Compliance with Solvency II, a crucial step for Malta's insurance community to maintain growth, has been tackled extensively by the Malta Risk & Insurance Report 2015. Solvency II, Europe's new capital adequacy and reporting regime for the insurance sector, will come into force in January 2016.
The report notes that important international insurance companies and corporations chose to domicile their third party writing captives in Malta was the ability to underwrite business across the European Union from this cost efficient base.
This is also the reason why it is hoped that the recently introduced RSVP legislation will attract investors and further insurers and reinsurers to the island to set up securitisation vehicles that can carry pan-European risks, not least to provide capital relief for smaller European insurers under the new regime.
Turning on to Solvency II, an MFSA spokesperson explained that "It can be said that in general the Maltese insurance market is ready for Solvency II. It is fair to say that there are undertakings which are more advanced than others in their preparedness for Solvency II."
In order to make sure that the island's insurance community is ready for the big day, the MFSA has been engaging with licence holders by way of on-site visits and meetings with the directors and senior management of Maltese licensed insurance and reinsurance undertakings, explained the spokesperson.
"In particular during the course of these last two years the MFSA has been assessing the measures taken by undertakings, including steps being taken and the progress being made by the undertakings, towards the implementation of the relevant aspects of the regulatory framework addressed by the EIOPA Guidelines on the System of Governance, the Guidelines on the Forward Looking Assessment of Own Risks and the Guidelines on the Submission of Information to National Competent Authorities which are applicable from January 2014".
The article notes that the MFSA has held several one-to-one workshops with regulated insurance entities to address specific areas of the Solvency II regime which are proving 'more challenging for the entities concerned,' explained the regulator. The MFSA has also issued a number of papers and circulars by way of guidance for the Maltese insurance market. It has also set up a helpdesk within the Insurance and Pensions Supervision Unit to reply to queries on Solvency II.
The MFSA spokesperson that "Solvency II is being considered as an opportunity for the undertakings to review business models; assess current board compositions to see whether the current board members collectively have the competence and/or experience to ensure that the undertaking will meet the requirements of Solvency II on an on-going basis; to review and/or formalise governance structures, board policies etc; to review existing risk registers, to review and assess the effectiveness of internal processes and procedures to determine whether these can meet the demands of Solvency II," the spokesperson said.
Another challenge is of course the costs involved in meeting the requirements of the Solvency II Pillar II and Pillar III obligations because a number of undertakings have had to appoint third party service providers to carry out some of the key functions identified under Solvency II or appointed consultants to assist them in their preparatory work.
The full Report is available on: https://goo.gl/ns4lK2.
MFSA Newsletter – October 2015
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