Protection and Compensation Fund Regulations, 2003

L.N. 435 of 2003

INSURANCE BUSINESS ACT

(CAP.403)

Protection and Compensation Fund Regulations, 2003

IN exercise of the powers conferred by article 51 of the Insurance

Business Act, the Minister of Finance and Economic Affairs, after

consultation with the Malta Financial Services Authority, has made the

following regulations>-

PART I - PRELIMINARY

(1) The title of these regulations is the Protection and

Compensation Fund Regulations, 2003.

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

January, 2004 other than paragraph (c) of regulation 22 of these

regulations which shall come into force on the 1st May, 2004.

(1)

In these regulations, unless the context otherwise

requires -

“the Act” means the Insurance Business Act<

“the Authority” means the competent authority appointed

under article 3 of the Act<

“business of motor insurance” means business of insurance

of group 2 as specified in Part II of the Third Schedule to the Act

or any class or part class thereof<

“Financial Services Tribunal” means the Tribunal referred to

in article 57 of the Act.

“the Fund” means the Protection and Compensation Fund

established by article 49 of the Act<

“gross premiums”, in relation to an insurer and a calendar

year, means premiums after deduction of discounts, refunds and

rebates of premium and premiums receivable by the company under

reinsurance contracts accepted by the company but before

deduction of premiums for reinsurance ceded and before deduction

of commission payable by the company>

Provided that, in the case of an insurer which is a company

whose head office is in a country outside Malta, or a company

whose head office is in Malta and carries on business of insurance

in a country outside Malta, the gross premium income relates to

premium income attributable to business of insurance carried on

by the insurer in Malta<

“insolvent insurer” shall be construed in accordance with sub-

regulation (1) of regulation 16 of these regulations<

“insurer”, in relation to the Fund, means a company authorised

under the Act to carry on in Malta long term business or general

business or a company which on the date of coming into force of

these regulations is authorised thereunder to carry on both long

term business and general business whether or not such business

is, in each case, combined with business of reinsurance but excludes

a company whose business is restricted to reinsurance<

“insurer concerned” has the meaning assigned to it by

regulation 24 of these regulations<

“the Management Committee” and “the Committee” mean

the Protection and Compensation Fund Management Committee

established by regulation 5 of these regulations<

“protected commitment” shall be construed in accordance with

indent (ii) of paragraph (a) of sub-regulation (3) of regulation 3 of

these regulations<

“protected liability” shall be construed in accordance with

paragraph (b) of sub-regulation (3) of regulation 3 of these

regulations<

“protected risk” shall be construed in accordance with indent

(i) of paragraph (a) of sub-regulation (3) of regulation 3 of these

regulations,

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

the same meanings as in the Act.

(2) These regulations shall not apply to an authorised

company which carries on solely and exclusively business of

reinsurance.

PART II - THE PROTECTION AND COMPENSATION FUND

(1) The purposes of the Fund as established by article 49 of

the Act are -

(a) to make payment of any claims in respect of risks situated

in Malta and of commitments where Malta is the country of the

commitment in the amounts prescribed by these regulations against

an insurer, remaining unpaid by reason of the insolvency of such

insurer<

(b) to make payment of compensation to victims of road

traffic accidents in circumstances prescribed by these regulations.

(2)

For the purposes of sub-regulation (1) of this

regulation -

(a) Part III of these regulations makes provision with respect

to payment of claims in the event of an insolvent insurer< and

(b) Part IV of these regulations makes provision with respect

to compensation to victims of road traffic accidents.

(3) There is hereby prescribed -

(a)

in relation to Part III of these regulations>

(i) in respect of risks situated in Malta, any class of

business of insurance specified in Part I of the Third Schedule

to the Act as a protected risk, other than the following classes

or part classes>-

1 where the insured is not an individual, 4, 5, 6, 7,

11, 12, 14 and 15<

(ii) in respect of commitments where Malta is the

country of the commitment, any class of business of insurance

specified in the Second Schedule to the Act as a protected

commitment, other than the following classes> -

III, V, VI and VIII

subject, in each case, to such limitations and restrictions

prescribed by that Part<

(b) in relation to Part IV of these regulations, any civil

liability to any person which is required to be covered by a policy

of insurance under compulsory insurance legislation as a protected

liability, subject to such limitations and restrictions prescribed by

that Part.

(1) The Fund shall be a body corporate having a distinct Legal status and

representation of

legal personality and shall be capable, subject to the provisions of the the Fund.

Act and of these regulations, of entering into contracts of borrowing or

otherwise incurring indebtedness for the purposes of its functions, of

acquiring, holding and disposing of any kind of property for the purposes

of its functions, of suing or being sued, and of doing all such things and

entering into all such transactions as are incidental or conducive to the

exercise or performance of its functions>

Provided that, with respect to any one insolvent insurer, the amount

borrowed should not exceed thirty per centum of the total amount of

payments to be made by the Fund under Part III of the regulations to all

qualifying persons of the insolvent insurer.

(2) The legal and judicial representation of the Fund shall

vest in the chairperson of the Management Committee>

Provided that, the Management Committee may appoint any one

or more of its members or of the officers or agents of the Fund to appear

in the name and on behalf of the Fund in any legal or judicial proceedings

and in any act, contract, instrument or other document whatsoever< and

where Part III or Part IV of these regulations is in operation, in respect

of any powers and duties of the Fund exercisable by any body or person

as provided in sub-regulation (2) of regulation 6 of these regulations,

the legal representation of the Fund shall also vest in such body or person

or in the legal representative thereof.

(1) There shall be a management committee to be known as Protection and

Compensation

the Protection and Compensation Fund Management Committee which Fund Management

shall consist of a chairperson and six members to be appointed by the Committee.

Authority and which shall include among its members -

(a) an officer, not below the grade of manager, performing

duties with the Authority possessing the necessary expertise and

experience in business of insurance<

(b) three persons nominated by an association or other body

representing insurers and recognised for such purpose by the

Authority, or of insurance agents acting on behalf of such insurers,

of whom, at least>-

(i) one person who represents insurers whose head

office is in Malta< and

(ii)

one person who represents insurers whose head

office is in a country outside Malta, or of insurance agents

acting on behalf of such insurers<

(c)

a person who, because of his experience,

qualifications or activities is considered as being able to state

and represent the point of view of consumers<

(d) an independent person who, in the opinion of the

Authority, possesses the necessary expertise and experience

in financial services>

Provided that, the nomination of persons as is envisaged

in paragraph (b) shall be such as to include at all times a

representative of insurers carrying on long term business and

a representative of insurers carrying on general business>

Provided further, that such members of the Management

Committee shall serve the Fund in their own personal capacity

and shall not represent or receive directives or instructions

from the person or entity nominating them. All members of

the Committee shall work in the best interest of the Fund and

shall pursue and promote its purposes.

(2) Whenever, for any reason whatsoever, the association

or other body representing insurers referred to in paragraph (b) of sub-

regulation (1) of this regulation fails to nominate, within the time given

to it for such purpose by the Authority the persons, or any of the persons,

which it is required to nominate under that sub-regulation, the Authority

shall appoint the persons, or the remaining persons, having regard to

the nomination provisions of sub-regulation (1) of this regulation.

(3) A person nominated by an association or other body

representing insurers shall not be eligible for appointment if he has a

financial or other interest as is likely to affect prejudicially the discharge

by him of his functions under these regulations.

(4) Every member of the Committee shall hold office,

including the office of chairperson, for such period and upon such terms

and conditions as may be determined by the Authority and indicated in

the letter of appointment, such term of office being not less that one

year and not more than three years. Every member of the Committee,

including the chairperson, shall be eligible for re-appointment.

(5) A member of the Committee may be relieved of office

by the Authority on the grounds of inability to perform the functions of

his office, whether due to infirmity of mind or of body, or to any other

cause, or of misbehaviour< and for the purposes of this sub-regulation,

repeated and unjustified non-attendance of the meetings of the

Management Committee may be deemed to amount to misbehaviour.

(6) A member of the Committee may resign from office by

letter addressed to the Authority.

(7) The Authority shall fill any vacancy occurring in the

Committee for any reason whatsoever as early as the vacancy occurs<

and in so doing, the Authority shall have regard to the nomination

provisions of sub-regulation (1) of this regulation.

(8) Notice of the names of the members of the Committee

and of any resignation, dismissal and new appointment shall be published

in the Gazette.

(9) The Committee may act notwithstanding any vacancy

among its members but shall conduct business only if at least four

members are present.

(10) Whenever at any meeting of the Committee the

chairperson is absent, the members present for that meeting shall elect

from among themselves a person to act as chairperson and to conduct

the proceedings of that meeting.

(11) Decisions of the Committee shall be taken by a majority

of votes of the members present. The chairperson shall have an original

vote and, in the event of an equality of votes, a second or casting vote.

(12) Subject to the provisions of the Act and of these

regulations, the Committee shall have power to regulate its own

proceedings and may also establish such procedures or make such rules

as it may deem appropriate for the better fulfilment of its purposes.

(13) Subject to sub-regulation (14) of this regulation, the

Committee shall pay to the chairperson and each member of the

Committee such remuneration as it may determine.

(14) Any determination of the Committee with respect to

the remuneration to be paid to the chairperson and to any member of

the Committee shall be subject to the approval of the Authority.

(15) The Authority shall appoint one of its officers to serve

as secretary to the Management Committee. Such person shall be

responsible to make the necessary preparations for the meetings of the

Committee and to keep the minutes thereof.

(1) The Fund shall be administered by and be under the

general control of the Management Committee.

(2) Subject to the provisions of sub-regulation (1) hereof,

the Management Committee shall have the power to appoint officers or

agents of the Fund and to grant them such powers or authority as it may

deem appropriate. In consultation with the Authority, the Committee

may, for the better fulfilment of its purposes, cause any part of its

business to be conducted on its behalf by such body or person and under

such arrangements or agreements as it may deem appropriate.

(3) The Management Committee shall not enter into an

agreement or arrangement as is envisaged in sub-regulation (2) of this

regulation in respect of the purpose set out in paragraph (b) of sub-

regulation (1) of regulation 3 of these regulations, unless there is in

force and in a manner satisfactory to the Committee, an agreement

among insurers carrying on business of motor insurance, binding on all

parties thereto and requiring them to act as insurers concerned< and

where any such agreement between insurers ceases to be operative, or

to be satisfactory to the Committee, any agreement or arrangement

entered into by the Committee under this regulation shall cease to have

effect upon notice in writing by the Committee to such person as may

lawfully receive notices on behalf of the body with which the

arrangement or agreement was made.

(4) Where an arrangement or agreement as is envisaged in

sub-regulation (3) of this regulation has been entered into by the

Committee, and for so long as such arrangement or agreement is in

operation, Part III of these regulations shall have effect if the arrangement

or agreement relates to the purpose set out in paragraph (a) of sub-

regulation (1) of regulation 3 of these regulations and Part IV of these

regulations shall have effect if the arrangement or agreement relates to

the purpose set out in paragraph (b) of sub-regulation (1) of the said

regulation.

(5) The Authority may issue an insurance directive to

determine such incidental, supplementary and consequential provisions

as appear necessary for the performance of the Management

Committee’s functions and conduct of its business under any provisions

of these regulations.

(1) The contributions to the Fund to be made by insurers Contributions

the Fund.

pursuant to article 50 of the Act are those prescribed by this regulation.

(2) Subject to the provisions of the following sub-regulations

of this regulation, the Committee shall every calendar year -

(a) for the purpose of the Fund under paragraph (a) of sub-

regulation (1) of regulation 3 of these regulations>

(i) in so far as that purpose relates solely to general

business, require every insurer carrying on in Malta general

business, whether or not such business constitutes, in whole

or in part, business of a protected risk, to pay a contribution

to the Fund to be utilised exclusively for the payment of claims

relating to protected risks situated in Malta<

(ii) in so far as that purpose relates solely to long term

business, require every insurer carrying on in Malta long term

business, whether or not such business constitutes, in whole

or in part, business of a protected commitment, to pay a

contribution to the Fund to be utilised exclusively for the

payment of claims relating to protected commitments where

Malta is the country of the commitment<

(b) for the purpose of the Fund under paragraph (b) of sub-

regulation (1) of regulation 3 of these regulations, require every

insurer carrying on business of motor insurance in Malta, to pay,

in addition to the contribution required to be made under paragraph

(a) of this sub-regulation, a further contribution to the Fund, of

such amount, and at such time or times, as the Committee may

determine, taking into account the sums required, or expected to

be required, for this purpose of the Fund, to be utilised exclusively

for the payment of compensation relating to protected liabilities.

(3) The obligation to pay contributions under indent (ii) of

paragraph (a) of sub-regulation (2) of this regulation shall also apply to

an insurer, other than an insolvent insurer which was licensed under the

Insurance Business Act, 1981, repealed by the Act, or is authorised

under the Act to carry on business of long term insurance, whether or

not such business constitutes, in whole or in part, business of a protected

commitment and which ceased to carry on that business and is carrying

out servicing of that business, or which ceases to carry on that business

and shall carry out servicing of that business. The obligation to pay

contributions shall continue until the company proves to the satisfaction

of the Authority that it has no further liability arising from such business.

(4) Without prejudice to sub-regulation (3) of this regulation,

where an insurer holds an authority on the date of coming into force of

these regulations to carry on in Malta both long term business and general

business, separate treatment shall be given to contributions paid by the

insurer into the Fund under this regulation -

(a) in respect of long term business, to be utilised exclusively

for the payment of claims relating to protected commitments where

Malta is the country of the commitment<

(b) in respect of general business, to be utilised exclusively

for the payment of claims relating to protected risks situated in

Malta.

(5) Subject to the provisions of regulation 9 of these

regulations, the amount every insurer shall be required to contribute

under paragraph (a) of sub-regulation (2) of this regulation shall be>

(a) if the contribution is made under indent (i) thereof, 0.125

per centum of, and calculated by reference to, the gross premium

income by the insurer for the year ending last before the beginning

of that calendar year in respect of general business<

(b) if the contribution is made under indent (ii) thereof, 0.125

per centum of, and calculated by reference to, the gross premium

income by the insurer for the year ending last before the beginning

of that calendar year in respect of long term business effected after

30 June 1986>

Provided that, the gross premium income shall exclude

premiums which relate to the following classes of business of

insurance>

(i) in respect of risks situated in Malta classes 4, 5, 6,

7, 11, 12, 14 and 15 in Part I of the Third Schedule to the Act<

(ii) in respect of commitments where Malta is the

country of the commitment classes III, V, VI and VIII in the

Second Schedule to the Act.

(6) A sum not exceeding 5 per centum of the total amount

of contributions payable to the Fund under sub-regulation (2) of this

regulation as may be determined by the Management Committee shall

be at the disposal of the Committee to meet ordinary expenses incurred

by the administration of the Fund, other than extraordinary expenses

incurred in relation to the purposes specified in paragraph (a) of sub-

regulation (1) of regulation 3 of these regulations.

(7) Expenses incurred by the Fund pursuant to, or in

consequence of, paragraph (a) of sub-regulation (1) of regulation 3 of

these regulations shall be paid out >

(a) in relation to protected risks situated in Malta, from the

contributions made in respect of general business< and

(b) in relation to protected commitments where Malta is

the country of the commitment, from the contributions made in

respect of long term business.

(8) The contributions payable by every insurer under sub-

regulation (2) of this regulation shall be due on the first day of July of

each calendar year but may be paid on any working day during that

month.

(9) Any contribution payable under this regulation

remaining unpaid by any insurer for any reason whatever, other than by

reason of the insolvency of the insurer, shall be recoverable by the Fund

from the insurer in the same manner as an administrative penalty is

recoverable by the Authority under the regulations made for the purposes

of subarticle (6) of article 67 of the Act, and, in any such recovery, any

reference to “the Authority” made in those regulations shall be deemed

to be a reference to “the Fund”.

(1) Every insurer shall, when satisfying its obligations under Statements

regulation 7 of these regulations, furnish the Fund with a statement of of

premium

the gross premium income of the company liable to the contribution - income.

(a) in respect of general business, under paragraph (a) of

sub-regulation (5) of regulation 7 of these regulations<

(b) in respect of long term business, under paragraph (b) of

the said sub-regulation (5).

(2) Where an insurer is required under this regulation to

furnish to the Fund a statement in respect of gross premium income of

more than one kind of business mentioned in paragraphs (a) and (b) of

sub-regulation (1) of this regulation, the insurer shall furnish a separate

statement in respect of gross premium income of each kind of business.

(3) Any person who causes or permits to be included in a

statement furnished to the Fund under this regulation any information

which he knows to be false in a material particular or recklessly causes

or permits to be so included any information which is false in a material

particular, shall be guilty of an offence and liable, on conviction, to a

fine (multa) of not less than five hundred Maltese liri but not exceeding

one thousand Maltese liri.

(4) Any insurer which makes default in complying with sub-

regulation (1) or (2) of this regulation shall be guilty of an infringement

and liable, to an administrative penalty of not less than five hundred

Maltese liri but not exceeding one thousand Maltese liri and in the case

of a continuing infringement to a further penalty not exceeding fifty

Maltese liri for each day during which the infringement continues.

(5) Any administrative penalty imposed by the Authority

under sub-regulation (4) of this regulation shall be recoverable by the

Fund in the same manner and to the same extent as an administrative

penalty is recoverable by the Authority under regulations made for the

purposes of subarticle (6) of article 67 of the Act< and, in any recovery,

any reference to the “Authority” made in those regulations shall be

deemed to be a reference to “the Fund”.

(1) Subject to sub-regulation (2) of this regulation, whenever

the funds held by the Management Committee in respect of the purpose

of paragraph (a) of sub-regulation (1) of regulation 3 of these regulations

amount to one million Maltese liri in respect of general business and

one million Maltese liri in respect of long term business, the Management

Committee shall, inform the Authority in writing of this fact.

(2) Notwithstanding that the funds held by the Committee

in respect of each kind of business are not equal to the amount determined

in sub-regulation (1) of this regulation, if at any time it appears to the

Committee that the funds held by it are reasonably adequate for it to

exercise its functions with respect to the purpose mentioned in sub-

regulation (1) of this regulation, the Committee shall draw up a report

on the adequacy of such funds stating the reasons for its consideration

and shall submit that report to the Authority.

(3) Whenever the Authority receives information or a report

as is envisaged in sub-regulations (1) and (2) of this regulation, the

Authority shall, after consultation with the Management Committee

and the auditor of the Fund, direct the Committee in writing -

(a) to continue to exercise its functions and powers under

regulation 7 of these regulations with respect to contributions to

the funds made under sub-regulation (6) of this regulation and to

require the contributions payable thereunder to continue to be paid>

(i) according to the percentage specified in the said

regulation< or

(ii) according to a percentage lower than the percentage

specified in the said regulation as the Authority shall specify

in the directive, or

(b) to suspend exercising its functions and powers under

the said regulation with respect to contributions to such funds in

respect of such business for a period of one or more years as the

Authority shall specify in the directive.

(4) Whenever, and for so long as, payment of the

contributions under sub-regulation (5) of regulation 7 of these regulations

is suspended, every insurer, other than an insolvent insurer, to which

that directive applies shall pay to the Fund a contribution of three hundred

Maltese liri and such contribution shall be paid in the month of January

of each year and be at the disposal of the Management Committee to

meet ordinary expenses incurred by the administration of the Fund as

in envisaged in sub-regulation (6) of regulation 7 of these regulations.

For the purpose of this sub-regulation, “insurer” shall include

an insurer which was licensed under the Insurance Business Act, 1981,

repealed by the Act, or is authorised under the Act to carry on business

of long term insurance, whether or not such business constitutes, in

whole or in part, business of a protected commitment and which ceased

to carry on that business and is carrying out servicing of that business,

or which ceases to carry on that business and shall carry out servicing

of that business.

(5) Whenever payment of contributions under sub-

regulation (5) of regulation 7 of these regulations is suspended, every

insurer authorised under the Act to carry on business of insurance in

Malta, on or after the date of enforcement of such suspension, shall pay

to the Fund the contribution established by sub-regulation (5) of

regulation 7 thereof for a period to be determined by the Management

Committee in consultation with the Authority.

(6) If, for so long as the directive issued by the Authority

under sub-regulation (3) of this regulation is in operation, whenever it

appears to the Management Committee that the circumstances which

led to the issuing of the directive have changed substantially or materially

so that the funds held by the Fund are inadequate for the Committee to

exercise its functions for the purpose of paragraph (a) of sub-regulation

(1) of regulation 3 of these regulations, the Committee shall, without

delay, inform the Authority of such change and of the new circumstances,

and, on receiving that information, the Authority shall forthwith modify

or revoke its directive with respect to contributions to those funds.

(1) Notwithstanding any provisions of these regulations,

if the Management Committee is required to make any payment or to

incur any other expenditure under any provision of Part III or Part IV of

these regulations at a time when the funds available to it for expenditure

under that provision, together with any other funds which are available

to it from other sources, including funds borrowed in terms of sub-

regulation (1) of regulation 4 of these regulations and which might be

applied to such expenditure, fall short of what is prescribed or required,

the Committee may then, in such a case, request every insurer to make

good the shortfall by such amount and within such time as it may

determine, subject to the provisions of sub-regulations (2) and (3) of

regulation 7 of these regulations.

(2) The Management Committee shall notify the Authority

where an insurer fails to comply with the obligations imposed on it

under sub-regulation (1) of this regulation and the Authority shall take

all measures appropriate including the imposition of an administrative

penalty of the amount determined in sub-regulation (4) of regulation 8

of these regulations, to ensure that the insurer meets such obligations.

(1) The Management Committee shall every calendar year,

and not later than three months after the end of its financial year, submit

to the Authority a report on the activities of the Fund during such year.

(2) A copy of the audited balance sheet and profit and loss

account for the said year, as well as a copy of the auditor’s report, shall

be attached to the report of the Committee.

(3) A copy of the report of the Management Committee

together with all documents attached to it shall be distributed among

insurers contributing to the Fund.

The financial year of the Fund shall be an accounting period

of twelve months ending on the thirty-first day of December of each

year.

(1) The Management Committee shall cause proper books

of account to be kept with respect to -

(a) all sums of money received and disbursed by the Fund

and the matters in respect of which the receipt and disbursements

take place<

(b) the assets and liabilities of the Fund.

(2) Subject to the provisions of article 50 of the Act and

without prejudice to any separate treatment to be given under those

provisions, separate accounts shall also be kept in respect of each

separate purpose of the Fund< and all income derived in respect of any

of such purposes shall be utilised exclusively for disbursements relating

to such purpose>

Provided that, notwithstanding the provisions of sub-

regulation (6) of regulation 7 and sub-regulation (4) of regulation 9 of

these regulations, nothing in this sub-regulation shall prevent the

payment of sums belonging to the Fund to meet administrative, legal,

judicial or other costs common to two or more purposes, subject to

such costs being properly apportioned between such purposes.

(3) The books of account shall be kept at the offices of the

Fund or at such other place or places as the Management Committee

thinks fit.

(4) The provisions of article 181 of the Companies Act shall, Cap.386.

in so far as they are not incompatible, apply to the balance sheet and

profit and loss account of the Fund by the substitution for references to

“company” and “directors” in those provisions of references to “the

Fund” and “members of the Management Committee” respectively.

(1) Once at least in every financial year, the accounts of Examination of

accounts.

the Fund shall be examined and the correctness of every balance sheet

and profit and loss account shall be certified by an auditor appointed by

the Committee.

(2) The profit and loss account shall be annexed to the

balance sheet, and the auditor’s report shall be attached thereto. A copy

of the profit and loss account, balance sheet and auditor’s report shall

be submitted to the Authority within two months from the end of the

financial year.

(3) A copy of every balance sheet and profit and loss

account, together with a copy of the auditor’s report, shall be published

within three months from the end of the financial year in two local

daily newspapers, of which one is published in the Maltese language

and the other in the English language, and shall, together with the report

on the activities of the Fund for that year made under sub-regulation (1)

of regulation 11 of these regulations, be made available to the public on

request.

An insurer on whom an administrative penalty has been

imposed under any provisions of these regulations, may within a period

of thirty days beginning from the date of service of a notice imposing

such penalty, appeal to the Financial Services Tribunal in accordance

with the provisions of article 58 of the Act.

PART III - PAYMENT OF CLAIMS IN THE EVENT OF

INSOLVENT INSURERS

(1) Whenever an insurer is unable to meet its obligations,

event of insolvency.

the Committee may, in respect of the said obligations arising from a

claim under a policy of insurance covering a protected risk situated in

Malta or a protected commitment where Malta is the country of the

commitment, make payments out of the Fund, under and in accordance

with the provisions of this Part, to a qualifying person.

(2) Payment shall also be made out of the Fund under this

Part if the insolvent insurer, is at the time that it is unable to meet its

obligations, servicing or running-off the business of insurance it was

licensed to carry on under the Act.

(3) No payment shall be made out of the Fund under this

Part unless the Committee is satisfied that the name of the insolvent

insurer is struck off the register or the insolvent insurer is definitely

wound up.

(4) For the purposes of these regulations, a person is a

qualifying person in relation to an insolvent insurer if -

(a) he is an insured of the insolvent insurer eligible for

protection under this regulation< or

(b) he is a person other than the policyholder to whom

payment in respect of any sums falling due under the policy could

have been made in accordance with the policy< or

(c) he is a person to whom the insolvent insurer is liable to

pay any sum or other consideration in respect of the insured’s legal

liability to such person under the policy of insurance.

In the case of long term business protected commitments,

payment shall be made to every qualifying person< and in the case of

general business protected risks, payment shall be made to every

qualifying person who is an individual and to every non-corporate body

or association of persons if all such persons are individuals.

In respect of a protected liability which is a liability required Quantum

payment.

to be covered by compulsory insurance legislation as defined in Part IV

of these regulations, payment under this Part in respect of protected

liabilities aforesaid incurred by the insured of an insolvent insurer shall

cover the whole of such liabilities< in respect of all other protected

liabilities, payment under this Part in respect of -

(a) long term business protected commitments shall be

limited to seventy-five per centum of the actuarial valuation of the

contract of insurance at the time the company concerned ceased to

carry on such business (adjusted for any premiums paid till date of

payment) remaining unpaid or ten thousand Maltese liri whichever

is the less<

(b) general business protected risks shall be limited to

seventy-five per centum of the liabilities incurred remaining unpaid

in any one case or ten thousand Maltese liri whichever is the less>

Provided that, in each case, the total amount of payments to

be made by the Fund under this Part with respect to any one

insolvent insurer shall not exceed one million Maltese liri.

(1) In no case shall any payment be made under this Part - When payment

must not be made.

(a)

where the claim is in respect of unearned premiums<

(b) where the claim is by or in respect of a person who is a

shareholder of the insolvent insurer and holds twenty per centum

or more of the issued shares of such insolvent insurer.

(2) Where the Management Committee is of the opinion,

that an applicant is not entitled to compensation in whole or in part, the

Committee shall give notice in writing of that opinion to such applicant

and the reasons therefor.

In considering compensation to any applicant for payment Compensation

under this Part, the Committee shall take into account any other amount paid

deducted from

of compensation paid to the applicant in respect of the same liability compensation

payable.

under the Act or any other law and in calculating the amount in respect

of which the insolvent insurer is unable to meet its liabilities, deduct

from the insolvent insurer’s liability any such amount of other

compensation paid.

No payment shall be made under this Part unless and until Assignment and

subrogation of

the applicant for payment has assigned to the Fund any right to any rights.

payment to which he may be entitled in respect of the same liability<

and, where such liability is covered by reinsurance, the Fund shall, in

addition, be entitled to pursue any reinsurance recoveries as if it were

the insolvent insurer.

This Part of these regulations shall not apply -

(a) to an insolvent insurer who is a member of a Recognised

Insurance Body, where the Recognised Insurance Body has given

to the Authority a written undertaking or any form of guarantee

acceptable to the Authority to meet all claims against any member

thereof, in a manner not being less favourable than that prescribed

by this Part in the event any member thereof, becomes an insolvent

insurer< or

(b) to an insolvent insurer who carries on solely and

exclusively business of insurance restricted to any one class or

part class and such class or part class is, under these regulations,

neither a protected risk nor a protected commitment< or

(c) to a branch of a European insurance undertaking carrying

on business of insurance pursuant to regulations relating to

European passport rights for insurance undertakings as may be

made in terms of article 64 of the Act, and which provides to the

satisfaction of the Authority that equivalent protection is available

to policyholders of protected risks and protected commitments in

a manner not being less favourable than that prescribed by this

Part, in the event of the insolvency of the European insurance

undertaking.

PART IV - COMPENSATION TO VICTIMS OF

ROAD TRAFFIC ACCIDENTS

(1) In this Part of these regulations, unless the context

otherwise requires -

“the Bureau” means the association or other body established

by insurers carrying on business of motor insurance with which

the Management Committee has made arrangements or an

agreement as provided in sub-regulation (2) of regulation 6 of these

regulations<

“civil liability” means any liability which may be incurred in

respect of the death of, or bodily injury to, any person or in respect

of any loss of, or damage to, any property of any person which is

required to be covered by a policy of insurance under compulsory

insurance legislation<

“company” has the same meaning as is assigned to it by the

Act, but does not include any Recognised Insurance Body, or a

member thereof<

“compulsory insurance legislation” means the Motor Vehicle

Insurance (Third-Party Risks) Ordinance, or any enactment Cap. 104.

replacing that law, and any regulations made thereunder<

“debtor” means a person responsible for the accident which

gave rise to civil liability.

“insurance” means insurance against civil liability effected

by or under a policy of insurance, a cover note, correspondence or

any other means, whether or not a certificate of insurance as

required by compulsory insurance legislation has been issued or

delivered<

“judgement” means a judgement of a court of competent

jurisdiction in Malta or in any European state, which has become

res judicata<

(2) To the extent of any powers and duties arising from any

arrangements or agreement entered into by the Management Committee

and the Bureau under regulation 6 of these regulations, the expression

“the Fund” in this Part shall include the Bureau.

(1) Subject and without prejudice to the other provisions Insurer concerned.

of this regulation, “insurer concerned” means the insurer who at the

time of the accident which gave rise to a civil liability was providing

insurance against such liability in respect of the vehicle arising out of

the use of which the liability of the debtor was incurred.

(2)

An insurer is the insurer concerned notwithstanding

that -

(a) the insurance was arranged after the accident giving rise

to a civil liability but purported to be effective at the time of such

accident< or

(b) the insurance was obtained by fraud, misrepresentation,

non-disclosure of material facts or mistake< or

(c) some term, description, limitation, exception or condition

(whether expressed or implied) of the insurance or of the proposal

form on which it is based expressly or by implication excludes the

insurer’s liability whether generally or in the particular

circumstances which gave rise to the liability of the debtor< or

(d) the debtor was in unauthorised possession of the vehicle

arising out of the use of which the liability of the debtor was

incurred< or

(e) the vehicle out of the use of which the civil liability of

the debtor arose was, at the time when the liability was incurred -

(i) being used for a purpose not authorised under the

terms of the insurance< or

(ii) being used by a person not authorised to drive the

vehicle under the terms of the insurance, or

Provided that, an insurer shall not be considered as the insurer

concerned in the circumstances referred to in indent (ii) of

paragraph (e) of this sub-regulation, if the death, bodily injury or

damage to property is sustained by a person who voluntarily entered

the vehicle which caused such death, bodily injury or damage to

property when the insurer concerned can prove that such person

knew it was uninsured.

(f) the driver of the vehicle out of the use of which the civil

liability of the debtor was incurred was, at the time when the liability

was incurred, disqualified from holding or obtaining a licence to

drive the vehicle or had his licence suspended or had never validly

held such licence.

(3) An insurer is not the insurer concerned -

(a) when the insurance was cancelled before the date on

which the civil liability was incurred by agreement between the

parties to the insurance and with the prior written permission of

the Commissioner of Police< or

(b) when the civil liability was incurred after the cancellation

of the insurance under a power of cancellation contained in such

insurance and after notice of such cancellation was given to the

Commissioner of Police in accordance with compulsory insurance

legislation< or

(c) when the insurance has ceased to be operative before

the date on which the civil liability was incurred by reason of a

transfer of interest in the vehicle which the insurance purports to

cover< or

(d) when the civil liability was incurred after a decision of

a court of competent jurisdiction which has become res judicata

has declared the insurance void or unforceable< or

(e) when the civil liability was incurred after the date on

which the insurance has, by its term, lapsed.

(4) For the purposes of these regulations, an insurer of a

motor trade road risk insurance covering unspecified vehicles shall, in

respect of such vehicles and irrespective of the basis of the insurance,

be the insurer concerned -

(a) in respect of vehicles not the property of the insured, if

the vehicle in respect of which the claim arises was in the custody

or control of the insured or was only removed from such custody

or control without the authority of the insured< and

(b) in respect of vehicles which are the property of the

insured, at all times, except that such insurer shall not be the insurer

concerned in respect of any vehicle specifically excluded from the

cover of the insurance by reference to its registration mark and

number, or specifically insured in the name of the motor trader

with another insurer< and

where an insurer concerned under a motor trade risk insurance as

aforesaid and an insurer concerned under a specified vehicle insurance

are both involved in circumstances in which neither insurance is liable

under its insurance, each of them shall be liable jointly and severally

for any amount due by way of damages and costs in respect of any civil

liability, such amount being due in the internal relations between such

insurers as to one half each.

(5) Where a person entering Malta is insured, or holds a

policy purporting to provide insurance, against civil liability and such

insurance was lawfully issued in or from a country outside Malta by an

insurer, or a subsidiary or associated company of an insurer, the company

issuing the insurance shall be the insurer concerned in the event of the

person insured becoming a debtor.

(6) For the purposes of this regulation a “motor trade road

risk insurance” means a policy of insurance provided to a person engaged

in the purchase, sale, repair, upkeep, servicing or maintenance of motor

vehicles which indemnifies him in respect of liabilities to third parties

arising out of the use of vehicles owned by him or in his custody or

control whilst being used on the road.

(1) If a judgement in respect of any civil liability which is

required to be covered by a policy of insurance under compulsory

insurance legislation is obtained against any person or persons and either

at the time of the accident giving rise to such liability there is not in

force a policy of insurance as required by the said legislation or such

policy is ineffective for any reason other than the inability of the insurer

to make payment, and any such liability is not satisfied in full within

twenty-eight days from the date upon which the person or persons in

whose favour such judgement was given became entitled to enforce it,

then, if there is no insurer concerned, the Fund shall, subject to the

provisions of these regulations, make payments to the person or persons

in whose favour such judgement was given, out of its funds set aside

for utilisation for the payment of compensation relating to protected

liabilities>

Provided that, no payments shall be made under this regulation

where the judgement relates to a vehicle the use of which is covered by

a security (or in lieu of such security by a deposit) in accordance with

compulsory insurance legislation unless there is also in force, in respect

of such vehicle, a policy of insurance purporting to cover such use of

the vehicle.

(2) No payment shall be made under this regulation unless

the following conditions concur-

(a) notice of the proceedings in which the judgement is given

has been given in writing by registered post or by a judicial letter,

within seven days after the commencement of such proceedings

by the plaintiff in such proceedings>

(i) to the insurer, in any case in which there was in

force at the time of the accident a policy of insurance

purporting to cover the use of the vehicle, and such fact was

known to the said plaintiff< or

(ii) to the Bureau in any other case<

(b) the plaintiff has complied with all the requirements of

the Fund in relation to any matter which could affect the payment

of compensation by the Fund under these regulations<

(c) the judgement or judgements and all rights thereunder

have been ceded to the Fund<

(d) the plaintiff in any of the aforesaid proceedings had given

credit to the Fund for any amount paid to him by or on behalf of

the defendant in such proceedings in respect of any civil liability

arising out of the event in respect of which compensation may be

payable by the Fund.

(3) In the case of payments relating to damage to property

caused by an uninsured vehicle, the Fund shall apply an excess of two

hundred Maltese liri with respect to each and every payment.

(1) Payment of compensation in respect of death or bodily Other cases of

compensation.

injury to any person, caused by or arising out of the use of a motor

vehicle, other than payment of compensation falling within the provision

of regulation 25 of these regulations, may be made out of funds set

aside by the Fund for the payment of compensation relating to protected

liabilities, if the following conditions concur -

(a) the applicant for payment is unable to trace any person

responsible for the death or bodily injury<

(b) the death or bodily injury was caused in such

circumstances that on the balance of probabilities the unidentified

person would be liable to pay damages to the applicant in respect

of such death or bodily injury<

(c) the liability of the unidentified person to pay damages

to the applicant is one which is required to be covered by insurance

or security under compulsory insurance legislation, it being

assumed for this purpose, in the absence of evidence to the contrary,

that the vehicle was being used in circumstances in which the user

was required by the said legislation to be insured or secured against

third party risks<

(d) the death or bodily injury was not caused by the use of

the vehicle by the unidentified person as a weapon, that is to say in

a deliberate attempt to run down the deceased or injured person<

and

(e) the application for compensation is made in writing

within two years from the date of the event giving rise to the death

or bodily injury.

(2) Where an application for compensation is made under

this regulation, the payment that may be made by the Fund as aforesaid

shall not exceed eighty per centum of the amount which a court in Malta

applying Maltese law would assess as damages which the applicant

would have been entitled to recover from the unidentified person in

respect of that death or bodily injury, if proceedings to enforce a claim

for damages in respect thereof had been successfully brought by the

applicant against the unidentified person or twenty-thousand Maltese

liri, whichever amount is the less. The amount so payable shall be

assessed by the Fund and in particular it shall>

(a) have the power to require any applicant to provide such

information as it may deem necessary for the purposes of

determining an application for granting compensation< and

(b) on the basis of information provided at its request by

the applicant, to give him a reasoned reply regarding the payment

of any compensation.

(3)

No payment under this regulation shall be made

unless -

(a) the applicant has given all such assistance, including

information required under sub-regulation (2) of this regulation as

may reasonably be required by or on behalf of the Fund to enable

any investigation to be carried out< and

(b) the applicant has assigned to the Fund any right to any

payment in respect of the death or injury to which his application

relates.

(4) The Fund shall determine an application for

compensation under this regulation within six months of receiving the

information required to be submitted under this regulation and if it

refuses to effect compensation, it shall inform the applicant in writing

of the reasons for its refusal.

(1) In the case of an accident arising from the use of a stolen

vehicle or a vehicle obtained by violence, and giving rise to civil liability,

compensation by the Fund to the injured party shall be made in the

circumstances referred to in subarticle (3) of article 12 of the Motor

Vehicles Insurance (Third-Party Risks) Ordinance (in this regulation

referred to as “the Ordinance”)>

Provided that, if the civil liability relates to damages to

property, the Fund shall apply an excess of one hundred Maltese

liri with respect to each and every payment.

(2) For the purposes of sub-regulation (1) of this regulation,

“injured party” has the same meaning as is assigned to it in article 2 of

the Ordinance.”

Cases where no

No payment for compensation in respect of civil liability may compensation

may be paid.

be made under these regulations where -

(a) the civil liability resulted from the use of a motor vehicle

which at the time of the event giving rise to such liability was

owned by or in the possession of the Government, unless there

was in force in respect of such vehicle a policy of insurance

purporting to cover such use of the vehicle< and for the purposes

of this paragraph, a vehicle which has been unlawfully removed

from the possession of the person for the time being legally entitled

to possession shall be deemed to have remained in the possession

of such person while it is so removed< or

(b) at the time of the accident the person -

(i) being the owner of or being a person using the

vehicle, was using, or causing or permitting the vehicle to be

used, without there being in force in relation to such use a

policy of insurance or such security as would comply with

the compulsory insurance legislation, knowing or having

reason to believe that no such policy or security was in force<

or

(ii) was allowing himself to be carried in a vehicle

knowing or having reason to believe that the vehicle had been

taken without the consent of the owner or other lawful

authority, unless he believed or had reason to believe that he

had lawful authority to be carried or would have had the

owner’s consent if the owner had known of the fact and the

circumstances of his carriage, or unless he had learned of the

circumstances of the taking of the vehicle after the journey

had commenced and he could not reasonably be expected to

alight from the vehicle< or

(iii) who sustained the death, bodily injury or damage to

property, voluntarily entered the vehicle which caused such

death, bodily injury or damage when the Fund can prove that

such person knew it was uninsured<

(c) pursuant to the Insurance Business Security Fund

Regulations 1986, repealed by these regulations, the death or injury

in respect of which compensation would otherwise be payable

occurred before the 1st of July, 1986.

Where the Fund is of the opinion that an applicant is not

entitled to compensation in whole or in part, under this Part of these

regulations, the Fund shall give notice in writing to such applicant of

the opinion and the reasons therefor.

(1) The Authority may issue insurance directives and

guidelines to insurers for the purposes of these regulations.

(2) Such insurance directives and guidelines may contain

such incidental, supplementary and consequential provisions as appear

to the Authority to be expedient for the purposes of these regulations.

PART V - SUPPLEMENTARY

(1) Saving the provisions of the following sub-regulations

of this regulation, the Insurance Business Security Fund Regulations,

1986 (hereinafter in these regulations referred to as “the 1986

Regulations”), are hereby repealed.

(2) Notwithstanding any other provision of these

regulations, the Security Fund Committee appointed by the Minister

under regulation 6 of the 1986 Regulations shall continue in office as if

the Security Fund Committee were appointed by the Authority under

regulation 5 of these regulations, and the Bureau with which the Security

Fund Committee had made an agreement under sub-regulation (2) of

regulation 6 of the 1986 Regulations shall also continue in office as if

the Management Committee had made the agreement with the Bureau

under sub-regulation (2) of regulation 6 of these regulations until -

(a) in the case of the Security Fund Committee, the Authority

shall, pursuant to regulation 5 of these regulations, appoint the

Management Committee< and

(b) in the case of the Bureau, the Management Committee

shall, pursuant to sub-regulation (2) of regulation 6 of these

regulations, make arrangement or agreement as is envisaged therein

with such body or person as it may deem appropriate.

(3) Where, immediately after the date of coming into force

of these regulations -

(a) a company licensed under the Insurance Business Act,

1981, repealed by the Act, to carry on in Malta the business of

insurance as principal, was, immediately before that date, in a state

of insolvency in accordance with the 1986 Regulations, and the

Security Fund Committee or the Management Committee, as the

case may be, was or is required, in respect of such of the obligations

as may arise from a policy of insurance issued in Malta by that

company, to make payments out of the Protection and

Compensation Fund, the Security Fund Committee or the

Management Committee shall -

(i) in its consideration of the obligations, be governed

by Part II of the 1986 Regulations< and

(ii) in its consideration of the contributions, be

governed by regulation 7 of Part I of the 1986 Regulations<

(b) a claim for compensation out of the Protection and

Compensation Fund was, immediately before that date, made or

was ought to be made, the Security Fund Committee or the

Management Committee shall -

(i) in its consideration of the claim, be governed by

Part III of the 1986 Regulations< and

(ii) in its consideration of the contributions, be

governed by regulation 7, of Part I of the 1986 Regulations.

(4) All assets and liabilities of the Security Fund transferred

to the Protection and Compensation Fund in virtue of the Act shall, as

from the date of coming into force of these regulations, be kept separate

from other assets and liabilities of the Protection and Compensation

Fund and the administration of the assets and liabilities which are to be

kept separate in virtue of those regulations shall continue to be governed

by regulation 10 of the 1986 Regulations until all obligations of the

Protection and Compensation Fund under the 1986 Regulations are

discharged in full.

(5) Any assets of the Protection and Compensation Fund

which are kept separate from the other assets of the Fund in virtue of

this regulation remaining in hand after the discharge of all obligations

under the 1986 Regulations shall be aggregated to the other assets of

the Fund and be assets of the Fund and continue to be used under these

regulations exclusively for the same purpose which they were used under

the 1986 Regulations.

(6) For the purpose of this regulation, the “Security Fund” means

the fund established by article 26 of the Insurance Business Act, 1981,

repealed by the Act.