Three Islands. Three Cities.. Three Pillars

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1 Three Islands. Three Cities.. Three Pillars pkfmalta.com SOLVENCY II in MALTA A CASE STUDY by Donna Greaves Bonello

2 Thresholds of Capital Floors Threshold one - Solvency Capital Requirement (SCR) insurers are currently immersed in defining their proposal for the way forward, an exercise they are performing in close contact with the regulator. While it is still early days in this regard, it is envisaged that upon eventual evaluation the MFSA will be able to determine whether any proposed internal models will be approved, beyond the standard models, with intricate focus being placed on a comprehensive understanding of the workings of such internal models, including the robustness of their testing and in a vital manner whether such proposed internal models are justified on the basis of the proportionality principle. Threshold two- Minimum Capital Requirement (MCR) must be strictly maintained at all time 25%- 45% of insurer s (SCR)

3 FLAOR/ORSA Marrying Risk & Capital Management Supporting Documentation to comprise: Detailed internal policy including stress/reverse stress tests, sensitivity analysis etc. Individual assessment records Internal Reporting Supervisory Reporting

4 Modernised Supervisory Review Process in Full-Swing - Good Corporate Governance The Malta Financial Services Authority has started to carry out evaluations under the new review process with a focus on the adequacy of each insurer s risk and internal governance processes, ever-reserving the right of intervention should the deemed need arise. Maltese legislation contains governance conserving provisions in the Company s Act with responsibility pertaining to the Directors in terms of Governance, Administration and Supervision, S. 136A

5 Corporate Governance Solvency II recognise Non-Executive Directors (NED s) as being one of the kernels of Good Corporate Governance Maltese Company law does not differentiate between different director types (executive/non-executive/independent) The syllogism is therefore that Solvency II will present new trials to Malta in efficiently introducing NED s and attaining the required delicate balance thereof that will serve the desired purpose of challenging the Board of Directors and infusing the same with their external expertise. Reports have indicated female NED s as filled with more promise-lord Davies Report, as cited by ILS Malta

6 Disclosure Reporting Publication Objective of achieving greater disciple in the market industry and more refined EU market integration To introduce a two-tier qualitative reporting mechanism with Regular Supervisory Report (RSR) to be submitted internally to the regulator upon request and the Solvency Financial Condition Report (SFCR) to be submitted to the public annually. While offering a more concise version of the RSR, the SFCR will command dedicated attention in satisfying compliance requirements and preserving sensitive data within newly prescribed limits.

7 The Means Must Augur The Ends On the 22nd of December, 2014 the MFSA commenced a consultation process on proposed amendments to the Insurance Business Act and the Insurance Intermediaries Act. Having consumer protection at its heart, this consultation comes to a close today. In order to accomplish the set goals, a shift in insurer attitude is necessary. Going beyond a mundane box-ticking approach and embracing the search for tangible value and an optimisation opportunity to emancipate the business structure at large.

8 Thank you for your time & attention pkfmalta.com Donna Greaves Bonello Tel: (+356)