RE-INSURANCE SPECIAL PURPOSE VEHICLES REGULATIONS

RE-INSURANCE SPECIAL PURPOSE VEHICLES

SUBSIDIARY LEGISLATION 403.19

RE-INSURANCE SPECIAL PURPOSE

VEHICLES REGULATIONS

22nd April, 2016

LEGAL NOTICE 130 of 2016.

The title of these regulations is the Reinsurance Special

Purpose Vehicles Regulations.

(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

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;

"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

RE-INSURANCE SPECIAL PURPOSE VEHICLES

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 Distribution 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 by

the Malta Financial Services Authority Act shall be the designated

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

purpose vehicles shall apply to all reinsurance special purpose

vehicles whose head office is in Malta and such reinsurance special

purpose vehicles shall comply with all the obligations and satisfy

all the requirements imposed on them by the said EU Regulations.

RE-INSURANCE SPECIAL PURPOSE VEHICLES

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

carry on business as a reinsurance special purpose vehicle in or

from Malta only in accordance with an authorisation granted by the

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.

RE-INSURANCE SPECIAL PURPOSE VEHICLES

(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 shall

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

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

competent authority may withdraw an authorisation granted to an

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

RE-INSURANCE SPECIAL PURPOSE VEHICLES

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 following

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

following provision shall apply in substitution

thereof

RE-INSURANCE SPECIAL PURPOSE VEHICLES

"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

RE-INSURANCE SPECIAL PURPOSE VEHICLES

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

RE-INSURANCE SPECIAL PURPOSE VEHICLES

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 Services

Authority Act shall apply mutatis mutandis to appeals that may be

brought before the Financial Services Tribunal in terms of these

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regulations.