Insurance Business (Insurers’ Assets and Liabilities)

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 17,834, 28 ta’ Ottubru, 2005

L.N. 351 of 2005

INSURANCE BUSINESS ACT

(CAP. 403)

Insurance Business (Insurers’ Assets and Liabilities)

(Amendment) Regulations, 2005

IN exercise of the powers conferred by articles 11, 14, 16, 17,18,

63 and 64 of the Insurance Business Act, the Prime Minister and Minister

of Finance, after consultation with the Malta Financial Services

Authority, has made the following regulations:-

The title of these regulations is the Insurance Business Citation and

(Insurers’ Assets and Liabilities) (Amendment) Regulations, 2005, and commencement.

they shall be read and construed as one with the Insurance Business

(Insurers’ Assets and Liabilities) Regulations, 2004, hereinafter referred L.N. 310 of 2004.

to as “the principal regulations” .

Sub-regulation (1) of regulation 2 of the principal regulations Amends

regulation 2

shall be amended as follows

of the

principal

regulations.

(a) immediately after the definition “implicit items” there

shall be inserted the following new definition

“ “ insurance holding company” means a parent

undertaking, the main business of which is to acquire and

hold participations in subsidiary undertakings, where those

subsidiary undertakings are exclusively or mainly insurance

undertakings, reinsurance undertakings, or non-EEA insurers,

at least one of such subsidiary undertakings being an insurance

undertaking, and which is not a mixed financial holding

company in terms of regulation 2 of the Financial L.N. 521 of 2004

Conglomerates Regulations, 2004;”; and

(b) immediately after the definition “Registrar of

Companies”, there shall be inserted the following new definition

“ “reinsurance undertaking” means an undertaking, other

than an insurance undertaking or a non-EEA insurer, the main

business of which consists in accepting risks ceded by an

insurance undertaking, a non-EEA insurer or other reinsurance

undertakings;”.

For regulation 3 of the principal regulations, there shall be

substituted the following

3. The purpose of these regulations is to implement the

“Implemen-

provisions of Directives 73/239/EEC, 88/357/EEC, 92/49/

EEC, 2002/83/EC, 2002/12/EC, 2002/13/EC, 98/78/EC and

2002/87/EC, and they shall be interpreted and applied

accordingly.”.

In sub-regulation (1) of regulation 6 of the principal

regulations, for the words “mentioned in regulations 3 and 4 of these

regulations” there shall be substituted the words “mentioned in regulation

4 of these regulations”.

Regulation 10 of the principal regulations shall be amended

as follows

(a) sub-regulation (7) thereof shall be renumbered as sub-

regulation (12); and

(b) immediately after sub-regulation (6) thereof, there shall

be added the following new sub-regulations

“(7) The margin of solvency shall also be reduced by

the following items-

(a) participations which the insurer holds in-

(i)

insurance undertakings,

(ii) reinsurance undertakings,

(iii) insurance holding companies,

(iv) credit institutions and financial institutions within

the meaning of Article 1(1) and (5) of Directive 2000/12/EC

of European Parliament and of the Council of the 20th March,

2000 relating to the taking up and pursuit of the business of

credit institutions,

(v) investment firms and financial institutions within

the meaning of Article 1(2) of Council Directive 93/22/EEC

of the 10th May, 1993 on investment services in the securities

field and of Article 2(4) and (7) of Council Directive 93/6/

EEC of 15 March 1993 on the capital adequacy of investment

firms and credit institutions;

(b) each of the following items which the insurer holds in respect

of the entities defined in paragraph (a) of this sub-regulation in which it

holds a participation -

(i) instruments referred to in paragraphs 4 and 5 of Title

II of the First Schedule to Insurance Directive 1 of 1999 –

Own Funds of Companies Carrying on Business of Insurance

or Acting as Insurance Agents or Insurance Managers; and

(ii) subordinated claims and instruments referred to in

Article 35 and Article 36(3) of Directive 2000/12/EC of

European Parliament and of the Council of the 20th March,

2000 relating to the taking up and pursuit of the business of

credit institutions.

(8) Where shares in another credit institution, investment

firm, financial institution, insurance or reinsurance undertaking or

insurance holding company are held temporarily for the purposes of a

financial assistance operation designed to reorganise and save that entity,

the competent authority may, upon application by the insurer concerned,

waive the provisions on deduction referred to under paragraphs (a) and

(b) of sub-regulation (7) of this regulation.

(9) As an alternative to the deduction of the items referred

to in paragraphs (a) and (b) of sub-regulation (7) of this regulation which

an insurer holding an authorisation holds in credit institutions, investment

firms and financial institutions, the insurer may, with the approval of

the competent authority given in writing, apply mutatis mutandis

Methods 1, 2, or 3 of the First Schedule to the Financial Conglomerates

Regulations, 2004

L.N. 521 of 2004

Provided that, the approval shall be given by the competent

authority in respect of Method 1 of the First Schedule to the Financial

Conglomerates Regulations, 2004, if the competent authority is confident L.N. 521 of 2004

about the level of integrated management and internal control regarding

the entities which would be included in the scope of consolidation. The

method chosen shall be applied in a consistent manner over a period of

time.

(10) For the calculation of the margin of solvency, insurance

undertakings subject to supplementary supervision in accordance with

the Insurance Business (Supplementary Supervision of Insurance L.N. 311 of 2004

Undertakings in an Insurance Group) Regulations, 2004 or to

supplementary supervision in accordance with the Financial

Conglomerates Regulations, 2004 need not deduct the items referred to L.N. 521 of 2004

in paragraphs (a) and (b) of sub-regulation (7) of this regulation which

are held in credit institutions, investment firms, financial institutions,

insurers, reinsurance undertakings or insurance holding companies

which are included in the supplementary supervision.

(11) For the purposes of the deduction of participations

referred to in sub-regulations (7) to (10) of this regulation, “participation”

shall have the same meaning as is assigned to it in regulation 2 of the

Insurance Business (Supplementary Supervision of Insurance

Undertakings in an Insurance Group) Regulations, 2004.”.

In sub-regulation (6) of regulation 26 of the principal

regulations, the words “or affiliated insurance” shall be deleted.

In sub-regulation (2) of regulation 41 of the principal

regulations, for the words “sub-regulations (2) and (3) of this regulations”

there shall be substituted the words “sub-regulation (2) of this

regulation”.

Sub-regulation (1) of regulation 49 of the principal regulations

shall be amended as follows

(a) for the definition “approved credit institution” there shall

be substituted the following

“ “ approved credit institution” means an institution

licensed as such under the Banking Act and any other

institution approved for such purposes by the competent

authority;”;

(b) the definition “insurance holding company” shall be

deleted;

(c) in the definition “listed”, in paragraph (b) for the words

“on a regulated market” there shall be substituted the words “ on a

regulated market,”;

(d) in the definition “long term business amount”, for the

words “Tenth Schedule” there shall be substituted the words “Ninth

Schedule”;

(e) for the definition “participating undertaking”, there shall

be substituted the following new definition

“ “ participating undertaking” means an undertaking

which is either a parent undertaking or other undertaking

which holds a participation or an undertaking linked with

another undertaking by a relationship within the meaning of

Article 12(1) of the Seventh Council Directive 83/349/EEC

of the 13th June, 1983 based on the Article 54(3)(g) of the

Treaty on consolidated accounts;”;

(f) the definition “reinsurance undertaking” shall be deleted;

(g) for the definition “related undertaking”, there shall be

substituted the following new definition

“ “related undertaking” means either a subsidiary or another

undertaking in which a participation is held, or an undertaking

linked with another undertaking by a relationship within the

meaning of Article 12(1) of the Seventh Council Directive 83/349/

EEC of the 13th June, 1983 based on the Article 54(3)(g) of the

Treaty on consolidated accounts;”.

For sub-regulation (4) of regulation 50 of the principal Amends

regulation 50

regulations, there shall be substituted the following

of the principal

regulations.

“ (4)

Subject to subarticle (3) of article 17 of the Act,

the competent authority may, in exceptional circumstances, on

application made to it in writing for that purpose

(a) permit any asset as is referred to in sub-regulation

(3) of this regulation to be taken into account, or to be taken

into account to a specified extent, and, if the asset is taken

into account, or taken into account to a specified extent, the

value of such asset shall be determined in accordance with

specific valuation provisions issued in writing for such

purposes by the competent authority; or

(b)

temporarily and under a properly reasoned

decision, permit any asset for which provision is made in

this Part of these regulations for their valuation to be taken

into account to an extent, other than that specified in Part II

of the Ninth Schedule.”.

In sub-regulation (5) of regulation 51 of the principal Amends

regulation 51

regulations, for the words “in subregulation (3)(a)”, there shall be of the principal

substituted the words “in subregulation (4)(a)”.

regulations.

In paragraph (f) sub-regulation (5) of regulation 62 of the Amends

principal regulations, for the words “within regulation 51;”, there shall regulation

of the principal

be substituted the words “within regulations 51 and 52;”.

regulations.

Immediately at the end of regulation 68 of the principal

regulations, there shall be added the following proviso

“Provided that, the amount of any reserve maintained under

subarticle 7 of article 17 of the Act shall be determined in

accordance with Part VIII of these regulations.”.

Regulation 83 of the principal regulations shall be amended

as follows

(a) in sub-regulation (1) thereof, for the words “of ultimate

insurance parent undertakings whose head office is in Malta”, there

shall be substituted the words “of ultimate insurance parent

undertakings and whose head office is in Malta.”; and

(b) in sub-regulation (5) thereof, for the words “in

accordance with sub-regulation (4) of regulation 84 of these

regulations”, there shall be substituted the words “ in accordance

with sub-regulation (3) of regulation 84 of these regulations”.

Immediately at the end of sub-regulation (3) of regulation

85 of the principal regulations, there shall be added the following

proviso

“Provided that, when an insurer becomes aware that it is

unable to establish the required margin of solvency until the

specified date, it shall, not later than three months prior to the

specified date, in accordance with article 14 of the Act, submit for

the approval of the competent authority to be given in writing, the

measures which the insurer proposes to take for such purposes,

and the competent authority may allow an insurer a further period

not exceeding two years in which to comply with such requirement.

The competent authority may in such circumstances, adopt

measures to safeguard the interests of insureds, policyholders,

creditors and other interested persons.”.

Regulation 86 of the principal regulations shall be deleted.

In paragraph 3 of the Third Schedule to the principal

regulation, for the words “pure reinsurer provisions and recoveries”,

there shall be substituted “pure reinsurer, claims, provisions and

recoveries”;

In paragraph 1 of the Fourth Schedule to the principal

regulations

(a) sub-paragraph (a) thereof shall be deleted;

(b) sub-paragraph (b) thereof shall be renumbered as sub-

paragraph (a) thereof; and

(c) sub-paragraph (c) thereof shall be renumbered as sub-

paragraph (b) thereof .

The Ninth Schedule to the principal regulations shall be Amends the

Ninth Schedule

amended as follows

to the principal

regulations.

(a) for paragraph 4 of Part I thereof, there shall be substituted

the following -

“4.

The permitted counterparty exposure limit is –

(a) where the counterparty is an individual or an

unincorporated body of persons, 5 per centum of the business

amount;

(b) where the counterparty is a counterparty of the type

mentioned in sub-paragraph (e) in the definition of counterparty,

10 per centum of the business amount;

(c) where the counterparty is a body corporate

or group, each of

(i)

30 per centum of the business amount;

(ii)

15 per centum of the business amount or such

lower amount as the insurer may decide where the exposure

arises other than by reason that debts are due or to become

due as a result of short term deposits made with an approved

credit institution;

(iii) 10 per centum of the business amount where the

exposure is other than to bodies which are approved

counterparties.”;

(b)

In paragraph 23 of Part I thereof

(i) for the words “in indent (ii) of sub-paragraph (2) of

paragraph 4 of this Part of this Schedule”, there shall be

substituted the words “in indent (ii) of sub-paragraph (c) of

paragraph 4 of this Part of this Schedule”; and

(ii) in paragraphs (b) and (c) thereof, for the words

“does not exceed 5% per centum of the business amount”,

there shall be substituted the words “does not exceed 10%

per centum of the business amount”; and

(c)

In paragraph 11 of Part II thereof

(i) for the words “in accordance with regulation 55 of

the regulations” there shall be substituted the words “in

accordance with regulation 56 of the regulations”; and

(ii) in sub-paragraph (a) thereof, for the words “falling

within regulation 56(1)(b) of the regulations” there shall be

substituted the words “falling within regulation 57(1)(b) of

the regulations”.

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press