Reinsurance Special Purpose Vehicles Regulations, 2016

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 19,559, 19 ta’ April, 2016

L.N. 130 of 2016

INSURANCE BUSINESS ACT

(CAP. 403)

Reinsurance Special Purpose Vehicles Regulations, 2016

IN exercise of the powers conferred by article 64 of the

Insurance Business Act, the Minister for Finance, acting on the

advice of the Malta Financial Services Authority, has made the

following regulations:-

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

scope.

Special Purpose Vehicles Regulations, 2016.

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

relevant provisions of the EU Delegated Regulation and the EU

Implementing Regulation, as hereinafter defined, and these

regulations shall be interpreted and applied accordingly.

(1) In these regulations, unless the context otherwise Interpretation.

requires -

"the Act" means the Insurance Business Act;

"authorised reinsurance special purpose vehicle" means a

reinsurance special purpose vehicle, which is authorised in

accordance with these regulations;

"ceding undertaking" means an insurance undertaking or

reinsurance undertaking which has received authorisation in

accordance with Article 14 of 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), that has transferred risk to a reinsurance special purpose

vehicle, and includes an insurance or reinsurance undertaking

authorised in a third country;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority Act; Cap. 330.

"EU Delegated Regulation" means Commission Delegated

Regulation (EU) 2015/35 of 10 October 2014 supplementing

Directive 2009/138/EC of the European Parliament and of the

Council on the taking-up and pursuit of the business of Insurance and

Reinsurance (Solvency II), as amended from time to time;

"EU

Implementing

Regulation"

means

Commission

Implementing Regulation (EU) 2015/462 of 19 March 2015 laying

down implementing technical standards with regard to the procedures

for supervisory approval to establish special purpose vehicles, for the

cooperation and exchange of information between supervisory

authorities regarding special purpose vehicles as well as to set out

formats and templates for information to be reported by special

purpose vehicles in accordance with Directive 2009/138/EC of the

European Parliament and of the Council, as amended from time to

time;

"EU Regulations" means the EU Delegated Regulation and the

EU Implementing Regulation, as herein defined, and words and

expressions used in these regulations and also used in the EU

Regulations shall have the same meaning as is given to them in the

said EU Regulations unless otherwise defined herein;

"Financial Services Tribunal" means the Tribunal established

under article 21 of the Malta Financial Services Authority Act;

"insurance manager" means a person enrolled as such under

article 13 of the Insurance Intermediaries Act;

"Insurance Rules" has the same meaning as is assigned to it by

article 2 of the Act for the purpose of carrying into effect the

provisions of these regulations;

"MiFID II Directive" means Directive 2014/65/EU of the

European Parliament and of the Council of 15 May 2014 on markets

in financial instruments and amending Directive 2002/92/EC and

Directive 2011/61/EU, as amended from time to time and includes

any implementing measures that have been or may be issued

thereunder;

"reinsurance special purpose vehicle" means an undertaking,

other than an existing insurance undertaking or reinsurance

undertaking, which assumes risks from a ceding undertaking and

which fully funds its exposure to such risks through the proceeds of a

debt issuance or any other financing mechanism where the repayment

right of the providers of such debt or financing mechanism are

subordinated to the reinsurance obligations of such a vehicle, and the

term "special purpose vehicle" used in the EU Regulations shall be

construed accordingly;

"third country" means a country that is not a Member State or

EEA State.

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

also used in the Act, but which are not defined herein or in the EU

Regulations, shall in these regulations have the same meaning as in

the Act.

(1) The Malta Financial Services Authority established Competent

by the Malta Financial Services Authority Act shall be the designated authority.

supervisory authority in Malta for the purposes of implementing the

relevant provisions of the EU Regulations, and any reference in these

regulations to the competent authority shall be deemed and construed

accordingly.

(2) The competent authority shall exercise all the functions,

obligations and powers and shall satisfy all the requirements imposed

on supervisory authorities by the EU Regulations.

(3) Without prejudice to the provisions of sub-regulation (1),

the competent authority may, for the better implementation of the EU

Regulations, exercise any of the powers assigned to it under the Act

in relation to reinsurance special purpose vehicles.

The provisions of the EU Regulations relating to special Applicability of

purpose vehicles shall apply to all reinsurance special purpose the

Regulations to

vehicles whose head office is in Malta and such reinsurance special reinsurance

special purpose

purpose vehicles shall comply with all the obligations and satisfy all vehicles.

the requirements imposed on them by the said EU Regulations.

(1) An undertaking whose head office is in Malta may Authorisation of

carry on business as a reinsurance special purpose vehicle in or from a special

Malta only in accordance with an authorisation granted by the vehicle.

competent authority in terms of these regulations.

(2) An authorised reinsurance special purpose vehicle shall

not engage in activities other than those for which the reinsurance

special purpose vehicle is authorised in terms of these regulations.

(3) Without prejudice to Article 9 of the EU Implementing

Regulation, where a reinsurance special purpose vehicle intends to

enter into contractual arrangements relating to the transfer of risk

with a ceding undertaking established in a third country, the

competent authority may consult the overseas regulatory authority

concerned, before it takes a decision on authorisation.

(4) The authorisation of a reinsurance special purpose vehicle

shall state the activities for which the reinsurance special purpose

vehicle is authorised and any terms and conditions relating to those

activities.

(5) An authorised reinsurance special purpose vehicle may,

subject to the approval of the competent authority, appoint an

insurance manager to manage its business.

(6) The competent authority shall decide on an application for

an authorisation within six months of the date of its receipt; and if it

refuses to issue the authorisation it shall inform the applicant in

writing stating the full reasons for the refusal.

(7) Any person who is aggrieved by a decision of the

competent authority to refuse to issue an authorisation under this

regulation may appeal against the decision to the Financial Services

Tribunal.

A reinsurance special purpose vehicle shall only be

eligible for authorisation in terms of these regulations if all the

following conditions are fulfilled

(a)

the applicant is an undertaking whose head office is

in Malta;

(b) its objects or purpose are restricted to operating as a

reinsurance special purpose vehicle; and

(c)

its providers of debt or financing will be

professional clients as defined in Annex II of the MiFID II

Directive.

The competent authority shall not issue an authorisation in

terms of these regulations unless it is satisfied that the relevant

provisions relating to authorisation, as set out in Chapter XV of the

EU Delegated Regulation and in the EU Implementing Regulation,

are being met.

(1) An application for authorisation shall be made in

writing by the reinsurance special purpose vehicle in the manner

determined by Insurance Rules and shall be accompanied by

supporting documentation as set out in Insurance Rules.

(2) The authorisation of a reinsurance special purpose vehicle

is only valid for the activities for which it was authorised, and any

change in these activities shall be subject to prior approval by the

competent authority.

(3) The competent authority shall have the power to require

any undertaking to provide such information as it may deem

necessary for the purposes of determining an application for

authorisation or approval.

(1) An authorised reinsurance special purpose vehicle Solvency

shall be fully funded at all times in accordance with Article 326 of the requirements.

EU Delegated Regulation.

(2) An authorised reinsurance special purpose vehicle shall

invest all its assets in accordance with Article 327 of the EU

Delegated Regulation.

(3) The authorised reinsurance special purpose vehicle shall

immediately inform the competent authority

(a) where it observes that the fully funded requirement

is no longer complied with; or

(b) where there is a risk of non-compliance in the

following three months.

(4) In the cases referred to in sub-regulation (3)(a) and (b), the

authorised reinsurance special purpose vehicle concerned shall

submit within one month of the observation of non-compliance or risk

of non-compliance, for approval by the competent authority, a

realistic financial scheme to restore compliance with the fully funded

requirement within such period as may be determined by the

competent authority.

(1) Without prejudice to article 26 of the Act, the Withdrawal of

competent authority may withdraw an authorisation granted to an authorisation.

authorised reinsurance special purpose vehicle in the following cases

(a)

when it no longer fulfils the conditions under which

the authorisation to establish a reinsurance special purpose

vehicle was granted; or

(b) when it fails seriously in its obligations under the

EU Regulations, these regulations or any Insurance Rules issued

hereunder, or any applicable provisions of the Act, or any

regulations or Insurance Rules issued thereunder, to which it is

subject.

(2) Without prejudice to the generality of sub-regulation

(1)(b), the competent authority shall consider the authorised

reinsurance special purpose vehicle to have committed a serious

failure where it does not comply with the requirement to remain fully

funded and the competent authority considers that the authorised

reinsurance special purpose vehicle cannot restore its compliance

within a reasonable time-frame not exceeding three months from the

observation of non-compliance with the fully funded requirement.

(3) Any decision to withdraw an authorisation shall state the

full reasons and shall be communicated to the authorised reinsurance

special purpose vehicle concerned. Any overseas regulatory

authorities concerned shall also be notified of the decision without

delay.

(4) For the purposes of sub-regulation (3), and in so far as

concerns the withdrawal of authorisation, the provisions of article 27

of the Act shall apply mutatis mutandis

Provided that, references to "revocation of an

authorisation" in article 27 of the Act shall be construed as a

reference to withdrawal of an authorisation.

(5) Any person who is aggrieved by a decision of the

competent authority to withdraw an authorisation under this

regulation may appeal against the decision to the Financial Services

Tribunal.

Where an authorised reinsurance special purpose vehicle

contravenes or fails to comply with any provisions of the EU

Regulations, these regulations or any Insurance Rules issued

hereunder, or any applicable provisions of the Act, or any regulations

or Insurance Rules issued thereunder, the competent authority may,

by notice in writing and without recourse to a court hearing, impose

on such undertaking an administrative penalty not exceeding one

hundred and fifty thousand euro (€150,000) in respect of each

infringement or failure to comply, as the case may be, and where such

infringement or failure to comply continues, a further penalty not

exceeding one hundred and sixteen euro (€116) for each day during

which the infringement or failure to comply continues

Provided that a penalty imposed under this article, whether

in the form of a fixed amount, a daily penalty, or both, may, in no

case, exceed one hundred and fifty thousand euro (€150,000).

(1) The provisions of the Act, other than the listed in

sub-regulation (2), shall apply to an authorised reinsurance special

purpose vehicle, in the same manner and to the same extent as they

apply to an undertaking authorised under the Act, as if a reference in

the Act to an "authorised insurance undertaking" or "authorised

reinsurance undertaking" were a reference to an "authorised

reinsurance special purpose vehicle".

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

(a)

Part III of the Act shall not apply;

(b)

Part IV of the Act shall not apply;

(c)

Part V of the Act shall apply subject to the

(i) article 20 of the Act shall not apply and the

following provision shall apply in substitution thereof

"Every authorised reinsurance special

purpose vehicle shall, within the period

stipulated in paragraph (4) of Article 325 of

the EU Delegated Regulation forward to the

competent authority, in addition to the

information required in accordance with sub-

article (2) of Article 325 of the said

Regulation, a copy of its audited financial

statements drawn up in accordance with the

Companies Act.";

(ii) articles 22 and 23 of the Act shall not apply;

(iii) article 24 of the Act shall apply as follows

(aa) sub-article (1) shall only apply in so

far as the obligations of auditors are concerned;

(bb) paragraphs (a) and (b) of sub-article

(1) shall apply;

(cc) paragraph (c) of sub-article (1) shall

apply as if the material breach, of the provisions of

the Act made applicable by these regulations, was ,

of the provisions of these regulations or of any

Insurance Rules issued hereunder or of the

provisions of the EU Regulations;

(dd) paragraph (d) shall not apply and the

following provision shall apply in substitution

thereof

"non-compliance with the fully funded

requirement under regulation 9";

(ee) paragraph (e) of sub-article (1) shall

not apply;

(ff) sub-articles (2) and (3) shall only

apply in so far as the obligations of auditors are

concerned;

(d)

article 25 of Part VI of the Act shall not apply;

(e)

Part VII shall apply subject to the following

(i)

article 31B shall not apply;

(ii)

article 31C shall not apply;

(f)

Part VII A of the Act shall not apply;

(g)

Part VIII of the Act shall not apply;

(h) Part IX of the Act shall apply subject to the

following

(i)

sub-article (1) of article 39 of the Act shall

apply as if an authorised reinsurance special purpose

vehicle were required to give, not later than one month

before the date on which it intends to cease its activities,

notice in writing of its intention to the competent authority,

and the authorised reinsurance special purpose vehicle

were required to comply with any directive issued to it by

the competent authority; and sub-articles (2) and (3)

thereof shall not apply;

(ii) article 41 shall apply as if an

authorised reinsurance special purpose vehicle

were required only to dissolve and

consequently wind up under and in accordance

with the Companies Act;

(iii) article 42 of the Act shall not apply;

(i)

articles 44 to 48C of Part X of the Act shall not

apply;

(j)

Part XI of the Act shall not apply; and

(k)

articles 60, 62 and 69 of Part XII of the Act shall not

apply.

(1) Without prejudice to sub-regulation (3) hereof,

articles 5, 5A, 6, 7, 13, 16, 17, 21, 24 and 25 of the Securitisation Act

shall apply to an authorised reinsurance special purpose vehicle.

(2) Subject to the provisions of this sub-regulation and of sub-

regulation (3), the following provisions of the Securitisation Act shall

apply to an authorised reinsurance special purpose vehicle in the

manner hereunder

(a)

article 2 shall apply subject to the following;

(i) the definition "originator or assignor" shall

not apply and any reference to the term "originator" or

"assignor" as used in the Securitisation Act shall be

deemed to be a reference to the term "ceding undertaking"

as defined in these regulations;

(ii) the definition "risks" shall not apply and any

reference to "risks" shall be construed in accordance with

paragraph (a) of Article 318 of the EU Delegated

Regulation;

(iii) the definition "securitisation" shall not apply

and any reference to "securitisation" shall be construed in

accordance with the definition of "reinsurance special

purpose vehicle" in regulation 2;

(iv) the definition "securitisation asset" shall not

apply;

(v) the definition "securitisation vehicle" shall

not apply and any reference to the term "securitisation

vehicle" as used in the Securitisation Act shall be deemed

to be a reference to the term "reinsurance special purpose

vehicle" as defined in these regulations;

(b)

article 8 shall apply subject to the following

(i) sub-article (1) thereof shall apply on

condition that the any delegation to a third party is subject

to approval by the competent authority;

(ii) sub-article 2 thereof shall not apply;

(c)

article 10 shall apply subject to the condition that

paragraph (c) of sub-article (1) thereof shall apply without

prejudice to any legitimate claim of the ceding undertaking

under the applicable contractual agreements;

(d) articles 11 and 12 shall apply only in so far as any

notice that may be required to be issued in accordance with sub-

article (5) of article 13;

(e) article 14 shall apply subject to the

condition that paragraph (c) of sub-article (2)

thereof shall only apply in so far as it provides

for the non-application of articles 1980 to

1984 of the Civil Code;

(f)

article 22 shall apply subject to the following

(i) sub-paragraph (ii) of paragraph (a) of sub-

article (1) thereof shall apply without prejudice to Article

321 of the EU Delegated Regulation;

(ii)

paragraph (b) of sub-article (1) thereof shall

not apply;

(iii) sub-article (2) thereof shall not apply.

(3) Notwithstanding the foregoing, where any applicable

provisions of the Securitisation Act, or any rules or regulations made

thereunder, are inconsistent with the provisions of these regulations

or of the EU Regulations, these regulations and, or the EU

Regulations shall prevail, and the provisions of the said Act, rules or

regulations shall, to the extent of the inconsistency, not apply to

reinsurance special purpose vehicles.

(1) The competent authority may share information and

cooperate with any European regulatory authorities or overseas

regulatory authorities concerned, in relation to the supervision of

authorised reinsurance special purpose vehicles.

(2) The competent authority may also exchange information

on planned supervisory actions where it deems these actions to have a

material and potentially adverse effect on the supervision of a ceding

undertaking for which a European regulatory authority or an overseas

regulatory authority is responsible.

(1) The competent authority may issue Insurance Rules

for the better carrying out of the provisions of the EU Regulations or

these regulations.

(2) Such Insurance Rules may contain such incidental,

supplementary and consequential provisions as appear to the

competent authority to be expedient for the purposes of the operation

and, or implementation of the EU Regulations or these regulations.

The provisions of article 21 of the Malta Financial Appeals.

Services Authority Act shall apply mutatis mutandis to appeals that Cap. 330.

may be brought before the Financial Services Tribunal in terms of

these regulations.

The Reinsurance Special Purpose Vehicles Regulations, Revocation of

the Reinsurance

2013, are hereby revoked.

Special Purpose

Vehicles

Regulations,

2013. L.N. 452 of

2013. B

€054