Insurance Business (Linked Long Term Contracts)

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 19,509, 10 ta’ Diċembru, 2015

L.N. 398 of 2015

INSURANCE BUSINESS ACT

(CAP. 403)

Insurance Business (Linked Long Term Contracts)

(Amendment) Regulations, 2015

IN exercise of the powers conferred by article 45 of the

Insurance Business Act, the Minister for Finance, after consultation

with the Malta Financial Services Authority, has made the following

regulations:-

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

Business (Linked Long Term Contracts) (Amendment) Regulations, commencement.

2015, and these regulations shall be read and construed as one with

the Insurance Business (Linked Long Term Contracts) Regulations, S.L. 403.08

hereinafter referred to as ''the principal regulations''.

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

2016.

Regulation 2 of the principal regulations shall be amended Amends

regulation 2 of

as follows

the principal

regulations.

(a) the current regulation shall be renumbered as sub-

regulation (1) thereof;

(b) for the definition ''authorised company'', there shall

be substituted the following

'' ''authorised undertaking'', in relation to linked

long term contracts, means an undertaking whose head

office is in Malta authorised to carry on long term

business, including business of insurance class III

specified in the Second Schedule to the Act, other than an

authorised reinsurance undertaking or a captive insurance

undertaking or a captive reinsurance undertaking;'';

(c)

the definition ''the Authority'' shall be deleted;

(d) immediately after the new definition ''authorised

undertaking'', there shall be added the following new

definitions

'' ''Directive 2009/65/EC'' means Directive 2009/

65/EC of the European Parliament and of the Council of 13

July 2009 on the coordination of laws, regulations and

administrative provisions relating to undertakings for

collective investment in transferable securities (UCITS)

(recast);

''index linked benefits'' means benefits

(a) provided for under any contract the

effecting of which constitutes the carrying on of

long term business; and

(b) determined by reference to fluctuations

in any index of the value of property (whether

specified in the contract or not);'';

(e)

the definition ''land'' shall be deleted;

(f)

immediately after the new definition ''index linked

benefits'' there shall be added the following new definition

'' ''linked fund'' means a real or notional account to

which an authorised undertaking appropriates linked assets

for the purposes of their being permitted links, and which

may be subdivided into units, the value of each of which is

determined by the authorised undertaking by reference to

the value of those linked assets;'';

(g) immediately after the definition ''long term

contract'', there shall be added the following new definitions

'' ''property linked benefits'' means

benefits other than index linked benefits

provided for under any contract the effecting

of which constitutes the carrying on of long-

term insurance business and determined by

reference to the value of, or the income from,

property of any description (whether

specified in the contract or not);

''Malta Financial Services Authority''

means the competent authority established by

the Malta Financial Services Authority Act;

''third country'' means a country which

is not a Member State or EEA State;''; and

(b) immediately after sub-regulation (1) thereof, as re-

numbered, there shall be added the following

''(2) These regulations shall apply only where the

investment risk is borne by a policyholder who is a natural

person.''.

In sub-regulation (5) of regulation 3 of the principal Amends

regulations, for the words ''in the value of derivative contracts other regulation

the principal

than permitted derivative contracts as defined in paragraph 15 of the regulations.

Schedule.'', there shall be substituted the words ''in the value of

derivative instruments other than financial derivative instruments as

specified in paragraph 12 of Part I of the Schedule.''.

The Schedule to the principal regulations shall be Substitution of

the Schedule to

substituted by the following

the principal

regulations.

''SCHEDULE

(Regulation 3)

PERMITTED LINKS

PART I

DESCRIPTIONS OF PROPERTY BY REFERENCE TO WHICH

BENEFITS MAY BE DETERMINED

1. Transferable securities and money market instruments

admitted to or dealt in on a regulated market as defined in Article

4(1)(14) of Directive 2004/39/EC, of the European Parliament and of

the Council of 21 April 2004 on markets in financial instruments

amending Council Directives 85/611/EEC and 93/6/EEC and

Directive 2000/12/EC of the European Parliament and of the Council

and repealing Council Directive 93/22/EEC.

2. Transferable securities and money market instruments

dealt in on another regulated market in a Member State or EEA State,

which operates regularly and is recognised and open to the public.

3. Transferable securities and money market instruments

admitted to official listing on a stock exchange in a third country or

dealt in on another regulated market in a third country which operates

regularly and is recognised and open to the public provided that the

choice of stock exchange or market has been approved by the Malta

Financial Services Authority.

4. Recently issued transferable securities, provided that

(a)

the terms of issue include an undertaking that an

application will be made for admission to official listing on a

stock exchange or to another regulated market which operates

regularly and is recognised and open to the public, provided that

the choice of stock exchange or market has been approved by

the Malta Financial Services Authority; and

(b) the admission referred to in sub-paragraph (a) is

secured within a year of issue.

Transferable securities not falling within paragraphs 1 to 4

of Part I of the Schedule provided that they are readily realisable in

Land and buildings (including any interest in land)

(a)

it is considered by the authorised undertaking to be

located in a territory with a properly functioning market,

indicated by the following criteria

(i) a lack of artificial barriers, including barriers

to foreign ownership and repatriation of capital;

(ii)

fair and accurate valuation;

(iii) suitably qualified and independent surveyors;

(iv) accurate financial information;

(v)

enforceable contractual and other property

rights;

(vi) clarity of taxation;

(vii) availability of reliable economic and property

market data;

(viii) ethical transaction standards; and

(b)

it is

(i)

owned directly by the authorised undertaking;

(ii) held in a structure, or a series of structures,

that do not pose a materially greater risk to the

policyholders than a direct holding; and

(iii) it is not geared in excess of 10% of the gross

asset value of the linked fund.

Loans

(a)

which are fully secured by hypothec or charge on

land and buildings (or any interest in land) which

(i) satisfy the criteria in paragraph 6 of this Part

of the Schedule; and

(ii) in the case of a loan made to a person other

than a body corporate, is not used wholly or mainly for

domestic purposes, and

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

dates for the payment of interest and the repayment of principal

can be fully ascertained from the terms of any agreement

relating to the loan.

Units of UCITS authorised according to Directive 2009/

65/EC or other collective investment undertakings within the

meaning of Article 1(2)(a) and (b) of Directive 2009/65/EC, whether

or not established in a Member State or EEA State, provided that

(a) such other collective investment undertakings are

authorised under laws which provide that they are subject to

supervision considered by the Malta Financial Services

Authority to be equivalent to that laid down in European Union

law, and that cooperation between authorities is sufficiently

ensured;

(b) the level of protection for unit-holders in the other

collective investment undertakings is equivalent to that

provided for unit-holders in a UCITS, and in particular that the

rules on asset segregation, borrowing, lending, and uncovered

sales of transferable securities and money market instruments

are equivalent to the requirements of Directive 2009/65/EC;

(c)

the business of the other collective investment

undertakings is reported in half-yearly and annual reports to

enable an assessment to be made of the assets and liabilities,

income and operations over the reporting period; and

(d) no more than 10% of the assets of the UCITS or of

the other collective investment undertakings, whose acquisition

is contemplated, can, according to their fund rules or

instruments of incorporation, be invested in aggregate in units

of other UCITS or other collective investment undertakings.

Deposits with credit institutions which are repayable on

demand or have the right to be withdrawn, and maturing in no more

than 12 months, provided that the credit institution has its registered

office in a Member State or EEA State or, if the credit institution has

its registered office in a third country, provided that it is subject to

prudential rules considered by the Malta Financial Services Authority

as equivalent to those laid down in European Union law.

Money market instruments other than those dealt in on a

regulated market, which fall under Article 2(1)(o) of Directive 2009/

65/EC, if the issue or issuer of such instruments is itself regulated for

the purpose of protecting investors and savings, provided that they

(a) issued or guaranteed by a central, regional or local

authority or central bank of a Member State, the European

Central Bank, the Community or the European Investment

Bank, a third country or, in the case of a Federal State, by one of

the members making up the federation, or by a public

international body to which one or more Member States belong;

(b) issued by an undertaking any securities of which are

dealt in on regulated markets referred to in paragraphs 1 to 3 of

this Part of the Schedule;

(c)

issued or guaranteed by an establishment subject to

prudential supervision, in accordance with criteria defined by

European Union law, or by an establishment which is subject to

and complies with prudential rules considered by the Malta

Financial Services Authority to be at least as stringent as those

laid down by European Union law; or

(d) issued by other bodies belonging to the categories

approved by the Malta Financial Services Authority provided

that investments in such instruments are subject to investor

protection equivalent to that laid down in sub-paragraphs (a),

(b) or (c) and provided that the issuer is a company whose

capital and reserves amount to at least EUR 10,000,000 and

which presents and publishes its annual accounts in accordance

with Directive 2013/34/EU of the European Parliament and of

the Council of 26 June 2013, is an entity which, within a group

of companies which includes one or several listed companies, is

dedicated to the financing of the group or is an entity which is

dedicated to the financing of securitisation vehicles which

benefit from a banking liquidity line.

11. Cash.

Financial derivative instruments, including equivalent

cash-settled instruments, dealt in on a regulated market referred to in

paragraphs 1 to 3 of this Part of the Schedule or financial derivative

instruments dealt in over-the-counter (OTC) derivatives, provided

that

(a) the underlying of the derivative consists of

instruments covered by this paragraph, financial indices,

interest rates, foreign exchange rates or currencies;

(b) the counterparties to OTC derivative transactions

are institutions subject to prudential supervision, and belonging

to the categories approved by the Malta Financial Services

Authority; and

(c)

the OTC derivatives are subject to reliable and

verifiable valuation on a daily basis and can be sold, liquidated

or closed by an offsetting transaction at any time at their fair

value at the UCITS’ initiative.

Units, by whatever name called, in a real or notional fund

which is limited to the descriptions of property mentioned in the

foregoing paragraphs of this Schedule, not being property falling

within paragraphs 17(a) to (e) of Part III of the Schedule, and which

under the contract is to be managed either

(a)

wholly by the insurer; or

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

person for whose acts and omissions in managing the scheme

the insurer assumes responsibility towards the policyholder as if

they were the acts or omissions of the insurer, and otherwise (if

at all) by the insurer.

PART II

INDICES BY REFERENCE TO WHICH BENEFITS

MAY BE DETERMINED

An index which is

(a)

calculated independently;

(b)

published at least once a week;

(c)

based on constituents, each of which is property

falling within paragraphs 1 to 11 of Part I of the Schedule; and

(d) calculated on a basis which is made available to the

public and which includes both the rules for including and

excluding constituents and the rules for valuation which must

use an arithmetic average of the value of the constituents.

A national index of retail prices published by or under the

authority of a government of a Member State or EEA State.

An index which is

(a)

based on constituents, each of which is property

falling within paragraphs 1 to 11 of Part I of the Schedule; and

(b) in respect of which a derivative contract is dealt in

on a regulated market referred to in paragraphs 1 to 3 of Part I of

the Schedule.

PART III

INTERPRETATION

Benefits payable under any contract to which regulation 3

of the regulations applies shall not be determined by reference to

(a) property of any of the descriptions specified in

paragraph 5 and paragraph 8 of Part I of the Schedule other than

units of UCITS authorised according to Directive 2009/65/EC,

or paragraphs 9 or 10 of Part I of the Schedule, if the value of

such property is determined, either wholly or partly, by

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

the value of, or fluctuations in the income from, property other

than property of the descriptions in Part I of this Schedule; or

(b) property of the description specified in paragraph 5

of Part I of the Schedule in excess of 10 per centum of the

aggregate property linked benefits under the contract; or

(c)

property of the description specified in paragraph 8

of Part I of the Schedule other than units of UCITS authorised

according to Directive 2009/65/EC, which in aggregate value

exceeds 10 per centum of the property linked benefits, unless

the contract; or

(d) property of the description specified in paragraph 8

of Part I of the Schedule where the contract under which the

benefits are payable has been marketed in accordance with any

legal restrictions which apply to the marketing of the

corresponding collective investment undertaking; or

(e)

property of any of the descriptions specified in Part I

of this Schedule which has the effect of a derivative instrument

other than financial derivative instruments specified in

paragraph 12 of Part I of this Schedule.

In this Schedule

(a) ''transferable securities'' has the meaning assigned to

it in article 2(1) of Directive 2009/65/EC;

''money market instruments'' has the meaning assigned to it

in article 2(1) of Directive 2009/65/EC.''.

B

€0.45