Insurance Business (Maintenance of Assets) Regulations, 2015

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

L.N. 408 of 2015

INSURANCE BUSINESS ACT

(CAP. 403)

Insurance Business (Maintenance of Assets) Regulations, 2015

IN exercise of the powers conferred by articles 18G and 64 of

the Insurance Business Act, the Minister of Finance, after

consultation with the Malta Financial Services Authority, has made

the following regulations:-

PART I

Preliminary

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

and

Business (Maintenance of Assets) Regulations, 2015.

commencement.

(2) The purpose of these regulations is in part to implement

Articles 162(2)(e) and 167 of the Solvency II Directive and they shall

be interpreted and applied accordingly.

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

2016.

(Regulation 4)

DEPOSITS TO BE MAINTAINED IN MALTA

1. The amount of deposit, which an insurance undertaking

which at the time of the coming into force of these regulations had

ceased to carry on the business it was licensed to carry on under the

1981 Act or the Act, and which is only servicing or running-off that

business, is required to maintain in Malta, shall be determined in

accordance with paragraphs (2) and (3) of this Schedule.

2. Pursuant to regulation 4(1)

(a)

Where an insurance undertaking is servicing long

term business of insurance, it shall maintain in Malta not less

than 25% and not more than 75%, as the competent authority

may, from time to time, either generally or specifically

determine. This amount of deposits shall be calculated on

(i) the gross premiums receivable by such

undertaking in Malta in relation to the servicing of that

long term business with respect to the immediately

preceding financial year; or

(ii) the mathematical provisions in relation to the

servicing of that long term business received by the

undertaking in Malta as at the close of the immediately

preceding financial year,

whichever is the greater amount.

(b) Where an insurance undertaking is administering the

run-off of its general business of insurance, it shall maintain in

Malta the amount of deposit which the insurance undertaking

was required to maintain immediately before the coming into

force of the Insurance Business (Insurers’ Assets and

Liabilities) Regulations, 2004. *

3. Pursuant to regulation 4(2), in the case of an insurer which

at the time of coming into force of these regulations was required to

maintain a deposit in Malta of no less than one-half of the minimum

guarantee fund pursuant to the Insurance Business (Insurers’ Assets

and Liabilities) Regulations, 2004, * and, or the Insurance Business

(Assets and Liabilities) Regulations, 2007, ** and the insurer is only

* revoked by the Insurance Business (Assets and Liabilities) Regulations, 2007.

servicing or running-off

that business, such insurer shall be required

to maintain the same amount of deposit on the coming into force of

these regulations.

In these regulations, unless the context otherwise requires - Interpretation.

"the Act" means the Insurance Business Act;

"the 1981 Act" means the Insurance Business Act, 1981, Cap. 290.

repealed by the Act;

"authorisation" means an authorisation under article 7 of the Act

to carry on business of insurance;

"authorised insurance undertaking" means an undertaking,

which has received authorisation pursuant to article 7 of the Act to

carry on business of direct general business and, or long term

business and includes an undertaking authorised to carry on direct

and reinsurance business;

"authorised reinsurance undertaking" means an undertaking

which has received authorisation pursuant to article 7 of the Act to

carry on business restricted to reinsurance;

"central securities depository" has the same meaning as is

assigned to it by article 2(1) of the Financial Markets Act;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority Act;

"custodian of assets" and "custodian" in relation to the assets

held or required to be held in custody for an insurer’s account by or

under any provision of the Act, shall be construed in accordance with

the provisions of regulation 8 and the Second Schedule;

"deposit" means the assets required to be maintained in Malta

by an insurer in accordance with regulations 3 or 4;

"deposit back arrangement", in relation to any contract of

reinsurance, means an arrangement whereby an amount is deposited

by the reinsurer with the cedant;

"gross premiums", in relation to an insurer and a financial year

(a)

means premiums after deduction of discounts,

refunds and rebates of premium but before deduction of

premiums for reinsurance ceded and before deduction of

commission payable; and

(b) includes premiums receivable by an insurer under

reinsurance contracts accepted by the insurer,

and in each case, reference to premiums relates to premium income

attributable to business of insurance carried on by the insurer in

Malta;

"insurer" means a third country insurance undertaking and a

third country reinsurance undertaking authorised under the Act, or the

insurance undertaking which at the time of coming into force of these

regulations had ceased to carry on business it was licensed to carry on

under the 1981 Act or the Act;

"Malta Financial Services Authority" means the Authority

established by the Malta Financial Services Authority Act;

"multilateral system" has the same meaning as is assigned to it

in article 2(1) of the Financial Markets Act;

"mathematical provisions" and "mathematical reserves" mean

the provision made by an insurer carrying on long term business to

cover liabilities (excluding liabilities which have fallen due and

liabilities arising from deposit back arrangements) arising under or in

connection with contracts for long term business;

"regulated market" has the same meaning as is assigned to it by

article 2(1) of the Financial Markets Act;

"required amount" means the amount of assets maintained in

accordance with regulations 3 or 4;

"Solvency II Directive" means Directive 2009/138/EC of the

European Parliament and of the Council of 25 November 2009 on the

taking-up and pursuit of the business of Insurance and Reinsurance

(Solvency II) (recast), as amended from time to time, and includes

any delegated acts and any technical standards that have been or may

be issued thereunder;

"Swiss general insurer" means an insurer -

(a)

whose head office is in Switzerland,

(b) who is authorised by the supervisory authority in

Switzerland as mentioned in article 7.1 of the agreement of 10

October 1989 between the European Economic Community and

the Swiss Confederation on direct insurance other than life

insurance approved on behalf of the European Economic

Community by the Council Decision of 20 June 1999 (91/370/

EEC), and

(c)

who is authorised in Malta to carry on general

business;

"third country insurance undertaking" means an undertaking,

other than a European insurance undertaking, which would require

authorisation as an authorised insurance undertaking pursuant to

article 7 as if its head office were situated in Malta;

"third country reinsurance undertaking" means an undertaking,

other than a European reinsurance undertaking, which would require

authorisation as an authorised reinsurance undertaking in accordance

with article 7 as if its head office were situated in Malta.

(2) Words and expressions used in these regulations which are

also used in the Act but which are not defined herein, shall have the

same meaning assigned to them as in the Act.

PART II

Maintenance of Assets in Malta

servicing or running-off that

business, such

8) insurer shall be required

(Regulation

to maintain the same amount of deposit on the coming into force of

these regulations.

PERSONS ACTING AS CUSTODIAN OF ASSETS

1. The persons SECOND

(1) Subject to sub-regulations (2) to (6), and subject to

regulation 5, a third country insurance undertaking and a third

country reinsurance undertaking which is authorised under the Act to

carry on business of insurance, shall make and maintain a deposit in

Malta of assets of an amount equal to at least one half of the absolute

floor as prescribed in Article 129(1)(d) of the Solvency II Directive,

in respect of the Minimum Capital Requirement, and deposits one

fourth of that absolute floor as security; the whole or a specified

proportion of such assets shall be deposited with and held in custody

for the undertaking’s account by a person in accordance with Parts III

and IV of these regulations.

(2) Where -

(a) the third country insurance undertaking and third

country reinsurance undertaking carry on business of insurance

in Malta and one or more other Member States or EEA States;

and

(b) the competent authority and the appropriate

European regulatory authorities have agreed that this regulation

should apply,

the third country insurance undertaking and third country reinsurance

undertaking shall make and maintain the deposit with such person and

in such Member State or EEA State as may be agreed between the

competent authority and the other European regulatory authorities.

(3) For the purposes of sub-regulation (2), an application to

make and maintain a deposit, shall be subject to the procedure laid

down in regulations 15 and 16 of the Insurance Business (General

Provisions of Supervision) Regulations, 2015.

(4) The provisions of this regulation shall not apply to a Swiss

general insurer.

listed in this

Schedule shall act as custodian of

assets for the purposes of article 18G of the Act and hold in custody

(Regulation

8)

for the insurer’s account assets

of a description

specified and assigned

to their exclusive custody in this Schedule.

PERSONS ACTING AS CUSTODIAN OF ASSETS

2. A central securities depository providing clearing and

1. The persons listed in this Schedule shall act as custodian of

settlement services in respect of instruments issued through such

assets for the purposes of article 18G of the Act and hold in custody

depository.

for the insurer’s account assets of a description specified and assigned

to their

3. exclusive

custody

bank in or

this

Schedule.

(1) Any

credit

institution lawfully carrying on

the business of banking in Malta shall act as custodian of assets

2. A central securities depository providing clearing and

consisting of currency deposits where such deposits are in a

settlement services in respect of instruments issued through such

convertible currency acceptable to the competent authority.

depository.

(2) Any such deposits shall be made out in the name of the

3. (1) Any bank or credit institution lawfully carrying on

competent authority for the account of the insurer.

the business of banking in Malta shall act as custodian of assets

consisting

of the

currency

purposes deposits

where such

deposits are in a

4. For

of this Schedule

-

convertible currency acceptable to the competent authority.

"bank" and "credit institution" have the meaning given in

regulation Any

(2)

such

deposits

shall be made out in the name of the

5(3) of

these

regulations;

competent authority for the account of the insurer.

"deposit" has the meaning given in regulation 5(3) of these

regulations. For the purposes of this Schedule -

4. "bank" and "credit institution" have the meaning given in

regulation 5(3) of these regulations;

"deposit" has the meaning given in regulation 5(3) of these

regulations.

** revoked by these regulations.

** revoked by these regulations.

€0.63

(1) Without prejudice to sub-regulation (2), in the case

of an insurer which at the time of coming into force of these

regulations had ceased to carry on the business it was licensed to

carry on under the 1981 Act or the Act and the insurer is only

servicing or running-off that business, the amount of deposit which

the insurer concerned is required to maintain in Malta shall be the

amount of deposit which such insurer was required to maintain,

pursuant to the Insurance Business (Companies Assets and

Liabilities) Regulations, 2000, * the Insurance Business (Insurers’

Assets and Liabilities) Regulations, 2004, ** and, or the Insurance

Business (Assets and Liabilities) Regulations, 2007, *** which amount is

being determined in paragraph (2) of the First Schedule to these

regulations or such higher amount as determined by the competent

authority.

(2) In the case of an insurer which at the time of coming into

force of these regulations was required to maintain a deposit in Malta

of no less than one-half of the minimum guarantee fund pursuant to

the Insurance Business (Insurers’ Assets and Liabilities) Regulations,

2004 ** and, or the Insurance Business (Assets and Liabilities)

Regulations, 2007 *** , and the insurer is only servicing or running-off

that business, such insurer shall be required to maintain the same

amount of deposit on the coming into force of these regulations.

(1) Subject to sub-regulation (2), the assets to be used Kind of assets to

for the purposes of the deposits referred to in regulation 3, unless be

Malta.

otherwise agreed with the European regulatory authorities, where

applicable, and in regulation 4, shall be assets of the following kind

and shall be treated to be assets of that kind only if they satisfy the

conditions applicable to assets of that kind

(a) an asset consisting of a deposit in a currency

acceptable to the competent authority with a bank or credit

institution lawfully carrying on the business of banking in Malta

if the deposit is in the name of the Malta Financial Services

Authority for the insurer’s account or pledged by the insurer

concerned in favour of the Malta Financial Services Authority

and the document constituting the pledge is delivered to the

competent authority; or

(b) an asset consisting of a holding of an instrument

admitted to listing on a regulated market or a multilateral

system, acceptable to the competent authority, from among

assets that are eligible for collateral purposes in Eurosystem

market operations, where such acceptable instrument holding is

pledged in favour of the Malta Financial Services Authority and

the document constituting the pledge is registered by the insurer

concerned with a central securities depository, that provides the

authentic definitive register of holdings of such instrument, and

the said document is delivered to the competent authority.

* revoked by the Insurance Business (Insurers’ Assets and Liabilities) Regula-

tions, 2004.

** revoked by the Insurance Business (Assets and Liabilities) Regulations, 2007.

***revoked by these regulations.

(2) For the avoidance of doubt, those insurers referred to in

regulation 4 shall continue to maintain the kind of assets which were

required to be maintained prior to the coming into force of these

regulations.

(3) For the purpose of sub-regulation (1) -

"bank" or "credit institution", have the same meaning as is

assigned to them by article 2(1) of the Banking Act;

"deposit", in relation to any currency, has the same meaning as

is assigned to it by article 2(1) of the Banking Act.

PART III

Custodian of Assets

In this Part of these regulations

"assets" in relation to a custodian of assets shall be construed in

accordance with the provisions of regulation 5.

(1) The deposit required to be maintained in accordance

with the provisions of regulations 3 or 4 shall be maintained by the

insurer in Malta and shall be deposited with and held in custody for

the insurer’s account by a person as custodian of assets for the

insurer; and that insurer shall deposit such assets with a person as

prescribed by regulation 8 and that person shall hold such assets in

custody for the insurer’s account subject to and in accordance with

written arrangements made between the insurer, that person and the

competent authority.

(2) The arrangements referred to in sub-regulation (1) shall be

made in such form and manner so as to satisfy the provisions of the

Act relevant to such requirement, these regulations and any such

directive which the competent authority may, from time to time,

either generally or specifically, issue in writing with respect to the

purpose or security of those assets.

(3) The competent authority shall be a party to those

arrangements solely for the purpose of ensuring the enforceability of

the provisions of those arrangements and the Act; and any expenses

incurred by or under those arrangements shall be borne by the insurer

concerned.

(4) Assets of an insurer held in custody for the undertaking’s

account by a person as custodian for the insurer shall be taken to be

held by that person in compliance with a requirement imposed by or

under any provision of the Act if, and only if, they are assets in whose

case the insurer has made with that person and the competent

authority written arrangements in the form and manner specified in

sub-regulation (2) that they are to be held by that person in

compliance with such a requirement.

(5) No assets held in custody for an insurer’s account by a

person as custodian for the insurer in compliance with a requirement

imposed by or under any provision of the Act shall, so long as the

requirement is in force, be released except with the approval of the

competent authority given in writing.

For the purposes of article 18G of the Act and of any of the Persons acting

provisions of these regulations, any person listed in the Second as

assets.

Schedule to these regulations shall act as custodian of assets for an

insurer and hold in custody for the insurer’s account, in the manner

determined by these regulations, assets of a description specified and

assigned to that person’s custody in the Second Schedule.

PART IV

Deposit of Assets

(1) Subject to sub-regulation (2), every deposit made, or Making an

required to be made, pursuant to regulations 3 or 4 shall be made with amount

deposit.

a custodian of assets in the manner set out in regulation 7 and shall be

maintained by the insurer at all times during the continuance of the

authorisation, run-off or servicing as the case may be, at a level equal

to at least the appropriate required amount

Provided that, where the deposit is an asset consisting of a

holding of an instrument admitted to listing on a regulated market or a

multilateral system, such asset shall be valued at ninety per centum of

the last quoted market price or such other lesser percentage as the

competent authority may determine, but not less than seventy-five per

centum of the last quoted price.

(2) Where an asset constituting or forming part of any deposit

made in accordance with sub-regulation (1) is an asset expressed in a

currency other than euro, a further sum or increased amount of

instruments equal to ten per centum of the value of that asset shall be

aggregated with the amount of assets constituting the deposit to make

good for any loss of value of that asset, in that other currency, which

might arise out of exchange risk.

(1) Subject to sub-regulation (2), where it appears to the Increasing the

competent authority that the amount of assets constituting any deposit amount

deposit.

made in accordance with regulation 9 is likely to fall, or falls, below

the appropriate required amount, or on the written application of the

insurer having regard to such circumstances, the competent authority

shall direct in writing the insurer concerned to increase the amount of

assets by a specified additional sum or holding amount to maintain

the appropriate required amount and the custodian to receive and hold

in custody the specified additional sum or holding amount and

aggregate it with the amount of assets constituting the deposit.

(2) Any increase in the amount of deposit required to be made

under sub-regulation (1) shall be made by the insurer as early as

practicable but not later than fourteen days from the date of the

competent authority’s direction in that regard to the insurer.

(1) Subject to sub-regulation (3), where an insurer

proposes to replace assets of a kind constituting or forming part of

any deposit ("assets of the old kind") with assets of any other kind

("assets of the new kind"), the insurer shall make an application in

writing to the competent authority in that regard giving the relevant

details of the assets of the old kind and the assets of the new kind

forming the object of the application and the competent authority

shall determine the application within thirty days of receiving the

details required to be given under this sub-regulation; and, if it

refuses the application, the competent authority shall inform the

insurer in writing of the reasons for the refusal.

(2) Where the competent authority approves of an application

made under sub-regulation (1), the competent authority shall direct in

writing the insurer to carry out the replacement of the assets of the old

kind with the assets of the new kind in accordance with any

conditions which it may deem fit to impose and the custodian to

receive and hold in custody, under those conditions, the assets of the

new kind and to release from custody, in accordance with sub-

regulation (3), the assets of the old kind.

(3) Assets of any kind constituting or forming part of any

deposit replaced or to be replaced with assets of any other kind shall

not be released from custody unless and until the competent authority

is satisfied that the assets replacing those assets have been received

and held in custody in accordance with regulation 7 of these

regulations.

(1) Subject to sub-regulations (3) and (4), where it

appears to an insurer that the amount of assets constituting any

deposit is higher than the appropriate required amount, the insurer

may propose to reduce the amount of assets to an amount being an

amount of not less than the appropriate required amount by making an

application in writing to the competent authority in that regard giving

the relevant details and specifying the sum proposed to be reduced

and the competent authority shall determine the application within

thirty days of receiving the details required to be given under this sub-

regulation; and, if it refuses the application, the competent authority

shall inform the insurer in writing of the reasons for the refusal.

(2) Where the competent authority approves of an application

made under sub-regulation (1), the competent authority shall direct in

writing the insurer to reduce the amount of assets constituting the

deposit by the sum or holding amount specified by the insurer, or any

other lower sum or holding amount as determined by the competent

authority, and the custodian to release from custody an amount equal

to the specified sum or holding amount, or the lower sum or holding

amount, as the case may be.

(3) The competent authority shall not approve of an

application made under sub-regulation (1) unless it is satisfied that

the remaining amount of assets constituting the deposit after the

release from custody of an amount equal to the specified sum or

holding amount or any other lower sum or holding amount is

adequate to maintain the appropriate required amount of deposit.

(4) Nothing in sub-regulations (2) and (3) shall relieve the

insurer of the obligation imposed on him by regulation 9 to maintain

at all times the deposit at least at the appropriate required amount.

(1) Where an insurer has ceased to carry on in Malta the Transfer,

business in respect of which the deposit was made, the insurer may withdrawal

cessation of

apply in writing to the competent authority for those funds to be business.

released to it.

(2) The competent authority shall, on receipt of an application

under sub-regulation (1) accompanied by an appropriate declaration,

determine the application having cognizance to the provisions of

articles 18G(4), 28, 41 and 42 of the Act and direct the custodian in

writing as it deems appropriate in the circumstances.

(3) In sub-regulation (2) an "appropriate declaration" means a

written declaration by the applicant as is required by article 18G(4) of

the Act or in consequence of a direction given in writing by the

competent authority under article 28 of the Act -

(a) stating and proving by submission of documentary

evidence acceptable to, or required by, the competent authority

that to the best of his knowledge and belief the insurer has no

further liability to discharge; and

(b)

if the applicant is not the insurer -

(i) declaring that the applicant is entitled to give

a good discharge for the relevant funds; and

(ii) stating and proving by submission of

documentary evidence acceptable to, or required by, the

competent authority the circumstances in which the

applicant is so entitled.

A direction given by the competent authority pursuant to

this Part of these regulations shall be sufficient authority for a

custodian of assets to comply with it.

(1) Notwithstanding anything contained in these

regulations, subject to the following sub-regulations of this

regulation, any insurer to whom regulation 3 or 4 applies may, in like

manner, satisfy the requirements of that regulation by producing to

the competent authority, in lieu of making a deposit with a custodian

of assets under this Part of these regulations, a security on assets for

an amount equal to at least the appropriate required amount and

maintaining security on those assets for that amount at all times

during the currency of the security.

(2) The content of every security produced under sub-

regulation (1) shall have to be agreed in advance between the insurer,

the issuer and the competent authority; and the security shall have to

be reinstated by the depositor to secure the appropriate required

amount each time the level of the amount is likely to fall, or falls,

below the required amount.

(3) The provisions of regulations 10, 12, 13 and 14 shall apply

mutatis mutandis in relation to a security as they apply in relation to a

deposit.

(4) Where -

(a) an insurer makes a deposit with a custodian of assets

in accordance with regulation 9 and, at a later date, elects to

substitute that deposit with a security to be produced to the

competent authority in accordance with sub-regulation (1); or

(b) an insurer produces to the competent authority a

security in accordance with sub-regulation (1) and, at a later

date, elects to substitute that security with a deposit to be made

with a custodian of assets in accordance with regulation 9,

in every case, the insurer shall make an application in writing to the

competent authority in that regard, giving the relevant details, and -

(i) if the application is to substitute a deposit

with a security, the competent authority shall direct in

writing the insurer to carry out the substitution in

accordance with sub-regulations (1) and (2) and, when the

security is produced, the custodian to release from custody

the deposit; and

(ii) if the application is to substitute a security

with a deposit, the competent authority shall direct in

writing the insurer to carry out the substitution in

accordance with regulation 9, and when the deposit is

made and held in custody, the issuer to terminate the

security without prejudice to any claims which the

competent authority may have, or may have had, against

the security prior to its termination.

For the purposes of regulation 15 -

Interpretation of

security.

"security" means -

(a) a contract of pledge as construed in Title XXI of the Cap. 16.

Civil Code; or

(b) a guarantee provided by or an irrevocable letter of

credit established with, a bank or credit institution

(i) licensed to carry on the business of banking

under the laws of Malta, or

(ii) lawfully permitted to carry on the business of

banking in a country outside Malta acceptable to the

competent authority provided that the bank or credit

institution is of first class standing,

and "issuer" shall be construed accordingly.

PART V

Miscellaneous Provisions

(1) Without prejudice to regulation 4, and saving the Revocation and

provisions of the following sub-regulations of this regulation, the Saving.

Insurance Business (Assets and Liabilities) Regulations, 2007 are

hereby revoked without prejudice to anything done or omitted to be

done thereunder prior to the coming into force of these regulations.

(2) (a)

Every insurer (other than for a third country

insurance undertaking or third country reinsurance undertaking) that,

pursuant to Insurance Business (Companies Assets and Liabilities)

Regulations, 2000, * the Insurance Business (Insurers’ Assets and

Liabilities) Regulations, 2004, ** and, or the Insurance Business

(Assets and Liabilities) Regulations, 2007, *** was required to

maintain in Malta assets of such an amount and of the kind as

determined by these regulations, and to whom this requirement no

longer applies, may apply in writing to the competent authority for

the release of these assets.

(b) Every third country insurance undertaking and third

country reinsurance undertaking which carries on business of

insurance in Malta and in one or more Member States or EEA States

and which maintains deposits in Malta in respect of which an

agreement has been entered into between the competent authority and

another European regulatory authority or authorities to maintain the

assets required under regulation 3(1) in the jurisdiction of the

European regulatory authority, the third country insurance

undertaking and third country reinsurance undertaking may apply in

writing to the competent authority for the release of those deposits, to

be deposited in the agreed upon jurisdiction.

(c)

Subject to paragraph (d), the competent authority

shall determine an application received under paragraphs (a) and (b)

within two months of its receipt.

(d) The competent authority shall, in the case of an

application submitted by a European insurance undertaking and

European reinsurance undertaking and which at the time of coming

into force of these regulations was authorised under the Act to carry

on business of insurance, determine such an application only if the

undertaking concerned elects to exercise a European right and

satisfies the establishment or service conditions specified in the

European Passport Rights for Insurance and Reinsurance

Undertakings Regulations.

(3) Nothing in the Insurance Business (Maintenance of Assets)

Regulations, 2015, shall be deemed to affect anything done, or

omitted to be done prior to the coming into force of such regulations,

including any arrangements entered into with a custodian referred to

in the Fifth Schedule to the Insurance Business (Assets and

Liabilities) Regulations, 2007, which arrangements shall remain in

force.

* revoked by the Insurance Business (Insurers’ Assets and Liabilities) Regula-

tions, 2004.

** revoked by the Insurance Business (Assets and Liabilities) Regulations, 2007.

***revoked by these regulations.