Insurance Business (Linked Long Term Contracts) Regulations,

Suppliment tal-Gazzetta tal-Gvern ta' Malta, Nru. 16,957, 13 ta' Gunju, 2000

L.N. 104 of 2000

INSURANCE BUSINESS ACT

(CAP. 403)

Insurance Business (Linked Long Term Contracts) Regulations,

IN exercise of the powers conferred by section 45 and 64 ofthe Insurance

BusinessAct, the Minister ofFinance, afterconsultation with the Malta Financial

Services Centre, has made the following regulations:-

(1) The title of these regulations is the Insurance Business Citation and

commencement.

(Linked Long Term Contracts) Regulations, 2000.

(2) These regulations shall come into force on the 1 st

January, 2001.

(Regulation 3)

PERMITTED LINKS

PART I

DESCRIPTIONS OF PROPERTY BY REFERENCE TO WHICH BENEFITS

MAY BE DETERMINED

1. Listed securities which are readily realisable, not being securities which are -

(a)

approved securities;

(b) loans or deposits of the kinds mentioned in paragraphs 4 and 7 of this

Schedule;

(c)

units or other beneficial interests in a collective investment scheme; or

(d)

derivative contracts.

2. Unlisted securities which are readily realisable, not being securities which

(a)

approved securities;

(b) loans or deposits of the kinds mentioned in paragraphs 4 and 7 of this

Schedule;

(c)

units or other beneficial interests in a collective investment scheme; or

(d)

derivative contracts.

3. Land (including any interest in land) which is situated in Malta or any other

country approved for such purpose by the Centre.

In these regulations, unless the context otherwise requires -

Interpretation.

"the Act" means the Insurance Business Act;

"authorised company", in relation to linked long term

contracts, means a company whose head office is in Malta

authorised to carry on long term business, including business of

insurance class III specified in the Second Schedule to the Act,

other than a company whose business is restricted to business of

reinsurance or affiliated insurance;

"the Centre" means the Malta Financial Services Centre

established by section 3 of the Malta Financial Services Centre Cap. 330.

Act and appointed under section 3 of the Act to be the Competent

Authority for the purposes of the Act;

"land" means land or building;

"linked long term contract" means a contract of the kind

described in paragraph 2, Roman number III, of the Second

Schedule to the Act;

"long term contract" means a contract for long term business;

and the words and expressions which are also used in the Act have the

same meanings as in the Act.

(1) Benefits payable under any contract to which this Linked long

regulation applies shall not be detennined, either wholly or partly, by tenn contracts.

reference to the value of, or the income from, or fluctuations in the

value of, property of any description other than property of any of the

descriptions specified in Part I ofthe Schedule to these regulations which,

where appropriate, comply with the provisions of paragraph 17 of the

said Schedule.

(2) Benefits payable under any contract to which this

regulation applies shall not be determined, whether directly or indirectly,

either wholly or partly, by reference to fluctuations in any index of the

value of property other than an index described in Part II of the Schedule

to these regulations.

(3)

This regulation applies to long term contracts which are-

(a) contracts entered into by authorised companies or have

been entered into by any such company at any time on or after the

1st October, 1998 and are still in force;

(b) contracts under which the benefits payable to the

policyholder are wholly or partly to be determined by reference to

the value of, or the income from, property of any description

(whether or not specified in the contract) or by reference to

fluctuations in, or in an index of, the value of property of any

description (whether or not so specified); and

(c) not contracts specified in paragraph (4) of this regulation

as being contracts to which this regulation does not apply.

(4) The contracts referred to in sub-paragraph (c) of

paragraph (3) of this regulation to which this regulation does not apply

are-

(a) contracts entered into before the coming into force of

these regulations to the extent that they provide for benefits to be

determined by reference to the value of, or the income from,

property of any description or by reference to fluctuations in, or in

an index of, property of any description, by reference to which

benefits were permitted to be determined before the coming into

force of these regulations;

(b) subject to paragraph (5) of this regulation, contracts to

manage the investments of pension funds that are not combined

with contracts of insurance covering either conservation of capital

or payment of a minimum interest.

(5) Benefits payable under contracts referred to in sub-

paragraph (b) of paragraph (4) of this regulation shall not be determined,

either wholly or partly, by reference to the value of, or the income from,

or fluctuations in the value of derivative contracts other than permitted

derivative contracts as defined in paragraph 15 of the Schedule to these

regulations.

Loans-

(a) which are fully secured by hypotech or charge on land (or any interest

in land) which

(i) is situated in Malta or any other country approved for such purpose

under paragraph 3 of this Schedule, and

(ii) in the case of a loan made to a person other than a body corporate,

is not used wholly or mainly for domestic purposes, and

(b) in relation to which the rate of interest and the due dates for the payment

of interest and the repayment of principal can be fully ascertained from the tenns

of any agreement relating to the loan.

Units or other beneficial interests in a collective investment scheme which

satisfies the following conditions -

(a) the property of the scheme comprises property of the type described in

paragraphs 1 to 10 of this Schedule; and

(b) the units are readily realisable at a price which represents the net value

per unit of the assets and liabilities of the scheme; and

(c) the price at which the units may be bought and sold is published

regularly.

Approved securities.

Loans to or deposits with an approved credit institution or an approved

financial institution.

Income due, or to become due, in respect of property of any ofthe descriptions

specified in the foregoing paragraphs of this Schedule.

Permitted derivative contracts.

10. Cash.

Units, by whatever name called, in a real or notional scheme which is limited

to the descriptions of property mentioned in the foregoing paragraphs of this Schedule,

not being property falling within sub-paragraphs (a) to (d) of paragraph 17 of this

Schedule, and which under the contract is to be managed either -

(a)

wholly by the insurer; or

(b) wholly or to any extent by another person being a person for whose

acts and omissions in managing the scheme the insurer assumes responsibility

towards the policyholder as if they were the acts or omissions of the insurer, and

otherwise (if at all) by the insurer.

PART II

INDICES BY REFERENCE TO WHICH BENEFITS MAY BE DETERMINED

An approved index.

PART III

INTERPRETATION

Unless the context otherwise requires, words and expressions contained in

this Schedule bear the same meaning as in Part IX of the Insurance Business (Companies

Assets and Liabilities) Regulations, 2000.

For the purposes of this Schedule, "approved index" means either -

(a)

an index which is

(i)

calculated independently,

(ii)

published at least once a week,

(iii) based on constituents, each of which is property falling within

paragraphs 1 to 8 or 10 of this Schedule, and

(iv) calculated on a basis which is made available to the public and

which includes both the rules for including and excluding constituents and

the rules for valuation which must use an arithmetic average of the value of

the constituents; or

(b) a national index of retail prices published by or under the authority of a

government of a state of a country falling within the zone of countries as may be

determined by an Insurance Directive made by the Centre for the purposes of any

provision of any regulation made under the Act; or

(c)

an index which is

(i) based on constituents, each of which is property falling within

paragraphs 1 to 8 or 10 of this Schedule; and

(ii)

in respect of which a derivative contract is listed.

(1) For the purposes of this Schedule, "permitted derivative contract" means

a derivative contract which -

(a)

is covered and

(i) which is held in connection with property of the type described in

sub-paragraph (2) of this paragraph for the purposes of reduction of

investment risks or efficient portfolio management; or

(ii) which has the effect of a permitted derivative contract held in

connection with such property for such purposes; and

(b) satisfies the conditions specified in paragraphs (6) to (8) of regulation

59 of the Insurance Business (Companies Assets and Liabilities) Regulations,

2000 except that for this purpose the references in the said regulation 59 to "an

asset for the valuation of which provision is made in this Part of these regulations"

shall be construed as a reference to permitted connected property.

(2)

The property described in this paragraph is either -

(a) permitted connected property, not being a contract or asset having the

effect of a derivative contract; or

(b) a pemlitted derivative contract or a contract or asset having the effect

of a permitted derivative contract either of which when taken together with the

permitted derivative contract mentioned first in sub-paragraph (1) of this paragraph

has the effect that the company holds either permitted connected property or a

permitted derivative contract in connection with such property.

(3)

For the purposes of this paragraph -

(a) a derivative contract shall be deemed to be covered if it would not

require a significant provision to be made in respect of it pursuant to regulation

65 of the Insurance Business (Companies Assets and Liabilities) Regulations,

2000 if it were a derivative contract to which Part IX of those regulations applied;

(b) "permitted connected property" means property of any of the

descriptions in paragraphs 1 to 8 or 10 of this Schedule and which is not property

falling within sub-paragraphs (a) to (d) of paragraph 17 of this Schedule.

In this Schedule, "readily realisable", in respect of an investment, has the

meaning set out in paragraph 2 of the Tenth Schedule to the Insurance Business

(Companies Assets and Liabilities) Regulations, 2000.

Benefits payable under any contract to which regulation 3 of the regulations

applies shall not be determined by reference to -

(a) property of any of the descriptions specified in paragraph 2,5 or 7 of

this Schedule if the value of such property is determined, either wholly or partly,

by reference to the value of, or the income from, or fluctuations in the value of, or

fluctuations in the income from, property other than property of the descriptions

in Part I of this Schedule; or

(b) property of the description specified in paragraph 2 of this Schedule in

excess of 10 per centum of the aggregate property linked benefits under the

contract; or

(c) property of the description specified in paragraph 5 of this Schedule

which in aggregate value exceeds 10 per centum of the property linked benefits,

unless the contract under which the benefits are payable has been marketed in

accordance with any legal restrictions which apply to the marketing of the

corresponding collective investment scheme; or

(d) property of any of the descriptions specified in Part I of this Schedule

which has the effect of a derivative contract other than a permitted derivative

contract.