INSURANCE

Mamo TCV is one of the leading law firms in Malta in the field of insurance regulatory and contract law. The firm boasts of a strong, specialized insurance law department representing all the indigenous Maltese companies providing insurance services on the Islands such as Insurance companies, brokers, agents, sub-agents and managers. 

 

Legal Background 

 

The insurance field in Malta is regulated by two main pieces of legislation namely the Insurance Business Act of 1998 and the Insurance Intermediaries Act of 2006.  

 

Additionally, the Malta Financial Services Authority (MFSA), being the Competent Authority appointed by the Minister of Finance in accordance with the said legislation, has issued a number of Insurance Directives, rules and regulations relative both to Insurance Companies and to Insurance Intermediaries. The law in this field has been influenced by European Union insurance regulatory law and practice.  

 

Regulators of Insurance Business 

 

Under the present legislation, there are two main regulators namely the Minister of Finance, and the “Competent Authority” appointed by the same Minister. This authority is currently the Malta Financial Services Authority (MFSA). These two regulators share between them the duties of supervision of the insurance business in Malta. The Financial Services Tribunal set up under the 1994 Banking Act, is also given additional powers within the field of insurance law. 

 

The Minister 

 

The Minister is given the ultimate authority to ensure that the players in the market, be they companies or brokers and other intermediaries, comply with the rules of the Acts and any regulations established under them. The competent authority is appointed by the Minister, who retains the power to prolong, renew or terminate such appointment. The Minister is empowered to give exemptions from the application of the Insurance Business Act. 

 

According to the Insurance Intermediaries Act, the Minister may also, after consultation with the competent Authority, issue additional rules and regulations or extend the application of the Act to other insurance intermediary business. 

 

 

The Competent Authority (MFSA) 

 

The “competent authority” appointed by the Minister in terms of the law is the Malta Financial Services Authority (MFSA). The role of this body is generally responsible for licensing, regulation and supervision of the insurance business market in Malta. This role encompasses the issuing of guidelines, regulations and directives, the granting of the required authorisations under the Act and even investigatory duties. One may say that the MFSA regulates all stages of the business life of the insurance provider – the entry into the insurance business, the carrying on of the business and finally the termination of the business. 

 

The Financial Services Tribunal 

 

This tribunal was set up under the Banking Act of 1994, but it has been given functions in the field of insurance. The Insurance Business Act gives it the competence to decide applications for transfer of long-term business and for ordering the payment of costs and expenses in relation to such applications. The Tribunal also hears appeals from decisions of the MFSA where there has been a misapplication of the law or an abuse of discretion or manifest unfairness. 

 

Insurance Business Providers 

 

Maltese law provides for the setting up of a number of insurance companies, be they local insurance principals, insurance brokers, insurance agents carrying on business for foreign and local insurance principals and insurance subagents (salespersons). 

 

Companies (local & foreign) 

 

Insurance companies are primarily regulated by the Insurance Business Act of 1998.  

 

The Act distinguishes between these companies using two criteria. The primary distinction which the law makes is whether a company is involved in “long-term” or “general” insurance business. The law does not define either “long-term” or “general” business but lists the classes of insurance falling under each term. Long-term business includes life and annuity policies, marriage and birth insurance, linked long term insurance, permanent health insurance, tontines, capital redemption, pension fund management, collective insurance and social insurance. General insurance business concerns such areas as accident and health, motor, marine and transport insurance, aviation, fire and other damage to property, liability, credit and suretyship insurance.  

 

Another distinction is based on the nationality of the companies that is whether the company’s head office is in or outside Malta. In fact, certain rules apply particularly to local companies, while others are applicable specifically for foreign companies. 

 

Setting up 

 

A company wishing to carry out insurance business in and from Malta must submit an application in writing on a prescribed form to the MFSA. The MFSA will issue such authorisation if it is satisfied that the requirements set out by the Insurance Business Act, the regulations made there under and the requirements of the insurance rules have been satisfied.  

 

A company wishing to carry out a combination of long-term and general business would be required to satisfy the MFSA that the long-term business is restricted to re-insurance and that the general business that be carried out by the company shall be restricted to accident and sickness classes or to any class or part of a class of business within that group and provided that it shall maintain separate management for each one.  

 

In addition to the requirements applicable to a local insurance company, a foreign company wishing to set up business in Malta is obliged to show, inter alia, that it is permitted to carry out insurance business in the country of its head office. Moreover, it must keep certain assets in Malta and must have a representative and a branch and/or authorised insurance agent.  

 

Carrying on insurance business 

 

The MFSA performs an ongoing regulating function in respect of insurance companies whilst they are in operation. The law lays down certain safeguards to ensure the stability of the insurance market inter alia, by the keeping of a margin of solvency, guaranteed funds and technical provisions. It is within the duties of the MFSA to ensure that these safeguards and other legal requirements are being met. To this end, the law requires companies to divulge to the MFSA information regarding their affairs, including the yearly audited accounts.  

 

Transfer of business of insurance and of shareholding in such business 

 

The Insurance Business Act lays down the procedures to be followed in the transfer of insurance business. In the case of a transfer of general insurance business, approval for such a scheme is to be requested of the MFSA. In the case of a transfer of a long-term business, approval for the transfer is to be regulated by the Financial Services Tribunal and such an application is to be accompanied inter alia by a report on the terms of the scheme made by an independent actuary. 

 

Authorisation is also required if there is planned a transfer of shares affecting qualifying shareholdings and the for a company to embark on a merger, reconstruction or division or have any change in its issued share capital and voting rights.  

 

Termination 

 

The MFSA has the power to revoke or suspend an authorisation given to a company to conduct insurance business. Such revocation can be automatic, as is the case when a foreign company’s authorisation is withdrawn by the relative overseas regulatory authority. In certain other situations it is within the MFSA’s discretion to revoke or suspend an authorisation, and it may intervene to do so whenever the public interest needs to be protected. If it is the authorised company itself which has decided to terminate its business, it would still be required to notify the MFSA and to obtain the relative authorisation to terminate its business. 

 

Insurance Intermediaries 

 

The Insurance Intermediaries Act 2006 which implements Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on Insurance Mediation provides the regulatory framework for the registration and enrolment of insurance intermediaries and for the carrying out of insurance intermediaries’ activities. The MFSA keeps registers of persons carrying on the insurance intermediaries activities of insurance agents, insurance managers and insurance brokers known as the Agents register, Managers Register and the Brokers Register. Persons who shall be entitled to be registered in the said registers are required to satisfy certain qualifications.  

 

Insurance intermediaries activities may be carried out by both individuals or legal persons. The MFSA also keeps a list of the persons and legal entities carrying on insurance intermediaries activities of insurance agents, insurance managers, insurance brokers and tied insurance intermediaries in the so-called Agents List, the Managers List, the Brokers List or the Tied Insurance Intermediaries List respectively. A company or a person who shall be entitled to be enrolled in the said list is also required to satisfy a number of obligations.The MFSA has the competence to strike off the name of any intermediary from its lists and registers on the grounds laid down in the Act.