ene fi Its are covere db y assets w h' IC h d etenrune
'
. t h e linked benefits.
benefits payable under a linked long tenn contract, regulation 16 of
these regulations does not apply.
(2) In so far as the liabilities for property linked benefits
are determined by reference to assets in a currency other than that in
which the company's obligations to the policyholder are expressed, those
liabilities shall for the purposes of the said regulation 16 be deemed to
be liabilities in the first-mentioned currency.
(3) In this regulation "property linked benefits" and "index
linked benefits" have the meanings given by paragraph (1) of regulation
48 of these regulations.
(1) The currency of an authorised company's general Matching: cu~ncy
of general busmess
business liabilities shall, for the purposes of regulation 16 of these liabilities.
regulations, be determined as follows.
(2) Where the liabilities are not expressed as liabilities in
tenns of a particular currency, they shall be regarded as liabilities in the
currency of the country in which the risk is situated or, if the company
on reasonable grounds so determines, in the currency in which the
premium payable under the contract is expressed.
(3) However, the company may regard its liabilities as
liabilities in the currency which it will use in accordance with past
experience or, in the absence of such experience, in the currency of the
country in which it is established -
(a) for contracts covering risks falling within general
business classes 4,5,6,7, 11, 12 and 13 (producer's liability only);
(b) for contracts covering risks falling within any other
general business class where, in accordance with the nature of the
risks, the company's liabilities are liabilities in a currency other
than that determined in accordance with paragraph (2) of this
regulation.
(4) Where a claim has been notified to an authorised
company and the company's liability in respect of that claim is payable
in a currency other than one which would result from the application of
the above provisions, the liability shall be regarded as a liability in the
currency in which the company is actually obliged to pay it.
(5) Where a claim is assessed in a currency which is known
to the company in advance but which is different from a currency
determined in accordance with the above provisions, the company may
regard its liabilities as liabilities in that currency.
An authorised company need not cover its liabilities by assets
in a particular currency if those assets would amount to 7 per centum or
less of the remainder of its assets in other currencies.
(1) Assets maintained pursuant to regulation 16 of these
regulations shall be maintained -
(a) if they cover liabilities in Maltese lira, in Malta or a
country falling within the zone of countries;
(b) if they cover liabilities in any other currency, in Malta
or the country of that currency, or a country falling within the zone
of countries.
(2) For the purpose of applying paragraph (1) of this
regulation to tangible assets and assets consisting of a claim against a
debtor or a listed or unlisted investment, the following provisions shall
have effect -
(a) a tangible asset shall be regarded as maintained in the
place where it is situated;
(b) an asset consisting of a claim against a debtor shall be
regarded as maintained in any place where it can be enforced by
legal action;
(c) an asset consisting of a listed investment shall be
regarded as maintained in any place where
(i) there is a stock exchange (of the kind described in
paragraph (a) of the definition of "listed" in paragraph (1) of
regulation 48 of these regulations) where it is listed, or
(ii) there is a regulated market as defined in paragraph
(1) of regulation 48 of these regulations where it is dealt in;
(d) an asset consisting of an unlisted investment issued by
a registered or incorporated company shall be regarded as
maintained in the place where the head office of that company is
situated.
(3)
In this regulation -
"assets" and "liabilities" have the same meaning as in
paragraph 4 of regulation 16 of these regulations;
"listed" and "unlisted" have the meaning given in paragraph
(1) of regulation 48 of these regulations.
Regulations 16 to 20 of these regulations shall not apply Exclusions from
(1)
regulations 16 to 20.
(a) business of insurance carried on in any country outside
Malta by a company whose head office is in Malta;
(b) business of insurance carried on in any country outside
Malta by a company whose head office is in a country outside
Malta; or
(c) business of reinsurance (unless it is facultative
reinsurance written by a company which also carries on business
of insurance that is not reinsurance); or
(d)
business of affiliated insurance.
(2) Regulation 16 of these regulations shall not apply to
business of insurance carried on in Malta by a company whose head
office is in a country outside Malta where the company's liabilities
relating to risks situated in Malta do not exceed 5 per centum of its total
liabilities.
(3) Regulation 20 of these regulations shall not apply to
business of insurance of groups 3 and 4 (within the meaning of Part II
of the Third Schedule to the Act).
PART VI - CUSTODIAN OF ASSETS
Interpretation.
In this Part of these regulations -
"assets", in relation to a custodian of assets, shall be construed
in accordance with the provisions of regulation 6 of these
regulations;
"company", in relation to assets held or required to be held in
custody, means a company applying for, or holding, an authorisation
under section 7 of the Act;
"custodian of assets" and "custodian", in relation to assets
held or required to be held in custody for a company's account by
or under any provision of the Act, shall be construed in accordance
with the provisions of regulation 24 of these regulations and the
Fifth Schedule.
(1) Where there is imposed on a company by or under any
provision of the Act a requirement that the whole or a specified
proportion of the assets required to be maintained by the company in
Malta under any provision of the Act shall be deposited with and held
in custody for the company's account by a person as custodian of assets
for the company, the company shall deposit such assets with a person
as prescribed by regulation 24 of these regulations for the purposes of
section 18 of the Act and that person shall hold such assets in custody
for the company's account in accordance with written arrangements
made between the company, that person and the Centre.
(2) The arrangements referred to in paragraph (1) of this
regulation shall be made in such form and manner as to satisfy the
provisions of the Act relevant to such requirement, these regulations
and any such directive which the Centre may, from time to time, either
generally or specifically, issue in writing with respect to the purpose or
security of those assets.
(3) The Centre shall be party to those arrangements solely
for the purpose of ensuring the enforceability of the provisions of those
arrangements and the Act; and any expenses incurred by or under those
arrangements shall be borne by the company concerned.
(4) Assets of a company held in custody for the company's
account by a person as custodian for the company shall be taken to be
held by that person in compliance with a requirement imposed by or
under any provision of the Act if, and only if, they are assets in whose
case the company has made with that person and the Centre written
arrangements in the form and manner specified in paragraph (2) of this
regulation that they are to be held by that person in compliance with
such a requirement.
(5) No assets held in custody for a company's account by a
person as custodian for the company in compliance with a requirement
imposed by or under any provision of the Act shall, so long as the
requirement is in force, be released except with the approval of the
Centre given in writing.
(6) The provisions of this regulation shall not apply to a
company if the business carried on by the company is restricted to
reinsurance or affiliated insurance.
For the purposes of section 18 of the Act any person listed in Persons a.cting
as custodIan
the Fifth Schedule shall act as custodian of assets for a company and of assets.
hold in custody for the company's account assets of a description
specified and assigned to that person's custody in the said Schedule.
Where assets of a company held in custody for the company's be
Assets dt:emed.to
account by or under any provision of the Act by a person as custodian and held in custody
for the company are held by the Central Bank of Malta, such assets by custodian.
shall be deemed to have been deposited with and held by the Central
Bank if, and only if, the documents of title of such assets are unassailable
in that the assets held in custody by the Central Bank are not subject to
any court injunction or encashment by the registered holder without the
knowledge of the Central Bank on the basis of a duplicate certificate.
PART VII - DEPOSIT OF ASSETS
In this Part of these regulations -
Interpretation.
"custodian of assets" and "custodian" have the meaning given
in regulation 22 of these regulations;
"deposit" means the assets required to be maintained in Malta
by a company and deposited with a custodian of assets by the
company mentioned in paragraph (b) of subsection (1) of section
10 of the Act or regulation 5 of these regulations made for the
purposes of paragraph (c) of subsection (1) of section 11 of the
Act, and "depositor" means a company applying for an
authorisation, or holding an authorisation, under the Act making,
or intending to make, such a deposit;
"required amount", in relation to a deposit -
(a) in the case of a depositor to whom paragraph (b) of
subsection (1) of section 10 of the Act applies, means the
amount of the minimum guarantee fund, and
(b) in the case of a depositor to whom paragraph (c) of
subsection (1) of section 11 of the Act applies, means the
amount of assets mentioned in regulation 5 of these
regulations.
(1) Subject to paragraph (2) of this regulation, every deposit Making and .
.
.
amount of depoSIt.
made, or reqUired to be made, pursuant to regulatIOn 3 or 4 of these
regulations shall be made with a custodian of assets in the manner set
out in regulation 23 of these regulations and shall be maintained by the
depositor at all times during the continuance of the authorisation at a
level equal to at least the appropriate required amount.
(2) In the case of a company whose head office is in Malta,
the deposit mentioned in paragraph (1) ofthis regulation shall be limited
to the amount of the minimum guarantee fund.
(3) Where an asset constituting or forming part of any
deposit made in accordance with paragraph (1) of this regulation is an
asset expressed in a currency other than Maltese lira, a sum equal to ten
per centum of the value of that asset to make good any loss of value of
that asset which might arise out of exchange risk shall be aggregated
with the amount of assets constituting the deposit.
(1) Subject to paragraph (2) of this regulation, where it
appears to the Centre that the amount of assets constituting any deposit
made in accordance with regulation 27 of these regulations is likely to
fall, or falls, below the appropriate required amount, or on the written
application of the depositor having regard to such circumstances, the
Centre shall direct in writing the depositor to increase the amount of
assets by a sum specified in Maltese liri to maintain the appropriate
required amount and the custodian to receive and hold in custody the
specified sum and aggregate it with the amount of assets constituting
the deposit.
(2) Any increase in the amount of deposit required to be
made under paragraph (1) of this regulation shall be made by the
depositor as early as practicable but not later than fourteen days from
the date of the Centre's direction in that regard to the depositor.
(1) Subject to paragraph (3) of this regulation, where a
depositor proposes to replace assets of a kind constituting or forming
part of any deposit ("assets of the old kind") with assets of any other
kind ("assets of the new kind"), the depositor shall make an application
in writing to the Centre in that regard giving the relevant details of the
assets of the old kind and the assets of the new kind forming the object
of the application and the Centre shall determine the application within
30 days of receiving the details required to be given under this paragraph;
and, if it refuses the application, the Centre shall inform the depositor
in writing of the reasons for the refusal.
(2)
Where the Centre approves of an application made under
paragraph (1) of this regulation, the Centre shall direct in writing the
depositor to carry out the replacement of the assets of the old kind with
the assets of the new kind in accordance with any conditions which it
may deem fit to impose and the custodian to receive and hold in custody,
under those conditions, the assets of the new kind and to release from
custody, in accordance with paragraph (3) ofthese regulations, the assets
of the old kind.
(3) Assets of any kind constituting or forming part of any
deposit replaced or to be replaced with assets of any other kind shall
not be released from custody unless and until the Centre is satisfied that
the assets replacing those assets have been received and held in custody
in accordance with regulation 17 of these regulations.
(1) Subject to paragraphs (3) and (4) of this regulation, Reducingthe
where it appears to a depositor that the amount of assets constituting : : : 1 of
any deposit is higher than the appropriate required amount, the depositor
may propose to reduce the amount of assets to an amount being an
amount not less than the appropriate required amount by making an
application in writing to the Centre in that regard giving the relevant
details and specifying the sum proposed to be reduced in Maltese liri
and the Centre shall determine the application within 30 days ofreceiving
the details required to be given under this paragraph; and, if it refuses
the application, the Centre shall inform the depositor in writing of the
reasons for the refusal.
Where the Centre approves of an application made under
(2)
paragraph (1) of this regulation, the Centre shall direct in writing the
depositor to reduce the amount of assets constituting the deposit by the
sum specified by the depositor, or any other lower sum determined by
the Centre, and the custodian to release from custody an amount equal
to the specified sum, or the lower sum, as the case may be.
(3) The Centre shall not approve of an application made
under paragraph (1) of this regulation unless it is satisfied that the
remaining amount of assets constituting the deposit after the release
from custody of an amount equal to the specified sum or any other
lower sum is adequate to maintain the appropriate required amount.
(4) Nothing in paragraphs (2) and (3) of this regulation shall
relieve the depositor of the obligation imposed on him by regulation 27
of these regulations to maintain at all times the deposit at least at the
appropriate required amount.
(1) Where a depositor has ceased to carry on in Malta the Ces,sationof
business in respect of which the deposit was made, the depositor or any busmess.
person who is entitled to give a good discharge for the funds representing
the deposit may apply in writing to the Centre for those funds to be
released to the depositor or to that other person, as the case may be.
(2) The Centre shall, on receipt of an application under
paragraph (1) of this regulation accompanied by an appropriate
declaration, determine the application having cognizance to the
provisions of subsection (4) of section 16, sections 28, 41 and 42 of the
Act and direct the custodian in writing as it deems appropriate in the
circumstances.
(3) In paragraph (2) of this regulation an "appropriate
declaration" means a written declaration by the applicant as is required
by subsection (4) of section 16 of the Act or in consequence of a direction
given in writing by the Centre under section 28 of the Act -
(a) stating and proving by submission of documentary
evidence acceptable to, or required by, the Centre that to the
best of his knowledge and belief the depositor has no further
liability to discharge, and
(b)
if the applicant is not the depositor: -
(i) declaring that the applicant is entitled to give
a good discharge for the relevant funds, and
(ii) stating and proving by submission of
documentary evidence acceptable to, or required by, the
Centre the circumstances in which the applicant is so
entitled.
A direction given by the Centre pursuant to this Part of these
regulations shall be sufficient authority for a custodian of assets to
comply with it.
(1) Notwithstanding anything contained in any other
regulation of this Part of these regulations, subject to the following
paragraphs of this regulation, any depositor to whom regulation 3 or 4
of these regulations applies may, in like manner, satisfy the requirements
of that regulation by producing to the Centre, in lieu of making a deposit
with a custodian of assets under this Part of these regulations, a security
on assets for an amount equal to at least the appropri~te required amount
and maintaining security on those assets for that amount at all times
during the currency of the security.
(2) The content of every security produced under paragraph
(1) of this regulation shall have to be agreed in advance between the
depositor, the issuer and the Centre; and the security shall have to be
reinstated by the depositor to secure the appropriate required amount
each time the level of the amount is likely to fall, or falls, below the
required amount.
(3) The provisions of regulations 28, 30, 31 and 32 of these
regulations shall apply mutatis mutandis in relation to a security as they
apply in relation to a deposit.
(4)
Where-
(a) a depositor makes a deposit with a custodian of assets
in accordance with regulation 27 of these regulations and, at a
later date, elects to substitute that deposit with a security to be
produced to the Centre in accordance with paragraph (1) of this
regulation, or
(b) a depositor produces to the Centre a security in
accordance with paragraph (1) of this regulation and, at a later
date, elects to substitute that security with a deposit to be made
with a custodian of assets in accordance with regulation 27 of these
regulations,
in every case, the depositor shall make an application in writing to the
Centre in that regard, giving the relevant details, and -
(a) if the application is to substitute a deposit with a security,
the Centre shall direct in writing the depositor to carry out the
substitution in accordance with paragraphs (1) and (2) of this
regulation and, when the security is produced, the custodian to
release from custody the deposit, and
(b) if the application is to substitute a security with a deposit,
the Centre shall direct in writing the depositor to carry out the
substitution in accordance with regulation 27 of these regulations,
and when the deposit is made and held in custody, the issuer to
tenninate the security without prejudice to any claims which the
Centre may have, or may have had, against the security prior to its
tennination.
(5)
For the purposes of this regulation -
"security" means -
(a) a contract of pledge as construed in Title XXI of
Part II of Book Second of the Civil Code;
(b)
a guarantee provided by, or
(c) an irrevocable letter of credit established with
a bank or credit institution
(i) licensed to carry on the business of banking under
the laws of Malta, Of
(ii) lawfully permitted to carry on the business of
banking in a country outside Malta acceptable to the Centre
provided that the bank or credit institution is of fIrst class
standing;
and "issuer" shall be construed accordingly.
(1)
Every depositor who on the appointed date was a
assets maintained in
depositor by virtue of a licence to operate as an insurer held under the
Malta in accordance
1981 Act and whose assets held on that date under paragraph (b) of
subsection (1) of section 5 or section 22 of the 1981 Act were, pursuant
to regulation 6 of the Insurance Business (Custodian of Assets)
Regulations, 1999 ("the 1999 Regulations"), deemed to be assets or a
proportion of assets which the depositor is required to maintain in Malta
under paragraph (c) of subsection (1) of section 11 of the Act shall, not
later than three months from the date of coming into force of these
regulations, determine the appropriate required amount and kind of assets
constituting the deposit to be made by the depositor in relation to the
business carried on in Malta by the depositor in accordance with Part II
of these regulations and, if the amount or kind of assets maintained in
Malta pursuant to the 1999 Regulations does not satisfy the requirements
of regulation 27 of these regulations, the depositor shall make the
necessary arrangements to ensure that the deposit satisfies the
requirements of the said regulation 27.
(2) Any determination of amount of assets made under
paragraph (1) of this regulation in relation to the business carried on in
Malta by a depositor shall be calculated as appropriate in accordance
with the provisions of regulation 5 of these regulations
Provided that, in relation to general business run-off by a
depositor pursuant to section 22 of the 1981 Act, such amount shall be
the appropriate guarantee fund which the depositor is required to
maintain in Malta under subsection (1) of section 16 of the Act or such
other higher amount commensurate with the Malta liabilities of the
depositor as the Centre may from time to time determine.
(3) Where, in relation to a depositor to whom paragraph (1)
of this regulation applies, the amount of assets maintained in Malta by
the depositor pursuant to regulation 6 of the 1999 Regulations exceeds
the amount of assets required to be maintained in Malta by the depositor
in accordance with regulation 5 of these regulations, or the kind of assets
maintained in Malta as aforesaid is not of a kind required by regulation
6 of these regulations, the excess amount, or the assets of such kind, as
the case may be, shall, on an application made in writing to the Centre
by the depositor in that regard giving the relevant details and specifying
the excess amount in Maltese liri or submitting to the satisfaction of the
Centre evidence that the assets of such kind have been substituted by
assets of the kind required by regulation 6 of these regulations, be
released from custody by the person who for the time being is custodian
of those assets for the purposes of regulation 6 of the 1999 Regulations
on direction given in writing by the Centre to that person in that regard.
PART VIII -EQUALISATION RESERVE
TITLE I - PRELIMINARY
This Part of these regulations shall have effect in respect of Application.
any financial year of a company ending on or after the appointed date.
In this Part of these regulations, unless the context otherwise Interpretation.
requires -
"accounted for" means reported in accordance with an
Insurance Directive to be made by the Centre for the purposes of
section 32 of the Act;
"alternative maximum reserve" means the aggregate value
of the business group alternative maxima as calculated in
accordance with Part N of the Seventh Schedule;
"business categories corresponding to a scheduled class"
means the business categories specified in the Sixth Schedule
corresponding to the same general business classes;
"business group" means a group comprising descriptions of
general business determined in accordance with regulation 40 of
these regulations;
"business group alternative maximum" has the meaning given
in Part N of the Seventh Schedule;
"business group maximum" has the meaning given in Part III
of the Seventh Schedule;
"claim" means a claim against a company under a contract of
insurance;
"claims management costs" refers to those claims
management costs required by the shareholder accounts rules (note
(4) to the profit and loss account format) to be included in claims
incurred other than those which, whether or not incurred through
the employment of the company's own staff, are directly
attributable to particular claims;
"company" means an authorised insurance company;
"consequential loss risks" means risks falling within general
business class 16 comprising risks of the persons insured sustaining
loss attributable to interruptions of the carrying on of business
carried on by them or to reduction of the scope of business so
carried on;
"contract of insurance" includes a contract of reinsurance;
"credit insurance business" means all business of insurance
falling within general business class 14 that is not business of
reinsurance;
"direct business" refers to business of insurance other than
business of reinsurance;
"equalisation reserve" means a reserve to be maintained under
subsection (7) of section 17 of the Act;
"facultative business" refers to facultative business of
reinsurance;
"financial year" means a period of account;
"general business policy" means a policy evidencing a contract
the effecting of which constitutes the carrying on of general
business of a relevant description;
"gross premiums earned" in respect of a financial year means
such proportion of gross premiums written as is attributable to
risks borne by the company during that financial year;
"gross premiums written" means the amounts required by the
First Schedule to the Insurance Business (Companies Accounts)
Regulations, 2000 to be shown in the profit and loss account of an
insurance company at general business technical account item
I.1.(a);
"the last financial year" means the financial year which last
ended before the date on which financial statements of the company
relating to that financial year are required to be forwarded to the
Centre pursuant to section 20 of the Act;
"maximum reserve" means the aggregate value of the business
group maxima as calculated in accordance with Part ill of the
Seventh Schedule;
"net claims incurred" in respect of a financial year means
claims arising from incidents occurring during that financial year
(including direct claims handling expenses), net of reinsurance and
other recoveries but excluding claims management costs;
"net claims paid" in respect of a financial year means claims
paid during that financial year (including direct claims handling
expenses), net of reinsurance and other recoveries but excluding
claims management costs, regardless of whether incidents giving
rise to such claims occurred during that financial year or any prior
financial year;
"net operating expenses" means the net amount paid in a
financial year in respect of commissions, other acquisition
expenses, administrative expenses, reinsurers' commissions and
profit participations;
"net premiums earned" and "net premiums written" mean,
respectively, gross premiums earned, net of reinsurance premiums
earned and gross premiums written, net of reinsurance premiums
payable under reinsurance ceded;
"nuclear risks" means risks falling within any class of general
business and arising in connection with the construction or use of
any nuclear reactor or nuclear installation or the carriage of any
nuclear matter;
"proportional reinsurance treaty" means a reinsurance treaty
under which in return for a proportion of the premium a pre-
determined proportion of each claim payment by the cedant under
policies subject to the treaty is recoverable from the reinsurer; and
"non-proportional reinsurance treaty" shall be construed
accordingly;
"reinsurance" and "reinsurer" include retrocession and
retrocessionaire respectively;
"reinsurance recoveries" means amounts in respect of claims
receivable by a company from a reinsurer under a contract of
reinsurance;
"the shareholder accounts rules" means the rules contained
in the First Schedule to the Insurance Business (Companies
Accounts) Regulations, 2000 for the preparation of accounts by
insurance companies;
"scheduled class" refers to the scheduled classes set out in
the Sixth Schedule;
"technical provisions" means the items required by the First
Schedule to the Insurance Business (Companies Accounts)
Regulations, 2000 to be shown in the balance sheet of an insurance
company at liabilities items C.l to 6;
"Title II business" and "Title ill business" mean, respectively,
business to which Title II and Title III of this Part of these
regulations applies;
"Title II company" and "Title III company" mean,
respectively, a company to which Title II and Title ill of this Part
of these regulations applies;
and, references to a numbered class of general business are
references to the class so numbered in Part I of the Third Schedule to
the Act.
(I) For the purposes of section 17 of the Act, in so far as it
refers to general business: equalisation reserve -
(a) Title II ofthis Part of these regulations makes provision
in relation to business other than credit insurance business; and
(b) Title III thereof makes provision in relation to credit
insurance business.
In relation to Title II and Title III of this Part of these
(2)
regulations -
(a) any business to which each Title applies is hereby
prescribed for the purposes of subsection (7) of section 17 of the
Act as a description of general business; and
(b) for the purposes of subsection (8) of that section
(companies to which subsection (7) of section 17 of the Act does
not apply), there is hereby prescribed any company whose head
office is in a country outside Malta.
TITLE II - BUSINESS OTHER THAN CREDIT INSURANCE
BUSINESS
(1) This Title of this Part of these regulations applies to a
company whose head office is in Malta.
(2) This Title of this Part of these regulations applies to
general business falling within any of the following sub-paragraphs -
(a) business in scheduled class 3 and corresponding
proportional reinsurance treaty business categories;
(b) direct, facultative and proportional reinsurance treaty
consequential loss risks;
(c) business in scheduled classes 1 and 2 and corresponding
reinsurance treaty business categories;
(d)
nuclear risks; and
(e) non-proportional reinsurance treaty business categories
corresponding to business in scheduled class 3 and non-proportional
reinsurance treaty consequential loss risks.
(3) For the purposes of paragraph (2) of this regulation, any
business falling within sub-paragraph (d) shall be treated as if it did not
fall within sub-paragraph (a), (b), (c) or (e).
(4) Any reference in this Title of this Part of these
regulations, the Sixth Schedule and Parts I and II ofthe Seventh Schedule
to "business group maximum" and "maximum reserve", in relation to a
company whose business is restricted to business of reinsurance which
is granted approval by the Centre to apply the alternative maximum,
shall respectively be deemed to be a reference to "business group
alternative maximum" and "alternative maximum reserve".
(5) For the purposes of paragraph (4) of this regulation
"alternative maximum", in relation to a business group, means a
percentage higher than the percentage of average net premiums written
relating to that business group specified in the table contained in sub-
paragraph (1) of paragraph 11 of the Seventh Schedule but not higher
than the percentage of average net premiums written relating to that
same business group specified in the table contained in sub-paragraph
(2) of paragraph 13 of the said Seventh Schedule as may be approved
by the Centre from year to year on an application made to it in writing
in that behalf by a company whose business is restricted to reinsurance
which elects to apply the alternative maximum.
(1) Subject to paragraphs (2) and (3) of this regulation, a
Title II company shall maintain an equalisation reserve in respect of
Title II business in accordance with regulations 40 to 44 of these
regulations.
(2) Regulations 40 to 44 ofthese regulations shall not apply
in respect of any Title II business where net premiums written in a
financial year of a company in respect of all that business are -
(a)
less than five hundred thousand Maltese liri; or
(b) less than 4 per centum of net premiums written in that
financial year in respect of all its general business and less than
one million Maltese liri,
and the company has no equalisation reserve to be brought forward
from the previous financial year.
(3) Regulations 40 to 44 of these regulations shall apply in
respect of any Title II business of a company whose business is restricted
to reinsurance notwithstanding the company satisfies the provisions of
paragraph (2) of this regulation, if the company elects to maintain an
equalisation reserve in respect of Title II business.
For the purposes of applying this Title of this Part of these
regulations, a Title II company shall classify its Title II business into
separate business groups comprising -
(a) business group A- business falling within sub-paragraph
(a) of paragraph (2) of regulation 38 of these regulations;
business group B - business falling within sub-paragraph
(b)
(b) of that paragraph;
(c) business group C - business falling within sub-paragraph
(c) of that paragraph;
(d) business group D - business falling within sub-paragraph
(d) of that paragraph; and
(e) business group E - business falling within sub-paragraph
(e) of that paragraph.
(1) At the end of each financial year, a Title II company Transfers to
shall make transfers to the equalisation reserve and transfers from the =~=~'
equalisation reserve in accordance with paragraphs (2) to (5) of this reserve.
regulation.
(2)
The company shall calculate -
(a) the aggregate value of transfers to be made to the
equalisation reserve in accordance with Part I of the Seventh
Schedule; and
(b) the aggregate value of transfers to be made from the
equalisation reserve in accordance with Part II of the Seventh
Schedule.
(3) Subject to paragraph (5) of this regulation, if the
aggregate value of transfers to be made to the equalisation reserve
exceeds the aggregate value of transfers to be made from the
equalisation reserve, the company shall transfer an amount equal
to the excess to the equalisation reserve.
(4) Subject to paragraph (5) of this regulation, if the
aggregate value of transfers to be made from the equalisation
reserve exceeds the aggregate value of transfers to be made to the
equalisation reserve, the company shall transfer from the
equalisation reserve an amount equal to such excess, or the amount
of the equalisation reserve brought forward from the previous
financial year (in this regulation referred to as the "previous year's
equalisation reserve"), whichever is the lower.
(5)
If the value of the previous year's equalisation reserve
together with the aggregate value of transfers to be made to the
equalisation reserve, less the aggregate value of transfers to be
made from the equalisation reserve, exceeds the maximum reserve
calculated in accordance with Part III of the Seventh Schedule,
the company shall transfer such an amount as is necessary to make
the equalisation reserve equal to the maximum reserve.
(1) If a Title II company transfers to another company all
its rights and obligations under any general business policies (pursuant
to a transfer approved by the Centre under section 33 of the Act), the
Seventh Schedule shall apply to that company at the end of the financial
year in which such transfer takes place with the following modifications.
(2) For the purposes of calculating amounts to be transferred
to the equalisation reserve (pursuant to Part I of the Seventh Schedule)
and the business group maxima applicable to the company's business
(pursuant to Part III of that Schedule), net premiums written in respect
of policies which were the subject of the transfer shall be excluded.
(3) If all the company's rights and obligations under all
general business policies falling within a business group have been
transferred, the business group maximum for that business shall be zero.
(l) If a Title II company acquires from another company
(the "transferor") all the transferor's rights and obligations under any
general business policies (pursuant to a transfer approved by the Centre
under section 33 of the Act), the Seventh Schedule shall apply to that
company at the end of the financial year in which such acquisition takes
place with the following modifications.
(2) Where consideration payable in respect of the acquisition
is accounted for by the company as an adjustment to premiums-
(a) for the purposes of calculating amounts to be transferred
to the equalisation reserve (pursuant to Part I of the Seventh
Schedule) and the business group maxima applicable to the
company's business (pursuant to Part III of that Schedule), net
premiums earned or net premiums written, as the case may require,
shall be adjusted by any amounts in respect of such consideration;
and
(b) for the purposes of calculating amounts to be transferred
from the equalisation reserve (pursuant to Part II of the Seventh
Schedule), net premiums earned or net premiums written, as the
case may require, shall include any amounts in respect of such
consideration.
(3) Where consideration payable in respect of the acquisition
is accounted for by the company as an adjustment to claims -
(a) for the purposes of calculating amounts to be transferred
from the equalisation reserve (pursuant to Part II of the Seventh
Schedule), net premiums earned or net premiums written, as the
case may require, shall be such amount as would have been
calculated had such consideration been accounted for by the
company as an adjustment to premiums; and
(b) for the purposes of calculating amounts to be transferred
from the equalisation reserve (pursuant to Part II of the Seventh
Schedule), net claims incurred or net claims paid, as the case may
require, shall be calculated as if such adjustment had not been made.
(4) For the purposes of paragraphs (2) and (3) of this
regulation, consideration payable in respect of the acquisition shall be
apportioned between business groups according to the business groups
within which the general business policies which are the subject of the
acquisition fall.
(5) For the avoidance of doubt, an adjustment to premiums
or claims for the purposes of paragraphs (2) and (3) of this regulation
may, in either case, be by way of addition or deduction, as appropriate.
(6) In any financial year following that of the acquisition,
the Seventh Schedule shall apply with the following modifications.
(7) Where any consideration payable in respect of the
acquisition was accounted for by the company as an adjustment to
premiums, for the purposes of calculating amounts to be transferred
from the equalisation reserve pursuant to Part II of the Seventh Schedule,
net premiums earned shall include an appropriate amount in respect of
the consideration for the transfer.
(8) Where consideration payable in respect of the acquisition
was accounted for by the company as an adjustment to claims, for the
purposes of calculating amounts to be transferred from the equalisation
reserve pursuant to Part II of the Seventh Schedule, net premiums earned
shall be taken to be such amount as would have been calculated had the
consideration been accounted for by the company as an adjustment to
premiums.
This regulation applies to a Title II company where -
(I)
Transfers from
equalisation
(a) the company has carried on Title II business for no less :~;.:n:~
than five financial years and net premiums written in respect of all written fall
.
.
below specified
that busmess m two or more of the four financial years preceding limits.
the last financial year are less than the amounts specified in sub-
paragraph (a) or (b) of paragraph (2) of regulation 39 of these
regulations, as the case may be; or
(b) the company has carried on Title II business for less
than five financial years and the average net premiums written in
respect of all that business in those years is less than the amounts
specified in sub-paragraph (a) or (b) of paragraph (2) of regulation
39 of these regulations, as the case may be; and
(c) the company has an equalisation reserve to be brought
forward from the financial year preceding the last financial year;
and
(d) net premiums written in the last financial year in respect
of Title II business are less than the amounts specified in sub-
paragraph (a) or (b) of paragraph (2) of regulation 39 of these
regulations, as the case may be.
(2) In this regulation "average net premiums written" means
the average amount of net premiums written in respect of that business
in a financial year and any previous financial years ending on or after
the appointed date.
(3) For the purposes of paragraph (2) of this regulation, if
any of the financial years which the company is required to take into
account for the calculation of average net premiums written is an
accounting period of more or of less than a period of twelve months,
pursuant to sub-section (3) of section 164 of the Companies Act, 1995,
the value of net premiums written in that financial year shall be the
amount represented by the formula -
NPWx365
d
where-
NPW means net premiums written in the financial year
concerned; and
d means the number of days falling in that financial year.
(4) A company to which this regulation applies shall, at
the end of the financial year, make a transfer from the equalisation reserve
of such an amount as is necessary to reduce the equalisation reserve to
zero.
Accelerated
(1) Subject to paragraph (2) of this regulation, any company start-up.
which is a Title II company which immediately before the date of corning
into force of the Act held a licence under the 1981 Act to operate as an
insurer and to carry on business of insurance of anyone or more classes
falling within anyone or more business groups which draws up its
financial statements pursuant to the provisions of section 20 of the Act
and in the form and content prescribed by the Insurance Business
(Companies Accounts) Regulations, 2000 for the first time immediately
after the appointed date may once only, and only at the end of the
financial year to which the statements relate, transfer out of the reserve
fund maintained by the company under subsection (1) of section 8 of
the 1981 Act ("the reserve fund") into the equalisation reserve an amount
which -
(a) where the value of the reserve fund of the company
equals or exceeds the value of the business group maximum in
respect of that business group or the aggregate value of the business
group maxima in respect of those business groups, as the case may
be, is, in either case, equal to or less than the value of the business
group maximum or the aggregate value of the business group
maxima;
(b) where the value of the reserve fund of the company is
less than the value of the business group maximum in respect of
that business group or the aggregate value of the business group
maxima in respect of those business groups, as the case may be, is,
in either case, equal to or less than the value of the reserve fund.
(2) Where any Title II company as aforesaid has drawn up
its financial statements pursuant to the provisions of section 20 of the
Act and in the form and content determined by a directive issued to the
company in writing for such purpose by the Centre for the first time
immediately after the appointed date, the company shall, for the purposes
of transferring of funds from the reserve fund to the equalisation reserve,
be deemed to have drawn up the financial statements pursuant to
subsection (1) of this section.
TITLE III - CREDIT INSURANCE BUSINESS
Application.
(1) This Title of this Part of these regulations applies to a
company whose head office is in Malta authorised to carry on credit
insurance business.
(2) This Title of this Part of these regulations applies to credit
insurance business.
(3) Subject to paragraph (4) of this regulation, this Title of
this Part of these regulations does not apply in the case of a company as
aforesaid, where the net premiums written in any financial year in respect
of its credit insurance business are less than 4 per centum of the total
net premiums written by it in that financial year and less than one million
Maltese liri.
(4) This Title ofthis Part of these regulations shall apply in
the case of a company as aforesaid notwithstanding the company satisfies
the provisions of paragraph (3) of this regulation if the company elects
to maintain an equalisation reserve in respect of its credit insurance
business.
A Title III company shall maintain an equalisation reserve in
respect of credit insurance business carried on by the company in
accordance with the Eighth Schedule.
PART IX - VALUATION OF ASSETS
(l) In this Part of these Regulations, unless the context
otherwise requires -
"amortised value" means the amortised value as determined
in accordance with generally accepted accounting concepts, bases
and policies or other generally accepted methods appropriate to
insurance companies;
"approved counterparty" means an approved credit institution
or any other institution as may be approved for such purpose by
the Centre;
"approved credit institution" means an institution licensed as
such under the Banking Act, 1994 or any other institution approved
for such purpose by the Centre with an appropriate credit rating as
may from time to time be agreed;
"approved financial institution" means any financial
institution licensed as such under the Financial Institutions Act,
1994 or any other institution approved for such purpose by the
Centre with an appropriate credit rating as may from time to time
be agreed;
"approved securities" means any of the following -
(a) any securities issued or guaranteed by, or the
repayment of the principal of which, or the interest on which
is guaranteed by, and any loans to or deposits with, the
Government of Malta or a government of a state of any country
falling within the zone of countries;
(b) any loan to, or deposit with, an approved credit
institution or approved financial institution;
"asset" includes part of an asset;
"collective investment scheme" has the same meaning as is Act No. XIV
assigned to it by subsection (1) of section 2 of the Investment of 1994.
Services Act, 1994;
"company" includes any body corporate;
"contract for differences" shall be construed in accordance
with paragraph 6 ofthe Second Schedule to the Investment Services
Act, 1994;
"counterparty" has the meaning set out in the Tenth Schedule;
"debt" includes an obligation to pay a sum of money under a
negotiable instrument;
"debt security" includes bonds, notes, debentures and
debenture stock;
"deferred acquisition costs" means those items shown at GIl
under the heading "Assets" listed in the balance sheet fonnat set
out immediately following paragraph 15 of the First Schedule to
the Insurance Business (Companies Accounts) Regulations, 2000;
"derivative contract" means a contract for differences, a
futures contract or an option; and includes a contract under which
the amount payable by either party is calculated by reference to
the amortised value of any property;
"equivalent securities" means securities issued by the same
issuer being of an identical type and having the same nominal value,
description and amount;
"exposure" -
(a) in relation to assets, means an amount determined
in accordance with regulation 61 of, and paragraph 5 of the
Tenth Schedule to, these regulations; and
(b) in relation to a counterparty, means an amount
determined in accordance with regulation 61 of, and
paragraphs 12 to 15 of the Tenth Schedule to, these
regulations;
"fixed interest securities" means securities which under their
terms of issue provide for fixed amounts of interest;
"futures contract" means a contract which falls within
paragraph 5 of the Second Schedule to the Investment Services
Act, 1994;
"general business amount" has the meaning given in the Tenth
Schedule;
"general business assets" and "general business liabilities"
mean respectively assets and liabilities of an insurance company
which are not long term business assets or long term business
liabilities;
"general premium income" means, in relation to an insurance
company in any year, the net amount, after deduction of any
premiums payable for reinsurance, of the premiums receivable by
the company in that year in respect of all business of insurance
other than long term business;
"index linked benefits" means benefits -
(a) provided for under any contract the effecting of
which constitutes the carrying on of long term business of
insurance; and
(b) determined by reference to fluctuations in any index
of the value of property (whether specified in the contract or
not);
"initial margin", in respect of a derivative contract or a contract
or asset having the effect of a derivative contract, means assets
which, before or at the time the contract is entered into, are
transferred by the insurance company subject to a condition that
such assets (or where the assets transferred are securities, equivalent
securities) will be returned to the company on completion of that
contract;
"intermediary" means a person authorised under section 13
of the Act or whose name appears in any of the lists established
and maintained under section 7 or 31 of the Insurance Brokers and Act No. XVIII
Other Intermediaries Act, 1998;
"issuer", in respect of a collective investment scheme, means
the manager or operator of the scheme and in respect of an interest
in a commercial partnership, means the partnership;
"land" means land or building; and "piece of land" shall be
construed accordingly;
"linked assets" means, in relation to an insurance company,
long term business assets of the company which are, for the time
being, identified in the records of the company as being assets by
reference to the value of which property linked benefits are to be
determined;
"listed", in relation to an investment, means that-
(a) there has been granted and not withdrawn a listing
in respect of that investment on the Malta Stock Exchange or
any other stock exchange acceptable to the Centre in any other
state which is a stock exchange within the law of that state;
or
(b) facilities for dealing in that investment have been
granted on a regulated market;
and "unlisted" shall be construed accordingly;
"long term business amount" has the meaning given in
paragraph 2 of the Tenth Schedule;
"long term business assets" and "long term business liabilities"
mean respectively assets of an insurance company which are, for
the time being, identified as covering the long term fund or funds
maintained by the company in respect of its long term business
and liabilities of the company which are attributable to its long
term business;
"market value" means the market value as determined in
accordance with generally accepted accounting concepts, bases
and policies or other generally accepted methods appropriate to
insurance companies;
"option" means any type of instrument falling within those
instruments described in paragraph 3 of the Second Schedule to
the Investment Services Act, 1994 or a warrant;
"permitted asset exposure limit" has the meaning set out in
paragraph 3 of the Tenth Schedule;
"permitted counterparty exposure limit" has the meaning set
out in paragraph 4 of the Tenth Schedule;
"proper valuation" means, in relation to land, a valuation made
by a qualified valuer not more than three years before the relevant
date which determined the amount which would be realised at the
time of the valuation on an open market sale of the land free from
any hypothec, mortgage or charge;
"property linked benefits" means benefits other than index
linked benefits -
(a) provided for under any contract the effecting of
which constitutes the carrying on of long tenn business of
insurance, and
(b) detennined by reference to the value of, or the
income from, property of any description (whether specified
in the contract or not);
"qualified valuer", in relation to any particular type of land
in any particular area, means a person who holds a warrant to
practise as a building professional (Perit) granted under the
Architecture and Civil Engineering Professionals (Periti) Act and,
where the qualified valuer is a person whose country of domicile
is a country outside Malta, a person who is duly qualified and
authorised in the country of his domicile to practise as a building
professional (equivalent to a Perit) under the laws of the country
of his domicile governing architecture and civil engineering
professionals acceptable to the Centre;
"regulated institution" means any of the following -
(a) a company formed and registered under the
Companies Act, 1995 carrying on the business of insurance;
and
(b)
an approved credit institution;
"regulated market" means a market which is characterised
(a)
regular operation;
(b) the fact that regulations issued or approved by the
competent authority of the state where the market is situated-
(i) define the conditions for the operation of and
access to the market;
(ii) define the conditions to be satisfied by a
financial instrument in order for it to be effectively dealt
in on the market; and
(iii) require compliance with reporting and
transparency requirements comparable to those set out
in an international regulated market of good repute; and
(c) the fact that the financial instruments dealt in are
of a quality comparable to those in an international regulated
market of good repute;
''related company" means, in relation to an insurance company-
(a)
a dependant of the insurance company, or
(b) a company of which the insurance company is a
dependant, or
(c) a dependant of a company of which the insurance
company is a dependant;
"relevant date" means, in relation to the valuation of any asset
for any purpose for which this Part of these regulations applies,
the date when the asset falls to be valued for that purpose;
"salvage right" means any right of an insurance company
under a contract of insurance to take possession of and to dispose
of property by virtue of the fact that the company has made a
payment or has become liable to make a payment in respect of a
loss thereof;
"securities" includes shares, debt securities, other sflnilar
instruments or Treasury Bills;
"settlement date" means any date on which the fulfilment of
an obligation under a derivative contract is or may be required;
"share" includes stock;
"subordinated debt" means any debt which, on a winding up
of the debtor, ranks for payment after the claims of general creditors
and is not to be repaid until the claims of all the general creditors
outstanding at the time have been settled;
"variation margin" means -
(a) in respect of a derivative contract, or a contract
having the effect of a derivative contract, assets (other than
assets transferred by way of initial margin) which, at the
relevant date, have been transferred by, to, or for the benefit
of, the company in pursuance of a condition in that contract
or a related contract; and
(b) in respect of an asset having the effect of a
derivative contract, assets which, at the relevant date, have
been transferred by, to, or for the benefit of, the company in
pursuance of a contractual right conferred, or obligation
imposed, by the holding of the asset having the effect of a
derivative contract;
"warrant" means an instrument which falls within paragraph
3 of the Second Schedule to the Investment Services Act, 1994.
(2) For the purposes of these regulations, a company is a
dependant of another company if it is a subsidiary undertaking of that
other company and "subsidiary undertaking" shall be construed in
accordance with paragraph (c) of subsection (2) of section 2 of the
Companies Act, 1995.
(3) For the purposes of these regulations, a debt owed to
(or an obligation to be fulfilled for the benefit of) an insurance company
shall be regarded as being secured only to the extent that it is -
(a)
secured by -
a letter of credit established with an approved credit
(i)
institution; or
(ii) a guarantee provided by an approved credit
institution,
and the sum of the aggregate amount available under all letters of
credit established for the benefit of the company with the same
counterparty, the aggregate amount of all guarantees issued for
the benefit of the company by that counterparty and the amount of
any exposure of the company to that counterparty does not exceed
the permitted counterparty exposure limit fDf t.hat counterparty; or
(b) secured by assets for the valuation of which provision
is made in this Part of these regulations and -
(i) the value of such assets (after deducting reasonable
expenses of sale and the amount of any other debt or obligation
secured thereon having priority to or ranking equally with
the debt or obligation) is sufficient to enable the debt or
obligation to be discharged in full; and
(ii) the value of the assets when aggregated with the
insurance company's exposure to assets of the same
description does not exceed the permitted exposure limit for
assets of that description (as defined in regulation 61 of, and
the Tenth Schedule to, these regulations);
(iii) where the assets give rise to exposure to a
counterparty, the exposure of the company to that
counterparty, when added to the aggregate amount available
under all letters of credit established for the benefit of the
company with that counterparty, and to the aggregate amount
of all guarantees issued for the benefit of that company by
that counterparty, does not exceed the permitted counterparty
exposure limit for that counterparty; or
(c) secured by a contract of pledge within the meaning of
Title XXI of Part II of Book Second of the Civil Code.
(4)
For the purposes of paragraph (3) of this regulation -
(a) the aggregate amount available under letters of credit
established with a counterparty shall be taken not to exceed the
sum of the aggregate amount of all debts and the aggregate value
of all obligations in respect of which those letters of credit were
established; and
(b) the aggregate amount of guarantees issued by a
counterparty shall be taken not to exceed the sum of the aggregate
amount of all debts and the aggregate value of all obligations so
guaranteed; and
(c) assets which are securing any other debt owed to (or
obligation to be fulfilled for the benefit of) the company shall be
treated as if they were assets of the company.
(1) Subject to paragraph (2) of this regulation, this Part of
these regulations applies with respect to the determination of the value
of assets of insurance companies for the purposes of -
(a) paragraph (c) of subsection (1) of section 11, sections
14, 16, 17 and 18, subsection (4) of section 41 and subsections (2)
and (3) of section 42 of the Act;
(b)
any investigation to which section 23 of the Act applies;
and
(c) any actuarial investigation made in pursuance of a
directive made by the Centre under any other provision of the Act.
(2) Where an insurance company has entered into any
contracts providing for the payment of property linked benefits, this
Part of these regulations shall not apply with respect to the detennination
of the value of the linked assets to the extent that they are held to match
liabilities in respect of such benefits.
(3) Subject to paragraph (4) of this regulation, any asset to
which this Part of these regulations applies (other than cash) for the
valuation of which no provision is made in this Part of these regulations
shall be left out of account for the purposes specified in paragraph (1)
of this regulation.
(4) The Centre may, in exceptional circumstances, on an
application made to it in writing in that behalf, pennit any such asset as
is referred to in paragraph (3) of this regulation to be taken into account,
or to be taken into account to a specified extent, and, if the asset is
taken into account, or taken into account to a specified extent, the value
of such asset shall be determined in accordance with specific valuation
provisions issued in writing for such purpose by the Centre.
(5) Where in all the circumstances of the case it appears
that the value of any asset is of a lesser value than the amount calculated
in accordance with this Part of these regulations, such lesser value shall
be the value of the asset.
(6) For the purposes of paragraph (5) of this regulation, in
determining whether it appears that an asset is of a lesser value than a
specified amount, regard shall be had to the underlying security and, in
the case of bonds, debt securities and other money and capital market
instruments, the credit rating of the issuer, including whether the issuer
belongs to any country falling within the zone of countries.
(7) Notwithstanding paragraph (1) of this regulation (but
subject to the conditions set out in paragraph (8) thereof), an insurance
company may, for the purposes of an investigation to which section 23
of the Act applies or any actuarial investigation made in pursuance of a
directive made by the Centre under any other provision of the Act, elect
to assign to any of its assets the value given to the asset in question in
the books or other records of the company.
(8) The conditions referred to in paragraph (7) of this
regulation are -
(a) that the election shall not enable the company to bring
into account any asset for the valuation of which no provision is
made in this Part of these regulations;
(b) that the value assigned to the aggregate of the assets
shall not be higher than the aggregate of the value of those assets
as detennined in accordance with regulations 50 to 61 of these
regulations.
(9) Where an insurance company has entered into a contract
for the conversion of currency which satisfies the conditions set out in
paragraph (10) of this regulation, then, for any of the purposes for which
this Part of these regulations applies, the company shall treat the
conversion as having been made on the relevant date.
(10) The conditions referred to in paragraph (9) of this
regulations are that-
(a)
either-
(i) the contract provides for the conversion into another
currency of an amount representing the sale of an asset which
has, on the relevant date, been sold but not delivered, or
(ii) the contract provides for the purchase of currency
for the purpose of settling the purchase of an asset which has,
on the relevant date, been purchased but not delivered;
(b)
the conversion is to take place during a period which
is -
(i) where the contract is in connection with the delivery
of a listed security, a period commencing on the date of the
contract and extending for the usual period of settlement as
laid down by the rules of the relevant stock exchange or
regulated market, or
(ii) where the contract is in connection with the delivery
of any other asset, a period commencing on the date of the
contract and extending for twenty working days thereafter;
and
(c) the contract is listed or has been entered into with an
approved counterparty.
(1) Subject to paragraph (2) of this regulation, the value of
any share in a dependant of an insurance company shall be not greater
than that part of the net asset value of the dependant which would be
payable in respect of the share if the dependant were in liquidation and
the net asset value were the amount distributable to the shareholders in
the winding up.
(2) In valuing an asset of an insurance company which
consists of shares in another company which is a dependant, any part of
that value which arises from an interest by that other company, direct or
indirect, in the shares of the insurance company shall be left out of
account.
(3) In this regulation, "net asset value" means, in relation
to a dependant, the amount by which the value of its assets, as determined
in accordance with regulation 51 of these regulations, exceeds the
amount of its liabilities as determined in the case of a dependant which
is an insurance company, in accordance with the said regulation 51.
(4) The value of any debt due, or to become due, to an
insurance company from a dependant (other than a debt to which
paragraph (2), (3) or (6) of regulation 52 of these regulations) shall be
the amount which would reasonably be expected to be recovered in
respect of that debt (due account being taken of any security held in
respect thereof and of the terms and conditions for payment) if the
dependant were in liquidation and -
(a) in the case of a dependant which is an insurance
company, the amount realised from its assets and the amount of its
liabilities in the liquidation were equal to the value of those assets
and the amount of those liabilities, as determined in accordance
with regulation 51 of these regulations, and
(b) in the case of a dependant which is not an insurance
company, the amount realised from its assets in the liquidation
were equal to the value of those assets, as determined in accordance
with the said regulation 51.
(5)
Any share in a dependant-
(a) in which there is no excess of assets over liabilities as
is mentioned in paragraph (3) of this regulation, or
(b) in relation to which an insurance company cannot
reasonably ascertain the amount of the liabilities of the dependant
for the purposes of the said paragraph (3),
shall be left out of account for the purposes for which this Part of these
regulations applies.
(6) Where an insurance company is unable to determine
the value of any debt due, or to become due, to the company from a
dependant because it cannot reasonably ascertain the amount of the
liabilities of the dependant for the purpose of ascertaining what would
reasonably be expected to be recovered in respect of that debt in
accordance with paragraph (4) of this regulation, the debt shall be left
out of account for the purposes for which this Part of these regulations
applies.
(I) This regulation shall apply with respect to the Valuation of assets
determination of the value of the assets and the amount of the liabilities ~~~~;~~%~f
of a dependant for the purposes of regulation 50 of these regulations. the purposes of
regulation 50.
(2) In the case of a dependant which is an insurance
company, whether or not it is a company authorised under the Act-
(a) subject to paragraph (4) of this regulation and paragraph
3 of the Ninth Schedule, the value of its assets shall be determined
in accordance with this Part of these regulations;
(b) subject to sub-paragraphs (c), (d), (e) and (f) of this
paragraph, the amount of its liabilities shall be determined in
accordance with Part X of these regulations;
(c) where the dependant carries on general business, its
general business liabilities shall be deemed to include an amount
equal to whichever is the greater of 200,000 Maltese liri or 20 per
centum of the general premium income;
(d) where the dependant carries on long term business, its
long term business liabilities shall be deemed to include whichever
is the greatest of the following three amounts -
(i) an amount ("the first amount") which is one-sixth
of the required margin of solvency that would be arrived at
by regarding the dependant as having its head office in Malta
(whether it has or not) and applying the provisions of the
First Schedule;
(ii) an amount which is six times the first amount,
reduced by the implicit figure within the meaning of sub-
paragraph (e) of this paragraph;
(iii)
400,000 Maltese liri;
(e) for the purposes of indent (ii) of sub-paragraph (d) of
this paragraph the implicit figure is -
(i) in the case of a dependant having its head office in
Malta, the amount of any implicit items relating to future
profits, zillmerising or hidden reserves which the dependant
is permitted to count by virtue of an approval given under
paragraph (5) of regulation 9 of these regulations and the
application of paragraph (5) of regulation 9 and regulations
10,11 and 12 of these regulations, and
(ii) in the case of a dependant having its head office in
a country outside Malta, the amount of any implicit items
relating to future profits or zillmerising which would be
arrived at by regarding the dependant as having its head office
in Malta and as having been permitted to count by virtue of
an approval given under paragraph (5) of regulation 9 of these
regulations and by applying paragraph (5) of regulation 9 and
regulations 10 and 11 of these regulations accordingly;
(f) in any case where the dependant is required to establish
a long term business fund or funds under section 17 of the Act, its
long term business liabilities shall be deemed to be not less than
the value of the assets covering that fund or funds.
(3)
In the case of a dependant which is not an insurance
company -
(a) the value of its assets shall be determined in accordance
with this Part of these regulations, subject to the provisions of and
the modifications provided for in paragraphs 3 and 4 of the Ninth
Schedule;
(b) subject to paragraph (4) of this regulation, assets ofthe
dependant which are of a relevant description shall be taken into
account only to the extent that their value does not exceed the
permitted limit applicable to the dependant in relation to those
assets; and
(c) any equipment leased by the dependant exclusively to
any person other than its subsidiary or holding company or a
subsidiary of its holding company shall be valued as a debt for the
purposes of this Part of these regulations.
(4)
Where-
(a) the dependant is an insurance company and has
general business assets of a relevant description or is not an
insurance company and has assets of a relevant description,
(b) the value of such assets exceeds the permitted limit
applicable to the dependant in relation to those assets, and
(c) the insurance company has no assets of the same
description of the relevant class, or has assets of the same
description of the relevant class and their value is less than
the permitted limit applicable to the insurance company in
relation to those assets,
then, for the purpose of determining the value of the assets of the
dependant, there shall be added to the permitted limit applicable to the
dependant in relation to the assets referred to in sub-paragraph (a) of
this paragraph an amount equal to the supplementary amount determined
in accordance with Part I of the Ninth Schedule.
(5)
In this regulation and the Ninth Schedule -
"assets of a relevant description" means assets of a description
specified in Part II of the Tenth Schedule or, in the case of a
dependant which is not an insurance company, assets which would
be of such a description if it were an insurance company;
"the insurance company" means the company the value of
whose shares in or debt due or to become due from the dependant
is being determined in accordance with regulation 50 of these
regulations;
"permitted limit" means, in relation to assets of a relevant
description -
(a) in the case of the insurance company, or a dependant
which is an insurance company, an amount equal to the
percentage of the general business amount or, as the case may
be, the long term business amount applicable in relation to
assets of that description in accordance with regulation 61 of
these regulations (as applied in the case of a dependant
pursuant to paragraph (2) of this regulation); and
(b) in the case of a dependant which is not an insurance
company, an amount equal to the percentage specified in the
Tenth Schedule, with respect to assets of that description, of
the liabilities of the dependant, other than liabilities to the
insurance company or any other related company of the
insurance company;
and references to assets held by any company being of the same
description as assets held by a dependant mean -
(i)
in relation to land of the dependant of a description
specified in paragraph 1 of Part IT of the Tenth Schedule, any
interest of that other company in that land, and
(ii) in relation to assets of the dependant of a description
specified in paragraphs 2 to 17 of Part IT of the Tenth Schedule,
assets of that other company which, if held by the dependant,
would be assets of that description.
(6) Save as otherwise provided in sub-paragraph (5) of
paragraph 3 of the Ninth Schedule, references in this regulation and in
the Tenth Schedule to assets of the insurance company being of a relevant
class mean-
(a) where this regulation and the Ninth Schedule are being
applied for the purpose of determining the value of a long term
business asset of the insurance company, assets of the insurance
company which are long term business assets, and
(b) in any other case, assets of the insurance company which
are general business assets.
(7) Where the insurance company cannot reasonably
ascertain in accordance with the provisions of this regulation -
(a)
the value of any asset of the dependant, or
the amount of the permitted limit applicable in relation
(b)
to any asset of the dependant,
that asset shall be left out of account in determining the value of the
assets of the dependant under this regulation.
(1) The value of any secured debt due, or to become due, ~bts and other
to an insurance company, other than a debt to which paragraph (4) of nghts.
regulation 50 of these regulations or paragraph (2), (3) or (7) of this
regulation applies, shall be -
(a) in the case of any such debt which is due, or will become
due, within twelve months of the relevant date (including any debt
which would become due within that period if the company were
to exercise any right to which it is entitled to require payment of
the same), the amount which can reasonably be expected to be
recovered in respect of that debt (due account being taken of the
nature and quality of the security and the terms and conditions for
payment thereof); and
(b) in the case of any other such debt, the amount which
would reasonably be paid by way of consideration for an immediate
assignment of the debt (due account being taken by the nature and
quality of the security and the terms and conditions for payment
thereof).
Any debt due, or to become due, to an insurance
(2)
company under a letter of credit shall be left out of account for the
purposes of this Part of these regulations.
(3) In the case of long term business carried on by a
company, the value of any debt due, or to become due, to the company
which is secured on a policy of insurance issued by the company and
which (together with any other debt secured on that policy) does not
exceed the amount payable on a surrender of that policy at the relevant
date shall be the amount of that debt.
(4) The value of any unsecured debt due, or to become due,
to an insurance company, other than a debt to which paragraph (4) of
regulation 50 of these regulations, paragraph (5), (6) or (7) of this
regulation or regulation 57 or 60 of these regulations applies, shall
be-
(a) in the case of any such debt which is due, or will become
due, within twelve months of the relevant date (including any debt
which would become due within that period if the company were
to exercise any right to which it is entitled to require payment of
the same), the amount which can reasonably be expected to be
recovered in respect of that debt (due account being taken of the
terms and conditions for payment thereof); and
(b) in the case of any other such debt, the amount which
would reasonably be paid by way of consideration for an immediate
assignment of the debt (due account being taken of the terms and
conditions for payment thereof).
(5) The value of any rights of the company under a contract
of reinsurance to which it is a party shall be the amount which can
reasonably be expected to be recovered in respect of those rights
Provided that those provisions shall not apply to -
(a) rights under a contract of reinsurance in respect of
long tenn business except to the extent that debts are due
under such contracts; or
(b) debts to which paragraph (4) of regulation 50 of
these regulations applies which are due or to become due.
(6) Notwithstanding paragraph (5) of this regulation, for the
purposes of section 17 of the Act, the amount recoverable by an
authorised company under contracts of reinsurance ceded by the
company to be netted from the amount set aside by the company to
meet its liabilities under contracts of insurance shall not exceed 75 per
centum of the amount of such .cession. However, any reduction in the
technical provisions arising from reinsurance shall be restricted to the
extent of the insurance risk transferred under the reinsurance
arrangements.
(7)
Any debt due, or to become due, to the company -
(a) from an intennediary in respect of money advanced on
account of commission to which that intennediary is not absolutely
entitled at the relevant date, or
(b)
in respect of unpaid share capital of the company, or
(c) from a company of which it is a dependant where such
debt is subordinated debt, or
(d)
which is a debt to which paragraph (8) of this regulation
applies,
shall be left out of account for the purposes for which this Part of these
regulations applies.
(8) This paragraph shall apply to a debt which is a debt
owed in respect ofpremiums (due account being taken of rebates, refunds
and commissions payable) which is recorded in the company's
accounting records as due and payable and has been outstanding for
more than three months
Provided that, where a debt is debt which-
(a) has been outstanding for more than three months
but not more than six months since it was due and payable;
and
(b) is attributed to a transaction which is recorded in
the company's accounting records as due and payable for not
more than twelve months,
the debt shall be taken into account for the purposes for which this Part
of these regulations applied but only to the extent that the value of the
debt shall be reduced not to exceed seventy-five per centum of the
amount which can reasonably be expected to be recovered in respect of
that debt (due account being taken of the terms and conditions for
payment thereof).
(9) In the case of general business carried on by a company,
the value of any subrogation rights of the company shall be the amount
which can reasonably be expected to be recovered by virtue of the
exercise of those rights.
(10) In the case of general business carried on by a company,
the value of any salvage right of the company shall be the amount which
can reasonably be expected to be recovered by virtue of the exercise of
that right.
(11) The value of any right to recover assets transferred by
way of initial margin shall be determined -
(a) where the initial margin was a payment in cash, as if there
were a debt owed to the insurance company for that amount, and
where the initial margin took the form of a transfer of
(b)
securities, as if there were a debt owea to the insurance company
of an amount equal to the value of such securities as determined in
accordance with this Part of these regulations.
(12) The value of any rights arising under a derivative
contract to which regulation 59 of these regulations does not apply, or
under a contract or asset having the effect of a derivative contract to
which the said regulation 59 does not apply, shall be the value of any
right to recover assets transferred by way of initial margin together
with the value of any other unconditional right to receive a specified
amount.
(13) This regulation shall not apply to any rights (other than
debts due) in respect of -
(a)
investments in dependants;
(b) securities or beneficial interests in a commercial
partnership;
(c)
units or other beneficial interests in a collective
investment scheme;
(d) a derivative contract, except as provided under paragraph
(11) or (12) of this regulation; or
(e) a contract or asset which has the effect of a derivative
contract except as provided under paragraph (11) or (12) of this
regulation or under paragraph (4) or (5) of regulation 60 of these
regulations.
(1) The value of any land of an insurance company (other
than land held by the company as security for a debt or to which
paragraph (2) of this regulation or regulation 58 of these regulations
applies) shall be not greater than the amount which (after deduction of
the reasonable expenses of sale) would be realised if the land were sold
at a price equal to the most recent proper valuation of that land which
has been provided to the company and any such land uf which there is
no proper valuation shall be left out of account for the purposes for
which this Part of these regulations applies.
(2) The value of any interest in land which is determinable
upon the death of any person or upon the happening of some other
future event or at some future time shall be the amount which would
reasonably be paid by way of consideration for an immediate transfer
thereof.
The value of any office machinery (including computer Equipment.
equipment), furniture, motor vehicles and other equipment of an
insurance company -
(a) in the financial year of the company in which it is
purchased, shall be not greater than three-quarters of the cost thereof
to the company;
(b) in the first financial year thereafter, shall be not greater
than one-half of that cost;
(c) in the second financial year thereafter, shall be not greater
than one-quarter of that cost; and
(d) in any subsequent financial year, shall be left out of
account for the purposes for which this Part of these regulations
applies.
(1) This regulation applies to the valuation of investments Securities and
beneficial interests
comprising securities and beneficial interests in commercial partnerships in conunercial
and, for the purposes of paragraph (5) of this regulation, investments partnerships.
includes loans. However, this regulation shall not apply to the valuation
of securities which are -
(a)
derivative contracts;
investments in dependants;
(b)
(c) units or other beneficial interests in collective investment
schemes, except as provided in paragraph (2) of regulation 56 of
these regulations; or
(d) contracts or assets having the effect of derivative
contracts, except as provided in paragraph (4) of regulation 13 of
these regulations.
(2) Subject to paragraphs (4) and (5) of this regulation and
regulation 60 of these regulations, the value of an investment to which
this regulation applies shall be -
(a) where the investment is transferable and paragraph (3)
of this regulation does not apply, the market value; and
(b) where the investment is transferable and paragraph (3)
of this regulation applies, the lower of
(i)
the market value, and
(ii) the amount which would reasonably be expected
to be received by way of consideration for an assignment or
transfer of the investment at a date not later than twelve months
after the relevant date, it being assumed that negotiations for
the assignment or transfer commenced on the relevant date
and the assignment or transfer was made other than to the
issuer or to an associate or an associated company of the issuer
or of the insurance company; and
(c)
where the investment is not transferable
the amount payable on redemption on the relevant
(i)
date or the most recent date before the relevant date on which
the issuer of the investment could have been required to
redeem the investment; or
(ii) where the investment cannot be redeemed, the
amount which would reasonably be paid by way of
compensation for the surrender of the interest in the
investment.
(3) This paragraph applies where it is not reasonable to
assume that, had negotiations for the assignment or transfer of the
investment commenced not more than seven working days before the
relevant date, the investment could have been assigned or transferred
on the relevant date for an amount not less than 97.5 per centum of the
market value other than to the issuer or to an associate or associated
company of the issuer or of the insurance company.
(4) Paragraph (3) of this regulation shall be taken not to
apply if it applies by reason only that -
(a) the listing of the investment has been temporarily
suspended following receipt of price sensitive information by the
stock exchange on which the investment is listed or the regulated
market on which facilities for dealing have been granted; or
(b) the extent of the holding would prevent an orderly
disposal of the investment for an amount equal to or greater than
97.5 per centum of the market value.
(5) Where an insurance company has made more than one
unlisted investment (other than a number of investments exclusively
comprising loans) and the value of such investments when taken together
is greater than the aggregate of the values of each investment valued
separately, then, such higher value may be ascribed to the investments
if it is reasonable to assume that none of the investments would be
assigned or transferred separately.
(1) Subject to paragraph (3) of this regulation, this Beneficialinterests
regu I atlOn applies to holdings of units or other beneficial interests in - investment
(a) a collective investment scheme within the meaning of
the Investment Services Act, 1994; or
(b)
any other collective investment scheme where
(i) the scheme does not employ derivative contracts
unless they are contracts to which regulation 59 of these
regulations applies; and
the scheme does not employ contracts or assets
(ii)
having the effect of derivative contracts unless they have the
effect of derivative contracts to which the said regulation 59
applies; and
(iii) the property of the scheme does not include assets
other than those for the valuation of which provisions is made
in this Part of these regulations.
(2) The value of units or other beneficial interests in a
collective investment scheme to which this regulation applies shall be-
(a) where the issuer can be required to purchase the units or
other beneficial interests from the holder upon the holder giving
notice of one month or less, the price at which the issuer would
have purchased the units or other beneficial interests on the relevant
date or the most recent date before the relevant date on which it
could have been required to make such a purchase; and
(b) where the issuer cannot be required to purchase the units
or other beneficial interests as set out in sub-paragraph (a) of this
paragraph, a value determined in accordance with regulation 55 of
these regulations.
(3) Other than as provided in paragraph (4) of regulation
60 of these regulations, this regulation shall not apply to units or other
beneficial interests in a collective investment scheme which has the
effect of a derivative contract.
In the case of general business, the value of deferred Deferred acquisition
acquisition costs shall be the value as determined in accordance with costs.
generally accepted accounting concepts, bases and policies or other
generally accepted methods appropriate to insurance companies.
The value of any long term business asset of a company
consisting of an interest in property which is a remainder, reversionary
interest, right of fee subject to a different or other future interest, whether
vested or contingent, shall be the amount which would reasonably be
paid by way of consideration for an immediate transfer or assignment
thereof.
(1) The value of rights (other than rights to recover assets
transferred by way of initial margin) under a derivative contract to which
this regulation applies shall be -
(a) in the case of a listed derivative contract, the market
value; and
(b) in the case of an unlisted derivative contract, the amount
which would reasonably be paid by way of consideration for closing
out that contract
in either case taking into account the market value of any assets which,
at the relevant date, have been transferred by way of variation margin.
(2) This regulation applies to an approved derivative
contract which is covered and -
(a) which is held in connection with a contract or asset of
the type described in paragraph (3) of this regulation for the
purposes of reduction of investment risks or efficient portfolio
management; or
(b) which has the effect of an approved derivative contract
held in connection with a contract or asset of the type mentioned
in the said paragraph (3) for such purposes.
(3)
The contract or asset described in this paragraph shall
be either-
(a) an approved derivative contract or a contract or asset
having the effect of an approved derivative contract either of which,
when taken together with the approved derivative contract the rights
under which are being valued in accordance with this regulation,
would have the effect that the company either holds an asset for
the valuation of which provision is made in this Part of these
regulations or holds an approved derivative contract in connection
with such an asset; or
(b) an asset for the valuation of which provision is made in
this Part of these regulations, being neither a derivative contract
nor a contract or asset having the effect of a derivative contract.
(4) For the purposes of this regulation an approved
derivative contract is covered if it does not require a significant provision
to be made in respect of it pursuant to regulation 65 of these regulations.
(5) For the purposes of determining in accordance with
paragraph (4) of this regulation whether a required provision is
significant, regard shall be had to the obligations of the company under
the contract and the volatility of the assets identified by the company as
being suitable to cover such obligations, and the required provision in
respect of anyone derivative contract shall be deemed to be significant
(a) the aggregate provision required in respect of all
contracts having a similar effect is significant; or
(b) the aggregate provisiop required in respect of all
contracts with which it is connected is significant.
(6) In this regulation "approved derivative contract" means
a derivative contract which -
(a) either is listed or has been entered into with an approved
counterparty; and
(b) the insurance company reasonably believes may be
readily closed out; and
(c) is either a contract for differences to which paragraph
(7) of this regulation applies or a futures contract or an option to
either of which paragraph (8) of this regulation applies.
(7)
This paragraph applies to -
(a) a contract for differences under which the amount
payable by either party is calculated solely by reference to
fluctuations in any of the following, namely -
(i) the value of an asset for the valuation of which
provision is made in this Part of these regulations; or
(ii) the amount of income from such an asset over a
defined period; or
(iii) an index of such assets, being an index in respect
of which a derivative contract is listed; or
(iv) a national index of retail prices published by or
under the authority of the Government of Malta or a
government of a state of any country falling within the zone
of countries;
or an arithmetic average thereof, and -
(b) a contract under which the amount payable by either
party is calculated by reference to the difference between the market
value and the amortised value of any asset for the valuation of
which provision is made in this Part of these regulations.
(8) This paragraph applies to a futures contract or an option
which in either case provides for the acquisition or disposal of assets
for the valuation of all of which provision is made in this Part of these
regulations at a price which is determined by one or more of the
following methods -
(a) for each date on which the contract may be completed
or tire option exercised, the price is a fixed amount under the terms
of the contract or option;
(b) it is determined by reference to the market value or the
amortised value of an asset for the valuation of which provision is
made in this Part of these regulations or the amount of income
over a defined period from such an asset;
(c) it is determined by reference to an index of the kind
mentioned in indent (iii) or (iv) of paragraph (7) of this regulation.
(1) Subject to paragraph (3) of this regulation, for the
purposes of this Part of these regulations, a contract has the effect of a
derivative contract if it is a contract (other than a derivative contract)
which provides whether upon the exercise of a right by the insurance
company or otherwise -
(a) for payment (at any time) of amounts which are
determined by fluctuations in
(i)
the value of property of any description;
(ii)
an index of the value of property of any description;
(iii)
income from property of any description; or
(iv) an index of income from property of any
description;
(b) for delivery of an asset other than an asset for the
valuation of which provision is made in regulation 54 of these
regulations to or by the insurance company; or
(c) for the conversion of an asset held by the insurance
company or another party to -
(i)
an asset of a different type; or
(ii)
a different asset of the same type.
(2) Subject to paragraph (3) of this regulation, for the
purposes of this Part of these regulations an asset has the effect of a
derivative contract ifthe asset is an asset (other than an approved security
or an asset falling within sub-paragraph (a) of paragraph (1) of regulation
56 of these regulations) and the holding of the asset confers contractual
rights or imposes contractual obligations to make or accept payment,
delivery or conversion as set out in sub-paragraphs (a) to (c) of paragraph
(1) of this regulation.
(3) A contract or asset does not have the effect of a derivative
contract by reason only that
(a) it provides for the unconditional delivery of assets, or
for the payment for unconditional delivery of assets, such delivery
or payment to be made within a period commencing at the date of
the contract and extending
(i) in the case of a listed security, for the usual period
for delivery or payment as determined by the rules of the
stock exchange or regulated market on which the securities
are listed or facilities for dealing have been granted;
(ii)
in any other case, for twenty working days;
(b) it is a contract of the type described in paragraph (9) of
regulation 49 of these regulations in respect of which the conditions
set out in paragraph (10) of regulation 49 of these regulations have
been satisfied.
(4)
Rights in respect of a contract or asset which has the
effect of a derivative contract to which regulation 59 of these regulations
applies shall -
(a) where the asset is a security, be valued in accordance
with regulation 55 of these regulations;
(b) where the asset comprises units or other beneficial
interests in a collective investment scheme, be valued in accordance
with regulation 56 of these regulations; and
(c) where the asset is a debt or other right, be valued in
accordance with regulation 52 of these regulations.
(5) Rights in respect of a contract or asset having the effect
of a derivative contract to which regulation 59 ofthese regulations does
not apply shall have a value determined in accordance with paragraph
(12) of regulation 52 of these regulations.
(6) For the purposes of determining whether a contract or
asset has the effect of a derivative contract to which regulation 59 of
these regulations applies, it shall be deemed to have the effect of a
derivative contract which is listed or transacted with an approved
counterparty if it is itself listed or so transacted.
(1) Subject to paragraphs (5) and (6) of this regulation the
aggregate value of the assets of an insurance company as determined in
accordance with this Part of these regulations shall, for any of the
purposes for which this Part of these regulations apply, be reduced by
an amount representing the aggregate of -
(a) the amount by which the company is exposed to assets
of any description in excess of the permitted asset exposure limit
for assets of that description;
(b) the amount by which the company is exposed to a
counterparty in excess of the permitted counterparty exposure limit
for such counterparty;
(c)
the amount by which the company has an excess
concentration with a number of counterparties;
(d) the value of any assets transferred to or for the benefit
of the company in pursuance of a condition in a derivative contract
to which paragraph (2) of regulation 59 of these regulations does
not apply or a related contract~ and
(e) the value of any assets transferred to or for the benefit
of the company in pursuance of a contract having the effect of a
derivative contract to which paragraph (2) of regulation 59 ofthese
regulations does not apply or a related contract,
as determined in accordance with the Tenth Schedule.
(2) Where a company is exposed to assets of any description
in excess of the permitted asset exposure limit for such assets, the
reduction required to be made by sub-paragraph (a) of paragraph (1) of
this regulation shall be made -
(a) by deducting (as far as possible) the amount of the excess
from the assets of that description held by the insurance company;
and
(b) where the company does not hold sufficient assets of
that description to eliminate the excess (or does not hold any assets
of that description) by making an appropriate deduction from the
aggregate value of the assets which the company would otherwise
be permitted to take into account for any of the purposes for which
this Part of these regulations applies.
(3) Where an insurance company is required to make a
reduction in accordance with sub-paragraph (b), (c), (d) or (e) of
paragraph (1) of this regulation, the reduction shall be made by making
a deduction from the aggregate value of the assets which the company
would otherwise be permitted to take into account for any of the purposes
for which this Part of these regulations applies.
(4) Where an insurance company carrying on long term
business has attributed assets partly to a long term business fund and
partly to its other assets, any reduction required to be made by this
regulation shall be made in the same proportion as the attribution.
(5)
Assets of an insurance company comprising-
(a)
approved securities or any interest accrued thereon;
(b) debts to which paragraph (3) of regulation 52 of these
regulations applies;
(c) rights to which paragraph (5), (9) or (10) of regulation
52 of these regulations applies;
(d)
debts in respect of premiums;
(e) moneys due from, or guaranteed by, the Government of
Malta or a government of a state of any country falling within the
zone of countries;
shares in or debts due or to become due from a dependant
(f)
falling within regulation 50 of these regulations; or
(g)
deferred acquisition costs,
shall not be taken into account in any of the calculations described in
paragraph (1) of this regulation.
(6) Where a company has entered into any contracts
providing for the payment of index linked benefits, the provisions of
sub-paragraph (a) of paragraph (1) of this regulation shall not apply to
assets of that company to the extent that they are held to match liabilities
in respect of such benefits.
(7) The provisions of this regulation shall not apply to a
company if its business in or from Malta is restricted to reinsurance.
PART X - DETERMINATION OF LIABILITIES
In this Part of these Regulations -
(l)
"derivative contract" has the meaning given in paragraph (1) of
regulation 48 of these regulations;
"general business liabilities" has the same meaning as in paragraph
(1) of regulation 48 of these regulations;
"insurance liabilities" means amounts calculated in accordance with
this Part of these regulations in respect of those items shown at C and D
under the heading "Liabilities" set out in the balance sheet fonnat set
immediately following paragraph 15 of the First Schedule to the
Insurance Business (Companies Accounts) Regulations, 2000;
"long tenn liabilities" means liabilities of an insurance company
arising under or in connection with contracts for long tenn business,
including liabilities arising from deposit back arrangements;
"the valuation date", in relation to an actuarial investigation, means
the date to which the investigation relates.
(2) Every company carrying on long tenn business shall
make available to the public bases and methods used in the calculation
of the technical provisions relating to that business, including provisions
for bonuses in the form, content and manner as may be determined by
an Insurance Directive made by the Centre for the purposes of this
regulation.
This Part of these regulations applies with respect to the
determination of the amount of liabilities of insurance companies for
the purposes of -
(a) paragraph (c) of subsection (1) of section 11, sections
14, 16, 17 and 18, subsection (4) of section 41 and subsections (2)
and (3) of section 42 of the Act;
(b)
an investigation to which section 23 of the Act applies;
and
(c) any actuarial investigation made in pursuance of a
directive made by the Centre under any other provision of the Act.
(1) Subject to this Part of these regulations, the amount of Long tenn business
and general
liabilities of an insurance company shall be determined in accordance business.
with generally accepted accounting concepts, bases and policies or other
generally accepted methods appropriate for insurance companies.
(2) Subject to paragraph (3) of this regulation, in
determining under paragraph (1) of this regulation the amount of
liabilities of an insurance company, all contingent and prospective
liabilities shall be taken into account including all liabilities in respect
of cumulative preference share capital but excluding other liabilities in
respect of share capital.
(3) In determining the amount of the own funds of an
insurance company pursuant to an Insurance Directive to be made by
the Centre for the purposes of the Act to determine the amount and the
components which make up the own funds of the insurance company,
cumulative preference share capital and subordinate loan capital in an
amount not to exceed the percentage of the amount of the own funds of
the company as may be determined by the Directive and subject to the
conditions as may also be determined by the said Directive shall not,
notwithstanding the provisions of paragraph (2) of this regulation, be
taken as liabilities of the company for the purposes of the amount of the
own funds of the company.
(1) An insurance company which has or may have Provision for
adverse changes.
(following the exercise of any right by the company or any other party)
an obligation to which this regulation applies to deliver assets or make
a payment shall -
(a) at all times identify the assets held by it which it considers
to be the most suitable to cover such obligation; and
(b) make prudent provision for the effect on the amount of
its excess assets of adverse variations between the value of the
assets identified and the value of the assets which it is or may be
obliged to deliver or the amount of the payment which it is or may
be obliged to make.
(2) For the purposes of paragraph (1) of this regulation the
company shall take into account all reasonably foreseeable adverse
variations and shall have particular regard to past volatility in the value
of the assets concerned (or assets of a similar nature) and the possibility
of adverse changes in such volatility in the future.
(3)
For the purposes of this regulation -
"linked assets" has the meaning given in paragraph (1) of
regulation 48 of these regulations;
"property linked liabilities" has the meaning given in
paragraph 2 of Part I of the Tenth Schedule; and
"the amount of its excess assets" means the difference between
the aggregate value of its assets (other than linked assets to the
extent that they are held to match property linked liabilities),
determined in accordance with Part IX of these regulations, and
the amount of its liabilities (other than property linked liabilities
or liabilities for which provision is made in accordance with this
regulation).
(4) Subject to paragraph (5) of this regulation, this regulation
applies to an obligation -
(a) under a contract relating to investments of the kinds
mentioned in item C under the heading "Assets" set out in the
balance sheet format set immediately following paragraph 15 of
the First Schedule to the Insurance Business (Companies Accounts)
Regulations, 2000 (whether such contract constitutes an asset or
liability of the company);
(b) undertaken for the purposes of, or in connection with
the making of, investments of the kind mentioned in sub-paragraph
(a) of this paragraph; or
(c) under a contract providing for the purchase, sale or
exchange of currency.
(5) This regulation shall not apply to a contract to the extent
that it relates to, or is for the purposes of the making of an investment
in, or is in connection with the making of an investment in, a building
which is to be occupied by the company and used by the company for
the conduct of its business.
The amount of insurance liabilities which are general business General business
liabilities shall be determined in accordance with the rules set out in the
"Rules for detennining provisions" of Title II of the First Schedule to
the Insurance Business (Companies Accounts) Regulations, 2000.
(1) The determination of the amount oflong term liabilities Long tenn
(other than liabilities which have fallen due for payment before the
valuation date) shall be made on actuarial principles which have due
regard to the reasonable expectations of policyholders and shall make
proper provision for all liabilities on prudent assumptions that shall
include appropriate margins for adverse deviation ofthe relevant factors.
(2) The determination shall take account of all prospective
liabilities as determined by the policy conditions for each existing
contract, taking credit for premiums payable after the valuation date.
(3) Without prejudice to the generality of paragraph (I) of
this regulation, the amount of the long term liabilities shall be determined
in compliance with each of regulations 68 to 78 of these regulations
and shall take into account, inter alia, the following factors-
(a)
all guaranteed benefits, including guaranteed surrender
values;
(b) vested, declared or allotted bonuses to which
policyholders are already either collectively or individually
contractually entitled;
(c) all options available to the policyholder under the terms
of the contract;
(d)
expenses, including commissions;
(e) any rights under contracts of reinsurance in respect of
long term business.
(I) Subject to paragraphs (2), (3) and (4) of this regulation, Method of
calculation.
t h e amount 0 f the long term liabilities shall be determined separately
for each contract by a prospective calculation.
(2) A retrospective calculation may be applied to determine
the liabilities where a prospective method cannot be applied to a
particular type of contract or benefit, or where it can be demonstrated
that the resulting amount of the liabilities would be no lower than would
be required by a prudent prospective calculation.
(3) Appropriate approximations or generalisations may be
made where they are likely to provide the same, or a higher, result than
individual calculations of the same amount of the liabilities in respect
of each contract.
(4) Where necessary, additional amounts shall be set aside
on an aggregated basis for general risks which are not individualised.
(5) The method of calculation of the amount of the liabilities
and the assumptions used shall not be subject to discontinuities from
year to year arising from arbitrary changes and shall be such as to
recognise the distribution of profits in an appropriate way over the
duration of each policy.
(6) The liabilities for contracts under which the policyholder
is eligible to participate in any established surplus shall have regard to
the level of the premiums under the contracts, to the assets held in respect
of those liabilities, and to custom and practice of the company in the
manner and timing of the distribution of profits or the granting of
discretionary additions, as the case may be.
(7) For the purposes of paragraph (6) of this regulation
"established surplus" means an excess of assets representing the whole
or a particular part ofthe fund or funds maintained by the company in
respect of its long term business over the liabilities, or a particular part
of the liabilities, of the company attributable to that business as shown
by an investigation to which section 23 of the Act applies or an actuarial
investigation which is made in pursuance of a directive made by the
Centre under any other provision of the Act.
(1) The amount of the liability determined in respect of a
group of contracts shall not be less than such amount as, if the
assumptions adopted for the valuation were to remain unaltered and
were fulfilled in practice, would enable liabilities similarly determined
at all times in the future to be covered from resources arising solely
from the contracts and the assets covering the amount of the liability
determined at the current valuation.
(2) The appointed actuary of an insurance company shall
include in the report of any investigation made under section 23 of the
Act or in pursuance of a directive made by the Centre under any other
provision of the Act, a statement that premiums for new business are
sufficient, on reasonable actuarial assumptions, to enable the company
to meet all its commitments and, in particular, to establish and maintain
adequate technical provisions.
(3) For the purposes of paragraph (2) of this regulation, all
aspects of the financial situation of an insurance company may be taken
into account, without the input from resources other than premiums
and income earned thereon being systematic and permanent in such a
way that it may jeopardise the company's solvency in the long term.
(1) Where further specified premiums are payable by the Valuation of
future premiums.
policyholder under a contract (not being a linked long term contract)
under which benefits (other than benefits arising from a distribution of
profits) are determined from the outset in relation to the total premiums
payable thereunder, then, subject to paragraph (4) of this regulation and
regulation 71 of these regulations -
(a) where the premiums under the contract are at a uniform
rate throughout the period for which they are payable, the premiums
to be valued shall be not greater than such level premiums as, if
payable for the same period as the actual premiums under the
contract and calculated according to the rates of interest and rates
of mortality or disability which are to be employed in calculating
the liability under the contract, would have been sufficient at the
outset to provide for the benefits under the contract according to
the contingencies upon which they are payable, exclusive of any
additions for profits, expenses or other charges;
(b) where the premiums under the contract are not at a
uniform rate throughout the period for which they are payable, the
premiums to be valued shall be not greater than such premiums as
would be determined on the principles set out in sub-paragraph (a)
of this paragraph modified as appropriate to take account of the
variations in the premiums payable by the policyholder in each
year,
save that a premium to be valued shall in no year be greater than the
amount of the premium payable by the policyholder.
(2) Where the terms of the contract have changed since the
contract was first made (the terms of the contract being taken to change
for the purposes of this paragraph if the change is indicated in an
endorsement on the policy but not if a new policy is issued), then, for
the purpose of paragraph (1) of this regulation it shall be assumed that
those changes from the time they occurred were provided for in the
contract at the time it was made.
(3)
Where under a contract (not being linked long term
contract) -
(a) each premium paid increases the benefits (other than
benefits arising from a distribution of profits) provided under the
contract, or
(b) the amount of a premium payable in future is not
determinable until it comes to be paid,
future premiums and the corresponding liability may be left out of
account so long as adequate provision is made against any risk that the
increase in the liabilities of the company resulting from the payment of
future premiums might exceed the amount of the premiums.
(4) An alternative valuation method to that described in
paragraphs (1) to (3) of this regulation may be used where it can be
demonstrated that the alternative method results in reserves no less, in
aggregate, than would result from the use of the method described in
those paragraphs.
(1) In order to take account of acquisition expenses, the
maximum annual premium to be valued under regulation 70 of these
regulations may (subject to paragraph (2) of this regulation) be increased
by an amount not greater than the equivalent, taken over the whole
period of premium payments and calculated according to the rates of
interest and rates of mortality or disability employed in valuing the
contract, of 3.5 per centum (or the defined percentage, if it is lower
than 3.5 per centum) of the relevant capital sum under the contract.
(2) For the purposes of paragraph (1) of this regulation "the
defined percentage" is the percentage arrived at by taking (for all
contracts of the same type as the contract in question for which an
adjustment is made) the average of the percentages of the relevant capital
sum under each such contract that represent the acquisition costs incurred
which, after allowing for the effects of taxation, might reasonably be
expected to be recovered from the premiums payable under the contract.
(3) The increase permitted by paragraph (1) of this
regulation shall be subject to the limitation that the amount of a future
premium valued shall not in any event be greater than the amount of the
premium actually payable by the policyholder.
(4)
For the purposes of this regulation -
(a) for contracts other than temporary assurances, the
relevant capital sum under a contract shall be arrived at in
accordance with paragraph (4) of regulation 11 of these regulations,
and
(b) for temporary assurances, the relevant capital sum shall
be the sum assured on the valuation date.
(1) The rates of interest to be used in calculating the present Rates of
interest.
value of future payments by or to an insurance company shall be no
greater than the rates of interest detennined from a prudent assessment
of the yields on existing assets attributed to the long term business and,
to the extent appropriate, the yields which it is expected will be obtained
on sums to be invested in the future.
(2) For the purposes of paragraph (1) of this regulation, the
assumed yield on an asset attributed to the long term business, before
any adjustment to take account of the effect of taxation, shall not exceed
the yield on that asset calculated in accordance with paragraphs (3) to
(7) of this regulation, reduced by 2.5 per centum of that yield.
(3)
For the purpose of calculating the yield on an asset -
(a) the asset shall be valued in accordance with Part IX of
these regulations, excluding any provision under which assets may
be taken at lower book values for the purposes of any investigation
to which section 23 of the Act applies or any actuarial investigation
made in pursuance of a directive made by the Centre under any
other provision of the Act; and
(b) the future income from any asset required to be taken
into account (whether interest, dividends or repayment of capital)
shall be reduced by a proportion corresponding to such of the excess
exposure to assets of that description, calculated in accordance
with paragraph 12 of Part I of the Tenth Schedule, as may
reasonably be attributed to such assets.
(4) For fixed interest investments (that is to say, investments
which are fixed interest securities as defined in paragraph (1) of
regulation 48 of these regulations) the yield on an asset, subject to
paragraph (7) of this regulation, shall be that annual rate of interest
which, if used to calculate the present value of future payments of interest
before the deduction of tax and the present value of repayments of capital,
would result in the sum of those amounts being equal to the value ofthe
asset.
(5) For variable interest investments (that is to say,
investments which are not fixed interest securities as defined in
paragraph (1) of regulation 48 of these regulations) that are equity shares
or land, the yield on an asset, subject to paragraph (7) of this regulation,
shall be the ratio to the value of the asset of the income before deduction
of tax which would be received in the period of twelve months following
the valuation date on the assumption that the asset will be held throughout
that period and that the factors which affect income will remain
unchanged, so however that account shall be taken of any changes in
those factors known to have occurred by the valuation date in particular,
without prejudice to the generality of the foregoing, of -
(a) any known changes in the rental income from property
or in dividends on equity shares;
(b) any forecast changes in dividends which have been
publicly announced by the valuation date;
(c)
the effect of any alterations in capital structure; and
(d) the value (at the most recent date for which it is known
at the valuation date) of any determinant of the amount of any
future interest payment, the said value being deemed to remain
unaltered for all subsequent dates.
(6) For variable interest investments (that is to say,
investments which are not fixed interest securities as defined in
paragraph (1) of regulation 48 of these regulations) other than equity
shares or land, the yield on an asset, subject to paragraph (7) of this
regulation, shall be that annual rate of interest which, if used to calculate
the present value of future payments of interest, before deduction of
tax, and the present value of repayments of capital, where applicable,
would result in the sum of these amounts being equal to the value of the
asset, on the assumption that -
(a) the value of any determinant of the amount of the next
interest rate payment and capital repayment made during the
following twelve months will be the value of that determinant at
the most recent date for which it is known at the valuation date;
(b) the amount of future interest payments and capital
repayments will take account, where appropriate, of -
(i) the right of either party to have the investment
repaid, and
(ii) an assumed yield on other comparable investments
made in the future not exceeding an amount determined in
accordance with paragraphs (8) to (10) of this regulation; and
(c) indices and all other factors which affect future income
payments or capital repayments will remain unchanged after the
valuation date.
In calculating the yield on an asset under this regulation -
(7)
(a)
if the asset does not consist of equity shares or land-
(i) a prudent adjustment shall be made to exclude that
part of the yield estimated to represent compensation for the
risk that the income from the asset might not be maintained
or that capital repayments might not be received as they fall
due,and
(ii) in making that adjustment, regard shall be had
wherever possible to the yields on risk-free investments of a
similar term in the same currency;
(b) for assets which are equity shares or land, adjustments
to yields shall be made as appropriate to exclude that part, if any,
of the yield from each category of asset that is needed to compensate
for the risk that the aggregate income from that category of asset,
taking one year with another, might not be maintained: for the
purposes of this sub-paragraph, a "category of asset" comprises
assets of a similar nature, type and degree of risk.
(8) To the extent that it is necessary to make an assumption
about the yields which will be obtained on sums to be invested in future,
the yield shall be determined in accordance with paragraphs (9) and
(10) of this regulations.
(9) Where the liabilities are denominated in Maltese lira,
the yield assumed, before any adjustment to take account of the effect
of taxation -
(a) on any investment to be made more than three years
after the valuation date shall not exceed the yield of the most recent
issue of any local development registered stock of a term of not
less than 10 years and not more than 15 years or, in the absence of
any such local development registered stock, such other
determinant as the Minister may, after consultation with the Centre,
by Order in the Gazette, from time to time, establish for the purposes
of this regulation;
(b) on any investment to be made at any time not more than
three years after the valuation date shall not exceed the assumed
yield determined under paragraph (2) of this regulation adjusted
linearly over the said three years to the yield determined in
accordance with sub-paragraph (a) of this paragraph.
(10) Where the liabilities are denominated in currencies
other than Maltese lira, the yield shall be determined on assumptions
that are as prudent as those made under paragraph (9) of this regulation.
(11) In no case shall a rate of interest determined for the
purposes of paragraph (1) of this regulation exceed the adjusted overall
yield on assets calculated as the weighted average of the reduced yields
on the individual assets arrived at under paragraph (2) thereof; and when
that weighted average is calculated -
(a) the weight given to each investment shall be its value as
an asset determined in accordance with Part IX of these regulations,
excluding any provision under which assets may be taken at lower
book values for the purposes of any investigation to which section
23 of the Act applies or any actuarial investigation made in
pursuance of a directive made by the Centre under any other
provision of the Act; and
(b) except in relation to the rate of interest used in valuing
payments of property linked benefits (as defined in paragraph (1)
of regulation 48 of these regulations), both the yield and the value
of any linked assets (as so defined) shall be omitted from the
calculation.
(12) For the purpose of determining the rates of interest to
be used in valuing a particular category of contracts the assets may,
where appropriate, be notionally apportioned between different
categories of contracts and in such cases the limit under paragraph (9)
of this regulation shall be applied on the basis of the overall yield on
the assets apportioned to the contracts in question.
The amount of the liability in respect of any category of
contract shall, where relevant, be determined on the basis of prudent
rates of mortality and disability that have regard to the country of the
commitment.
(1) Provision for expenses, whether implicit or explicit, Expenses.
shall be not less than the amount required, on prudent assumptions, to
meet the total net cost, after taking account of the effect of taxation,
that would be likely to be incurred in fulfilling contracts if the company
were to cease to transact new business twelve months after the valuation
date.
(2) The provision mentioned in paragraph (1) of this
regulation shall have regard to, among other things, the company's actual
expenses in the last twelve months before the valuation date and to the
effects of inflation on future expenses on prudent assumptions as to the
future rates of increase in prices and earnings.
(1) Provision shall be made on prudent assumptions to cover Options.
any increase in liabilities caused by policyholders exercising options
under their contracts.
(2) Where a contract includes an option whereby the
policyholder could secure a guaranteed cash payment within twelve
months following the valuation date, the provision for that option shall
be such as to ensure that the value placed on the contract is not less than
the amount required to provide for the payments that would have to be
made if the option were exercised.
No contract for long term business shall be treated as an asset. Contracts not to
be treated as assets.
Allowance shall not be made in the valuation for the voluntary No credit for
profits from
discontinuance of any contract if the amount of the liability so voluntary
determined would thereby be reduced.
discontinuance.
The determination of the amount of long term liabilities shall Nature and
tenn of assets.
take into account the nature and term of the assets representing those
liabilities and the value placed upon them and shall include prudent
provision against the effects of possible future changes in the value of
the assets on -
(a) the ability of the company to meet its obligations arising
under contracts for long term business as they arise, and
(b) the adequacy of the assets to meet the liabilities as
determined in accordance with regulations 68 to 77 of these
regulations.
PART XI - MISCELLANEOUS PROVISION
Without prejudice to the provisions of regulation 34 of these
regulations, the Insurance Business (Custodian of Assets) Regulations,
1999 are hereby revoked.