INSURANCE BUSINESS (MAINTENANCE OF ASSETS) REGULATIONS (maintenanceofassets)

SUBSIDIARY LEGISLATION 403.16

INSURANCE BUSINESS (MAINTENANCE

OF ASSETS) REGULATIONS

1st January, 2016 *

LEGAL NOTICE 408 of 2015.

PART I

Preliminary

(1) The title of these regulations is the Insurance Business

(Maintenance of Assets) Regulations.

(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.

(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 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) In these regulations, unless the context otherwise

requires -

"the Act" means the Insurance Business Act;

"th e 198 1 Act" m eans the Insurance Business Act, 1981,

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;

*see regulation 1(3) of these Regulations, as originally promulgated.

"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

t he taki ng -u p and pu rsui t of t he b usi ness o f In surance 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

(Regulation 8)

PERSONS ACTING AS CUSTODIAN OF ASSETS

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

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

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

assigned to their exclusive custody in this Schedule.

2. A central securities depository providing clearing and

settlement services in respect of instruments issued through such

depository.

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

business of banking in Malta shall act as custodian of assets

consisting of currency deposits where such deposits are in a

*

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

†

revoked by these regulations.

convertible currency acceptable to the competent authority.

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

competent authority for the account of the insurer.

4. For the purposes of this Schedule -

"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.

(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 prescrib ed 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.

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

a n i n s u r e r w hi c h at t he t i m e o f c o m in g i n t o f o r c e o f th e s e

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 ( Com panies 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 for

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

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.

(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.

*

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

2004. †

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

‡

revoked by 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

provisions of these regulations, any person listed in the Second

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

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

with 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

competent authority that the amount of assets constituting any

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

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

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

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

li ke manner, satisfy the requ irement s o f that regulatio n 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 -

"security" means -

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

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) (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

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

2004. revoked by the Insurance Business (Assets and Liabilities) Regulations, 2007.

revoked by these regulations.

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 these Regulations shall be deemed to affect

anything done, or omitted to be done prior to the coming into force

of these 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.