On the 22 February 2023, the MFSA issued a consultation document along with draft legislation aimed at introducing new and enhanced rules on the exchange of confidential information which will allow insurance undertakings authorised under the Insurance Business Act ("IBA"), enrolled persons under the Insurance Distribution Act ("IDA") and Maltese branches or subsidiaries of multinational groups to share necessary confidential information concerning their clients with other entities within the same group, auditors, appointed experts or outsourcing service provider.

The primary scope of the consultation document is to address the challenges faced by insurance entities. Although insurance entities are required to collect client information and report it at group level, they are prohibited from sharing such confidential information with other group members of the same company under the current legislation. The proposed amendments envisage the inclusion of two new sub-articles; sub-article (3) to article 60 of the IBA and sub-article (8) to article 46 of the IDA which aim to broaden the list of persons with whom confidential information may be exchanged.

Proposed Amendments to the IBA

Under the current legal framework, the exchange of confidential information is allowed in accordance with the provisions of the Professional Secrecy Act and article 257 of the Criminal Code, among insurers, intermediaries, between insurers and intermediaries, and between insurers and/or intermediaries and the Commissioner of Police.

By virtue of the new amendments, authorised insurance undertakings will be allowed to exchange confidential information relating to the affairs of its policyholders, potential policy holders, insureds, claimants or connected persons, with:

  • other members of the group of companies of which the undertaking forms part and the undertaking's holding company, financial holding company, mixed financial holding company or mixed activity holding company;
  • any auditor or expert engaged by the undertaking; or
  • any outsourcing service provider carrying out the activities of the undertaking.

This shall be allowed under the condition that the provisions of the Professional Secrecy Act and article 257 of the Criminal Code are complied with, and provided that the information is already in the possession of the undertaking and necessary for the proper carrying out of its activities and for the fulfilment of its obligations. The MFSA has clarified that in the draft legislation that matters relating to advertising, marketing or promotion do not justify the sharing of confidential information and therefore shall not be considered as necessary for the fulfilment of the undertaking's activities and obligations.

Any exchange of client information shall be made subject to all proper controls and safeguards and the undertakings must ensure that the receiver of the information is subject to equivalent obligations of data protection, confidentiality and care, in accordance with Maltese law and EU law, including GDPR. Moreover, the provisions of the Prevention of Money Laundering Act and any Funding of Terrorism Regulations must be observed when exchanging client information.

The MFSA has attached a consolidated draft version of the IBA reflecting the proposed changes which can be found here.

Proposed Amendments to the IDA

Presently, the IDA prohibits insurance agents, insurance managers, insurance brokers, tied insurance intermediaries or ancillary insurance intermediaries ("enrolled person") from exchanging confidential client information. Under the current legal framework, information may only be exchanged with the MFSA if it is necessary to ensure compliance with the IDA or any other legislation,

Similar to the proposed amendments to the IBA, the proposed amendments will allow enrolled persons forming part of a group of companies to communicate confidential information which is in their possession relating to policyholders, potential policy holders, insureds, claimants or connected persons with entities within the same group, auditors and experts engaged by the enrolled person or outsourcing service provider. This exchange of information can only take place when necessary for the proper execution out of the enrolled person's activities and fulfilment of its obligations and notwithstanding the provisions of the Professional Secrecy Act and article 257 of the Criminal Code.

The amendments to the will be in line with those to be introduced in the IBA as enrolled persons will be obliged to ensure that the group company member, appointed auditor or expert, or outsourcing service provider receive the confidential information subject to all proper controls and safeguards. Additionally, the insurance intermediaries are required to ascertain that the receivers are subject to equivalent obligations of data protection, confidentiality and care as required by Maltese law and EU law, including GDPR, and in accordance with the provisions of the Prevention of Money Laundering and Funding of Terrorism Regulations.

Article 2(1) of the IDA will see the inclusion of new definitions for the following terminology: "connected person", "financial holding company", "GDPR", "holding company", "insured", "mixed activity holding company", "mixed financial holding company", "overseas regulatory authority" and "policyholder". These definitions will clarify whose information can be shared and with whom, in line with the proposed article 46(8).

A consolidated draft version of the IDA with the proposed amendments has been made available by the MFSA and can be viewed here.

The MFSA encourages stakeholders to submit their comments and feedback on the proposed amendments to the Insurance and Pensions Supervision by sending an email to ips_legal@mfsa.mt by 30 March 2023. A Feedback Statement will later be published along with a circular informing the market on when the amendments will come into force. We will continue to monitor the progress of the new amendments and inform our readers accordingly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.