Ownership and organisational requirements
Ownership of (re)insurers
Are there any restrictions on ownership of or investment in (re)insurers in your jurisdiction, including any limits on foreign ownership/investment?
There are no restrictions as to who can become a shareholder of a (re)insurer. However, all shareholders that meet the definition of a ‘qualifying shareholder’ must be approved by the Malta Financial Services Authority (MFSA) before effectively becoming a shareholder of a (re)insurer. For this purpose, a ‘qualifying shareholding’ is defined by the Insurance Business Act as a direct or indirect holding:
- in an undertaking which represents 10% or more of the share capital or of the voting rights; or
- which makes it possible to exercise a significant influence over the management of the undertaking in which that holding subsists.
What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?
A transfer of control or acquisition of a qualifying shareholding in a (re)insurer requires prior approval by the MFSA.
Qualifying shareholders increasing or decreasing their level of control within specified shareholding brackets must notify the MFSA and supply any information which may be requested by the regulator depending on the circumstances of each particular case.
In assessing the proposed acquirer, the MFSA shall, in order to ensure the sound and prudent management of the undertaking in which an acquisition is proposed, and having regard for the likely influence of the proposed acquirer on the undertaking, appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition.
The transfer of a portfolio of (re)insurance business requires the consent of:
- the MFSA – in the case of general insurance business and business restricted to reinsurance; or
- the Financial Services Tribunal – in the case of long-term insurance business.
- Additional publication and disclosure requirements as set out in Part VIII of the Insurance Business Act would also apply to such transfers.
Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?
(Re)insurance entities are generally set up as a public or private limited liability company. The legal regime in Malta also provides for the possibility of setting up a cell company through which to carry out the business of (re)insurance. Such cellular structures include protected cell companies and incorporated cell companies.
Further, reinsurers can opt to establish a securitisation-type structure through a reinsurance special purpose vehicle, the purpose of which would be to assume risks from a ceding undertaking and fully fund 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 vehicle.
Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?
The Solvency II regime was implemented in Malta on 1 January 2016. As part of the Pillar II requirements under Solvency II, (re)insurers are required to establish an effective system of governance providing for sound and prudent management of an undertaking. This would include the establishment of four key functions as prescribed by the Solvency II regime, which include:
- risk management;
- internal audit;
- compliance; and
The system of governance adopted by the undertaking should be proportionate to the nature, scale and complexity of the operations of the undertaking and should include at least:
- an adequate transparent organisational structure; and
- an effective system for ensuring the transmission of information.
The undertaking is required to review its system of governance on a regular basis.
All directors, controllers and other persons who will effectively direct or manage the business of (re)insurance must be assessed by the MFSA as being fit and proper.
Directors and officers must continue to satisfy the fit and proper requirement on an ongoing basis.
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