Undertakings in an Insurance Group) Regulations, 2004

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 17,594, 28 ta’ Mejju, 2004

L.N. 311 of 2004

INSURANCE BUSINESS ACT

(CAP. 403)

Insurance Business (Supplementary Supervision of Insurance

Undertakings in an Insurance Group) Regulations, 2004

IN exercise of the powers conferred by articles 63 and 64 of the

Insurance Business Act, the Prime Minister and the Minister of Finance,

after consultation with the Malta Financial Services Authority, has made

the following regulations>-

(1) These regulations may be cited as the Insurance Business Citation and

commencement.

(Supplementary Supervision of Insurance Undertakings in an Insurance

Group) Regulations, 2004.

(2) These regulations shall be deemed to come into force

st

on the 1 May, 2004.

(1)

In these regulations, unless the context otherwise Interpretation.

requires-

“the Act” means the Insurance Business Act<

“the competent authority” means the Malta Financial Services

Authority appointed under article 3 of the Act<

“the Regulations” means the Insurance Business (Insurers’ L.N. 310 of 2004.

Assets and Liabilities) Regulations, 2004<

“EEA insurance parent undertaking” means an insurance

parent undertaking whose head office is in Malta or another EEA

State<

“EEA insurer” means an insurer, other than a pure reinsurer

or a non-directive insurer, whose head office is in an EEA State

other than Malta and which has received authorisation under article

4 of Directive 2002#83#EC or article 6 of Directive 73#239#EEC

from the foreign authority<

“EEA State” means a State which is a contracting party to the

agreement on the European Economic Area signed at Oporto on 2

May, 1992 as amended by the Protocol signed at Brussels on the

17 th March, 1993 and as amended from time to time<

“financial year” means each period at the end of which the

balance of the accounts of an insurer is struck or, if no such balance

is struck, the calendar year<

“financial year in question” means the financial year which

last ended before the date on which the accounts of an insurer are

required to be submitted to the competent authority under article

20 of the Act<

“foreign authority” means a competent authority within the

meaning of article 1(k) of Directive 92#49#EEC or article 1(n) of

Directive 2002#83#EC of an EEA State<

“insurance group” means an insurance parent undertaking and

its related undertakings that are>

(a) insurers<

(b) reinsurance undertakings< or

(c)

insurance holding companies<

“Insurance Groups Directive” means the Directive, 98#78#EC,

of the European Parliament and of the Council of the 27 th October,

1998 on the supplementary supervision of insurance undertakings

in an insurance group<

“insurance holding company” means an undertaking whose

main business is to acquire and hold participations in subsidiary

undertakings, where those subsidiary undertakings are exclusively

or mainly insurance undertakings<

“insurance parent undertaking” in relation to an insurance

undertaking, is a parent undertaking of that insurance undertaking,

which is either itself an insurance undertaking or an insurance

holding company<

“insurer” means the party to a contract of insurance who agrees

to pay a sum of money or other consideration on the happening of

a specified event<

“insurer whose head office is in Malta” means a company

authorised in terms of the Act, whose head office is in Malta and

which is entitled to carry on business of insurance in an EEA State,

other than Malta in exercise of a European right<

“mixed-activity insurance holding company” means a parent

undertaking, other than an insurance undertaking, a non-member-

country insurance undertaking, a reinsurance undertaking or an

insurance holding company, which includes at least one insurance

undertaking among its subsidiary undertakings<

“non-directive insurer” means -

(a)

a mutual (carrying on long term business) -

(i) whose articles of association contain provisions for

calling up additional contributions from members or reducing

their benefits or claiming assistance from other persons who

have undertaken to provide it< and

(ii) whose annual gross premium income (other than

from contracts of reinsurance) has not exceeded 5 million

Euro for each of the financial year in question and the two

previous financial years<

(b) a mutual (carrying on general business) whose –

(i) articles of association contain provisions for calling

up additional contributions from members or reducing their

benefits<

(ii) business does not cover liability risks, other than

ancillary risks, or credit or suretyship risks<

(iii) gross premium income (other than from contracts

of reinsurance) for the financial year in question did not exceed

5 million Euro< and

(iv) members provided at least half of that gross

premium income<

(c) an insurer whose business of insurance (other than

reinsurance) is –

(i) restricted to the provision of assistance for persons

who get into difficulties while travelling, while away from

home or while away from their permanent residence<

(ii) carried out exclusively on a local basis and consists

only of benefits in kind< and

(iii) such that the gross premium income from the

provision of assistance in the financial year in question did

not exceed 200,000 Euro,

and whose business of insurance is limited to that described

in the foregoing paragraphs (a) to (c)<

“non-EEA insurer” means an insurer, other than a pure State

reinsurer, whose head office is not in an EEA<

“notional required minimum margin” means>

(a) in the case of an insurer (other than a pure reinsurer)

that has its head office in the zone of countries the amount of

the required minimum margin, or equivalent, under the

regulatory requirements of that country<

(b) in the case of a pure reinsurer that has its head office

in the zone of countries, the amount that would be the required

minimum margin, or equivalent, if the regulatory requirements

of that state or territory within the zone of countries applicable

to undertakings carrying on direct insurance business were

applied to the pure reinsurer< and

(c) in all other cases, the amount of the required

minimum margin that would apply if the insurer were an

insurer with its head office in Malta (whether it is or not)<

“parent undertaking” has the same meaning as is assigned to

it by article 2 of the Companies Act<

“parent undertaking solvency calculation” means the

calculation required by Part XI of the Regulations<

“participation” means the holding of a participating interest

or the holding, directly or indirectly, of 20% or more of the voting

rights or capital<

“participating interest” shall have the meaning as is assigned

to it by article 2 of the Companies Act<

“participating undertaking” means an undertaking which holds

a participation in the undertaking in question<

“pure reinsurer” means an insurer whose business is restricted

to business of reinsurance<

“related undertaking” means, in relation to an insurer -

(a)

a subsidiary undertaking of the insurer< or

(b) a company of which the insurer is a subsidiary

undertaking< or

(c) a subsidiary undertaking of a company of which

the insurer is a subsidiary undertaking<

“reinsurance undertaking” means an undertaking, other than

an insurance undertaking or a non-member-country insurance

undertaking, the main business of which consists in accepting risks

ceded by an insurance undertaking, a non-member country

insurance undertaking or other reinsurance undertakings<

“solvency deficit” means a deficit in the assets available to

cover the undertaking’s liabilities and represent its notional required

minimum margin, if any<

“subsidiary undertaking” means an undertaking within the

meaning of paragraph (c) of sub-article (2) of article 2 of the

Companies Act<

“ultimate EEA insurance parent undertaking” means an EEA

insurance parent undertaking that is not itself the subsidiary

undertaking of another EEA insurance parent undertaking<

“ultimate insurance parent undertaking” means an insurance

parent undertaking that is not itself the subsidiary undertaking of

another insurance parent undertaking<

“zone of countries” means a zone of countries as may be

determined by an Insurance Directive made by the competent

authority by virtue of sub-article (3) of article 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 shall,

in these regulations, have the same meanings as in the Act.

(1) Every insurer whose head office is in Malta which is a Applicability.

participating undertaking in at least one EEA insurer, reinsurance

undertaking or non-EEA insurer, shall be subject to supplementary

supervision in accordance with regulation 4 of these regulations.

(2) Every insurer whose head office is in Malta, the parent

undertaking of which is an insurance holding company, a reinsurance

undertaking or a non-EEA insurer, shall be subject to supplementary

supervision in accordance with regulation 4 of these regulations.

(3) Every insurer whose head office is in Malta, the parent

undertaking of which is a mixed-activity insurance holding company,

shall be subject to supplementary supervision in accordance with

regulation 4 of these regulations>

Provided that, the exercise of supplementary supervision shall

in no way imply that the competent authority is required to play a

supervisory role in relation to the non-EEA insurer, insurance holding

company, mixed activity insurance holding company or reinsurance

undertaking taken individually.

(1)

The supplementary supervision shall take into account>

(a) related undertakings of an insurer whose head office is

in Malta<

(b) participating undertakings in an insurer whose head

office is in Malta< and

(c) related undertakings of a participating undertaking in

an insurer whose head office is in Malta.

(2) Without prejudice to regulation 6 of these regulations,

the competent authority may decide not to take into account in the

supplementary supervision referred to in sub-regulation (1) of this

regulation non-EEA insurers where there are legal impediments to the

transfer of the necessary information.

(3) Every insurer whose head office is in Malta subject to

supplementary supervision shall have adequate internal control

mechanisms in place for the production of any data and information

relevant for the purposes of such supplementary supervision.

(4) Undertakings that are subject to supplementary

supervision and their related undertakings and participating undertakings

shall exchange among themselves any information relevant for the

purposes of such supplementary supervision.

(5) (a) The competent authority shall have access to any

information which would be relevant for the purpose of supervision of

an EEA insurer subject to supplementary supervision<

(b) The competent authority may address itself directly to

the relevant undertakings referred to in sub-regulation (4) of this

regulation, to obtain the necessary information only if such

information has been requested from the insurer whose head office

is in Malta and has not been supplied by such undertaking.

(6) The competent authority may carry out, in Malta, itself,

or through an inspector appointed in terms of article 30 of the Act, on-

the-spot verification of information referred to in sub-regulation (3) of

this regulation at>

(a) the insurer whose head office is in Malta subject to

supplementary supervision<

(b) subsidiary undertakings of that insurer<

(c)

parent undertakings of that insurer< and

(d) subsidiary undertakings of a parent undertaking of that

insurer.

(7) (a) Where the competent authority wishes to verify

information concerning another undertaking in another EEA State, which

is a related insurance undertaking, a subsidiary undertaking, a parent

undertaking or a subsidiary undertaking of a parent undertaking of the

insurer whose head office is in Malta subject to supplementary

supervision, the competent authority shall request the foreign authority

of that other EEA State to have that verification carried out<

(b) The foreign authority may also request the competent

authority to have such on-the-spot verification carried out on its

behalf< or

(c) The competent authority may allow the foreign

authorities making the request to carry out on-the-spot verification

itself or by allowing an auditor or expert to carry it out.

(1) General supervision shall be carried out by the competent General supervision

and reporting tothe

authority over transactions between>

competentauthority.

(a)

an insurer whose head office is in Malta< and

(i) a related undertaking of the insurer<

(ii) a participating undertaking in the insurer<

(iii) a related undertaking of a participating undertaking

in the insurer<

(b) an insurer whose head office is in Malta and a natural

person who holds a participation in>

(i) the insurer or any of its related undertakings<

(ii) a participating undertaking in the insurer<

(iii) a related undertaking of a participating undertaking

in the insurer.

(2) An insurer whose head office is in Malta shall provide

the competent authority with a declaration of the following information

in respect of itself and, subject to the exceptions in sub-regulation (3)

of this regulation, in respect of each member of the insurance group>

(a)

the name, location of head office and principal activity<

(b) the relationship with each other member of the insurance

group, including the amounts and descriptions of holdings of share

capital and voting rights<

(c)

loans between members of the insurance group<

(d) guarantees and off-balance sheet transactions between

members of the insurance group<

(e)

investments between members of the insurance group<

(f) reinsurance operations between members of the

insurance group<

(g) agreements to share costs between members of the

insurance group<

(h) whether the member of the group is a subsidiary

undertaking of the ultimate insurance parent undertaking and, if

different, of the ultimate EEA insurance parent undertaking<

(i) subject to sub-regulation (3) of this regulation, the

ultimate insurance parent undertaking’s proportional share of, or

if the group member is a subsidiary undertaking of that parent the

whole of, any solvency deficit<

(j) subject to sub-regulation (3) of this regulation, the

ultimate EEA insurance parent undertaking’s proportional share

of, or if the group member is a subsidiary undertaking of that parent

the whole of, any solvency deficit< and

(k) a statement that>

(i) the declaration has been properly prepared in

accordance with this regulation, and

(ii)

proper records have been maintained and adequate

information obtained by the insurer for the purpose of the

declaration required by this regulation.

(3) Paragraphs (i) and (j) of sub-regulation (2) of this

regulation shall not apply with respect to a group member, other than

the insurer with head office in Malta, where>

(a) the parent undertaking solvency calculation in relation

to the ultimate insurance parent undertaking or the ultimate EEA

insurance parent undertaking, as the case may be, is positive<

(b) the group member is not a parent undertaking of the

insurer whose head office is in Malta<

(c) the group member is not a participating undertaking in

the insurer whose head office is in Malta<

(d) the group member is not a related undertaking of the

insurer whose head office is in Malta<

(e) the group member’s solvency deficit does not exceed

5% of the positive parent undertaking solvency calculation in

relation to the ultimate insurance parent undertaking or the ultimate

EEA insurance parent undertaking, as the case may be< and

(f) the insurer whose head office is in Malta has complied

with paragraphs (i) or (j) of sub-regulation (2) of this regulation,

as the case may be, in relation to sufficient group members so that

the sum of the solvency deficits in the remaining group members

does not exceed 10% of the positive parent undertaking solvency

calculation in relation to the ultimate insurance parent undertaking

or the ultimate EEA insurance parent undertaking, as the case may

be.

(4) Subject to sub-regulations (6), (7), (8) and (9) of this

regulation, the declaration required by sub-regulation (2) of this

regulation shall also include>

(a) calculations (“the parent undertaking solvency

calculations”) in respect of each of the ultimate insurance parent

undertaking and ultimate EEA insurance parent undertaking of

the value of its surplus assets, determined in accordance with the

requirements of Part IX of the Regulations (other than paragraphs

(a) to (c) of sub-regulation (1) of regulation 62), less>

(i) any provision for related undertakings valued on

the basis of regulation 67 of the Regulations, except to the

extent already allowed for in the value of surplus assets, and

(ii) where the surplus assets are valued at nil, the

amount of any deficit in the assets available to cover>

(aa)

any liabilities not already provided for, and

(bb) the notional required minimum margin, if

any, of the ultimate insurance parent undertaking or the

ultimate EEA insurance parent undertaking, as the case

may be< and

(b) if either of the parent undertaking solvency calculations

is negative, a statement as to the reasons why such deficit or deficits

has or have arisen and of any remedial action taken or planned.

(5) The information and calculations required under this

regulation must be provided by not later than six months from the end

(a)

the financial year in question< or

(b) the financial year of the ultimate EEA insurance parent

undertaking< or

(c) the financial year of the ultimate insurance parent

undertaking.

(6) If the foreign authority has agreed to be the supervisor

responsible for exercising supplementary supervision of the EEA insurer

under sub-article (2) of article 4 of the Insurance Groups Directive or,

where no such agreement has been reached, but>

(a) the head office of the ultimate EEA insurance parent

undertaking is situated in an EEA State, other than Malta, and that

parent is itself an insurer, other than a pure reinsurer< or

(b) where that parent is not an insurer, another member of

the insurance group is an insurer (other than a pure reinsurer) whose

head office is situated in an EEA State other than Malta, and that

member is>

(i) a parent undertaking of the insurer whose head

office is in Malta, or

(ii) has a notional required minimum margin which

exceeds the notional required minimum margin of the insurer,

then the insurer may provide the information and

calculations required under paragraphs (i) and (j) of sub-

regulation (2) of this regulation and the parent undertaking

solvency calculation in relation to the ultimate EEA insurance

parent undertaking prepared in accordance with the

requirements of the EEA State of supplementary supervision

or of the relevant head office for>

(aa) the valuation of assets and the determination

of liabilities of insurers and insurance holding

companies< and

(bb) the calculation of the required minimum

solvency margin of insurers.

(7) If the head office of the ultimate insurance parent

undertaking is situated in a country within the zone of countries other

than an EEA State, then the insurer may provide>

(a) the parent undertaking solvency calculation, in

accordance with the provisions of Part XI of the Regulations, in

relation to the ultimate insurance parent undertaking prepared in

accordance with accounting practice applicable for the purposes

of the supervision of insurers in the state or territory of the head

office>

(i) adapted as necessary to apply the general principles

set out in paragraphs 1.B, 1.C, and 1.D of Annex I of the

Insurance Groups Directive< and

(ii) using the deduction and aggregation method or

the accounting consolidation-based method set out in Annex

I of the Insurance Groups Directive< and

(b) the solvency deficits under paragraph (i) of sub-

regulation (2) of this regulation prepared in accordance with the

requirements>

(i) for the valuation of assets and the determination of

liabilities of insurers and insurance holding companies, and

(ii) for the calculation of the required minimum

solvency margin of insurers,

in the state or territory where the ultimate insurance parent

undertaking’s head office is situated.

(8) If the head office of the insurer’s ultimate insurance

parent undertaking is not situated in Malta or in a country within the

zone of countries, then the insurance company may provide the parent

undertaking solvency calculation in relation to the ultimate insurance

parent undertaking prepared in accordance with the requirements of

Part X of the Regulations (other than paragraphs (a) to (c) of sub-

regulation (1) of regulation 62 of the Regulations).

(9) If the ultimate insurance parent undertaking or, as the

case may be, the ultimate EEA insurance parent undertaking of the

insurer is itself an insurer to which Part IX of the Regulations apply,

then the insurer is not required to provide a parent undertaking solvency

calculation in relation to that parent.

(10) The declarations required by sub-regulations (2) and

(4) of this regulation>

(a) subject to paragraph (c), must be signed by, where there

are more than two directors of the company, at least two of those

directors and, where there are not more than two directors, all the

directors< and

(b) subject to sub-regulation (11) of this regulation, must

include a statement from the auditors of the insurer, or of a company

under paragraph (c) of this sub-regulation that, in their opinion, it

has been properly compiled in accordance with this regulation from

information provided by members of the insurance group and from

the company’s own records< and

(c) may be provided on behalf of the insurer (the first

insurer) by any other insurer to which this regulation applies and

which is a member of the insurance group (the second insurer)

where>

(i)

it is signed by two directors of the second insurer<

and

(ii) it contains a statement that it has been copied to

the board of directors of the first insurer.

(11) The statement under paragraph (b) of sub-regulation

(10) of this regulation is not required to include the parent undertaking

solvency calculation or a calculation with respect to that parent under

paragraphs (i) or (j) of sub-regulation (2) of this regulation>

(a) where the parent undertaking solvency calculation is

provided in accordance with sub-regulation (6) of this regulation<

and

(b) to the extent that a statement is provided from auditors

qualified in the EEA State of supplementary supervision or of the

relevant head office, that in their opinion the calculation complies

with the requirements applicable in that State to the preparation of

solvency calculations for insurance groups pursuant to the

Insurance Groups Directive.

(1) Where any information necessary for any of the Availability of

information and

calculations required by these regulations or Part XI of the Regulations, powers of

concerning a related undertaking with its registered office in an EEA intervention

State or a non-EEA State, is not available to the competent authority,

for whatever reason, the book value of that undertaking in the

participating undertaking shall be deducted from the elements eligible

for the calculation provided for under regulation 51 of the Regulations.

In that case, the unrealised gains connected with such participation shall

not be allowed as an element eligible for the calculation.

(2) If, on the basis of any of the calculations provided for

in Part IX of the Regulations, it results that the solvency of a subsidiary

insurance undertaking of the insurance holding company, the reinsurance

undertaking or the non-EEA insurer, is, or may be jeopardised, the

competent authority shall take appropriate measures at the level of the

insurer whose head office is in Malta.

(1) The purpose of these regulations is to implement the

provisions of Directive 98#78#EC of the European Parliament and of

the Council of 27 October 1998, and shall be interpreted and applied

accordingly.

(2) In the event that any of these regulations conflict with

the provisions of the Insurance Groups Directive, the latter shall prevail.